<PAGE>
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 March 31, 2000 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 (I.R.S. Employer Identification No.)
incorporation or organization)
3232 MCKINNEY AVENUE, SUITE 900, 75204
DALLAS, TEXAS
(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 April 30, 2000, 15,023,956 shares of the registrant's Common
Stock, $.01 par value per share, were outstanding.
<PAGE>
F.Y.I. INCORPORATED AND SUBSIDIARIES
FORM 10-Q FOR THE PERIOD ENDED MARCH 31, 2000
INDEX
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION
<S> <C> <C>
Item 1 Financial Statements 3
Consolidated Balance Sheets - December 31, 1999 and
March 31, 2000 (unaudited) 4
Consolidated Statements of Operations - Three months ended
March 31, 1999 and 2000 (unaudited) 5
Consolidated Statements of Cash Flows - Three months ended
March 31, 1999 and 2000 (unaudited) 6
Notes to Consolidated Financial Statements - March 31, 2000 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 13
PART II. OTHER INFORMATION
Item 5 Other Information II-1
Item 6 Exhibits and Reports on Form 8-K II-2
SIGNATURES II-3
INDEX TO EXHIBITS II-4
</TABLE>
2
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
3
<PAGE>
F.Y.I. INCORPORATED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1999 2000
---------------- -------------
ASSETS (UNAUDITED)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 9,396 $ 11,930
Accounts receivable and notes receivable, less allowance of $8,835 and
$8,828, respectively 82,863 92,729
Notes receivable, stockholders - short term 269 --
Current portion of deferred tax asset 2,890 3,244
Inventories 5,695 6,425
Prepaid expenses and other current assets 5,506 5,104
------------ -----------
Total current assets 106,619 119,432
PROPERTY, PLANT AND EQUIPMENT, net 46,512 50,679
GOODWILL AND OTHER INTANGIBLES, net of amortization of $10,728
and $12,617, respectively 212,316 228,138
OTHER NONCURRENT ASSETS 3,908 4,885
------------ -----------
Total assets $ 369,355 $ 403,134
============ ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued liabilities $ 78,280 $ 63,245
Current maturities of long-term obligations 1,204 1,158
Income taxes payable 7,022 6,835
------------ -----------
Total current liabilities 86,506 71,238
LONG-TERM OBLIGATIONS, net of current maturities 85,172 125,894
DEFERRED INCOME TAXES, net of current portion 2,017 1,863
OTHER LONG-TERM OBLIGATIONS 20,651 8,406
------------ -----------
Total liabilities 194,346 207,401
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Preferred stock, $.01 par value, 1,000,000 shares authorized,
no shares issued and outstanding -- --
Common stock, $.01 par value, 26,000,000 shares authorized,
14,581,639 and 15,129,721 shares issued and outstanding at
December 31, 1999 and March 31, 2000, respectively 146 151
Additional paid-in-capital 120,179 137,329
Retained earnings 55,185 62,347
------------ -----------
175,510 199,827
Less - Treasury stock, $.01 par value, 36,670 and 169,121 shares
at December 31, 1999 and March 31, 2000, respectively (501) (4,094)
------------ -----------
Total stockholders' equity 175,009 195,733
------------ -----------
Total liabilities and stockholders' equity $ 369,355 $ 403,134
============ ===========
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
4
<PAGE>
F.Y.I. INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
MARCH 31,
---------------------------
1999 2000
---------- ----------
(UNAUDITED)
<S> <C> <C>
REVENUE $ 71,612 $ 107,765
COST OF SERVICES 44,148 65,673
DEPRECIATION 1,864 3,116
---------- ----------
Gross profit 25,600 38,976
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES 15,555 23,474
AMORTIZATION 909 1,890
---------- ----------
Operating income 9,136 13,612
OTHER (INCOME) EXPENSE:
Interest expense 497 1,852
Interest income (105) (102)
Other (income) expense, net (45) (75)
---------- ----------
Income before income taxes 8,789 11,937
PROVISION FOR INCOME TAXES 3,516 4,775
---------- ----------
NET INCOME $ 5,273 $ 7,162
========== ==========
NET INCOME PER COMMON SHARE
BASIC $ 0.38 $ 0.49
========== ==========
DILUTED $ 0.36 $ 0.46
========== ==========
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING
BASIC 13,940 14,564
========== ==========
DILUTED 14,579 15,520
========== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
5
<PAGE>
F.Y.I. INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
MARCH 31,
---------------------------
1999 2000
---------- ----------
(UNAUDITED)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 5,273 $ 7,162
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization 2,773 5,006
Change in operating assets and liabilities:
Accounts receivable and notes receivable (3,023) (4,396)
Prepaid expenses and other assets (1,534) (2,670)
Accounts payable and other current liabilities 4,042 1,383
---------- ----------
Net cash provided by operating activities 7,531 6,485
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property, plant and equipment (3,746) (3,655)
Cash paid for acquisitions, net of cash acquired (13,897) (40,762)
---------- ----------
Net cash used for investing activities (17,643) (44,417)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from common stock issuance, net of underwriting
discounts and other costs 1,244 657
Proceeds from long-term obligations 10,750 48,500
Principal payments on long-term obligations (7,391) (8,691)
---------- ----------
Net cash provided by financing activities 4,603 40,466
NET CHANGE IN CASH AND CASH EQUIVALENTS (5,509) 2,534
CASH AND CASH EQUIVALENTS, beginning of period 14,592 9,396
---------- ----------
CASH AND CASH EQUIVALENTS, end of period $ 9,083 $ 11,930
========== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
6
<PAGE>
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 the accounts of F.Y.I. Incorporated
and our subsidiaries.
In the opinion of our management, the accompanying consolidated financial
statements include all of our accounts and the adjustments necessary to
present fairly our financial position at March 31, 2000, our results of
operations for the three months ended March 31, 1999 and 2000, and our cash
flows for the three months ended March 31, 1999 and 2000. All significant
intercompany transactions have been eliminated. Although we believe 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 our
consolidated financial statements and the related notes thereto in our Annual
Report on Form 10-K filed with the Commission on March 23, 2000. The results
of operations for the interim periods ended March 31, 1999 and 2000 may not be
indicative of the results for the full year.
Certain prior period amounts have been reclassified to make their
presentation consistent with the current year.
2. WEIGHTED AVERAGE SHARES OUTSTANDING
Basic and diluted net income per common share were computed in accordance
with Statement of Financial Accounting Standards No. 128, "Earnings Per
Share." The differences between basic weighted average common shares and
diluted weighted average common shares and common stock equivalents are as
follows (in thousands):
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
MARCH 31,
---------------------------
1999 2000
---------- ----------
<S> <C> <C>
Basic weighted average common shares 13,940 14,564
Weighted average options and warrants and other
contingent consideration 639 956
---------- ----------
Diluted weighted average common shares 14,579 15,520
========== ==========
</TABLE>
7
<PAGE>
3. BUSINESS COMBINATIONS
2000 ACQUISITIONS
During the first three months of 2000, we acquired three document and
information management outsourcing solutions businesses which were accounted
for as purchases (the "Purchased Companies"). These acquisitions were Mailing
and Marketing, Inc., Global Direct, Inc. and Pinnacle Legal Copies, Inc. and
PLCI, Inc. The aggregate consideration paid for the Purchased Companies
consisted of $25.0 million in cash and 17,986 shares of common stock. The
preliminary allocation of the purchase price is set forth below (in
thousands):
<TABLE>
<S> <C>
Consideration Paid $ 25,471
Estimated Fair Value of Tangible Assets 13,679
Estimated Fair Value of Liabilities 7,649
Goodwill 19,441
</TABLE>
The weighted average fair market value of the shares of common stock used
in calculating the consideration paid for the Purchased Companies was $27.80,
which represents market price on the date of acquisition.
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.
CONTINGENT CONSIDERATION
Certain of our acquisitions are subject to adjustments in their overall
consideration based upon the achievement of specified earnings targets over
one to three year periods. During the first quarter of 2000, we paid
consideration of $14.3 million in cash and 359,115 shares of common stock in
relation to contingent consideration agreements that have been finalized. This
consideration is net of cash and shares received relating to holdback
arrangements. The shares received were recorded as treasury stock. Based upon
the evaluation of cumulative earnings through March 31, 2000 against the
specified earnings targets, we have accrued aggregate contingent consideration
of approximately $15.1 million, of which $8.4 million is classified as
accounts payable and accrued liabilities and $6.7 million is classified as
other long-term obligations. All of the periods applicable for the earnout
targets have not been completed, and the amounts paid at the conclusion are
likely to be different from amounts presently accrued.
INTANGIBLE ASSETS
All intangibles are considered enterprise goodwill. Based on the
historical profitability of the purchased companies and trends in the legal,
healthcare and other industries to outsource document management functions in
the foreseeable future, the enterprise goodwill is being amortized over
periods not to exceed 30 years. Management continually evaluates whether
events and circumstances indicate that the remaining estimated useful life of
intangible assets might 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 a majority of our acquisitions is not deductible for income
tax purposes.
8
<PAGE>
4.SEGMENT REPORTING
We and our subsidiaries are principally engaged in document and
information outsourcing services. We have identified segments based on
management responsibility as follows:
F.Y.I. Image: (i) electronic imaging services, involving the conversion of
paper or microfilm documents into digitized information, database management
and indexing; (ii) analog services involving the conversion of paper documents
into microfilm images, film processing and computer based indexing and
formatting; (iii) data capture and database management services involving data
capture, data consolidation and elimination, storage, maintenance, formatting
and report creation; (iv) claims processing; and (v) integrated solutions,
which deliver technical services with a focus on document imaging, work flow,
COLD and document information management systems using third party imaging
systems.
F.Y.I. Legal: (i) automated litigation support, including document
conversion, computer indexing and automated document retrieval; (ii)
litigation consulting services such as discovery assistance, labor
discrimination, forensic analysis and other trial support services; (iii)
high-speed, multiple-set reproduction of documents; (iv) records acquisition
in the form of subpoena of business documents and service of process; and (v)
employee and investor services, which provide administration, record keeping
and information processing services.
F.Y.I. HealthSERVE: (i) processing a request for a patient's medical
records from a physician, insurance company, attorney, healthcare institution
or individual; (ii) off-site active storage of a healthcare institutions
medical records; (iii) online delivery of images of selected medical records
for healthcare institutions; (iv) document and data conversion services for
healthcare institutions; (v) document conversion services for state government
disability, worker's compensation claims and other government agencies; (vi)
temporary staffing services; (vii) providing attending physicians' statements
for life and health insurance underwriting; and (viii) managed care compliance
reviews.
F.Y.I. Direct: (i) direct mail, which includes direct mail and fulfillment
services to clients who need rapid, reliable and cost-effective methods for
making large scale distributions of advertising, literature and other
information; (ii) full service commercial printing, including printing and
related services such as electronic prepress services, full-color report
production of annual reports, flyers and catalogs; and (iii) statement
processing.
We measure segment profit as earnings before taxes. Information on
segments follows (in thousands):
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31, 2000
--------------------------------------------------------------------------------
F.Y.I. Image F.Y.I. Legal F.Y.I.HealthSERVE F.Y.I. Direct Consolidated
------------ ------------ ----------------- ------------- ------------
<S> <C> <C> <C> <C> <C>
Revenue $36,566 $21,283 $31,389 $18,527 $107,765
Income before income taxes 4,547 2,609 3,675 1,106 11,937
THREE MONTHS ENDED MARCH 31, 1999 (1)
--------------------------------------------------------------------------------
F.Y.I. Image F.Y.I. Legal F.Y.I.HealthSERVE F.Y.I. Direct Consolidated
------------ ------------ ----------------- ------------- ------------
<S> <C> <C> <C> <C> <C>
Revenue $15,578 $20,606 $25,854 $9,574 $71,612
Income before income taxes 2,551 2,367 3,293 578 8,789
</TABLE>
(1) The 1999 segments have been reclassified to conform to our 2000 segment
structure.
9
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion should be read in conjunction with our financial
statements 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 forward-looking statements is contained under
"Item 5. Other Information."
INTRODUCTION
Our revenue is segregated into the following segments: (i) F.Y.I. Image;
(ii) F.Y.I. Legal; (iii) F.Y.I. HealthSERVE; and (iv) F.Y.I. Direct. Services
provided to customers are described by segment as follows:
F.Y.I. IMAGE: (i) electronic imaging services involving the conversion of
paper or microfilm documents into digitized information, database management
and indexing; (ii) analog services involving the conversion of paper documents
into microfilm images, film processing and computer based indexing and
formatting; (iii) data capture and database management services involving data
capture, data consolidation and elimination, storage, maintenance, formatting
and report creation; (iv) claims processing; and (v) integrated solutions,
which deliver technical services with a focus on document imaging, work flow,
COLD and document information management systems using third party imaging
systems.
F.Y.I. LEGAL: (i) automated litigation support, including document
conversion, computer indexing and automated document retrieval; (ii)
litigation consulting services such as discovery assistance, labor
discrimination, forensic analysis and other trial support services; (iii)
high-speed, multiple-set reproduction of documents; (iv) records acquisition
in the form of subpoena of business documents and service of process; and (v)
employee and investor services, which provide administration, record keeping
and information processing services.
F.Y.I. HEALTHSERVE: (i) processing a request for a patient's medical
records from a physician, insurance company, attorney, healthcare institution
or individual; (ii) off-site active storage of a healthcare institution's
medical records; (iii) online delivery of images of selected medical records
for healthcare institutions; (iv) document and data conversion services for
healthcare institutions; (v) document conversion services for state government
disability, worker's compensation claims and other government agencies; (vi)
temporary staffing services; (vii) providing attending physicians' statements
for life and health insurance underwriting; and (viii) managed care compliance
reviews.
F.Y.I. DIRECT: (i) direct mail, which includes direct mail and fulfillment
services to clients who need rapid, reliable and cost-effective methods for
making large scale distributions of advertising, literature and other
information; (ii) full service commercial printing, including printing and
related services such as electronic prepress services, full-color report
production of annual reports, flyers and catalogs; and (iii) statement
processing.
Cost of services consists primarily of compensation and benefits to
employees providing goods and services to our clients, occupancy costs,
equipment costs and supplies. Cost of services also includes the cost of
products sold for micrographics supplies and equipment, computer hardware and
software and business imaging supplies and equipment.
Selling, general and administrative expenses ("SG&A") consist primarily
of: (i) compensation and related benefits to sales and marketing, executive
management, accounting, human resources and other administrative employees;
(ii) other sales and marketing costs; (iii) communications costs; (iv)
insurance costs; and (v) legal and accounting professional fees and expenses.
10
<PAGE>
THREE MONTHS ENDED MARCH 31, 2000 COMPARED TO THREE MONTHS ENDED
MARCH 31, 1999
REVENUE
Revenue increased 50.5% from $71.6 million for the three months ended
March 31, 1999 to $107.8 million for the three months ended March 31, 2000.
This increase was largely due to: (i) revenue from the acquisitions completed
subsequent to March 31, 1999; and (ii) internal growth of 12.7% in revenue at
the companies owned for longer than one year, based on the acquisition
anniversary date. This internal growth was primarily attributable to our
F.Y.I. Image segment and our F.Y.I. HealthSERVE and government services
business.
GROSS PROFIT
Gross profit increased 52.3% from $25.6 million for the three months ended
March 31, 1999 to $39.0 million for the three months ended March 31, 2000,
largely due to acquisitions completed subsequent to March 31, 1999. Gross
profit as a percentage of revenue increased from 35.7% for the three months
ended March 31, 1999 to 36.2% for the three months ended March 31, 2000,
primarily due to higher profit margins associated with new acquisitions.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
SG&A increased 50.9% from $15.6 million, or 21.7% of revenue, for the
three months ended March 31, 1999 to $23.5 million, or 21.8% of revenue, for
the three months ended March 31, 2000. This increase in SG&A was a result of:
(i) SG&A incurred at companies acquired subsequent to March 31, 1999; and (ii)
increased corporate overhead required to manage the consolidated group.
OPERATING INCOME
Operating income increased 49.0% from $9.1 million, or 12.8% of revenue,
for the three months ended March 31, 1999 to $13.6 million, or 12.6% of
revenue, for the three months ended March 31, 2000, largely attributable to
the factors discussed above.
INCOME BEFORE INCOME TAXES AND NET INCOME
Income before income taxes increased 35.8% from $8.8 million for the three
months ended March 31, 1999 to $11.9 million for the three months ended March
31, 2000, and net income increased 35.8% from $5.3 million for the three
months ended March 31, 1999 to $7.2 million for the three months ended March
31, 2000, largely attributable to the factors discussed above.
11
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
At March 31, 2000, we had $48.2 million of working capital and $11.9
million of cash. Cash flows provided by operating activities for the three
months ended March 31, 2000 were $6.5 million and were due to an increase in
revenue and partially offset by an increase in accounts receivable. Net cash
used in investing activities was $44.4 million, primarily due to payment of
$40.8 million for acquisitions, net of cash acquired. Net cash provided by
financing activities was $40.5 million, primarily due to borrowings on our
line of credit.
During the three months ended March 31, 1999, net cash flows provided by
operating activities were $7.5 million. Net cash used in investing activities
was $17.6 million, as we paid $13.9 million for acquisitions, net of cash
acquired. Net cash provided by financing activities was $4.6 million.
In February 1998, we entered into our line of credit with Paribas (the
"1998 Credit Agreement"). Under the 1998 Credit Agreement, we could borrow on
a revolving credit basis loans in an aggregate outstanding principal amount
up to $65.0 million, subject to certain customary borrowing capacity
requirements. In April 1999 and August 1999, the 1998 Credit Agreement was
amended to increase the aggregate outstanding principal limit to $100 million
and $125 million, respectively. In November 1999, we further amended the 1998
Credit Agreement, increasing the aggregate principal limit to $150 million.
In May 2000, the 1998 Credit Agreement was further amended to increase the
aggregate principal limit to $175 million from $150 million. The availability
under the 1998 Credit Agreement as of May 5, 2000 was $37.7 million for
acquisitions, working capital and general corporate purposes. Depending on
the mix of stock and cash used to execute our acquisition program, we may
need to seek additional financing through the public or private sale of
equity or debt securities. There can be no assurance we could secure such
financing if and when it is needed or on terms we deem acceptable.
In January 2000, we registered on Form S-4 (Registration No. 333-92981)
3,012,217 shares of common stock for issuance in our acquisition program (the
"Acquisition Shelf"), of which 2,994,231 shares were available as of March 31,
2000.
12
<PAGE>
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We do not ordinarily use financial instruments, such as derivatives, to
manage the impact of interest rate changes or other market risks in our
business and we are not party to any leveraged financial instruments.
13
<PAGE>
PART II. OTHER INFORMATION
ITEM 5. OTHER INFORMATION
RECENT DEVELOPMENTS
ACQUISITIONS
Since December 31, 1999, we have acquired the following document and
information outsourcing solutions businesses: (i) Mailing & Marketing, Inc., a
direct mail, print, and fulfillment business located in California; (ii)
Global Direct, Inc., a direct mail production business located in Oklahoma;
and (iii) Pinnacle Legal Copies, Inc. and PLCI, Inc., a legal copy service
business located in Minnesota and Wisconsin.
AMENDMENT TO CREDIT AGREEMENT
In May 2000, the 1998 Credit Agreement was amended to increase the
aggregate principal limit to $175 million from $150 million.
RISKS ASSOCIATED WITH FORWARD-LOOKING STATEMENTS
This Report contains certain forward-looking statements such as our
intentions, hopes, beliefs, expectations, strategies, predictions or any
other variation thereof or comparable phraseology of our future activities or
other future events or conditions within the meaning of Section 27A of the
Securities Act of 1933, as amended (the "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 uncertainty, including, without
limitation, variations in quarterly results, volatility of our stock price,
development by competitors of new or superior products, technology or
services, the entry into the market by new competitors, the sufficiency of
our working capital and our ability to realize benefits from consolidating
certain general and administrative functions, to assimilate and integrate
acquisitions, to continue our acquisition program, to manage our growth, to
retain management, to implement our focused business strategy, to expand our
document and information management services geographically, to attract and
retain customers, to increase revenue by cross-selling services and to
successfully defend our company in ongoing and future litigation. Although we
believe that the assumptions underlying the forward-looking statements
contained herein are reasonable, any of the assumptions could be inaccurate,
and, therefore, there can be no assurance that the forward-looking statements
included in this Report 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 us or any other person that our objectives and plans will
be achieved.
II-1
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
10.77 Amended and Restated Employment Agreement between F.Y.I.
Incorporated and Jonathan B. Shaw
10.78 Fifth Amendment to Amended and Restated Credit Agreement dated
April 13, 2000, by and among F.Y.I. Incorporated, Paribas, Bank
of America N.A., and Bank One, Texas N.A. and the Lenders named
therein.
27.1 Financial Data Schedule
(b) Reports on Form 8-K
None
II-2
<PAGE>
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: May 12, 2000 By: /s/ Ed H. Bowman, Jr.
------------------------------------------
Ed H. Bowman, Jr.
Chief Executive Officer and President
Date: May 12, 2000 By: /s/ Timothy J. Barker
------------------------------------------
Timothy J. Barker
Executive Vice President and Chief
Financial Officer (Principal Financial
and Accounting Officer)
II-3
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C>
10.77 Amended and Restated Employment Agreement between F.Y.I.
Incorporated and Jonathan B. Shaw
10.78 Fifth Amendment to Amended and Restated Credit Agreement dated
April 13, 2000, by and among F.Y.I. Incorporated, Paribas, Bank
of America N.A., and Bank One, Texas N.A. and the Lenders named
therein.
27.1 Financial Data Schedule
</TABLE>
II-4
<PAGE>
AMENDED AND RESTATED EMPLOYMENT AGREEMENT
JONATHAN B. SHAW
This Amended and Restated Employment Agreement (the "Agreement") by and between
F.Y.I. Incorporated, a Delaware corporation ("F.Y.I." or the "Company") and
Jonathan B. Shaw ("Employee") is hereby entered into and effective as of the
date of January 26, 2000. This Agreement hereby supersedes any other employment
agreements or understandings; written or oral, between the Imagent Acquisition
Corp., F.Y.I. 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 management and information management services.
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 Business Segment Manager and
officer of several subsidiaries. As such, Employee shall have responsibilities,
duties and authority reasonably accorded to and expected of a Business Segment
Manager and officer of several subsidiaries. Employee hereby accepts this
employment upon the terms and conditions herein contained and,
<PAGE>
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 making personal 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
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 $198,000
per year, payable on a regular basis in accordance with the Company's standard
payroll procedures but not less than monthly. On at least an annual basis, the
Board will review Employee's performance and may make increases to such base
salary if, in its discretion, any such increase is warranted. Such recommended
increase would, in all likelihood, require approval by the Board or a duly
constituted committee thereof.
(b) INCENTIVE BONUS PLAN. For 2000 and subsequent years, it is the
Company's intent to develop a written Incentive Bonus Plan setting forth the
criteria under which Employee will be eligible to receive year-end bonus awards.
Employee is eligible to participate in the Bonus Plan up to 50% of base pay.
Employee acknowledges receipt of Warrant No. 42 in payment for any 2000 Bonus
opportunity.
(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, with benefits provided to Employee under this
clause (i) to be at least equal to such benefits provided to F.Y.I.
executives.
<PAGE>
(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 (pro rated for any year in which Employee is employed for
less than the full year).
(iv) The Company shall provide Employee a $500 per month car
allowance (determined on a pre-tax basis).
(v) The Company shall reimburse Employee up to $200 per month
for club dues actually incurred by Employee, PROVIDED that such club is
used at least 50 percent of the time for business purposes.
(vi) 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 F.Y.I.'s 1995 Long-Term Incentive Compensation Plan.
3. NON-COMPETITION AGREEMENT.
(a) Subject to Section 3(c), 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, persons, company,
partnership, corporation or business 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 is in
the process of initiating business operations during the term of this
covenant (collectively, the "Territory");
-3-
<PAGE>
(ii) call upon any person who is, at that time, within the
Territory, an employee of the Company (including the respective
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 respective subsidiaries thereof), provided
that Employee shall be permitted to call upon and hire any member of
his or her 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 respective 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 respective
subsidiaries thereof) or for which the Company made an acquisition
analysis, for the purpose of acquiring such entity, provided that the
Employee shall not be charged with violating this section unless and
until the Employee shall have knowledge or notice that such prospective
acquisition candidate was called upon, or that an acquisition analysis
was made for the purpose of acquiring such entity; or
(v) disclose customers, whether in existence or proposed, of
the Company (or the respective 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.
(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 they 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.
(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
-4-
<PAGE>
and business of the Company on the date of the execution of this Agreement
and the current plans of F.Y.I.; 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 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 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 therefore, 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, 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 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 which the
court deems reasonable, and the Agreement shall thereby be reformed.
(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 stated at the beginning
of this paragraph 3, during which the agreements and covenants of Employee
made in this paragraph 3 shall
-5-
<PAGE>
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. [Intentionally left blank.]
5. TERM; TERMINATION; RIGHTS ON TERMINATION. The term of this
Agreement shall begin on the date hereof and continue for one (1) year (the
"Initial Term"). This Agreement and Employee's employment may be terminated
in any one of the followings 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 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 Initial Term of this Agreement or for one (1) year,
whichever amount is greater.
(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
-6-
<PAGE>
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. Employee may only be terminated
without cause by the Company during the Initial Term hereof if such
termination is approved by at least sixty-six percent (66%) of the
members of the Board of Directors of F.Y.I. 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 Initial Term of this Agreement or
for one (1) year, whichever amount is greater. Further, in the event
any termination by the Employee for Good Reason, the period set forth
in paragraph 3(a) during which the terms of paragraph 3 apply shall be
reduced to one (1) year from the date of termination of employment.
(e) CHANGE IN CONTROL OF F.Y.I. Refer to paragraph 12 below.
(f) TERMINATION BY EMPLOYEE FOR GOOD REASON. The Employee may
terminate his employment hereunder for "Good Reason." As used herein,
"Good Reason" shall mean the continuance of any of the following after
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) the assignment to Employee of any duties
materially and adversely inconsistent with the 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 the 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;
-7-
<PAGE>
(ii) Employee's removal from, or failure to be
reappointed or reelected to, Employee's position under 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, 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 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 Initial Term of this Agreement
or for one (1) year, whichever amount is greater. Further, in the event any
termination by the Employee for Good Reason, the period set forth in paragraph
3(a) during which the terms of paragraph 3 apply shall be reduced to one (1)
year from the date of termination of employment.
(g) TERMINATION BY EMPLOYEE WITHOUT CAUSE. If Employee resigns
or otherwise terminates his employment without Good Reason pursuant to
paragraph 5(f), Employee shall receive no severance compensation.
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 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, 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 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,
their representatives, vendors or customers which pertain to the business of
the
-8-
<PAGE>
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 which is collected by Employee shall be 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 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 relationships or 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.
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,
-9-
<PAGE>
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 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.
(h) 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.
(i) In the event of a pending Change in Control wherein the Company
and Employee have not received written notice at least five (5) 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, then such Change in Control shall be deemed to be
a termination of this Agreement by the Company without cause and the
applicable portions of paragraph 5(d) will apply; however, under such
circumstances, the amount of the
-10-
<PAGE>
lump-sum severance payment due to Employee shall be triple the amount
calculated under the terms of paragraph 5(d) and the non-competition
provisions of paragraph 3 shall not apply whatsoever.
(j) In any Change in Control situation in which Employee has
received written notice from the successor to the Company that such successor
is willing to assume the Company's obligations hereunder, Employee may
nonetheless, at his sole discretion, elect to terminate this Agreement by
providing written notice to the Company at least five (5) business days prior
to the anticipated closing of the transaction giving rise to the Change in
Control. In such case, the applicable provisions of paragraph 5(d) will apply
as though the Company had terminated the Agreement without cause; however,
under such circumstances, the amount of the lump-sum severance payment due to
Employee shall be 150% the amount calculated under the terms of paragraph
5(d) and the non-competition provisions of paragraph 3 shall all apply for a
period of one (1) year from the effective date of termination.
(k) For purposes of applying paragraph 5 under the
circumstances described in (b) and (c) above, the effective date of
termination will be the closing date of the transaction giving rise to the
Change in Control and all compensation, reimbursements and lump-sum payments
due Employee must be paid in full by the Company at or prior to such closing.
Further, Employee will be given sufficient time and opportunity to elect
whether to exercise all or any of his vested options to purchase F.Y.I.
Common Stock, including any options with accelerated vesting under the
provisions of F.Y.I.'s 1995 Long-Term Incentive Compensation Plan, such that
he may convert the options to shares of F.Y.I. Common Stock at or prior to
the closing of the transaction giving rise to the Change in Control, if he so
desires.
(l) A "Change in Control" shall be deemed to have occurred if:
(i) any person, other than the F.Y.I. or an employee benefit
plan of F.Y.I., 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
F.Y.I.'s registration statement with respect to its initial public
offering, constitute the Board of Directors of F.Y.I. (the "Original
Directors") or (B) who thereafter are elected to the Board of Directors
of F.Y.I. and whose election,
-11-
<PAGE>
or nomination for election, to the Board of Directors of F.Y.I. 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 F.Y.I. and whose election,
or nomination for election, to the Board of Directors of F.Y.I. 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
F.Y.I.;
(iii) the stockholders of F.Y.I. shall approve a merger,
consolidation, recapitalization, or reorganization of F.Y.I., 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 F.Y.I. immediately prior to the transaction, with the
voting power of each such continuing holder relative to other such
continuing holders not substantially altered in the transaction; or
(iv) the stockholders of F.Y.I. shall approve a plan of
complete liquidation of F.Y.I. or an agreement for the sale or
disposition by F.Y.I. of all or a substantial portion of F.Y.I.'s
assets (i.e., 50% or more of the total assets of F.Y.I.).
(m) Employee shall be reimbursed by the Company or its
successor for any excise taxes that Employee incurs under Section 4999 of the
Internal Revenue Code of 1986, as a result of any Change in Control. Such
amount will be due and payable by the Company or its successor within ten
(10) days after Employee delivers a written request for reimbursement
accompanied by a copy of his tax return(s) showing the excise tax actually
incurred by Employee and detailed supporting calculations of an accounting
firm selected by Employee used to determine such excise tax. If the Company's
accounting firm shall disagree with such determination, the parties shall
select an independent accounting firm to make a final determination. The
costs of such independent accounting firm shall be shared equally by the
parties.
13. COMPLETE AGREEMENT. This Agreement is not a promise of future
employment. Employee has no oral representations, understandings or
-12-
<PAGE>
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 written 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 F.Y.I.: Locke Liddell & Sapp LLP
2200 Ross Avenue, Suite 2200
Dallas, Texas 75201-6776
Attention: Charles C. Reeder, Esq.
With a copy to: F.Y.I. Incorporated
3232 McKinney Avenue, Suite 900
Dallas, Texas 75204-7418
Attention: Margot T. Lebenberg
Senior Vice President and General Counsel
To Employee: Jonathan B. Shaw
25 Evan Way
Pikesville, MD 21208
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
-13-
<PAGE>
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 direct expense of
any arbitration proceeding shall be borne by the Company.
17. [Intentionally left blank.]
18. GOVERNING LAW. This Agreement shall in all respects be construed
according to the laws of the State of Delaware.
19. 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.
-14-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
EMPLOYEE:
/s/ Jonathan B. Shaw
-----------------------------
F.Y.I. INCORPORATED
By:/s/ Ed H. Bowman, Jr.
------------------------------
Title: President and Chief Executive Officer
<PAGE>
FIFTH AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT
THIS FIFTH AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT (this
"AMENDMENT") is entered into to be effective as of April 28, 2000, by and
among F.Y.I. Incorporated, a Delaware corporation ("F.Y.I."), the Lenders (as
such term is defined in the Credit Agreement, as hereinafter defined) which
are parties hereto, Paribas, a bank organized under the laws of France acting
through its Chicago Branch, as agent for itself and the other Lenders (the
"AGENT"), and Bank of America, N.A., and Bank One, Texas, N.A., as co-agents
for themselves and the other Lenders (the "CO-AGENTS").
RECITALS
A. F.Y.I., the Agent, the Co-Agents and certain of the Lenders
entered into that certain Amended and Restated Credit Agreement dated as of
February 17, 1998 (as amended by a First Amendment thereto dated as of August
3, 1998, a Second Amendment thereto dated as of April 13, 1999, a Third
Amendment thereto dated August 13, 1999, and a Fourth Amendment dated as of
November 10, 1999, the "CREDIT AGREEMENT"), pursuant to which, among other
things, the Lenders agreed to make certain loans available to F.Y.I. upon the
terms and conditions set forth therein;
B. F.Y.I., the Agent, the Co-Agents and the Lenders desire to amend
the Credit Agreement to increase the aggregate principal amount of the
Commitments and in certain other respects as more fully set out herein.
AGREEMENT
NOW, THEREFORE, for and in consideration of the premises and other
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, F.Y.I., the Lenders, the Agent and the Co-Agents hereby agree
as follows:
1. TERMS. All terms used herein which begin with an initial
capital letter shall, unless otherwise expressly defined herein, have the
same definitions assigned to such terms in the Credit Agreement, as modified
by this Amendment.
2. AMENDMENT TO THE COMMITMENT. Effective as of the date
hereof, the aggregate principal amount of the Commitments is increased from
$150,000,000 to $175,000,000. The amount set forth opposite the name of each
Lender on the signature pages hereto under the heading "Commitment" shall
represent the obligation of such Lender after giving effect to this
Amendment..
3. DEFINITIONS.
(a) Effective as of the date hereof, the following definition
appearing in SECTION 1.1 of the Credit Agreement is hereby amended to
read in its entirety as follows:
"COMMITMENT" means, as to any Lender, the obligation
of such Lender to make or continue Loans and incur or
participate in Letter of Credit Liabilities hereunder in an
aggregate principal amount at any one time outstanding up to
but not exceeding the amount set forth opposite the name of
such Lender on the signature pages to the Fifth Amendment to
this Agreement under the heading "Commitment" or, if such
Lender is a party to an Assignment and Acceptance, the amount
set forth in the most recent Assignment and Acceptance of such
Lender, as the same may be reduced or terminated pursuant to
SECTION 2.13 or 11.2, and
FIFTH AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT - Page 1
<PAGE>
"COMMITMENTS" means such obligations of all Lenders. As of
the date of the execution of the Fifth Amendment to this
Agreement, the aggregate principal amount of the
Commitments is $175,000,000.
(b) Effective as of the date hereof, the following
additional definitions are added to SECTION 1.1 of the Credit
Agreement to appear therein in its proper alphabetical order and to
read in its entirety as follows:
"FIFTH AMENDMENT" means the Fifth Amendment to this
Agreement dated as of April 28, 2000.
4. CONDITIONS PRECEDENT. This Amendment shall be effective
upon the occurrence of each of the following:
(a) FIFTH AMENDMENT. The execution of this Amendment
by each of F.Y.I., the Agent, the Co-Agents and the Lenders;
(b) CONSENTS. The execution of a consent to this
Amendment by each of the Loan Parties other than F.Y.I. in the form
requested by the Agent, which, among other things, shall reaffirm
the Guaranty and Security Agreement, if any, executed by each such
Loan Party;
(c) NOTES. New Notes duly completed and executed by
F.Y.I. and payable, respectively, to the order of each Lender whose
Commitment is increased hereby in the principal amount of such
Lender's Commitment after giving effect to this Amendment;.
(d) RESOLUTIONS. Resolutions of the board of directors
of F.Y.I. certified by its Secretary or an Assistant Secretary or
other analogous officer or representative which authorize the
execution, delivery and performance by the Loan Parties of this
Amendment and such other Loan Documents to be executed in connection
herewith to which F.Y.I. or any other Loan Party is to be a party;
(e) OFFICERS' CERTIFICATE. An officers' certificate of
F.Y.I. certifying as to the incumbency and signature of each officer
of the Loan Parties executing this Amendment and the other Loan
Documents to be executed in connection herewith, as to no changes to
such Loan Parties' articles or certificates of incorporation, other
analogous constitutional documents, or bylaws since the copies
thereof most recently certified and delivered to the Agent, and as
to the continuing existence and good standing of each Loan Party,
such certificate to be dated as of a current date and in form
reasonably satisfactory to the Agent and its counsel;
(f) PAYMENT OF FEES AND EXPENSES. F.Y.I. shall have
paid all fees and expenses of or incurred by the Agent and its
counsel to the extent billed on or before the date hereof and
payable pursuant to this Amendment;
(g) OPINIONS OF COUNSEL. A favorable opinion of Locke
Liddell & Sapp LLP, counsel for the Loan Parties, in form and
substance satisfactory to the Agent with respect to F.Y.I. and its
Subsidiaries;
(h) LENDER COMMITMENT FEES. F.Y.I. shall have paid all
fees and expenses to Agent on behalf of, respectively, each Lender
whose Commitment is increased hereby as set forth in that certain
fee letter dated as of April 28, 2000, between Agent and F.Y.I.; and
FIFTH AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT - Page 2
<PAGE>
(i) PROCEEDINGS SATISFACTORY. All matters and
proceedings taken in connection with this Amendment and the other
Loan Documents to be delivered in connection herewith shall be
reasonably satisfactory to the Agent and its counsel.
Borrower shall deliver, or cause to be delivered, to the Agent
sufficient counterparts of each agreement, document or instrument to be
received by the Agent under this SECTION 4 to permit the Agent to
distribute a copy of the same to each Lender.
5. REPRESENTATION AND WARRANTIES. F.Y.I. represents and warrants
to the Agent and each Lender that:
(a) the representations and warranties made by F.Y.I.
in the Loan Documents, as the same are amended hereby, are true and
correct at the time this Amendment is executed and delivered, except
to the extent that such representations and warranties are expressly
by their terms made only as of the Closing Date or another specified
date. F.Y.I. further represents and warrants to the Agent and the
Lenders that: (i) the execution, delivery and performance of this
Amendment and any and all other Loan Documents executed and/or
delivered in connection herewith have been authorized by all
requisite corporate action on the part of F.Y.I. and the other Loan
Parties, as appropriate, and will not violate the articles of
incorporation or bylaws of F.Y.I. or such other Loan Parties; (ii)
no Event of Default has occurred and is continuing and no event or
condition has occurred that with the giving of notice or lapse of
time or both would be an Event of Default; and (iii) F.Y.I. is in
full compliance with all covenants and agreements contained in the
Credit Agreement as amended hereby; and
(b) the Total Debt to EBITDA Ratio computed as of and
for the twelve calendar month period most recently ended is equal to
or less than 2.00 to 1.00.
6. COSTS. F.Y.I. agrees to pay all reasonable costs incurred in
connection with the negotiation, preparation, execution and consummation of this
Amendment and the transactions preceding and contemplated by this Amendment
including, without limitation, the reasonable fees and expenses of Jenkens &
Gilchrist, P.C., counsel to the Agent.
7. Miscellaneous.
(a) HEADINGS. Section headings are for reference only,
and shall not affect the interpretation or meaning of any provision
of this Amendment.
(b) NO WAIVER. No failure on the part of the Agent or
the Lenders to exercise, and no delay in exercising, and no course
of dealing with respect to, any right, power or privilege under the
Loan Documents shall operate as a waiver thereof, and no single or
partial exercise of any right, power or privilege under the Loan
Documents shall preclude any other or further exercise thereof or
the exercise of any other right, power or privilege.
(c) EFFECT OF THIS AMENDMENT. The Credit Agreement, as
amended by this Amendment, shall remain in full force and effect
except that any reference therein, or in any other Loan Document,
referring to the Credit Agreement, shall be deemed to refer to the
Credit Agreement, as amended by this Amendment.
(d) GOVERNING LAW. EXCEPT TO THE EXTENT THAT THE
CREDIT AGREEMENT EXPRESSLY PROVIDES OTHERWISE, THIS AMENDMENT SHALL
BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE
FIFTH AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT - Page 3
<PAGE>
STATE OF TEXAS.
(e) COUNTERPARTS. This Amendment may be executed by
the different parties hereto on separate counterparts, each of
which, when so executed, shall be deemed an original, but all such
counterparts shall be construed as but one and the same Amendment.
(f) NO ORAL AGREEMENTS. THE CREDIT AGREEMENT, AS
AMENDED BY THIS AMENDMENT, TOGETHER WITH THE OTHER LOAN DOCUMENTS,
REPRESENTS THE ENTIRE AGREEMENT AMONG THE PARTIES, AND MAY NOT BE
CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT
ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL
AGREEMENTS AMONG THE PARTIES.
(Remainder of page intentionally left blank)
FIFTH AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT - Page 4
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be executed by their respective duly authorized officers as of the date first
above written.
F.Y.I.:
F.Y.I. INCORPORATED
By: /s/ Timothy J. Barker
------------------------------
Timothy J. Barker
Senior Vice President
LENDERS:
Commitment: PARIBAS, as Agent and a Lender
$35,000,000
By: /s/ Clark C. King, III
------------------------------
Name: Clark C. King III
Title: Managing Director
By: /s/ Michael C. Colias
------------------------------
Name: Michael C. Colias
Title: Assistant Vice President
Commitment: BANK OF AMERICA, N.A.,
$35,000,000 as Co-Agent and a Lender
By: /s/ Steven A. Mackenzie
------------------------------
Name: Steven A. Mackenzie
Title: Vice President
Commitment: BANK ONE, TEXAS, N.A.,
$35,000,000 as Co-Agent and a Lender
By: /s/ Gina A. Norris
------------------------------
Name: Gina A. Norris
Title: Managing Director
Commitment: TEXAS CAPITAL BANK,
$10,000,000 NATIONAL ASSOCIATION, as a Lender
By: /s/ Russell Hartsfeld
------------------------------
Name: Russell Hartsfield
Title: Senior Vice President
FIFTH AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT - Page 5
<PAGE>
Commitment: WELLS FARGO BANK TEXAS,
$35,000,000 NATIONAL ASSOCIATION, successor by
consolidation to Wells Fargo Bank
(Texas), National Association, as a
Lender
By: /s/ Zach S. Johnson
------------------------------
Name: Zach S. Johnson
Title: Assistant Vice President
Commitment: SUNTRUST BANK, ATLANTA,
$25,000,000 as a Lender
By: /s/ Daniel S. Komitor
------------------------------
Name: Daniel S. Komitor
Title: Director
FIFTH AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT - Page 6
<PAGE>
Each of the undersigned hereby consents and agrees to this
Amendment, and each of the undersigned agrees that the Guaranty and the
Security Agreements (if any) executed by such Loan Party shall remain in full
force and effect and shall continue to be the legal, valid and binding
obligations of such Loan Party enforceable against such Loan Party in
accordance with its respective terms and agrees that the "Obligations," as
defined in the Credit Agreement, shall include all indebtedness under the
Credit Agreement, as amended hereby, including, without limitation, the
indebtedness evidenced by the new Notes executed pursuant hereto.
LOAN PARTIES:
APS SERVICES ACQUISITION CORP.
ACADIAN CONSULTANTS CORP.
ADVANCED DIGITAL GRAPHICS, INC.
AMERICAN ECONOMICS GROUP ACQUISITION CORP.
AMERICAN ECONOMICS GROUP, INC.
ASSOCIATE RECORD TECHNICIAN SERVICES ACQUISITION CORP.
B&B (BALTIMORE-WASHINGTON) ACQUISITION CORP.
BANKNOTE PRINTING COMPANY
CH ACQUISITION CORP.
CALIFORNIA MEDICAL RECORD SERVICE ACQUISITION CORP.
COPYRIGHT ACQUISITION CORP.
COPYRIGHT INC.
CREATIVE MAILINGS, INC.
DATA ENTRY & INFORMATIONAL SERVICES ACQUISITION CORP.
DATA ENTRY & INFORMATIONAL SERVICES, INC.
DPAS ACQUISITION CORP.
DEBARI ASSOCIATES ACQUISITION CORP.
DELIVEREX ACQUISITION CORP. (successor in interest by merger to Deliverex
Sacramento Acquisition Corp.)
DELIVEREX SACRAMENTO ACQUISITION CORP.
DISC ACQUISITION CORP.
DOCTEX ACQUISITION CORP.
EAGLE LEGAL SERVICES ACQUISITION CORP.
ECONOMIC RESEARCH SERVICES, INC.
EXIGENT COMPUTER GROUP ACQUISITION CORP.
EXIGENT COMPUTER GROUP, INC.
F.Y.I. CORPORATE ACQUISITION CORP.
F.Y.I. DIRECT INC.
F.Y.I. DISCOVERY SERVICES INCORPORATED (formerly known as Robert A. Cook
Acquisition Corp. and successor in interest by merger to Delaware Major
Acquisition Corp.)
F.Y.I. ETRIEVE INCORPORATED
F.Y.I. HEALTHSERVE INCORPORATED
F.Y.I. IMAGE INC.
F.Y.I. INPUT INC.
F.Y.I. INTEGRATION SOLUTIONS INC.
F.Y.I. LEGAL INCORPORATED
F.Y.I. PRINT INC.
F.Y.I. RECORDS INC.
F.Y.I. STORAGE INC.
F.Y.I. INVESTMENTS, INC.
GLOBAL DIRECT ACQUISITION CORP.
FIFTH AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT - Page 7
<PAGE>
GLOBAL DIRECT, INC.
HEALTHSERVE V.C. CORP.
IMAGENT ACQUISITION CORP.
IMC MANAGEMENT, INC.
INFORMATION MANAGEMENT SERVICES ACQUISITION CORP.
INFORMATION MANAGEMENT SERVICES, INC.
INPUT MANAGEMENT, INC.
LIFO MANAGEMENT, INC.
LEONARD ARCHIVES ACQUISITION CORP.
MAILING AND MARKETING ACQUISITION CORP.
MANAGED CARE PROFESSIONALS ACQUISITION CORP.
MANAGED CARE PROFESSIONALS, INC.
MAVRICC MANAGEMENT SYSTEMS, INC.
MMS ESCROW AND TRANSFER AGENCY, INC.
MMS SECURITIES, INC.
MEDICOPY ACQUISITION CORP.
MICRO PUBLICATION SYSTEMS, INC.
MICROFILM DISTRIBUTION SERVICES, INC.
MICROFILMING SERVICES, INC.
MINNESOTA MEDICAL RECORD SERVICE ACQUISITION CORP.
NBDE ACQISITON CORP.
NORTHERN MINNESOTA MEDICAL RECORD SERVICES ACQUISITION CORP.
PENINSULA RECORD MANAGEMENT, INC.
PERMANENT RECORDS MANAGEMENT, INC.
PMI IMAGING SYSTEMS ACQUISITION CORP.
PMI IMAGING SYSTEMS, INC.
PREMIER ACQUISITION CORP.
QUALITY DATA CONVERSIONS ACQUISITION CORP.
QUALITY DATA CONVERSIONS, INC.
QCS INET ACQUISITION CORP.
QUALITY COPY ACQUISITION CORP.
RAC (CALIFORNIA) ACQUISITION CORP.
RESEARCHERS ACQUISITION CORP.
RECORDEX ACQUISITION CORP.
RUST CONSULTING ACQUISITION CORP.
RUST CONSULTING, INC.
TAPS ACQUISITION CORP.
T.C.H. GROUP, INC.
TCH MAILHOUSE, INC.
THE RUST CONSULTING GROUP, INC.
ZIA INFORMATION ANALYSIS GROUP, INC. (formerly known as ZIA ACQUISITION CORP.)
ZIP SHRED CANADA ACQUISITION CORP.
ZIPSHRED, INC.
By: /s/ Timothy J. Barker
------------------------------------------------------------------------
Timothy J. Barker, Authorized Officer for each of the corporations above
FIFTH AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT - Page 8
<PAGE>
INPUT OF TEXAS, L.P. (formerly known as Input of Texas, Inc.)
By: Input Management, Inc., its general partner
By: /s/ Timothy J. Barker
-----------------------------------------
Timothy J. Barker, Vice President
LIFO SYSTEMS, L.P. (formerly known as LIFO Systems, Inc.)
By: LIFO Management, Inc., its general partner
By: /s/ Timothy J. Barker
-----------------------------------------
Timothy J. Barker, Vice President
PERMANENT RECORDS, L.P. (successor, by merger, to Texas Medical Record Service
Acquisition Corp. and Permanent Records Acquisition Corp.)
By: Permanent Records Management, Inc., its general partner
By: /s/ Timothy J. Barker
-----------------------------------------
Timothy J. Barker, Vice President
IMC, L.P.
By: IMC Management, Inc., its general partner
By: /s/ Timothy J. Barker
-----------------------------------------
Timothy J. Barker, Vice President
FIFTH AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT - Page 9
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 11,930
<SECURITIES> 0
<RECEIVABLES> 92,729
<ALLOWANCES> (8,828)
<INVENTORY> 6,425
<CURRENT-ASSETS> 119,432
<PP&E> 89,469
<DEPRECIATION> (38,790)
<TOTAL-ASSETS> 403,134
<CURRENT-LIABILITIES> 71,238
<BONDS> 127,052
0
0
<COMMON> 151
<OTHER-SE> 195,582
<TOTAL-LIABILITY-AND-EQUITY> 403,134
<SALES> 6,092
<TOTAL-REVENUES> 107,765
<CGS> 3,885
<TOTAL-COSTS> 89,147
<OTHER-EXPENSES> (177)
<LOSS-PROVISION> 231
<INTEREST-EXPENSE> 1,852
<INCOME-PRETAX> 11,937
<INCOME-TAX> 4,775
<INCOME-CONTINUING> 7,162
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,162
<EPS-BASIC> 0.49
<EPS-DILUTED> 0.46
</TABLE>
