-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, KH9Meozu/2cefUx3UYU7XL9EccgSPt/g7PSFlVVd24rUYzVBJGtZ82D7PP6rW0/i oLdtugvbHR4NADDszIffAg== 0000950134-98-001940.txt : 19980312 0000950134-98-001940.hdr.sgml : 19980312 ACCESSION NUMBER: 0000950134-98-001940 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 13 CONFORMED PERIOD OF REPORT: 19971231 FILED AS OF DATE: 19980311 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: FYI INC CENTRAL INDEX KEY: 0000936931 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-MANAGEMENT SERVICES [8741] IRS NUMBER: 752560895 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: SEC FILE NUMBER: 000-27444 FILM NUMBER: 98563721 BUSINESS ADDRESS: STREET 1: 3232 MCKINNEY AVE STREET 2: STE 900 CITY: DALLAS STATE: TX ZIP: 75204 BUSINESS PHONE: 2149537555 MAIL ADDRESS: STREET 1: 3232 MCKINNEY AVE STREET 2: STE 900 CITY: DALLAS STATE: TX ZIP: 75204 10-K405 1 FORM 10-K405 FOR FISCAL YEAR END 12/31/97 1 ================================================================================ SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ------------------------ FORM 10-K (MARK ONE) [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 1997 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES 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 incorporation or organization) Identification No.) 3232 MCKINNEY AVE., SUITE 900, DALLAS, TEXAS 75204 (Address of principal executive offices) (zip code)
(214) 953-7555 (Registrant's telephone number, including area code) SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
NAME OF EACH EXCHANGE TITLE OF EACH CLASS ON WHICH REGISTERED ------------------- --------------------- None None
Securities registered pursuant to Section 12(g) of the Act: COMMON STOCK, PAR VALUE $.01 PER SHARE (Title of Class) 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 [ ] INDICATE BY CHECK MARK IF DISCLOSURE OF DELINQUENT FILERS PURSUANT TO ITEM 405 OF REGULATION S-K IS NOT CONTAINED HEREIN, AND WILL NOT BE CONTAINED, TO THE BEST OF REGISTRANT'S KNOWLEDGE, IN DEFINITIVE PROXY OR INFORMATION STATEMENTS INCORPORATED BY REFERENCE IN PART III OF THIS FORM 10-K OR ANY AMENDMENT TO THIS FORM 10-K. YES [X] NO [ ] The aggregate market value of voting stock held by non-affiliates of the Registrant as of February 19, 1998 was $241,718,354, based on the last sale price ($25.125) of the Registrant's Common Stock, $.01 par value per share, on the Nasdaq National Market on February 19, 1998. As of February 19, 1998, 11,377,332 shares of the Registrant's Common Stock were outstanding. DOCUMENTS INCORPORATED BY REFERENCE: Portions of the Proxy Statement for the 1998 Annual Meeting of Stockholders to be filed with the Securities and Exchange Commission not later than 120 days after the end of the Company's fiscal year ended December 31, 1997 are incorporated by reference into Part III of this Form 10-K. ================================================================================ 2 F.Y.I. INCORPORATED 1997 FORM 10-K ANNUAL REPORT TABLE OF CONTENTS
PAGE ---- PART I Item 1. Business.................................................... 3 Item 2. Properties.................................................. 14 Item 3. Legal Proceedings........................................... 14 Item 4. Submission of Matters to a Vote of Security Holders......... 14 PART II Item 5. Market for Registrant's Common Equity and Related Stockholder Matters......................................... 15 Item 6. Selected Financial Data..................................... 16 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations................................... 18 Item 8. Financial Statements and Supplementary Data................. 23 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.................................... 43 PART III Item 10. Directors and Executive Officers of the Registrant.......... 44 Item 11. Executive Compensation...................................... 44 Item 12. Security Ownership of Certain Beneficial Owners and Management.................................................. 44 Item 13. Certain Relationships and Related Transactions.............. 44 PART IV Item 14. Exhibits, Financial Statements Schedules, and Reports on Form 8-K.................................................... 44
2 3 PART I ITEM 1. BUSINESS GENERAL F.Y.I. Incorporated ("F.Y.I." or the "Company") was founded in September 1994 to create a national, single source provider of document and information outsourcing solutions to document and information intensive industries, including: healthcare, law, banking, insurance, retailing, manufacturing and government. The Company's primary strategy is to acquire, integrate and operate companies in the highly fragmented document and information outsourcing solutions industry. In January 1996, F.Y.I. acquired, simultaneously with the closing of its initial public offering (the "IPO"), seven document management services businesses (the "Founding Companies"). Since the IPO, and through December 31, 1997, the Company acquired 29 additional companies (the "Subsequent Acquisitions"). Since December 31, 1997, the Company has acquired five additional companies, for a total of 41 acquisitions since the Company's inception. The Company intends to continue to aggressively pursue strategic acquisitions in existing and new markets, cross-sell its full range of services to its current customer base and expand the marketing of its services to new customers. An estimated four trillion documents are generated annually in the United States. A significant portion of the processing, management and storage of these documents is outsourced to small service companies. Further, the Company believes that the document and information outsourcing solutions market is growing due to several factors, including: (i) government regulations that require lengthy document retention periods and rapid accessibility for many types of records; (ii) increased customer expectations of low cost access to records on short notice and, in many instances, at disparate locations; (iii) the increasing litigiousness of society, necessitating access to relevant documents and records for extended periods; and (iv) continuing advancements in computer, networking, facsimile, printing and other technologies which have greatly facilitated the production and wide distribution of documents. The Company's target clients generate large volumes of documents and require specialized processing, distribution, storage and retrieval of these documents and the information they contain. The Company believes that these clients will continue to increase their outsourcing of document and information management in order to maintain their focus on core operating competencies and revenue generating activities; reduce fixed costs, including labor and equipment costs; and gain access to new technologies without incurring the expense and risk of near-term obsolescence of such technologies. The document and information outsourcing solutions business is highly fragmented. The Company believes that many small document management services businesses: (i) have insufficient capital for expansion; (ii) cannot keep abreast of rapidly changing technologies; (iii) lack effective marketing programs; and (iv) are unable to meet the needs of large, geographically dispersed clients. In addition, there are a limited number of options for owners of such businesses to obtain liquidity by selling their businesses. As a result, the Company believes that many owners of such businesses will continue to be receptive to its acquisition program. BUSINESS STRATEGY The Company's goal is to become a national, single source provider of document and information outsourcing solutions to information and document intensive industries, including: healthcare, law, banking, insurance, retailing, manufacturing and government. In order to achieve this goal, the Company is implementing its focused business strategy based on the following key principles: Establish Full Service Operations in Multiple Metropolitan Areas. The Company intends to establish a full range of document management operations to meet the diverse needs of targeted metropolitan areas by implementing its "fill-in-the-grid" strategy through selected acquisitions and expansion of existing businesses. Ultimately, the Company will seek to achieve a national scope of coverage so that it can implement a national sales and service policy. 3 4 Capitalize on Cross-Selling Opportunities. The Company intends to continue to cross-sell in two primary ways. First, the Company intends to sell its existing clients additional document and information solutions provided by the Company's other businesses. Second, the Company intends to use its knowledge with respect to specific industry segments to sell such services to new clients. Achieve Cost Savings Through Consolidation and Economies of Scale. The Company believes that it will be able to achieve significant savings by combining a number of general and administrative functions at the corporate level, by reducing or eliminating redundant functions and facilities, and by implementing corporate purchasing programs. For example, the Company has implemented an insurance plan, employee benefits programs and purchasing plans for certain items, such as paper, microfilm and storage racks for the Company and its subsidiaries, on a combined basis. To the extent that the Company is able to expand through the acquisition of additional document and information management businesses, the Company believes that such cost savings will continue to accrue. Operate With a Decentralized Management Strategy. The Company believes that the experienced local management teams of its acquired businesses have a valuable understanding of their respective markets and businesses and have existing client relationships upon which they may capitalize. Accordingly, the Company is operating and expects to continue to operate with a decentralized management strategy. Local management will remain empowered to make most of the day-to-day operating decisions at each location and will be primarily responsible for the profitability and growth of that location. Although the Company intends to have local management operate with a high degree of autonomy, the Company believes that regular communication between the individual businesses and the Company's executive management team will be integral to realizing the benefits afforded by the consolidation of these businesses into a single company. The Company is organized around strategic business units focusing on common services to common customer bases enabling synergies and cross-selling opportunities. ACQUISITION STRATEGY Since the Company's inception, it has acquired 41 companies. The Company believes that there are significant opportunities to consolidate the capabilities and resources of a number of additional existing document and information outsourcing solutions businesses with the intent of providing customers with a single source document and information outsourcing solution. Accordingly, the Company is pursuing a "fill-in-the-grid" strategy aimed at providing comprehensive document and information outsourcing solutions services based on the demands of the given geographical market. The Company has implemented an aggressive, three-tiered acquisition program consisting of "beachhead acquisitions" to enter additional geographic markets, "service expansion acquisitions" to acquire additional service capabilities within such markets and "tuck-in" acquisitions to gain market share. In order to enter a new geographic market, the Company makes "beachhead" acquisitions of leading document and information outsourcing solutions companies with strong market positions. In analyzing beachhead acquisition candidates, the Company focuses on acquiring businesses that have one or more of the following characteristics: (i) experienced and high quality management; (ii) multiple locations, preferably with operations in two to three contiguous markets; (iii) a strong customer franchise; and (iv) a history of profitability. The second tier of the Company's acquisition program involves the acquisition of related document and information outsourcing solutions services companies that will increase the Company's offered services in a particular region. In making such "service expansion" acquisitions, the Company assesses the services required by the specific market's customer base and then seeks to acquire leading providers of such services within that geographic area. Finally, in order to increase its market share and realize economies of scale, the third tier of the Company's acquisition program is the acquisition of smaller "tuck-in" businesses that can be easily assimilated into the operations of the Company's existing businesses. Such tuck-in businesses are intended to enable the Company to benefit from the operating leverage of its existing businesses by acquiring additional market share and revenue while eliminating or reducing certain general, administrative and operating costs 4 5 previously associated with such revenue. Accordingly, the Company targets tuck-in businesses with strong customer relationships. The Company believes that it will continue to be a successful acquiror of other document and information outsourcing solutions companies due to its strategy of retaining selected owners and management of acquired companies, its access to growth capital and its ability to offer sellers cash for their business as well as an ongoing equity stake in the Company. Nevertheless, there are numerous risks associated with the Company's acquisition program. See "-- Risk Factors -- Acquisition Strategy," "-- Reliance on Key Personnel" and "-- Need for Additional Financing to Continue Acquisition Strategy." SERVICES OFFERED The Company provides a wide variety of document and information outsourcing solutions and draws upon its available services to develop solutions for its clients based on their specific needs. The current document and information outsourcing solutions that are provided in certain geographic locations include: Document Management and Related Services Document and Data Conversion Services include electronic imaging services and micrographic services. Electronic imaging services involve the conversion of paper or microfilm documents into digitized information through optical scanners. Digitized information can be stored as an image or converted to code through optical character recognition (OCR) or digital imaging storage and retrieval technologies. Conversion to code provides additional processing capabilities, such as manipulation of data. In both cases, the digitized information can be stored on either a magnetic medium, such as a computer diskette, or on optical laser disks, such as compact disks. Electronic imaging is generally used because of the storage media's high speed of retrieval, its multiple indexing and text search formatting capabilities and its ability to be used to distribute output to multiple locations. Electronic imaging services are typically billed on a job-by-job basis, based on the number of images and complexity of the retrieval applications. Micrographics services involve: (i) the conversion of paper documents into microfilm images; (ii) film processing; and (iii) computer-based indexing and formatting. Typically, customers select micrographic services: (i) as a cost-competitive technology to reduce the physical size of stored records; (ii) for their long-term (over 100 years) archival capabilities; and (iii) as an intermediate step in certain imaging or reprographic applications. Data Capture and Database Management Services involve data capture (manually or through scanning or other electronic media), data consolidation and elimination, storage, maintenance, formatting and report creation. Data capture includes the conversion of text and handwritten paper media into digital files. An advantage of digital files is the ability to manipulate large amounts of data quickly and efficiently. In some cases, database services include statistical analysis of data. Direct Mail includes direct mail and fulfillment services. Direct mail and fulfillment services provide customers with rapid, reliable and cost-effective methods for making large-scale distributions of statements, reports and letters to consumers and other target audiences. Records Management Services consist of active or open shelf storage and archival storage of inactive documents. Active or open shelf storage services involve the storage, processing (i.e., indexing and formatting), retrieval, delivery and return to storage of documents on a rapid time frame. Many of such services are provided electronically. Representative uses for open shelf storage include active medical and legal case files. In many instances, open shelf storage is offered as an outsourced file room service, where documents are requested and retrieved frequently and, often, transmitted via facsimile or electronically due to the urgency of the request. Service fees generally include a monthly fee based on activity levels and volumes stored, with extra billing for specialized requests. The archiving of inactive documents involves storage for extended periods of time with a lesser emphasis on service or accessibility to stored documents. Typical uses for archival storage of inactive documents include 5 6 storage of closed files for professional services firms and documents that may be required by law to be maintained by hospitals, other healthcare institutions and financial institutions for extended periods. Service fees generally include billing for storage space, plus activity charges for each retrieval, delivery and return to storage, and ultimately for document destruction. Industry Specific Services The Company has developed industry specific services in order to address the document and information management needs of its particular clients. These industry specific services include: Healthcare Services. Healthcare services include medical records release services or processing a request for a patient's medical records from a physician, insurance company, attorney, healthcare institution or individual. The medical records release service provider initially verifies that the release is properly authorized, coordinates the retrieval of the record, determines the relevant parts of the record to be copied and delivers the copied records (or portions thereof) to the requesting party. Medical records release services are provided on-site and off-site pursuant to contracts with hospitals, other large healthcare institutions and insurance companies. The medical records release service provider bills the recipient directly and sometimes pays a fee to the hospital. Additional services include archival records storage and management, and document and data conversion. Recently, the Company acquired companies which provide attending physician statements (APS) for life and health insurance underwriting and image processing services for handling state government disability and workers' compensation claims. Litigation Support. Litigation often involves the production (i.e., delivery to opposing counsel) and management of thousands of pages of documents, extracted in their current working form from the offices and files of litigating parties and their experts, advisors and legal counsel. Litigation support services include managing the logistics of high volume document production, microfilming and/or electronic imaging, document coding, computer indexing, automated document retrieval and high speed, multiple-set reproduction of documents. Additional litigation support services include subpoena of business documents and service of process, deposition reporting services, discovery assistance, document coding, forensic analysis and other trial support services to law firms, corporations and regulated entities. These clients typically look to litigation support companies to augment their internal operations and capabilities on an as-needed, job-by-job basis. Clients are generally billed on a per unit basis. Employee and Investor Services. Employee and investor services include administration, record keeping and information processing services. Our services maintain detailed employee and/or investor records on behalf of (i) general partners to service their investors in limited partnerships, REITs and master limited partnerships; (ii) corporations to provide turn-key outsourced administration of employee stock purchase plans and employee stock option plans; and (iii) banks and broker/dealers to provide complete record keeping and administration services for additional brokerage and IRA accounts. Product Sales The Company acts as a distributor of a wide range of microfilm and business imaging supplies as well as filing and shelving supplies, software, and earns commissions on the sales of imaging systems and equipment. Material Contract. In February 1998, the Company was preliminarily awarded a five year, $30 million contract by New York State to provide document imaging services to the New York Workers' Compensation Board in support of processing workers' compensation claims for the entire State. There can be no assurance that New York State will approve the final contract. SALES AND MARKETING The Company has a broad customer base, and none of the Company's customers accounted for more than 5.0% of revenue for the year ended December 31, 1997. Historically, the Company's sales efforts have been implemented on a location-by-location basis and typically have been coordinated either through separate sales personnel or as part of the local management's responsibilities. The Company's existing local sales efforts 6 7 are supplemented through local sales representatives. The Company strives to increase its client base by attracting customers away from small, single business operators as a result of its ability to offer a broader range of solutions for its clients' document management needs. In addition, the Company intends to continue to focus on increasing revenue from its existing clients by cross-selling its services and broadening its product offerings. Once the Company gains critical mass in a number of metropolitan areas, it will seek to augment local sales and marketing efforts through the implementation of a national sales/account program. COMPETITION The document and information outsourcing solutions businesses in which the Company competes and expects to compete are highly competitive. A significant source of competition is the in-house document handling capability of the Company's target client base. There can be no assurance that these businesses will outsource more of their document management needs or that such businesses will not bring in-house services that they currently outsource. In addition, certain of the Company's competitors are larger businesses and have greater financial resources than the Company. Certain of these competitors operate in broader geographic areas than the Company, and others may choose to enter the Company's areas of operation in the future. In addition, the Company intends to continue to enter new geographic areas through internal growth and by acquiring existing companies and expects to encounter significant competition from established competitors in each of such new areas. As a result of this highly competitive environment, the Company may lose customers or have difficulty in acquiring new customers and new companies and its results of operations may be adversely affected. The Company believes that the principal competitive factors in document and information outsourcing solutions services include accuracy, reliability and security of service, client segment specific knowledge and price. The Company competes primarily on the basis of quality of service and client segment specific knowledge, and believes that it competes favorably with respect to these factors. EMPLOYEES As of December 31, 1997, the Company had approximately 2,900 full-time and 990 part-time employees. As of such date, the Company had approximately 160 employees represented by labor unions. The Company considers its relations with its employees to be good. EXECUTIVE OFFICERS OF THE COMPANY The following table sets forth certain information concerning each of the executive officers of the Company:
NAME AGE POSITION ---- --- -------- Thomas C. Walker............... 65 Chairman of the Board and Chief Development Officer Ed H. Bowman, Jr............... 51 President and Chief Executive Officer; Director David Lowenstein............... 36 Executive Vice President -- Corporate Development and Treasurer; Director Timothy J. Barker.............. 35 Senior Vice President and Chief Financial Officer Gregory R. Melanson............ 44 Senior Vice President and Director Joe A. Rose.................... 47 Senior Vice President Ronald Zazworsky............... 53 Senior Vice President John D. Kearney, Sr............ 44 Vice President -- Corporate Development Margot T. Lebenberg............ 30 Vice President, General Counsel and Secretary Gary Patton.................... 44 Vice President of Human Resources & Director of Corporate Programs
Thomas C. Walker has been Chairman of the Board of F.Y.I. since its inception in September 1994 and has been Chief Development Officer of F.Y.I. since November 1995. From September 1994 until Novem- 7 8 ber 1995, Mr. Walker held the positions of President and Chief Executive Officer. From August 1991 to December 1994, Mr. Walker was Vice President, Corporate Development, of Laidlaw Waste Systems, Inc., a subsidiary of Laidlaw, Inc., a waste management company, where he was responsible for its acquisition and divestiture program in the United States and Mexico. From May 1989 until he joined Laidlaw Waste Systems, Inc., Mr. Walker was President of Thomas C. Walker Associates, Inc., a company providing merger, acquisition and financial consulting services focusing on the waste management industry. During his career, Mr. Walker has been responsible for the acquisition or divestiture of over 150 businesses over a 30-year period. Mr. Walker holds a B.S. in Industrial Engineering from Lafayette College. In May 1989, Mr. Walker resigned from a senior executive position with a former employer and received a severance payment under the terms of his employment agreement. In July 1989, such employer commenced a proceeding in bankruptcy, and, after emerging from such proceeding and in connection with its liquidation, sought to recover Mr. Walker's severance payment as a preference claim. Mr. Walker litigated this claim but ultimately entered into a judgment requiring him to make significant payments to his former employer. In April 1993, Mr. Walker filed a voluntary petition in bankruptcy in order to discharge such judgment and two mortgage notes relating to two condominiums in Dallas, the holders of which were unwilling to renegotiate the terms of the mortgages. Mr. Walker did not seek any other relief from creditors, and the bankruptcy was discharged in February 1994. Ed H. Bowman, Jr. has been President and Chief Executive Officer and a Director of F.Y.I. since November 1995. From May 1993 to June 1995, Mr. Bowman was Executive Vice President and Chief Operating Officer of the Health Systems Group of First Data Corporation, a financial services company. Mr. Bowman was responsible for the day-to-day operations of research and development, marketing and customer service. From 1983 to 1993, Mr. Bowman served in a number of executive positions with HBO & Co. ("HBO"), including VP -- International, VP -- Marketing, Senior VP -- Customer Services, Group Senior VP -- Research and Development, and last serving as Executive Vice President and Chief Operating Officer of the Star Business Unit with responsibility for domestic operations. Prior to joining HBO, Mr. Bowman was with Andersen Consulting for 10 years, where he was elected a Partner. Mr. Bowman became a C.P.A. in 1973 and holds an M.S. from Georgia Institute of Technology and a B.B.A. from Georgia State University. Mr. Bowman is an investor and former board member of several early-stage, high-technology companies. David Lowenstein has been Executive Vice President -- Corporate Development and Acquisitions and a Director of F.Y.I. since February 1995. In November 1997, Mr. Lowenstein was named Treasurer. From July 1996 through November 1997, Mr. Lowenstein held the additional position of Chief Financial Officer. Prior to joining the Company, Mr. Lowenstein served, since February 1994, as Vice President, Business Development of Laidlaw Waste Systems, Inc., with overall responsibility for Laidlaw Waste System's acquisition and divestiture program in North America. From April 1990 until February 1994, Mr. Lowenstein served in a variety of capacities, including Director -- Corporate Development, for Laidlaw, Inc. From November 1988 to March 1990, he served as a business analyst for Tricil, Ltd., a solid and hazardous waste company that was acquired by Laidlaw, Inc. in 1990. Mr. Lowenstein has been responsible for the acquisition or divestiture of over 75 businesses in North America and Europe. Mr. Lowenstein holds a B.A. in Economics from Sir Wilfred Laurier University and an M.S. in Public and Business Administration from Carnegie Mellon University. Mr. Lowenstein is a citizen of the Dominion of Canada residing in the United States. Timothy J. Barker has been Senior Vice President and Chief Financial Officer of F.Y.I. since November 1997. From November 1995 to November 1997, Mr. Barker held the positions of Chief Accounting Officer and Controller of F.Y.I. Prior to joining F.Y.I. as a full-time consultant in June 1995, Mr. Barker was a manager with Arthur Andersen LLP, where he served in various capacities over a nine-year period. Mr. Barker served as Vice President of Financial Planning and Analysis for Sunbelt National Mortgage Corporation from June 1993 to October 1994. Mr. Barker holds a B.A. in Accounting from Texas Tech University and has been a C.P.A. since 1985. Greg Melanson has been Senior Vice President since February 1998 and a Director of the Company and the Chairman of the Board, President and Chief Executive Officer of Researchers Acquisition Corp. 8 9 ("Researchers"), a wholly-owned subsidiary of the Company, since the closing of the IPO. Prior to the IPO and since 1978, Mr. Melanson held such offices with the predecessor of Researchers. Mr. Melanson has been in the litigation support services business since 1975. Mr. Melanson holds a B.A. from the University of Southern California. Joe A. Rose has been Senior Vice President of F.Y.I. since July 1997. From May 1995 through January 1997, Mr. Rose was President and CEO of FormMaker Software, Inc. From May 1993 through May 1995, Mr. Rose was Corporate Vice President with John H. Harland Company and President and CEO of its subsidiary, Formation Technology, Inc. From July 1988 through May 1993, Mr. Rose served as Executive Vice President with National Data Corporation. Mr. Rose holds a B.A. from Texas Tech University. Ronald Zazworsky has been Senior Vice President of F.Y.I. since October 1997. From February 1994 until July 1997, Mr. Zazworsky was Senior Vice President at Medaphis Corporation. From April 1992 to February 1994, Mr. Zazworsky was President and CEO at Habersham Banking Solutions, Inc. Prior to 1992, Mr. Zazworsky was employed at HBO as Regional Vice President for eight years. Previously, Mr. Zazworsky held various sales, marketing and management positions at IBM. Mr. Zazworsky holds a B.A. from Gettysburg College and an M.B.A. from Emory University. John D. Kearney, Sr. has been Vice President of Corporate Development of F.Y.I. since January 1998. From July 1995 until joining the Company, Mr. Kearney was a Managing Director and Senior Vice President of Corporate Finance at Rauscher Pierce Refsnes, Inc. where he directed the firm's information technology investment banking team. From September 1991 until July 1995, Mr. Kearney was a Senior Vice President of Corporate Finance at Raymond James & Associates, Inc. Mr. Kearney holds a B.A. in Political Science from the State University of New York at Oneonta and a J.D. and M.B.A. from Duke University. Margot T. Lebenberg has been Vice President, General Counsel and Secretary of F.Y.I. since May 1996. From 1992 until joining the Company, Ms. Lebenberg was an attorney with Morgan, Lewis & Bockius LLP in New York, where she practiced law primarily in the areas of securities and mergers and acquisitions, specializing in consolidation transactions. Ms. Lebenberg holds a B.A. in Economics and History from the State University of New York at Binghamton and a J.D. from Fordham University School of Law. Gary Patton has been Vice President of Human Resources and Director of Corporate Programs of F.Y.I. since November 1997 and Director of Corporate Programs since October 1996. From 1992 until joining the Company, Mr. Patton was Vice President of Human Resources at Sunbelt Corporation. From 1987 until 1992, Mr. Patton was Vice President of Human Resources at International Claim Service Corporation. Mr. Patton holds a B.A. degree from University of North Texas. 9 10 RISK FACTORS LIMITED OPERATING HISTORY; RISKS OF INTEGRATION; ABILITY TO MANAGE GROWTH F.Y.I. was founded in September 1994 and conducted no operations prior to the consummation of the IPO. F.Y.I. acquired the Founding Companies simultaneously with the closing of the IPO and has acquired 34 additional companies since that time (together with the Founding Companies, the "Operating Companies"). Prior to their acquisition, the Operating Companies operated as separate independent entities. Currently, the Company has a decentralized financial reporting system and relies on the existing reporting systems of the Operating Companies. The success of the Company will depend, in part, on the Company's ability to integrate the operations of the Operating Companies, including centralizing certain functions to achieve cost savings and developing programs and processes that will promote cooperation and the sharing of opportunities and resources. There can be no assurance that the management group will effectively be able to oversee the combined entity and implement the Company's operating or growth strategies. The resulting growth of the acquisition strategy of the Company places significant demands on management and on the Company's internal systems and controls. There can be no assurance that the management group will effectively be able to direct the Company through periods of significant growth. In addition, no assurance can be given that the Company's current systems will be adequate for its future needs or that the Company will be successful in implementing new systems. A number of the Operating Companies offer different services, utilize different capabilities and technologies and target different geographic markets and client segments. While the Company believes that there are substantial opportunities in integrating these businesses, these differences increase the risk inherent in successfully completing such integration. Further, there can be no assurance that the Company's strategy to establish a single source provider for document management services will be successful, or that the Company's target client segments will accept the Company as a provider of such services. In addition, there can be no assurance that the operating results of the Company will match or exceed the combined individual operating results achieved by the Operating Companies prior to their acquisition. ACQUISITION STRATEGY The Company's primary growth strategy is the acquisition of additional document and information outsourcing solutions businesses that will complement its existing businesses. There can be no assurance that the Company will be able to identify or reach mutually agreeable terms with acquisition candidates and their owners, or that the Company will be able to profitably manage additional businesses or successfully integrate such additional businesses into the Company without substantial costs, delays or other problems. Acquisitions may involve a number of special risks including: (i) adverse short-term effects on the Company's reported operating results; (ii) diversion of management's attention; (iii) dependence on retention, hiring and training of key personnel; (iv) risks associated with unanticipated problems or legal liabilities; and (v) amortization of acquired intangible assets. Some or all of these risks could have a material adverse effect on the Company's operations and financial performance. In addition, to the extent that consolidation becomes more prevalent in the industry, the prices for attractive acquisition candidates may be bid up to higher levels. In any event, there can be no assurance that businesses acquired in the future will achieve sales and profitability that justify the investment therein. Unfavorable developments at an acquired company could have a material adverse impact on the reputation and business of the Company as a whole. The Company is regularly in discussions with additional acquisition candidates and may from time to time enter into letters of intent with respect to the acquisition of such businesses. No assurance can be given, however, that the Company will acquire any additional businesses. NEED FOR ADDITIONAL FINANCING TO CONTINUE ACQUISITION STRATEGY The Company currently intends to finance future acquisitions by using cash and its Common Stock for all or a portion of the consideration to be paid. The Company's Registration Statement on Form S-4 (Registration No. 333-24015) (the "Acquisition Shelf") relates to the offering of 2,500,000 shares of 10 11 Common Stock to be used as consideration for acquisitions by the Company, of which 1,810,437 shares remained available as of December 31, 1997. In the event that the Company's Common Stock does not maintain sufficient value, or potential acquisition candidates are unwilling to accept the Company's Common Stock as consideration for the sale of their businesses, the Company may be required to utilize more of its cash resources, if available, in order to continue its acquisition program. If the Company does not have sufficient cash resources, its growth could be limited unless it is able to obtain capital through additional debt or equity financings. Under the Company's amended and restated line of credit with Banque Paribas and Bank of America Texas, N.A., as co-agents and the lenders named therein, (the "1998 Credit Agreement"), the Company and its subsidiaries can borrow, on a revolving credit basis, loans in an aggregate outstanding principal amount of $50 million for acquisitions, working capital and general corporate purposes subject to certain restrictions in the 1998 Credit Agreement. As of February 19, 1998, the availability under the 1998 Credit Agreement was $31.2 million. There can be no assurance, however, that funds available under the 1998 Credit Agreement will be sufficient for the Company's needs. EFFECT OF POTENTIAL FLUCTUATIONS IN OPERATING RESULTS ON PRICE OF COMMON STOCK; VOLATILITY OF STOCK PRICE Results for any quarter are not necessarily indicative of the results that the Company may achieve for any subsequent quarter or a full fiscal year. Quarterly results may vary materially as a result of the timing and structure of acquisitions, the timing and magnitude of costs related to such acquisitions, the gain or loss of material client relationships and variations in the prices charged by the Company for the services it provides. In addition, since a significant portion of the Company's revenue is generated on a project-by-project basis, the timing or completion of material projects could result in fluctuations in the Company's results of operations for particular quarterly periods. Such fluctuations in operating results may adversely affect the market price of the Company's Common Stock. The market price for the Company's shares may also fluctuate in response to material announcements by the Company or significant clients or competitors of the Company, changes in the economic or other conditions impacting the Company's targeted client segments or changes in general economic conditions. Further, the securities markets have experienced significant price and volume fluctuations from time to time that have often been unrelated or disproportionate to the operating performance of particular companies. These broad fluctuations may adversely affect the market price of the Common Stock. DEPENDENCE ON CERTAIN CLIENT SEGMENTS AND TECHNOLOGY The Company derives its revenue primarily from information and document intensive industries. Fundamental changes in the business practices of any of these client segments, whether due to regulatory, technological or other developments, could cause a material reduction in demand by such clients for the services offered by the Company. Any such reduction in demand would have a material adverse effect on the results of operations of the Company. The document and information outsourcing solutions industry is characterized by technological change, evolving customer needs and emerging technical standards. Although the Company believes that it will be able to continue to offer services based on the newest technologies, there can be no assurance that the Company will be able to obtain the rights to use any such technologies, that it will be able to effectively implement such technologies on a cost-effective or timely basis or that such technologies will not render obsolete the Company's role as a third party provider of document management services. COMPETITION The document and information outsourcing solutions businesses in which the Company competes and expects to compete are highly competitive. A significant source of competition is the in-house document handling capability of the Company's targeted client base. There can be no assurance that these businesses will outsource more of their document and information needs or that such businesses will not bring in-house, services that they currently outsource. In addition, certain of the Company's competitors are larger businesses and have greater financial resources than the Company. Certain of these competitors operate in broader geographic areas than the Company, and others may choose to enter the Company's areas of operation in the future. In addition, the Company intends to enter new geographic areas through internal growth and 11 12 acquisitions and expects to encounter significant competition from established competitors in each of such new areas. As a result of this highly competitive environment, the Company may lose customers or have difficulty in acquiring new customers and new companies, and its results of operations may be adversely affected. RELIANCE ON KEY PERSONNEL The Company's operations are dependent on the continued efforts of its executive officers and on senior management of the Operating Companies. Furthermore, the Company will likely depend on the senior management of businesses acquired in the future. If any of these people is unable or unwilling to continue in his or her present role, or if the Company is unable to attract and retain other skilled employees, the Company's business could be adversely affected. The Company does not currently have key person life insurance covering any of its executive officers or other members of senior management. POTENTIAL LIABILITY FOR BREACH OF CONFIDENTIALITY A substantial portion of the Company's business involves the handling of documents containing confidential and other sensitive information. Although the Company has established procedures intended to prevent any unauthorized disclosure of confidential information and, in some cases, has contractually limited its potential liability for unauthorized disclosure of such information, there can be no assurance that unauthorized disclosures will not result in material liability to the Company. CASUALTY; RISK OF BUSINESS INTERRUPTIONS The Company believes that its future results of operations will be dependent in large part upon its ability to provide prompt and efficient services to its customers. Certain of the Company's operations are performed at a single location and are dependent on continuous computer, electrical and telephone service. As a result, any disruption of the Company's day-to-day operations could have a material adverse effect upon the Company. There can be no assurance that a fire, flood, earthquake, power loss, telephone service loss or other event affecting one or more of the Company's facilities would not disable these services. Any significant damage to any such facility or other failure that causes significant interruptions in the Company's operations may not be covered by insurance. Any uninsured or underinsured loss could have a material adverse effect on the Company's business, financial condition or results of operations. PUBLIC SECTOR MARKET AND CONTRACTING RISKS A portion of the Company's present business involves public sector contracts, and the Company anticipates a growing portion of its business coming from local, state and federal government agencies. Public sector contracts are subject to detailed regulatory requirements and public policies, as well as to funding priorities. Contracts with public sector customers may be conditioned upon the continuing availability of public funds, which in turn depends upon lengthy and complex budgetary procedures, and may be subject to certain pricing constraints. Moreover, public sector contracts may generally be terminated for a variety of factors, including when it is in the best interests of the respective governmental entity. There can be no assurance that these factors or others unique to contracts with governmental entities will not have a material adverse effect on the Company's future business, financial condition and results of operations. CONTROL BY MANAGEMENT As of February 19, 1998, the directors and executive officers of the Company beneficially owned approximately 18.6% of the outstanding shares of Common Stock and exercise substantial control over the Company's affairs. These stockholders acting together would likely be able to elect a sufficient number of directors to control the Board of Directors and to approve or disapprove any matter submitted to a vote of stockholders. 12 13 POTENTIAL EFFECT OF SHARES ELIGIBLE FOR FUTURE SALE ON PRICE OF COMMON STOCK The market price of the Common Stock of the Company could be adversely affected by the sale of substantial amounts of Common Stock of the Company in the public market. In addition, many shares are subject to contractual restrictions on resale which generally expire two years from the date of issuance. The Company has an aggressive acquisition program under which it recently completed, and expects to continue to pursue, acquisitions that are accounted for under the pooling-of-interests method of accounting. Under the pooling-of-interests method of accounting, the affiliates of the acquired companies, which are generally all of the stockholders of the companies acquired by the Company, must be free to sell or otherwise transfer shares of the Common Stock received in the acquisition, subject to their compliance with federal securities laws, as soon as the Company releases results of operations that reflect the combined operations of the Company and the acquired company for a minimum of 30 days. If a significant number of shares of Common Stock are issued in acquisitions that are consummated in close proximity to each other, such shares will become freely tradable at the same time. If a large number of shares are sold by stockholders in the market as soon as their shares became freely transferable, the price of the Common Stock could be adversely affected. The Company has reserved for issuance under the Company's 1995 Stock Option Plan (the "Plan") an aggregate of 650,000 shares of Common Stock, or 16% of the aggregate number of shares of the Common Stock outstanding, whichever is greater. The Company has registered the shares issuable upon exercise of options granted under the Plan, and such shares will be eligible for resale in the public market. As of February 19, 1998, the Company had options to purchase 1,578,291 shares of Common Stock outstanding under the Plan. IMPACT OF THE YEAR 2000 ISSUE The "Year 2000 Issue" describes the use of two digits rather than four digits to define the applicable year in certain computer programs. With the coming millennium, any of the Company's computer programs that have two digit date-sensitive software may interpret a date of "00" as the year 1900 rather than the year 2000. This could result in a system failure or miscalculations causing disruptions of operations, including, among other things, a temporary inability to process transactions, send invoices or engage in similar normal business activities. Management is in the process of evaluating the effect of the Year 2000 Issue on the Company. Based on preliminary findings, the total cost of addressing the Year 2000 Issue is not expected to have a material adverse effect on the Company's business, financial condition or results of operations. However, management is in the process of completing its assessment of the potential impact of the Year 2000 Issue on the Company and the potential exposure of the Company to related problems of its customers and suppliers. There can be no assurance that such exposure or the costs of remediating any problems associated therewith will not materially adversely affect the Company's future business, financial condition or results of operations. ENVIRONMENTAL MATTERS The Company is subject to regulations and ordinances that govern activities or operations that may have adverse environmental effects, such as discharges to air and water. The Company is not aware of any environmental conditions relating to present or past waste generation at or from these facilities that would be likely to have a material adverse effect on the business, financial condition or results of operations of the Company. However, there can be no assurance that environmental liabilities in the future will not have a material adverse effect on the business, financial condition or results of operations of the Company. 13 14 EFFECT OF CERTAIN CHARTER PROVISIONS The Board of Directors of the Company is empowered to issue preferred stock without stockholder action. The existence of this "blank-check" preferred could render more difficult or discourage an attempt to obtain control of the Company by means of a tender offer, merger, proxy contest or otherwise. RISKS ASSOCIATED WITH FORWARD-LOOKING STATEMENTS This Report contains certain forward-looking statements such as the Company's or management's intentions, hopes, beliefs, expectations, strategies, predictions or any other variation thereof or comparable phraseology of the Company's future activities or other future events or conditions within the meaning of Section 27A of the Securities Act and Section 21E of the Securities Exchange Act of 1934, as amended, which are intended to be covered by the safe harbors created thereby. Investors are cautioned that all forward-looking statements involve risks and uncertainty, including without limitation, variations in quarterly results, volatility of the Company's stock price, development by competitors of new or superior products or services, or entry into the market of new competitors, the sufficiency of the Company's working capital and the ability of the Company to realize benefits from consolidating certain general and administrative functions, to assimilate and integrate acquisitions, to continue its aggressive acquisition program, to retain management, to implement its focused business strategy to expand its document management services geographically, to retain customers or attract customers from other businesses, to increase revenue by cross-selling services and to successfully defend itself in ongoing and future litigation. Although the Company believes that the assumptions underlying the forward-looking statements contained herein are reasonable, any of the assumptions could be 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 the Company or any other person that the objectives and plans of the Company will be achieved. ITEM 2. PROPERTIES As of December 31, 1997, the Company operated in excess of 110 document management service facilities in 32 states. Except for the two facilities owned by the Company, these facilities are leased and are principally used for operations and general administrative functions. See Note 8 of Notes to Consolidated Financial Statements of F.Y.I. Incorporated and Subsidiaries for further information relating to these leases. In March 1996, the Company moved into its current corporate headquarters in Dallas, Texas. As of December 31, 1997, the Company also operated on-site at over 450 client locations and from time to time at many other client locations for specific projects. In order to secure its obligations under the 1998 Credit Agreement, the Company granted to Banque Paribas and Bank of America Texas, N.A., as co-agents for the Company's lenders, a lien on substantially all of the Company's properties and other assets. See "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations -- Liquidity and Capital Resources." The Company believes that its properties are generally well maintained, in good condition and adequate for its present needs. Furthermore, the Company believes that suitable additional or replacement space will be available when required. ITEM 3. LEGAL PROCEEDINGS The Company is, from time to time, a party to litigation arising in the normal course of its business. Management believes that none of these actions will have a material adverse effect on the financial condition or results of operations of the Company. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS During the fourth quarter of the year ended December 31, 1997, no matters were submitted to a vote of the security holders. 14 15 PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS MARKET INFORMATION The Company's Common Stock trades on The Nasdaq Stock Market under the symbol "FYII." The Company completed its IPO in January 1996 at a price of $13.00 per share. The following table sets forth, for the Company's fiscal periods indicated, the range of high and low last reported sale prices for the Common Stock.
HIGH LOW ------ ------ FISCAL YEAR 1996 First Quarter (from January 23, 1996)..................... $20.00 $13.00(1) Second Quarter............................................ $22.00 $16.00 Third Quarter............................................. $23.00 $17.00 Fourth Quarter............................................ $23.00 $20.00 FISCAL YEAR 1997 First Quarter............................................. $26.25 $20.63 Second Quarter............................................ $25.31 $16.75 Third Quarter............................................. $26.25 $23.00 Fourth Quarter............................................ $26.25 $21.75 FISCAL YEAR 1998 First Quarter (through February 19, 1998)................. $26.25 $24.00
- --------------- (1) Represents the initial public offering price. HOLDERS On February 19, 1998, the last reported sale price of the Common Stock on The Nasdaq Stock Market was $25.125 per share. At February 19, 1998, there were 121 holders of record of the Company's Common Stock, although the Company believes the number of beneficial holders is substantially greater. DIVIDENDS The Company does not anticipate paying any cash dividends on its Common Stock in the foreseeable future and intends to retain its earnings, if any, to finance the expansion of its business and for general corporate purposes. Any payment of future dividends will be at the discretion of the Board of Directors and will depend upon, among other things, the Company's earnings, financial condition, capital requirements, level of indebtedness, contractual restrictions and other factors that the Company's Board of Directors deems relevant. 15 16 ITEM 6. SELECTED FINANCIAL DATA SELECTED FINANCIAL DATA F.Y.I. was founded in September 1994 and effectively began its operations on February 1, 1996 following the completion of the IPO. F.Y.I. acquired, simultaneously with and as a condition to the closing of the IPO, the seven Founding Companies (the "Acquisitions"). The Acquisitions have been accounted for in accordance with generally accepted accounting principles ("GAAP") as a combination of the Founding Companies at historical cost. For accounting purposes and for the purposes of the presentation of the financial data herein, January 31, 1996 has been used as the effective date of the Acquisitions. Since the IPO and through December 31, 1997, the Company acquired four companies in transactions that were accounted for as poolings-of-interests: (i) The Rust Consulting Group, Inc. ("Rust") in December 1996; (ii) MAVRICC Management Systems, Inc. and a related company, MMS Escrow and Transfer Agency, Inc. (collectively, "MAVRICC") in March 1997; (iii) Input of Texas, Inc. ("Input") in March 1997; and (iv) Micro Publishing Systems, Inc. ("MPS") in December 1997 (collectively, the "Pooled Companies"). The consolidated financial statements for all periods presented have been restated to include the accounts of MAVRICC and Input. As a result, F.Y.I. is reporting financial results in periods prior to the Company's inception. The consolidated financial statements of the Company were not restated for the Rust and MPS acquisitions for the periods prior to January 1, 1996 and 1997, respectively, due to their financial immateriality. The Pooled Companies and the Company were not under common control or management during the periods prior to their respective mergers. The results of operations for the periods presented may not be indicative of the results in the future because of (i) the impact of acquisitions recorded as purchases, whose results are only included subsequent to the purchase date; and (ii) the impact of acquisitions recorded as poolings-of-interests, whose predecessor companies were not under common control or management. Subsequent to the IPO and through December 31, 1997, the Company acquired 25 additional companies in transactions accounted for as purchases. The Company's results of operations include the results of these acquisitions from the date of their respective acquisition. The Selected Financial Data for the years ended December 31, 1995, 1996 and 1997 have been derived from the Consolidated Financial Statements of F.Y.I. Incorporated and Subsidiaries that have been audited by Arthur Andersen LLP and that appear elsewhere in this Report. The Selected Financial Data for the years ended December 31, 1993 and 1994 have been derived from financial statements of MAVRICC and Input not included elsewhere in this Report. The Selected Financial Data are based on available information and certain assumptions described in the footnotes set forth below, all of which the Company believes are reasonable. The Selected Financial Data provided below should be read in conjunction with the historical financial statements of F.Y.I., including the related notes thereto, and "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" that appear elsewhere in this Report. 16 17 SELECTED FINANCIAL DATA (IN THOUSANDS, EXCEPT PER SHARE DATA)
1993(1) 1994 1995 1996 1997 ------- ------ ------ -------- -------- STATEMENT OF OPERATIONS DATA: Service revenue................................ $6,752 $7,548 $9,040 $ 81,775 $145,824 Product and other revenue...................... -- -- -- 7,043 8,318 ------ ------ ------ -------- -------- Total revenue........................ 6,752 7,548 9,040 88,818 154,142 Cost of services............................... 4,005 4,487 5,369 50,672 92,194 Cost of products sold.......................... -- -- -- 4,898 5,949 Depreciation................................... 152 111 145 1,766 3,269 ------ ------ ------ -------- -------- Gross profit......................... 2,595 2,950 3,526 31,482 52,730 Selling, general and administrative expenses(2).................................. 1,556 2,402 2,000 20,653 33,379 Amortization................................... -- -- -- 599 1,835 ------ ------ ------ -------- -------- Operating income(2).................. 1,039 548 1,526 10,230 17,516 Interest and other expense (income), net(3).... (29) 18 (31) 782 1,382 ------ ------ ------ -------- -------- Income before income taxes(2)(3)............... 1,068 530 1,557 9,448 16,134 Provision for income taxes(4).................. 530 248 530 3,849 6,554 ------ ------ ------ -------- -------- Net income(2)(3)(4)............................ $ 538 $ 282 $1,027 $ 5,599 $ 9,580 ====== ====== ====== ======== ======== Net income per common share Basic (2)(3)(4).............................. $ 0.32 $ 0.17 $ 0.60 $ 0.81 $ 0.92 Diluted (2)(3)(4)............................ 0.32 0.17 $ 0.60 $ 0.79 $ 0.90 Weighted average common shares outstanding Basic........................................ 1,687 1,687 1,717 6,924 10,438 Diluted...................................... 1,687 1,687 1,717 7,052 10,616 BALANCE SHEET DATA: Working capital................................ $ 150 $ 548 $ (904) $ 21,928 $ 22,105 Total assets................................... 1,458 2,680 4,530 102,119 126,238 Long-term obligations, net of current maturities................................... 15 6 443 4,662 5,692 Stockholders' equity........................... 452 1,059 1,280 76,541 100,516
- --------------- (1) Input previously reported on a fiscal year ending March 31. The results of Input for the fiscal year ending March 31, 1994 have been combined with the results of MAVRICC for the year ended December 31, 1993. The results of Input for all other years presented have been restated to reflect a calendar year. (2) Gives effect to the Compensation Differential. See Note 2 of Notes to Consolidated Financial Statements of F.Y.I. Incorporated and Subsidiaries. (3) Interest expense for the year ended December 31, 1997 includes the write-off of approximately $1.2 million ($0.7 million, net of taxes, and $0.07 per share) of unamortized debt issuance costs related to the Company's 1996 Credit Agreement. See Note 7 of Notes to Consolidated Financial Statements of F.Y.I. Incorporated and Subsidiaries. (4) Gives effect to certain tax adjustments related to the taxation of certain Founding and Pooled Companies as S corporations or sole proprietorships prior to the consummation of the Acquisitions and the tax impact of the Compensation Differential in each period. See Note 2 of Notes to Consolidated Financial Statements of F.Y.I. Incorporated and Subsidiaries. 17 18 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion should be read in conjunction with the financial statements of the Company and the related notes thereto and "Item 6. Selected Financial Data" appearing elsewhere in this Report. Additional information concerning factors that could cause results to differ materially from those in the forward-looking statements is contained under "Item 1. Business -- Risk Factors." INTRODUCTION F.Y.I. was founded in September 1994 to create a national, single source provider of document and information outsourcing solutions. In January 1996, F.Y.I. acquired, simultaneously with the closing of the IPO, the Founding Companies. The Acquisitions have been accounted for in accordance with GAAP as a combination of the Founding Companies at historical cost, and January 31, 1996 has been used as the effective date of the Acquisitions. Between September 1994 and the consummation of the IPO, F.Y.I. did not conduct any operations. Accordingly, the actual operating results of the Company included in the Statement of Operations for the year ended December 31, 1996 include the 11 months of operations subsequent to the consummation of the Acquisitions and the IPO. During the period prior to the IPO, F.Y.I. incurred various legal, accounting, marketing, travel and other costs in connection with the Acquisitions and the IPO which were funded by the issuance of equity securities. Additional costs associated with the Acquisitions and the IPO were paid with proceeds of the IPO. Since the IPO and through December 31, 1997, the Company acquired four companies in transactions that were accounted for as poolings-of-interests: (i) Rust in December 1996; (ii) MAVRICC in March 1997; (iii) Input in March 1997; and (iv) MPS in December 1997. The consolidated financial statements for all periods presented have been restated to include the accounts of MAVRICC and Input. As a result, F.Y.I. is reporting financial results in periods prior to the Company's inception. The consolidated financial statements of the Company were not restated for the Rust and MPS acquisitions for the periods prior to January 1, 1996 and 1997, respectively, due to their financial immateriality. The Pooled Companies and the Company were not under common control or management during the periods prior to their respective mergers. The results of operations for the periods presented may not be indicative of the results in the future because of (i) the impact of acquisitions recorded as purchases, whose results are only included subsequent to the purchase date; and (ii) the impact of acquisitions recorded as poolings-of-interests, whose predecessor companies were not under common control or management. Subsequent to the IPO and through December 31, 1997, the Company acquired 25 additional companies in transactions accounted for as purchases. In accordance with GAAP, the Company's results of operations include the results of these acquisitions from the date of their respective acquisition. The Company's revenue is classified as service revenue and product and other revenue. Service revenue relates to the following document management services: (i) document and data conversion services; (ii) data capture services; (iii) direct marketing services; (iv) records management services; (v) healthcare services; (vi) litigation support services; and (vi) employee and investor services. Product revenue and other revenue represents sales of micrographic and business imaging supplies and equipment, primarily in conjunction with film processing and other micrographic services, sales of filing supplies, shelving and software, commissions on the sales of imaging systems and equipment and franchising fees. Cost of services consists primarily of compensation and benefits to non-administrative employees, occupancy costs, equipment costs and supplies. Cost of products sold relates to micrographics and business imaging supplies and equipment, filing supplies, shelving and software. Selling, general and administrative expenses ("SG&A") consist primarily of: (i) compensation and related benefits to the sales and marketing, executive management, accounting, human resources and other administrative employees of the Company; (ii) other sales and marketing costs; (iii) communications costs; (iv) insurance costs; and (v) legal and accounting professional fees and expenses. 18 19 RESULTS OF OPERATIONS The following table sets forth certain items expressed as a percentage of total revenue for the periods indicated:
YEAR ENDED DECEMBER 31, ------------------------- 1995 1996 1997 ----- ----- ----- Service revenue........................................... 100.0% 92.1% 94.6% Product and other revenue................................. 0.0 7.9 5.4 ----- ----- ----- Total revenue................................... 100.0 100.0 100.0 Cost of services.......................................... 59.4 57.1 59.8 Cost of products sold..................................... 0.0 5.5 3.9 Depreciation.............................................. 1.6 2.0 2.1 ----- ----- ----- Gross profit.................................... 39.0 35.4 34.2 Selling, general and administrative expenses(1)........... 22.1 23.3 21.6 Amortization.............................................. 0.0 0.6 1.2 ----- ----- ----- Pro forma operating income(1)................... 16.9 11.5 11.4 Interest and other expense (income), net(2)............... (0.3) 0.9 0.9 ----- ----- ----- Income before income taxes(1)(2).......................... 17.2 10.6 10.5 Provision for income taxes(3)............................. 5.8 4.3 4.3 ----- ----- ----- Net income(1)(2)(3)....................................... 11.4% 6.3% 6.2% ===== ===== =====
- --------------- (1) Adjusted for the Compensation Differential. See Note 2 of Notes to Consolidated Financial Statements of F.Y.I. Incorporated and Subsidiaries. (2) Includes the write off of unamortized debt issuance costs of 0.8% of total revenue, or 0.5% net of the associated income tax effect. See Note 7 of Notes to Consolidated Financial Statements of F.Y.I. Incorporated and Subsidiaries. (3) Gives effect to certain tax adjustments related to the taxation of certain Founding Companies and Pooled Companies as S corporations or sole proprietorships prior to the consummation of the Acquisitions and the tax impact of the Compensation Differential in each period. See Note 2 of Notes to Consolidated Financial Statements of F.Y.I. Incorporated and Subsidiaries. YEAR ENDED DECEMBER 31, 1997 COMPARED TO YEAR ENDED DECEMBER 31, 1996 Revenue Total revenue. Total revenue increased 73.5%, from $88.8 million for the year ended December 31, 1996 to $154.1 million for the year ended December 31, 1997. This increase was comprised of a 78.3% increase in service revenue and a 18.1% increase in product and other revenue. Service revenue. Service revenue increased $64.0 million, from $81.8 million for the year ended December 31, 1996 to $145.8 million for the year ended December 31, 1997. This increase was largely due to: (i) revenue from the acquisitions completed subsequent to December 31, 1996 accounted for under the purchase method of accounting; (ii) internal growth of 9.0% in service revenue at the Founding Companies and the companies acquired and accounted for under the purchase method of accounting consummated prior to December 31, 1996; and (iii) internal growth of 6.3% at the Pooled Companies acquired prior to December 1997. The internal growth of the Founding Companies and purchased companies was primarily attributable to: (i) an increase in medical records release revenue of $1.9 million, primarily attributable to the expansion into 28 additional healthcare institutions in the Eastern United States and Texas during 1997 and due to increased production volumes at facilities contracted during 1996; (ii) an increase in litigation support revenue of $3.0 million primarily due to increased overnight document production and increased medical records subpoena and service of process requests; and (iii) an increase in records management revenue of 19 20 $2.3 million due to expansion into additional healthcare institutions in California and storage facilities in Michigan. Product and other revenue. Product and other revenue increased approximately $1.3 million, from $7.0 million for the year ended December 31, 1996 to $8.3 million for the year ended December 31, 1997. This increase primarily resulted from increased sales of filing and shelving supplies associated with the acquisition of Information Management Corporation in June 1997. This increase in product revenue was partially offset by: (i) a decline in commissions on the sales of micrographics equipment; (ii) a decline in franchise fee revenue; and (iii) a decrease in software sales. Gross profit Gross profit increased 67.5%, from $31.5 million for the year ended December 31, 1996 to $52.7 million for the year ended December 31, 1997, largely due to the increases in revenue discussed above. Gross profit as a percentage of revenue decreased from 35.4% for the year ended December 31, 1996 to 34.2% for the year ended December 31, 1997, primarily due to a reduction in the percentage of revenue from the Pooled Companies from 1996 to 1997. Selling, general and administrative expenses SG&A increased 43.8%, from $23.9 million, or 27.0% of revenue, for the year ended December 31, 1996 to $34.4 million, or 22.3% of revenue, for the year ended December 31, 1997, primarily due to SG&A associated with the acquisitions subsequent to December 31, 1996. After giving effect to the Compensation Differential in each period, SG&A increased 61.6%, from $20.7 million, or 23.3% of revenue, for the year ended December 31, 1996 to $33.4 million, or 21.6% of revenue, for the year ended December 31, 1997. This decrease as a percentage of revenue was a result of a decrease in SG&A as a percentage of revenue at the Founding and Pooled Companies from 21.4% for the year ended December 31, 1996 to 18.7% for the year ended December 31, 1997, primarily due to spreading the companies' fixed costs over a larger revenue base. Pro forma operating income Pro forma operating income adjusted for the Compensation Differential increased 71.2%, from $10.2 million, or 11.5% of revenue, for the year ended December 31, 1996 to $17.5 million, or 11.4% of revenue, for the year ended December 31, 1997. Interest Expense Interest expense increased 60.1% from $1.2 million for the year ended December 31, 1996 to $1.9 million for the year ended December 31, 1997, primarily due to the write-off of unamortized debt issue costs related to the Company's credit agreement entered into in April 1996, with Banque Paribas, as agent, and the lenders named therein (the "1996 Credit Agreement"). Interest on borrowings decreased $0.5 million, from $0.9 million in 1996 to $0.4 million in 1997, as the Company entered 1997 with minimal debt and $21.4 million in cash. Pro forma income before income taxes and pro forma net income Pro forma income before income taxes adjusted for the Compensation Differential increased 70.8%, from $9.4 million for the year ended December 31, 1996 to $16.1 million for the year ended December 31, 1997, and pro forma net income adjusted for both the Compensation Differential and pro forma provision for taxes increased 71.1%, from $5.6 million for the year ended December 31, 1996 to $9.6 million for the year ended December 31, 1997, largely attributable to the factors discussed above. YEAR ENDED DECEMBER 31, 1996 COMPARED TO YEAR ENDED DECEMBER 31, 1995 For the year ended December 31, 1996, revenue increased from $9.0 million for the year ended December 31, 1995 to $88.8 million for the year ended December 31, 1996. Gross profit increased from 20 21 $3.5 million for the year ended December 31, 1995 to $31.5 million for the year ended December 31, 1996. Operating income increased from $(59,000) for the year ended December 31, 1995 to $6.9 million for the year ended December 31, 1996. Net income increased from $30,000 for the year ended December 31, 1995, to $3.3 million for the year ended December 31, 1996. As previously mentioned, the financial statements for 1995 have been restated to include the accounts of MAVRICC and Input, two companies acquired in transactions accounted for as poolings-of-interests. The Pooled Companies and the Company were not under common control or management during the periods presented prior to their respective mergers. The Company acquired 25 companies in 1996, including the Founding Companies, whose results were included in the Company's results for the period after the effective date of the respective acquisition, thereby resulting in the increases discussed above. For further discussion of the 1996 operations versus the operations of the Founding Companies for 1995, see the Company's 1996 Annual Report on Form 10-K. FLUCTUATIONS IN QUARTERLY RESULTS OF OPERATIONS Revenue from the Company's services shows no significant seasonal variations. However, service revenue can vary from period to period due to the impact of specific projects, primarily in litigation support and data capture and document and data conversion. Quarterly results may also vary as a result of the timing of acquisitions and the timing and magnitude of costs related to such acquisitions. LIQUIDITY AND CAPITAL RESOURCES At December 31, 1997, the Company had $22.1 million of working capital and $6.9 million of cash. Cash flows provided by operating activities for the year ended December 31, 1997 were $6.6 million. Net cash provided by operating activities for the year ended December 31, 1997 was primarily impacted by: (i) an increase in revenue and a corresponding increase in accounts receivable; and (ii) a decrease in accounts payable and accrued liabilities associated primarily with the payment of 1996 income taxes and 1997 estimated taxes. Net cash used in investing activities was $14.6 million for the year ended December 31, 1997, and was primarily used for the purchase of property, plant and equipment and payments of $8.0 million for acquisitions, net of cash acquired. Net cash used in financing activities was $6.4 million, as the Company assumed and subsequently retired $8.0 million of debt in acquisitions and paid $2.3 million for other long-term obligations. These uses were offset in part by proceeds from employee stock option exercises and an advance in the fourth quarter from the Company's line of credit. During the year ended December 31, 1996, net cash provided by operating activities was $5.5 million. Net cash used for investing activities was $40.6 million, as the Company paid $37.2 million for acquisitions, net of cash acquired. Net cash provided by financing activities was $56.4 million, primarily due to the Company's IPO in January 1996 and the follow-on public offering in December 1996 (the "December Offering"), which raised $68.2 million, net of underwriting discounts and other costs associated with the offerings. The Company assumed $8.5 million of debt in the acquisitions of the Founding Companies, of which $7.7 million was subsequently retired with the proceeds of the IPO. In April 1996, the Company entered into a $35.0 million Line of Credit (the "1996 Credit Agreement"). During the year ended December 31, 1996, the Company borrowed $22.8 million under the 1996 Credit Agreement to help fund the acquisition program, all of which was subsequently repaid with cash from operations and the proceeds of the December Offering. As of December 31, 1997, no proceeds were remaining from the December Offering. The Company assumed $4.0 million of debt in other 1996 acquisitions, of which $1.0 million was retired. The Company anticipates that cash on hand, cash from operations, additional bank financing available under the 1998 Credit Agreement and shares of Common Stock available under the Acquisition Shelf (as defined below) will provide sufficient liquidity to execute the Company's acquisition and internal growth plans for approximately the next 12 months. In February 1998, F.Y.I. entered into the 1998 Credit Agreement. Under the 1998 Credit Agreement, the Company and its subsidiaries can borrow on a revolving credit basis loans in an aggregate outstanding principal amount up to $50.0 million, subject to certain customary borrowing capacity requirements. The availability under the 1998 Credit Agreement as of February 19, 1998 was $31.2 million for acquisitions, working capital and general corporate purposes. Should the Company accelerate its acquisition program, the Company may need to seek additional financing through the public or private sale 21 22 of equity or debt securities. There can be no assurance that the Company could secure such financing if and when it is needed or on terms the Company deems acceptable. As of December 31, 1997, 1,810,437 shares were available on the Company's Acquisition Shelf. IMPACT OF THE YEAR 2000 ISSUE The "Year 2000 Issue" describes the use of two digits rather than four digits to define the applicable year in certain computer programs. With the coming millennium, any of the Company's computer programs that have two digit date-sensitive software may interpret a date of "00" as the year 1900 rather than the year 2000. This could result in a system failure or miscalculations causing disruptions of operations, including, among other things, a temporary inability to process transactions, send invoices or engage in similar normal business activities. Management is in the process of evaluating the effect of the Year 2000 Issue on the Company. Based on preliminary findings, the total cost of addressing the Year 2000 Issue is not expected to have a material adverse effect on the Company's business, financial condition or results of operations. However, management is in the process of completing its assessment of the potential impact of the Year 2000 Issue on the Company and the potential exposure of the Company to related problems of its customers and suppliers. There can be no assurance that such exposure or the costs of remediating any problems associated therewith will not materially adversely affect the Company's future business, financial condition or results of operations. 22 23 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
PAGE ---- F.Y.I. INCORPORATED AND SUBSIDIARIES Report of Independent Public Accountants.................. 24 Consolidated Balance Sheets............................... 25 Consolidated Statements of Operations..................... 26 Consolidated Statements of Stockholders' Equity........... 27 Consolidated Statements of Cash Flows..................... 28 Notes to Consolidated Financial Statements................ 29
23 24 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To F.Y.I. Incorporated: We have audited the accompanying consolidated balance sheets of F.Y.I. Incorporated (a Delaware corporation) and subsidiaries (the "Company") as of December 31, 1996 and 1997 and the related consolidated statements of operations, stockholders' equity and cash flows for each of the three years in the period ended December 31, 1997. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of F.Y.I. Incorporated and subsidiaries as of December 31, 1996 and 1997, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1997 in conformity with generally accepted accounting principles. Dallas, Texas, ARTHUR ANDERSEN LLP February 20, 1998 24 25 F.Y.I. INCORPORATED AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (IN THOUSANDS, EXCEPT SHARE DATA) ASSETS
DECEMBER 31, -------------------- 1996 1997 -------- -------- CURRENT ASSETS: Cash and cash equivalents................................... $ 21,352 $ 6,926 Accounts receivable and notes receivable, less allowance for doubtful accounts of $1,240 and $3,122, respectively...... 19,665 29,468 Inventory................................................... 522 1,675 Notes receivable, shareholders -- short term................ 30 351 Prepaid expenses and other current assets................... 924 2,134 -------- -------- Total current assets.............................. 42,493 40,554 PROPERTY, PLANT AND EQUIPMENT, net.......................... 13,303 19,888 GOODWILL AND OTHER INTANGIBLES, net of amortization of $690 and $2,530, respectively.................................. 43,235 64,278 NOTES RECEIVABLE, SHAREHOLDERS -- LONG TERM................. 643 321 OTHER NONCURRENT ASSETS..................................... 2,445 1,197 -------- -------- Total assets...................................... $102,119 $126,238 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable and accrued liabilities.................... $ 15,219 $ 12,962 Short-term obligations...................................... 250 -- Current maturities of long-term obligations................. 585 856 Unearned revenue............................................ 1,087 1,991 Income taxes payable........................................ 2,665 1,660 Current portion of deferred income taxes.................... 759 980 -------- -------- Total current liabilities......................... 20,565 18,449 LONG-TERM OBLIGATIONS, net of current maturities............ 4,662 5,692 DEFERRED INCOME TAXES, net of current portion............... 351 874 OTHER LONG-TERM OBLIGATIONS................................. -- 707 -------- -------- Total liabilities................................. 25,578 25,722 COMMITMENTS AND CONTINGENCIES STOCKHOLDERS' EQUITY: Preferred stock, $.01 par value, 1,000,000 shares authorized, 0 shares issued and outstanding............... -- -- Common stock, $.01 par value, 26,000,000 shares authorized, 9,728,726 and 10,946,286 shares issued and outstanding at December 31, 1996 and December 31, 1997, respectively..... 97 109 Additional paid-in-capital.................................. 74,191 89,541 Retained earnings........................................... 2,754 11,367 -------- -------- 77,042 101,017 Less -- Treasury stock, $.01 par value, 36,670 shares at December 31, 1996 and 1997................................ (501) (501) -------- -------- Total stockholders' equity........................ 76,541 100,516 -------- -------- Total liabilities and stockholders' equity........ $102,119 $126,238 ======== ========
The accompanying notes are an integral part of these financial statements. 25 26 F.Y.I. INCORPORATED AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (IN THOUSANDS, EXCEPT PER SHARE DATA)
YEAR ENDED DECEMBER 31, --------------------------- 1995 1996 1997 ------ ------- -------- REVENUE: Service revenue........................................... $9,040 $81,775 $145,824 Product and other revenue................................. -- 7,043 8,318 ------ ------- -------- Total revenue.......................................... 9,040 88,818 154,142 COST OF SERVICES............................................ 5,369 50,672 92,194 COST OF PRODUCTS SOLD....................................... -- 4,898 5,949 DEPRECIATION................................................ 145 1,766 3,269 ------ ------- -------- Gross profit.............................................. 3,526 31,482 52,730 SELLING, GENERAL AND ADMINISTRATIVE EXPENSES................ 3,585 23,941 34,423 AMORTIZATION................................................ -- 599 1,835 ------ ------- -------- Operating (loss) income................................... (59) 6,942 16,472 OTHER (INCOME) EXPENSE: Interest expense.......................................... 163 1,156 1,851 Interest income........................................... (11) (286) (508) Other (income) expense, net............................... (183) (88) 39 ------ ------- -------- (Loss) income before income taxes...................... (28) 6,160 15,090 (BENEFIT) PROVISION FOR INCOME TAXES........................ (58) 2,865 6,083 ------ ------- -------- NET INCOME.................................................. $ 30 $ 3,295 $ 9,007 ====== ======= ======== PRO FORMA DATA (Unaudited -- See Note 2): Historical net income..................................... $ 30 $ 3,295 $ 9,007 Pro forma compensation differential....................... 1,585 3,288 1,044 Pro forma provision for income taxes...................... 588 984 471 ------ ------- -------- PRO FORMA NET INCOME........................................ $1,027 $ 5,599 $ 9,580 ====== ======= ======== NET INCOME PER COMMON SHARE BASIC..................................................... $ 0.02 $ 0.48 $ 0.86 ====== ======= ======== DILUTED................................................... $ 0.02 $ 0.47 $ 0.85 ====== ======= ======== PRO FORMA NET INCOME PER COMMON SHARE BASIC..................................................... $ 0.60 $ 0.81 $ 0.92 ====== ======= ======== DILUTED................................................... $ 0.60 $ 0.79 $ 0.90 ====== ======= ======== WEIGHTED AVERAGE COMMON SHARES OUTSTANDING BASIC..................................................... 1,717 6,924 10,438 ====== ======= ======== DILUTED................................................... 1,717 7,052 10,616 ====== ======= ========
The accompanying notes are an integral part of these financial statements. 26 27 F.Y.I. INCORPORATED AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (IN THOUSANDS, EXCEPT SHARE DATA)
COMMON STOCK PREFERRED STOCK TREASURY STOCK ------------------- --------------- --------------- TOTAL SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT APIC R/E S/E ---------- ------ ------ ------ ------ ------ ------- ------- -------- Balance, December 31, 1994... 1,686,477 $ 17 9,000 $ -- -- $ -- $ 901 $ 141 $ 1,059 Stock offering............... 39,185 1 -- -- -- 322 -- 323 Stock issued in exchange for services................... 21,099 -- -- -- -- -- 35 -- 35 Dividends to shareholders of pooled companies........... -- -- -- -- -- -- -- (167) (167) Net income................... -- -- -- -- -- -- -- 30 30 ---------- ---- ------ ---- ------ ----- ------- ------- -------- Balance, December 31, 1995... 1,746,761 18 9,000 -- -- -- 1,258 4 1,280 Pooling-of-interests adjustments at January 1, 1996....................... 110,000 1 -- -- -- -- 242 83 326 Initial public offering, net of costs................... 2,185,000 22 -- -- -- -- 21,830 -- 21,852 Conversion of preferred stock into common stock.......... 542,557 5 (9,000) -- -- -- (5) -- -- Issuance of common stock for Founding Companies......... 1,878,933 19 -- -- -- -- (4,586) -- (4,567) S corporation to C corporation conversion for Founding Companies......... -- -- -- -- -- -- (691) -- (691) Common stock issued in connection with acquisitions............... 856,735 9 -- -- -- -- 11,827 -- 11,836 Treasury stock re-acquired in connection with acquisitions............... -- -- -- -- 36,670 (501) -- -- (501) Exercise of options, net..... 45,740 -- -- -- -- -- 711 -- 711 Secondary offering, net of costs...................... 2,363,000 23 -- -- -- -- 43,605 -- 43,628 Dividends to shareholders of pooled companies........... -- -- -- -- -- -- -- (628) (628) Net income................... -- -- -- -- -- -- -- 3,295 3,295 ---------- ---- ------ ---- ------ ----- ------- ------- -------- Balance, December 31, 1996... 9,728,726 97 -- -- 36,670 (501) 74,191 2,754 76,541 Pooling-of-interests adjustments at January 1, 1997....................... 326,506 3 -- -- -- -- 608 (294) 317 Common stock issued in connection with acquisitions............... 804,128 8 -- -- -- -- 13,209 -- 13,217 Dividends to shareholders of pooled companies........... -- -- -- -- -- -- -- (100) (100) Exercise of options, net..... 86,926 1 -- -- -- -- 1,533 -- 1,534 Net income................... -- -- -- -- -- -- -- 9,007 9,007 ---------- ---- ------ ---- ------ ----- ------- ------- -------- Balance, December 31, 1997... 10,946,286 $109 -- $ -- 36,670 $(501) $89,541 $11,367 $100,516 ========== ==== ====== ==== ====== ===== ======= ======= ========
The accompanying notes are an integral part of these financial statements. 27 28 F.Y.I. INCORPORATED AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (IN THOUSANDS)
YEAR ENDED DECEMBER 31, ------------------------------- 1995 1996 1997 ------- -------- -------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income.................................................. $ 30 $ 3,295 $ 9,007 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization............................. 145 2,365 5,104 Deferred tax (benefit) provision.......................... (18) (219) 289 Change in operating assets and liabilities: Accounts receivable and notes receivable.................. (239) (639) (4,915) Inventory................................................. -- 4 (427) Prepaid expenses and other assets......................... (91) (642) 953 Accounts payable and accrued liabilities.................. 163 893 (4,063) Unearned revenue.......................................... -- 414 681 ------- -------- -------- Net cash (used in) provided by operating activities...................................... (10) 5,471 6,629 CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of property, plant and equipment................. (172) (3,534) (6,723) Distribution from partnership............................. -- 86 60 Cash paid for acquisitions, net of cash acquired.......... -- (37,200) (7,956) ------- -------- -------- Net cash used for investing activities............ (172) (40,648) (14,619) CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from common stock issuance, net of underwriting discounts and other costs.............................. (741) 68,227 814 Proceeds from preferred stock issuance.................... 135 -- -- Proceeds from short-term obligations...................... 1,990 7,808 446 Proceeds from long-term obligations....................... 936 19,133 3,000 Cash paid for debt issuance costs......................... -- (1,627) -- Dividends paid to shareholders of pooled companies........ (167) (100) (100) Principal payments on short-term obligations.............. (2,163) (9,568) (262) Principal payments on long-term obligations............... (398) (27,516) (10,334) ------- -------- -------- Net cash (used in) provided by financing activities...................................... (408) 56,357 (6,436) NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS........ (590) 21,180 (14,426) CASH AND CASH EQUIVALENTS, beginning of period.............. 762 172 21,352 ------- -------- -------- CASH AND CASH EQUIVALENTS, end of period.................... $ 172 $ 21,352 $ 6,926 ======= ======== ======== SUPPLEMENTAL DATA: Cash paid for: Income taxes.............................................. $ -- $ 1,731 $ 7,106 Interest.................................................. $ 150 $ 934 $ 400 NONCASH FINANCING TRANSACTIONS: Debt assumed in acquisitions.............................. $ -- $ 12,485 $ 8,030 Equipment acquired via capital lease...................... $ -- $ 863 $ 171
The accompanying notes are an integral part of these financial statements. 28 29 F.Y.I. INCORPORATED AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. ORGANIZATION AND BASIS OF PRESENTATION: F.Y.I. Incorporated (the "Company" or "F.Y.I.") was founded in September 1994 to create a national, single source provider of document and information outsourcing solutions to document and information intensive industries, including: healthcare, law, banking, insurance, retailing, manufacturing and government. In January 1996, F.Y.I. acquired (the "Acquisitions") simultaneously with the closing of its initial public offering (the "IPO") on January 26, 1996, seven document management services businesses (the "Founding Companies"). The consideration for the Founding Companies consisted of a combination of cash and common stock (the "Common Stock") of F.Y.I. Between September 1994 and the consummation of the IPO and the Acquisitions, F.Y.I. did not conduct any operations. For accounting purposes and for the purposes of the presentation of the financial statements herein, January 31, 1996 has been used as the effective date of the Acquisitions. Accordingly, the actual operating results of the Company included in the Statement of Operations for the twelve months ended December 31, 1996 include the eleven months of operations subsequent to the consummation of the Acquisitions. Since the IPO, the Company acquired four companies in transactions that were accounted for as poolings-of-interests: (i) The Rust Consulting Group, Inc. ("Rust") in December 1996; (ii) MAVRICC Management Systems, Inc. and a related company, MMS Escrow and Transfer Agency, Inc. (collectively, "MAVRICC") in March 1997; (iii) Input of Texas, Inc. ("Input") in March 1997; and (iv) Micro Publishing Systems, Inc. ("MPS") in December 1997 (collectively, the "Pooled Companies"). The consolidated financial statements for all periods presented have been restated to include the accounts of MAVRICC and Input. As a result, F.Y.I. is reporting financial results in periods prior to the Company's inception. The consolidated financial statements of the Company were not restated for the Rust and MPS acquisitions for the periods prior to January 1, 1996 and 1997, respectively, due to their financial immateriality. The Pooled Companies and the Company were not under common control or management during the periods prior to their respective mergers. The results of operations for the periods presented may not be indicative of the results in the future because of (i) the impact of acquisitions recorded as purchases, whose results are only included subsequent to the purchase date; and (ii) the impact of acquisitions recorded as poolings-of-interests, whose predecessor companies were not under common control or management. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: Cash and Cash Equivalents The Company considers highly liquid investments with original maturities of three months or less to be cash equivalents. Cash equivalents are carried at cost, which approximates market value. Inventory Inventory is stated at the lower of cost or market with cost determined on a first-in, first-out (FIFO) basis. Property, Plant and Equipment Property, plant and equipment are recorded at cost. Depreciation is computed using straight-line and accelerated methods over the estimated useful lives of the assets. Leasehold improvements are depreciated over the lesser of the estimated useful life or the term of the lease. 29 30 F.Y.I. INCORPORATED AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Intangible Assets Intangible assets consist primarily of excess purchase price over net assets, which are amortized over 30 years. In conformance with Statement of Financial Accounting Standards ("SFAS") No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of," the Company's management continually evaluates whether events and circumstances indicate the remaining estimated useful life of intangible assets may warrant revisions or that the remaining balance of intangibles or other long-lived assets may not be recoverable. To make this evaluation, management uses an estimate of undiscounted net income over the remaining life of the intangibles or other long-lived assets. Revenue Recognition Revenue is recognized when the services are rendered, or products are shipped, to the Company's customers. Microfilm processing revenue is recognized on a percentage-of-completion basis. Unearned revenue represents customer storage and certain services which are billed in advance. Income Taxes Income taxes are provided based upon the provisions of SFAS No. 109, "Accounting for Income Taxes," which requires recognition of deferred income taxes under the asset and liability method. Deferred income taxes are provided for temporary differences in the recognition of revenue and expenses for tax and financial reporting purposes. Temporary differences result primarily from accelerated depreciation and amortization for tax purposes, deferred contract revenue being taxed when billed, and various accruals and reserves being deductible for tax purposes in different periods. Net Income Per Share Net income per common share has been computed in accordance with SFAS No. 128, "Earnings Per Share," which requires the disclosure of basic and diluted net income per share. Basic net income per share has been computed by dividing net income by the weighted average number of common shares outstanding for the period. Diluted net income per share has been computed by dividing net income by the weighted average number of common shares and common stock equivalents outstanding for the period. Net income per share has been restated for all periods presented in accordance with SFAS No. 128. Use of Estimates in Financial Statements The preparation of financial statements in conformity with generally accepted accounting principles ("GAAP") requires management to make estimates and assumptions that affect the reported amounts of certain assets and liabilities and disclosure of contingent liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Reclassifications Certain prior year amounts have been reclassified to make their presentation consistent with the current year. Consolidation The accompanying financial statements and related notes to consolidated financial statements include the accounts of F.Y.I. Incorporated and its subsidiaries, which consist of the results of: (i) F.Y.I. Incorporated; (ii) the Founding Companies acquired simultaneously with the closing of F.Y.I.'s IPO on January 23, 1996 30 31 F.Y.I. INCORPORATED AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) based on an effective date of January 31, 1996; (iii) the companies acquired in business combinations accounted for under the purchase method of accounting from their respective acquisition dates; and (iv) the companies acquired in business combinations accounted for under the pooling-of-interests method of accounting for all periods presented. All significant intercompany balances and transactions have been eliminated. Recent Accounting Pronouncements In June 1997, the Financial Accounting Standards Board issued two new statements: SFAS No. 130, "Reporting Comprehensive Income," which requires enterprises to report, by major component and in total, all changes in equity from nonowner sources; and SFAS No. 131, "Disclosures about Segments of an Enterprise and Related Information," which establishes annual and interim reporting standards for a public company's operating segments and related disclosures about its products, services, geographic areas, and major customers. Both statements are effective for the Company's fiscal year ended December 31, 1998, with earlier application permitted. The effect of adoption of these statements will be limited to the form and content of the Company's disclosures and will not impact the Company's results of operations, cash flow or financial position. Pro Forma Net Income (Unaudited) The Company acquired Rust in December 1996, MAVRICC in March 1997, Input in March 1997, and MPS in December 1997, all in transactions that were accounted for as poolings-of-interests. The Pooled Companies were managed through their acquisition dates as independent private companies and represent a variety of tax structures. Therefore, selling, general and administrative expenses for the historical periods reflect compensation and related benefits that the former owners have received from the business during those periods. In connection with the acquisition, the owners have entered into employment agreements that provide for compensation and benefits at levels lower than the historical amounts (the "Compensation Differential"). The unaudited pro forma data present compensation at the level the owners have agreed to receive subsequent to the acquisition. In addition, the pro forma data present the incremental provision for income taxes as if all entities had been subject to federal and state income taxes and the related income tax impact of the Compensation Differential discussed above. 3. ALLOWANCE FOR DOUBTFUL ACCOUNTS AND NOTES RECEIVABLE: The activity in the allowance for doubtful accounts and notes receivable is as follows (in thousands):
BALANCE AT CHARGED TO BALANCE AT BEGINNING BALANCE COSTS AND END OF OF PERIOD ACQUIRED EXPENSES WRITE-OFFS PERIOD ---------- -------- ---------- ---------- ---------- Twelve months ended December 31, 1996................................. $ 22 $1,038 $1,017 $ 837 $1,240 ====== ====== ====== ====== ====== Twelve months ended December 31, 1997................................. $1,240 $2,046 $1,631 $1,795 $3,122 ====== ====== ====== ====== ======
31 32 F.Y.I. INCORPORATED AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 4. PROPERTY, PLANT AND EQUIPMENT: Property, plant and equipment consist of the following (in thousands):
ESTIMATED DECEMBER 31, USEFUL LIVES ----------------- YEARS 1996 1997 ------------ ------- ------- Land................................................... N/A $ 602 $ 602 Buildings and improvements............................. 7--18 2,335 2,691 Leasehold improvements................................. 5--10 792 1,194 Vehicles............................................... 5--7 1,253 1,990 Machinery and equipment................................ 5--15 14,705 18,062 Computer equipment..................................... 3--7 3,769 9,320 Furniture and fixtures................................. 5--15 999 2,493 ------- ------- 24,455 36,352 Less -- Accumulated depreciation and amortization...... 11,152 16,464 ------- ------- $13,303 $19,888 ======= =======
5. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES: Accounts payable and accrued liabilities consist of the following (in thousands):
DECEMBER 31, ------------------ 1996 1997 ------- ------- Accounts payable and accrued liabilities.................... $ 4,968 $ 5,182 Accrued compensation and benefits........................... 2,819 4,698 Customer deposits........................................... 883 1,129 Accrued liabilities from acquisitions....................... 5,211 1,344 Accrued professional fees................................... 1,035 176 Other....................................................... 303 433 ------- ------- $15,219 $12,962 ======= =======
6. BUSINESS COMBINATIONS: 1997 Acquisitions During 1997, the Company acquired 11 additional document management businesses, eight of which were accounted for as purchases (the "Purchased Companies") and three of which were accounted for under the pooling-of-interests method. The eight acquisitions accounted for as purchases were Acadian Consultants, Inc. ("Acadian"), Computer Central Corporation ("CCC"), Deliverex of San Francisco ("Deliverex San Francisco"), Information Management Corporation ("IMC"), Major Legal Services ("Major"), Quality Copy Service, QCSInet, Inc. and affiliates (collectively, "QCS"), APS Services ("APS"), and ZipShred, Inc. and ZipShred of America, LLC (collectively, "ZipShred"). The aggregate consideration paid for the Purchased Companies consisted of $5.8 million in cash and 724,572 shares of Common Stock. The preliminary allocation of the purchase price is set forth below (in thousands):
Consideration Paid.......................................... $17,950 Estimated Fair Value of Tangible Assets..................... 8,153 Estimated Fair Value of Liabilities......................... 11,772 Goodwill.................................................... 21,569
32 33 F.Y.I. INCORPORATED AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The weighted average fair market values of the shares of Common Stock used in calculating the consideration paid was $16.79, which represents a 30% to 35% discount from the average trading price of the Common Stock based on the length and type of restrictions in the purchase agreements. The estimated fair market values reflected above are based on preliminary estimates and assumptions and are subject to revision. In management's opinion, the preliminary allocations are not expected to be materially different than the final allocations. Certain of the acquisitions are subject to additional consideration based upon achievement of specified earning targets over a one or two year period. The acquisitions of MAVRICC and Input in March 1997 for 820,000 and 263,636 shares of Common Stock, respectively, were accounted for as poolings-of-interests. The consolidated financial statements for all periods presented have been restated to include the accounts of MAVRICC and Input. The separate and combined results of F.Y.I., MAVRICC and Input for the periods preceding the acquisition were as follows (in thousands):
F.Y.I. MAVRICC INPUT CONSOLIDATED ------- ------- ------ ------------ Year ended December 31, 1995: Total revenue................................. $ -- $6,456 $2,584 $ 9,040 Net income (loss)............................. -- 177 (147) 30 Pro forma net income.......................... -- 1,049 (22) 1,027 Diluted weighted average common shares........ 633 820 264 1,717 Year ended December 31, 1996: Total revenue................................. 75,722 8,793 4,303 88,818 Net income (loss)............................. 4,031 (829) 93 3,295 Pro forma net income.......................... 4,172 1,028 399 5,599 Diluted weighted average common shares........ 5,968 820 264 7,052
The acquisition of MPS in December 1997 for 326,506 shares of Common Stock was accounted for as a pooling-of-interests. The consolidated financial statements of the Company were not restated for periods prior to January 1, 1997 due to the financial immateriality of MPS. The interim results of the Company for the period from January 1, 1997 through September 30, 1997 have been restated for the MPS acquisition. Restated total revenue, net income, pro forma net income and weighted average shares outstanding after giving effect to the pooling-of-interests with MPS are summarized below. Pro forma net income reflects adjustments for the Compensation Differential and the related income tax effect.
NINE MONTHS ENDED SEPTEMBER 30, 1997 ---------------------------- AS PREVIOUSLY AS RESTATED REPORTED ----------- ------------- (IN THOUSANDS, EXCEPT PER SHARE DATA) Total revenue............................................... $109,893 $105,176 Net income.................................................. 6,645 6,843 Net income per common share(1).............................. $ 0.63 $ 0.67 Pro forma net income........................................ 7,202 6,920 Pro forma net income per common share(1).................... $ 0.69 $ 0.68 Weighted average common shares outstanding(1)............... 10,486 10,159
- --------------- (1) Net income per common share has been restated in accordance with SFAS 128. 33 34 F.Y.I. INCORPORATED AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 1996 Acquisitions Since the IPO and through December 31, 1996, the Company acquired 18 additional businesses (the "1996 Acquisitions") that provide document management services, of which 17 were accounted for as purchases and one was accounted for as a pooling-of-interests. The 1996 Acquisitions consist of: Sacramento Valley Records Management, Inc. ("Sacramento"); Microfilm Associates, Ltd. ("Microfilm"); B&B Information and Image Management, Inc. ("B&B"); Premier Document Management, Inc. and PDM Services, Inc. ("Premier"); Robert A. Cook and Staff, Inc. and RAC Services, Inc. ("Cook"); Octo, Inc. ("Octo"); Domor Data Processing ("Domor"); Index Record Management ("Index"); Rushmore Legal Support ("Rushmore"); C.M.R.S. Incorporated ("CMRS"), Minnesota Medical Record Service, Inc. ("Minnesota Medical Record"), and Texas Medical Record Service, Inc. ("Texas Medical Record") (collectively "Medical Record"); ZIA Information Analysis Group ("ZIA"); Carton Hodgson, Inc. and CH Direct, Inc. (collectively "Carton"); Data Input Services Corporation ("DISC"); Deliverex of Seattle ("Deliverex Seattle"); Researchers Litigation Support, L.L.C. ("Researchers LLC"); and Rust. The aggregate consideration paid for the 17 acquisitions accounted for as purchases consisted of $32.3 million in cash, 820,065 shares of Common Stock net of stock repurchased by the Company, and future contingent payment estimates of $2,664,000 to be paid in cash and stock. The preliminary allocation of the purchase price is set forth below (in thousands): Consideration Paid.......................................... $46,523 Estimated Fair Value of Tangible Assets..................... 15,134 Estimated Fair Value of Liabilities......................... 12,994 Goodwill.................................................... 44,383
The fair market value of the shares of Common Stock used in calculating the consideration paid ranged from $13.65 to $16.35, which is based on approximately a 20-39% discount from the average trading price of the Common Stock based on the length and type of stock resale restrictions outlined in the purchase agreements. The acquisition of Rust in December 1996 for 110,000 shares of Common Stock was accounted for as a pooling-of-interests. The consolidated financial statements of the Company were not restated for periods prior to January 1, 1996 due to the financial immateriality of Rust. Acquisitions of the Founding Companies Simultaneously with the closing of the IPO, the Company acquired the Founding Companies. The aggregate consideration paid by F.Y.I. to acquire the Founding Companies was approximately $35 million, consisting of: (i) $7,059,000 in cash; (ii) 1,878,933 shares of Common Stock; (iii) the assumption and repayment of approximately $191,000 of indebtedness owed by a Founding Company stockholder; and (iv) the distribution of cash and certain receivables to certain Founding Company stockholders of S corporations in the amount of $3,450,000, representing the undistributed retained earnings of S corporations, upon which taxes have been paid by the stockholders. The Acquisitions have been accounted for in accordance with GAAP as a combination of F.Y.I. and the Founding Companies at historical cost, because: (i) the Founding Companies' stockholders transferred assets to F.Y.I. in exchange for Common Stock and cash simultaneously, with the IPO; (ii) the nature of future operations of the Company will be substantially identical to the combined operations of the Founding Companies; and (iii) no former stockholder group of any of the Founding Companies obtained a majority of the outstanding voting shares of the Company. 34 35 F.Y.I. INCORPORATED AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 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 a period of 30 years. Management continually evaluates whether events and circumstances indicate that the remaining estimated useful life of intangible assets may warrant revisions or that the remaining balance of intangibles or other long-lived assets may not be recoverable. To make this evaluation, management uses an estimate of undiscounted net income over the remaining life of the intangibles or other long-lived assets. The goodwill associated with the B&B, Premier, Medical Record, ZIA, Carton, DISC, Acadian, CCC, Deliverex San Francisco, IMC, Major, QCS and APS acquisitions is not deductible for income tax purposes. Pro Forma Financial Data Set forth below are unaudited pro forma financial data for the years ended December 31, 1996 and December 31, 1997. The unaudited pro forma data give effect to: (i) the acquisitions of B&B, Premier, Cook, Medical Record, ZIA, Carton, DISC, Acadian, CCC, IMC, Major, QCS, APS and MPS; (ii) the acquisitions of the Founding Companies; and (iii) compensation and tax adjustments for all transactions as if these transactions had occurred on January 1, 1996. The acquisitions of Sacramento, Microfilm, Octo, Domor, Rushmore, Index, Deliverex Seattle, Researchers LLC, Deliverex San Francisco and ZipShred have not been included in the pro forma financial statements for periods prior to their acquisition date as the effect is immaterial.
PRO FORMA YEAR ENDED DECEMBER 31, -------------------------- 1996 1997 ----------- ----------- (UNAUDITED, IN THOUSANDS, EXCEPT PER SHARE DATA) Revenue..................................................... $162,677 $176,128 Income before income taxes.................................. 10,328 15,969 Net income.................................................. 6,197 9,581 Net income per common share Basic..................................................... $ 0.75 $ 0.88 Diluted................................................... $ 0.74 $ 0.87 Weighted average common shares outstanding Basic..................................................... 8,298 10,839 Diluted................................................... 8,426 11,017
The pro forma financial data are provided for informational purposes only and do not purport to present the results of operations of the Company had the transactions assumed therein occurred on or as of the dates indicated, nor are they necessarily indicative of the results of operations which may be achieved in the future. Subsequent to December 31, 1997, the Company acquired five additional businesses. 35 36 F.Y.I. INCORPORATED AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 7. CREDIT FACILITIES: Short-Term Obligations Short-term obligations consist of the following (in thousands):
DECEMBER 31, ------------ 1996 1997 ---- ---- Line of credit, expiring at December 1997, interest at prime plus 0.5% (8.75% at December 31, 1996 and 9.0% at December 31, 1997)................................................. $250 $ -- ---- ---- Total short-term obligations................................ $250 $ -- ==== ====
Long-term Obligations Long-term obligations consist of the following (in thousands):
DECEMBER 31, ---------------- 1996 1997 ------ ------ Line of credit, expiring at February 18, 2001, interest at prime plus 1.5% or the Eurodollar rate plus 3% (8.75% to 9.75% at December 31, 1996 and 8.94% to 10% at December 31, 1997)................................................. $ -- 2,000 Industrial Revenue Bonds: Variable Rate (3.5% at December 31, 1996 and 3.3% at December 31, 1997) Demand/Fixed Rate Revenue Bonds, Prince George's County, Maryland; due beginning in 1996 through 2014, secured by all real estate equipment and other tangible property of a subsidiary of the Company............................................... 2,346 2,296 Note payable -- Small Business Administration, monthly payment of $3,000, including principal and interest at 4%, maturing November 17, 2014, secured by deed of trust on real estate and non-real estate assets of the Company, guaranteed by a stockholder and the stockholder's wife.... 395 376 Notes payable -- Small Business Administration, monthly payment of $10,077, including principal and interest at prime plus 2.75% (11% at December 31, 1996 and 11.25% at December 31, 1997), maturing August 21, 2003 and December 12, 2003, secured by all equipment and tangible property of the Company, guaranteed by a stockholder............... 585 -- Notes payable - Affiliates, due on demand with interest ranging from 1% to 8% above prime (9.25% to 16.25% at December 31, 1996 and 9.5% to 16.5% at December 31, 1997), unsecured................................................. 56 -- Capital lease obligations................................... 1,431 1,306 All other obligations....................................... 434 570 ------ ------ Total............................................. 5,247 6,548 Less -- Current maturities of long-term obligations......... 585 856 ------ ------ Total long-term obligations....................... $4,662 5,692 ====== ======
In April 1996, the Company and its subsidiaries entered into a credit agreement, as amended (the "1996 Credit Agreement"), with Banque Paribas, as agent, and the lenders named therein. In February 1998, F.Y.I. entered into a new credit agreement (the "1998 Credit Agreement") with Banque Paribas and Bank of America Texas, N.A., as co-agents and lenders named therein. Under the 1998 Credit Agreement, the Company and its subsidiaries can borrow on a revolving credit basis loans in an aggregate outstanding principal 36 37 F.Y.I. INCORPORATED AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) amount up to $50.0 million, subject to certain customary borrowing capacity requirements. The 1998 Credit Agreement is secured by the assets and/or stock of F.Y.I. and its subsidiaries. The commitment to fund revolving credit loans under the 1998 Credit Agreement expires February 17, 2001. The annual interest rate applicable to borrowings under this facility is, at the option of the Company, (i) the prime rate or (ii) grid pricing ranging from 0.5% to 1.5% plus the Eurodollar rate based on the ratio of debt to EBITDA (as defined in the 1998 Credit Agreement). The 1998 Credit Agreement requires mandatory prepayments in certain circumstances. The outstanding principal balance of revolving credit loans is due and payable on March 31, 2003. The Company also has outstanding an irrevocable letter of credit in the amount of approximately $2.4 million to serve as a guarantee for periodic principal and interest payments related to the Industrial Revenue Bonds. In January 1998, the Company entered into a letter of credit in the amount of $10,000,000 to serve as a guarantee for performance under a preliminary contract with the New York State Workers Compensation Board. The Company capitalized certain costs associated with the 1996 Credit Agreement. The unamortized costs of approximately $1.2 million were expensed in the fourth quarter of 1997 when the Company agreed to terms on the 1998 Credit Agreement. The weighted average interest rate on short and long-term obligations at December 31, 1997 and 1996 was 7.34% and 6.81%, respectively. The 1996 and 1998 Credit Agreements contain certain reporting requirements and financial covenants, including requirements that the Company maintain minimum levels of net worth and other financial ratios. As of December 31, 1997 and 1996, the Company has complied with all loan covenants. Maturities of Long-Term Obligations As of December 31, 1997, maturities of long-term obligations are as follows (in thousands):
YEARS ENDING DECEMBER 31, ------------------------- 1998........................................................ $ 856 1999........................................................ 566 2000........................................................ 501 2001........................................................ 2,293 2002........................................................ 151 Thereafter.................................................. 2,181 ------ Total....................................................... $6,548 ======
37 38 F.Y.I. INCORPORATED AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 8. LEASE COMMITMENTS: The operating companies lease various office buildings, machinery, equipment, and vehicles. Future minimum lease payments under capital leases and noncancellable operating leases are as follows (in thousands):
YEAR ENDED DECEMBER 31, 1997 -------------------- CAPITAL OPERATING YEARS ENDING DECEMBER 31, LEASES LEASES ------------------------- ------- --------- 1998........................................................ $ 635 $ 7,087 1999........................................................ 424 6,178 2000........................................................ 263 4,194 2001........................................................ 187 3,337 2002........................................................ 33 2,350 Thereafter.................................................. 8 6,059 ------ ------- Total minimum lease payments................................ $1,550 $29,205 ======= Less -- Amounts representing interest....................... 244 ------ Net minimum lease payments.................................. 1,306 Less -- Current portion of obligations under capital leases.................................................... 516 ------ Long-term portion of obligations under capital leases....... $ 790 ======
Rent expense for all operating leases for the years ended December 31, 1995, 1996, and 1997 was approximately $275,000, $4,145,000, and $7,871,000, respectively. Certain operating companies sublease a portion of their office facilities under noncancellable lease agreements which expire at various dates to three businesses. Future minimum sublease rental income as of December 31, 1997 for the remainder of the term and in the aggregate are as follows (in thousands):
YEARS ENDING DECEMBER 31, ------------------------- 1998........................................................ $ 97 1999........................................................ 90 2000........................................................ 78 2001........................................................ 11 ---- $276 ====
9. INCOME TAXES: The provision for federal and state income taxes consists of the following (in thousands):
YEAR ENDED DECEMBER 31, ------------------------ 1995 1996 1997 ---- ------ ------ Current Federal.................................................. $(18) $2,523 $4,987 State.................................................... -- 547 807 Deferred Federal.................................................. (40) (165) 249 State.................................................... -- (40) 40 ---- ------ ------ $(58) $2,865 $6,083 ==== ====== ======
38 39 F.Y.I. INCORPORATED AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The differences in income taxes provided and the amounts determined by applying the federal statutory tax rate to income before income taxes result from the following (in thousands):
YEAR ENDED DECEMBER 31, ------------------------ 1995 1996 1997 ---- ------ ------ Tax at statutory rate...................................... $(10) $2,094 $5,131 Add (deduct): State income taxes....................................... -- 339 559 (Income) loss of S Corporations.......................... (60) 282 (66) Nondeductible expenses................................... 12 150 459 ---- ------ ------ $(58) $2,865 $6,083 ==== ====== ======
The components of deferred income tax liabilities and assets are as follows (in thousands):
DECEMBER 31, ---------------- 1996 1997 ------ ------ Deferred income tax liabilities -- Tax over book depreciation and amortization............... $ 441 $ 874 Accrual to cash differences, net.......................... 1,067 974 Accounts receivable....................................... -- 340 Other, net................................................ 7 -- ------ ------ Total deferred income tax liabilities............. 1,515 2,188 Deferred income tax assets -- Allowance for doubtful accounts........................... 305 266 Other, net................................................ 100 68 ------ ------ Total deferred income tax assets.................. 405 334 ------ ------ Total net deferred income tax liabilities................... $1,110 $1,854 ====== ====== Current portion of deferred income tax liabilities.......... 759 980 Long-term deferred tax liabilities.......................... 351 874 ------ ------ $1,110 $1,854 ====== ======
10. STOCKHOLDERS' EQUITY: Initial Public Offering and December Public Stock Offering: On January 26, 1996, the Company completed the IPO of 2,185,000 shares of Common Stock (including the exercise of the underwriters' over-allotment option) at $13.00 per share. Proceeds from the IPO, net of underwriting commissions and offering costs, were approximately $22.9 million. Upon the closing of the IPO, the Company converted the 9,000 shares of Series A Preferred Stock then outstanding into 542,557 shares of Common Stock. On December 17, 1996, the Company completed a follow-on public offering (the "December Offering") of 2,363,000 shares of Common Stock (including the exercise of the underwriters' over-allotment option) at $20.00 per share. Proceeds from the December Offering, net of underwriting commissions and offering costs, were approximately $43.6 million. 39 40 F.Y.I. INCORPORATED AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Stock Options and Warrants: At December 31, 1997, the Company had one stock-based compensation plan, the 1995 Stock Option Plan ("the Plan"), which is described below. The Company applies APB Opinion 25 and related Interpretations in accounting for the Plan. Accordingly, no compensation cost has been recognized for the Plan. Had compensation cost for the Plan been determined based upon the fair value at grant dates for awards under the Plan consistent with the method of SFAS No. 123, "Accounting for Stock Based Compensation," the Company's net income and earnings per share would have been as follows (in thousands, except for per share data):
DECEMBER 31, ---------------- 1996 1997 ------ ------ Net income under SFAS 123................................... $2,708 $7,476 Diluted net income per common share under SFAS 123.......... 0.46 0.70 Actual net income........................................... 3,295 9,007 Actual diluted net income per common share.................. 0.47 0.85
The fair value of each option grant was estimated on the date of the grant using the Black-Scholes option pricing model with the following assumptions for 1996: risk free interest rate ranging from 5.4% to 6.9%, no dividend yield, expected life of three years, and volatility of 36%. The following assumptions were used for 1997: risk free interest rate ranging from 5.7% to 6.6%, no dividend yield, expected life of three years, and volatility of 33%. In October 1995, the Board of Directors and F.Y.I.'s stockholders approved the Plan, which became effective on the date of the IPO. The Plan provides awards of options to purchase Common Stock and may include incentive stock options ("ISOs") and/or non-qualified stock options. The Plan also provides for automatic option grants to directors who are not otherwise employed by the Company or its subsidiaries. Upon commencement of service (or upon agreeing to serve in the case of the initial non-employee directors), a non-employee director will receive a non-qualified option to purchase 10,000 shares of Common Stock, and continuing non-employee directors will receive annual options to purchase 5,000 shares of Common Stock. Options granted to non-employee directors become exercisable one-third on the date of grant and one-third on each of the next two anniversaries of the date of grant. Non-employee directors' options have a term of five years from the date of grant. The maximum number of shares of Common Stock that may be subject to outstanding options, determined immediately after the grant of any option, is the greater of 650,000 shares or 16% of the aggregate number of shares of the Company's Common Stock outstanding, provided, however, that options to purchase no more than 650,000 shares of Common Stock may be granted as ISOs. At December 31, 1997 and 1996, approximately 189,000 and 1,037,000 shares, respectively, were available for issuance. The Company had options to purchase 1,561,981 and 690,370 shares outstanding at December 31, 1997 and 1996, respectively. These options, other than those granted to employee directors, have 10 year expirations 40 41 F.Y.I. INCORPORATED AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) and various vesting schedules. Options are granted at the market price of the Common Stock on the date of grant.
OPTIONS OUTSTANDING ------------------------------------ WEIGHTED AVERAGE SHARES EXERCISE PRICE -------------- ---------------- (IN THOUSANDS) Balance at inception................................. -- -- Granted.............................................. 473 $13.00 ----- ------ Balance, December 31, 1995........................... 473 $13.00 Granted.............................................. 316 $19.58 Exercised............................................ 46 $13.00 Forfeited............................................ 53 $13.28 ----- ------ Balance, December 31, 1996........................... 690 $15.99 Granted.............................................. 982 $21.95 Exercised............................................ 87 $14.28 Forfeited............................................ 23 $18.09 ----- ------ Balance, December 31, 1997........................... 1,562 $19.80 ===== ====== Exercisable, December 31, 1997....................... 453 $17.48 ===== ======
The following table summarizes information about stock options granted under the Plan that were outstanding at December 31, 1997:
OPTIONS OUTSTANDING OPTIONS EXERCISABLE ------------------------------------------------- ------------------------------- NUMBER WEIGHTED-AVERAGE NUMBER RANGE OF OUTSTANDING REMAINING WEIGHTED-AVERAGE EXERCISABLE WEIGHTED-AVERAGE EXERCISE PRICES AT 12/31/97 CONTRACTUAL LIFE EXERCISE PRICE AT 12/31/97 EXERCISE PRICE - --------------- ----------- ---------------- ---------------- ------------ ---------------- $ 13.00 307,011 7.4 $13.00 170,931 $13.00 $16.00-$20.00 261,120 8.9 $18.73 170,300 $19.10 $20.38-$25.31 993,850 9.5 $22.18 111,630 $21.86
Warrants to Purchase Common Stock In November 1995, the Company granted to executive officers warrants to purchase 115,000 shares of common stock with an exercise price of $10.00 per share. The warrants are exercisable as to 50% of the underlying shares on March 31, 1997, and as to the remaining 50% on January 26, 1998. In May 1996, the Company granted to the Chief Executive Officer an additional warrant to purchase 50,000 shares of Common Stock at an exercise price of $20.00 per share. The additional warrant is exercisable as to 50% of the underlying shares on May 21, 1997 and as to the remaining 50% on May 21, 1998. 41 42 F.Y.I. INCORPORATED AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Net Income Per Share Basic and diluted net income per share were computed in accordance with SFAS 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):
YEAR ENDED DECEMBER 31, ------------------------ 1995 1996 1997 ----- ----- ------ Basic weighted average common shares....................... 1,717 6,924 10,438 Weighted average options and warrants...................... -- 128 178 ----- ----- ------ Diluted weighted average common shares..................... 1,717 7,052 10,616 ===== ===== ======
11. EMPLOYEE BENEFIT PLANS: The Company established a defined contribution plan (the "401(k) plan") in January 1997. The 401(k) plan covers employees of the Company and some of its subsidiaries. The employees must be at least 21 years of age and work at least 1,000 hours per year with one year of service to be eligible for the plan. In addition, the Company established a non-qualified plan in December 1996. The non-qualified compensation plan permits eligible officers to defer a portion of their compensation. Contributions to both the 401(k) plan and the non-qualified compensation plan consist of employee pre-tax contributions determined as a percentage of each participating employee's compensation. The Company may make contributions to either or both plans at the discretion of the Company's Board of Directors. No contributions were made to the 401(k) plan or the non-qualified compensation plan by F.Y.I. for the years ended December 31, 1997 or 1996. F.Y.I. offers no post-employment or post-retirement benefits. Certain of the subsidiaries have qualified defined contribution employee benefit plans (the "Plans"), the majority of which allow for voluntary pre-tax contributions by employees. The subsidiaries pay all general and administrative expenses of the Plans and, in some cases, the subsidiaries make matching and discretionary contributions to the Plans. The subsidiaries offer no post-employment or post-retirement benefits. The expense incurred related to the Plans by the subsidiaries was approximately $33,000, $131,000, and $140,000 for the years ended December 31, 1995, 1996, and 1997, respectively. 12. RELATED-PARTY TRANSACTIONS: Leasing Transactions Certain of the Founding Companies lease their operating facilities, along with certain equipment, from selling parties who remained employees or directors of the Company. These leases are for various lengths and annual amounts. The rental expense for these operating leases for the years ended December 31, 1997 and 1996 was approximately $834,000 and $487,000, respectively. Notes Receivable In the Acquisitions, the Company acquired $642,000 of notes receivable from two Founding Company stockholders. At the time of the Merger, the stockholders entered into new notes receivable with a stated interest rate (5%) and principal payment schedules. Interest is payable on a semi-annual basis, and principal is due as follows: 1998 -- $321,000; and 1999 -- $321,000. Other Transactions A subsidiary purchased digital coding services from an entity in which an F.Y.I. stockholder and director had a controlling interest. Effective December 1, 1996, the Company purchased this entity from the stockholder for $2,700,000. The expense incurred to the entity for the 11 months ended November 30, 1996 42 43 F.Y.I. INCORPORATED AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) was $32,000, and billings to the entity were $49,000. Additionally, the Company charged the entity a management fee for accounting services. Management fees were $25,000 for the eleven months ended November 30, 1996. 13. COMMITMENTS AND CONTINGENCIES: Litigation The Company is, from time to time, a party to litigation arising in the normal course of its business. Management believes that none of these actions will have a material adverse effect on the financial position or results of operations of the Company. Concentration of Credit Risk Financial instruments that potentially subject the Company to concentration of credit risk consist primarily of cash and cash equivalents and trade receivables. The Company maintains cash and cash equivalents and certain other financial instruments at various major financial institutions across many geographic areas. Credit risk on trade receivables is minimized as a result of the large number of entities comprising the Company's customer base and their dispersion across many industries and geographic areas. 14. QUARTERLY INFORMATION (UNAUDITED):
F.Y.I. INCORPORATED ------------------------------------------------------------------------------ 1996 QUARTER ENDED 1997 QUARTER ENDED ------------------------------------- ------------------------------------- MAR 31 JUN 30 SEP 30 DEC 31 MAR 31 JUN 30 SEP 30 DEC 31 ------- ------- ------- ------- ------- ------- ------- ------- Total revenue................ $12,221 $20,281 $25,938 $30,378 $33,488 $35,896 $40,509 $44,249 Gross profit................. 4,090 6,939 9,453 11,000 11,383 12,316 13,672 15,359 Earnings before taxes........ 771 1,897 1,970 1,522 3,577 4,100 3,504 3,909 Net income................... 469 1,182 1,243 401 2,163 2,380 2,102 2,362 Pro forma earnings before taxes...................... 1,105 2,275 2,968 3,100 3,820 4,127 4,250 3,937 Pro forma net income......... 664 1,359 1,773 1,803 2,256 2,396 2,550 2,378 Net income per common share Basic...................... $ 0.07 $ 0.18 $ 0.18 $ 0.05 $ 0.21 $ 0.23 $ 0.20 $ 0.22 Diluted.................... $ 0.07 $ 0.17 $ 0.18 $ 0.05 $ 0.21 $ 0.23 $ 0.20 $ 0.21 Pro forma net income per common share Basic...................... $ 0.10 $ 0.20 $ 0.25 $ 0.24 $ 0.22 $ 0.23 $ 0.24 $ 0.22 Diluted.................... $ 0.10 $ 0.20 $ 0.25 $ 0.23 $ 0.22 $ 0.23 $ 0.24 $ 0.22 Weighted average common shares outstanding Basic...................... 6,463 6,632 6,962 7,639 10,129 10,281 10,533 10,810 Diluted.................... 6,578 6,763 7,084 7,784 10,295 10,424 10,739 11,007
Amounts reported differ from amounts previously reported due to the pooling-of-interests with MPS discussed in Note 7. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. 43 44 F.Y.I. INCORPORATED AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT Information called for by Item 10 will be set forth under the caption "Election of Directors" in the Company's 1998 Proxy Statement, which will be filed not later than 120 days after the end of the Company's fiscal year end December 31, 1997 and which is incorporated herein by this reference. ITEM 11. EXECUTIVE COMPENSATION Information called for by Item 11 will be set forth under the caption "Executive Compensation" in the Company's 1998 Proxy Statement, which will be filed not later than 120 days after the end of the Company's fiscal year end December 31, 1997 and which is incorporated herein by this reference. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT Information called for by Item 12 will be set forth under the caption "Security Ownership of Certain Beneficial Owners and Management" in the Company's 1998 Proxy Statement, which will be filed not later than 120 days after the end of the Company's fiscal year end December 31, 1997 and which is incorporated herein by this reference. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS Information called for by Item 13 will be set forth under the caption "Certain Relationships and Related Transactions" in the Company's 1998 Proxy Statement, which will be filed not later than 120 days after the end of the Company's fiscal year end December 31, 1997 and which is incorporated herein by this reference. PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENTS SCHEDULES, AND REPORTS ON FORM 8-K The following documents are being filed as part of this Report: (a)(1) Consolidated Financial Statements See Index to Consolidated Financial Statements on page 23. 44 45 All other schedules are omitted because they are not applicable, not required or the required information is in the Financial Statements or the Notes thereto. (a)(3) The following Exhibits are filed as part of this Report as required by Item 601 of Regulation S-K. The Exhibits designated by an asterisk are management contracts and compensatory plans and arrangements required to be filed as Exhibits to this Report.
EXHIBIT NUMBER DESCRIPTION ------- ----------- 2.1 -- Agreement and Plan of Reorganization, dated as of October 25, 1995, by and among F.Y.I., Incorporated, Deliverex, Incorporated, ASK Record Management, Inc., Deliverex Acquisition Corp., and the Stockholders named therein (Incorporated by reference to Exhibit 2.1 to Amendment No. 1 to the Company's Registration Statement on Form S-1 (Registration No. 33-98608) effective January 12, 1996) 2.2 -- Agreement and Plan of Reorganization, dated as of October 25, 1995, by and among F.Y.I. Incorporated, C. & T. Management Services, Inc., Qualidata, Inc., DPAS Acquisition Corp., and the Stockholders named therein (Incorporated by reference to Exhibit 2.2 to Amendment No. 1 to the Company's Registration Statement on Form S-1 (Registration No. 33-98608) effective January 12, 1996) 2.3 -- Agreement and Plan of Reorganization, dated as of October 25, 1995, by and among F.Y.I. Incorporated, Melanson & Associates, Inc., Bay Area Micrographics, Researchers Acquisition Corp., and the Stockholders named therein (Incorporated by reference to Exhibit 2.3 to Amendment No. 1 to the Company's Registration Statement on Form S-1 (Registration No. 33-98608) effective January 12, 1996) 2.4 -- Agreement and Plan of Reorganization, dated as of October 25, 1995, by and among F.Y.I. Incorporated, Paragon Management Group, Inc., Recordex Acquisition Corp., Recordex Services, Inc., and the Stockholders named therein (Incorporated by reference to Exhibit 2.4 to Amendment No. 1 to the Company's Registration Statement on Form S-1 (Registration No. 33-98608) effective January 12, 1996) 2.5 -- Agreement and Plan of Reorganization, dated as of October 25, 1995, by and among F.Y.I. Incorporated, Permanent Records Inc., Permanent Records Acquisition Corp., and the Stockholders named therein (Incorporated by reference to Exhibit 2.5 to Amendment No. 1 to the Company's Registration Statement on Form S-1 (Registration No. 33-98608) effective January 12, 1996) 2.6 -- Agreement and Plan of Reorganization, dated as of October 25, 1995, by and among F.Y.I. Incorporated, Leonard Archives Inc., Leonard Acquisition Corp. and the Stockholders named therein (Incorporated by reference to Exhibit 2.6 to Amendment No. 1 to the Company's Registration Statement on Form S-1 (Registration No. 33-98608) effective January 12, 1996) 2.7 -- Agreement and Plan of Reorganization, dated as of October 25, 1995, by and among Imagent Corporation, Imagent Acquisition Corp. and the Stockholders named therein (Incorporated by reference to Exhibit 2.7 to Amendment No. 1 to the Company's Registration Statement on Form S-1 (Registration No. 33-98608) effective January 12, 1996) 2.8 -- Agreement and Plan of Reorganization dated as of October 25, 1995, by and among Mobile Information Services Corporation, Inc., Imagent Acquisition Corp. and the Stockholders named therein (Incorporated by reference to Exhibit 2.8 to Amendment No. 1 to the Company's Registration Statement on Form S-1 (Registration No. 33-98608) effective January 12, 1996)
45 46
EXHIBIT NUMBER DESCRIPTION ------- ----------- 2.9 -- First Amendment to Agreement and Plan of Reorganization, dated as of October 25, 1995, by and among F.Y.I. Incorporated, Leonard Archives Inc., Leonard Acquisition Corp. and the Stockholders named therein (Incorporated by reference to Exhibit 2.9 to Amendment No. 1 to the Company's Registration Statement on Form S-1 (Registration No. 33-98608) effective January 12, 1996) 2.10 -- First Amendment to Agreement and Plan of Reorganization, dated as of November 14, 1995, by and among F.Y.I. Incorporated, C. & T. Management Services, Inc., Qualidata, Inc., DPAS Acquisition Corp., and the Stockholders named therein (Incorporated by reference to Exhibit 2.10 to Amendment No. 1 to the Company's Registration Statement on Form S-1 (Registration No. 33-98608) effective January 12, 1996) 2.11 -- Agreement and Plan of Reorganization, dated as of May 31, 1996, by and among F.Y.I. Incorporated, B&B (Baltimore-Washington) Acquisition Corp., B&B Information and Image Management, Inc. and Charles J. Bauer, Jr. (Incorporated by reference to Exhibit 10.17 to Post-Effective Amendment No. 2 to the Company's Registration Statement on Form S-1 (Registration No. 333-1084) effective July 11, 1996) 2.12 -- Agreement and Plan of Reorganization, dated as of May 31, 1996, by and among F.Y.I. Incorporated, Premier Acquisition Corp., Premier Document Management, Inc., PDM Services, Inc., Brian E. Whiteside, Christopher S. Moore, Lynnette C. Pomerville and Gary T. Sievert (Incorporated by reference to Exhibit 10.18 to Post-Effective Amendment No. 2 to the Company's Registration Statement on Form S-1 (Registration No. 333-1084) effective July 11, 1996) 2.13 -- Asset Purchase Agreement, dated as of June 28, 1996, by and among F.Y.I. Incorporated, Robert A. Cook Acquisition Corp., Robert A. Cook and Staff, Inc. and RAC Services, Inc., Robert A. Cook and Robert A. Cook and Anna M. Cook, as Co-Trustees of the Cook 1993 Living Trust (Incorporated by reference to Exhibit 10.19 to Post-Effective Amendment No. 2 to the Company's Registration Statement on Form S-1 (Registration No. 333-1084) effective July 11, 1996) 2.14 -- Agreement and Plan of Reorganization, dated as of August 30, 1996, by and among F.Y.I. Incorporated, California Medical Record Service Acquisition Corp., C.M.R.S. Incorporated and Alan Simon (Incorporated by reference to Exhibit 2.14 to Post-Effective Amendment No. 3 to the Company's Registration Statement on Form S-1 (Registration No. 333-1084) effective September 11, 1996) 2.15 -- Agreement and Plan of Reorganization, dated as of August 30, 1996, by and among F.Y.I. Incorporated, Texas Medical Record Service Acquisition Corp., Texas Medical Record Service, Inc., California Medical Record Service Acquisition Corp. and Karen Jill Simon (Incorporated by reference to Exhibit 2.15 to Post-Effective Amendment No. 3 to the Company's Registration Statement on Form S-1 (Registration No. 333-1084) effective September 11, 1996) 2.16 -- Agreement and Plan of Reorganization, dated as of August 30, 1996, by and among F.Y.I. Incorporated, Minnesota Medical Record Service Acquisition Corp., Minnesota Medical Record Service, Inc. and Alan Simon (Incorporated by reference to Exhibit 2.16 to Post-Effective Amendment No. 3 to the Company's Registration Statement on Form S-1 (Registration No. 333-1084) effective September 11, 1996)
46 47
EXHIBIT NUMBER DESCRIPTION ------- ----------- 2.17 -- Agreement and Plan of Reorganization, dated as of August 30, 1996, by and among F.Y.I. Incorporated, ZIA Acquisition Corp., ZIA Information Analysis Group and the shareholders named therein (Incorporated by reference to Exhibit 2.17 to Post-Effective Amendment No. 3 to the Company's Registration Statement on Form S-1 (Registration No. 333-1084) effective September 11, 1996) 2.18 -- Agreement and Plan of Reorganization, dated as of March 27, 1997, by and among F.Y.I. Incorporated, MAVRICC Acquisition Corp., MAVRICC Management Systems, Inc., F.Y.I. Incorporated, Craig F. Moncher and Kyle C. Kerbawy (Incorporated by reference to Exhibit 2.18 to the Company's Current Report on Form 8-K filed on April 9, 1997) 2.19 -- Agreement and Plan of Reorganization, dated as of March 27, 1997, by and among F.Y.I. Incorporated, MMS Escrow Acquisition Corp., MMS Escrow and Transfer Agency, Inc., Craig F. Moncher and Kyle C. Kerbawy (Incorporated by reference to Exhibit 2.19 to the Company's Current Report Form 8-K filed on April 9, 1997) 3.1 -- Amended and Restated Certificate of Incorporation of F.Y.I. Incorporated (Incorporated by reference to Exhibit 3.1 to the Company's Registration Statement on Form S-1 (Registration No. 33-98608) effective January 12, 1996) 3.2 -- Amended and Restated By-Laws of F.Y.I. Incorporated (Incorporated by reference to Exhibit 3.2 to the Company's Form 10-Q filed on August 8, 1997) 4 -- Form of certificate evidencing ownership of Common Stock of F.Y.I. Incorporated (Incorporated by reference to Exhibit 4.2 to Amendment No. 1 to the Company's Registration Statement on Form S-1 (Registration No. 33-98608) effective January 12, 1996) 10.1* -- F.Y.I. Incorporated 1995 Stock Option Plan (Incorporated by reference to Exhibit 10.1 to the Company's Registration Statement on Form S-1 (Registration No. 33-98608) effective January 12, 1996) 10.2* -- Employment Agreement between F.Y.I. Incorporated and Thomas C. Walker (Incorporated by reference to Exhibit 10.2 to Amendment No. 1 to the Company's Registration Statement on Form S-1 (Registration No. 33-98608) effective January 12, 1996) 10.3* -- Employment Agreement between F.Y.I. Incorporated and David Lowenstein (Incorporated by reference to Exhibit 10.3 to Amendment No. 1 to the Company's Registration Statement on Form S-1 (Registration No. 33-98608) effective January 12, 1996) 10.4* -- Employment Agreement between F.Y.I. Incorporated and Jerry F. Leonard, Jr. (Incorporated by reference to Exhibit 10.4 to Amendment No. 1 to the Company's Registration Statement on Form S-1 (Registration No. 33-98608) effective January 12, 1996) 10.5* -- Employment Agreement between F.Y.I. Incorporated and Greg Melanson (Incorporated by reference to Exhibit 10.5 to Amendment No. 1 to the Company's Registration Statement on Form S-1 (Registration No. 33-98608) effective January 12, 1996) 10.6* -- Employment Agreement between F.Y.I. Incorporated and Jonathan B. Shaw (Incorporated by reference to Exhibit 10.6 to Amendment No. 1 to the Company's Registration Statement on Form S-1 (Registration No. 33-98608) effective January 12, 1996)
47 48
EXHIBIT NUMBER DESCRIPTION ------- ----------- 10.7* -- Employment Agreement between F.Y.I. Incorporated and G. Michael Bellenghi (Incorporated by reference to Exhibit 10.7 to Amendment No. 1 to the Company's Registration Statement on Form S-1 (Registration No. 33-98608) effective January 12, 1996) 10.8 -- Form of Indemnification Agreement between F.Y.I. and each director (Incorporated by reference to Exhibit 10.8 to Company's Registration Statement on Form S-1 (Registration No. 33-98608) effective January 12, 1996) 10.9* -- Employment Agreement between F.Y.I. Incorporated and Ed H. Bowman, Jr. (Incorporated by reference to Exhibit 10.9 to Amendment No. 1 to the Company's Registration Statement on Form S-1 (Registration No. 33-98608) effective January 12, 1996) 10.10 -- Form of Registration Rights Agreement, dated as of November 14, 1995, by and among Thomas C. Walker, David Lowenstein and the persons named therein (Incorporated by reference to Exhibit 10.10 to Amendment No. 1 to the Company's Registration Statement on Form S-1 (Registration No. 33-98608) effective January 12, 1996) 10.11* -- Warrant issued to Ed H. Bowman, Jr. (Incorporated by reference to Exhibit 10.11 to Amendment No. 1 to the Company's Registration Statement on Form S-1 (Registration No. 33-98608) effective January 12, 1996) 10.12 -- Five Year Media Purchase Agreement, dated as of August 9, 1994, between Eastman Kodak Company and Jonathan B. Shaw (Incorporated by reference to Exhibit 10.12 to Amendment No. 1 to the Company's Registration Statement on Form S-1 (Registration No. 33-98608) effective January 12, 1996) 10.13* -- Employment Agreement between F.Y.I. Incorporated and Robert C. Irvine (Incorporated by reference to Exhibit 10.13 to the Company's Registration Statement on Form S-1 (Registration No. 333-1084) effective February 16, 1996) 10.14 -- Credit Agreement, dated as of April 18, 1996, by and among F.Y.I. Incorporated and its subsidiaries and Banque Paribas, IBJ Schroder Bank & Trust, and First Source Financial LLP (Incorporated by reference to Exhibit 10.14 to Post-Effective Amendment No. 1 to the Company's Registration Statement on Form S-1 (Registration No. 333-1084) effective April 30, 1996) 10.15 -- Lease Agreement between F.Y.I. Incorporated and One McKinney Plaza, Inc. (Incorporated by reference to Exhibit 10.15 to Post-Effective Amendment No. 1 to the Company's Registration Statement on Form S-1 (Registration No. 333-1084) effective April 30, 1996) 10.16* -- Employment Agreement between F.Y.I. Incorporated and Margot T. Lebenberg (Incorporated by reference to Exhibit 10.16 to Post-Effective Amendment No. 2 to the Company's Registration Statement on Form S-1 (Registration No. 333-1084) effective July 11, 1996) 10.17 -- First Amendment to Credit Agreement, dated as of June 26, 1996, by and among F.Y.I. Incorporated and its subsidiaries and Banque Paribas, IBJ Schroder Bank & Trust, and First Source Financial LLP (Incorporated by reference to Exhibit 10.20 to Post-Effective Amendment No. 2 to the Company's Registration Statement on Form S-1 (Registration No. 333-1084) effective July 11, 1996) 10.18* -- Warrant issued to Ed H. Bowman, Jr. (Incorporated by reference to Exhibit 10.21 to Post-Effective Amendment No. 2 to the Company's Registration Statement on Form S-1 (Registration No. 333-1084) effective July 11, 1996)
48 49
EXHIBIT NUMBER DESCRIPTION ------- ----------- 10.19* -- Warrant issued to Robert C. Irvine (Incorporated by reference to Exhibit 10.22 to Post-Effective Amendment No. 2 to the Company's Registration Statement on Form S-1 (Registration No. 333-1084) effective July 11, 1996) 10.20* -- Employment Agreement between F.Y.I. Incorporated and Timothy J. Barker (Incorporated by reference to Exhibit 2 to Post-Effective Amendment No. 3 to the Company's Registration Statement on Form S-1 (Registration No. 333-1084) effective July 11, 1996) 10.21* -- Separation Agreement, dated July 17, 1996, by and between F.Y.I. Incorporated and Robert C. Irvine (Incorporated by reference to Exhibit 10.21 to the Company's Registration Statement on Form S-1 (Registration No. 333-16057) effective December 11, 1996) 10.22* -- Warrant issued to Timothy J. Barker (Incorporated by reference to Exhibit 10.22 to the Company's Registration Statement on Form S-1 (Registration No. 333-16057) effective December 11, 1996) 10.23 -- Second Amendment to Credit Agreement, dated as of August 30, 1996, by and among F.Y.I. Incorporated and its subsidiaries and Banque Paribas, IBJ Schroder Bank & Trust, and First Source Financial LLP (Incorporated by reference to Exhibit 10.23 to the Company's Registration Statement on Form S-1 (Registration No. 333-16057) effective December 11, 1996) 10.24 -- Third Amendment to Credit Agreement, dated as of December 18, 1996, by and among F.Y.I. Incorporated and its subsidiaries and Banque Paribas, IBJ Schroder Bank & Trust and First Source Financial LLP (Incorporated by reference to Exhibit 10.24 to the Company's Annual Report on Form 10-K filed on March 11, 1997). 10.25* -- Amended and Restated Employment Agreement between F.Y.I. Incorporated and Ed H. Bowman, Jr. (Incorporated by reference to Exhibit 10.25 to the Company's Current Report on Form 8-K filed on April 9, 1997) 10.26* -- Amended and Restated Warrant issued by F.Y.I. Incorporated to Ed H. Bowman, Jr. (Incorporated by reference to Exhibit 10.26 to the Company's Current Report on Form 8-K filed on April 9, 1997) 10.27* -- Amended and Restated Warrant issued by F.Y.I. Incorporated to Ed H. Bowman, Jr. (Incorporated by reference to Exhibit 10.27 to the Company's Current Report on Form 8-K filed on April 9, 1997) 10.28* -- Amended and Restated Warrant issued by F.Y.I. Incorporated to Timothy J. Barker (Incorporated by reference to Exhibit 10.28 to the Company's Current Report on Form 8-K filed on April 9, 1997) 10.29* -- Employment Agreement between F.Y.I. Incorporated and Joe A. Rose (Incorporated by reference to Exhibit 10.29 to the Company's Form 10-Q filed on August 8, 1997) 10.30* -- Amended and Restated Employment Agreement between F.Y.I. Incorporated and Joe A. Rose (Incorporated by reference to Exhibit 10.30 to the Company's Form 10-Q filed on November 10, 1997) 10.31 -- Fourth Amendment to Credit Agreement, dated as of November 21, 1997, by and among F.Y.I. Incorporated and its subsidiaries and Banque Paribas, IBJ Schroder Bank & Trust and First Source Financial LLP 10.32 -- Fifth Amendment to Credit Agreement, dated as of January 1, 1998, by and among F.Y.I. Incorporated and its subsidiaries and Banque Paribas, IBJ Schroder Bank & Trust and First Source Financial LLP
49 50
EXHIBIT NUMBER DESCRIPTION ------- ----------- 10.33* -- Employment Agreement between F.Y.I. Incorporated and Ronald Zazworsky 10.34* -- Employment Agreement between F.Y.I. Incorporated and Thomas C. Walker 10.35* -- Employment Agreement between F.Y.I. Incorporated and David Lowenstein 10.36* -- Employment Agreement between F.Y.I. Incorporated and John D. (Jack) Kearney 10.37 -- Amended and Restated Credit Agreement, dated as of February 17, 1998, by and among F.Y.I. Incorporated, Banque Paribas, Bank of America Texas, N.A. and the Lenders named therein 10.38 -- Form of Agreement between the New York State Workers' Compensation Board and QCSinet Acquisition Corp. 10.39* -- First Amendment to the Amended and Restated Employment Agreement between F.Y.I. Incorporated and Ed H. Bowman, Jr. 21 -- List of subsidiaries of F.Y.I. Incorporated 23.1 -- Consent of Arthur Andersen LLP 24 -- Power of Attorney (included with the signature page hereof) 27 -- Financial Data Schedule
(b) Reports on Form 8-K: The Company did not file any Form 8-K Current Reports during the last quarter of the fiscal year ended December 31, 1997. 50 51 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized. F.Y.I. INCORPORATED By: /s/ ED H. BOWMAN, JR. ---------------------------------- Ed H. Bowman, Jr., Chief Executive Officer and President Date: March 11, 1998 POWER OF ATTORNEY Each person whose signature appears below hereby authorizes and constitutes Ed H. Bowman, Jr. and Margot T. Lebenberg, and each of them singly, his true and lawful attorneys-in-fact with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities to sign and file any and all amendments to this report with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, and he hereby ratifies and confirms all that said attorneys-in-fact or any of them, or their substitutes, may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the date indicated.
SIGNATURE CAPACITY IN WHICH SIGNED DATE --------- ------------------------ ---- /s/ ED H. BOWMAN, JR. Director, President and Chief March 11, 1998 - ----------------------------------------------------- Executive Officer (Principal Ed H. Bowman, Jr. Executive Officer) /s/ TIMOTHY J. BARKER Senior Vice President and Chief March 11, 1998 - ----------------------------------------------------- Financial Officer (Principal Timothy J. Barker Accounting Officer) /s/ THOMAS C. WALKER Chairman of the Board and Chief March 11, 1998 - ----------------------------------------------------- Development Officer Thomas C. Walker /s/ DAVID LOWENSTEIN Director, Executive Vice March 11, 1998 - ----------------------------------------------------- President Corporate David Lowenstein Development and Treasurer /s/ DONALD F. MOOREHEAD, JR. Director March 11, 1998 - ----------------------------------------------------- Donald F. Moorehead, Jr. /s/ G. MICHAEL BELLENGHI Director March 11, 1998 - ----------------------------------------------------- G. Michael Bellenghi /s/ JERRY F. LEONARD, JR. Director March 11, 1998 - ----------------------------------------------------- Jerry F. Leonard, Jr. /s/ GREGORY R. MELANSON Director and Senior Vice March 11, 1998 - ----------------------------------------------------- President Gregory R. Melanson
51 52
SIGNATURE CAPACITY IN WHICH SIGNED DATE --------- ------------------------ ---- /s/ JONATHAN B. SHAW Director March 11, 1998 - ----------------------------------------------------- Jonathan B. Shaw /s/ MICHAEL J. BRADLEY Director March 11, 1998 - ----------------------------------------------------- Michael J. Bradley /s/ HON. EDWARD M. ROWELL Director March 11, 1998 - ----------------------------------------------------- Hon. Edward M. Rowell /s/ KYLE C. KERBAWY Director March 11, 1998 - ----------------------------------------------------- Kyle C. Kerbawy
52 53 EXHIBIT INDEX
EXHIBIT NUMBER DESCRIPTION ------- ----------- 2.1 -- Agreement and Plan of Reorganization, dated as of October 25, 1995, by and among F.Y.I., Incorporated, Deliverex, Incorporated, ASK Record Management, Inc., Deliverex Acquisition Corp., and the Stockholders named therein (Incorporated by reference to Exhibit 2.1 to Amendment No. 1 to the Company's Registration Statement on Form S-1 (Registration No. 33-98608) effective January 12, 1996) 2.2 -- Agreement and Plan of Reorganization, dated as of October 25, 1995, by and among F.Y.I. Incorporated, C. & T. Management Services, Inc., Qualidata, Inc., DPAS Acquisition Corp., and the Stockholders named therein (Incorporated by reference to Exhibit 2.2 to Amendment No. 1 to the Company's Registration Statement on Form S-1 (Registration No. 33-98608) effective January 12, 1996) 2.3 -- Agreement and Plan of Reorganization, dated as of October 25, 1995, by and among F.Y.I. Incorporated, Melanson & Associates, Inc., Bay Area Micrographics, Researchers Acquisition Corp., and the Stockholders named therein (Incorporated by reference to Exhibit 2.3 to Amendment No. 1 to the Company's Registration Statement on Form S-1 (Registration No. 33-98608) effective January 12, 1996) 2.4 -- Agreement and Plan of Reorganization, dated as of October 25, 1995, by and among F.Y.I. Incorporated, Paragon Management Group, Inc., Recordex Acquisition Corp., Recordex Services, Inc., and the Stockholders named therein (Incorporated by reference to Exhibit 2.4 to Amendment No. 1 to the Company's Registration Statement on Form S-1 (Registration No. 33-98608) effective January 12, 1996) 2.5 -- Agreement and Plan of Reorganization, dated as of October 25, 1995, by and among F.Y.I. Incorporated, Permanent Records Inc., Permanent Records Acquisition Corp., and the Stockholders named therein (Incorporated by reference to Exhibit 2.5 to Amendment No. 1 to the Company's Registration Statement on Form S-1 (Registration No. 33-98608) effective January 12, 1996) 2.6 -- Agreement and Plan of Reorganization, dated as of October 25, 1995, by and among F.Y.I. Incorporated, Leonard Archives Inc., Leonard Acquisition Corp. and the Stockholders named therein (Incorporated by reference to Exhibit 2.6 to Amendment No. 1 to the Company's Registration Statement on Form S-1 (Registration No. 33-98608) effective January 12, 1996) 2.7 -- Agreement and Plan of Reorganization, dated as of October 25, 1995, by and among Imagent Corporation, Imagent Acquisition Corp. and the Stockholders named therein (Incorporated by reference to Exhibit 2.7 to Amendment No. 1 to the Company's Registration Statement on Form S-1 (Registration No. 33-98608) effective January 12, 1996) 2.8 -- Agreement and Plan of Reorganization dated as of October 25, 1995, by and among Mobile Information Services Corporation, Inc., Imagent Acquisition Corp. and the Stockholders named therein (Incorporated by reference to Exhibit 2.8 to Amendment No. 1 to the Company's Registration Statement on Form S-1 (Registration No. 33-98608) effective January 12, 1996) 2.9 -- First Amendment to Agreement and Plan of Reorganization, dated as of October 25, 1995, by and among F.Y.I. Incorporated, Leonard Archives Inc., Leonard Acquisition Corp. and the Stockholders named therein (Incorporated by reference to Exhibit 2.9 to Amendment No. 1 to the Company's Registration Statement on Form S-1 (Registration No. 33-98608) effective January 12, 1996)
54
EXHIBIT NUMBER DESCRIPTION ------- ----------- 2.10 -- First Amendment to Agreement and Plan of Reorganization, dated as of November 14, 1995, by and among F.Y.I. Incorporated, C. & T. Management Services, Inc., Qualidata, Inc., DPAS Acquisition Corp., and the Stockholders named therein (Incorporated by reference to Exhibit 2.10 to Amendment No. 1 to the Company's Registration Statement on Form S-1 (Registration No. 33-98608) effective January 12, 1996) 2.11 -- Agreement and Plan of Reorganization, dated as of May 31, 1996, by and among F.Y.I. Incorporated, B&B (Baltimore-Washington) Acquisition Corp., B&B Infor- mation and Image Management, Inc. and Charles J. Bauer, Jr. (Incorporated by reference to Exhibit 10.17 to Post-Effective Amendment No. 2 to the Company's Registration Statement on Form S-1 (Registration No. 333-1084) effective July 11, 1996) 2.12 -- Agreement and Plan of Reorganization, dated as of May 31, 1996, by and among F.Y.I. Incorporated, Premier Acquisition Corp., Premier Document Management, Inc., PDM Services, Inc., Brian E. Whiteside, Christopher S. Moore, Lynnette C. Pomerville and Gary T. Sievert (Incorporated by reference to Exhibit 10.18 to Post-Effective Amendment No. 2 to the Company's Registration Statement on Form S-1 (Registration No. 333-1084) effective July 11, 1996) 2.13 -- Asset Purchase Agreement, dated as of June 28, 1996, by and among F.Y.I. Incorporated, Robert A. Cook Acquisition Corp., Robert A. Cook and Staff, Inc. and RAC Services, Inc., Robert A. Cook and Robert A. Cook and Anna M. Cook, as Co-Trustees of the Cook 1993 Living Trust (Incorporated by reference to Exhibit 10.19 to Post-Effective Amendment No. 2 to the Company's Registration Statement on Form S-1 (Registration No. 333-1084) effective July 11, 1996) 2.14 -- Agreement and Plan of Reorganization, dated as of August 30, 1996, by and among F.Y.I. Incorporated, California Medical Record Service Acquisition Corp., C.M.R.S. Incorporated and Alan Simon (Incorporated by reference to Exhibit 2.14 to Post-Effective Amendment No. 3 to the Company's Registration Statement on Form S-1 (Registration No. 333-1084) effective September 11, 1996) 2.15 -- Agreement and Plan of Reorganization, dated as of August 30, 1996, by and among F.Y.I. Incorporated, Texas Medical Record Service Acquisition Corp., Texas Medical Record Service, Inc., California Medical Record Service Acquisition Corp. and Karen Jill Simon (Incorporated by reference to Exhibit 2.15 to Post-Effective Amendment No. 3 to the Company's Registration Statement on Form S-1 (Registration No. 333-1084) effective September 11, 1996) 2.16 -- Agreement and Plan of Reorganization, dated as of August 30, 1996, by and among F.Y.I. Incorporated, Minnesota Medical Record Service Acquisition Corp., Minnesota Medical Record Service, Inc. and Alan Simon (Incorporated by reference to Exhibit 2.16 to Post-Effective Amendment No. 3 to the Company's Registration Statement on Form S-1 (Registration No. 333-1084) effective September 11, 1996) 2.17 -- Agreement and Plan of Reorganization, dated as of August 30, 1996, by and among F.Y.I. Incorporated, ZIA Acquisition Corp., ZIA Information Analysis Group and the shareholders named therein (Incorporated by reference to Exhibit 2.17 to Post-Effective Amendment No. 3 to the Company's Registration Statement on Form S-1 (Registration No. 333-1084) effective September 11, 1996)
55
EXHIBIT NUMBER DESCRIPTION ------- ----------- 2.18 -- Agreement and Plan of Reorganization, dated as of March 27, 1997, by and among F.Y.I. Incorporated, MAVRICC Acquisition Corp., MAVRICC Management Systems, Inc., F.Y.I. Incorporated, Craig F. Moncher and Kyle C. Kerbawy (Incorporated by reference to Exhibit 2.18 to the Company's Current Report on Form 8-K filed on April 9, 1997) 2.19 -- Agreement and Plan of Reorganization, dated as of March 27, 1997, by and among F.Y.I. Incorporated, MMS Escrow Acquisition Corp., MMS Escrow and Transfer Agency, Inc., Craig F. Moncher and Kyle C. Kerbawy (Incorporated by reference to Exhibit 2.19 to the Company's Current Report Form 8-K filed on April 9, 1997) 3.1 -- Amended and Restated Certificate of Incorporation of F.Y.I. Incorporated (Incorporated by reference to Exhibit 3.1 to the Company's Registration Statement on Form S-1 (Registration No. 33-98608) effective January 12, 1996) 3.2 -- Amended and Restated By-Laws of F.Y.I. Incorporated (Incorporated by reference to Exhibit 3.2 to the Company's Form 10-Q filed on August 8, 1997) 4 -- Form of certificate evidencing ownership of Common Stock of F.Y.I. Incorporated (Incorporated by reference to Exhibit 4.2 to Amendment No. 1 to the Company's Registration Statement on Form S-1 (Registration No. 33-98608) effective January 12, 1996) 10.1* -- F.Y.I. Incorporated 1995 Stock Option Plan (Incorporated by reference to Exhibit 10.1 to the Company's Registration Statement on Form S-1 (Registration No. 33-98608) effective January 12, 1996) 10.2* -- Employment Agreement between F.Y.I. Incorporated and Thomas C. Walker (Incorporated by reference to Exhibit 10.2 to Amendment No. 1 to the Company's Registration Statement on Form S-1 (Registration No. 33-98608) effective January 12, 1996) 10.3* -- Employment Agreement between F.Y.I. Incorporated and David Lowenstein (Incorporated by reference to Exhibit 10.3 to Amendment No. 1 to the Company's Registration Statement on Form S-1 (Registration No. 33-98608) effective January 12, 1996) 10.4* -- Employment Agreement between F.Y.I. Incorporated and Jerry F. Leonard, Jr. (Incorporated by reference to Exhibit 10.4 to Amendment No. 1 to the Company's Registration Statement on Form S-1 (Registration No. 33-98608) effective January 12, 1996) 10.5* -- Employment Agreement between F.Y.I. Incorporated and Greg Melanson (Incorporated by reference to Exhibit 10.5 to Amendment No. 1 to the Company's Registration Statement on Form S-1 (Registration No. 33-98608) effective Janu- ary 12, 1996) 10.6* -- Employment Agreement between F.Y.I. Incorporated and Jonathan B. Shaw (Incorporated by reference to Exhibit 10.6 to Amendment No. 1 to the Company's Registration Statement on Form S-1 (Registration No. 33-98608) effective January 12, 1996) 10.7* -- Employment Agreement between F.Y.I. Incorporated and G. Michael Bellenghi (Incorporated by reference to Exhibit 10.7 to Amendment No. 1 to the Company's Registration Statement on Form S-1 (Registration No. 33-98608) effective January 12, 1996) 10.8 -- Form of Indemnification Agreement between F.Y.I. and each director (Incorporated by reference to Exhibit 10.8 to Company's Registration Statement on Form S-1 (Registration No. 33-98608) effective January 12, 1996)
56
EXHIBIT NUMBER DESCRIPTION ------- ----------- 10.9* -- Employment Agreement between F.Y.I. Incorporated and Ed H. Bowman, Jr. (Incorporated by reference to Exhibit 10.9 to Amendment No. 1 to the Company's Registration Statement on Form S-1 (Registration No. 33-98608) effective January 12, 1996) 10.10 -- Form of Registration Rights Agreement, dated as of November 14, 1995, by and among Thomas C. Walker, David Lowenstein and the persons named therein (Incorporated by reference to Exhibit 10.10 to Amendment No. 1 to the Com- pany's Registration Statement on Form S-1 (Registration No. 33-98608) effective January 12, 1996) 10.11* -- Warrant issued to Ed H. Bowman, Jr. (Incorporated by reference to Exhibit 10.11 to Amendment No. 1 to the Company's Registration Statement on Form S-1 (Registration No. 33-98608) effective January 12, 1996) 10.12 -- Five Year Media Purchase Agreement, dated as of August 9, 1994, between Eastman Kodak Company and Jonathan B. Shaw (Incorporated by reference to Exhibit 10.12 to Amendment No. 1 to the Company's Registration Statement on Form S-1 (Registration No. 33-98608) effective January 12, 1996) 10.13* -- Employment Agreement between F.Y.I. Incorporated and Robert C. Irvine (Incorporated by reference to Exhibit 10.13 to the Company's Registration Statement on Form S-1 (Registration No. 333-1084) effective February 16, 1996) 10.14 -- Credit Agreement, dated as of April 18, 1996, by and among F.Y.I. Incorporated and its subsidiaries and Banque Paribas, IBJ Schroder Bank & Trust, and First Source Financial LLP (Incorporated by reference to Exhibit 10.14 to Post-Effective Amendment No. 1 to the Company's Registration Statement on Form S-1 (Registration No. 333-1084) effective April 30, 1996) 10.15 -- Lease Agreement between F.Y.I. Incorporated and One McKinney Plaza, Inc. (Incorporated by reference to Exhibit 10.15 to Post-Effective Amendment No. 1 to the Company's Registration Statement on Form S-1 (Registration No. 333-1084) effective April 30, 1996) 10.16* -- Employment Agreement between F.Y.I. Incorporated and Margot T. Lebenberg (Incorporated by reference to Exhibit 10.16 to Post-Effective Amendment No. 2 to the Company's Registration Statement on Form S-1 (Registration No. 333-1084) effective July 11, 1996) 10.17 -- First Amendment to Credit Agreement, dated as of June 26, 1996, by and among F.Y.I. Incorporated and its subsidiaries and Banque Paribas, IBJ Schroder Bank & Trust, and First Source Financial LLP (Incorporated by reference to Exhibit 10.20 to Post-Effective Amendment No. 2 to the Company's Registration Statement on Form S-1 (Registration No. 333-1084) effective July 11, 1996) 10.18* -- Warrant issued to Ed H. Bowman, Jr. (Incorporated by reference to Exhibit 10.21 to Post-Effective Amendment No. 2 to the Company's Registration Statement on Form S-1 (Registration No. 333-1084) effective July 11, 1996) 10.19* -- Warrant issued to Robert C. Irvine (Incorporated by reference to Exhibit 10.22 to Post-Effective Amendment No. 2 to the Company's Registration Statement on Form S-1 (Registration No. 333-1084) effective July 11, 1996) 10.20* -- Employment Agreement between F.Y.I. Incorporated and Timothy J. Barker (Incorporated by reference to Exhibit 2 to Post-Effective Amendment No. 3 to the Company's Registration Statement on Form S-1 (Registration No. 333-1084) effective July 11, 1996)
57
EXHIBIT NUMBER DESCRIPTION ------- ----------- 10.21* -- Separation Agreement, dated July 17, 1996, by and between F.Y.I. Incorporated and Robert C. Irvine (Incorporated by reference to Exhibit 10.21 to the Company's Registration Statement on Form S-1 (Registration No. 333-16057) effective December 11, 1996) 10.22* -- Warrant issued to Timothy J. Barker (Incorporated by reference to Exhibit 10.22 to the Company's Registration Statement on Form S-1 (Registration No. 333-16057) effective December 11, 1996) 10.23 -- Second Amendment to Credit Agreement, dated as of August 30, 1996, by and among F.Y.I. Incorporated and its subsidiaries and Banque Paribas, IBJ Schroder Bank & Trust, and First Source Financial LLP (Incorporated by reference to Exhibit 10.23 to the Company's Registration Statement on Form S-1 (Registration No. 333-16057) effective December 11, 1996) 10.24 -- Third Amendment to Credit Agreement, dated as of December 18, 1996, by and among F.Y.I. Incorporated and its subsidiaries and Banque Paribas, IBJ Schroder Bank & Trust and First Source Financial LLP (Incorporated by reference to Exhibit 10.24 to the Company's Annual Report on Form 10-K filed on March 11, 1997). 10.25* -- Amended and Restated Employment Agreement between F.Y.I. Incorporated and Ed H. Bowman, Jr. (Incorporated by reference to Exhibit 10.25 to the Company's Current Report on Form 8-K filed on April 9, 1997) 10.26* -- Amended and Restated Warrant issued by F.Y.I. Incorporated to Ed H. Bowman, Jr. (Incorporated by reference to Exhibit 10.26 to the Company's Current Report on Form 8-K filed on April 9, 1997) 10.27* -- Amended and Restated Warrant issued by F.Y.I. Incorporated to Ed H. Bowman, Jr. (Incorporated by reference to Exhibit 10.27 to the Company's Current Report on Form 8-K filed on April 9, 1997) 10.28* -- Amended and Restated Warrant issued by F.Y.I. Incorporated to Timothy J. Barker (Incorporated by reference to Exhibit 10.28 to the Company's Current Report on Form 8-K filed on April 9, 1997) 10.29* -- Employment Agreement between F.Y.I. Incorporated and Joe A. Rose (Incorporated by reference to Exhibit 10.29 to the Company's Form 10-Q filed on August 8, 1997) 10.30* -- Amended and Restated Employment Agreement between F.Y.I. Incorporated and Joe A. Rose (Incorporated by reference to Exhibit 10.30 to the Company's Form 10-Q filed on November 10, 1997) 10.31 -- Fourth Amendment to Credit Agreement, dated as of November 21, 1997, by and among F.Y.I. Incorporated and its subsidiaries and Banque Paribas, IBJ Schroder Bank & Trust and First Source Financial LLP 10.32 -- Fifth Amendment to Credit Agreement, dated as of January 1, 1998, by and among F.Y.I. Incorporated and its subsidiaries and Banque Paribas, IBJ Schroder Bank & Trust and First Source Financial LLP 10.33* -- Employment Agreement between F.Y.I. Incorporated and Ronald Zazworsky 10.34* -- Employment Agreement between F.Y.I. Incorporated and Thomas C. Walker 10.35* -- Employment Agreement between F.Y.I. Incorporated and David Lowenstein 10.36* -- Employment Agreement between F.Y.I. Incorporated and John D. (Jack) Kearney
58
EXHIBIT NUMBER DESCRIPTION ------- ----------- 10.37 -- Amended and Restated Credit Agreement, dated as of February 17, 1998, by and among F.Y.I. Incorporated, Banque Paribas, Bank of America Texas, N.A. and the Lenders named therein 10.38 -- Form of Agreement between the New York State Workers' Compensation Board and QCSinet Acquisition Corp. 10.39* -- First Amendment to the Amended and Restated Employment Agreement between F.Y.I. Incorporated and Ed H. Bowman, Jr. 21 -- List of subsidiaries of F.Y.I. Incorporated 23.1 -- Consent of Arthur Andersen LLP 24 -- Power of Attorney (included with the signature page hereof) 27 -- Financial Data Schedule
EX-10.31 2 4TH AMENDMENT TO CREDIT AGREEMENT DATED 11/21/97 1 EXHIBIT 10.31 FOURTH AMENDMENT TO CREDIT AGREEMENT THIS FOURTH AMENDMENT TO CREDIT AGREEMENT (the "Fourth Amendment") is entered into to be effective as of November 21, 1997, by and among F.Y.I. Incorporated, a Delaware corporation ("F.Y.I."), Imagent Acquisition Corp., a Delaware corporation ("Imagent"), Researchers Acquisition Corp., a Delaware corporation ("Researchers"), Recordex Acquisition Corp., a Delaware corporation ("Recordex"), DPAS Acquisition Corp., a Delaware corporation ("DPAS"), Leonard Archives Acquisition Corp., a Delaware corporation ("Leonard"), Deliverex Acquisition Corp., a Delaware corporation ("Deliverex"), Permanent Records Acquisition Corp., a Delaware corporation ("Permanent"), Deliverex Sacramento Acquisition Corp., a Delaware corporation ("Sacramento"), (F.Y.I., Imagent, Researchers, Recordex, DPAS, Leonard, Deliverex, Permanent and Sacramento are collectively referred to as the "Original Borrowers"), B&B (Baltimore- Washington) Acquisition Corp., a Delaware corporation ("B&B"), Premier Acquisition Corp., a Delaware corporation ("Premier"), Robert A. Cook Acquisition Corp., a Delaware corporation ("Cook"), Peninsula Record Management, Inc., a California corporation ("Peninsula"), RAC (California) Acquisition Corp., a Delaware corporation ("RAC"), California Medical Record Service Acquisition Corp., a Delaware corporation ("California Medical"), Minnesota Medical Record Service Acquisition Corp., a Delaware corporation ("Minnesota Medical"), Texas Medical Record Service Acquisition Corp., a Delaware corporation ("Texas Medical"), ZIA Information Analysis Group, Inc., formerly known as ZIA Acquisition Corp., a Delaware corporation ("Zia"), CH Acquisition Corp., a Delaware Corporation ("CH") and DISC Acquisition Corp., a Delaware corporation ("DISC") (B&B, Premier, Cook, Peninsula, RAC, California Medical, Minnesota Medical, Texas Medical, Zia, CH and DISC are referred to collectively as the "New Borrowers") (the Original Borrowers and the New Borrowers are referred to collectively as the "Borrowers"), Banque Paribas, a bank organized under the laws of the Republic of France, as Agent (the "Agent"), and the Lenders (as such term is defined in the Credit Agreement, as hereinafter defined) which are parties hereto. RECITALS A. The Original Borrowers, the Agent and the Lenders entered into that certain Credit Agreement dated as of April 18, 1996 (the "Original Credit Agreement"), pursuant to which, among other things, the Lenders agreed to make certain loans available to the Original Borrowers upon the terms and conditions set forth therein; B. The Borrowers, certain of the New Borrowers, the Agent and the Lenders entered into that certain First Amendment to Credit Agreement dated as of June 26, 1996, that certain Second Amendment to Credit Agreement dated as of August 30, 1996, and that certain Third Amendment to Credit Agreement dated as of December 18, 1996 (the Original Credit Agreement, as amended, is hereinafter referred to as the "Credit Agreement"). FOURTH AMENDMENT TO CREDIT AGREEMENT Page 1 2 C. The Borrowers, the Agent and the Lenders desire to amend the Credit Agreement in certain respects as more fully set out herein. AGREEMENT NOW, THEREFORE, for and in consideration of the premises and other valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Borrowers, the Lenders, and the Agent hereby agree as follows: 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 Fourth Amendment. 2. Amendment to Definition of "Term Loans Commitments Termination Date." Effective as of the date hereof, the definition of "Term Loans Commitments Termination Date" contained in Section 1.1 of the Credit Agreement is hereby amended by deleting the phrase "October 15, 1997" and replacing it with the phrase "March 31, 1998". 3. Amendment to Section 2.1(c) of the Credit Agreement. Effective as of the date hereof, Section 2.1(c) of the Credit Agreement is hereby amended to read in its entirety as follows: (c) Term Loans. Subject to the terms and conditions of this Agreement, each Lender severally agrees to make one or more term loans to the Term Loans Borrowers from time to time from and including the Closing Date to but excluding the Term Loans Commitments Termination Date up to but not exceeding the amount of such Lender's Term Loans Commitment. (Such term loans referred to in this Section 2.1(c) made by the Lenders to the Term Loans Borrowers are hereinafter collectively called the "Term Loans".) Notwithstanding anything else herein or elsewhere to the contrary, the obligation of each Lender to make Term Loans shall terminate on the Term Loans Commitments Termination Date. 4. Amendment to Section 2.3(c) of the Credit Agreement. Effective as of the date hereof, Section 2.3(c) of the Credit Agreement is hereby amended to read in its entirety as follows: (c) Each of the Term Loans Borrowers shall jointly and severally pay to the Agent for the account of each applicable Lender the outstanding principal of the Term Loans existing as of the Term Loans Commitments Termination Date (and the outstanding principal for the Term Loans shall be due and payable) in thirteen (13) equal quarterly installments on the dates set forth below FOURTH AMENDMENT TO CREDIT AGREEMENT Page 2 3 in an amount sufficient to amortize fully the Term Loans by the Term Loans Maturity Date: Payment Date April 15, 1998 July 15, 1998 October 15, 1998 January 15, 1999 April 15, 1999 July 15, 1999 October 15, 1999 January 15, 2000 April 15, 2000 July 15, 2000 October 15, 2000 January 15, 2001 April 15, 2001 5. Amendment to Section 2.11(a) of the Credit Agreement. Effective as of the date hereof, the second sentence in Section 2.11(a) of the Credit Agreement is hereby amended by deleting the phrase "October 15, 1997" wherever located in such sentence and replacing it with the phrase "Term Loans Commitments Termination Date" in each such location. 6. Amendment to Section 10.6 of the Credit Agreement. Effective as of the date hereof, the chart in Section 10.6 of the Credit Agreement is hereby amended and restated to read in its entirety as follows:
Ending on December 31 Amount --------------------- ------ 1996 $1,750,000 1997 $2,600,000 1998 $2,750,000 1999 $2,950,000 2000 and thereafter $3,150,000
7. Representations and Warranties. The representations and warranties made by the Borrowers in the Loan Documents, as the same are amended hereby, are true and correct at the time this Fourth 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. FOURTH AMENDMENT TO CREDIT AGREEMENT Page 3 4 8. Costs. The Borrowers jointly and severally agree to pay all costs incurred in connection with the negotiation, preparation, execution and consummation of this Fourth Amendment and the transactions preceding and contemplated by this Fourth Amendment including, without limitation, the fees and expenses of counsel to the Agent and the Lenders. 9. Miscellaneous. (a) Headings. Section headings are for reference only, and shall not affect the interpretation or meaning of any provision of this Fourth 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 Fourth Amendment. The Credit Agreement, as amended by this Fourth 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 Fourth Amendment. (d) Governing Law. EXCEPT TO THE EXTENT THAT THE CREDIT AGREEMENT EXPRESSLY PROVIDES OTHERWISE, THIS THIRD AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF TEXAS. (e) Counterparts. This Fourth Amendment may be executed by the different parties hereto on separate counterparts, each of which, when so executed, shall be deemed an original, but all such counterparts shall constitute but one and the same Fourth Amendment. (f) NO ORAL AGREEMENTS. THE CREDIT AGREEMENT, AS AMENDED BY THIS THIRD 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. FOURTH AMENDMENT TO CREDIT AGREEMENT Page 4 5 IN WITNESS WHEREOF, the parties hereto have caused this Fourth Amendment to be executed by their respective duly authorized officers as of the date first above written. BORROWERS: F.Y.I. INCORPORATED By: /s/ David Lowenstein ----------------------------------- David Lowenstein Executive Vice President IMAGENT ACQUISITION CORP. RESEARCHERS ACQUISITION CORP. RECORDEX ACQUISITION CORP. DPAS ACQUISITION CORP. LEONARD ARCHIVES ACQUISITION CORP. DELIVEREX ACQUISITION CORP. PERMANENT RECORDS ACQUISITION CORP. DELIVEREX SACRAMENTO ACQUISITION CORP. B&B (BALTIMORE-WASHINGTON) ACQUISITION CORP. PREMIER ACQUISITION CORP. ROBERT A. COOK ACQUISITION CORP. PENINSULA RECORD MANAGEMENT, INC. RAC (CALIFORNIA) ACQUISITION CORP. CALIFORNIA MEDICAL RECORD SERVICE ACQUISITION CORP. MINNESOTA MEDICAL RECORD SERVICE ACQUISITION CORP. TEXAS MEDICAL RECORD SERVICE ACQUISITION CORP. ZIA INFORMATION ANALYSIS GROUP, INC. CH ACQUISITION CORP. DISC ACQUISITION CORP. By: /s/ David Lowenstein ----------------------------------- David Lowenstein Executive Vice President, acting on behalf of each of the above FOURTH AMENDMENT TO CREDIT AGREEMENT Page 5 6 LENDERS: BANQUE PARIBAS, as Agent and as a Lender By: /s/ Clark C. King, III -------------------------------- Name: Clark C. King, III Title: Director By: /s/ Peter Toal -------------------------------- Name: Peter Toal Title: Managing Director FIRST SOURCE FINANCIAL LLP By: FIRST SOURCE FINANCIAL, INC., its Agent/Manager By: /s/ John Walding ----------------------------- Name: John Walding Title: Vice President IBJ SCHRODER BANK & TRUST COMPANY By: /s/ Mark Minter -------------------------------- Name: Mark Minter Title: Director FOURTH AMENDMENT TO CREDIT AGREEMENT Page 6 EX-10.32 3 5TH AMENDMENT TO CREDIT AGREEMENT DATED 1/1/98 1 EXHIBIT 10.32 FIFTH AMENDMENT TO CREDIT AGREEMENT THIS FIFTH AMENDMENT TO CREDIT AGREEMENT (the "Fifth Amendment") is entered into to be effective as of January 1, 1998, by and among F.Y.I. Incorporated, a Delaware corporation ("F.Y.I."), Imagent Acquisition Corp., a Delaware corporation ("Imagent"), Researchers Acquisition Corp., a Delaware corporation ("Researchers"), Recordex Acquisition Corp., a Delaware corporation ("Recordex"), DPAS Acquisition Corp., a Delaware corporation ("DPAS"), Leonard Archives Acquisition Corp., a Delaware corporation ("Leonard"), Deliverex Acquisition Corp., a Delaware corporation ("Deliverex"), Permanent Records Acquisition Corp., a Delaware corporation ("Permanent"), Deliverex Sacramento Acquisition Corp., a Delaware corporation ("Sacramento"), (F.Y.I., Imagent, Researchers, Recordex, DPAS, Leonard, Deliverex, Permanent and Sacramento are collectively referred to as the "Original Borrowers"), B&B (Baltimore- Washington) Acquisition Corp., a Delaware corporation ("B&B"), Premier Acquisition Corp., a Delaware corporation ("Premier"), Robert A. Cook Acquisition Corp., a Delaware corporation ("Cook"), Peninsula Record Management, Inc., a California corporation ("Peninsula"), RAC (California) Acquisition Corp., a Delaware corporation ("RAC"), California Medical Record Service Acquisition Corp., a Delaware corporation ("California Medical"), Minnesota Medical Record Service Acquisition Corp., a Delaware corporation ("Minnesota Medical"), Texas Medical Record Service Acquisition Corp., a Delaware corporation ("Texas Medical"), ZIA Information Analysis Group, Inc., formerly known as ZIA Acquisition Corp., a Delaware corporation ("Zia"), CH Acquisition Corp., a Delaware Corporation ("CH") and DISC Acquisition Corp., a Delaware corporation ("DISC") (B&B, Premier, Cook, Peninsula, RAC, California Medical, Minnesota Medical, Texas Medical, Zia, CH and DISC are referred to collectively as the "New Borrowers") (the Original Borrowers and the New Borrowers are referred to collectively as the "Borrowers"), Banque Paribas, a bank organized under the laws of the Republic of France, as Agent (the "Agent"), and the Lenders (as such term is defined in the Credit Agreement, as hereinafter defined) which are parties hereto. RECITALS A. The Original Borrowers, the Agent and the Lenders entered into that certain Credit Agreement dated as of April 18, 1996 (the "Original Credit Agreement"), pursuant to which, among other things, the Lenders agreed to make certain loans available to the Original Borrowers upon the terms and conditions set forth therein; B. The Borrowers, certain of the New Borrowers, the Agent and the Lenders entered into that certain First Amendment to Credit Agreement dated as of June 26, 1996, that certain Second Amendment to Credit Agreement dated as of August 30, 1996, that certain Third Amendment to Credit Agreement dated as of December 18, 1996 and that certain Fourth Amendment to Credit Agreement dated as of November 21, 1997 (the Original Credit FIFTH AMENDMENT TO CREDIT AGREEMENT Page 1 2 Agreement, as amended, is hereinafter referred to as the "Credit Agreement"). C. FYI hopes to enter into a new credit facility (the "New Credit Facility") by and among the Borrowers, the Agent and certain other financial institutions. D. F.Y.I. and the other Borrowers have requested the Lenders to issue a $10,000,000 irrevocable letter of credit (the "Letter of Credit") for the benefit of the New York State Workers' Compensation Board. E. The $10,000,000 Letter of Credit must be issued before the New Credit Facility, if any, is closed. F. The Agent and the Lenders desire to accommodate the request of F.Y.I. and the other Borrowers to issue the Letter of Credit under the Credit Agreement and to otherwise amend the Credit Agreement in certain respects as more fully set out herein. AGREEMENT NOW, THEREFORE, for and in consideration of the premises and other valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Borrowers, the Lenders, and the Agent hereby agree as follows: 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 Fifth Amendment. 2. Amendment to Section 2.14. Effective as of the date hereof, the limitations on the aggregate amount of outstanding Letter of Credit Liabilities permitted under the Revolving Credit Loan Commitments and the Term Loan Commitments shall be amended and modified to $2,157,136.90 and $11,242,863.10, respectively, and the aggregate amount of Letter of Credit Liabilities permitted under the Credit Agreement shall not exceed $13,400,000. Without the express written consent of all Lenders, no other Letters of Credit may be issued under the Credit Agreement. 3. Issuance of Letter of Credit in favor of New York State Workers' Compensation Board. Effective as of the date hereof, the Lenders authorize the Agent to issue the Letter of Credit in the face amount of $10,000,000 to New York State Workers' Compensation Board for the account of F.Y.I. under the Credit Agreement. 4. New Credit Facility. The Agent and the Borrowers agree that the Letter of Credit will be deemed part of the "Obligations" under the Credit Agreement and will also be deemed to be part of the "Obligations" under the New Credit Facility if and when the New FIFTH AMENDMENT TO CREDIT AGREEMENT Page 2 3 Credit Facility is closed. 5. Prepayment and Reduction of Commitments. If the New Credit Facility does not close or become effective on or before February 28, 1998, (a) the Borrowers shall be required to prepay $10,000,000 on the Term Loans on January 31, 1999; and such prepayment shall be applied in inverse order of maturity, (b) the Term Loan Commitments shall be permanently reduced by $10,000,000 and (c) the Borrowers shall immediately grant to Agent for the benefit of the Lenders a first and prior lien and security interest in $10,000,000 cash. 6. Representations and Warranties. The representations and warranties made by the Borrowers in the Loan Documents, as the same are amended hereby, are true and correct at the time this Fifth 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. 7. Costs. The Borrowers jointly and severally agree to pay all costs incurred in connection with the negotiation, preparation, execution and consummation of this Fifth Amendment and the transactions preceding and contemplated by this Fifth Amendment including, without limitation, the fees and expenses of counsel to the Agent and the Lenders. 8. Miscellaneous. (a) Headings. Section headings are for reference only, and shall not affect the interpretation or meaning of any provision of this Fifth 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 Fifth Amendment. The Credit Agreement, as amended by this Fifth 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 Fifth Amendment. (d) Governing Law. EXCEPT TO THE EXTENT THAT THE CREDIT AGREEMENT EXPRESSLY PROVIDES OTHERWISE, THIS THIRD AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF TEXAS. FIFTH AMENDMENT TO CREDIT AGREEMENT Page 3 4 (e) Counterparts. This Fifth Amendment may be executed by the different parties hereto on separate counterparts, each of which, when so executed, shall be deemed an original, but all such counterparts shall constitute but one and the same Fifth Amendment. (f) NO ORAL AGREEMENTS. THE CREDIT AGREEMENT, AS AMENDED BY THIS FIFTH AMENDMENT, TOGETHER WITH THE OTHER LOAN DOCUMENTS, REPRESENTS THE ENTIRE AGREEMENT AMONG THE PARTIES, AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS AMONG THE PARTIES. IN WITNESS WHEREOF, the parties hereto have caused this Fifth Amendment to be executed by their respective duly authorized officers as of the date first above written. BORROWERS: F.Y.I. INCORPORATED By: /s/ David Lowenstein ---------------------------------- David Lowenstein Executive Vice President FIFTH AMENDMENT TO CREDIT AGREEMENT Page 4 5 IMAGENT ACQUISITION CORP. RESEARCHERS ACQUISITION CORP. RECORDEX ACQUISITION CORP. DPAS ACQUISITION CORP. LEONARD ARCHIVES ACQUISITION CORP. DELIVEREX ACQUISITION CORP. PERMANENT RECORDS ACQUISITION CORP. DELIVEREX SACRAMENTO ACQUISITION CORP. B&B (BALTIMORE-WASHINGTON) ACQUISITION CORP. PREMIER ACQUISITION CORP. ROBERT A. COOK ACQUISITION CORP. PENINSULA RECORD MANAGEMENT, INC. RAC (CALIFORNIA) ACQUISITION CORP. CALIFORNIA MEDICAL RECORD SERVICE ACQUISITION CORP. MINNESOTA MEDICAL RECORD SERVICE ACQUISITION CORP. TEXAS MEDICAL RECORD SERVICE ACQUISITION CORP. ZIA INFORMATION ANALYSIS GROUP, INC. CH ACQUISITION CORP. DISC ACQUISITION CORP. By: /s/ David Lowenstein ------------------------------ David Lowenstein Executive Vice President, acting on behalf of each of the above LENDERS: BANQUE PARIBAS, as Agent and as a Lender By: /s/ Clark C. King, III ------------------------------ Name: Clark C. King, III Title: Director FIFTH AMENDMENT TO CREDIT AGREEMENT Page 5 6 FIRST SOURCE FINANCIAL LLP By: FIRST SOURCE FINANCIAL, INC., its Agent/Manager By: /s/ John Walding -------------------------------- Name: John Walding Title: Vice President IBJ SCHRODER BANK & TRUST COMPANY By: /s/ Mark Minter -------------------------------- Name: Mark Minter Title: Director FIFTH AMENDMENT TO CREDIT AGREEMENT Page 6 EX-10.33 4 EMPLOYMENT AGREEMENT - RONALD ZAZWORSKY 1 EXHIBIT 10.33 EMPLOYMENT AGREEMENT (RONALD ZAZWORSKY) THIS EMPLOYMENT AGREEMENT (the "Agreement") is made and entered into the 28th day of October, 1997 by and between Ronald Zazworsky ("Employee") and F.Y.I. Incorporated, a Delaware corporation (the "Company"). This Agreement hereby supersedes any other employment agreements or understandings, written or oral, between the Company and Employee. R E C I T A L S The following statements are true and correct: As of the date of this Agreement, the Company is engaged primarily in the document management services business (the "Business"). Employee is employed hereunder by the Company in a confidential relationship wherein Employee, in the course of his employment with the Company, has and will continue to become familiar with and aware of information as to the Company's customers, specific manner of doing business, including the processes, techniques and trade secrets utilized by the Company, and future plans with respect thereto, all of which has been and will be established and maintained at great expense to the Company; this information is a trade secret and constitutes the valuable goodwill of the Company. Therefore, in consideration of the mutual promises, terms, covenants and conditions set forth herein and the performance of each, it is hereby agreed as follows: A G R E E M E N T S 1. Employment and Duties. (a) The Company hereby employs Employee as a Senior Vice President. As such, Employee shall have responsibilities, duties and authority reasonably accorded to and expected of a Senior Vice President and will report directly to the President of the Company. Employee hereby accepts this employment upon the terms and conditions herein contained and, subject to paragraph 1(b), agrees to devote his working time, attention and efforts to promote and further the business of the Company. (b) Employee shall not, during the term of his employment hereunder, be engaged in any other business activity pursued for gain, profit or other pecuniary advantage except to the 2 extent that such activity does not interfere with Employee's duties and responsibilities hereunder. The foregoing limitations shall not be construed as prohibiting Employee from making personal investments in such form or manner as will neither require his services in the operation or affairs of the companies or enterprises in which such investments are made. 2. Compensation. For all services rendered by Employee, the Company shall compensate Employee as follows: (a) Base Salary; Annual Bonus. The base salary payable to Employee shall be $150,000 per year, payable on a regular basis in accordance with the Company's standard payroll procedures but not less than monthly (pro-rated for any year in which Employee is employed for less than the full year) beginning January 1, 1998. In addition, a one-time lump sum payment of $26,000 shall be paid to you on January 1, 1998. For 1998 and subsequent years, it is the Company's intent to develop a written Incentive Bonus Plan setting forth the criteria under which Employee and other officers and key employees will be eligible to receive year-end bonus awards. Employee shall be eligible for a bonus opportunity of up to 50% of Employee's annual base salary beginning January 1, 1998 in accordance with this Incentive Bonus Plan, pro- rated for any year in which Employee was employed for less than the full year. The award of any bonus shall be based on F.Y.I.'s overall performance and the total performance of the business unit managed and shall be payable in various increments based on the performance. The incremental payments and the Company's targeted performance shall be determined by the Board of Directors (the "Board") or the compensation committee thereof. (b) Other Compensation. Employee shall be entitled to receive additional benefits and compensation from the Company in such form and to such extent as specified below: (i) Payment of all premiums for coverage for Employee and Employee's dependent family members under health, hospitalization, disability, dental and other insurance plans that the Company may have in effect from time to time. (ii) Reimbursement for all business travel and other out-of-pocket expenses reasonably incurred by Employee in the performance of his services pursuant to this Agreement and a $500 per month car allowance (determined on a pre-tax basis). All reimbursable expenses shall be appropriately documented in reasonable detail by Employee upon submission of any request for reimbursement, and in a format and manner consistent with the Company's expense reporting policy. (iii) Four (4) weeks paid vacation for each year during the period of employment or such greater amount as may be afforded officers and key employees generally under the Company's policies in effect from time to time (pro-rated for any year in which Employee is employed for less than the full year). 2 3 (iv) The Company shall provide Employee with other executive perquisites as may be available to or deemed appropriate for Employee by the Board and participation in all other Company-wide employee benefits as available from time to time. (v) Employee shall be granted options (the "Options") to acquire 50,000 shares of Common Stock at the fair market value on the date hereof. The Options shall become exercisable as to 40% of the underlying shares one year following the date hereof and as to the remainder, 20% of the underlying shares of Common Stock on each of the next two through four anniversaries of the date hereof. The Options shall expire on the tenth anniversary of the date of grant. 3. [INTENTIONALLY LEFT BLANK] 4. Term; Termination; Rights on Termination. The term of this Agreement shall begin on the date hereof and continue for one (1) year (the "Term"). This Agreement and Employee's employment may be terminated in any one of the following ways: (a) Death. The death of Employee shall immediately terminate the Agreement with no severance compensation due to Employee's estate. (b) Disability. The Company will make efforts to reasonably accommodate Employee as required by applicable state or federal disability laws. However, the parties irrebutably presume that, given Employee's position, it would be an undue hardship to the Company if Employee is absent for more than three (3) consecutive months. Therefore, if as a result of incapacity due to physical or mental illness or injury, Employee shall have been absent from his full-time duties hereunder for three (3) consecutive months, then thirty (30) days after receiving written notice (which notice may occur before or after the end of such three (3) month period, but which shall not be effective earlier than the last day of such three (3) month period), the Company may terminate Employee's employment hereunder provided Employee is unable to 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, 3 4 the base salary at the rate then in effect for whatever time period is remaining under the Term of this Agreement or for six (6) months, whichever amount is greater. (c) Good Cause. The Company may terminate the Agreement five (5) days after written notice to Employee for good cause, which shall be: (i) Employee's breach of this Agreement; (ii) Employee's negligence in the performance or nonperformance (continuing for five (5) days after receipt of the written notice) of any of Employee's material duties and responsibilities hereunder; (iii) Employee's dishonesty, fraud or misconduct with respect to the business or affairs of the Company that adversely affects the operations or reputation of the Company; (iv) Employee's conviction of a felony crime; or (v) chronic alcohol abuse or illegal drug abuse by Employee. In the event of a termination for good cause, as enumerated above, Employee shall have no right to any severance compensation. (d) Without Cause. At any time after the commencement of employment, the Company may, without cause, terminate this Agreement and Employee's employment, effective ten (10) days after written notice is provided to Employee. Employee may only be terminated without cause by the Company during the Term hereof if such termination is approved by the Board of Directors of the Company. Should Employee be terminated by the Company without cause, Employee shall receive from the Company, in a lump-sum payment due on the effective date of termination, the base salary at the rate then in effect for whatever time period is remaining under the Term of this Agreement or for six (6) months, whichever amount is greater. (e) Termination by Employee for Good Reason. Employee may terminate his employment hereunder for "Good Reason." As used herein, "Good Reason" shall mean the continuance of any of the following after fifteen (15) days' prior written notice by Employee to the Company, specifying the basis for such Employee's having Good Reason to terminate this Agreement: (i) Employee's removal from, or failure to be reappointed or reelected to, Employee's position under this Agreement, except as contemplated by paragraphs 4(a), (b) and (c); or (ii) Any other material breach of this Agreement by the Company, including the failure to pay Employee on a timely basis the amounts to which he is entitled under this Agreement. 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 4 5 rate then in effect for whatever time period is remaining under the Term of this Agreement or for six (6) months, whichever amount is greater. (f) Termination by Employee Without Cause. If Employee resigns or otherwise terminates his employment without Good Reason pursuant to paragraph 4(e), Employee shall receive no severance compensation. Upon termination of this Agreement for any reason provided in clauses (a) through (f) above, Employee shall be entitled to receive all compensation earned and all benefits and reimbursements vested or due through the effective date of termination. Additional compensation subsequent to termination, if any, will be due and payable to Employee only to the extent and in the manner expressly provided above or in paragraph 16. All other rights and obligations of the Company and Employee under this Agreement shall cease as of the effective date of termination, except that the Company's obligations under paragraph 10 herein and Employee's obligations under paragraphs 5, 6, 7, 10 and 11 herein shall survive such termination in accordance with their terms. 5. Return of Company Property. All records, designs, patents, business plans, financial statements, manuals, memoranda, lists and other property delivered to or compiled by Employee by or on behalf of the Company or their representatives, vendors or customers which pertain to the business of the Company shall be and remain the property of the Company, as the case may be, and be subject at all times to their discretion and control. Likewise, all correspondence, reports, records, charts, advertising materials and other similar data pertaining to the business, activities or future plans of the Company that is collected by Employee shall be delivered promptly to the Company without request by it upon termination of Employee's employment. 6. Inventions. Employee shall disclose promptly to the Company any and all significant conceptions and ideas for inventions, improvements and valuable discoveries, whether patentable or not, which are conceived or made by Employee, solely or jointly with another, during the period of employment or within one (1) year thereafter, and which are directly related to the business or activities of the Company and that Employee conceives as a result of his employment by the Company. Employee hereby assigns and agrees to assign all his interests therein to the Company or its nominee. Whenever requested to do so by the Company, Employee shall execute any and all applications, assignments or other instruments that the Company shall deem necessary to apply for and obtain letters patent of the United States or any foreign country or to otherwise protect the Company's interest therein. 7. Trade Secrets. Employee agrees that he will not, during or after the term of this Agreement with the Company, disclose the specific terms of the Company's relationships or 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. 5 6 8. Disclosure of Information. Employee agrees that for a period of three (3) years after the date hereof or during the term of this Agreement and for a period of three (3) years thereafter, whichever is longer, without the prior written consent of the Company, Employee shall not, directly or indirectly, through any form of ownership, in any individual or representative or affiliated capacity whatsoever, except as may be required by law, reveal, divulge, disclose or communicate to any person, firm, association, corporation or other entity in any manner whatsoever information of any kind, nature or description concerning: (i) the names of any prior or present suppliers or customers with respect to the Business, (ii) the prices for products or services with respect to the Business, (iii) the names of personnel with respect to the Business, (iv) the manner of operation with respect to the Business, (v) the plans, trade secrets, or other data of any kind, nature or description, whether tangible or intangible, with respect to the Business, or (vi) any other financial, statistical or other information regarding the business acquired by the Company that the Company designates or treats as confidential or proprietary. The agreements set forth herein shall not apply to any information that at the time of disclosure or thereafter is generally available to and known by the public (other than as a result of a disclosure directly or indirectly by Employee in violation of this Agreement). Without regard to whether any or all of the foregoing matters would be deemed confidential, material or important, the parties hereto stipulate that as between them, the same are important, material and confidential and gravely affect the effective and successful conduct of the Business and its goodwill. 9. Noncompetition. (a) Employee agrees that during the term of this Agreement and, upon termination of Employee's employment by the Company for a period of three (3) years thereafter, he shall not: (i) Call upon, solicit, divert, take away or attempt to call upon, solicit, divert or take away any existing customers, suppliers, businesses, or accounts of the Business in connection with any business substantially similar to the Business in the territory defined as 100 miles in and around the Company's and its affiliates operations (the "Territory"); (ii) Hire, attempt to hire, contact or solicit with respect to hiring for himself or on behalf of any other person any present employee of the Company in the Business; (iii) Lend credit, money or reputation for the purpose of establishing or operating a business substantially similar to the Business in the Territory; (iv) Do any act that Employee knew or reasonably should have known might directly injure the Company in any material respect or that might divert customers, suppliers or employees from the Business; and (v) Without limiting the generality of the foregoing provisions, conduct a business substantially similar to the Business under the name "F.Y.I. Incorporated" or any other trade names, trademarks or service marks heretofore used by the Company or its affiliates. 6 7 The covenants in subsections (i) through (v) are intended to restrict Employee from competing in any manner with the Company or the Business in the activities that have heretofore been carried on by the Company or its affiliates. The obligations set forth in subsections (i) through (v) above shall apply to actions by Employee, through any form of ownership, and whether as principal, officer, director, agent, employee, employer, consultant, stockholder or holder of any equity security (beneficially or as trustee of any trust), lender, partner, joint venturer or in any other individual or representative or affiliated capacity whatsoever. However, none of the foregoing shall prevent Employee from being the holder of up to 5.0% in the aggregate of any class of securities of any corporation engaged in the activities described in subsection (i) through (v) above, provided that such securities are listed on a national securities exchange or reported on the Nasdaq National Market. 10. Indemnification. In the event Employee is made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by the Company against Employee), by reason of the fact that he is or was performing services under this Agreement, then the Company shall indemnify Employee against all expenses (including attorneys' fees), judgments, fines and amounts paid in settlement, as actually and reasonably incurred by Employee in connection therewith. In the event that both Employee and the Company are made a party to the same third-party action, complaint, suit or proceeding, the Company agrees to engage competent legal representation, and Employee agrees to use the same representation, provided that if counsel selected by the Company shall have a conflict of interest that prevents such counsel from representing Employee, Employee may engage separate counsel and the Company shall pay all attorneys' fees of such separate counsel. Further, while Employee is expected at all times to use his best efforts to faithfully discharge his duties under this Agreement, Employee shall not be held liable to the Company for errors or omissions made in good faith where Employee has not exhibited negligence or performed criminal and fraudulent acts which damage the business of the Company. 11. No Prior Agreements. Employee hereby represents and warrants to the Company that the execution of this Agreement by Employee and his employment by the Company and the performance of his duties hereunder will not violate or be a breach of any agreement with a former employer, client or any other person or entity. Further, Employee agrees to indemnify the Company for any claim, including, but not limited to, attorneys' fees and expenses of investigation, by any such third party that such third party may now have or may hereafter come to have against the Company based upon or arising out of any non-competition agreement, invention or secrecy agreement between Employee and such third party which was in existence as of the date of this Agreement. 12. Assignment; Binding Effect. Employee understands that he has been selected for employment by the Company on the basis of his personal qualifications, experience and skills. Employee agrees, therefore, he cannot assign all or any portion of his performance under this Agreement. Subject to the preceding, this Agreement shall be binding upon, inure to the benefit 7 8 of and be enforceable by the parties hereto and their respective heirs, legal representatives, successors and assigns. 13. Complete Agreement. This Agreement is not a promise of future employment. Employee has no oral representations, understandings or agreements with the Company or any of its officers, directors or representatives covering the same subject matter as this Agreement. This written Agreement is the final, complete and exclusive statement and expression of the agreement between the Company and Employee and of all the terms of this Agreement, and it cannot be varied, contradicted or supplemented by evidence of any prior or contemporaneous oral or written agreements. This Agreement may not be later modified except by a further writing signed by a duly authorized officer of the Company and Employee, and no term of this Agreement may be waived except by writing signed by the party waiving the benefit of such term. 14. Notice. Whenever any notice is required hereunder, it shall be given in writing addressed as follows: To the Company: F.Y.I. Incorporated 3232 McKinney Avenue Suite 900 Dallas, Texas 75204 Attn: Margot T. Lebenberg, Esq. To Employee: Ronald Zazworsky 456 Ivy Park Lane Atlanta, Georgia 30342 Notice shall be deemed given and effective three (3) days after the deposit in the United States mail of a writing addressed as above and sent first class mail, certified, return receipt requested, or when actually received. Either party may change the address for notice by notifying the other party of such change in accordance with this paragraph 14. 15. Severability; Headings. If any portion of this Agreement is held invalid or inoperative, the other portions of this Agreement shall be deemed valid and operative and, so far as is reasonable and possible, effect shall be given to the intent manifested by the portion held invalid or inoperative. The paragraph headings herein are for reference purposes only and are not intended in any way to describe, interpret, define or limit the extent or intent of the Agreement or of any part hereof. 16. Arbitration. Any unresolved dispute or controversy arising under or in connection with this Agreement shall be settled exclusively by arbitration, conducted before a panel of three (3) arbitrators in Dallas, Texas, in accordance with the rules of the American Arbitration Association then in effect. The arbitrators shall not have the authority to add to, detract from, or modify any provision hereof nor to award punitive damages to any injured party. The arbitrators 8 9 shall have the authority to order back-pay, severance compensation, vesting of options (or cash compensation in lieu of vesting of options), reimbursement of costs, including those incurred to enforce this Agreement, and interest thereon in the event the arbitrators determine that Employee was terminated without disability or good cause, as defined in paragraphs 4(b) and 4(c), respectively, or that the Company has otherwise materially breached this Agreement. A decision by a majority of the arbitration panel shall be final and binding. Judgment may be entered on the arbitrators' award in any court having jurisdiction. The direct expense of any arbitration proceeding shall be borne by the Company. 17. Governing Law. This Agreement shall in all respects be construed according to the laws of the State of Texas. 18. Counterparts. This Agreement may be executed simultaneously in two (2) or more counterparts, each of which shall be deemed an original and all of which together shall constitute but one and the same instrument. 19. Attorneys' Fees. In the event of any litigation or arbitration arising under or in connection with this Agreement, the prevailing party shall be entitled to reasonable attorneys' fees as determined by the court or arbitration panel, as the case may be. Each party to this Agreement represents and warrants that it has been represented by counsel in the negotiation and execution of this Agreement, including without limitation the provisions set forth in this paragraph 19. 20. 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) In the event of a pending Change in Control wherein the Company and Employee have 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, 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 lump-sum severance payment due to Employee shall be the equivalent of Employee's salary for one year and the non-competition provisions of paragraph 3 shall not apply whatsoever. (c) 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 9 10 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 the equivalent of Employee's salary for one year and the non-competition provisions of paragraph 3 shall all apply for a period of one (1) year from the effective date of termination. (d) 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 an opportunity to elect whether to exercise 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, such that he may convert the options 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. (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; 10 11 (iii) the stockholders of the Company shall approve a merger, consolidation, recapitalization, or reorganization of the Company, a reverse stock split of outstanding voting securities, or consummation of any such transaction if stockholder approval is not sought or obtained, other than any such transaction which would result in at least 75% of the total voting power represented by the voting securities of the surviving entity outstanding immediately after such transaction being Beneficially Owned by at least 75% of the holders of outstanding voting securities of the Company immediately prior to the transaction, with the voting power of each such continuing holder relative to other such continuing holders not substantially altered in the transaction; or (iv) the stockholders of the Company shall approve a plan of complete liquidation of the Company or an agreement for the sale or disposition by the Company of all or a substantial portion of the Company's assets (i.e., 50% or more of the total assets of the Company). (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) Employee shall be reimbursed by the Company or its successor for any excise taxes and/or interest or penalties with respect to such excise taxes that Employee incurs under Section 4999 of the Internal Revenue Code of 1986, as amended (or any similar tax that may hereafter be imposed), 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. 11 12 IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written. F.Y.I. INCORPORATED By: /s/ Ed H. Bowman, Jr. ---------------------------------- Title: President and Chief Executive Officer EMPLOYEE: /s/ Ronald Zazworsky ------------------------------------- Ronald Zazworsky 12 EX-10.34 5 EMPLOYMENT AGREEMENT - THOMAS C. WALKER 1 EXHIBIT 10.34 EMPLOYMENT AGREEMENT This Employment Agreement (the "Agreement") between F.Y.I., Incorporated ("FYI"), a Delaware corporation, and Thomas C. Walker ("Employee") is hereby entered into and effective as of the 1st day of January 1998. This Agreement hereby supersedes any other employment agreements or understandings, written or oral, between FYI and Employee. R E C I T A L S The following statements are true and correct: As of the date of this Agreement, FYI, primarily through companies it intends to acquire as subsidiaries, will be engaged primarily in the business of providing document/information management services. References herein to "FYI" are intended to include FYI and these operating subsidiaries, as may be applicable in the circumstances. Employee will be employed hereunder by FYI in a confidential relationship wherein Employee, in the course of his employment with FYI, will become familiar with and aware of information as to FYI's customers, specific manner of doing business, including the processes, techniques and trade secrets utilized by FYI, and future plans with respect thereto, all of which will be established and maintained at great expense to FYI; this information is a trade secret and constitutes the valuable good will of FYI. 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) FYI hereby employs Employee as Chairman of the Board and Chief Development Officer. As such, Employee shall have responsibilities, duties and authority reasonably accorded to and expected of a Chairman of the Board and Chief Development Officer and will report directly to the Board of Directors of FYI (the "Board"). Additional or different duties, titles or positions, however, may be assigned to Employee or may be taken from Employee from time to time by the Board, provided that any such changes are consistent and compatible with Employee's experience, background and managerial skills. Employee hereby accepts this employment upon the terms and conditions herein contained and agrees to devote his time, attention and efforts to promote and further the business of FYI. -1- 2 (b) Employee shall faithfully adhere to, execute and fulfill all reasonable policies established by FYI. (c) 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, other than to a 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, FYI shall compensate Employee as follows: (a) Base Salary. Beginning on January 1, 1998, the base salary payable to Employee shall be Two Hundred Twenty-Five Thousand Dollars ($225,000) per year, payable on a semimonthly basis in equal installments as nearly as practicable on the first (1st) and fifteenth (15th) day of each month. On at least an annual basis, the Board will review Employee's performance and may make increases to such base salary if, in its sole discretion, any such increase is warranted. (b) Incentive Bonus Plan. It is FYI's intent to develop a written Incentive Bonus Plan setting forth the criteria under which Employee and other officers and key employees will be eligible to receive year-end bonus awards. Employee shall have the opportunity under this plan to be eligible for bonus not to exceed a value equal to 50% of base salary. (c) Stock Options. FYI's Stock Option Plan sets forth detailed terms and conditions which will govern stock option grants to Employee and other employees of FYI. (d) Executive Perquisites, Benefits and Other Compensation. Employee shall be entitled to receive additional benefits and compensation from FYI 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 FYI may have in effect from time to time. (ii) Payment of all dues for a social or luncheon club, provided such club is used by Employee at least fifty percent (50%) of the time for business entertainment. -2- 3 (iii) 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 FYI's expense reporting policy. (iv) Four (4) weeks of paid vacation per year or such greater amount as may be afforded officers and key employees under FYI's policies in effect from time to time. (v) An automobile allowance in the amount of Five Hundred Dollars ($500) per month. (vi) Other executive perquisites as may be available to or deemed appropriate for Employee by the Board and participation in all other employee benefits as available from time to time. 3. Non-Competition Agreement. (a) Employee will not, during the period of his employment by or with FYI, 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 FYI, within 100 miles of FYI or where any of its subsidiaries conducts business, including any territory serviced by FYI or any of its subsidiaries (the "Territory"); (ii) call upon any person who is, at that time, within the Territory, an employee of FYI (including its subsidiaries) in a managerial capacity for the purpose or with the intent of enticing such employee away from or out of the employ of FYI (including its subsidiaries); (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 FYI (including its subsidiaries) within the Territory for the purpose of soliciting or selling products or services in direct competition with FYI within the Territory; or -3- 4 (iv) call upon any prospective acquisition candidate, on his own behalf or on behalf of any competitor of FYI, which candidate was either called upon by FYI or for which FYI made an acquisition analysis, for the purpose of acquiring such entity. Notwithstanding the above, the foregoing covenant shall not be deemed to prohibit Employee from acquiring as an investment not more than one percent (1%) of the capital stock of a competing business, whose stock is traded on a national securities exchange or in the over-the-counter market. (b) Because of the difficulty of measuring economic losses to FYI as a result of a breach of the foregoing covenant, and because of the immediate and irreparable damage that could be caused to FYI for which it would have no other adequate remedy, Employee agrees that the foregoing covenant may be enforced by FYI in the event of breach by him by injunctions and restraining orders, which injunctions and restraining orders may be obtained from any court with appropriate jurisdiction. (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 FYI on the date of the execution of this Agreement and the current plans of FYI; but it is also the intent of FYI and Employee that such covenants be construed and enforced in accordance with the changing activities and business of FYI throughout the term of this covenant, whether before or after the date of termination of the employment of Employee. For example, if, during the term of this Agreement, FYI enters a new and different business in addition to that enumerated under the Recitals above, then Employee will be precluded from soliciting the customers or employees of such new business and from directly competing with such new business within 100 miles of its operating location(s) through the term of this covenant. (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 FYI, whether predicated on this Agreement or otherwise, shall not constitute a defense to the enforcement by FYI 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 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 even if there is pending in a court of competent jurisdiction an action -4- 5 (including any appeal from any final judgment) brought by any person, whether or not a party to this Agreement, in which such person contests the validity of such agreements and covenants or their enforceability or seeks to avoid their performance or enforcement. 4. Term; Termination; Rights on Termination. The term of this Agreement shall begin on the date hereof and continue for one (1) year, and, unless terminated sooner as herein provided, shall continue thereafter on a year-to- year basis on the same terms and conditions contained herein. 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), FYI 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 FYI with a written statement from a qualified doctor to such effect and provided, further, that, at FYI'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 FYI 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 FYI, in a lump-sum payment due within ten (10) days of the effective date of termination, the Base Salary at the rate then in effect for whatever time period is remaining under the term of this Agreement or for one (1) year, whichever amount is greater. (c) Good Cause. FYI may terminate the Agreement ten (10) days after written notice to Employee for good cause, which shall include: (1) Employee's willful, material and irreparable breach of this Agreement; (2) Employee's breach of paragraph 3(a) above; (3) Employee's gross negligence in the performance or intentional nonperformance (continuing for ten (10) days after receipt of written notice of need to cure) of any of Employee's material duties and responsibilities hereunder except for nonperformance due to disability, as set forth in paragraph 4(b) above; (4) Employee's willful dishonesty, fraud or misconduct with respect to the business or affairs of FYI which materially and adversely affects the operations or reputation of FYI; (5) Employee's conviction of a felony crime; or (6) 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. -5- 6 (d) Without Cause. At any time after the commencement of employment, FYI or Employee may, without cause, terminate this Agreement and Employee's employment, effective thirty (30) days after written notice is provided to the other party. Should Employee be terminated by FYI without cause, Employee shall receive from FYI, in a lump-sum payment due on the effective date of termination in the amount of one half of the Base Salary at the rate then in effect. If Employee resigns or otherwise terminates his employment without cause pursuant to this paragraph 4(d), Employee shall receive no severance compensation. Employee shall be deemed to have been terminated without cause by FYI if Employee shall be assigned any duties materially inconsistent with, or Employee's responsibilities shall be significantly limited, or Employee shall be significantly demoted, in any case so as not to be serving in a senior executive officer capacity to FYI (and its subsidiaries and affiliates), and the continuance thereof for a period of five (5) business days after written notice from Employee that he is unwilling to accept such changes in duties or responsibilities. (e) Change in Control of FYI. Refer to paragraph 11 below. Upon termination of this Agreement for any reason provided above, Employee shall be entitled to receive all compensation earned and all benefits 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 11. All other rights and obligations of FYI and Employee under this Agreement shall cease as of the effective date of termination, except that FYI's obligations under paragraph 8 herein and Employee's obligations under paragraphs 3, 5, 6, 7 and 9 herein shall survive such termination in accordance with their terms. If termination of Employee's employment arises out of FYI's failure to pay Employee on a timely basis the amounts to which he is entitled under this Agreement or as a result of any other breach of this Agreement by FYI, as determined by a court of competent jurisdiction or pursuant to the provisions of paragraph 15 below, FYI 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. Further, none of the provisions of paragraph 3 shall apply in the event this Agreement is terminated as a result of a breach by FYI. 5. Return of Company Property. All records, designs, patents, business plans, financial statements, manuals, memoranda, lists and other property delivered to or compiled by Employee by or on behalf of FYI or its representatives, vendors or customers which pertain to the business of FYI shall be and remain the property of FYI 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 FYI which are collected by Employee shall be delivered promptly to FYI without request by it upon termination of Employee's employment. -6- 7 6. Inventions. Employee shall disclose promptly to FYI 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 FYI and which Employee conceives as a result of his employment by FYI. Employee hereby assigns and agrees to assign all his interests therein to FYI or its nominee. Whenever requested to do so by FYI, Employee shall execute any and all applications, assignments or other instruments that FYI shall deem necessary to apply for and obtain Letters Patent of the United States or any foreign country or to otherwise protect FYI's interest therein. 7. Trade Secrets. Employee agrees that he will not, during or after the term of this Agreement with FYI, disclose the material trade secrets of FYI, whether in existence or proposed, to any person, firm, partnership, corporation or business for any reason or purpose whatsoever. 8. 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 FYI against Employee), by reason of the fact that he is or was performing services under this Agreement or any prior agreement with F.Y.I., or was or is an employee of F.Y.I. then FYI 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 FYI are made a party to the same third-party action, complaint, suit or proceeding, FYI agrees to engage competent legal representation, and Employee agrees to use the same representation, subject to Employees reasonable approval or Employee will be liable and responsible for all attorneys' fees of any separate legal representation and counsel engaged by him. 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 FYI 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 FYI. 9. No Prior Agreements. Employee hereby represents and warrants to FYI that the execution of this Agreement by Employee and his employment by FYI 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 FYI 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 FYI 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. 10. Assignment: Binding Effect. Employee understands that he has been selected for employment by FYI 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 11 below, this -7- 8 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. 11. Change in Control. The following provisions shall become applicable in the event of a Change in Control. (a) Unless he elects to terminate this Agreement pursuant to (c) below, Employee understands and acknowledges that FYI may be merged or consolidated with or into another entity and that such entity shall automatically succeed to the rights and obligations of FYI hereunder. (b) In the event of a pending Change in Control wherein FYI and Employee have 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 FYI's business and/or assets that such successor is not willing as of the closing to assume and agree to perform FYI's obligations under this Agreement in the same manner and to the same extent that FYI is hereby required to perform, then such Change in Control shall be deemed to be a termination of this Agreement by FYI without cause and the applicable portions of paragraph 4(d) will apply; however, under such circumstances, the amount of the lump-sum severance payment due to Employee shall be triple the Base Salary then in effect and the non-competition provisions of paragraph 3 shall not apply whatsoever. (c) In any Change in Control situation, Employee may, at his sole discretion, elect to terminate this Agreement by providing written notice to FYI 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 4(d) will apply as though FYI had terminated the Agreement without cause; however, under such circumstances, the amount of the lump-sum severance payment due to Employee shall be one hundred and fifty percent (150%) of the Base Salary then in effect and the non-competition provisions of paragraph 3 shall all apply for a period of one (1) year from the effective date of termination. (d) For purposes of applying paragraph 4 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 FYI at or prior to such closing. Further, all of Employee's stock options shall immediately vest and Employee will be given ninety (90) days and an opportunity to elect whether to exercise all or any of his vested options to purchase FYI common stock, including any options with accelerated vesting under the provisions of any Stock Option Plan adopted by FYI, such that he may convert the options to shares of FYI common stock at or prior to the closing of the transaction giving rise to the Change in Control, if he so desires. -8- 9 (e) A "Change in Control," shall be deemed to have occurred if: (i) any person, other than FYI or an employee benefit plan of FYI, 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 FYI and immediately after such acquisition such Person is, directly or indirectly, the Beneficial Owner of voting securities representing fifty percent (50%) or more of the total voting power of all of the then-outstanding voting securities of FYI; (ii) the individuals (A) who, as of the effective date of the Company's registration statement with respect to its IPO, constitute the Board (the "Original Directors") or (B) who thereafter are elected to the Board and whose election, or nomination for election, to the Board was approved by a vote of at least two-thirds (2/3) of the Original Directors then still in office (such directors becoming "Additional Original Directors" immediately following their election) or (C) who are elected to the Board and whose election, or nomination for election, to the Board was approved by a vote of at least two-thirds (2/3) of the Original Directors and Additional Original Directors then still in office (such directors also becoming "Additional Original Directors" immediately following their election) (such individuals being the "Continuing Directors"), cease for any reason to constitute a majority of the members of the Board; (iii) the stockholders of FYI shall approve a merger, consolidation, recapitalization, or reorganization of FYI, 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 FYI 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 FYI shall approve a plan of complete liquidation of FYI or an agreement for the sale or disposition by FYI of all or a substantial portion of FYI's assets (i.e., 50% or more of the total assets of FYI). (f) Employee must be notified in writing by FYI at any time that FYI or any member of its Board anticipates that a Change in Control may take place. (g) Employee shall be reimbursed by FYI 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 FYI 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. -9- 10 12. Complete Agreement. This Agreement is not a promise of future employment. Employee has no oral representations, understandings or agreements with FYI 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 FYI 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 FYI and Employee, and no term of this Agreement may be waived except by writing signed by the party waiving the benefit of such term. 13. Notice. Whenever any notice is required hereunder, it shall be given in writing addressed as follows: To FYI: F.Y.I. Incorporated 3232 McKinney Avenue Suite 900 Dallas, Texas 75204 Attention: Margot Lebenberg Vice President and General Counsel With a copy to: Charles C. Reeder, Esq. Locke Purnell Rain Harrell 2200 Ross Avenue Suite 2200 Dallas, Texas 75201 To Employee: Thomas C. Walker Residence 10-A 3510 Turtle Creek Blvd. Dallas, Texas 75219 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 13. 14. 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. -10- 11 15. 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 affect. The arbitrators shall not have the authority to add to, detract from, or modify any provision hereof nor to award punitive damages to any injured party. The arbitrators shall have the authority to order back-pay, severance compensation, vesting of options (or cash compensation in lieu of vesting of options), reimbursement of costs, including those incurred to enforce this Agreement, and interest thereon in the event the arbitrators determine that Employee was terminated without disability or good cause, as defined in paragraphs 4(b) and 4(c), respectively, or that FYI 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 FYI. 16. Governing Law. This agreement shall in all respects be construed according to the laws of the State of Texas. 17. Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. F.Y.I. INCORPORATED By: /s/ Ed Bowman ------------------------------------- Ed Bowman President and Chief Executive Officer EMPLOYEE: /s/ Thomas C. Walker ---------------------------------------- Thomas C. Walker -11- EX-10.35 6 EMPLOYMENT AGREEMENT - DAVID LOWENSTEIN 1 EXHIBIT 10.35 EMPLOYMENT AGREEMENT This Employment Agreement (the "Agreement") between F.Y.I., Incorporated ("FYI"), a Delaware corporation, and David Lowenstein ("Employee") is hereby entered into and effective as of the 1st day of January 1998. This Agreement hereby supersedes any other employment agreements or understandings, written or oral, between FYI and Employee. RECITALS The following statements are true and correct: As of the date of this Agreement, FYI, primarily through companies it intends to acquire as subsidiaries, will be engaged primarily in the business of providing document/information management services. References herein to "FYI" are intended to include FYI and these operating subsidiaries, as may be applicable in the circumstances. Employee will be employed hereunder by FYI in a confidential relationship wherein Employee, in the course of his employment with FYI, will become familiar with and aware of information as to FYI's customers, specific manner of doing business, including the processes, techniques and trade secrets utilized by FYI, and future plans with respect thereto, all of which will be established and maintained at great expense to FYI; this information is a trade secret and constitutes the valuable good will of FYI. 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: AGREEMENTS 1. Employment and Duties. (a) FYI hereby employs Employee as Executive Vice President-Corporate Development and Treasurer. As such, Employee shall have responsibilities, duties and authority reasonably accorded to and expected of an Executive Vice President-Corporate Development and Treasurer and will report directly to the Board of Directors of FYI (the "Board"). Additional or different duties, titles or positions, however, may be assigned to Employee or may be taken from Employee from time to time by the Board, provided that any such changes are consistent and compatible with Employee's experience, background and managerial skills. Employee hereby accepts this employment upon the terms and conditions herein contained and agrees to devote his time, attention and efforts to promote and further the business of FYI. -1- 2 (b) Employee shall faithfully adhere to, execute and fulfill all reasonable policies established by FYI. (c) 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, other than to a 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, FYI shall compensate Employee as follows: (a) Base Salary. Beginning on January 1, 1998, the base salary payable to Employee shall be Two Hundred Thousand Dollars ($200,000) per year, payable on a semimonthly basis in equal installments as nearly as practicable on the first (1st) and fifteenth (15th) day of each month. On at least an annual basis, the Board will review Employee's performance and may make increases to such base salary if, in its sole discretion, any such increase is warranted. (b) Incentive Bonus Plan. It is FYI's intent to develop a written Incentive Bonus Plan setting forth the criteria under which Employee and other officers and key employees will be eligible to receive year-end bonus awards. Employee shall have the opportunity under this plan to be eligible for bonus not to exceed a value equal to 50% of base salary. (c) Stock Options. FYI's Stock Option Plan sets forth detailed terms and conditions which will govern stock option grants to Employee and other employees of FYI. (d) Executive Perquisites, Benefits and Other Compensation. Employee shall be entitled to receive additional benefits and compensation from FYI 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 FYI may have in effect from time to time. (ii) Reimbursement for all business travel and other out-of-pocket expenses reasonably incurred by Employee in the performance of his services pursuant to this Agreement. 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 FYI's expense reporting policy. -2- 3 (iii) Four (4) weeks of paid vacation per year or such greater amount as may be afforded officers and key employees under FYI's policies in effect from time to time. (iv) An automobile allowance in the amount of Five Hundred Dollars ($500) per month. (v) Other executive perquisites as may be available to or deemed appropriate for Employee by the Board and participation in all other employee benefits as available from time to time. 3. Non-Competition Agreement. (a) Employee will not, during the period of his employment by or with FYI, 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 FYI, within 100 miles of FYI or where any of its subsidiaries conducts business, including any territory serviced by FYI or any of its subsidiaries (the "Territory"); (ii) call upon any person who is, at that time, within the Territory, an employee of FYI (including its subsidiaries) in a managerial capacity for the purpose or with the intent of enticing such employee away from or out of the employ of FYI (including its subsidiaries); (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 FYI (including its subsidiaries) within the Territory for the purpose of soliciting or selling products or services in direct competition with FYI within the Territory; or (iv) call upon any prospective acquisition candidate, on his own behalf or on behalf of any competitor of FYI, which candidate was either called upon by FYI or for which FYI made an acquisition analysis, for the purpose of acquiring such entity. Notwithstanding the above, the foregoing covenant shall not be deemed to prohibit Employee from acquiring as an investment not more than one percent (1%) of the capital stock of -3- 4 a competing business, whose stock is traded on a national securities exchange or in the over-the-counter market. (b) Because of the difficulty of measuring economic losses to FYI as a result of a breach of the foregoing covenant, and because of the immediate and irreparable damage that could be caused to FYI for which it would have no other adequate remedy, Employee agrees that the foregoing covenant may be enforced by FYI in the event of breach by him by injunctions and restraining orders, which injunctions and restraining orders may be obtained from any court with appropriate jurisdiction. (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 FYI on the date of the execution of this Agreement and the current plans of FYI; but it is also the intent of FYI and Employee that such covenants be construed and enforced in accordance with the changing activities and business of FYI throughout the term of this covenant, whether before or after the date of termination of the employment of Employee. For example, if, during the term of this Agreement, FYI enters a new and different business in addition to that enumerated under the Recitals above, then Employee will be precluded from soliciting the customers or employees of such new business and from directly competing with such new business within 100 miles of its operating location(s) through the term of this covenant. (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 FYI, whether predicated on this Agreement or otherwise, shall not constitute a defense to the enforcement by FYI 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 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 even if there is pending in a court of competent jurisdiction an action (including any appeal from any final judgment) brought by any person, whether or not a party to this Agreement, in which such person contests the validity of such agreements and covenants or their enforceability or seeks to avoid their performance or enforcement. 4. Term; Termination; Rights on Termination. The term of this Agreement shall begin on the date hereof and continue for one (1) year, and, unless terminated sooner as herein provided, shall continue thereafter on a year-to-year basis on the same terms and conditions -4- 5 contained herein. 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), FYI 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 FYI with a written statement from a qualified doctor to such effect and provided, further, that, at FYI'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 FYI 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 FYI, in a lump-sum payment due within ten (10) days of the effective date of termination, the Base Salary at the rate then in effect for whatever time period is remaining under the term of this Agreement or for one (1) year, whichever amount is greater. (c) Good Cause. FYI may terminate the Agreement ten (10) days after written notice to Employee for good cause, which shall include: (1) Employee's willful, material and irreparable breach of this Agreement; (2) Employee's breach of paragraph 3(a) above; (3) Employee's gross negligence in the performance or intentional nonperformance (continuing for ten (10) days after receipt of written notice of need to cure) of any of Employee's material duties and responsibilities hereunder except for nonperformance due to disability, as set forth in paragraph 4(b) above; (4) Employee's willful dishonesty, fraud or misconduct with respect to the business or affairs of FYI which materially and adversely affects the operations or reputation of FYI; (5) Employee's conviction of a felony crime; or (6) 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, FYI or Employee may, without cause, terminate this Agreement and Employee's employment, effective thirty (30) days after written notice is provided to the other party. Should Employee be terminated by FYI without cause, Employee shall receive from FYI, in a lump-sum payment due on the effective date of termination in the amount of one half of the Base Salary at the rate then in effect. If Employee resigns or otherwise terminates his employment without cause pursuant to this paragraph 4(d), Employee shall receive no severance compensation. Employee shall be deemed -5- 6 to have been terminated without cause by FYI if Employee shall be assigned any duties materially inconsistent with, or Employee's responsibilities shall be significantly limited, or Employee shall be significantly demoted, in any case so as not to be serving in a senior executive officer capacity to FYI (and its subsidiaries and affiliates), and the continuance thereof for a period of five (5) business days after written notice from Employee that he is unwilling to accept such changes in duties or responsibilities. (e) Change in Control of FYI. Refer to paragraph 11 below. Upon termination of this Agreement for any reason provided above, Employee shall be entitled to receive all compensation earned and all benefits 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 11. All other rights and obligations of FYI and Employee under this Agreement shall cease as of the effective date of termination, except that FYI's obligations under paragraph 8 herein and Employee's obligations under paragraphs 3, 5, 6, 7 and 9 herein shall survive such termination in accordance with their terms. If termination of Employee's employment arises out of FYI's failure to pay Employee on a timely basis the amounts to which he is entitled under this Agreement or as a result of any other breach of this Agreement by FYI, as determined by a court of competent jurisdiction or pursuant to the provisions of paragraph 15 below, FYI 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. Further, none of the provisions of paragraph 3 shall apply in the event this Agreement is terminated as a result of a breach by FYI. 5. Return of Company Property. All records, designs, patents, business plans, financial statements, manuals, memoranda, lists and other property delivered to or compiled by Employee by or on behalf of FYI or its representatives, vendors or customers which pertain to the business of FYI shall be and remain the property of FYI 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 FYI which are collected by Employee shall be delivered promptly to FYI without request by it upon termination of Employee's employment. 6. Inventions. Employee shall disclose promptly to FYI 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 FYI and which Employee conceives as a result of his employment by FYI. Employee hereby assigns and agrees to assign all his interests therein to FYI or its nominee. Whenever requested to do so by FYI, Employee shall execute any and all applications, -6- 7 assignments or other instruments that FYI shall deem necessary to apply for and obtain Letters Patent of the United States or any foreign country or to otherwise protect FYI's interest therein. 7. Trade Secrets. Employee agrees that he will not, during or after the term of this Agreement with FYI, disclose the material trade secrets of FYI, whether in existence or proposed, to any person, firm, partnership, corporation or business for any reason or purpose whatsoever. 8. 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 FYI against Employee), by reason of the fact that he is or was performing services under this Agreement or any prior agreement with F.Y.I., or was or is an employee of F.Y.I. then FYI 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 FYI are made a party to the same third-party action, complaint, suit or proceeding, FYI agrees to engage competent legal representation, and Employee agrees to use the same representation, subject to Employees reasonable approval or Employee will be liable and responsible for all attorneys' fees of any separate legal representation and counsel engaged by him. 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 FYI 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 FYI. 9. No Prior Agreements. Employee hereby represents and warrants to FYI that the execution of this Agreement by Employee and his employment by FYI 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 FYI 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 FYI 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. 10. Assignment: Binding Effect. Employee understands that he has been selected for employment by FYI 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 11 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. 11. Change in Control. The following provisions shall become applicable in the event of a Change in Control. -7- 8 (a) Unless he elects to terminate this Agreement pursuant to (c) below, Employee understands and acknowledges that FYI may be merged or consolidated with or into another entity and that such entity shall automatically succeed to the rights and obligations of FYI hereunder. (b) In the event of a pending Change in Control wherein FYI and Employee have 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 FYI's business and/or assets that such successor is not willing as of the closing to assume and agree to perform FYI's obligations under this Agreement in the same manner and to the same extent that FYI is hereby required to perform, then such Change in Control shall be deemed to be a termination of this Agreement by FYI without cause and the applicable portions of paragraph 4(d) will apply; however, under such circumstances, the amount of the lump-sum severance payment due to Employee shall be triple the Base Salary then in effect and the non-competition provisions of paragraph 3 shall not apply whatsoever. (c) In any Change in Control situation, Employee may, at his sole discretion, elect to terminate this Agreement by providing written notice to FYI 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 4(d) will apply as though FYI had terminated the Agreement without cause; however, under such circumstances, the amount of the lump-sum severance payment due to Employee shall be one hundred and fifty percent (150%) of the Base Salary then in effect and the non-competition provisions of paragraph 3 shall all apply for a period of one (1) year from the effective date of termination. (d) For purposes of applying paragraph 4 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 FYI at or prior to such closing. Further, all of Employee's stock options shall immediately vest and Employee will be given ninety (90) days and an opportunity to elect whether to exercise all or any of his vested options to purchase FYI common stock, including any options with accelerated vesting under the provisions of any Stock Option Plan adopted by FYI, such that he may convert the options to shares of FYI common stock at or prior to the closing of the transaction giving rise to the Change in Control, if he so desires. (e) A "Change in Control," shall be deemed to have occurred if: (i) any person, other than FYI or an employee benefit plan of FYI, 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 FYI and immediately after such acquisition such Person is, directly or indirectly, the Beneficial Owner of voting securities representing fifty percent (50%) or more of the total voting power of all of the then-outstanding voting securities of FYI; -8- 9 (ii) the individuals (A) who, as of the effective date of the Company's registration statement with respect to its IPO, constitute the Board (the "Original Directors") or (B) who thereafter are elected to the Board and whose election, or nomination for election, to the Board was approved by a vote of at least two-thirds (2/3) of the Original Directors then still in office (such directors becoming "Additional Original Directors" immediately following their election) or (C) who are elected to the Board and whose election, or nomination for election, to the Board was approved by a vote of at least two-thirds (2/3) of the Original Directors and Additional Original Directors then still in office (such directors also becoming "Additional Original Directors" immediately following their election) (such individuals being the "Continuing Directors"), cease for any reason to constitute a majority of the members of the Board; (iii) the stockholders of FYI shall approve a merger, consolidation, recapitalization, or reorganization of FYI, 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 FYI 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 FYI shall approve a plan of complete liquidation of FYI or an agreement for the sale or disposition by FYI of all or a substantial portion of FYI's assets (i.e., 50% or more of the total assets of FYI). (f) Employee must be notified in writing by FYI at any time that FYI or any member of its Board anticipates that a Change in Control may take place. (g) Employee shall be reimbursed by FYI 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 FYI 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. 12. Complete Agreement. This Agreement is not a promise of future employment. Employee has no oral representations, understandings or agreements with FYI 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 FYI 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 -9- 10 agreements. This written Agreement may not be later modified except by a further writing signed by a duly authorized officer of FYI and Employee, and no term of this Agreement may be waived except by writing signed by the party waiving the benefit of such term. 13. Notice. Whenever any notice is required hereunder, it shall be given in writing addressed as follows: To FYI: F.Y.I. Incorporated 3232 McKinney Avenue Suite 900 Dallas, Texas 75204 Attention: Margot Lebenberg Vice President and General Counsel With a copy to: Charles C. Reeder, Esq. Locke Purnell Rain Harrell 2200 Ross Avenue Suite 2200 Dallas, Texas 75201 To Employee: David Lowenstein 2808 McKinney Avenue, Apt. 452 Dallas, Texas 75204 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 13. 14. 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. 15. 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 affect. 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 -10- 11 compensation in lieu of vesting of options), reimbursement of costs, including those incurred to enforce this Agreement, and interest thereon in the event the arbitrators determine that Employee was terminated without disability or good cause, as defined in paragraphs 4(b) and 4(c), respectively, or that FYI 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 FYI. 16. Governing Law. This agreement shall in all respects be construed according to the laws of the State of Texas. 17. Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. F.Y.I. INCORPORATED By: /s/ Ed Bowman ------------------------------------- Ed Bowman President and Chief Executive Officer EMPLOYEE: /s/ David Lowenstein -------------------------------------------- David Lowenstein -11- EX-10.36 7 EMPLOYMENT AGREEMENT - JOHN (JACK) KEARNEY 1 EXHIBIT 10.36 EMPLOYMENT AGREEMENT JOHN D. (JACK) KEARNEY THIS EMPLOYMENT AGREEMENT (the "Agreement") is made and entered into the 5th day of January, 1998 by and between John D. (Jack) Kearney ("Employee") and F.Y.I. Incorporated, a Delaware corporation (the "Company"). This Agreement hereby supersedes any other employment agreements or understandings, written or oral, between the Company and Employee. RECITALS The following statements are true and correct: As of the date of this Agreement, the Company is engaged primarily in the document management services business (the "Business"). Employee is employed hereunder by the Company in a confidential relationship wherein Employee, in the course of his employment with the Company, has and will continue to become familiar with and aware of information as to the Company's customers, specific manner of doing business, including the processes, techniques and trade secrets utilized by the Company, and future plans with respect thereto, all of which has been and will be established and maintained at great expense to the Company; this information is a trade secret and constitutes the valuable goodwill of the Company. Therefore, in consideration of the mutual promises, terms, covenants and conditions set forth herein and the performance of each, it is hereby agreed as follows: AGREEMENTS 1. Employment and Duties. (a) The Company hereby employs Employee as a Vice President-Corporate Development. As such, Employee shall have responsibilities, duties and authority reasonably accorded to and expected of a Vice President-Corporate Development and will report directly to the Executive Vice President-Corporate Development of the Company. Employee hereby accepts this employment upon the terms and conditions herein contained and, subject to paragraph 1(b), agrees to devote his working time, attention and efforts to promote and further the business of the Company. 2 (b) Employee shall not, during the term of his employment hereunder, be engaged in any other business activity pursued for gain, profit or other pecuniary advantage except to the extent that such activity does not interfere with Employee's duties and responsibilities hereunder. The foregoing limitations shall not be construed as prohibiting Employee from making personal investments in such form or manner as will neither require his services in the operation or affairs of the companies or enterprises in which such investments are made. 2. Compensation. For all services rendered by Employee, the Company shall compensate Employee as follows: (a) Base Salary; Annual Bonus. The base salary payable to Employee shall be $150,000 per year, payable on a regular basis in accordance with the Company's standard payroll procedures but not less than monthly (pro-rated for any year in which Employee is employed for less than the full year). For 1998 and subsequent years, it is the Company's intent to develop a written Incentive Bonus Plan setting forth the criteria under which Employee and other officers and key employees will be eligible to receive year-end bonus awards. Employee shall be eligible for a bonus opportunity of up to 50% of Employee's annual base salary in accordance with this Incentive Bonus Plan, pro-rated for any year in which Employee was employed for less than the full year. The award of any bonus shall be based on the total performance of the Employee and the Company. The incremental payments and the Company's targeted performance shall be determined by the Board of Directors (the "Board") or the compensation committee thereof. (b) Other Compensation. Employee shall be entitled to receive additional benefits and compensation from the Company in such form and to such extent as specified below: (i) Payment of all premiums for coverage for Employee and Employee's dependent family members under health, hospitalization, disability, dental and other insurance plans that the Company may have in effect from time to time. (ii) Reimbursement for all business travel and other out-of-pocket expenses reasonably incurred by Employee in the performance of his services pursuant to this Agreement and a $500 per month car allowance (determined on a pre-tax basis). All reimbursable expenses shall be appropriately documented in reasonable detail by Employee upon submission of any request for reimbursement, and in a format and manner consistent with the Company's expense reporting policy. (iii) Four (4) weeks paid vacation for each year during the period of employment or such greater amount as may be afforded officers and key employees generally under the Company's policies in effect from time to time (pro-rated for any year in which Employee is employed for less than the full year). 2 3 (iv) The Company shall provide Employee with other executive perquisites as may be available to or deemed appropriate for Employee by the Board and participation in all other Company-wide employee benefits as available from time to time, which may include participation in the Company's 1996 Long-Term Incentive Compensation Plan. (v) Employee shall be granted options (the "Options") to acquire 40,000 shares of Common Stock at the fair market value on the date hereof. The Options shall become exercisable as to 40% of the underlying shares one year following the date hereof and as to the remainder, 20% of the underlying shares of Common Stock on each of the next three (3) anniversaries of the date hereof. The Options shall expire on the tenth anniversary of the date of grant. After six months of employment, Employee shall be eligible for an additional grant to acquire up to 10,000 shares of Common Stock based upon Employee's performance objectives ("Additional Options"). Such Additional Options shall vest 20% on each anniversary of the date of grant. 3. Place of Performance. (a) Employee understands that he may be requested by the Board of Directors of the Company (the "Board") to relocate from his then current residence to another geographic location in order to more efficiently carry out his duties and responsibilities under this Agreement or as part of a promotion or other increase in duties and responsibilities. In such event, if Employee agrees to relocate, the Company will pay relocation costs up to $30,000 to move Employee, his immediate family and their personal property and effects. Such costs may include, by way of example, but are not limited to, pre-move visits to search for a new residence, investigate schools or for other purposes; temporary lodging and living costs prior to moving into a new permanent residence; duplicate home carrying costs; and closing costs on the sale of Employee's present residence and on the purchase of a comparable residence in the new location. The general intent of the foregoing is to assist Employee with the cost of the relocation, with an understanding that Employee will use his best efforts to incur only those costs which are reasonable and necessary to effect a smooth, efficient and orderly relocation with minimal disruption to the business affairs of the Company and the personal life of Employee and his family. (b) Notwithstanding the above, if Employee is requested by the Board to relocate and Employee refuses, such refusal shall not constitute "good cause" for termination of this Agreement under the terms of paragraph 4(c). 4. Term; Termination; Rights on Termination. The term of this Agreement shall begin on the date hereof and continue for one (1) year (the "Term"). This Agreement and Employee's employment may be terminated in any one of the following ways: (a) Death. The death of Employee shall immediately terminate the Agreement with no severance compensation due to Employee's estate. 3 4 (b) Disability. The Company will make efforts to reasonably accommodate Employee as required by applicable state or federal disability laws. However, the parties irrebutably presume that, given Employee's position, it would be an undue hardship to the Company if Employee is absent for more than three (3) consecutive months. Therefore, if as a result of incapacity due to physical or mental illness or injury, Employee shall have been absent from his full-time duties hereunder for three (3) consecutive months, then thirty (30) days after receiving written notice (which notice may occur before or after the end of such three (3) month period, but which shall not be effective earlier than the last day of such three (3) month period), the Company may terminate Employee's employment hereunder provided Employee is unable to resume his full-time duties at the conclusion of such notice period. Also, Employee may terminate his employment hereunder if his health should become impaired to an extent that makes the continued performance of his duties hereunder hazardous to his physical or mental health or his life, provided that Employee shall have furnished the Company with a written statement from a qualified doctor to such effect and provided, further, that at the Company's request made within thirty (30) days of the date of such written statement, Employee shall submit to an examination by a doctor selected by the Company who is reasonably acceptable to Employee or Employee's doctor and such doctor shall have concurred in the conclusion of Employee's doctor. In the event this Agreement is terminated as a result of Employee's disability, Employee shall receive from the Company, in a lump-sum payment due within ten (10) days of the effective date of termination, the base salary at the rate then in effect for whatever time period is remaining under the Term of this Agreement or for six (6) months, whichever amount is greater. (c) Good Cause. The Company may terminate the Agreement five (5) days after written notice to Employee for good cause, which shall be: (i) Employee's breach of this Agreement; (ii) Employee's negligence in the performance or nonperformance (continuing for five (5) days after receipt of the written notice) of any of Employee's material duties and responsibilities hereunder; (iii) Employee's dishonesty, fraud or misconduct with respect to the business or affairs of the Company that adversely affects the operations or reputation of the Company; (iv) Employee's conviction of a felony crime; or (v) chronic alcohol abuse or illegal drug abuse by Employee. In the event of a termination for good cause, as enumerated above, Employee shall have no right to any severance compensation. (d) Without Cause. At any time after the commencement of employment, the Company may, without cause, terminate this Agreement and Employee's employment, effective ten (10) days after written notice is provided to Employee. Employee may only be terminated without cause by the Company during the Term hereof if such termination is approved by the Board of Directors of the Company. Should Employee be terminated by the Company without cause, Employee shall receive from the Company, in a lump-sum payment due on the effective date of termination, the base salary at the rate then in effect for whatever time period is remaining under the Term of this Agreement or for six (6) months, whichever amount is greater. (e) Termination by Employee for Good Reason. Employee may terminate his employment hereunder for "Good Reason." As used herein, "Good Reason" shall mean the 4 5 continuance of any of the following after fifteen (15) days' prior written notice by Employee to the Company, specifying the basis for such Employee's having Good Reason to terminate this Agreement: (i) Employee's removal from, or failure to be reappointed or reelected to, Employee's position under this Agreement, except as contemplated by paragraphs 4(a), (b) and (c); or (ii) Any other material breach of this Agreement by the Company, including the failure to pay Employee on a timely basis the amounts to which he is entitled under this Agreement. In the event of any dispute with respect to the termination by the Employee for Good Reason, such dispute shall be resolved pursuant to the provisions of paragraph 16 below. In the event that it is determined that Good Reason did exist, the Company shall pay all amounts and damages to which Employee may be entitled as a result of such breach, including interest thereon and all reasonable legal fees and expenses and other costs incurred by Employee to enforce his rights hereunder. Should Employee terminate his employment for Good Reason, Employee shall receive from the Company, in a lump-sum payment due on the effective date of termination, the base salary at the rate then in effect for whatever time period is remaining under the Term of this Agreement or for six (6) months, whichever amount is greater. (f) Termination by Employee Without Cause. If Employee resigns or otherwise terminates his employment without Good Reason pursuant to paragraph 4(e), Employee shall receive no severance compensation. Upon termination of this Agreement for any reason provided in clauses (a) through (f) above, Employee shall be entitled to receive all compensation earned and all benefits and reimbursements vested or due through the effective date of termination. Additional compensation subsequent to termination, if any, will be due and payable to Employee only to the extent and in the manner expressly provided above or in paragraph 16. All other rights and obligations of the Company and Employee under this Agreement shall cease as of the effective date of termination, except that the Company's obligations under paragraph 10 herein and Employee's obligations under paragraphs 5, 6, 7, 10 and 11 herein shall survive such termination in accordance with their terms. 5. Return of Company Property. All records, designs, patents, business plans, financial statements, manuals, memoranda, lists and other property delivered to or compiled by Employee by or on behalf of the Company or their representatives, vendors or customers which pertain to the business of the Company shall be and remain the property of the Company, as the case may be, and be subject at all times to their discretion and control. Likewise, all correspondence, reports, records, charts, advertising materials and other similar data pertaining to the business, activities or future plans of the Company that is collected by Employee shall be 5 6 delivered promptly to the Company without request by it upon termination of Employee's employment. 6. Inventions. Employee shall disclose promptly to the Company any and all significant conceptions and ideas for inventions, improvements and valuable discoveries, whether patentable or not, which are conceived or made by Employee, solely or jointly with another, during the period of employment or within one (1) year thereafter, and which are directly related to the business or activities of the Company and that Employee conceives as a result of his employment by the Company. Employee hereby assigns and agrees to assign all his interests therein to the Company or its nominee. Whenever requested to do so by the Company, Employee shall execute any and all applications, assignments or other instruments that the Company shall deem necessary to apply for and obtain letters patent of the United States or any foreign country or to otherwise protect the Company's interest therein. 7. Trade Secrets. Employee agrees that he will not, during or after the term of this Agreement with the Company, disclose the specific terms of the Company's relationships or agreements with their respective significant vendors or customers or any other significant and material trade secret of the Company, whether in existence or proposed, to any person, firm, partnership, corporation or business for any reason or purpose whatsoever. 8. Disclosure of Information. Employee agrees that for a period of three (3) years after the date hereof or during the term of this Agreement and for a period of three (3) years thereafter, whichever is longer, without the prior written consent of the Company, Employee shall not, directly or indirectly, through any form of ownership, in any individual or representative or affiliated capacity whatsoever, except as may be required by law, reveal, divulge, disclose or communicate to any person, firm, association, corporation or other entity in any manner whatsoever information of any kind, nature or description concerning: (i) the names of any prior or present suppliers or customers with respect to the Business, (ii) the prices for products or services with respect to the Business, (iii) the names of personnel with respect to the Business, (iv) the manner of operation with respect to the Business, (v) the plans, trade secrets, or other data of any kind, nature or description, whether tangible or intangible, with respect to the Business, or (vi) any other financial, statistical or other information regarding the business acquired by the Company that the Company designates or treats as confidential or proprietary. The agreements set forth herein shall not apply to any information that at the time of disclosure or thereafter is generally available to and known by the public (other than as a result of a disclosure directly or indirectly by Employee in violation of this Agreement). Without regard to whether any or all of the foregoing matters would be deemed confidential, material or important, the parties hereto stipulate that as between them, the same are important, material and confidential and gravely affect the effective and successful conduct of the Business and its goodwill. 9. Noncompetition. (a) Employee agrees that during the term of this Agreement and, upon termination of Employee's employment by the Company for a period of three (3) years thereafter, he shall not: 6 7 (i) Call upon, solicit, divert, take away or attempt to call upon, solicit, divert or take away any existing customers, suppliers, businesses, or accounts of the Business in connection with any business substantially similar to the Business in the territory defined as 100 miles in and around the Company's and its affiliates operations (the "Territory"); (ii) Hire, attempt to hire, contact or solicit with respect to hiring for himself or on behalf of any other person any present employee of the Company in the Business; (iii) Lend credit, money or reputation for the purpose of establishing or operating a business substantially similar to the Business in the Territory; (iv) Do any act that Employee knew or reasonably should have known might directly injure the Company in any material respect or that might divert customers, suppliers or employees from the Business; and (v) Without limiting the generality of the foregoing provisions, conduct a business substantially similar to the Business under the name "F.Y.I. Incorporated" or any other trade names, trademarks or service marks heretofore used by the Company or its affiliates. The covenants in subsections (i) through (v) are intended to restrict Employee from competing in any manner with the Company or the Business in the activities that have heretofore been carried on by the Company or its affiliates. The obligations set forth in subsections (i) through (v) above shall apply to actions by Employee, through any form of ownership, and whether as principal, officer, director, agent, employee, employer, consultant, stockholder or holder of any equity security (beneficially or as trustee of any trust), lender, partner, joint venturer or in any other individual or representative or affiliated capacity whatsoever. However, none of the foregoing shall prevent Employee from being the holder of up to 5.0% in the aggregate of any class of securities of any corporation engaged in the activities described in subsection (i) through (v) above, provided that such securities are listed on a national securities exchange or reported on the Nasdaq National Market. 10. Indemnification. In the event Employee is made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by the Company against Employee), by reason of the fact that he is or was performing services under this Agreement, then the Company shall indemnify Employee against all expenses (including attorneys' fees), judgments, fines and amounts paid in settlement, as actually and reasonably incurred by Employee in connection therewith. In the event that both Employee and the Company are made a party to the same third-party action, complaint, suit or proceeding, the Company agrees to engage competent legal representation, and Employee agrees to use the same representation, provided that if counsel selected by the Company shall have a conflict of interest that prevents such counsel from representing Employee, Employee may engage separate counsel and the Company shall pay all attorneys' fees of such separate counsel. Further, while Employee is expected at all times to use his best efforts to faithfully discharge his duties 7 8 under this Agreement, Employee shall not be held liable to the Company for errors or omissions made in good faith where Employee has not exhibited negligence or performed criminal and fraudulent acts which damage the business of the Company. 11. No Prior Agreements. Employee hereby represents and warrants to the Company that the execution of this Agreement by Employee and his employment by the Company and the performance of his duties hereunder will not violate or be a breach of any agreement with a former employer, client or any other person or entity. Further, Employee agrees to indemnify the Company for any claim, including, but not limited to, attorneys' fees and expenses of investigation, by any such third party that such third party may now have or may hereafter come to have against the Company based upon or arising out of any non-competition agreement, invention or secrecy agreement between Employee and such third party which was in existence as of the date of this Agreement. 12. Assignment; Binding Effect. Employee understands that he has been selected for employment by the Company on the basis of his personal qualifications, experience and skills. Employee agrees, therefore, he cannot assign all or any portion of his performance under this Agreement. Subject to the preceding, this Agreement shall be binding upon, inure to the benefit of and be enforceable by the parties hereto and their respective heirs, legal representatives, successors and assigns. 13. Complete Agreement. This Agreement is not a promise of future employment. Employee has no oral representations, understandings or agreements with the Company or any of its officers, directors or representatives covering the same subject matter as this Agreement. This written Agreement is the final, complete and exclusive statement and expression of the agreement between the Company and Employee and of all the terms of this Agreement, and it cannot be varied, contradicted or supplemented by evidence of any prior or contemporaneous oral or written agreements. This Agreement may not be later modified except by a further writing signed by a duly authorized officer of the Company and Employee, and no term of this Agreement may be waived except by writing signed by the party waiving the benefit of such term. 14. Notice. Whenever any notice is required hereunder, it shall be given in writing addressed as follows: To the Company: F.Y.I. Incorporated 3232 McKinney Avenue Suite 900 Dallas, Texas 75204 Attn: Margot T. Lebenberg, Esq. To Employee: John D. (Jack) Kearney 7327 Marquette Street Dallas, TX 75225 8 9 Notice shall be deemed given and effective three (3) days after the deposit in the United States mail of a writing addressed as above and sent first class mail, certified, return receipt requested, or when actually received. Either party may change the address for notice by notifying the other party of such change in accordance with this paragraph 14. 15. Severability; Headings. If any portion of this Agreement is held invalid or inoperative, the other portions of this Agreement shall be deemed valid and operative and, so far as is reasonable and possible, effect shall be given to the intent manifested by the portion held invalid or inoperative. The paragraph headings herein are for reference purposes only and are not intended in any way to describe, interpret, define or limit the extent or intent of the Agreement or of any part hereof. 16. Arbitration. Any unresolved dispute or controversy arising under or in connection with this Agreement shall be settled exclusively by arbitration, conducted before a panel of three (3) arbitrators in Dallas, Texas, in accordance with the rules of the American Arbitration Association then in effect. The arbitrators shall not have the authority to add to, detract from, or modify any provision hereof nor to award punitive damages to any injured party. The arbitrators shall have the authority to order back-pay, severance compensation, vesting of options (or cash compensation in lieu of vesting of options), reimbursement of costs, including those incurred to enforce this Agreement, and interest thereon in the event the arbitrators determine that Employee was terminated without disability or good cause, as defined in paragraphs 4(b) and 4(c), respectively, or that the Company has otherwise materially breached this Agreement. A decision by a majority of the arbitration panel shall be final and binding. Judgment may be entered on the arbitrators' award in any court having jurisdiction. The direct expense of any arbitration proceeding shall be borne by the Company. 17. Governing Law. This Agreement shall in all respects be construed according to the laws of the State of Texas. 18. Counterparts. This Agreement may be executed simultaneously in two (2) or more counterparts, each of which shall be deemed an original and all of which together shall constitute but one and the same instrument. 19. Attorneys' Fees. In the event of any litigation or arbitration arising under or in connection with this Agreement, the prevailing party shall be entitled to reasonable attorneys' fees as determined by the court or arbitration panel, as the case may be. Each party to this Agreement represents and warrants that it has been represented by counsel in the negotiation and execution of this Agreement, including without limitation the provisions set forth in this paragraph 19. 9 10 20. 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) In the event of a pending Change in Control wherein the Company and Employee have 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 not 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 lump-sum severance payment due to Employee shall be the equivalent of Employee's salary for six months and the non-competition provisions of paragraph 9 shall not apply whatsoever. (c) 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 the equivalent of Employee's salary for six months and the non-competition provisions of paragraph 9 shall all apply for a period of one (1) year from the effective date of termination. (d) 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 an opportunity to elect whether to exercise 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, such that he may convert the options 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. 10 11 (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 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. 11 12 (g) Employee shall be reimbursed by the Company or its successor for any excise taxes and/or interest or penalties with respect to such excise taxes that Employee incurs under Section 4999 of the Internal Revenue Code of 1986, as amended (or any similar tax that may hereafter be imposed), 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. [BALANCE OF PAGE INTENTIONALLY LEFT BLANK] 12 13 IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written. F.Y.I. INCORPORATED By: /s/ Ed H. Bowman, Jr. ---------------------------------------- Title: President and Chief Executive Officer EMPLOYEE: /s/ John D. (Jack) Kearney -------------------------------------------- John D. (Jack) Kearney 13 EX-10.37 8 AMENDED/RESTATED CREDIT AGREEMENT DATED 2/17/98 1 EXHIBIT 10.37 AMENDED AND RESTATED CREDIT AGREEMENT dated as of February 17, 1998 by and among F.Y.I. INCORPORATED, BANQUE PARIBAS, AS AGENT, BANK OF AMERICA TEXAS, N.A., AS CO-AGENT, and THE LENDERS NAMED HEREIN $50,000,000 REVOLVING CREDIT LOAN FACILITY 2 TABLE OF CONTENTS
Page ---- ARTICLE 1 - Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Section 1.1 Definitions, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Section 1.2 Other Definitional Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 Section 1.3 Accounting Terms and Determinations . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 Section 1.4 Financial Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 ARTICLE 2 - Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 Section 2.1 Commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 Section 2.2 Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 Section 2.3 Repayment of Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 Section 2.4 Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 Section 2.5 Borrowing Procedure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 Section 2.6 Optional Prepayments, Conversions and Continuations of Loans, Reduction of Commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 Section 2.7 Mandatory Prepayments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 Section 2.8 Minimum Amounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29 Section 2.9 Certain Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29 Section 2.10 Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30 Section 2.11 Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30 Section 2.12 Computations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30 Section 2.13 Termination or Reduction of Commitments . . . . . . . . . . . . . . . . . . . . . . . . . . 31 Section 2.14 Letters of Credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31 ARTICLE 3 - Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34 Section 3.1 Method of Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34 Section 3.2 Pro Rata Treatment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35 Section 3.3 Sharing of Payments, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35 Section 3.4 Non-Receipt of Funds by the Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35 Section 3.5 Withholding Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36 Section 3.6 Withholding Tax Exemption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37 Section 3.7 Reinstatement of Obligations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37 ARTICLE 4 - Yield Protection and Illegality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38 Section 4.1 Additional Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38 Section 4.2 Limitation on Types of Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39 Section 4.3 Illegality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39 Section 4.4 Treatment of Affected Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40 Section 4.5 Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40 Section 4.6 Capital Adequacy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41 Section 4.7 Additional Interest on Eurodollar Loans . . . . . . . . . . . . . . . . . . . . . . . . . . 41
AMENDED AND RESTATED CREDIT AGREEMENT - Page i 3 ARTICLE 5 - Security . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42 Section 5.1 Collateral . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42 Section 5.2 Guaranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42 Section 5.3 New Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42 Section 5.4 Additional Security. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43 Section 5.5 Release of Collateral . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44 Section 5.6 Setoff . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45 Section 5.7 Landlord and Mortgagee Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45 ARTICLE 6 - Conditions Precedent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46 Section 6.1 Closing Date Conditions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46 Section 6.2 Initial Extension of Credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49 Section 6.3 All Extensions of Credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50 Section 6.4 Closing Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51 ARTICLE 7 - Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51 Section 7.1 Corporate Existence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51 Section 7.2 Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51 Section 7.3 Corporate Action: No Breach . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52 Section 7.4 Operation of Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52 Section 7.5 Intellectual Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52 Section 7.6 Litigation and Judgments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53 Section 7.7 Rights in Properties; Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53 Section 7.8 Enforceability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53 Section 7.9 Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53 Section 7.10 Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53 Section 7.11 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54 Section 7.12 Margin Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54 Section 7.13 ERISA; Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54 Section 7.14 Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55 Section 7.15 Capitalization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55 Section 7.16 Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55 Section 7.17 Compliance with Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56 Section 7.18 Investment Company Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56 Section 7.19 Public Utility Holding Company Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56 Section 7.20 Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56 Section 7.21 Labor Disputes and Acts of God . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57 Section 7.22 Material Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57 Section 7.23 Bank Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57 Section 7.24 Outstanding Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57 Section 7.25 Related Transactions Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58 Section 7.26 Solvency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
AMENDED AND RESTATED CREDIT AGREEMENT - Page ii 4 Section 7.27 Employee Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58 Section 7.28 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58 Section 7.29 Common Enterprise . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59 ARTICLE 8 - Affirmative Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59 Section 8.1 Reporting Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59 Section 8.2 Maintenance of Existence, Conduct of Business . . . . . . . . . . . . . . . . . . . . . . . 62 Section 8.3 Maintenance of Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63 Section 8.4 Taxes and Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63 Section 8.5 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63 Section 8.6 Inspection Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64 Section 8.7 Keeping Books and Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65 Section 8.8 Compliance with Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65 Section 8.9 Compliance with Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65 Section 8.10 Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65 Section 8.11 ERISA; Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65 Section 8.12 Trade Accounts Payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65 Section 8.13 No Consolidation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65 ARTICLE 9 - Negative Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66 Section 9.1 Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66 Section 9.2 Limitation on Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67 Section 9.3 Mergers, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67 Section 9.4 Restricted Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68 Section 9.5 Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68 Section 9.6 Limitation on Issuance of Capital Stock . . . . . . . . . . . . . . . . . . . . . . . . . . 69 Section 9.7 Transactions With Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69 Section 9.8 Disposition of Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70 Section 9.9 Sale and Leaseback . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70 Section 9.10 Lines of Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71 Section 9.11 Environmental Protection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71 Section 9.12 Intercompany Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71 Section 9.13 Management Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71 Section 9.14 Modification of Other Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71 Section 9.15 ERISA Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72 Section 9.16 Dividend Restrictions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72 ARTICLE 10 - Financial Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73 Section 10.1 Consolidated Net Worth . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73 Section 10.2 Ratio of Total Debt to EBITDA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73 Section 10.3 Consolidated Fixed Charge Coverage Ratio . . . . . . . . . . . . . . . . . . . . . . . . . 74 Section 10.4 Consolidated Interest Coverage Ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . 74 Section 10.5 Capital Expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
AMENDED AND RESTATED CREDIT AGREEMENT - Page iii 5 ARTICLE 11 - Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75 Section 11.1 Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75 Section 11.2 Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77 Section 11.3 Cash Collateral . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78 Section 11.4 Performance by the Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78 ARTICLE 12 - The Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79 Section 12.1 Appointment, Powers and Immunities . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79 Section 12.2 Rights of Agent as a Lender . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79 Section 12.3 Defaults . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80 Section 12.4 INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80 Section 12.5 Independent Credit Decisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81 Section 12.6 Several Commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81 Section 12.7 Successor Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81 ARTICLE 13 - Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82 Section 13.1 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82 Section 13.2 INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82 Section 13.3 Limitation of Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83 Section 13.4 No Duty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83 Section 13.5 No Fiduciary Relationship . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83 Section 13.6 Equitable Relief . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84 Section 13.7 No Waiver; Cumulative Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84 Section 13.8 Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84 Section 13.9 Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87 Section 13.10 ENTIRE AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87 Section 13.11 Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87 Section 13.12 Maximum Interest Rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88 Section 13.13 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89 Section 13.14 GOVERNING LAW; SUBMISSION TO JURISDICTION; SERVICE OF PROCESS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90 Section 13.15 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90 Section 13.16 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90 Section 13.17 Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90 Section 13.18 Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90 Section 13.19 Independence of Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91 Section 13.20 Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91 Section 13.21 WAIVER OF JURY TRIAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91 Section 13.22 Approvals and Consent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91 Section 13.23 Agent for Services of Process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91 Section 13.24 Amendment and Restatement of Prior Agreement. . . . . . . . . . . . . . . . . . . . . . . 92 Section 13.25 Assignments and Assumptions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92
AMENDED AND RESTATED CREDIT AGREEMENT - Page iv 6 INDEX TO EXHIBITS
Exhibit Description of Exhibit Section - ------- ---------------------- ------- A Form of Assignment and Acceptance 1.1 B Form of Note 1.1 and 2.2 C Form of Subordination Agreement 1.1 D Form of Swingline Note E Form of Notice of Borrowings, Conversions, Continuations or Prepayments 2.9 F Form of Solvency Certificate 1.1, 6.2, 8.1 G Form of Compliance Certificate 8.1
INDEX TO SCHEDULES
Schedule Description of Schedule - -------- ----------------------- 1.1(a) Mortgaged Properties 1.1(b) Permitted Liens 7.4 Permits, Franchises, Licenses and Authorizations constituting Governmental Requirements or involving Governmental Authorities 7.6 Litigation and Judgments 7.7 Ownership of Real Properties 7.10 Existing Debt 7.11 Taxes 7.13 Plans 7.15 Capitalization; Options, etc. 7.22 Material Contracts 7.23 Bank Accounts 7.27 Employee Matters 7.28 Insurance 9.5 Investments
AMENDED AND RESTATED CREDIT AGREEMENT - Page v 7 AMENDED AND RESTATED CREDIT AGREEMENT THIS AMENDED AND RESTATED CREDIT AGREEMENT, dated as of February 17, 1998, is by and among F.Y.I. INCORPORATED ("F.Y.I."), a Delaware corporation, each of the banks or other lending institutions which is a party hereto (as evidenced by the signature pages of this Agreement) or which may from time to time become a party hereto or any successor or assignee thereof (individually, a "Lender" and, collectively, the "Lenders"), BANQUE PARIBAS, a bank organized under the laws of France acting through its Chicago Branch, as agent for itself and the other Lenders (in such capacity, together with its successors in such capacity, the "Agent") and BANK OF AMERICA TEXAS, N.A., as co-agent for itself and the other Lenders (in such capacity, together with its successors in such capacity, the "Co-Agent"). RECITALS: a. On April 18, 1996, F.Y.I., certain Subsidiaries of F.Y.I. (collectively, the "Prior Borrowers"), the Agent and certain lenders executed a certain Credit Agreement (as amended from time to time, the "Prior Agreement") pursuant to which the Lenders (as defined therein) extended (i) a revolving credit facility to the Revolving Loans Borrowers (as defined therein, including F.Y.I.) for working capital and general corporate purposes and (ii) a term loan facility to the Term Loans Borrowers (as defined therein, including F.Y.I.) to finance future acquisitions by the Term Loans Borrowers. After giving effect to certain assignments made to Paribas immediately prior hereto, Paribas is, as of the Closing Date, the only lender under the Prior Agreement. b. F.Y.I., the Lenders identified on the signature pages of this Agreement, the Agent and the Co- Agent desire, with the written consent of the Prior Borrowers, to enter into this Agreement for the purposes of providing the credit facility referred to herein and amending and restating the Prior Agreement in its entirety. NOW, THEREFORE, in consideration of the premises and the mutual covenants herein contained, the parties hereto hereby agree as follows: ARTICLE 1 Definitions Section 1.1 Definitions, etc. As used in this Agreement, the following terms shall have the following meanings: "Accounting Changes" means as specified in Section 1.3(a). "Acquisition" means any transaction or series of related transactions for the purpose of or AMENDED AND RESTATED CREDIT AGREEMENT - Page 1 8 resulting, directly or indirectly, in (a) the acquisition of all or substantially all of the assets of a Person or of any business or division of a Person, (b) the acquisition by a Person of 50% or more of the Capital Stock of any Person or otherwise causing any Person to become a Subsidiary of the acquiring Person, or (c) a merger, consolidation, amalgamation or any other combination of a Person with another Person. "Additional Costs" means as specified in Section 4.1(a). "Adjusted Eurodollar Rate" means, for any Eurodollar Loan for any Interest Period therefor, the rate per annum (rounded upwards, if necessary, to the nearest 1/16 of one percent) determined by the Agent to be equal to (a) the Eurodollar Rate for such Eurodollar Loan for such Interest Period divided by (b) one minus the Reserve Requirement for such Eurodollar Loan for such Interest Period. "Affiliate" means, as to any Person, any other Person (a) that directly or indirectly, through one or more intermediaries, controls or is controlled by, or is under common control with, such Person; (b) that directly or indirectly beneficially owns or holds fifty percent or more of any class of voting Capital Stock of such Person; or (c) fifty percent or more of the voting Capital Stock of which is directly or indirectly beneficially owned or held by the Person in question. The term "control" means the possession, directly or indirectly, of the power to direct or cause direction of the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise; provided, however, in no event shall the Agent, the Co-Agent or any Lender be deemed an Affiliate of F.Y.I. or any of its Subsidiaries. "Agent" means as specified in the initial paragraph of this Agreement. "Agreement" means this Agreement and any and all amendments, modifications, supplements, renewals, extensions or restatements hereof. "Applicable Lending Office" means for each Lender and each Type of Loan, the Lending Office of such Lender (or an Affiliate of such Lender) designated for such Type of Loan below its name on the signature pages hereof (or, with respect to a Lender that becomes a party to this Agreement pursuant to an assignment made in accordance with Section 13.8, in the Assignment and Acceptance executed by it) or such other office of such Lender (or an Affiliate of such Lender) as such Lender may from time to time specify to F.Y.I. and the Agent as the office by which its Loans of such Type are to be made and maintained. "Applicable Margin" means, with respect to any period and with respect to Prime Rate Loans, Eurodollar Loans and the Commitment Fees, the percentage set forth in the table below that corresponds to the ratio of (a) Total Debt as of the date of the relevant financial statements referred to below to (b) EBITDA for the four fiscal quarters of FYI then most recently ended as of the date of such financial statements, calculated in accordance with Section 1.4: AMENDED AND RESTATED CREDIT AGREEMENT - Page 2 9
- ----------------------------------------------------------------------------------------------- Applicable Margins for - ----------------------------------------------------------------------------------------------- Total Debt to Eurodollar Prime Commitment EBITDA Ratio Loans Rate Loans Fee - ----------------------------------------------------------------------------------------------- > or = 2.50 to 1.00 1.50% 0% 0.375% - ----------------------------------------------------------------------------------------------- > or = 2.00 to 1.00 and < 2.50 to 1.00 1.00% 0% 0.250% - ----------------------------------------------------------------------------------------------- > or = 1.50 to 1.00 and < 2.00 to 1.00 0.75% 0% 0.250% - ----------------------------------------------------------------------------------------------- < 1.50 to 1.00 0.50% 0% 0.250% - -----------------------------------------------------------------------------------------------
For purposes hereof and notwithstanding the preceding sentence, the Applicable Margin for the period from the Closing Date to the first Calculation Date shall be deemed to be 0.50% for Eurodollar Loans, 0% for Prime Rate Loans and 0.250% for Commitment Fees and shall thereafter be calculated on each Calculation Date based upon the preceding table and the financial statements delivered by F.Y.I. pursuant to Section 8.1(b) and the certificate delivered by F.Y.I. pursuant to Section 8.1(c); provided, that if F.Y.I. fails to deliver to the Agent such financial statements or certificate on or before the relevant Calculation Date, the Applicable Margin shall be deemed to be the percentage reflected in the preceding table as if the ratio of Total Debt to EBITDA were greater than 2.50 to 1.00 until the date such statements and certificate are received by the Agent, after which the Applicable Margin shall be determined as otherwise provided herein. "Asset Disposition" means the disposition of any or all of the Property (other than sales of Inventory in the ordinary course of business and the grant of a Lien as security) of F.Y.I. or any of its Subsidiaries, whether by sale, lease, transfer, assignment, condemnation or otherwise, but excluding any involuntary disposition resulting from casualty damage to Property. "Assignee" means as specified in Section 13.8(b). "Assigning Lender" means as specified in Section 13.8(b). "Assignment and Acceptance" means an assignment and acceptance entered into by a Lender and its Assignee and accepted by the Agent pursuant to Section 13.8(e), in substantially the form of Exhibit A hereto. "B&B Letter of Credit" means a Letter of Credit issued by the Issuing Bank in favor of the Fifth Third Bank, as trustee, or any successor thereto (the "Trustee") for the benefit of the holders of those certain $2,400,000 Prince George's County, Maryland Variable Rate Demand/Fixed Rate Revenue Bonds (B&B Records Center, Inc. Facility) 1989 Issue as a replacement for the letter of credit issued by Crestar Bank in favor of the Trustee, in a face amount not to exceed $2,500,000, and issued under the Commitments, as such Letter of Credit may be renewed, extended or replaced. AMENDED AND RESTATED CREDIT AGREEMENT - Page 3 10 "B of A Letter of Credit" means that certain Letter of Credit issued by Bank of America National Trust & Savings Association in favor of the New York State Workers Compensation Board as beneficiary in a face amount of $10,000,000 having an expiration date of March 31, 2003, which Letter of Credit was issued pursuant to an Application and Agreement for Standby Letter of Credit, dated as of January 27, 1998, between F.Y.I. and QCSINET Acquisition Corp., a wholly-owned Subsidiary of F.Y.I., as Applicants, and Bank of America Texas, N.A. as credit-provider. "Bankruptcy Code" means as specified in Section 11.1(e). "Basle Accord" means the proposals for risk-based capital framework described by the Basle Committee on Banking Regulations and Supervisory Practices in its paper entitled "International Convergence of Capital Measurement and Capital Standards" dated July 1988, as amended, supplemented and otherwise modified and in effect from time to time, or any replacement thereof. "Business Day" means (a) any day on which commercial banks are not authorized or required to close in New York, New York or Chicago, Illinois, and (b) with respect to all borrowings, payments, Conversions, Continuations, Interest Periods and notices in connection with Eurodollar Loans, any day which is a Business Day described in clause (a) above and which is also a day on which dealings in Dollar deposits are carried out in the London interbank market. "Calculation Date" means the date occurring each quarter during the term of this Agreement which is 15 days after the date upon which quarterly financial statements of F.Y.I. and its consolidated Subsidiaries are required by Section 8.1(b) to be delivered to the Agent (or, if such date is not a Business Day, the next succeeding Business Day). "Capital Expenditures" means, for any period, expenditures (including the aggregate amount of Capital Lease Obligations incurred during such period) made by F.Y.I. or any of its Subsidiaries to acquire or construct fixed assets, plant or equipment (including renewals, improvements or replacements, but excluding repairs) during such period and which, in accordance with GAAP, are classified as capital expenditures, exclusive of any expenditures for Acquisitions. "Capital Lease Obligations" means, as to any Person, the obligations of such Person to pay rent or other amounts under a lease of (or other agreement conveying the right to use) real and/or personal Property, which obligations are classified as a capital lease on a balance sheet of such Person under GAAP. For purposes of this Agreement, the amount of such Capital Lease Obligations shall be the capitalized amount thereof, determined in accordance with GAAP. "Capital Stock" means corporate stock and any and all shares, partnership interests, limited partnership interests, limited liability company interests, membership interests, equity interests, participations, rights or other equivalents (however designated) of corporate stock or any of the foregoing issued by any entity (whether a corporation, a partnership or another entity). "Change of Control" means the existence or occurrence of any of the following after the AMENDED AND RESTATED CREDIT AGREEMENT - Page 4 11 Closing Date: (a) any Person or two or more Persons acting as a group (as defined in Section 13d-3 of the Securities Exchange Act of 1934) shall have acquired beneficial ownership (within the meaning of Rule 13d-3 of the Securities and Exchange Commission under the Securities Exchange Act of 1934) of 20% or more of the outstanding shares of voting stock of F.Y.I.; (b) individuals who, as of the Closing Date, constitute the Board of Directors of F.Y.I. (the "F.Y.I. Incumbent Board") cease for any reason to constitute at least a majority of the Board of Directors of F.Y.I.; provided, however, that any individual becoming a director of F.Y.I. subsequent to the Closing Date whose election, or nomination for election by F.Y.I.'s shareholders was approved by a vote of at least a majority of the directors then comprising the F.Y.I. Incumbent Board shall be considered as though such individual were a member of the F.Y.I. Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of either an actual or threatened election contest (as such terms are used in Rule 14a-11 of Regulation 14A promulgated under the Securities Exchange Act of 1934) or other actual or threatened solicitation of proxies or contest by or on behalf of a Person other than the Board of Directors of F.Y.I.; or (c) the consummation of any transaction the result of which is that any Person or group beneficially owns more of the voting stock of F.Y.I. than is beneficially owned, in the aggregate, by the "Permitted Holders" as such term is defined in the Prior Agreement. "Closing Date" means February 17, 1998, the date of this Agreement. "Co-Agent" means as specified in the initial paragraph of this Agreement. "Code" means the Internal Revenue Code of 1986, as amended, and the regulations promulgated and rulings issued thereunder. "Collateral" means all Property of any nature whatsoever upon which a Lien is created or purported to be created by any Loan Document as security for the Obligations or any portion thereof. "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 hereto 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 "Commitments" means such obligations of all Lenders. As of the Closing Date, the aggregate principal amount of the Commitments is $50,000,000. "Commitment Percentage" means, as to any Lender, the percentage equivalent of a fraction, the numerator of which is the amount of the Commitment of such Lender, and the denominator of which is the aggregate amount of the Commitments of all of the Lenders, as adjusted from time to time in accordance with Section 13.8. "Consolidated Fixed Charge Coverage Ratio" means, for any period, the ratio of (a)(i) AMENDED AND RESTATED CREDIT AGREEMENT - Page 5 12 EBITDA of F.Y.I. and its Subsidiaries for such period minus (ii) Capital Expenditures of F.Y.I. and its Subsidiaries paid during such period, minus (iii) taxes of F.Y.I. and its Subsidiaries paid or payable in cash during such period, to (b) the Fixed Charges of F.Y.I. and its Subsidiaries for such period. "Consolidated Interest Coverage Ratio" means, for any period, the ratio of (a) EBITDA of F.Y.I. and its Subsidiaries for such period to (b) Consolidated Interest Expense for such period. "Consolidated Interest Expense" means, for any period, all interest on Debt of F.Y.I. and its Subsidiaries (or other applicable Person) paid or accrued during such period, including the interest portion of payments under Capital Lease Obligations, but excluding any fees paid by F.Y.I. and its Subsidiaries in connection with the closing of the transactions evidenced by the Prior Agreement or this Agreement to the extent that the same have been capitalized in accordance with GAAP. "Consolidated Net Income" means, for any period, the net income (or loss) of F.Y.I. and its Subsidiaries (or other applicable Person) for such period, determined on a consolidated basis in accordance with GAAP. "Consolidated Net Worth" means, at any particular time, all amounts which, in conformity with GAAP, would be included as stockholders' equity on a consolidated balance sheet of F.Y.I. and its Subsidiaries. "Continue", "Continuation" and "Continued" shall refer to the continuation pursuant to Section 2.6 of a Eurodollar Loan as a Eurodollar Loan of the same Type from one Interest Period to the next Interest Period. "Contract Rate" means as specified in Section 13.12(a). "Convert", "Conversion" and "Converted" shall refer to a conversion pursuant to Section 2.6 or Article 4 of one Type of Loan into the other Type of Loan. "Currency Hedge Agreement" means any currency hedge or exchange agreement, option or futures contract or other agreement intended to protect against or manage a Person's exposure to fluctuations in currency exchange rates. "Current Date" means a date occurring no more than 30 days prior to the Closing Date or such earlier date which is reasonably acceptable to the Agent. "Debt" means as to any Person at any time (without duplication): (a) all indebtedness, liabilities and obligations of such Person for borrowed money, (b) all indebtedness, liabilities and obligations of such Person evidenced by bonds, notes, debentures, or other similar instruments, (c) all indebtedness, liabilities and obligations of such Person to pay the deferred purchase price of Property or services, except trade accounts payable of such Person arising in the ordinary course of AMENDED AND RESTATED CREDIT AGREEMENT - Page 6 13 business that are not past due by more than 120 days, and excluding Seller Earn Out which is contingent, (d) all Capital Lease Obligations of such Person, (e) all Debt of others Guaranteed by such Person, (f) all indebtedness, liabilities and obligations secured by a Lien existing on Property owned by such Person, whether or not the indebtedness, liabilities or obligations secured thereby have been assumed by such Person or are non-recourse to such Person, (g) all reimbursement obligations of such Person (whether contingent or otherwise) in respect of letters of credit, bankers' acceptances, surety or other bonds and similar instruments, (h) all indebtedness, liabilities and obligations of such Person to redeem or retire shares of Capital Stock of such Person, (i) all indebtedness, liabilities and obligations of such Person under Interest Rate Protection Agreements or Currency Hedge Agreements, and (j) all indebtedness, liabilities and obligations of such Person in respect of unfunded vested benefits under any Plan. "Debt Issuance" means any issuance by F.Y.I. or any Subsidiary of F.Y.I. of any Debt of F.Y.I. or such Subsidiary, respectively, which Debt is issued or sold by F.Y.I. or any Subsidiary of F.Y.I. primarily for the purpose of raising capital or increasing liquidity and which Debt consists of Debt of the types referred to in clauses (a) or (b) of the definition of "Debt", but not of the types of Debt referred to in clauses (c), (d), (e), (g), (h), (i) or (j) of the definition of "Debt" and which Debt is not permitted under Section 9.1. The incurrence of Seller Subordinated Debt does not constitute a "Debt Issuance." "Default" means an Event of Default or the occurrence of an event or condition which with notice or lapse of time or both would become an Event of Default. "Default Rate" means, (a) in respect of any principal of any Loan or any Reimbursement Obligation at all times during which an Event of Default has occurred and is continuing, and (b) in respect of any principal of any Loan, any Reimbursement Obligation or any other amount payable by F.Y.I. under this Agreement or any other Loan Document which is not paid when due (whether at stated maturity, by acceleration or otherwise), a rate per annum during the period of such Event of Default or during the period commencing on the due date until such amount is paid in full, respectively, equal to the lesser of (i) the sum of two percent (2%) plus the Prime Rate as in effect from time to time plus the Applicable Margin for Prime Rate Loans for the applicable period or (ii) the Maximum Rate; provided, however, that if such Event of Default relates to, or if such amount in default is, principal of a Eurodollar Loan and the due date is a day other than the last day of an Interest Period therefor, the "Default Rate" for such principal shall be, for the period from and including the due date and to but excluding the last day of the Interest Period therefor, the lesser of (A) two percent plus the interest rate for such Eurodollar Loan for such Interest Period as provided in Section 2.4(a)(ii) hereof or (B) the Maximum Rate and, thereafter, the rate provided for above in this definition. "Deposit Account" means a deposit account maintained by F.Y.I. with a bank selected by F.Y.I. and reasonably acceptable to the Agent. "Dollars" and "$" mean lawful money of the U.S. AMENDED AND RESTATED CREDIT AGREEMENT - Page 7 14 "EBITDA" means, for any period, without duplication, the sum of the following for F.Y.I. and its Subsidiaries (or other applicable Person) for such period determined on a consolidated basis in accordance with GAAP: (a) Consolidated Net Income, plus (b) Consolidated Interest Expense, plus (c) income and franchise taxes to the extent deducted in determining Consolidated Net Income, plus (d) depreciation and amortization expense and other non-cash, non- tax items to the extent deducted in determining Consolidated Net Income, minus (e) non-cash income to the extent included in determining Consolidated Net Income. For purposes of calculating the EBITDA of F.Y.I. and its consolidated Subsidiaries for any period of four consecutive fiscal quarters including, without limitation, the four consecutive fiscal quarter period used in determining compliance with the twelve month trailing EBITDA requirement in the definition of Permitted Acquisition, the EBITDA associated with any Person or assets acquired in a Permitted Acquisition during such period of four consecutive fiscal quarters shall be added, without duplication, if the Permitted Acquisition and the EBITDA of the Person or assets acquired were approved in writing by the Required Lenders. "Eligible Assignee" means (a) any Affiliate of a Lender or (b) any commercial bank, savings and loan association, savings bank, finance company, insurance company, pension fund, mutual fund or other financial institution (whether a corporation, partnership or other entity) acceptable to the Agent and approved by F.Y.I., which approval shall not unreasonably be withheld, provided, however, that any Person referred to in this clause (b) shall not be required to be acceptable to the Agent or approved by F.Y.I. if a Default has then occurred and is continuing. "Environmental Law" means any federal, state, local or foreign law, statute, code or ordinance, principle of common law, rule or regulation, as well as any Permit, order, decree, judgment or injunction issued, promulgated, approved or entered thereunder, relating to pollution or the protection, cleanup or restoration of the environment or natural resources, or to the public health or safety, or otherwise governing the generation, use, handling, collection, treatment, storage, transportation, recovery, recycling, discharge or disposal of Hazardous Materials, including, without limitation as to U.S. laws, the Comprehensive Environmental Response, Compensation and Liability Act of 1980, 42 U.S.C. Section 9601 et seq., the Superfund Amendment and Reauthorization Act of 1986, 99-499, 100 Stat. 1613, the Resource Conservation and Recovery Act of 1976, 42 U. S. C. Section 6901 et seq., the Occupational Safety and Health Act, 29 U S.C. Section 651 et seq., the Clean Air Act, 42 U.S.C. Section 7401 et seq., the Clean Water Act, 33 U. S. C. Section 1251 et seq., the Emergency Planning and Community Right to Know Act, 42 U. S. C. Section 11001 et seq., the Federal Insecticide, Fungicide and Rodenticide Act, 7 U.S.C. Section 136 et seq., and the Toxic Substances Control Act, 15 U.S.C. Section 2601 et seq., and any state or local counterparts. "Environmental Liabilities" means, as to any Person, all liabilities, obligations, responsibilities, Remedial Actions, losses, damages, punitive damages, consequential damages, treble damages, costs and expenses (including, without limitation, all reasonable fees, disbursements and expenses of counsel, expert and consulting fees and costs of investigation and feasibility studies), fines, penalties, sanctions and interest incurred as a result of any claim or demand, by any Person, whether based in contract, tort, implied or express warranty, strict liability or criminal, penal or civil statute, including, without limitation, any Environmental Law, Permit, order or agreement AMENDED AND RESTATED CREDIT AGREEMENT - Page 8 15 with any Governmental Authority or other Person, arising from environmental, health or safety conditions or the Release or threatened Release of a Hazardous Material into the environment. "Equity Issuance" means any issuance by F.Y.I. or any Subsidiary of F.Y.I. of any Capital Stock of F.Y.I. or such Subsidiary, respectively. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended from time to time, and the regulations and published interpretations thereunder. "ERISA Affiliate" means any corporation or trade or business which is a member of a group of entities, organizations or employers of which a Loan Party is also a member and which is treated as a single employer within the meaning of Sections 414(b), (c), (m) or (o) of the Code. "Eurodollar Loans" means Loans that bear interest at rates based upon the Eurodollar Rate and the Adjusted Eurodollar Rate. "Eurodollar Rate" means, for any Eurodollar Loan for any Interest Period therefor, the rate per annum (rounded upwards, if necessary, to the nearest 1/16 of 1%) quoted by the Reference Lender at approximately 11:00 a.m. London time (or as soon thereafter as practicable) two Business Days prior to the first day of such Interest Period for the offering by the Reference Lender to leading banks in the London interbank market of Dollar deposits in immediately available funds having a term comparable to such Interest Period and in an amount comparable to the principal amount of the Eurodollar Loan made by the Reference Lender to which such Interest Period relates. If the Reference Lender is not participating in any Eurodollar Loans during any Interest Period therefor (whether as a result of Section 4.4 or for any other reason), the Eurodollar Rate and the Adjusted Eurodollar Rate for such Loans for such Interest Period shall be determined by reference to the amount of the Loans which the Reference Lender would have made had it been participating in such Loans. "Event of Default" means as specified in Section 11.1. "Federal Funds Rate" means, for any day, the rate per annum (rounded upwards, if necessary, to the nearest one- sixteenth of one percent (1/16 of 1%)) equal to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers on such day, as published by the Federal Reserve Bank of New York on the Business Day next succeeding such day, provided that (a) if the day for which such rate is to be determined is not a Business Day, the Federal Funds Rate for such day shall be such rate on such transactions on the next preceding Business Day as so published on the next succeeding Business Day and (b) if such rate is not so published on such next succeeding Business Day, the Federal Funds Rate for any day shall be the average rate charged to the Reference Lender on such day on such transactions as determined by the Agent. "Fee Letter" means the letter dated as of February 17, 1998 (and accepted by F.Y.I. as of AMENDED AND RESTATED CREDIT AGREEMENT - Page 9 16 February 17, 1998) between F.Y.I. and the Agent. "Fixed Charges" means, for any period, the sum of (a) Consolidated Interest Expense of F.Y.I. and its Subsidiaries during such period, plus (b) all scheduled payments (as such scheduled payments are reduced by application of any prepayments) of principal with respect to the Loans and other outstanding Debt during such period, plus (c) for any period commencing prior to the Loans Termination Date, an amount equal to 20% of the principal amount of the Loans outstanding as of the end of such period. "F.Y.I." means as specified in the initial paragraph of this Agreement. "F.Y.I. Common Stock" means the common stock of F.Y.I., par value $.01 per share. "F.Y.I. Equity Documents" means F.Y.I.'s Certificate of Incorporation and the F.Y.I. Common Stock. "GAAP" means generally accepted accounting principles, applied on a consistent basis, as set forth in Opinions of the Accounting Principles Board of the American Institute of Certified Public Accountants and/or in statements of the Financial Accounting Standards Board and/or their respective successors and which are applicable in the circumstances as of the date in question. Accounting principles are applied on a "consistent basis" when the accounting principles applied in a current period are comparable in all material respects to those accounting principles applied in a preceding period. "Governmental Authority" means any nation or government, any state, provincial or political subdivision thereof and any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government. "Governmental Requirement" means any law, statute, code, ordinance, order, rule, regulation, judgment, decree, injunction, franchise, Permit, certificate, license, authorization or other directive or requirement of any federal, state, county, municipal, parish, provincial or other Governmental Authority or any department, commission, board, court, agency or any other instrumentality of any of them. "Guarantee" by any Person means any obligation, contingent or otherwise, of such Person directly or indirectly guaranteeing any Debt or other obligation of any other Person and, without limiting the generality of the foregoing, any obligation, direct or indirect, contingent or otherwise, of such Person (a) to purchase or pay (or advance or supply funds for the purchase or payment of) such Debt or other obligation (whether arising by virtue of partnership arrangements, by agreement to keep-well, to purchase assets, goods, securities or services, to take-or-pay or to maintain financial statement conditions or otherwise) or (b) entered into for the purpose of assuring in any other manner the obligee of such Debt or other obligation as to the payment thereof or to protect the obligee against loss in respect thereof (in whole or in part), provided that the term Guarantee shall not AMENDED AND RESTATED CREDIT AGREEMENT - Page 10 17 include endorsements for collection or deposit in the ordinary course of business. The term "Guarantee" used as a verb has a corresponding meaning. The amount of any Guarantee shall be deemed to be an amount equal to the stated or determinable amount of the primary obligation in respect of which such Guarantee is made or, if not stated or determinable, the maximum anticipated liability in respect thereof (assuming such Person is required to perform thereunder). "Guaranties" means the guaranty agreements, in form and substance satisfactory to the Agent, executed at any time pursuant to the Prior Agreement or this Agreement by any of the Subsidiaries of F.Y.I. or any other Loan Party in favor of the Agent for the benefit of the Agent and the Lenders, and any guaranty agreement executed pursuant to Section 5.3 hereof, and any and all amendments, modifications, supplements, renewals, extensions or restatements thereof. "Hazardous Material" means any substance, product, liquid, waste, pollutant, chemical, contaminant, insecticide, pesticide, gaseous or solid matter, organic or inorganic matter, fuel, micro-organisms, ray, odor, radiation, energy, vector, plasma, constituent or material which (a) is or becomes listed, regulated or addressed under any Environmental Law or (b) is, or is deemed to be, alone or in any combination, hazardous, hazardous waste, toxic, a pollutant, a deleterious substance, a contaminant or a source of pollution or contamination under any Environmental Law, including, without limitation, asbestos, petroleum, underground storage tanks (whether empty or containing any substance) and polychlorinated biphenyls. "Intellectual Property" means any U.S. or foreign patents, patent applications, trademarks, trade names, service marks, brand names, logos and other trade designations (including unregistered names and marks), trademark and service mark registrations and applications, copyrights and copyright registrations and applications, inventions, invention disclosures, protected formulae, formulations, processes, methods, trade secrets, computer software, computer programs and source codes, manufacturing research and similar technical information, engineering know-how, customer and supplier information, assembly and test data drawings or royalty rights. "Interest Period" means, with respect to any Eurodollar Loan, each period commencing on the date such Loan is made or Converted from a Prime Rate Loan or (if Continued) the last day of the next preceding Interest Period with respect to such Loan, and ending on the numerically corresponding day in the first, second, third or sixth calendar month thereafter, as F.Y.I. may select as provided in Section 2.9 hereof, except that each such Interest Period which commences on the last Business Day of a calendar month (or on any day for which there is no numerically corresponding day in the appropriate subsequent calendar month) shall end on the last Business Day of the appropriate subsequent calendar month. Notwithstanding the foregoing: (a) each Interest Period which would otherwise end on a day which is not a Business Day shall end on the next succeeding Business Day (or, if such succeeding Business Day falls in the next succeeding calendar month, on the next preceding Business Day); (b) any Interest Period which would otherwise extend beyond the Loans Maturity Date shall end on the Loans Maturity Date; (c) no more than seven (7) Interest Periods for Eurodollar Loans shall be in effect at the same time; (d) no Interest Period shall have a duration of less than one month and, if the Interest Period for any Eurodollar Loans would otherwise AMENDED AND RESTATED CREDIT AGREEMENT - Page 11 18 be a shorter period, such Loans shall not be available hereunder; (e) no Interest Period shall have a duration of more than six months; and (f) no Interest Period for a Loan may commence before and end after any principal repayment date unless, after giving effect thereto, the aggregate principal amount of the Eurodollar Loans having Interest Periods that end after such principal payment date shall be equal to or less than the amount of the Loans scheduled to be outstanding hereunder after such principal payment date. The permitted length of Interest Periods will not limit the terms of any Interest Rate Protection Agreement. "Interest Rate Protection Agreements" means, with respect to F.Y.I. or any Subsidiary of F.Y.I., an interest rate swap, cap or collar agreement or similar arrangement between F.Y.I. or any Subsidiary of F.Y.I. and one or more Lenders that are parties to this Agreement providing for the transfer or mitigation of interest rate risks either generally or under specified contingencies. "Inventory" means all inventory now owned or hereafter acquired by F.Y.I. or any of its Subsidiaries wherever located and whether or not in transit, which is or may at any time be held for sale or lease, or furnished under any contract (exclusive of leases of real Property covered by a Mortgage) for service or held as raw materials, work in process, or supplies or materials used or consumed in the business of F.Y.I. or any of its Subsidiaries. "Investments" means as specified in Section 9.5. "IPO" means F.Y.I.'s public offering of 2,185,000 shares of F.Y.I. Common Stock which offering closed in January of 1996 and was made pursuant to the registration statement of F.Y.I. Incorporated on Form S-1, No. 33-98608, the final version of which was filed with the Securities and Exchange Commission on January 23, 1996. "IPO Documents" means that certain registration statement of F.Y.I. Incorporated on Form S-1, No. 33-98608, the final version of which was filed with the Securities and Exchange Commission on January 23, 1996, that certain underwriting agreement between Montgomery Securities, William Blair & Co., L.L.C. and F.Y.I., regarding the public offering of 1,900,000 shares of common stock, dated January 22, 1996, and each other document filed with the Securities and Exchange Commission or any state securities commission in connection with the IPO. "Issuing Bank" means Banque Paribas or, in the case of the B of A Letter of Credit only, Bank of America Texas, N.A. (with respect to notices and payment of fees and reimbursements pursuant to this Agreement) or Bank of America National Trust & Savings Association (with respect to the issuance of the B of A Letter of Credit and drawings thereunder). "Lender" and "Lenders" means as specified in the initial paragraph of this Agreement. "Letter of Credit" means any standby letter of credit issued by the Issuing Bank for the account of F.Y.I. (or F.Y.I. and any of its Subsidiaries) pursuant to this Agreement (which letter of credit shall be irrevocable unless otherwise agreed by the Issuing Bank and F.Y.I.). AMENDED AND RESTATED CREDIT AGREEMENT - Page 12 19 "Letter of Credit Agreement" means, with respect to each Letter of Credit to be issued by the Issuing Bank therefor, the letter of credit application and reimbursement agreement which such Issuing Bank requires to be executed by the account party or parties in connection with the issuance of such Letter of Credit. "Letter of Credit Liabilities" means, at any time, the aggregate undrawn face amounts of all outstanding Letters of Credit and all unreimbursed drawings under Letters of Credit issued pursuant to the Commitments. "Lien" means any lien, mortgage, security interest, tax lien, financing statement, pledge, charge, hypothecation or other encumbrance of any kind or nature whatsoever (including, without limitation, any conditional sale or title retention agreement), whether arising by contract, operation of law or otherwise. "Loan Documents" means this Agreement, the Prior Agreement, the Notes, the Security Documents, the Fee Letter, the Letters of Credit, the Letter of Credit Agreements, any Interest Rate Protection Agreement or Currency Hedge Agreement between F.Y.I. or any Subsidiary of F.Y.I. and any Lender, any Subordination Agreements, and all other agreements, documents and instruments now or hereafter executed and/or delivered pursuant to or in connection with any of the foregoing (including, without limitation, this Agreement and the Prior Agreement), and any and all amendments, modifications, supplements, renewals, extensions or restatements thereof. "Loan Party" means F.Y.I., each of its Subsidiaries and any other Person who is or becomes a party to any agreement, document or instrument that Guarantees or secures payment or performance of the Obligations or any part thereof. "Loans" means as specified in Section 2.1(a). "Loans Maturity Date" means March 31, 2003. "Loans Termination Date" means February 17, 2001. "Material Adverse Effect" means any material adverse effect, or the occurrence of any event or the existence of any condition that could reasonably be expected to have a material adverse effect, on (a) the business or financial condition or performance of F.Y.I. and its Subsidiaries, taken as a whole, (b) the ability of F.Y.I. to pay and perform the Obligations when due, or (c) the validity or enforceability of (i) any of the Loan Documents, (ii) any Lien created or purported to be created by any of the Loan Documents or the required priority of any such Lien, or (iii) the rights and remedies of the Agent or the Lenders under any of the Loan Documents. "Material Contracts" means, as to any Person, any supply, purchase, service, employment, tax, indemnity, shareholder or other agreement or contract for which the aggregate amount or value of services performed or to be performed for or by, or funds or other Property transferred or to be AMENDED AND RESTATED CREDIT AGREEMENT - Page 13 20 transferred to or by, such Person or any of its Subsidiaries party to such agreement or contract, or by which such Person or any of its Subsidiaries or any of their respective Properties are otherwise bound, during any fiscal year of the Person exceeds $5,000,000 as of the Closing Date with respect to expenditures required by such Person, or $10,000,000 as of the Closing Date with respect to revenues which the other party to the contract is required to pay to such Person, and any and all amendments, modifications, supplements, renewals or restatements thereof. "Material Subsidiary" means any Subsidiary of F.Y.I. which is not a Nonmaterial Subsidiary. "Maximum Rate" means, with respect to any Lender, the maximum non-usurious interest rate (or, if the context so permits or requires, an amount of interest calculated at such rate), if any, that at any time or from time to time may be contracted for, taken, reserved, charged or received with respect to the particular Obligations as to which such rate is to be determined, payable to such Lender pursuant to this Agreement or any other Loan Document, under laws applicable to such Lender which are presently in effect or, to the extent allowed by law, under such applicable laws which may hereafter be in effect and which allow a higher maximum non-usurious interest rate than applicable laws now allow. The Maximum Rate shall be calculated in a manner that takes into account any and all fees, payments and other charges in respect of the Loan Documents that constitute interest under applicable law. Each change in any interest rate provided for herein based upon the Maximum Rate resulting from a change in the Maximum Rate shall take effect without notice to F.Y.I. at the time of such change in the Maximum Rate. For purposes of determining the Maximum Rate under Texas law if, contrary to the intent of the parties, Texas law is ever used to determine the Maximum Rate, the applicable rate ceiling shall be the indicated rate ceiling described in, and computed in accordance with, Article 5069, Vernon's Texas Civil Statutes; provided, however, that, to the extent permitted by applicable law, the Agent shall have the right to change the applicable rate ceiling from time to time in accordance with applicable law. "Mortgaged Properties" means, collectively, the fee-owned Properties and leasehold interests in the Properties listed on Schedule 1.1(a) hereof which are or are to be subject to the Mortgages, and any such after-acquired Properties which become subject to a Mortgage pursuant to Section 5.4 hereof. "Mortgages" means the deed of trusts, leasehold deeds of trust, mortgages, leasehold mortgages, collateral assignments of leases and other real estate security documents, in form and substance satisfactory to the Agent, executed at any time pursuant to the Prior Agreement or this Agreement by F.Y.I. or any of its Subsidiaries or any other Loan Party in favor of the Agent for the benefit of the Agent and the Lenders with respect to any Mortgaged Property, and any and all amendments, modifications, supplements, renewals or restatements thereof. "Multiemployer Plan" means a multiemployer plan defined as such in Section 3(37) of ERISA to which contributions have been made by or are required from any Loan Party or any ERISA Affiliate since 1974 and which is covered by Title IV of ERISA. AMENDED AND RESTATED CREDIT AGREEMENT - Page 14 21 "Net Proceeds" means, with respect to any Asset Disposition, (a) the gross amount of cash received by F.Y.I. or any of its Subsidiaries from such Asset Disposition, minus (b) the amount, if any, of all taxes paid or payable by F.Y.I. or any of its Subsidiaries directly resulting from such Asset Disposition (including the amount, if any, estimated by F.Y.I. in good faith at the time of such Asset Disposition for taxes payable by F.Y.I. or any of its Subsidiaries on or measured by net income or gain resulting from such Asset Disposition), minus (c) the reasonable out- of-pocket costs and expenses incurred by F.Y.I. or such Subsidiary in connection with such Asset Disposition (including reasonable brokerage fees paid to a Person other than an Affiliate of F.Y.I. and including any transfer or similar taxes) excluding any fees or expenses paid to an Affiliate of F.Y.I., minus (d) amounts applied to the repayment of indebtedness (other than the Obligations) secured by a Permitted Lien on the Property subject to the Asset Disposition, minus (e) the actual amount refunded to the buyer as a result of a post-closing purchase price adjustment which occurs within 180 days of the closing and is provided for in the asset purchase agreement or the stock purchase agreement as provided to the Lenders prior to the Acquisition. "Net Proceeds" with respect to any Asset Disposition shall also include proceeds (after deducting any amounts specified in clauses (b), (c) and (d) of the preceding sentence) of insurance with respect to any actual or constructive loss of Property, an agreed or compromised loss of Property or the taking of any Property under the power of eminent domain and condemnation awards and awards in lieu of condemnation for the taking of Property under the power of eminent domain, except such proceeds and awards as are released to and used by F.Y.I. or any of its Subsidiaries in accordance with Section 8.5(b). "Net Proceeds" means, with respect to any Equity Issuance or Debt Issuance, (a) the gross amount of cash or other consideration received from such Equity Issuance or Debt Issuance, as the case may be, minus (b) the reasonable out-of-pocket costs and expenses incurred by the issuer in connection with such Equity Issuance or Debt Issuance, as the case may be (including reasonable underwriting fees paid to a Person other than an Affiliate of F.Y.I.) excluding any fees or expenses paid to an Affiliate of F.Y.I. "Nonconsenting Lender" means as specified in Section 13.11. "Nonmaterial Subsidiary" means, as of any date of determination, a Subsidiary of F.Y.I. (a) which has total tangible assets that are less than $7,500,000, (b) which has net worth that is less than $7,500,000, and (c) which has revenues that are less than $7,500,000 during the twelve-month period then most recently ended. For purposes of this definition, total tangible assets, net worth and revenues of a Subsidiary shall be determined on a consolidated basis for such Subsidiary and for all Subsidiaries of such Subsidiary. "Notes" means the promissory notes made by F.Y.I. evidencing the Loans (including, without limitation, the Swingline Advances) in the form of Exhibit B or, as to the Swingline Advances, Exhibit D hereto, and also includes such promissory notes issued in registered form pursuant to Section 2.2(b). "Obligations" means any and all (a) indebtedness, liabilities and obligations of the Loan Parties, or any of them, to the Agent, the Issuing Bank and the Lenders, or any of them, evidenced by and/or arising pursuant to any of the Loan Documents, now existing or hereafter arising, whether AMENDED AND RESTATED CREDIT AGREEMENT - Page 15 22 direct, indirect, related, unrelated, fixed, contingent, liquidated, unliquidated, joint, several or joint and several, including, without limitation, (i) the obligations of the Loan Parties to repay the Loans, the Letter of Credit Liabilities and the Reimbursement Obligations, to pay interest on the Loans, the Letter of Credit Liabilities and Reimbursement Obligations (including, without limitation, interest, if any, accruing after any bankruptcy, insolvency, reorganization or other similar filing) and to pay all fees, indemnities, costs and expenses (including attorneys' fees) provided for in the Loan Documents and (ii) the indebtedness constituting the Loans, the Letter of Credit Liabilities, the Reimbursement Obligations and such fees, indemnities, costs and expenses, and (b) indebtedness, liabilities and obligations of F.Y.I. or any of its Subsidiaries under any and all Interest Rate Protection Agreements and Currency Hedge Agreements that it may enter into with any Lender to the extent permitted by Section 9.1(e). "Operating Lease" means, with respect to any Person, any lease, rental or other agreement for the use by that Person of any Property which is not a Capital Lease Obligation. "Outstanding Credit" means, at any particular time, the sum of (a) the outstanding principal amount of the Loans (inclusive of the Swingline Advances), plus (b) the Letter of Credit Liabilities. "Paribas" means Banque Paribas, a bank organized under the laws of the Republic of France. "Payor" means as specified in Section 3.4. "PBGC" means the Pension Benefit Guaranty Corporation or any entity succeeding to all or any of its functions under ERISA. "Pension Plan" means an employee pension benefit plan as defined in Section 3(2) of ERISA (including a Multiemployer Plan) which is subject to the funding requirements under Section 302 of ERISA or Section 412 of the Code, in whole or in part, and which is maintained or contributed to currently or at any time within the six years immediately preceding the Closing Date or, in the case of a Multiemployer Plan, at any time since September 2, 1974, by F.Y.I. or any subsidiary of F.Y.I. or any ERISA Affiliate for employees of F.Y.I. or any subsidiary of F.Y.I. or any ERISA Affiliate. "Peril" means as specified in Section 8.5(a). "Permit" means any permit, certificate, approval, order, license or other authorization. "Permitted Acquisition" means any Acquisition which has been approved in writing by the Agent and the Required Lenders or any other Acquisition which satisfies each of the following requirements: (a) the acquiror (or surviving corporation if the acquisition is by means of a merger) is F.Y.I. or any Subsidiary of F.Y.I., (b) the assets to be acquired in connection with such Acquisition are assets that are to be used in the existing businesses of the acquiror as such business is presently conducted, (c) such Acquisition has been approved by the Board of Directors of the acquired entity, (d) the acquired entity shall have generated positive EBITDA during the twelve-month period AMENDED AND RESTATED CREDIT AGREEMENT - Page 16 23 preceding the Acquisition, which positive EBIDTA shall be audited or reviewed by an accounting firm acceptable to the Agent if (but only if) the Acquisition involves total consideration paid or payable of $10,000,000 or more, after adjusting for excess owners' compensation and other pro forma charges as validated by the Agent, (e) after giving effect to such Acquisition and any Debt incurred in connection therewith, Total Debt does not exceed 2.5 times EBITDA for the four fiscal quarters most recently completed of F.Y.I. and its Subsidiaries (and including the acquired entity's trailing twelve month EBITDA as adjusted for any interest not acquired, if audited or reviewed by an accounting firm acceptable to the Agent) (EBITDA may include proforma adjustments to an acquired entity's earnings, as adjusted for any interest not acquired, acceptable to the Agent), (f) such Acquisition shall not exceed $20,000,000 in total consideration (including any Debt assumed or guaranteed in connection therewith), without Required Lenders' approval, (g) the aggregate amount of all such Acquisitions made on or after the Closing Date shall not exceed $25,000,000, in total consideration (including any Debt assumed or guaranteed in connection therewith) in any twelve month period without Required Lenders' approval, (h) prior to and after giving effect to the Acquisition, no Default shall exist, (i) after giving effect to such Acquisition, F.Y.I. will not violate any financial covenant, and (j) no material part of the Property or business operations to be acquired are located outside the U.S. or Canada; provided, however, that up to $7,000,000 (valued at total purchase consideration including any Debt assumed or guaranteed in connection therewith) in Acquisitions made on or after the Closing Date and during the term of this Agreement will be deemed to be Permitted Acquisitions despite their failure to meet the requirements of items (d) or (j) preceding so long as no such acquired entity or entities shall have annual sales (individually for any one such acquired entity or in the aggregate for all such acquired entities) in excess of $10,000,000 or cumulative EBITDA losses (individually for any one such acquired entity or in the aggregate for all such acquired entities) in excess of $1,500,000 incurred, in each case during the twelve-month period preceding the respective dates of acquisition. "Permitted Acquisition Documents" means any acquisition agreement and each other material agreement, document or instrument executed or delivered in connection with or pursuant to any Permitted Acquisition. "Permitted Capital Expenditures" means as specified in Section 10.6. "Permitted Liens" means: (a) Liens disclosed on Schedule 1.1(b) hereto as to F.Y.I. and its Material Subsidiaries (as applicable, as described on such schedule); (b) Liens securing the Obligations in favor of the Agent (for the benefit of the Agent and the Lenders) pursuant to the Loan Documents; (c) Encumbrances consisting of easements, zoning restrictions or other restrictions on the use of real Property or, as to the real Property referred to in clause (ii) below only, imperfections to title that (i) as to any Mortgaged Property, do not (individually AMENDED AND RESTATED CREDIT AGREEMENT - Page 17 24 or in the aggregate) materially affect the value of the Property encumbered thereby or materially impair the ability of F.Y.I. or any of its Subsidiaries to use such Property in its businesses, and none of which is violated in any material respect by existing or proposed structures or land use, and (ii) as to any real Property other than Mortgaged Property, were entered into in the ordinary course of business and could not have a Material Adverse Effect; (d) Liens for taxes, assessments or other governmental charges that are not delinquent or which are being contested in good faith and for which adequate reserves have been established; (e) Liens of mechanics, materialmen, warehousemen, carriers, landlords or other similar statutory Liens securing obligations that are not yet due and are incurred in the ordinary course of business or which are being contested in good faith and for which adequate reserves have been established; (f) Liens resulting from good faith deposits to secure payment of workmen's compensation or other social security programs or to secure the performance of tenders, statutory obligations, surety and appeal bonds, bids, contracts (other than for payment of Debt) or leases, all in the ordinary course of business; (g) Purchase-money Liens on any Property hereafter acquired or the assumption after the Closing Date of any Lien on Property existing at the time of such acquisition (and not created in contemplation of such acquisition), or a Lien incurred or assumed after the Closing Date in connection with any conditional sale or other title retention agreement or Capital Lease Obligation; provided that: (i) any Property subject to the foregoing is acquired by F.Y.I. or any of its Subsidiaries in the ordinary course of its business and the Lien on the Property attaches concurrently or within 90 days after the acquisition thereof; (ii) the Debt secured by any Lien so created, assumed or existing shall not exceed the lesser of the cost or fair market value at the time of acquisition of the Property covered thereby; (iii) each such Lien shall attach only to the Property so acquired and the proceeds thereof; and (iv) the Debt secured by all such Liens, together with the Debt secured by all other purchase-money Liens on any Property at any time owned or acquired, shall not exceed $8,000,000 at any time outstanding in the aggregate; (h) Easements, rights-of-way, restrictions and other Liens and imperfections to title that are approved by the Agent and are listed on Exhibit B to any Mortgage; and AMENDED AND RESTATED CREDIT AGREEMENT - Page 18 25 (i) Any extension, renewal or replacement of any of the foregoing, provided that Liens permitted hereunder shall not be extended or spread to cover any additional indebtedness or Property; provided, however, that none of the Permitted Liens (except those in favor of the Agent) may attach or relate to the Capital Stock of or any other ownership interest in F.Y.I. or any of its Subsidiaries. "Person" means any individual, corporation, trust, association, company, partnership, joint venture, limited liability company, Governmental Authority or other entity. "Plan" means any employee benefit plan as defined in Section 3(3) of ERISA established or maintained or contributed to by any Loan Party opposing counsel any ERISA Affiliate, including any Pension Plan. "Prime Rate" means, at any time, the rate of interest per annum then most recently established by Morgan Guaranty Trust Company as announced at its office in New York, New York, as its highest commercial prime rate then in effect, which rate may not be the lowest rate of interest charged by Morgan Guaranty Trust Company to its commercial borrowers. Each change in any interest rate provided for herein based upon the Prime Rate resulting from a change in the Prime Rate shall take effect without notice to F.Y.I. at the time of such change in the Prime Rate. "Prime Rate Loans" means Loans that bear interest at rates based upon the Prime Rate. "Principal Office" means the principal office of the Agent in Chicago, Illinois, presently located at 227 West Monroe Street, Suite 3300, Chicago, Illinois 60606. "Prior Agreement" means as specified in Recital A of this Agreement. "Prior Borrowers" means as specified in Recital A of this Agreement. "Prohibited Transaction" means any transaction set forth in Section 406 of ERISA or Section 4975 of the Code. "Projections" means F.Y.I.'s forecasted consolidated (a) balance sheets, (b) income statements, and (c) cash flow statements, together with appropriate supporting details and a statement of underlying assumptions, prepared on or about the Closing Date. "Property" means property of all kinds, real, personal or mixed, tangible or intangible (including, without limitation, all rights relating thereto), whether owned or acquired on or after the Closing Date. "Quarterly Date" means the last day of each March, June, September and December of each year, the first of which shall be the first such day after the Closing Date. AMENDED AND RESTATED CREDIT AGREEMENT - Page 19 26 "Receivables" means, as at any date of determination thereof, each and every "account" as such term is defined in the UCC and includes, without limitation, the unpaid portion of the obligation, as stated on the respective invoice, or, if there is no invoice, other writing, of a customer of F.Y.I. or any of its Subsidiaries in respect of Inventory sold and shipped or services rendered by F.Y.I. or any of its Subsidiaries. "Reference Lender" means Banque Paribas. "Register" means as specified in Section 13.8(d). "Registered Note" means as specified in Section 2.2(b). "Registered Note Register" means as specified in Section 13.8(h). "Regulation D" means Regulation D of the Board of Governors of the Federal Reserve System as the same may be amended or supplemented from time to time. "Regulatory Change" means, with respect to any Lender, any change after the Closing Date in any U.S. federal or state laws or foreign laws or regulations (including Regulation D) or the adoption or making after such date of any interpretations, directives or requests applying to a class of lenders including such Lender of or under any U.S. federal or state laws or foreign laws or regulations (whether or not having the force of law) by any Governmental Authority charged with the interpretation or administration thereof. "Reimbursement Obligation" means the obligation of F.Y.I. (as account party or parties, respectively) to reimburse the Issuing Bank for any drawing under a Letter of Credit. "Related Transactions" means, collectively, (a) the making of the Loans, (b) the execution and delivery of the Related Transactions Documents, and (c) the payment of all fees, costs and expenses associated with the foregoing. "Related Transactions Documents" means the Loan Documents, the F.Y.I. Equity Documents, the IPO Documents and all other agreements, documents and instruments executed and/or delivered pursuant to or in connection with any of the foregoing. "Release" means, as to any Person, any release, spill, emission, leaking, pumping, injection, deposit, discharge, disposal, disbursement, leaching or migration of Hazardous Materials into the indoor or outdoor environment or into or out of Property owned by such Person, including, without limitation, the movement of Hazardous Materials through or in the air, soil, surface water or ground water. "Remedial Action" means a actions required to (a) cleanup, remove, respond to, treat or otherwise address Hazardous Materials in the indoor or outdoor environment, (b) prevent the Release AMENDED AND RESTATED CREDIT AGREEMENT - Page 20 27 or threat of Release or minimize the further Release of Hazardous Materials so that they do not migrate or endanger or threaten to endanger public health or welfare or the indoor or outdoor environment, (c) perform studies and investigations on the extent and nature of any actual or suspected contamination, the remedy or remedies to be used or health effects or risks of such contamination, or (d) perform post-remedial monitoring, care or remedy of a contaminated site. "Reportable Event" means any of the events set forth in Section 4043 of ERISA. "Required Lenders" means, at any date of determination, Lenders having in the aggregate at least 81% (in Dollar amount as to any one or more of the following) of the sum of the aggregate outstanding Commitments (or, if the Commitments have terminated or expired, the aggregate outstanding principal amount of the Loans and the aggregate Letter of Credit Liabilities). "Required Payment" means as specified in Section 3.4. "Reserve Requirement" means, for any Eurodollar Loan of any Lender for any Interest Period therefor, the maximum rate at which reserves (including any marginal, supplemental or emergency reserves) are required to be maintained during such Interest Period under any regulations of the Board of Governors of the Federal Reserve System (or any successor) by such Lender for deposits exceeding $1,000,000 against "Eurocurrency Liabilities" as such term is used in Regulation D. Without limiting the effect of the foregoing, the Reserve Requirement shall reflect any other reserves required to be maintained by such Lenders by reason of any Regulatory Change against (a) any category of liabilities which includes deposits by reference to which the Eurodollar Rate or the Adjusted Eurodollar Rate is to be determined or (b) any category of extensions of credit or other assets which include Eurodollar Loans. "Responsible Officer" means, as to any Loan Party, the chief financial officer, chief operating officer or chief executive officer of such Person. "Restricted Payment" means (a) any dividend or other distribution (whether in cash, Property or obligations), direct or indirect, on account of (or the setting apart of money for a sinking or other analogous fund for) any shares of any class of Capital Stock of F.Y.I. or any of its Subsidiaries now or hereafter outstanding, except a dividend payable solely in equity securities of F.Y.I.; (b) any redemption, conversion, exchange, retirement, sinking fund or similar payment, purchase or other acquisition for value, direct or indirect, of any shares of any class of Capital Stock of F.Y.I. or any of its Subsidiaries now or hereafter outstanding; (c) any loan, advance or payment (pursuant to a tax sharing agreement or otherwise) to F.Y.I.; and (d) any payment made to retire, or to obtain the surrender of, any outstanding warrants, options or other rights to acquire shares of any class of Capital Stock of F.Y.I. or any of its Subsidiaries now or hereafter outstanding. "Security Agreements" means the security agreements and pledge agreements, in form and substance satisfactory to the Agent, executed at any time pursuant to the Prior Agreement or this Agreement by F.Y.I. or any of its Subsidiaries or any other Loan Party in favor of the Agent for the AMENDED AND RESTATED CREDIT AGREEMENT - Page 21 28 benefit of the Agent and the Lenders, and any security agreement or pledge agreement executed pursuant to Section 5.3 hereof, and any and all amendments, modifications, supplements, renewals, extensions or restatements thereof. "Security Documents" means the Guaranties, the Security Agreements and the Mortgages, as they may be amended, modified, supplemented, renewed, extended or restated from time to time, and any and all other agreements, deeds of trust, mortgages, chattel mortgages, security agreements, pledges, guaranties, assignments of proceeds, assignments of income, assignments of contract rights, assignments of partnership interests, assignments of royalty interests, assignments of performance or other collateral assignments, completion or surety bonds, standby agreements, subordination agreements, undertakings and other agreements, documents, instruments and financing statements now or hereafter executed and/or delivered by any Loan Party in connection with or as security or assurance for the payment or performance of the Obligations or any part thereof. "Seller Earn Out" means any obligation incurred by F.Y.I. or a Subsidiary in connection with a Permitted Acquisition which (i) is only payable by F.Y.I. for performance by a seller, or a shareholder, officer or director of a seller, of obligations over the passage of time (e.g., non-compete payments) or in the event certain future performance goals are achieved with respect to the assets or business acquired, excluding any noncompete payments in excess of 15% of the purchase price and excluding performance-based payments which are greater than 750% of the earnings or cash flow on which they are based and (ii) provides that the maximum potential liability of F.Y.I. or any Subsidiary with respect thereto is limited. "Seller Subordinated Debt" means any Debt of F.Y.I. (and not of any Subsidiary of F.Y.I.) which (a) is owed to a seller as part of the purchase consideration for a Permitted Acquisition, (b) is subordinated to the Obligations pursuant to a Subordination Agreement, (c) does not, when aggregated with the principal balance of all other Seller Subordinated Debt, exceed $10,000,000 in principal amount, (d) does not have an interest rate in excess of twelve percent (12%) per annum, and (e) is unsecured. Seller Subordinated Debt may be convertible into Capital Stock of F.Y.I. "Solvency Certificate" means a certificate substantially in the form of Exhibit F attached hereto. "Solvent" means, with respect to any Person as of the date of any determination, that on such date (a) the fair value of the Property of such Person (both at fair valuation and at present fair saleable value) is greater than the total liabilities, including, without limitation, contingent liabilities, of such Person, (b) the present fair saleable value of the assets of such Person is not less than the amount that will be required to pay the probable liability of such Person on its debts as they become absolute and matured, (c) such Person is able to realize upon its assets and pay its debts and other liabilities, contingent obligations and other commitments as they mature in the normal course of business, (d) such Person does not intend to, and does not believe that it will, incur debts or liabilities beyond such Person's ability to pay as such debts and liabilities mature, and (e) such Person is not engaged in business or a transaction, and is not about to engage in business or a transaction, for AMENDED AND RESTATED CREDIT AGREEMENT - Page 22 29 which such Person's Property would constitute unreasonably small capital after giving due consideration to current and anticipated future capital requirements and current and anticipated future business conduct and the prevailing practice in the industry in which such Person is engaged. In computing the amount of contingent liabilities at any time, such liabilities shall be computed at the amount which, in light of the facts and circumstances existing at such time, represents the amount (net of contribution rights) that can reasonably be expected to become an actual or matured liability. "Subordination Agreement" means a Subordination Agreement in the form attached hereto as Exhibit C, relating to Seller Subordinated Debt. "Subsidiary" means, with respect to any Person, any corporation or other entity of which at least a majority of the outstanding shares of stock or other ownership interests having by the terms thereof ordinary voting power to elect a majority of the board of directors (or Persons performing similar functions) of such corporation or entity (irrespective of whether or not at the time, in the case of a corporation, stock of any other class or classes of such corporation shall have or might have voting power by reason of the happening of any contingency) is at the time directly or indirectly owned or controlled by such Person or one or more of its Subsidiaries or by such Person and one or more of its Subsidiaries. "Swingline Advances" means as specified in Section 2.1(a). "Total Debt" means, at any particular time, the aggregate principal amount of all Debt of F.Y.I. and its Subsidiaries outstanding, determined on a consolidated basis. "Total Debt to EBITDA Ratio" means as specified in Section 10.3. "Total Senior Debt" means, at any particular time, the aggregate principal amount of the Total Debt that is not Seller Subordinated Debt. "Type" means any type of Loan (i.e., a Prime Rate Loan or Eurodollar Loan). "UCC" means the Uniform Commercial Code as in effect in the State of Texas and/or any other jurisdiction, the laws of which may be applicable to or in connection with the creation, perfection or priority of any Lien on any Property created pursuant to any Security Document. "UCP" means as specified in Section 2.14(b). "U.S." means the United States of America. "Wholly-Owned Subsidiary" means, with respect to any Person, a Subsidiary of such Person all of whose outstanding Capital Stock (other than directors' qualifying shares, if any) shall at the time be owned by such Person and/or one or more of its Wholly-Owned Subsidiaries. AMENDED AND RESTATED CREDIT AGREEMENT - Page 23 30 Section 1.2 Other Definitional Provisions. All definitions contained in this Agreement are equally applicable to the singular and plural forms of the terms defined. The words "hereof", "herein" and "hereunder" and words of similar import referring to this Agreement refer to this Agreement as a whole and not to any particular provision of this Agreement. Unless otherwise specified, all Article and Section references pertain to this Agreement. Terms used herein that are defined in the UCC, unless otherwise defined herein, shall have the meanings specified in the UCC. Section 1.3 Accounting Terms and Determinations. (a) All accounting terms not specifically defined herein shall be construed in accordance with GAAP consistent with such accounting principles applied in the preparation of the audited financial statements referred to in Section 7.2(a). All financial information delivered to the Agent pursuant to Section 8.1 shall be prepared in accordance with GAAP applied on a basis consistent with such accounting principles applied in the preparation of the audited financial statements referred to in Section 7.2(a) or in accordance with Section 8.7. In the event that any "Accounting Changes" (as defined below) occur and such changes result in a change in the method of calculation of financial covenants, standards or terms in this Agreement, then F.Y.I. and the Agent agree to enter into negotiations in order to amend such provisions of this Agreement so as to equitably reflect such Accounting Changes with the desired result that the criteria for evaluating F.Y.I.'s financial condition shall be the same after such Accounting Changes as if such Accounting Changes had not been made. Until such time as such an amendment shall have been executed and delivered by F.Y.I., the Agent and the Required Lenders, all financial covenants, standards and terms in this Agreement shall continue to be calculated or construed as if such Accounting Changes had not occurred. "Accounting Changes" means: (a) changes in accounting principles required by the promulgation of any rule, regulations, pronouncement or opinion by the Financial Accounting Standards Board, the American Institute of Certified Public Accounts or the Securities and Exchange Commission (or successors thereto or agencies with similar functions) after the Closing Date; and (b) changes in accounting principles approved by F.Y.I.'s certified public accountants and implemented after the Closing Date. (b) F.Y.I. shall deliver to the Agent and the Lenders, at the same time as the delivery of any annual or quarterly financial statement under Section 8.1, (i) a description, in reasonable detail, of any material variation between the application of GAAP employed in the preparation of the next preceding annual, quarterly or monthly financial statements as to which no objection has been made in accordance with the last sentence of subsection (a) preceding and (ii) reasonable estimates of the difference between such statements arising as a consequence thereof. (c) To enable the ready and consistent determination of compliance with the covenants set forth in this Agreement (including Article 10 hereof), neither F.Y.I. nor any of its Subsidiaries will change the last day of its fiscal year from December 31, or the last days of the first three fiscal quarters of F.Y.I. and its Subsidiaries in each of its fiscal years from that existing on the Closing Date. Any Subsidiary of F.Y.I. created or acquired after the Closing Date shall, as soon as reasonably practicable, be put on a fiscal year ending December 31. AMENDED AND RESTATED CREDIT AGREEMENT - Page 24 31 Section 1.4 Financial Covenants. The financial covenants contained in Article 10 shall be calculated on a consolidated basis for F.Y.I. and its Subsidiaries. AMENDED AND RESTATED CREDIT AGREEMENT - Page 25 32 ARTICLE 2 Loans Section 2.1 Commitments. (a) Loans. Subject to the terms and conditions of this Agreement, each Lender severally agrees to make one or more revolving credit loans to F.Y.I. from time to time from and including the Closing Date to but excluding the Loans Termination Date up to but not exceeding the amount of such Lender's Commitment as then in effect; provided, however, that (i) the Outstanding Credit applicable to a Lender shall not at any time exceed the remainder of such Lender's Commitment then in effect minus such Lender's Commitment Percentage of the Swingline Advances then outstanding and (ii) the Outstanding Credit of all Lenders shall not at any time exceed the remainder of the Commitments then in effect minus the Swingline Advances then outstanding. (Such revolving credit loans referred to in this Section 2.1(a) now or hereafter made by the Lenders to F.Y.I. from and including and after the Closing Date are hereinafter collectively called the "Loans".) All loans made by the Lenders (as defined in this Agreement or the Prior Agreement) or their predecessors in interest to F.Y.I. or any Subsidiary of F.Y.I. under the Prior Agreement that are outstanding as of the Closing Date shall hereafter be Loans hereunder and shall be deemed to have been made to F.Y.I. under this Agreement. Subject to the foregoing limitations and the other terms and conditions of this Agreement, F.Y.I. may, prior to the Loans Termination Date, borrow, repay and reborrow the Loans hereunder. Notwithstanding anything to the contrary contained in this Agreement, F.Y.I. may from time to time request, and Paribas may at its discretion from time to time advance (but shall in no event be obligated to advance), Loans which are to be funded solely by Paribas (the "Swingline Advances"); provided, however, that (A) the aggregate principal amount of the Swingline Advances outstanding at any time shall not exceed $1,000,000 and the aggregate principal amount of the Loans outstanding at any time (inclusive of the Swingline Advances) shall not exceed the aggregate principal amount of the Commitments, (B) all Swingline Advances shall be and shall remain as Prime Rate Loans, and (C) Paribas shall give the Agent and each Lender written notice of the aggregate outstanding principal amount of the Swingline Advances upon the written request of the Agent or any Lender (but no more often than once every calendar quarter). Furthermore, upon one Business Day's prior written notice given by Paribas to the Agent and the other Lenders at any time and from time to time (including, without limitation, at any time following the occurrence of a Default or an Event of Default) and, in any event and without the necessity of any such notice, on the Business Day immediately preceding the Loans Termination Date, each Lender (including, without limitation, Paribas) severally agrees, as provided in the first sentence of this Section 2.1(a), and notwithstanding anything to the contrary contained in this Agreement, the existence of any Default or Event of Default or the inability or failure of F.Y.I. or any of its Subsidiaries or any other Loan Party to satisfy any condition precedent to funding any of the Loans contained in Article 6 (which conditions precedent shall not apply to this sentence), to make a Loan, in the form of a Prime Rate Loan, in an amount equal to its Commitment Percentage of the aggregate principal amount of the Swingline Advances then outstanding, and the proceeds of such Loans shall be promptly paid AMENDED AND RESTATED CREDIT AGREEMENT - Page 26 33 by the Agent to Paribas and applied as a repayment of the aggregate principal amount of the Swingline Advances then outstanding. (b) Continuation and Conversion of Loans. Subject to the terms and conditions of this Agreement, F.Y.I. may borrow the Loans as Prime Rate Loans or as Eurodollar Loans (except for Loans which constitute Swingline Advances) and, until the Loans Maturity Date, may Continue Eurodollar Loans or Convert Loans (other than Loans which constitute Swingline Advances) of one Type into Loans of the other Type. (c) Lending Offices. Loans of each Type made by each Lender shall be made and maintained at such Lender's Applicable Lending Office for Loans of such Type. (d) Refinancing of Prior Loans. Notwithstanding anything to the contrary contained in this Agreement, all Revolving Credit Loans (as defined in the Prior Agreement) which are outstanding under the Prior Agreement as of the Closing Date shall be automatically refinanced by Loans made under this Agreement as of the Closing Date and, accordingly, Loans in the aggregate principal amount equal to the aggregate principal amount of such Revolving Credit Loans shall be, as of the Closing Date, outstanding under this Agreement. Section 2.2 Notes. (a) Unregistered Notes. The Loans made by each Lender shall be evidenced by a single promissory note of F.Y.I. in substantially the form of Exhibit B hereto, dated the Closing Date, payable to the order of such Lender in a principal amount equal to its Commitment (as originally in effect or thereafter increased) and otherwise duly completed; provided, however, that the Swingline Advances made by Paribas shall be evidenced by a single promissory note of F.Y.I. in the maximum original principal amount of $1,000,000 payable to the order of Paribas in substantially the form of Exhibit D hereto, dated the Closing Date. Each Lender is hereby authorized by F.Y.I. to endorse on the schedule (or a continuation thereof) attached to the Note of such Lender, to the extent applicable, the date, amount and Type of and the Interest Period for each Loan made by such Lender to F.Y.I. and the amount of each payment or prepayment of principal of such Loan received by such Lender, provided that any failure by such Lender to make any such endorsement shall not affect the obligations of F.Y.I. under such Note or this Agreement in respect of such Loan. (b) Registered Notes. Any Lender that is not a U.S. Person and that could become completely exempt from withholding of U.S. taxes in respect of payment of any Obligations due to such Lender hereunder relating to any of its Loans if such Loans were in registered form for U.S. Federal income tax purposes may request F.Y.I. (through the Agent), to exchange such Lender's Note evidencing its Loans for a promissory note or notes registered as provided in Section 13.8(h) hereof (a "Registered Note"). Registered Notes may not be exchanged for Notes that are not in registered form. AMENDED AND RESTATED CREDIT AGREEMENT - Page 27 34 Section 2.3 Repayment of Loans. F.Y.I. shall pay to the Agent for the account of each applicable Lender the outstanding principal of the Loans existing as of the Loans Termination Date (and the outstanding principal of the Loans existing as of the Loans Termination Date shall be due and payable) in eight (8) quarterly installments as follows: (a) On each of the first seven (7) Quarterly Dates following the Loans Termination Date, F.Y.I. shall pay to the Agent an amount equal to the quotient of the Outstanding Credit as of the Loans Termination Date divided by twenty (20); and (b) On the Loans Maturity Date, F.Y.I. shall pay to the Agent an amount equal to the aggregate outstanding principal amount of all Loans. For purposes of this Section 2.3, the aggregate undrawn face amount of all Letters of Credit and the aggregate amount of the outstanding Reimbursement Obligations shall be added to the outstanding principal balance of the Loans for purposes of determining the amount F.Y.I. must pay to the Agent under this Section 2.3. More specifically, if any Letters of Credit or Reimbursement Obligations are outstanding as of the Loans Maturity Date, then, in addition to the repayment of all outstanding Loans on the Loans Maturity Date, F.Y.I. shall deliver to the Agent cash or cash equivalents in an amount equal to the aggregate undrawn face amount of all Letters of Credit and the aggregate amount of all outstanding Reimbursement Obligations, such cash or cash equivalents to be pledged to the Agent as security for the Obligations pursuant to documentation satisfactory to the Agent in form and substance. Section 2.4 Interest. (a) Interest Rate. F.Y.I. shall pay to the Agent for the account of each Lender interest on the unpaid principal amount of each Loan made by such Lender to F.Y.I. for the period commencing on the date of such Loan to but excluding the date such Loan shall be paid in full, at the following rates per annum: (i) during the periods such Loan is a Prime Rate Loan, the lesser of (A) the Prime Rate plus the Applicable Margin or (B) the Maximum Rate; and (ii) during the periods such Loan is a Eurodollar Loan, the lesser of (A) the Eurodollar Rate plus the Applicable Margin or (B) the Maximum Rate. (b) Payment Dates. Accrued interest on the Loans shall be due and payable in arrears as follows: (i) in the case of Prime Rate Loans, on each Quarterly Date; (ii) in the case of each Eurodollar Loan, on the last day of the Interest Period with respect thereto and, in the case of a Eurodollar Loan having an Interest Period of six (6) AMENDED AND RESTATED CREDIT AGREEMENT - Page 28 35 months, on the day in the third succeeding calendar month numerically corresponding to the commencement date of such Interest Period (or, if no numerically corresponding date exists, on the last Business Day of such third succeeding calendar month); (iii) upon the payment or prepayment of any Loan or the Conversion of any Loan to a Loan of the other Type (but only on the principal amount so paid, prepaid or Converted); and (iv) on the Loans Maturity Date. (c) Default Interest. Notwithstanding the foregoing, F.Y.I. shall pay to the Agent for the account of each Lender interest at the applicable Default Rate on any principal of any Loan made by such Lender, any Reimbursement Obligation owing to such Lender and (to the fullest extent permitted by law) any other amount payable by F.Y.I. under this Agreement or any other Loan Document to such Lender, which is not paid in full when due (whether at stated maturity, by acceleration or otherwise) or which is outstanding during the continuance of an Event of Default, for the period from and including the due date thereof or the date of the occurrence of such Event of Default (as applicable) to but excluding the date the same is paid in full. Interest payable at the Default Rate shall be payable from time to time on demand by the Agent. Section 2.5 Borrowing Procedure. F.Y.I. shall give the Agent notice of each borrowing hereunder in accordance with Section 2.9. Not later than 12:00 noon (Chicago, Illinois time) on the date specified for each borrowing hereunder, each Lender will make available the amount of the Loan to be made by it on such date to the Agent, at the Principal Office, in immediately available funds, for the account of F.Y.I. The amount so received by the Agent shall, subject to the terms and conditions of this Agreement, be made available to F.Y.I. by wire transfer of immediately available funds to the applicable Deposit Account no later than 1:00 p.m. Section 2.6 Optional Prepayments, Conversions and Continuations of Loans, Reduction of Commitments. Subject to Sections 2.7 and 2.8, F.Y.I. shall have the right from time to time to prepay the Loans, to Convert all or part of a Loan (other than a Swingline Advance) of one Type into a Loan of another Type or to Continue Eurodollar Loans; provided that: (a) F.Y.I. shall give the Agent notice of each such prepayment, Conversion or Continuation as provided in Section 2.9, (b) Eurodollar Loans may only be Converted on the last day of the Interest Period, unless F.Y.I., concurrently with making any such prepayment, pays all amounts owing to the Agent and the Lenders under Section 4.5, (c) except for Conversions of Eurodollar Loans into Prime Rate Loans, no Conversions or Continuations shall be made while a Default has occurred and is continuing, (d) optional prepayments of the Loans shall be applied first to the Swingline Advances (until such advances are paid in full) and then to the Loans other than the Swingline Advances, and (e) optional prepayments of the Loans made on or after the Loans Termination Date shall be applied to the then-remaining installments of principal of the Loans pro rata. AMENDED AND RESTATED CREDIT AGREEMENT - Page 29 36 Section 2.7 Mandatory Prepayments. (a) Asset Dispositions. F.Y.I. shall, within two Business Days after each day on which it or any of its Subsidiaries receives any Net Proceeds from an Asset Disposition, pay to the Agent, as a prepayment of the Loans, an aggregate amount equal to 100% of the Net Proceeds from such Asset Disposition. Notwithstanding the foregoing, no such prepayment will be required pursuant to this Section 2.7(a) (i) from the Net Proceeds from any single Asset Disposition of used equipment if such Net Proceeds are $250,000 or less and are fully re-invested in equipment used in the ordinary course of the business of the Person making such Asset Disposition within 180 days of such Asset Disposition, so long as the Net Proceeds from all such Asset Dispositions in any one calendar year do not exceed $250,000, (ii) from the Net Proceeds of any expropriation or condemnation of real Property if and to the extent that such Net Proceeds are, as a result of such expropriation or condemnation, re-invested in similar real Property or used to modify other then-existing real Property used in the ordinary course of the business of the Person whose real Property is affected thereby within 180 days of receipt of proceeds of such expropriation or condemnation or (iii) until the cumulative Net Proceeds received at any time from all Asset Dispositions made on or after December 31, 1997 exceeds 15% of F.Y.I.'s consolidated tangible net assets as of the date of such Asset Disposition (in which case a prepayment shall be made in the amount of the Net Proceeds from any Asset Disposition in excess of such amount, or if, as of the date of determination, cumulative Net Proceeds from prior Asset Dispositions exceed 15% of F.Y.I.'s consolidated tangible net assets, F.Y.I. shall pay to the Agent, as a prepayment of the Loans, in addition to 100% of the Net Proceeds from such Asset Disposition, the amount of such cumulative Net Proceeds from prior Asset Dispositions in excess of 15% of F.Y.I.'s consolidated tangible net assets). Notwithstanding the foregoing, in connection with any Asset Disposition consisting of the disposition of assets acquired in a Permitted Acquisition, to the extent that the disposition of such assets was contemplated and disclosed to the Lenders at the time of the consummation of the Permitted Acquisition in which the assets were acquired, and if such Asset Disposition occurs within one year of the closing of the Permitted Acquisition, the prepayment required under this Section 2.7(a) shall be limited to the lesser of 100% of the Net Proceeds of the Asset Disposition or an amount equal to the principal amount of any Loans advanced in connection with the Permitted Acquisition. (b) Equity Issuances. F.Y.I. shall, on each day that it receives any Net Proceeds from any Equity Issuance, pay to the Agent, as a prepayment of the Loans, an aggregate amount equal to 50% of the Net Proceeds from such Equity Issuance; provided, however, that no prepayment shall be required if and to the extent that the Capital Stock issued in such Equity Issuance is (i) issued to a Seller as part of the purchase consideration for a Permitted Acquisition, (ii) issued to raise cash to pay part of the purchase consideration for a specific Permitted Acquisition contemplated at the time of such issuance and the proceeds of which are subsequently expended for such purpose, or (iii) issued to an officer, director, employee or consultant of either F.Y.I. or a Subsidiary of F.Y.I. in consideration for services rendered or pursuant to any employee benefit or incentive plan. This Section 2.7(b) shall not apply if the Total Debt to EBITDA Ratio is less than 2.00 to 1.00 after giving effect to the Equity Issuance and to application of proceeds thereof. AMENDED AND RESTATED CREDIT AGREEMENT - Page 30 37 (c) Debt Issuances. F.Y.I. shall, on each day that it or any of its Subsidiaries receives any Net Proceeds from any Debt Issuance, pay to the Agent, as a prepayment of the Loans, an aggregate amount equal to 100% of the Net Proceeds from such Debt Issuance. No Debt Issuances may be made without the prior written consent of the Agent and the Required Lenders. (d) Commitments. If at any time the Outstanding Credit exceeds the Commitments, within three Business Day after the occurrence thereof F.Y.I. shall pay to the Agent the amount of such excess as a prepayment of the Loans (or, if the Loans have been paid in full, to reduce or to provide cash collateral to secure the outstanding Letter of Credit Liabilities relating to Letters of Credit issued pursuant to the Commitments). (e) Application of Mandatory Prepayments. All prepayments pursuant to Sections 2.7(a), 2.7(b) or 2.7(c) preceding (i) if made prior to the Loans Termination Date, shall be applied first to any Swingline Advances until such advances are paid in full, and (ii) if made on or after the Loans Termination Date, shall be applied to the then- remaining installments of principal of the Loans in the inverse order of the maturities of such installments. Section 2.8 Minimum Amounts. Except for Conversions and prepayments pursuant to Section 2.7 and Article 4, each borrowing, each Conversion and each prepayment of principal of the Loans shall be in an amount at least equal to $1,000,000 or an integral multiple of $500,000 in excess thereof; provided, however, that each borrowing of Swingline Advances shall be in an amount at least equal to $100,000 or in integral multiples of $50,000 in excess thereof (borrowings, prepayments or Conversions of or into Loans of different Types or, in the case of Eurodollar Loans, having different Interest Periods at the same time hereunder shall be deemed separate borrowings, prepayments and Conversions for purposes of the foregoing, one for each Type or Interest Period). Section 2.9 Certain Notices. Notices by F.Y.I. to the Agent of terminations or reductions of Commitments, of borrowings and issuances of Letters of Credit, Conversions, Continuations and prepayments of Loans and of the duration of Interest Periods shall be irrevocable and shall be effective only if received by the Agent not later than 12:00 noon (Chicago, Illinois time) on the Business Day prior to or on the date of the relevant termination, reduction, borrowing or issuance, Conversion, Continuation or prepayment or the first day of such Interest Period specified below: AMENDED AND RESTATED CREDIT AGREEMENT - Page 31 38
Number of Notice Business Days Prior ------ ------------------- Terminations or Reductions of Commitments 1 Borrowing of Prime Rate Loans same day Borrowing of Eurodollar Loans 3 Conversions or Continuations of Loans 3 Prepayment of Prime Rate Loans same day Prepayments of Eurodollar Loans 3 Issuances of Letters of Credit 5
Each such notice of termination or reduction shall specify the amount of the Commitments to be terminated or reduced. Each such notice of borrowing, Conversion, Continuation or prepayment shall specify the Loans to be borrowed, Converted, Continued or prepaid and the amount (subject to Section 2.8 hereof) and Type of the Loans to be borrowed (and, with respect to Prime Rate Loans, whether any of such Loans shall consist of Swingline Advances), Converted, Continued or prepaid (and, in the case of a Conversion, the Type of Loans to result from such Conversion) and the date of borrowing, Conversion, Continuation or prepayment (which shall be a Business Day). Notices of borrowings, Conversions, Continuations or prepayments shall be in the form of Exhibit E hereto, appropriately completed as applicable. Each such notice of the duration of an Interest Period shall specify the Loans to which such Interest Period is to relate. The Agent shall promptly notify the Lenders of the contents of each such notice. In the event F.Y.I. fails to select the Type of Loan, or the duration of any Interest Period for any Eurodollar Loan, within the time period and otherwise as provided in this Section 2.9, such Loan (if outstanding as Eurodollar Loan) will be automatically Converted into a Prime Rate Loan on the last day of preceding Interest Period for such Loan or (if outstanding as a Prime Rate Loan) will remain as, or (if not then outstanding) will be made as, a Prime Rate Loan. F.Y.I. may not borrow any Eurodollar Loans, Convert any Loans into Eurodollar Loans or Continue any Loans as Eurodollar Loans if the interest rate for such Eurodollar Loans would exceed the Maximum Rate. Section 2.10 Use of Proceeds. (a) F.Y.I. represents and warrants to and covenants with the Agent and the Lenders that the proceeds of the Loans to be made on and after the Closing Date shall be used for working capital and general corporate purposes of F.Y.I. and its Subsidiaries in the ordinary course of business and to finance partially or wholly future Permitted Acquisitions, including the transaction costs of F.Y.I. and its Subsidiaries associated with such Permitted Acquisitions. (b) None of the proceeds of any Loan have been or will be used to acquire any security in any transaction that is subject to Section 13 or 14 of the Securities Exchange Act of 1934, as AMENDED AND RESTATED CREDIT AGREEMENT - Page 32 39 amended, or to purchase or carry any margin stock (within the meaning of Regulations G, T, U or X of the Board of Governors of the Federal Reserve System). Section 2.11 Fees. (a) F.Y.I. agrees to pay to the Agent for the account of each Lender a commitment fee (the "Commitment Fees") on the daily average unused or unfunded amount of such Lender's Commitment, for the period from and including the Closing Date to and including the Loans Termination Date, at the rate equal to the Applicable Margin per annum based on a 360 day year and the actual number of days elapsed, which accrued Commitment Fees shall be payable in arrears on each Quarterly Date beginning on March 31, 1998 and on the Loans Termination Date. Notwithstanding anything to the contrary contained in this Agreement, any and all Swingline Advances outstanding from time to time shall be wholly excluded, and shall not count as used or funded amounts, for purposes of determining the unused or unfunded amount of each Lender's Commitment in accordance with this Section 2.11(a). (b) F.Y.I. agrees to pay to the Agent (for the account of the Agent and/or the Lenders, as may be specified in the Fee Letter) such additional fees as are specified in the Fee Letter, which fees shall be payable in such amounts and on such dates as are specified therein. Section 2.12 Computations. Interest and fees payable by F.Y.I. hereunder and under the other Loan Documents shall be computed on the basis of a year of 360 days (except as stated in the proviso below) and the actual number of days elapsed (including the first day but excluding the last day) occurring in the period for which payable unless, in the case of interest, such calculation would result in a usurious rate, in which case interest shall be calculated on the basis of a year of 365 or 366 days, as the case may be; provided, however, that interest payable by F.Y.I. hereunder on all Prime Rate Loans shall be on the basis of a completed year of 365 or 366 days, as applicable. Section 2.13 Termination or Reduction of Commitments. (a) Optional. F.Y.I. shall have the right to terminate or reduce in part the unused portion of the Commitments at any time and from time to time, provided that (i) F.Y.I. shall give notice of each such termination or reduction as provided in Section 2.9, (ii) each partial reduction shall be in an aggregate amount of at least $1,000,000 or an integral multiple of $500,000 in excess thereof, and (iii) F.Y.I. shall not have the right to terminate or reduce in part any unused portion of the Commitments that could or may be required to be advanced by the Lenders to refinance Swingline Advances then outstanding. The Commitments may not be reinstated or increased after they have been terminated or reduced. (b) Mandatory. Each mandatory prepayment of the Loans pursuant to Section 2.7 shall permanently reduce the Commitments by the amount of the prepayment, which reduction may not be reinstated. AMENDED AND RESTATED CREDIT AGREEMENT - Page 33 40 Section 2.14 Letters of Credit. (a) Subject to the terms and provisions of this Agreement, F.Y.I. may utilize the Commitments by requesting that the Issuing Bank issue Letters of Credit; provided, that the aggregate amount of outstanding Letter of Credit Liabilities under the Commitments shall not at any time exceed $17,500,000. Notwithstanding anything to the contrary contained in this Agreement, each of the letters of credit issued under or in connection with the Prior Agreement and outstanding as of the Closing Date and the B of A Letter of Credit shall be deemed, and shall be, a Letter of Credit issued hereunder. Promptly after the Closing Date, Bank of America Texas will return to Paribas the letter of credit issued by Paribas on January 28, 1998, in support of the B of A Letter of Credit. Upon the later of (i) the date of this Agreement or (ii) the date of issue of each Letter of Credit, the Issuing Bank shall be deemed, without further action by any party hereto, to have sold to each Lender, and each Lender shall be deemed, without further action by any party hereto, to have purchased from the Issuing Bank, a participation to the extent of such Lender's Commitment Percentage in such Letter of Credit. (b) F.Y.I. shall give the Issuing Bank (with a copy to the Agent) at least five Business Days irrevocable prior notice (effective upon receipt) specifying the date of each Letter of Credit and the nature of the transactions to be supported thereby. Upon receipt of such notice the Issuing Bank shall promptly notify each applicable Lender of the contents thereof and of such Lender's Commitment Percentage of the amount of the proposed Letter of Credit. Each Letter of Credit shall have an expiration date that does not exceed one year from the date of issuance (provided, however, that the B&B Letter of Credit may have an expiration date that is up to eighteen months after the date of issuance and the B of A Letter of Credit may have an expiration date that extends to March 31, 2003) and that does not extend beyond the Loans Maturity Date, shall be payable in Dollars, shall support a transaction entered into in the ordinary course of the account party's or parties' business, shall be satisfactory in form and substance to the Issuing Bank, and shall be issued pursuant to such agreements, documents and instruments (including a Letter of Credit Agreement) as the Issuing Bank may reasonably require, none of which shall be inconsistent with this Section 2.14. Each Letter of Credit shall (i) provide for the payment of drafts presented for, on or thereunder by the beneficiary in accordance with the terms thereof, when such drafts are accompanied by the documents (if any) described in the Letter of Credit and (ii) to the extent not inconsistent with the terms hereof or any applicable Letter of Credit Agreement, be subject to the Uniform Customs and Practice for Documentary Credits (1993 Revision), International Chamber of Commerce Publication No. 500 (together with any subsequent revision thereof approved by a Congress of the International Chamber of Commerce and adhered to by the Issuing Bank, the "UCP"), and shall, as to matters not governed by the UCP, be governed by, and construed and interpreted in accordance with, the laws of the State of Texas. (c) F.Y.I. agrees to pay to the Agent for the account of each Lender, in arrears on each Quarterly Date beginning on March 31, 1998 and on the Loans Maturity Date, a nonrefundable letter of credit fee with respect to each Letter of Credit issued in an amount equal to the product of (i) the Applicable Margin for Eurodollar Loans in effect on the date of issuance of such Letter of Credit AMENDED AND RESTATED CREDIT AGREEMENT - Page 34 41 (with respect to the fee due on the first Quarterly Date after issuance) or on the first day of the applicable quarter or other period beginning after the calendar quarter during which the issuance of such Letter of Credit occurred (with respect to the fee due on each subsequent Quarterly Date or on the Loans Maturity Date), multiplied by (ii) the daily average face amount of the Letters of Credit in effect during the applicable period. The Agent agrees to pay to each Lender, promptly after receiving any payment of letter of credit fees referred to above in this subsection (c), such Lender's Commitment Percentage of such fees. F.Y.I. further agrees to pay to the Issuing Bank for its own account, on the date of issuance of such Letter of Credit and on each anniversary of such date of issuance (if such Letter of Credit then remains outstanding), an amount equal to the greater of one-quarter of one percent (0.25%) of the face amount of the Letter of Credit being issued or $750.00. In addition to the foregoing fees, F.Y.I. shall pay or reimburse the Issuing Bank for such normal and customary costs and expenses, including, without limitation, administrative, issuance, amendment, payment and negotiation charges, as are incurred or charged by the Issuing Bank in issuing, effecting payment under, amending or otherwise administering any Letter of Credit. (d) Upon receipt from the beneficiary of any Letter of Credit of any demand for payment or other drawing under such Letter of Credit, the Issuing Bank shall promptly notify F.Y.I. and each applicable Lender as to the amount to be paid as a result of such demand or drawing and the respective payment date. If at any time the Issuing Bank shall make a payment to a beneficiary of a Letter of Credit pursuant to a drawing under such Letter of Credit, each Lender will pay to the Issuing Bank, immediately upon the Issuing Bank's demand at any time commencing after such payment until reimbursement therefor in full by F.Y.I., an amount equal to such Lender's Commitment Percentage of such payment, together with interest on such amount for each day from the date of such payment to the date of payment by such Lender of such amount at a rate of interest per annum equal to the Federal Funds Rate. (e) F.Y.I. shall be irrevocably and unconditionally obligated to immediately reimburse the Issuing Bank for any amounts paid by the Issuing Bank upon any drawing under any Letter of Credit issued pursuant to the Commitments, without presentment, demand, protest or other formalities of any kind. The Issuing Bank will pay to each Lender such Lender's Commitment Percentage of all amounts received from or on behalf of F.Y.I. for application in payment, in whole or in part, of the Reimbursement Obligation in respect of any Letter of Credit, but only to the extent such Lender has made payment to the Issuing Bank in respect of such Letter of Credit pursuant to subsection (d) above. Outstanding Reimbursement Obligations shall bear interest at the Default Rate and such interest shall be payable on demand. (f) The Reimbursement Obligations of F.Y.I. under this Agreement and the other Loan Documents shall be absolute, unconditional and irrevocable, and shall be performed strictly in accordance with the terms of this Agreement and the other Loan Documents under all circumstances whatsoever, including, without limitation, the following circumstances. (i) Any lack of validity or enforceability of any Letter of Credit or any other Loan Document; AMENDED AND RESTATED CREDIT AGREEMENT - Page 35 42 (ii) Any amendment or waiver of or any consent to departure from any Loan Document; (iii) The existence of any claim, setoff, counterclaim, defense or other right which any Loan Party or other Person may have at any time against any beneficiary of any Letter of Credit, the Agent, the Issuing Bank, the Lenders or any other Person, whether, in connection with this Agreement or any other Loan Document or any unrelated transaction; (iv) Any statement, draft or other document presented under any Letter of Credit proving to be forged, fraudulent, invalid or insufficient in any respect or any statement therein being untrue or inaccurate in any respect whatsoever, provided, that the failure of the Issuing Bank to discover such forgery, fraud, invalidity or insufficiency shall not have constituted gross negligence or willful misconduct by the Issuing Bank; (v) Payment by the Issuing Bank under any Letter of Credit against presentation of a draft or other document that does not comply with the terms of such Letter of Credit, provided, that such payment shall not have constituted gross negligence or willful misconduct of the Issuing Bank; and (vi) Any other circumstance whatsoever, whether or not similar to any of the foregoing, provided that such other circumstance or event shall not have been the result of the gross negligence or willful misconduct of the Issuing Bank. (g) F.Y.I. assumes all risks of the acts or omissions of any beneficiary of any Letter of Credit with respect to its use of such Letter of Credit. Neither the Agent, the Issuing Bank, the Lenders nor any of their respective officers or directors shall have any responsibility or liability to F.Y.I. or any other Person for: (i) the failure of any draft to bear any reference or adequate reference to any Letter of Credit, or the failure of any documents to accompany any draft at negotiation, or the failure of any Person to surrender or to take up any Letter of Credit or to send documents apart from drafts as required by the terms of any Letter of Credit, or the failure of any Person to note the amount of any instrument on any Letter of Credit, (ii) errors, omissions, interruptions or delays in transmission or delivery of any messages, (iii) in the absence of gross negligence or willful misconduct of the Issuing Bank, the validity, sufficiency or genuineness of any draft or other document, or any endorsement(s) thereon, even if any such draft, document or endorsement should in fact prove to be in any and all respects invalid, insufficient, fraudulent or forged or any statement therein is untrue or inaccurate in any respect, (iv) the payment by the Issuing Bank to the beneficiary of any Letter of Credit against presentation of any draft or other document that does not comply with the terms of the Letter of Credit, or (v) any other circumstance whatsoever in making or failing to make any payment under a Letter of Credit; provided, however, that, notwithstanding the foregoing, the account party or parties shall have a claim against the Issuing Bank, and the Issuing Bank shall be liable to the account party or parties, to the extent of any direct, but not indirect or consequential, damages suffered by the account party or parties which it or they prove in a final nonappealable judgment were caused by (A) the Issuing Bank's willful misconduct or gross negligence in AMENDED AND RESTATED CREDIT AGREEMENT - Page 36 43 determining whether documents presented under any Letter of Credit complied with the terms thereof or (B) the Issuing Bank's willful failure to pay under any Letter of Credit after presentation to it of documents strictly complying with the terms and conditions of such Letter of Credit. The Issuing Bank may accept documents that appear on their face to be in order, without responsibility for further investigation, regardless of any notice or information to the contrary. ARTICLE 3 Payments Section 3.1 Method of Payment. All payments of principal, interest, fees and other amounts to be made by the F.Y.I. under this Agreement and the other Loan Documents shall be made to the Agent at the Principal Office for the account of each Lender's Applicable Lending Office in Dollars and in immediately available funds, without setoff, deduction or counterclaim, not later than 11:00 a.m. (Chicago, Illinois time) on the date on which such payment shall become due (each such payment made after such time on such due date to be deemed to have been made on the next succeeding Business Day). F.Y.I. shall, at the time of making any such payment, specify to the Agent the sums payable by F.Y.I. under this Agreement and the other Loan Documents to which such payment is to be applied (and in the event that F.Y.I. fails to so specify, or if an Event of Default has occurred and is continuing, the Agent may apply such payment to the Obligations in such order and manner as the Agent may elect, subject to Section 3.2); provided, however, that, unless Paribas expressly agrees to the contrary, such payment shall be applied first to any Swingline Advances until such advances are paid in full. Upon the occurrence and during the continuation of an Event of Default, all proceeds of any Collateral, and all funds from time to time on deposit in any concentration account or any collection account, if any, referred to in Section 8.13, may be applied by the Agent to the Obligations in such order and manner as the Agent may elect, subject to Section 3.2; provided, however, that, unless Paribas expressly agrees to the contrary, such proceeds and funds shall be applied first to any outstanding Swingline Advances until such advances are paid in full. Each payment received by the Agent under this Agreement or any other Loan Document for the account of a Lender shall be paid promptly to such Lender, in immediately available funds, for the account of such Lender's Applicable Lending Office. Whenever any payment under this Agreement or any other Loan Document shall be stated to be due on a day that is not a Business Day, such payment may be made on the next succeeding Business Day, and such extension of time shall in such case be included in the computation of the payment of interest and commitment fee, as the case may be. Section 3.2 Pro Rata Treatment. Except to the extent otherwise provided in this Agreement: (a) each Loan shall be made by the Lenders under Section 2.1, each payment of commitment fees under Section 2.11(a) shall be made for the account of the Lenders, and each termination or reduction of the Commitments under Section 2.13 shall be applied to the Commitments of the Lenders, pro rata according to the respective unused Commitments; (b) the making, Conversion and Continuation of Loans of a particular Type (other than Conversions AMENDED AND RESTATED CREDIT AGREEMENT - Page 37 44 provided for by Section 4.4) shall be made pro rata among the Lenders holding Loans of such Type according to the amounts of their respective Commitments; (c) each payment and prepayment by F.Y.I. of principal of or interest on Loans of a particular Type shall be made to the Agent for the account of the Lenders holding Loans of such Type pro rata in accordance with the respective unpaid principal amounts of such Loans held by such Lenders; (d) Interest Periods for Loans of a particular Type shall be allocated among the Lenders holding Loans of such Type pro rata according to the respective principal amounts held by such Lenders; and (e) the Lenders (other than the Issuing Bank) shall purchase participations in the Letters of Credit pro rata in accordance with their Commitment Percentages. Section 3.3 Sharing of Payments, Etc. If a Lender shall obtain payment of any principal of or interest on any of the Obligations due to such Lender hereunder through the exercise of any right of setoff, banker's lien, counterclaim or similar right, or otherwise, it shall promptly purchase from the other Lenders participations in the Obligations held by the other Lenders in such amounts, and make such adjustments from time to time as shall be equitable to the end that all the Lenders shall share pro rata in accordance with the unpaid principal and interest on the Obligations then due to each of them. To such end, all of the Lenders shall make appropriate adjustments among themselves (by the resale of participations sold or otherwise) if all or any portion of such excess payment is thereafter rescinded or must otherwise be restored. F.Y.I. agrees, to the fullest extent it may effectively do so under applicable law, that any Lender, so purchasing a participation in the Obligations by the other Lenders may exercise all rights of setoff, banker's lien, counterclaim or similar rights with respect to such participation as fully as if such Lender were a direct holder of Obligations in the amount of such participation. Nothing contained herein shall require any Lender to exercise any such right or shall affect the right of any Lender to exercise, and retain the benefits of exercising, any such right with respect to any other indebtedness, liability or obligation of F.Y.I. or any of its Subsidiaries. Section 3.4 Non-Receipt of Funds by the Agent. Unless the Agent shall have been notified by a Lender or F.Y.I. (the "Payor") prior to the date on which such Lender is to make payment to the Agent of the proceeds of a Loan to be made by it hereunder or F.Y.I. is to make a payment to the Agent for the account of one or more of the Lenders, as the case may be (such payment being herein called the "Required Payment"), which notice shall be effective upon receipt, that the Payor does not intend to make the Required Payment to the Agent, the Agent may assume that the Required Payment has been made and may, in reliance upon such assumption (but shall not be required to), make the amount thereof available to the intended recipient on such date and, if the Payor has not in fact made the Required Payment to the Agent, the recipient of such payment shall, on demand, pay to the Agent the amount made available to it together with interest thereon in respect of the period commencing on the date such amount was so made available by the Agent until the date the Agent recovers such amount at a rate per annum equal to the Federal Funds Rate for such period. AMENDED AND RESTATED CREDIT AGREEMENT - Page 38 45 Section 3.5 Withholding Taxes. (a) All payments by F.Y.I. of principal of and interest on the Loans and of all fees and other amounts payable under the Loan Documents shall be made free and clear of, and without deduction by reason of, any present or future taxes, levies, duties, imposts, assessments or other charges levied or imposed by any Governmental Authority (other than taxes on the overall net income of any Lender). If any such taxes, duties, imposts, assessments or other charges are so levied or imposed, F.Y.I. will (i) make additional payments in such amounts so that every net payment of principal of and interest on the Loans and of all other amounts payable by it under the Loan Documents, after withholding or deduction for or on account of any such present or future taxes, duties, imposts, assessments or other charges (including any tax imposed on or measured by net income of a Lender attributable to payments made to or on behalf of a Lender pursuant to this Section 3.5 and any penalties or interest attributable to such payments), will not be less than the amount provided for herein or therein absent such withholding or deduction (provided that F.Y.I. shall not have any obligation to pay such additional amounts to any Lender to the extent that such taxes, duties, imposts, assessments or other charges are levied or imposed by reason of the failure of such Lender to comply with the provisions of Section 3.6), (ii) make such withholding or deduction, and (iii) remit the full amount deducted or withheld to the relevant Governmental Authority in accordance with applicable law. Without limiting the generality of the foregoing, F.Y.I. will, upon written request of any Lender, reimburse each such Lender for the amount of (A) such taxes, duties, imports, assessments or other charges so levied or imposed by any Governmental Authority and paid by such Lender as a result of payments made by F.Y.I. under or with respect to the Loans and Letter of Credit Liabilities other than such taxes, duties, imports, assessments and other charges previously withheld or deducted by F.Y.I. which have previously resulted in the payment of the required additional amount to the Lender, and (B) such taxes, duties, assessments and other charges so levied or imposed with respect to any Lender reimbursement under the foregoing clause (A), so that the net amount received by such Lender (net of payments made under or with respect to the Loans and Letter of Credit Liabilities) after such reimbursement will not be less than the net amount the Lender would have received if such taxes, duties, assessments and other charges on such reimbursement had not been levied or imposed. F.Y.I. shall furnish promptly to the Agent for distribution to each affected Lender, as the case may be, upon request of such Lender, official receipts evidencing any such payment, withholding or reduction. (b) F.Y.I. will indemnify the Agent and each Lender (without duplication) against, and reimburse the Agent and each Lender for, all present and future taxes, levies, duties, imposts, assessments or other charges (including interest and penalties) levied or collected (whether or not legally or correctly imposed, assessed, levied or collected), excluding, however, any taxes imposed on the overall net income of the Agent or such Lender or any lending office of the Agent or such Lender by any jurisdiction in which the Agent or such Lender or any such lending office is located, on or in respect of this Agreement, any of the Loan Documents or the Obligations or any portion thereof (the "reimbursable taxes"). Any such indemnification shall be on an after-tax basis, taking into account any such reimbursable taxes imposed on the amounts paid as indemnity. AMENDED AND RESTATED CREDIT AGREEMENT - Page 39 46 (c) Without prejudice to the survival of any other term or provision of this Agreement, the obligations of F.Y.I. under this Section 3.5 shall survive the payment of the Loans and the other Obligations and termination of the Commitments. Section 3.6 Withholding Tax Exemption. Each Lender that is not incorporated or otherwise formed under the laws of the U.S. or a state thereof agrees that it will, prior to or on or about the Closing Date or the date upon which it becomes a party to this Agreement and if it is legally able to do so, deliver to F.Y.I., for and on behalf of F.Y.I., and the Agent two duly completed copies of U.S. Internal Revenue Service Form 1001, 4224 or W-8, as appropriate, certifying in any case that such Lender is entitled to receive payments from F.Y.I. under any Loan Document without deduction or withholding of any U.S. federal income taxes. Each Lender which so delivers a Form 1001, 4224 or W-8 further undertakes to deliver to F.Y.I., for and on behalf of F.Y.I., and the Agent two additional copies of such form (or a successor form) on or before the date such form expires or becomes obsolete or after the occurrence of any event requiring a change in the most recent form so delivered by it, and such amendments thereto or extensions or renewals thereof as may be reasonably requested by F.Y.I. or the Agent, in each case certifying that such Lender is entitled to receive payments from F.Y.I. under any Loan Document without deduction or withholding of any U.S. federal income taxes, unless an event (including without limitation any change in treaty, law or regulation) has occurred prior to the date on which any such delivery would otherwise be required which renders all such forms inapplicable or which would prevent such Lender from duly completing and delivering any such form with respect to it and such Lender advises F.Y.I., for and on behalf of F.Y.I., and the Agent that it is not capable of receiving such payments without any deduction or withholding of U.S. federal income tax. Section 3.7 Reinstatement of Obligations. Notwithstanding anything to the contrary contained in this Agreement or any other Loan Document, if the payment of any amount of principal of or interest with respect to the Loans, the Reimbursement Obligations or any other amount of the Obligations, or any portion thereof, is rescinded, voided or must otherwise be refunded by the Agent, any Lender or the Issuing Bank upon the insolvency, bankruptcy or reorganization of F.Y.I. or any other Loan Party or otherwise for any reason whatsoever, then each of (a) the Obligations, (b) the Loan Documents (including, without limitation, this Agreement, the Notes and the Security Documents), (c) the indebtedness, liabilities and obligations of F.Y.I. and any other Loan Party under the Loan Documents, and (d) all Liens for the benefit of the Agent and the Lenders created under or evidenced by the Loan Documents, will be automatically reinstated and become automatically effective and in full force and effect, all to the extent that and as though such payment so rescinded, voided or otherwise refunded had never been made. AMENDED AND RESTATED CREDIT AGREEMENT - Page 40 47 ARTICLE 4 Yield Protection and Illegality Section 4.1 Additional Costs. (a) F.Y.I. shall pay directly to each Lender from time to time, promptly upon the request of such Lender, the costs actually incurred by such Lender which such Lender determines are directly attributable to its making or maintaining of any Eurodollar Loans to F.Y.I. or its obligation to make or create any of such Loans hereunder to F.Y.I., or any reduction in any amount receivable by such Lender hereunder from F.Y.I. in respect of any such Loans or obligations (such increases in costs and reductions in amounts receivable being herein called "Additional Costs"), resulting from any Regulatory Change which: (i) changes the basis of taxation of any amounts payable to such Lender under this Agreement or its Notes in respect of any of such Loans (other than taxes imposed on the overall net income of such Lender or its Applicable Lending Office for any of such Loans by the jurisdiction in which such Lender has its principal office or such Applicable Lending Office); (ii) imposes or modifies any reserve, special deposit, minimum capital, capital ratio or similar requirement relating to any extensions of credit or other assets of, or any deposits with or other liabilities or commitments of, such Lender (including any of such Loans or any deposits referred to in the definition of "Eurodollar Rate" in Section 1.1 hereof, but excluding the Reserve Requirement to the extent it is included in the calculation of the Adjusted Eurodollar Rate); or (iii) imposes any other condition affecting this Agreement or the Notes or any of such extensions of credit or liabilities or commitments. Each Lender will notify F.Y.I. (with a copy to the Agent) of any event occurring after the Closing Date which will entitle such Lender to compensation pursuant to this Section 4.1(a) as promptly as practicable after it obtains knowledge thereof and determines to request such compensation, and (if so requested by F.Y.I.) will designate a different Applicable Lending Office for the Eurodollar Loans of such Lender if such designation will avoid the need for, or reduce the amount of, such compensation and will not, in the sole opinion of such Lender, violate any law, rule or regulation or be in any way disadvantageous to such Lender, provided that such Lender shall have no obligation to so designate an Applicable Lending Office located in the U.S. Each Lender will furnish F.Y.I. with a certificate setting forth the basis, amount and computation of each request of such Lender for compensation under this Section 4.1(a). If any Lender requests compensation from F.Y.I. under this Section 4.1(a), F.Y.I. may, by notice to such Lender (with a copy to the Agent), suspend the obligation of such Lender to make or Continue making, or Convert Prime Rate Loans into, AMENDED AND RESTATED CREDIT AGREEMENT - Page 41 48 Eurodollar Loans until the Regulatory Change giving rise to such request ceases to be in effect (in which case the provisions of Section 4.4 hereof shall be applicable). (b) Without limiting the effect of the foregoing provisions of this Section 4.1, in the event that, by reason of any Regulatory Change, any Lender either (i) incurs Additional Costs based on or measured by the excess above a specified level of the amount of a category of deposits or other liabilities of such Lender which includes deposits by reference to which the interest rate on Eurodollar Loans is determined as provided in this Agreement or a category of extensions of credit or other assets of such Lender which includes Eurodollar Loans or (ii) becomes subject to restrictions on the amount of such a category of liabilities or assets which it may hold, then, if such Lender so elects by notice to F.Y.I. (with a copy to the Agent), the obligation of such Lender to make or Continue making, or Convert Prime Rate Loans into, Eurodollar Loans hereunder shall be suspended until such Regulatory Change ceases to be in effect (in which case the provisions of Section 4.4 hereof shall be applicable). (c) Determinations and allocations by any Lender for purposes of this Section 4.1 of the effect of any Regulatory Change on its costs of maintaining its obligation to make Loans or of making or maintaining Loans or on amounts receivable by it in respect of Loans and of the additional amounts required to compensate such Lender in respect of any Additional Costs, shall be conclusive in the absence of manifest error, provided that such determinations and allocations are made on a reasonable basis. Section 4.2 Limitation on Types of Loans. Anything herein to the contrary notwithstanding, if with respect to any Eurodollar Loans for any Interest Period therefor: (a) The Agent reasonably determines (which determination shall be conclusive absent manifest error) that quotations of interest rates for the relevant deposits referred to in the definition of "Eurodollar Rate" in Section 1.1 hereof are not being provided in the relative amounts or for the relative maturities for purposes of determining the rate of interest for such Loans as provided in this Agreement; or (b) Required Lenders reasonably determine (which determination shall be conclusive absent manifest error) and notify the Agent that the relevant rates of interest referred to in the definition of "Eurodollar Rate" or "Adjusted Eurodollar Rate" in Section 1.1 hereof on the basis of which the rate of interest for such Loans for such Interest Period is to be determined do not accurately reflect the cost to the Lenders of making or maintaining such Loans for such Interest Period; then the Agent shall give F.Y.I. prompt notice thereof and, so long as such condition remains in effect, the Lenders shall be under no obligation to make Eurodollar Loans or to Convert Prime Rate Loans into Eurodollar Loans and F.Y.I. shall, on the last day(s) of the then current Interest Period(s) for the outstanding Eurodollar Loans, either prepay such Loans or Convert such Loans into Prime Rate Loans in accordance with the terms of this Agreement. AMENDED AND RESTATED CREDIT AGREEMENT - Page 42 49 Section 4.3 Illegality. Notwithstanding any other provision of this Agreement, in the event that it becomes unlawful for any Lender or its Applicable Lending Office to (a) honor its obligation to make Eurodollar Loans hereunder or (b) maintain Eurodollar Loans hereunder, then such Lender shall promptly notify F.Y.I. for and on behalf of F.Y.I. (with a copy to the Agent) thereof and such Lender's obligation to make or maintain Eurodollar Loans and to Convert Prime Rate Loans into Eurodollar Loans hereunder shall be suspended until such time as such Lender may again make and maintain Eurodollar Loans (in which case the provisions of Section 4.4 hereof shall be applicable). Section 4.4 Treatment of Affected Loans. If the obligation of any Lender to make or Continue, or to Convert Prime Rate Loans into, Eurodollar Loans is suspended pursuant to Section 4.1 or 4.3 hereof, such Lender's Eurodollar Loans shall be automatically Converted into Prime Rate Loans on the last day(s) of the then current Interest Period(s) for the Eurodollar Loans (or, in the case of a Conversion required by Section 4.1(b) or 4.3 hereof, on such earlier date as such Lender may specify to F.Y.I., with a copy to the Agent) and, unless and until such Lender gives notice as provided below that the circumstances specified in Section 4.1 or 4.3 hereof which gave rise to such Conversion no longer exist: (a) To the extent that such Lender's Eurodollar Loans have been so Converted, all payments and prepayments of principal which would otherwise be applied to such Lender's Eurodollar Loans shall be applied instead to its Prime Rate Loans; and (b) All Loans which would otherwise be made or Continued by such Lender as Eurodollar Loans shall be made as or Converted into Prime Rate Loans and all Loans of such Lender which would otherwise be Converted into Eurodollar Loans shall be Converted instead into (or shall remain as) Prime Rate Loans. If such Lender gives notice to F.Y.I. (with a copy to the Agent) that the circumstances specified in Section 4.1 or 4.3 hereof which gave rise to the Conversion of such Lender's Eurodollar Loans pursuant to this Section 4.4 no longer exist (which such Lender agrees to do promptly upon such circumstances ceasing to exist) at a time when Eurodollar Loans are outstanding, such Lender's Prime Rate Loans shall be automatically Converted, on the first day(s) of the next succeeding Interest Period(s) for such outstanding Eurodollar Loans, to the extent necessary so that, after giving effect thereto, all Loans held by the Lenders holding Eurodollar Loans and by such Lender are held pro rata (as to principal amounts, Types and Interest Periods) in accordance with their respective Commitments. Section 4.5 Compensation. F.Y.I. shall pay to the Agent for the account of each Lender, promptly upon the request of such Lender through the Agent, such amount or amounts as shall be sufficient (in the reasonable opinion of such Lender) to compensate it for any loss, cost or expense incurred by it as a result of: (a) Any payment, prepayment or Conversion of a Eurodollar Loan for any reason AMENDED AND RESTATED CREDIT AGREEMENT - Page 43 50 (including, without limitation, the acceleration of the outstanding Loans pursuant to Section 11.2) on a date other than the last day of an Interest Period for such Loan; or (b) Any failure by F.Y.I. for any reason (including, without limitation, the failure of any conditions precedent specified in Article 6 to be satisfied) to borrow, Convert or prepay a Eurodollar Loan on the date for such borrowing, Conversion or prepayment specified in the relevant notice of borrowing, prepayment or Conversion under this Agreement. Section 4.6 Capital Adequacy. If, after the Closing Date, any Lender shall have determined that the adoption or implementation of any applicable law, rule or regulation regarding capital adequacy (including, without limitation, any law, rule or regulation implementing the Basle Accord), or any change therein, or any change in the interpretation or administration thereof by any central bank or other Governmental Authority charged with the interpretation or administration thereof, or compliance by such Lender (or its parent) with any guideline, request or directive regarding capital adequacy (whether or not having the force of law) of any central bank or other Governmental Authority (including, without limitation, any guideline or other requirement implementing the Basle Accord), has or would have the effect of reducing the rate of return on such Lender's (or its parent's) capital as a consequence of its obligations hereunder or the transactions contemplated hereby to a level below that which such Lender (or its parent) could have achieved but for such adoption, implementation, change or compliance (taking into consideration such Lender's policies with respect to capital adequacy) by an amount deemed by such Lender to be material, then from time to time, within ten Business Days after demand by such Lender (with a copy to the Agent), F.Y.I. shall pay to such Lender such additional amount or amounts as will compensate such Lender (or its parent) for such reduction. A certificate of such Lender claiming compensation under this Section 4.6 and setting forth the additional amount or amounts to be paid to it hereunder shall be conclusive absent manifest error, provided that the determination thereof is made on a reasonable basis. In determining such amount or amounts, such Lender may use any reasonable averaging and attribution methods. Section 4.7 Additional Interest on Eurodollar Loans. F.Y.I. shall pay, directly to each Lender from time to time, additional interest on the unpaid principal amount of each Eurodollar Loan held by such Lender, from the date of the making of such Eurodollar Loan until such principal amount is paid in full, at an interest rate per annum determined by such Lender in good faith equal to the positive remainder (if any) of (a) the Adjusted Eurodollar Rate applicable to such Eurodollar Loan minus (b) the Eurodollar Rate applicable to such Eurodollar Loan. Each payment of additional interest pursuant to this Section 4.7 shall be payable by F.Y.I. on each date upon which interest is payable on such Eurodollar Loan pursuant to Section 2.4(b); provided, however, that F.Y.I. shall not be obligated to make any such payment of additional interest until the first Business Day after the date when F.Y.I. has been informed (i) that such Lender is subject to a Reserve Requirement and (ii) of the amount of such Reserve Requirement (after which time F.Y.I. shall be obligated to make all such payments of additional interest, including, without limitation, such payment of additional interest that otherwise would have been payable by F.Y.I. on or prior to such time had F.Y.I. been earlier informed). AMENDED AND RESTATED CREDIT AGREEMENT - Page 44 51 ARTICLE 5 Security Section 5.1 Collateral. To secure the full and complete payment and performance of the Obligations, F.Y.I. shall, and shall cause each of its Subsidiaries in existence on the Closing Date (other than, with respect to clause (b) succeeding, such Subsidiaries, if any, which are Nonmaterial Subsidiaries and which have not previously granted the Liens referred to in this Section 5.1) to, grant to the Agent for the benefit of the Agent and the Lenders a perfected, first priority Lien (except for Permitted Liens, if any, which are expressly permitted by the Loan Documents to have priority over the Liens in favor of the Agent) on all of its right, title and interest in and to the following Property, whether now owned or hereafter acquired, pursuant to the Security Documents: (a) all Capital Stock of each of the Subsidiaries of F.Y.I. now owned or hereafter acquired by F.Y.I. or any Subsidiary of F.Y.I.; and (b) all other Property of F.Y.I. and each of such Subsidiaries in which a security interest was (or was required to be) granted to the Agent by F.Y.I. or such Subsidiary pursuant to or in accordance with the Prior Agreement and/or the Security Documents (as defined in the Prior Agreement), including, without limitation, the Mortgaged Properties and all accounts (including, without limitation, Receivables), inventory (including, without limitation, Inventory), equipment, contract rights, general intangibles, instruments, investment property, chattel paper, Permits, Intellectual Property and intercompany Debt. Section 5.2 Guaranties. Each Subsidiary of F.Y.I. in existence on the Closing Date shall guarantee the payment and performance of the Obligations pursuant to the applicable Guaranty. Section 5.3 New Subsidiaries. Contemporaneously with the creation or acquisition of any Subsidiary of F.Y.I. after the Closing Date, F.Y.I. shall and shall cause each of its Subsidiaries to: (a) grant or cause to be granted to the Agent, for the benefit of the Agent and the Lenders, a perfected, first priority security interest in all Capital Stock or other ownership interests in or indebtedness of such Subsidiary owned by F.Y.I. or by any Subsidiary of F.Y.I. (to the extent such Capital Stock or other ownership interests or indebtedness are already not so pledged to the Agent); (b) cause each such Subsidiary to guarantee the payment and performance of the Obligations by executing and delivering to the Agent an appropriate Guaranty, substantially in the form of the Guaranties delivered by other Subsidiaries of F.Y.I. on or about the Closing Date, and which Guaranty also provides that such Subsidiary agrees to comply with all of the covenants contained in this Agreement applicable to it; and (c) if and to the extent required by Section 5.4, cause each such Subsidiary to execute and AMENDED AND RESTATED CREDIT AGREEMENT - Page 45 52 deliver to the Agent an appropriate Security Agreement, substantially in the form of the Security Agreements delivered by other Subsidiaries of F.Y.I. on or before the Closing Date, and such other Security Documents as the Agent may reasonably request to grant the Agent, for the benefit of the Agent and the Lenders, a perfected, first priority Lien (except for Permitted Liens, if any, which are expressly permitted by the Loan Documents to have priority over the Liens in favor of the Agent) on all Property of such Subsidiary (other than immaterial Properties in which the Agent has agreed it will not require a Lien). Section 5.4 Additional Security. (a) If the Total Debt to EBITDA Ratio shall at any time (whether before or after any release of Liens in accordance with Section 5.5) exceed 1.75 to 1.00, F.Y.I. shall, and shall cause each of its Subsidiaries other than Nonmaterial Subsidiaries (subject to Section 5.4(b)) to, within ten Business Days thereafter, grant or cause to be granted to the Agent, for the benefit of the Agent and the Lenders, a perfected, first priority Lien in all Property of F.Y.I. and such Subsidiaries (other than immaterial Properties in which Agent has agreed it will not require a Lien) in which a Lien was not previously granted in accordance with Section 5.1 or 5.3 , which Liens shall be granted pursuant to such Security Documents in form and substance satisfactory to the Agent as the Agent may request from time to time. Without limiting the generality of the foregoing, if the Total Debt to EBITDA Ratio shall at any time exceed 1.75 to 1.00, F.Y.I. shall, and shall cause each of its Subsidiaries other than Nonmaterial Subsidiaries (subject to Section 5.4(b)) to, within ten Business Days thereafter and contemporaneously with the acquisition of any fee real Property or the execution of any lease of real Property concurrently therewith or thereafter execute, acknowledge and deliver to the Agent a Mortgage or an amendment or modification to an existing Mortgage covering (i) all fee real Property then owned or then being or thereafter acquired, respectively, F.Y.I. or any of such Subsidiaries and (ii) all of F.Y.I.'s or any of such Subsidiaries' rights and interests as lessee, in, to and under each real estate lease then in existence or then being or thereafter entered into, respectively, together with evidence reasonably satisfactory to the Agent and its counsel, including, without limitation, if requested by the Agent, a commitment for a mortgagee policy of title insurance in favor of the Agent, in form and substance reasonably satisfactory to the Agent, that the Mortgage creates a valid, first priority Lien on the fee estate or leasehold estate, as the case may be, in favor of the Agent for the benefit of the Agent and the Lenders (except for Permitted Liens, if any, which are expressly permitted by the Loan Documents to have priority over the Liens in favor of the Agent), together with appraisals and surveys if requested by the Agent; provided, however, that (A) with respect to any fee real Property having a fair market value of less than $200,000, F.Y.I. and such Subsidiaries shall not be required to execute, acknowledge or deliver such Mortgage or amendment or modification to an existing Mortgage unless or until fee real Property or Properties having an aggregate fair market value of $200,000 or more would be covered by any such Mortgage or amendment or modification to an existing Mortgage and, until such time, shall not be required to deliver such mortgagee policy of title insurance or such appraisals (unless required by laws or regulations applicable to any Lender) or surveys with respect to such Properties or waivers of landlord liens or landlord agreements referred to herein and (B) with respect to any lease of real Property, F.Y.I. and such Subsidiaries shall not be required to execute, acknowledge or deliver such AMENDED AND RESTATED CREDIT AGREEMENT - Page 46 53 Mortgage or amendment or modification to an existing Mortgage if the tangible Property of F.Y.I. and/or its Subsidiaries located and to be located thereon does not exceed $500,000 in aggregate fair market value. Following the date of each such acquisition of Property, if requested by the Agent or the Required Lenders, F.Y.I. shall, and shall cause each of its Subsidiaries with an interest in such Properties to, (A) deliver or cause to be delivered to the Agent, a mortgagee policy of title insurance insuring the Liens of the Mortgage covering such fee real Property in an amount reasonably satisfactory to the Agent on standard form policies (except for Permitted Liens, if any, which are expressly permitted by the Loan Documents to have priority over the Liens in favor of the Agent) and (B) provide the Agent with a current environmental assessment of such Property in form and substance reasonably satisfactory to the Agent. In addition, with respect to each such leasehold estate, F.Y.I. shall, and shall cause each of its Subsidiaries to, use its best reasonable efforts to obtain either (1) waivers of landlord's Liens from each lessor or (2) landlord agreements from each lessor, in form and substance reasonably satisfactory to the Agent. (b) Notwithstanding anything to the contrary contained in Section 5.4(a), in the event that additional security is required to be granted in accordance with Section 5.4(a), one or more Nonmaterial Subsidiaries (as the Agent may request) shall be required to grant Liens in accordance with Section 5.4(a) as if such Nonmaterial Subsidiaries were Material Subsidiaries if and to the extent necessary to ensure that (i) the aggregate total assets of all Nonmaterial Subsidiaries that have not granted such Liens does not exceed five percent of the total assets of F.Y.I. and its Subsidiaries on a consolidated basis, (ii) the aggregate net worth of all Nonmaterial Subsidiaries that have not granted such Liens does not exceed five percent of the total net worth of F.Y.I. and its Subsidiaries on a consolidated basis, and (iii) the aggregate revenues of all Nonmaterial Subsidiaries that have not granted such Liens does not exceed five percent of the revenues of F.Y.I. and its Subsidiaries on a consolidated basis. Section 5.5 Release of Collateral. (a) Upon any sale, transfer or other disposition of Collateral that is expressly permitted under Section 9.8 and upon five Business Days prior written request by F.Y.I., the Agent shall execute at F.Y.I.'s expense such documents as may be necessary to evidence the release by the Agent of its Liens on such Collateral; provided, however, that (i) the Agent shall not be required to release any Lien on any Collateral if a Default shall have occurred and be continuing, (ii) the Agent shall not be required to execute any such document on terms which, in the Agent's opinion, would expose the Agent to liability or create any obligation not reimbursed by F.Y.I. or entail any consequences other than the release of such Lien without recourse or warranty, and (iii) such release shall not in any manner discharge, affect or impair any of the Obligations or any of the Agent's Liens on any Collateral retained by F.Y.I. or any of its Subsidiaries, including, without limitation, its Liens on the proceeds of any such sale, transfer or other disposition. (b) If, after additional security has been granted in accordance with Section 5.4, the Total Debt to EBITDA Ratio is less than 1.75 to 1.00 and F.Y.I., at such time, has an investment grade rating from either Moody's Investors Service, Inc. (Baa3 or better) or Standard & Poor's Corporation AMENDED AND RESTATED CREDIT AGREEMENT - Page 47 54 (BBB- or better) on an unsecured basis, the Agent shall, upon the request of F.Y.I., execute at F.Y.I.'s expense such documents as may be necessary to evidence the release by the Agent of its Liens on any or all Collateral granted as additional security in accordance with Section 5.4; provided, however, that (i) the Agent shall not be required to release any Lien on any Collateral if a Default shall have occurred and be continuing, (ii) the Agent shall not be required to execute any such document on terms which, in the Agent's opinion, would expose the Agent to liability or create any obligation not reimbursed by F.Y.I. or entail any consequences other than the release of such Lien without recourse or warranty, and (iii) such release shall not in any manner discharge, affect or impair any of the Obligations or any of the Agent's Liens on any Collateral retained by F.Y.I. or any of its Subsidiaries, including, without limitation, its Liens on the proceeds of any such sale, transfer or other disposition. Section 5.6 Setoff. If an Event of Default shall have occurred and be continuing, each Lender is hereby authorized at any time and from time to time, without notice to F.Y.I., any other Loan Party or any other Person (any such notice being hereby expressly waived by F.Y.I.), to set off and apply any and all deposits (general, time or demand, provisional or final) at any time held and other indebtedness at any time owing by such Lender to or for the credit or the account of F.Y.I. against any and all of the Obligations now or hereafter existing under this Agreement, such Lender's Note or any other Loan Document, irrespective of whether or not the Agent or such Lender shall have made any demand under this Agreement, such Lender's Note or any such other Loan Document and although such Obligations may be unmatured. Each Lender agrees promptly to notify F.Y.I. (with a copy to the Agent) after any such setoff and application, provided that the failure to give such notice shall not affect the validity of such setoff and application. The rights and remedies of each Lender hereunder are in addition to other rights and remedies (including, without limitation, other rights of setoff) which such Lender may have. Section 5.7 Landlord and Mortgagee Waivers. On or before the Closing Date with respect to a lease of real Property as to which the Agent has or is, in accordance with Article 5 of this Agreement or the Prior Agreement, required to have a leasehold Mortgage, and prior to or concurrently with F.Y.I. or any of its Subsidiaries entering into a lease of real Property on or after the Closing Date as to which the Agent has or is, in accordance with Article 5, required to have a leasehold Mortgage, F.Y.I. shall, unless the Agent has waived such requirement in its discretion as to any particular leased Property, provide to the Agent an agreement of such of the landlords and their lenders relating to such leased Properties, in form and substance reasonably satisfactory to the Agent, including, without limitation, any leased Properties where the landlord (i) owns any Capital Stock of F.Y.I., (ii) holds any Seller Subordinated Debt, or (iii) is the beneficiary of or payee under any Seller Earn Out. AMENDED AND RESTATED CREDIT AGREEMENT - Page 48 55 ARTICLE 6 Conditions Precedent Section 6.1 Closing Date Conditions. The agreement of the Agent and the Lenders to enter into this Agreement, and each of the obligations of each Lender to make its initial Loan under this Agreement and the obligation of the Issuing Bank to issue the initial Letter of Credit under this Agreement are subject to the conditions precedent that the Agent shall have received, on or before the Closing Date, all of the following in form and substance satisfactory to the Agent and, in the case of actions to be taken, evidence that the following required actions have been taken to the satisfaction of the Agent; provided, however, that, if and to the extent that any of the items listed in clauses (c), (d), (e), (i), (m), (o), (q), (x) or (y) below were delivered at the closing of, or in accordance with, the Prior Agreement and have not been amended, extended, supplemented or otherwise altered, such items shall not be required to be delivered again. (a) Resolutions. Resolutions of the Board of Directors of F.Y.I. and each Material Subsidiary certified by its Secretary or an Assistant Secretary which authorize the execution, delivery and performance by such Loan Party of the Loan Documents to which it is or is to be a party; (b) Incumbency Certificate. A certificate of incumbency certified by the Secretary or an Assistant Secretary of F.Y.I. and each Material Subsidiary certifying the name of each officer or other representative of such Loan Party (i) who is authorized to sign the Loan Documents to which such Loan Party is or is to be a party (including any certificates contemplated therein), together with specimen signatures of each such officer or other representative, and (ii) who will, until replaced by other officers or representatives duly authorized for that purpose, act as its representative for the purposes of signing documents and giving notices and other communications in connection with the Loan Documents and the transactions contemplated thereby; (c) Articles or Certificates of Incorporation, etc. The articles or certificates of incorporation, certificate of formation, certificate of limited partnership, partnership agreement or other applicable constitutional document of F.Y.I. and each Material Subsidiary certified by the Secretary of State or other applicable Governmental Authority of the state or other jurisdiction of incorporation or organization of such Loan Party and dated as of a Current Date; (d) Bylaws. The bylaws of F.Y.I. and each Material Subsidiary certified by the Secretary or an Assistant Secretary of such Loan Party; (e) Governmental Certificates. Certificates of appropriate officials as to the existence and good standing, status or compliance, as applicable, of F.Y.I. and each Material Subsidiary in their respective jurisdictions of incorporation or organization and any and all jurisdictions where such Loan Party is qualified to do business as a foreign corporation or other entity, each such certificate to be dated as of a Current Date; AMENDED AND RESTATED CREDIT AGREEMENT - Page 49 56 (f) Notes. The Notes duly completed and executed by F.Y.I.; (g) Guaranties. A Guaranty executed by each of the Subsidiaries of F.Y.I. (or such amendments or ratifications to the Guaranties existing as of the Closing Date as are deemed necessary or appropriate by the Agent); (h) Security Agreements. A Security Agreement executed by F.Y.I. and each of its Subsidiaries which are required to grant Liens in accordance with Article 5 (or such amendments or ratifications to the Security Agreements existing as of the Closing Date as are deemed necessary or appropriate by the Agent to maintain its perfected security interest in the Collateral); (i) Stock Certificates. The stock certificates representing all of the issued and outstanding Capital Stock of each of the Subsidiaries of F.Y.I. accompanied by appropriate stock powers signed in blank; (j) Financing Statements. Financing statements and all other requisite filing documents executed by the Loan Parties necessary or appropriate to perfect the Liens created pursuant to the Security Documents (or such amendments to the financing statements existing as of the Closing Date as are deemed necessary or appropriate by the Agent); (k) Lien Releases. Releases or assignments of Liens and UCC-3 financing statements in recordable form, as may be necessary to reflect that the Liens created by the Security Documents are first priority Liens (except for Permitted Liens, if any, which are expressly permitted by the Loan Documents to have priority over the Liens in favor of the Agent); (l) Lien Searches. If and to the extent not previously delivered to the Agent in connection with the Prior Agreement, Lien searches in the names of F.Y.I. and each of its Material Subsidiaries (and in all names under which each such Person has done business within the last five years and in all names of Persons who previously owned any of the Properties constituting Collateral as the Agent may require) in each state, county, parish or other jurisdiction where each such Person maintains an office or has Property, showing no financing statements or other Lien instruments of record except for Permitted Liens (and Liens released in accordance with Section 6.1(k)); (m) Leases. If requested by the Agent, copies of all leases (and all amendments and supplements thereto) pursuant to which F.Y.I. or any of its Subsidiaries leases Mortgaged Properties; (n) Consents. Copies of all material consents necessary for the execution, delivery and performance by each of the Loan Parties of the Loan Documents to which it is a party, which consents shall be certified by a Responsible Officer of the applicable Loan Party as true and correct copies of such consents as of the Closing Date; (o) Permits. If requested by the Agent, copies of all material Permits affecting F.Y.I. or any of its Material Subsidiaries in connection with its businesses or any of the Properties owned or AMENDED AND RESTATED CREDIT AGREEMENT - Page 50 57 leased by it, and evidence satisfactory to the Agent that F.Y.I. and each of its Material Subsidiaries are able to conduct their businesses with the use of such Permits in full force and effect; (p) Payment of Principal, Interest, Fees and Expenses. F.Y.I. shall have paid in full (i) all outstanding principal of the "Term Loans" (as defined in the Prior Agreement), (ii) all accrued and unpaid interest (whether or not due and payable) with respect to the Revolving Credit Loans (as defined in the Prior Agreement) and the Term Loans (as defined in the Prior Agreement), (iii) all accrued and unpaid fees (whether or not due and payable) under or with respect to the Prior Agreement (including, without limitation, commitment fees, letter of credit fees and other fees payable in accordance with Section 2.11 of the Prior Agreement), (iv) all fees due on or before the Closing Date as specified in this Agreement or in the Fee Letter, and (v) all fees and expenses of or incurred by the Agent and its counsel to the extent billed on or before the Closing Date and payable pursuant to this Agreement; (q) Regulatory Approvals. Evidence satisfactory to the Agent that all filings, consents or approvals with or of Governmental Authorities necessary to consummate the transactions contemplated by the Loan Documents and the Related Transactions Documents have been made and obtained, as applicable, including, without limitation, all approvals or filings (if any) required under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 and the lapse of all waiting periods with respect thereto; (r) Compliance with Laws. As of the Closing Date, each Person that is a party to this Agreement or any of the other Loan Documents shall have complied with all Governmental Requirements necessary to consummate the transactions contemplated by this Agreement and the other Loan Documents; (s) No Prohibitions. No Governmental Requirement shall prohibit the consummation of the transactions contemplated by this Agreement or any other Loan Document, and no order, judgment or decree of any Governmental Authority or arbitrator shall, and no litigation or other proceeding shall be pending or threatened which would, enjoin, prohibit, restrain or otherwise adversely affect the consummation of the transactions contemplated by this Agreement and the other Loan Documents or otherwise have a Material Adverse Effect; (t) No Material Adverse Change. As of the Closing Date, no material adverse change shall have occurred with respect to the financial condition, results of operations, business, operations, capitalization, liabilities or prospects of F.Y.I. or any of its Subsidiaries since December 31, 1996, and the Agent shall have received evidence that the economic performance of F.Y.I. and each of its Subsidiaries to the Closing Date is not materially different from the economic projections for F.Y.I. and each of its Subsidiaries for fiscal year 1997 that were previously submitted to the Agent; (u) Unused Revolving Credit Commitments. As of the Closing Date, the aggregate amount of unused availability under the Commitments, after giving effect to the Loans made on such date, shall be at least $10,000,000; AMENDED AND RESTATED CREDIT AGREEMENT - Page 51 58 (v) Financial Statements. If and to the extent not previously delivered to the Agent, copies of each of the financial statements referred to in Section 7.2; (w) Opinions of Counsel. Favorable opinions (or comfort letters with respect to clause (ii) succeeding) of (i) Locke Purnell Rain Harrell (a Professional Corporation), counsel for the Loan Parties, and such other counsel as may be acceptable to the Agent, in form and substance satisfactory to the Agent with respect to F.Y.I. and its Subsidiaries with respect to the Loan Documents and (ii) such other counsel as may be acceptable to the Agent regarding the power and authority of each of the Subsidiaries of F.Y.I. to execute and deliver its Guaranty and Security Agreement under the laws of its jurisdiction of incorporation or organization, as the Agent may require; (x) Opinions of Local Counsel. If and to the extent not previously delivered to the Agent, a favorable opinion or comfort letter (as the Agent may require) of local counsel to the Agent in each state or province where Mortgaged Properties or Inventory owned by F.Y.I. or its Subsidiaries are located in form and substance satisfactory to the Agent; and (y) Accountant's Letter. If and to the extent not previously delivered to the Agent, a letter from F.Y.I. authorizing the independent public accountant of F.Y.I. and its Subsidiaries to communicate with the Agent and the Lenders and acknowledging reliance by the Agent and the Lenders on past, present and future financial statements. F.Y.I. 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 6.1 to permit the Agent to distribute a copy of the same to each of the Lenders. After the request of F.Y.I., the Agent shall inform F.Y.I. in writing as to the status of satisfaction of the conditions precedent set forth in this Section 6.1. Section 6.2 Initial Extension of Credit. Each of the obligations of each Lender to make its initial Loan under this Agreement and the obligation of the Issuing Bank to issue the initial Letter of Credit under this Agreement are subject to the condition precedent that the Agent shall have received, on or before the date of such initial Loan or initial Letter of Credit (whichever is earlier), all of the following in form and substance satisfactory to the Agent, and, in the case of action to be taken, evidence that the following required actions have been taken to the satisfaction of the Agent: (a) Mortgages. Mortgages covering all of the Mortgaged Properties owned by F.Y.I. or any of its Subsidiaries listed on Schedule 1.1(a) hereof or otherwise required to be mortgaged at such date in accordance with this Agreement executed by F.Y.I. or such Subsidiary (as applicable) (or such amendments or ratifications to the Mortgages existing as of the Closing Date as are deemed necessary or appropriate by the Agent to maintain its perfected Lien on the Collateral); (b) Landlord and Mortgagee Waivers. If required in accordance with Section 5.7, agreements of such of the landlords and their lenders relating to the leased Properties leased by F.Y.I. AMENDED AND RESTATED CREDIT AGREEMENT - Page 52 59 and its Subsidiaries as the Agent may require in form and substance reasonably satisfactory to the Agent, including, without limitation, for any leased Properties where the landlord (i) owns any Capital Stock of F.Y.I., (ii) holds any Seller Subordinated Debt, or (iii) is the beneficiary of or payee under any Seller Earn Out; (c) Endorsements to Title Opinions. Endorsements to the existing mortgagee policies of title insurance (if any) issued on behalf of a title insurance company reasonably acceptable to the Agent in favor of the Agent; committing that the Mortgages create valid, first priority Liens on the Mortgaged Properties (except for Permitted Liens, if any, which are expressly permitted by the Loan Documents to have priority over the Liens in favor of the Agent) as security for the Obligations; each such endorsement shall (i) have been issued at the expense of F.Y.I. or its Subsidiary, (ii) contain no exceptions or exclusions except for those approved by the Agent, (iii) have been issued and underwritten by companies acceptable to the Agent, (iv) contain such endorsements as may be required by the Agent, (v) be in an amount satisfactory to the Agent, and (vi) be otherwise in form and substance satisfactory to the Agent; (d) Wiring Instructions. Written instructions from F.Y.I. to the Agent with respect to the disbursement of the proceeds of the Loans; (e) Insurance Policies. Originals of certificates of insurance evidencing all insurance policies required by this Agreement and the other Loan Documents, together with endorsements naming the Agent as loss payee under all such casualty insurance policies and the Agent as an additional insured party under all such liability policies and, if requested by the Agent, copies of all such insurance policies. (f) Letter of Credit Agreement. With respect to any issuance of a Letter of Credit, a Letter of Credit Agreement in the form required by the Issuing Bank with respect thereto executed by F.Y.I.; (g) Solvency Certificate; Contribution Agreement. (i) A Solvency Certificate; and (ii) contribution agreements (or applicable amendments to any such agreements existing as of the Closing Date) between and among F.Y.I. and its Subsidiaries to evidence applicable rights of contribution; (h) Budget. A copy of the consolidated budget of F.Y.I. and its Subsidiaries for fiscal year 1997 (segregated by entity and quarter or month, and setting forth all material assumptions); and (i) Closing Balance Sheet. A copy of the unaudited consolidated balance sheet of F.Y.I. and its Subsidiaries as of September 30, 1997, which balance sheet shall be accompanied by a certificate of a Responsible Officer of F.Y.I. certifying that there has been no material adverse change in the assets or liabilities of F.Y.I. and its Subsidiaries, taken as a whole, since such date. Section 6.3 All Extensions of Credit. The obligation of each Lender to make any Loan AMENDED AND RESTATED CREDIT AGREEMENT - Page 53 60 (including the initial Loan) and the obligation of the Issuing Bank to issue any Letter of Credit (including the initial Letter of Credit) under this Agreement are subject to the satisfaction of each of the conditions precedent set forth in Section 6.1 and 6.2 as of the dates required by such Sections 6.1 and 6.2 and each of the following additional conditions precedent: (a) No Default or Material Adverse Effect. No Default or Material Adverse Effect shall have occurred and be continuing, or would result from such Loan or Letter of Credit; (b) Representations and Warranties. All of the representations and warranties of F.Y.I. and its Subsidiaries and the other Loan Parties contained in Article 7 hereof and in the other Loan Documents shall be true and correct on and as of the date of such Loan or Letter of Credit with the same force and effect as if such representations and warranties had been made on and as of such date, 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; and (c) Additional Documentation. The Agent shall have received such additional approvals, opinions, agreement, documents and instruments as the Agent may reasonably request. Each notice of borrowing or request for the issuance of a Letter of Credit by F.Y.I. hereunder shall constitute a representation and warranty by F.Y.I. that the conditions precedent set forth in Sections 6.2(a) and (b) have been satisfied (both as of the date of such notice and, unless F.Y.I. otherwise notifies the Agent prior to the date of such borrowing or Letter of Credit, as of the date of such borrowing or Letter of Credit). Section 6.4 Closing Certificates. The agreement of the Agent and the Lenders to enter into this Agreement is subject to the condition that the Agent receive, concurrently with the execution and delivery of this Agreement, a Closing Certificate in form and substance reasonably satisfactory to the Agent certifying as to the satisfaction of each of the conditions precedent set forth in Section 6.1. The obligations of the Lenders to make the initial Loan and the obligation of the Issuing Bank to issue the initial Letter of Credit are subject to the condition that the Agent receive, prior to the date of such initial Loan or the issuance of such initial Letter of Credit, a Closing Certificate in form and substance reasonably satisfactory to the Agent certifying as to the satisfaction of each of the conditions precedent set forth in Section 6.2. AMENDED AND RESTATED CREDIT AGREEMENT - Page 54 61 ARTICLE 7 Representations and Warranties F.Y.I. represents and warrants to the Agent and the Lenders that the following statements are and, after giving effect to the Related Transactions, will be true, correct and complete: Section 7.1 Corporate Existence. Each Loan Party (a) is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation or organization, (b) has all requisite power and authority to own its Properties and carry on its business as now being or as proposed to be conducted, and (c) is qualified to do business in all jurisdictions in which the nature of its business makes such qualification necessary and where failure to so qualify would have a Material Adverse Effect. Each Loan Party has the power and authority and legal right to execute, deliver and perform its obligations under the Loan Documents and the Related Transactions Documents to which it is or may become a party. F.Y.I. is a holding company and is not an operating company and does not engage in any material business operations apart from the ownership and management of its Subsidiaries. Section 7.2 Financial Statements. (a) F.Y.I. has delivered to the Agent and the Lenders proforma audited combined and combining financial statements of F.Y.I. and its Subsidiaries as of and for the fiscal years ended December 31, 1993, 1994, 1995, and 1996 and unaudited combined and combining financial statements for F.Y.I. and its Subsidiaries for the nine-month period ended September 30, 1997. To F.Y.I.'s knowledge, such financial statements are true and correct, have been prepared in accordance with GAAP and fairly and accurately present, on a combined and combining (where applicable) basis, the financial condition of F.Y.I. and its combined Subsidiaries, as of the respective dates indicated therein and the results of operations for the respective periods indicated therein. There has not been, as of the Closing Date, any material adverse change in the business, condition (financial or otherwise), operations or Properties of F.Y.I. or its Subsidiaries or since the effective dates of the most recent applicable financial statements referred to in this Section 7.2(a). (b) The Projections were prepared by F.Y.I. on a basis substantially consistent with the financial statements referred to in Section 7.2(a). The Projections represent, as of the Closing Date, the good faith estimate of F.Y.I. concerning the probable financial condition and performance of F.Y.I. and its Subsidiaries based on assumptions believed to be reasonable at the time made. Section 7.3 Corporate Action: No Breach. The execution, delivery and performance by each Loan Party of the Loan Documents to which it is or may become a party and compliance with the terms and provisions hereof and thereof have been duly authorized by all requisite corporate or other entity action on the part of the Loan Parties and do not and will not (a) violate or conflict with, or result in a breach of, or require any consent under (i) the articles or certificates of incorporation or bylaws of any Loan Party, (ii) any Governmental Requirement applicable to a Loan Party or any AMENDED AND RESTATED CREDIT AGREEMENT - Page 55 62 of its Property or any order, writ, injunction or decree of any Governmental Authority or arbitrator applicable to a Loan Party or any of its Property, or (iii) any material agreement, document or instrument to which any Loan Party is a party or by which any Loan Party or any of its Property is bound or subject, or (b) constitute a default under any such material agreement, document or instrument, or result in the creation or imposition of any Lien (except under the Security Documents as provided in Article 5) upon any of the revenues or Property of any Loan Party. Section 7.4 Operation of Business. The Loan Parties possess all material Permits, franchises, licenses and authorizations necessary or appropriate to conduct their respective businesses substantially as now conducted and where the failure to do so would constitute or result in a Material Adverse Effect. All of such Permits, franchises, licenses and authorizations of F.Y.I. and its Material Subsidiaries which constitute a Governmental Requirement or which are or are to be issued by any Governmental Authority are disclosed on Schedule 7.4. None of such Persons is in material violation of any such Permits, franchises, licenses or authorizations. Section 7.5 Intellectual Property. The Loan Parties own or possess (or will be licensed or have the full right to use) all Intellectual Property which is necessary for the operation of their respective businesses as presently conducted and as proposed to be conducted, without any known conflict with the rights of others which could reasonably be expected to have a Material Adverse Effect. The consummation of the transactions contemplated by this Agreement, the other Loan Documents and the Related Transactions Documents will not materially alter or impair, individually or in the aggregate, any of such rights of such Persons. No product of the Loan Parties infringes upon any Intellectual Property owned by any other Person, and no claim or litigation is pending or, to the knowledge of F.Y.I. or any of its Subsidiaries, threatened against any Loan Party or any such Person contesting its right to use any product or material which could have a Material Adverse Effect. There is no violation by any Loan Party of any right of such Loan Party with respect to any material Intellectual Property owned or used by such Loan Party which would constitute or result in a Material Adverse Effect. Section 7.6 Litigation and Judgments. Each material action, suit, investigation or proceeding before or by any Governmental Authority or arbitrator pending or, to the knowledge of F.Y.I. or any of its Subsidiaries, threatened against or affecting any Loan Party, or that relates to any of the Related Transactions as of the Closing Date, is disclosed on Schedule 7.6. None of such actions, suits, investigations or proceedings could, if adversely determined, have a Material Adverse Effect. As of the Closing Date, there are no outstanding judgments against any Loan Party or any of their respective Subsidiaries. Section 7.7 Rights in Properties; Liens. Each of the Loan Parties has good and indefeasible title to or, except as expressly stated to the contrary on Schedule 1.1(a), valid leasehold interests in its Properties and assets, real and personal, including the Properties, assets and leasehold interests reflected in the financial statements described in Section 7.2 and the Pro Formas, and none of the Properties or leasehold interests of F.Y.I. or any of its Material Subsidiaries or, to the best of F.Y.I.'s knowledge without undertaking a current Lien search, any of its Nonmaterial Subsidiaries AMENDED AND RESTATED CREDIT AGREEMENT - Page 56 63 is subject to any Lien, except Permitted Liens. Except as disclosed on Schedule 7.7, neither F.Y.I. nor any of its Subsidiaries owns any right, title or interest in any real Properties. Section 7.8 Enforceability. The execution, delivery and performance of the Loan Documents and the Related Transaction Documents to which each of the Loan Parties is a party have been duly authorized by resolutions of the board of directors of such Loan Party (or other appropriate action authorizing such execution, delivery and performance has been taken with respect to each Loan Party that is not a corporation). The Loan Documents and the Related Transactions Documents have been duly and validly executed and delivered by each of the Loan Parties that is a party thereto and constitute the legal, valid and binding obligations of the Loan Parties, enforceable against the Loan Parties in accordance with their respective terms, except as limited by bankruptcy, insolvency or other laws of general application relating to the enforcement of creditors' rights and general principles of equity. Section 7.9 Approvals. No authorization, approval or consent of, and no filing or registration with or notice to, any Governmental Authority or third party is or will be necessary for the execution, delivery or performance by any Loan Party of any of the Loan Documents or Related Transactions Documents to which it is a party or for the validity or enforceability thereof, except for such consents, approvals and filings as have been validly obtained or made and are in full force and effect. The consummation of the Related Transactions does not require the consent or approval of any other Person, except such consents and approvals (a) as have been validly obtained and are in full force and effect or (b) as to which the failure to obtain is not, individually or in the aggregate, material. None of the Loan Parties has failed to obtain any material governmental consent, approval, license, Permit, franchise or other governmental authorization necessary for the ownership of any of its Properties or the conduct of its business. Section 7.10 Debt. As of the Closing Date, the Loan Parties and their Subsidiaries have no Debt except for (a) the Obligations and (b) the Debt disclosed on Schedule 7.10 hereto. Section 7.11 Taxes. The Loan Parties have filed all tax returns (federal, state and local) required to be filed, including all income, franchise, employment, Property and sales tax returns, and have paid all of their respective liabilities (other than liabilities which do not, in the aggregate, exceed $100,000 in amount) for taxes, assessments, governmental charges and other levies that are due and payable, except such taxes, if any, the payment of which is currently being contested in good faith by appropriate proceedings diligently conducted by or on behalf of such Person and as to which, if required by GAAP, such Person has established adequate reserves. F.Y.I. is not aware of any pending investigation of any Loan Party or any of their respective Subsidiaries, by any taxing authority or of any pending but unassessed tax liability of any Loan Party or any of their respective Subsidiaries, other than with respect to (a) ad valorem or other real property taxes not in excess of $100,000 as to any such Person and (b) other taxes in an aggregate amount as to any such Person which could not, if an adverse determination is made with respect to such taxes, materially and adversely affect such Person, which (as to each of clauses (a) and (b) preceding) are currently being contested in good faith by appropriate proceedings diligently conducted by or on behalf of such AMENDED AND RESTATED CREDIT AGREEMENT - Page 57 64 Person and as to which, if required by GAAP, such Person has established adequate reserves. No tax Liens have been filed and, except as disclosed on Schedule 7.11, no claims are being asserted against any Loan Party or any of their respective Subsidiaries, with respect to any taxes; provided, however, that, with respect to the Nonmaterial Subsidiaries, such representation is made only to the best of F.Y.I.'s knowledge without undertaking a current Lien search. Except as disclosed on Schedule 7.11 hereto, as of the Closing Date, none of the U.S. income tax returns of the Loan Parties or any of their respective Subsidiaries are under audit. The charges, accruals and reserves on the books of the Loan Parties in respect of taxes or other governmental charges are in accordance with GAAP. Section 7.12 Margin Securities. None of the Loan Parties or any of their respective Subsidiaries is engaged principally, or as one of its important activities, in the business of extending credit for the purpose of purchasing or carrying margin stock (within the meaning of Regulations G, T, U or X of the Board of Governors of the Federal Reserve System), and no part of the proceeds of any Loan will be used to purchase or carry any margin stock or to extend credit to others for the purpose of purchasing or carrying margin stock. Section 7.13 ERISA; Plans. Neither any Loan Party nor any ERISA Affiliate maintains or contributes to, or has any obligation under, any Pension Plan other than the Pension Plans identified on Schedule 7.13. Each Plan of each Loan Party is in compliance in all material respects with all applicable provisions of ERISA and the Code . Neither a Reportable Event nor a Prohibited Transaction has occurred within the last 60 months with respect to any Plan. No notice of intent to terminate a Pension Plan has been filed, nor has any Pension Plan been terminated. No circumstances exist which constitute grounds entitling the PBGC to institute proceedings to terminate, or appoint a trustee to administer, a Pension Plan, nor has the PBGC instituted any such proceedings. Neither any of the Loan Parties nor any ERISA Affiliate has completely or partially withdrawn from a Multiemployer Plan. Each Loan Party and each ERISA Affiliate have met their minimum funding requirements under ERISA and the Code with respect to all of their Plans subject to such requirements, and, as of the Closing Date except as specified on Schedule 7.13, the present value of all vested benefits under each funded Plan (exclusive of any Multiemployer Plan) does not and will not exceed the fair market value of all such Plan assets allocable to such benefits, as determined on the most recent valuation date of such Plan and in accordance with ERISA. Neither any of the Loan Parties nor any ERISA Affiliate has incurred any liability to the PBGC under ERISA. No litigation is pending or threatened concerning or involving any Plan. There are no unfunded or unreserved liabilities (on either a going-concern basis or a wind-up basis) relating to any Plan that could, individually or in the aggregate, have a Material Adverse Effect if such Loan Party were required to fund or reserve such liability in full. As of the Closing Date, no funding waivers have been or will have been requested or granted under Section 412 of the Code with respect to any Plan. No unfunded or unreserved liability for benefits under any Plan or Plans or (exclusive of any Multiemployer Plans) exceeds $2,000,000 with respect to any such Plan or $4,000,000 with respect to all such Plans in the aggregate as of the Closing Date, on either a going-concern basis or a wind-up basis. AMENDED AND RESTATED CREDIT AGREEMENT - Page 58 65 Section 7.14 Disclosure. No written statement, report, representation or warranty made by any Loan Party in any Loan Document (excluding any IPO Documents to the extent that the same may be deemed to be Loan Documents) or furnished to the Agent or any Lender by any Loan Party in connection with the Loan Documents (excluding any IPO Documents to the extent that the same may be deemed to be Loan Documents) or the making of the Loans or issuance of the Letters of Credit as contemplated hereby contains any untrue statement (at the time such statement was made) of a material fact or omits to state any material fact necessary to make the statements herein or therein not misleading. There is no fact known to F.Y.I. which has had a Material Adverse Effect, and there is no fact known to F.Y.I. which might in the future have a Material Adverse Effect, except as may have been disclosed in writing to the Agent and the Lenders. Section 7.15 Capitalization. (a) On and as of the Closing Date, the authorized Capital Stock, share ownership and par value per share of each of the Subsidiaries of F.Y.I. are listed on Schedule 7.15. (b) All of the issued and outstanding Capital Stock of F.Y.I. and its Subsidiaries has been validly issued and is fully paid and nonassessable. Except as described on Schedule 7.15, there are no outstanding subscriptions, options, warrants, calls or rights (including preemptive rights) to acquire, and no outstanding securities or instruments convertible into, Capital Stock of F.Y.I. or any of its Subsidiaries. (c) On and as of the Closing Date, each Material Subsidiary of F.Y.I. is identified as such on Schedule 7.15 and, except as so identified, F.Y.I. does not have any Material Subsidiaries on and as of such date. Section 7.16 Agreements. None of the Loan Parties is a party to any indenture, loan, credit agreement, stock purchase agreement or any lease or other agreement, document or instrument, or subject to any charter or corporate restriction, that could reasonably be expected to have a Material Adverse Effect. None of the Loan Parties is in default in any respect in the performance, observance or fulfillment of any of the obligations, covenants or conditions contained in any agreement, document or instrument binding on it or its Properties, except for instances of noncompliance that, individually or in the aggregate, could not have a Material Adverse Effect. Section 7.17 Compliance with Laws. None of the Loan Parties is in violation of any Governmental Requirement, except for instances of non-compliance that, individually or in the aggregate, could not have a Material Adverse Effect. Section 7.18 Investment Company Act. None of the Loan Parties is an "investment company" within the meaning of the Investment Company Act of 1940, as amended. Section 7.19 Public Utility Holding Company Act. None of the Loan Parties is a "holding company" or a "subsidiary company" of a "holding company" or an "affiliate" of a "holding AMENDED AND RESTATED CREDIT AGREEMENT - Page 59 66 company" or a "public utility" within the meaning of the Public Utility Holding Company Act of 1935, as amended. Section 7.20 Environmental Matters. (a) Except for instances of noncompliance with or exceptions to any of the following representations and warranties that could not have, individually or in the aggregate, a Material Adverse Effect: (i) The Loan Parties and all of their respective Properties and operations are in full compliance with all Environmental Laws in all material respects. Neither F.Y.I. nor any of its Subsidiaries is aware of, and neither F.Y.I. nor any of its Subsidiaries has received written notice of, any past, present or future conditions, events, activities, practices or incidents which may interfere with or prevent the compliance or continued compliance by any Loan Party with all Environmental Laws; (ii) The Loan Parties have obtained all Permits that are required under applicable Environmental Laws, and all such Permits are in good standing and all such Persons are in compliance with all of the terms and conditions thereof; (iii) No Hazardous Materials exist on, about or within or have been (to F.Y.I.'s or any of its Subsidiaries' knowledge) or are being used, generated, stored, transported, disposed of on or Released from any of the Properties of the Loan Parties except in compliance with applicable Environmental Laws in all material respects. The use which the Loan Parties make and intend to make of their respective Properties will not result in the use, generation, storage, transportation, accumulation, disposal or Release of any Hazardous Material on, in or from any of their Properties except in compliance with applicable Environmental Laws; (iv) Neither the Loan Parties nor any of their respective currently or previously owned or leased Properties or operations is subject to any outstanding or, to the best of F.Y.I.'s or any of its Subsidiaries' knowledge, threatened order from or agreement with any Governmental Authority or other Person or subject to any judicial or administrative proceeding with respect to (A) any failure to comply with Environmental Laws, (B) any Remedial Action, or (C) any Environmental Liabilities; (v) There are no conditions or circumstances associated with the currently or previously owned or leased Properties or operations of the Loan Parties that could reasonably be expected to give rise to any Environmental Liabilities or claims resulting in any Environmental Liabilities. None of the Loan Parties is subject to, or has received written notice of any claim from any Person alleging that any of the Loan Parties is or will be subject to, any Environmental Liabilities; (vi) None of the Properties of the Loan Parties is a treatment facility (except for AMENDED AND RESTATED CREDIT AGREEMENT - Page 60 67 the recycling of Hazardous Materials generated on-site and the treatment of liquid wastes subject to the Clean Water Act or other applicable Environmental Law) for temporary storage of Hazardous Materials generated on-site prior to their disposal off-site) or disposal facility requiring a permit under the Resource Conservation and Recovery Act, 42 U.S.C. Section 6901 et seq., regulations thereunder or any comparable provision of state law. The Loan Parties and their Subsidiaries are compliance with all applicable financial responsibility requirements of all Environmental Laws; and (vii) None of the Loan Parties has failed to file any notice required under applicable Environmental Law reporting a Release. (b) No Lien arising under any Environmental Law has attached to any Property or revenues of any Loan Party. Section 7.21 Labor Disputes and Acts of God. Neither the business nor the Properties of any Loan Party are affected by any fire, explosion, accident, strike, lockout or other labor dispute, drought, storm, hail, earthquake, embargo, act of God or of the public enemy or other casualty (whether or not covered by insurance) that is having or could have a Material Adverse Effect. Section 7.22 Material Contracts. Attached hereto as Schedule 7.22 is a complete list, as of the Closing Date, of all Material Contracts of the Loan Parties, other than the Loan Documents. All of the Material Contracts are in full force and effect and none of the Loan Parties is in default under any Material Contract and, to the best of F.Y.I.'s or any of its Subsidiaries' knowledge after due inquiry, no other Person that is a party thereto is in default under any of the Material Contracts. None of the Material Contracts prohibit the transactions contemplated under the Loan Documents or the Related Transactions Documents. All of the Material Contracts have been transferred or assigned to, or are currently in the name of, a Loan Party. F.Y.I. has delivered to the Agent a complete and current copy of each Material Contract (other than purchase orders entered into in the ordinary course of business) existing on the Closing Date and, with respect to each Material Contract (other than purchase orders entered into in the ordinary course of business) entered into after the Closing Date, will deliver to the Agent a complete and current copy of such Material Contract in a reasonably prompt fashion after the creation thereof. Section 7.23 Bank Accounts. As of the Closing Date, Schedule 7.23 sets forth the account numbers and location of all primary bank accounts of F.Y.I. Section 7.24 Outstanding Securities. As of the Closing Date, all outstanding securities (as defined in the Securities Act of 1933, as amended, or any successor thereto, and the rules and regulations of the Securities and Exchange Commission thereunder) of the Loan Parties have been offered, issued, sold and delivered in compliance with all applicable Governmental Requirements. Each of the IPO and the IPO Documents were conducted and prepared in accordance with all applicable Governmental Requirements, including, without limitation, Rule 10b-5 of the Securities and Exchange Commission under the Securities Exchange Act of 1934. AMENDED AND RESTATED CREDIT AGREEMENT - Page 61 68 Section 7.25 Related Transactions Documents. (a) No rights of cancellation or rescission and, to F.Y.I.'s or any of its Subsidiaries' knowledge, no defaults or defenses exist with respect to any of the Related Transactions Documents. F.Y.I. has delivered to the Agent complete and correct copies of all Related Transactions Documents, including all schedules and exhibits thereto. The Related Transactions Documents set forth the entire agreement and understanding of the parties thereto relating to the subject matter thereof, and there are no other agreements, arrangements or understandings, written or oral, relating to the matters covered thereby. (b) As of the Closing Date, all conditions precedent to the Related Transactions pursuant to the Related Transactions Documents have been fulfilled or (with the prior written consent of the Agent) waived, the Related Transactions Documents have not been amended or otherwise modified (except as permitted by this Agreement), and there has not been any breach of any material term or condition contained in the Related Transactions Documents. Section 7.26 Solvency. F.Y.I. and each of its Subsidiaries, as a separate entity, is Solvent as of the Closing Date. Section 7.27 Employee Matters. Except as set forth on Schedule 7.27, as of the Closing Date (a) none of the Loan Parties or any of its respective Subsidiaries, or any of its respective employees, is subject to any collective bargaining agreement, and (b) no petition for certification or union election is pending with respect to the employees of any Loan Party or any of its respective Subsidiaries, and no union or collective bargaining unit has sought such certification or recognition with respect to the employees of any of the Loan Parties or any of its respective Subsidiaries. There are no strikes, slowdowns, work stoppages or controversies pending or, to the best knowledge of F.Y.I. or any of its Subsidiaries after due inquiry, threatened against, any of the Loan Parties or any of its respective Subsidiaries, and its respective employees, which could have, either individually or in the aggregate, a Material Adverse Effect. Except as set forth on Schedule 7.27, as of the Closing Date, none of the Loan Parties or any of its respective Subsidiaries is subject to an employment contract. Section 7.28 Insurance. Schedule 7.28 sets forth a summary description of all policies of insurance that will be in effect as of the Closing Date for F.Y.I. and its Subsidiaries. To the extent such policies have not been replaced, no notice of cancellation has been received for such policies and F.Y.I. and its Subsidiaries are in compliance with all of the terms and conditions of such policies. AMENDED AND RESTATED CREDIT AGREEMENT - Page 62 69 Section 7.29 Common Enterprise. The expertise and efforts of F.Y.I. and each of its Subsidiaries support and benefit the other members of their affiliated corporate group. F.Y.I. and each Subsidiary expect to derive substantial benefit (and F.Y.I. and each Subsidiary may reasonably be expected to derive substantial benefit), directly and indirectly, from the Loans, Letters of Credit and the other transactions contemplated by this Agreement, both in their separate capacities and as a member of an affiliated and integrated corporate group. F.Y.I. and each Subsidiary will receive reasonably equivalent value in exchange for the collateral and guaranty being provided by it pursuant to Article 5 as security for the payment and performance of the Obligations. ARTICLE 8 Affirmative Covenants F.Y.I. covenants and agrees that, as long as the Obligations or any part thereof are outstanding or any Lender has any Commitment hereunder or any Letter of Credit remains outstanding, it will perform and observe, or cause to be performed and observed, the following covenants: Section 8.1 Reporting Requirements. F.Y.I. will furnish to the Agent, in quantities sufficient to allow the Agent to distribute the same to each Lender (and the Agent shall distribute the same to each Lender in a reasonably prompt fashion after its receipt thereof): (a) Annual Financial Statements. As soon as available, and in any event within 90 days after the end of each fiscal year of F.Y.I., beginning with the fiscal year ending December 31, 1997, (i) a copy of the annual audit report of F.Y.I. and its consolidated Subsidiaries as of the end of and for such fiscal year then ended containing, on a consolidated and (if requested by the Agent) consolidating basis, balance sheets and statements of income, retained earnings and cash flow, in each case setting forth in comparative form the figures for the preceding fiscal year, all in reasonable detail and audited and certified by independent certified public accountants of recognized standing acceptable to the Agent and containing no qualification thereto except as may be reasonably acceptable to the Agent, to the effect that such report has been prepared in accordance with GAAP, (ii) a certificate of such independent certified public accountants to the Agent (A) stating that to their knowledge no Default has occurred and is continuing or, if in their opinion a Default has occurred and is continuing, stating the nature thereof, and (B) confirming the calculations set forth in the officer's certificate delivered concurrently therewith, and (iii) if requested by the Agent, unaudited consolidating balance sheets and statements of income, retained earnings and cash flow, in each case setting forth in comparative form the figures for the preceding fiscal year; (b) Quarterly Financial Statements. As soon as available, and in any event within 45 days after the end of each of the quarters of each fiscal year of F.Y.I., beginning with the fiscal quarter ending December 31, 1997, a copy of (i) an unaudited financial report of F.Y.I. and its consolidated AMENDED AND RESTATED CREDIT AGREEMENT - Page 63 70 Subsidiaries as of the end of such fiscal quarter and for the portion of the fiscal year then ended containing, on a consolidated basis, balance sheets and statements of income, retained earnings and cash flow, in each case setting forth in comparative form the figures for the corresponding period of the preceding fiscal year, all in reasonable detail certified by a Responsible Officer of F.Y.I. to have been prepared in accordance with GAAP and to fairly and accurately present (subject to year-end audit adjustments) the financial condition and results of operations of F.Y.I. and its consolidated Subsidiaries, on a consolidated basis, at the date and for the periods indicated therein and (ii) management's financial reports comparing actual financial results for the period to the current budget for the period; (c) Certificate of No Default, etc.. Concurrently with the delivery of each of the financial statements referred to in Sections 8.1(a) and 8.1(b)), a certificate, substantially in the form of Exhibit G hereto, of a Responsible Officer of F.Y.I. (i) stating that, to the best of such officer's knowledge, no Default has occurred and is continuing or, if a Default has occurred and is continuing, stating the nature thereof and the action that has been taken and is proposed to be taken with respect thereto, and (ii) showing (with respect to each certificate delivered concurrently with the delivery of each of the financial statements referred to in Section 8.1(a) and 8.1(b)) in reasonable detail the calculations demonstrating compliance with Section 9.5(i) and Article 10, (iii) summarizing all material information regarding each Acquisition made during the fiscal quarter then most recently ended, which information shall include the names of the acquiror and the entity whose Capital Stock or assets were acquired, the nature of the assets owned by the acquired entity or acquired directly (as applicable), the nature of the business of the acquired entity or in which the assets acquired were and will be utilized (as applicable), the amount of the purchase price and all other consideration paid and payable in connection with such Acquisition and the form of such purchase price or other consideration, the remaining amount (if any) in each "basket" referred to in the definition of the term "Permitted Acquisition" after giving effect to all of such Acquisitions and such other information as the Agent may reasonably request, (iv) attaching (unless the Agent has agreed that the same need not be attached) the most recent financial statements of the entity whose Capital Stock or assets were acquired that are available to F.Y.I. and (if the Agent so requests) a copy of all Permitted Acquisition Documents relating to such Acquisition referred to in clause (iii) preceding, and (v) certifying that each Acquisition referred to in clause (iii) preceding is a Permitted Acquisition (and including financial data supporting such certification if requested by the Agent) and that no other Acquisitions were consummated during the fiscal quarter then most recently ended; (d) Budget. As soon as available and in any event before the beginning of each fiscal year of F.Y.I. for each fiscal year after 1997, a copy of the budget of F.Y.I. and its Subsidiaries on a consolidated basis for such fiscal year (segregated by entity with respect to each entity, if any, to be acquired which is included in such budget and segregated by quarter or month and setting forth all material assumptions); (e) Management Letters. Promptly upon any request therefor by the Agent, a copy of any management letter or written report submitted to any Loan Party by independent certified public accountants with respect to the business, condition (financial or otherwise), operations, prospects AMENDED AND RESTATED CREDIT AGREEMENT - Page 64 71 or Properties of any such Person; (f) Notice of Litigation. Promptly after the commencement thereof, notice of all actions, suits and proceedings before any Governmental Authority or arbitrator affecting any Loan Party which, if determined adversely to any such Person could have a Material Adverse Effect; (g) Notice of Default. As soon as possible and in any event immediately upon F.Y.I.'s knowledge or the knowledge of any Subsidiary of F.Y.I. of the occurrence of any Default, a written notice setting forth the details of such Default and the action that F.Y.I. or such Subsidiary has taken and proposes to take with respect thereto, and F.Y.I. will also at that time provide notice of such Default to each holder of Seller Subordinated Debt; (h) ERISA Reports. Promptly after the filing or receipt thereof, copies of all reports, including annual reports, and notices which any Loan Party or any of its ERISA Affiliates files with or receives from the PBGC or the U.S. Department of Labor under ERISA; and as soon as possible and in any event within five days after any such Person knows or has reason to know that any Pension Plan is insolvent, or that any Reportable Event or Prohibited Transaction has occurred with respect to any Plan or that the PBGC, any Loan Party or any ERISA Affiliate has instituted or will institute proceedings under ERISA to terminate or withdraw from or reorganize any Pension Plan, a certificate of a Responsible Officer of such Loan Party setting forth the details as to such insolvency, withdrawal, Reportable Event, Prohibited Transaction, tax or penalty or termination and the action that such Loan Party has taken and proposes to take with respect thereto; (i) Reports to Other Creditors. Promptly after the furnishing thereof, a copy of any statement or report furnished by any Loan Party to any other party pursuant to the terms of any indenture, loan, stock purchase or credit or similar agreement and not otherwise required to be furnished to the Agent and the Lenders pursuant to any other subsection of this Section 8.1; (j) Notice of Material Adverse Effect. Within five Business Days after F.Y.I. or any Subsidiary of F.Y.I. becomes aware thereof, written notice of any matter that could have a Material Adverse Effect; (k) Proxy Statements, Etc. As soon as available, one copy of each financial statement, report, notice or proxy statement sent by any Loan Party to its stockholders generally and one copy of each regular, periodic or special report, registration statement or prospectus filed by any Loan Party with any securities exchange or the Securities and Exchange Commission or any successor agency, and of all press releases and other statements made by any of the Loan Parties to the public containing material developments in its business; (l) Notice of New Properties and Subsidiaries. Concurrently with the delivery of each of the financial statements referred to in Sections 8.1(a) and 8.1(b), notice of (i) if the Total Debt to EBITDA Ratio then exceeds 1.75 to 1.00, any real Property acquired or any lease of real Property which meets the criteria set forth in Section 5.4 entered into by F.Y.I. or any of its Subsidiaries as AMENDED AND RESTATED CREDIT AGREEMENT - Page 65 72 lessee, (ii) if the Total Debt to EBITDA Ratio then exceeds 1.75 to 1.00, any additional patents, copyrights and trademarks, and any other Intellectual Property of which the Agent should be aware in order to ensure its Lien thereon, acquired by F.Y.I. or any of its Subsidiaries, and (iii) the creation or acquisition of any direct or indirect Subsidiary of F.Y.I. after the Closing Date and subsequent to the last delivery of such information; (m) Appraisals. From time to time if the Agent determines that such appraisals are required to comply with applicable Governmental Requirements or to syndicate the Loans, appraisals of the Mortgaged Properties reasonably satisfactory in form and substance to the Agent (such appraisals to be at the expense of F.Y.I.); (n) Insurance. Within 30 days after any request therefor by the Agent, a report in form and substance reasonably satisfactory to the Agent summarizing all material insurance coverage maintained by F.Y.I. and its Subsidiaries as of the date of such report and all material insurance coverage planned to be maintained by such Persons in the subsequent fiscal year; (o) Plan Information. From time to time, as reasonably requested by the Agent or any Lender, such books, records and other documents relating to the any Pension Plan as the Agent or any Lender shall specify; prior to any termination, partial termination or merger of a Pension Plan covering employees of F.Y.I. or any Subsidiary of F.Y.I. or any ERISA Affiliate, or a transfer of assets of a Pension Plan covering employees of F.Y.I. or any Subsidiary of F.Y.I. or any ERISA Affiliate, written notification thereof; promptly upon F.Y.I.'s or any F.Y.I. Subsidiary's receipt thereof, a copy of any determination letter or advisory opinion regarding any Pension Plan received from any Governmental Authority and any amendment or modification thereto as may be necessary as a condition to obtaining a favorable determination letter or advisory opinion; and promptly upon the occurrence thereof, written notification of any action requested by any Governmental Authority to be taken as a condition to any such determination letter or advisory opinion; (p) Environmental Assessments and Notices. Promptly after the receipt thereof, a copy of each environmental assessment (including any analysis relating thereto) prepared with respect to any real Property of any Loan Party and each notice sent by any Governmental Authority relating to any failure or alleged failure to comply with any Environmental Law or any liability with respect thereto; (q) Certain Capital Expenditures. If any Permitted Capital Expenditures (as defined in Section 10.5) consist of the purchase of all or substantially all of the assets of any Person, at least 30 days prior to such purchase, provide evidence satisfactory to the Agent that the contingent liabilities to be assumed by the purchaser with respect to such assets (including, without limitation, contingent liabilities relating to ERISA, environmental matters and litigation) do not exceed ten percent of the purchase price paid for such assets; (r) General Information. Promptly, such other information concerning the Loan Parties and their respective Subsidiaries as the Agent or any Lender may from time to time reasonably AMENDED AND RESTATED CREDIT AGREEMENT - Page 66 73 request; and (s) Solvency Certificate. At the time of the making of the initial Loan or the issuance of the initial Letter of Credit and at the making of each Loan thereafter, a Solvency Certificate. Section 8.2 Maintenance of Existence, Conduct of Business. F.Y.I. will, and will cause each of its Subsidiaries to (except as may be otherwise permitted by Section 9.3), preserve and maintain its corporate existence and all of its material leases, privileges, licenses, Permits, franchises, qualifications, Intellectual Property, intangible Property and rights that are necessary in the ordinary conduct of its business. F.Y.I. will, and will cause each of its Subsidiaries to, conduct its business in an orderly and efficient manner in accordance with good business practices, in each case in all material respects. Section 8.3 Maintenance of Properties. F.Y.I. will, and will in all material respects cause each of its Subsidiaries to, maintain, keep and preserve all of its Properties necessary or appropriate in the proper conduct of its business in good repair, working order and condition (ordinary wear and tear excepted) and make all necessary repairs, renewals, replacements, betterments and improvements thereof. Section 8.4 Taxes and Claims. F.Y.I. will, and will cause each of its Subsidiaries to, pay or discharge at or before maturity or before becoming delinquent (a) all taxes, levies, assessments and governmental charges (other than those which do not, in the aggregate, exceed $100,000 in amount) imposed on it or its income or profits or any of its Property and (b) all lawful claims for labor, material and supplies, which, if unpaid, might become a Lien upon any of its Property; provided, however, that neither F.Y.I. nor any of its Subsidiaries shall be required to pay or discharge any tax, levy, assessment or governmental charge or claim for labor, material or supplies whose amount, applicability or validity is being contested in good faith by appropriate proceedings being diligently pursued and for which adequate reserves have been established under GAAP. Section 8.5 Insurance. (a) F.Y.I. will, and will cause each of its Subsidiaries to, keep insured by financially sound and reputable insurers all Property of a character usually insured by responsible corporations engaged in the same or a similar business similarly situated against loss or damage of the kinds and in the amounts customarily insured against by such corporations or entities and carry such other insurance as is usually carried by such corporations or entities, provided that in any event F.Y.I. and its Subsidiaries (as appropriate) will maintain: (i) Property Insurance -- Insurance against loss or damage covering substantially all of the tangible real and personal Property and improvements of F.Y.I. and each of its Subsidiaries by reason of any Peril (as defined below) in such amounts (subject to any deductibles as shall be satisfactory to the Agent) as shall be reasonable and customary and sufficient to avoid the insured named therein from becoming a co-insurer of any loss under AMENDED AND RESTATED CREDIT AGREEMENT - Page 67 74 such policy, but in any event in such amounts as are reasonably available as determined by F.Y.I.'s independent insurance broker reasonably acceptable to the Agent. (ii) Automobile Liability Insurance for Bodily Injury and Property Damage --Insurance in respect of all vehicles (whether owned, hired or rented by F.Y.I. or any of its Subsidiaries) at any time located at, or used in connection with, its Properties or operations against liabilities for bodily injury and Property damage in such amounts as are then customary for vehicles used in connection with similar Properties and businesses, but in any event to the extent required by applicable law. (iii) Comprehensive General Liability Insurance -- Insurance against claims for bodily injury, death or Property damage occurring on, in or about the Property (and adjoining streets, sidewalks and waterways) of F.Y.I. and its Subsidiaries, in such amounts as are then customary for Property similar in use in the jurisdictions where such Properties are located. (iv) Worker's Compensation Insurance -- Worker's compensation insurance (including employers' liability insurance) to the extent required by applicable law, which may be self-insurance to the extent permitted by applicable law. (v) Product Liability Insurance -- Insurance against claims for bodily injury, death or Property damage resulting from the use of products sold by F.Y.I. or any of its Subsidiaries to the extent and in such amounts as then customarily maintained by responsible Persons engaged in businesses similar to that of F.Y.I. and/or any of its Subsidiaries. (vi) Business Interruption Insurance -- Insurance against loss of operating income earned from the operation of the Properties of F.Y.I. and its Subsidiaries, by reason of any Peril (to the extent reasonably available) affecting the operation thereof, and insurance against any other insurable loss of operating income by reason of any business interruption affecting F.Y.I. or any of its Subsidiaries to the extent covered by standard business interruption policies in the applicable states. Such insurance shall be written by financially responsible companies selected by F.Y.I. and having an A.M. Best Rating of "A-" or better and being in a financial size category of "VI" or larger, or by other companies reasonably acceptable to the Required Lenders. No later than the date of the making of the initial Loan or the issuance of the initial Letter of Credit, each policy referred to in this Section 8.5 shall provide that it will not be canceled, amended or reduced except after not less than 30 days' prior written notice to the Agent and shall also provide that the interests of the Agent and the Lenders shall not be invalidated by any act or negligence of F.Y.I. or any of its Subsidiaries. F.Y.I. will advise the Agent promptly of any policy cancellation, reduction or amendment. For purposes hereof, the term "Peril" shall mean, collectively, fire, lightning, flood, windstorm, hail, explosion, riot and civil commotion, vandalism and malicious mischief, damage from aircraft, vehicles and smoke and other perils covered by the "all-risk" endorsement then in use in the jurisdictions where the Properties of F.Y.I. and its Subsidiaries are located. AMENDED AND RESTATED CREDIT AGREEMENT - Page 68 75 (b) If a Default shall have occurred and be continuing, F.Y.I. will cause all proceeds of insurance paid on account of the loss of or damage to any Property of F.Y.I. or any of its Subsidiaries and all awards of compensation for any Property of F.Y.I. or any of its Subsidiaries taken by condemnation or eminent domain to be paid directly to the Agent to be applied against or held as security for the Obligations, at the election of the Agent and the Required Lenders. Section 8.6 Inspection Rights. F.Y.I. will, and will cause each of its Subsidiaries to, permit representatives and agents of the Agent and each Lender, during normal business hours and upon reasonable notice to F.Y.I., to examine, copy and make extracts from its books and records, to visit and inspect its Properties and to discuss its business, operations and financial condition with its officers and independent certified public accountants. F.Y.I. will authorize its accountants in writing (with a copy to the Agent) to comply with this Section 8.6. The Agent or its representatives may, at any time and from time to time at F.Y.I.'s expense, conduct field exams for such purposes as the Agent may reasonably request. Section 8.7 Keeping Books and Records. F.Y.I. will, and will cause each of its Subsidiaries to, maintain appropriate books of record and account in accordance with GAAP consistently applied in which true, full and correct entries will be made of all their respective dealings and business affairs. If any Accounting Changes from the accounting principles used in the preparation of the financial statements referenced in Section 8.1 are hereafter required or permitted by GAAP and are adopted by any F.Y.I. or any of its Subsidiaries, the provisions of Section 1.3(a) shall be applicable thereto; provided that, until any necessary amendments have been made, the certificate required to be delivered under Section 8.1(c) hereof demonstrating compliance with Article 10 shall include calculations setting forth the adjustments from the relevant items as shown in the current financial statements based on the changes to GAAP to the corresponding items based on GAAP as used in the financial statements referenced in Section 7.2(a), in order to demonstrate how such financial covenant compliance was derived from the current financial statements. Section 8.8 Compliance with Laws. F.Y.I. will, and will cause each of its Subsidiaries to, comply with all applicable Governmental Requirements, except for instances of noncompliance that could not have, individually or in the aggregate, a Material Adverse Effect. Section 8.9 Compliance with Agreements. F.Y.I. will, and will cause each of its Subsidiaries to, comply with all agreements, contracts and instruments binding on it or affecting its Properties or business, except for instances of noncompliance that could not have, individually or in the aggregate, a Material Adverse Effect. Section 8.10 Further Assurances. F.Y.I. will, and will cause each of its Subsidiaries to, execute and deliver such further agreements, documents and instruments and take such further action as may be reasonably requested by the Agent to carry out the provisions and purposes of this Agreement and the other Loan Documents, to evidence the Obligations and to create, preserve, maintain and perfect the Liens of the Agent for the benefit of itself and the Lenders in and to the Collateral and the required priority of such Liens. AMENDED AND RESTATED CREDIT AGREEMENT - Page 69 76 Section 8.11 ERISA; Plans. F.Y.I. will, and will cause each of its ERISA Affiliates to, comply with all minimum funding requirements and all other material requirements of ERISA, if applicable, so as not to give rise to any liability thereunder. Section 8.12 Trade Accounts Payable. F.Y.I. will, and will cause each of its Subsidiaries to, pay all trade accounts payable before the same become more than 90 days past due, except (a) trade accounts payable contested in good faith or (b) trade accounts payable in an aggregate amount not to exceed at any time outstanding $400,000 and with respect to which no proceeding to enforce collection has been commenced or, to the knowledge of F.Y.I. or any Subsidiary of F.Y.I., threatened. Section 8.13 No Consolidation. F.Y.I. will, and (except with respect to clause (a) succeeding which shall not be applicable to Subsidiaries of F.Y.I.) will cause each of its Subsidiaries to: (a) with respect to F.Y.I. only, provide that, at all times, at least one (1) member of its board of directors or at least one (1) of its officers will be a Person who is not an officer, director or employee of any Affiliate of F.Y.I. or any other Subsidiary; (b) maintain corporate records and books of account separate from those of any corporation which is an Affiliate of F.Y.I. and separate from those of any Subsidiary of F.Y.I.; (c) not commingle its funds or assets with those of any corporation which is an Affiliate of F.Y.I. or with those of any Subsidiary of F.Y.I.; and (d) provide that its board of directors will hold all appropriate meetings to authorize and approve such Person's corporate actions. ARTICLE 9 Negative Covenants Each of F.Y.I. and each of its Subsidiaries jointly and severally covenants and agrees that, as long as the Obligations or any part thereof are outstanding or any Lender has any Commitment hereunder or any Letter of Credit remains outstanding, it will perform and observe, or cause to be performed and observed, the following covenants: Section 9.1 Debt. F.Y.I. will not, and will not permit any of its Subsidiaries to, incur, create, assume or permit to exist any Debt, except: (a) Debt of F.Y.I. and its Subsidiaries to the Lenders pursuant to the Loan Documents; AMENDED AND RESTATED CREDIT AGREEMENT - Page 70 77 (b) Existing Debt described on Schedule 7.10 hereto and renewals, replacements (on terms no more onerous to the borrower than the existing terms), and extensions of such Debt which do not increase the outstanding principal amount of, such Debt and the terms and provisions of which are not materially more onerous than the terms and conditions of such Debt on the Closing Date; (c) Purchase money Debt secured by purchase money Liens, which Debt and Liens are permitted under and meet all of the requirements of clause (g) of the definition of Permitted Liens contained in Section 1.1; (d) Seller Subordinated Debt; provided, however, that no Seller Subordinated Debt may be created or incurred during the continuance of any Default or Event of Default or if a Default or Event of Default would result from the creation or incurrence of such Seller Subordinated Debt; (e) Intercompany Debt between or among F.Y.I. and any of its Wholly-Owned Subsidiaries incurred in the ordinary course of business, subject to the requirement that any and all of the Debt permitted pursuant to this Section 9.1(e) shall be unsecured, shall be evidenced by instruments satisfactory to the Agent which will be pledged to the Agent for the benefit of the Agent and the Lenders and shall be subordinated to the Obligations pursuant to a subordination agreement in form and substance satisfactory to the Agent (the foregoing being referred to as "Intercompany Debt"); (f) Obligations under Interest Rate Protection Agreements and Currency Hedge Agreements, provided that each counterparty shall be Banque Paribas or another counterparty rated in one of the three highest rating categories of Standard and Poors Corporation or Moody's Investors Service, Inc., and provided that the maximum amount for which interest may be fixed or capped under all such Interest Rate Protection Agreements may not exceed one hundred percent (100%) of the Debt of F.Y.I. and its Subsidiaries, and provided further, however, that the maximum amount of currency for which risk may be hedged under a Currency Hedge Agreement may not exceed one hundred percent (100%) of the foreign currency at risk in the transactions in which F.Y.I. and its Subsidiaries are engaged; and (g) Liabilities of F.Y.I. or any F.Y.I. Subsidiary in respect of unfunded vested benefits under any Plan if and to the extent that the existence of such liabilities will not constitute, cause or result in a Default; provided, however, that, notwithstanding the foregoing, the aggregate outstanding principal amount of Debt of the Subsidiaries of F.Y.I., exclusive of Debt referred to in clause (a) preceding, shall not at any time exceed $10,000,000. Section 9.2 Limitation on Liens. F.Y.I. will not, and will not permit any of its Subsidiaries to, incur, create, assume or permit to exist any Lien upon any of its Property or AMENDED AND RESTATED CREDIT AGREEMENT - Page 71 78 revenues, whether now owned or hereafter acquired, except Permitted Liens. Section 9.3 Mergers, Etc. F.Y.I. will not, and will not permit its Subsidiaries to, (a) become a party to a merger or consolidation, (b) wind-up, dissolve or liquidate itself, or (c) purchase or acquire all or a material or substantial part of the business or Properties of any Person; provided, however, that (i) Permitted Acquisitions (but no other Acquisitions) shall be permitted, and (ii) any Subsidiary of F.Y.I. may merge with and into F.Y.I. if F.Y.I. is the entity surviving such merger and any Subsidiary of F.Y.I. may merge with and into any Wholly-Owned Subsidiary of F.Y.I. if such Wholly-Owned Subsidiary is the entity surviving such merger and no consideration is given by the surviving entity in such merger other than Capital Stock of the surviving entity and such Capital Stock is pledged to the Agent, on behalf of the Agent and the Lenders, as security for the Obligations pursuant to Section 9.6. The surviving entity in any such merger shall ratify the Security Documents and other obligations of the non-surviving entity under the Loan Documents. Section 9.4 Restricted Payments. F.Y.I. will not, and will not permit any of its Subsidiaries to, make any Restricted Payments, except: (a) Subsidiaries of F.Y.I. may declare and pay dividends to F.Y.I.; (b) The Subsidiaries of F.Y.I. may make tax payments to F.Y.I. if and to the extent that all such payments are promptly paid by F.Y.I. to the appropriate Governmental Authority to whom such payments are owed; provided that in no event shall such payments be greater than the amounts actually paid by F.Y.I. in respect of such taxes; (c) To the extent required by the terms of any employment agreement, purchases by F.Y.I. of shares of F.Y.I. Common Stock from employees of F.Y.I. or its Subsidiaries upon the termination of the employment of such employees, provided that the amount paid therefor shall not exceed the fair market value of such shares to be purchased and shall not exceed $250,000 in the aggregate during any fiscal year or a cumulative total of $350,000 in the aggregate during the term of this Agreement and F.Y.I. shall grant to the Agent, for the benefit of the Agent and the Lenders, a Lien on all of such shares purchased by F.Y.I. as security for the Obligations pursuant to a pledge agreement in form and substance reasonably satisfactory to the Agent; (d) To the extent permitted under Sections 9.5(g) and 9.5(h); provided, however, that no Restricted Payments may be made pursuant to clauses (a), (b), (c) or (d) preceding if a Default exists at the time of such Restricted Payment or would result therefrom. Section 9.5 Investments. F.Y.I. will not, and will not permit any of its Subsidiaries to, make or permit to remain outstanding any advance, loan, extension of credit or capital contribution to or investment in any Person, or purchase or own any stock, bonds, notes, debentures or other securities of any Person, or be or become a joint venturer with or partner of any Person (all such AMENDED AND RESTATED CREDIT AGREEMENT - Page 72 79 transactions being herein called "Investments"), except: (a) Investments in obligations or securities received in settlement of debts (created in the ordinary course of business) owing to F.Y.I. or any of its Subsidiaries; (b) Existing Investments identified on Schedule 9.5 hereto; (c) Investments in securities issued or guaranteed by the U.S. or any agency thereof with maturities of one year or less from the date of acquisition; (d) Investments in certificates of deposit and Eurodollar time deposits with maturities of six months or less from the date of acquisition, bankers' acceptances with maturities not exceeding six months and overnight bank deposits, in each case with any Lender or with any domestic commercial bank having capital and surplus in excess of $500,000,000; (e) Investments in repurchase obligations with a term of not more than seven days for securities of the types described in clause (c) preceding with any Lender or with any domestic commercial bank having capital and surplus in excess of $500,000,000; (f) Investments in commercial paper of a domestic issuer rated A-1 or better or P-1 or better by Standard & Poor's Corporation or Moody's Investors Services, Inc., respectively, maturing not more than six months from the date of acquisition; (g) (i) Investments by F.Y.I. and its Subsidiaries in its Subsidiaries existing on the Closing Date, (ii) any Investments of F.Y.I. in its Subsidiaries which represent amounts invested in such Subsidiary to enable such Subsidiary (A) to pay all or a portion of the purchase consideration for a Permitted Acquisition, (B) to make Permitted Capital Expenditures, (C) to retire any Existing Debt, or (D) to retire any Debt assumed in connection with a Permitted Acquisition, and (iii) Investments by F.Y.I. in Wholly-Owned Subsidiaries of F.Y.I.; (h) Intercompany Debt permitted pursuant to Section 9.1(e); (i) up to $10,000,000 in Investments made by F.Y.I., and owned by F.Y.I. and not any Subsidiary of F.Y.I., in publicly traded equity securities of a Person whose material business and properties are all located in the U.S. or Canada and who is engaged in a business similar or complementary to the business of F.Y.I. or a Subsidiary of F.Y.I. and which has generated positive EBITDA during the twelve-month period preceding the purchase of such securities so long as the aggregate of such equity securities owned by F.Y.I. does not at any time exceed (a) 5% of the total assets of F.Y.I. and its consolidated Subsidiaries as determined in accordance with GAAP; and (j) Investments which constitute Permitted Acquisitions; provided, however, that no Investments may be made by F.Y.I. or any of its Subsidiaries pursuant AMENDED AND RESTATED CREDIT AGREEMENT - Page 73 80 to clause (g) or (h) preceding if a Default exists at the time of such Investment or would result therefrom. Section 9.6 Limitation on Issuance of Capital Stock. F.Y.I. will not permit any of its Subsidiaries to, at any time issue, sell, assign or otherwise dispose of (a) any of its Capital Stock, (b) any securities exchangeable for or convertible into or carrying any rights to acquire any of its Capital Stock, or (c) any option, warrant or other right to acquire any of its Capital Stock; provided, however, that, if and to the extent not otherwise prohibited by this Agreement or the other Loan Documents (i) a Subsidiary of F.Y.I. may issue additional shares of its Capital Stock to F.Y.I. for full and fair consideration, and (ii) F.Y.I. may engage in any merger permitted under clause (ii) of the proviso to Section 9.3; provided, further, however, that all of such additional shares of Capital Stock referred to in clauses (i) and (ii) preceding and any shares of Capital Stock issued in any merger referred to in clause (ii) preceding shall be pledged to the Agent, on behalf of the Agent and the Lenders, as security for the Obligations pursuant to a pledge agreement in form and substance reasonably satisfactory to the Agent. Section 9.7 Transactions With Affiliates. Except for (a) the payment of salaries, bonus and incentive compensation in the ordinary course of business consistent with prudent business practices, and (b) the furnishing of employment benefits in the ordinary course of business consistent with prudent business practices, F.Y.I. will not, and will not permit any of its Subsidiaries to, enter into any transaction, including, without limitation, the purchase, sale or exchange of Property or the rendering of any service, with any Affiliate, officer or director of F.Y.I. or such Subsidiary except in the ordinary course of and pursuant to the reasonable requirements of F.Y.I.'s or such Subsidiary's business and upon fair and reasonable terms no less favorable to F.Y.I. or such Subsidiary, respectively, than would be obtained in a comparable arms-length transaction with a Person not an Affiliate, officer or director of F.Y.I. or such Subsidiary, respectively. Section 9.8 Disposition of Property. F.Y.I. will not, and will not permit any of its Subsidiaries to, sell, lease, assign, transfer or otherwise dispose of any of its Property, except: (a) dispositions of Inventory in the ordinary course of business, (b) Asset Dispositions by F.Y.I. and its Subsidiaries to Persons other than F.Y.I. and its Subsidiaries if each of the following conditions has been satisfied: (i) the Net Proceeds from any single Asset Disposition or series of related Asset Dispositions in any fiscal year of F.Y.I. do not exceed $250,000 and the cumulative Net Proceeds from all Asset Dispositions do not exceed $500,000, (ii) the consideration received by F.Y.I. or its Subsidiaries is at least equal to the fair market value of such assets, (iii) the sole consideration received is cash payable at the closing, provided, however, that up to a cumulative total of $125,000 of Property may be disposed of by F.Y.I. and its Subsidiaries on a combined basis on terms which defer payment of a portion of the purchase price, (iv) no Default exists at the time of or will result from such Asset Disposition, and (v) F.Y.I. makes, or causes the appropriate Subsidiary to make, any payment required under Section 2.7; AMENDED AND RESTATED CREDIT AGREEMENT - Page 74 81 (c) Asset Dispositions by F.Y.I. and its Subsidiaries to F.Y.I. or another Subsidiary if each of the following conditions has been satisfied: (i) the aggregate fair market value of the assets sold, disposed of or otherwise transferred shall not exceed $250,000 in aggregate amount during any fiscal year, (ii) the assets sold, disposed of or otherwise transferred shall, if subject to a first priority Lien in favor of the Agent and the Lenders, continue to be subject to a perfected, first priority Lien (except for Permitted Liens, if any, which are expressly permitted by the Loan Documents to have priority over the Liens in favor of the Agent) in favor of the Agent and the Lenders, and (iii) no Default exists at the time of or will result from such Asset Disposition; (d) dispositions of Property no longer used or useful in the ordinary course of business; (e) Asset Dispositions that were contemplated and disclosed to the Lenders at the time of any Permitted Acquisition if the Asset Disposition occurs, and the Net Proceeds thereof are applied, as required or permitted by Section 2.7; and (f) Asset Dispositions by Subsidiaries of F.Y.I., and Asset Dispositions consisting of a sale of all of the issued and outstanding Capital Stock of a Subsidiary of F.Y.I., if the aggregate fair market value of the Property sold or otherwise transferred in connection with all of such Asset Dispositions on or after the Closing Date does not exceed ten percent of the net book value of the tangible assets of F.Y.I. and its Subsidiaries as of the date of any such Asset Disposition. Section 9.9 Sale and Leaseback. F.Y.I. will not, and will not permit any of its Subsidiaries to, enter into any arrangement with any Person pursuant to which it leases from such Person real or personal Property that has been or is to be sold or transferred, directly or indirectly, by it to such Person. Section 9.10 Lines of Business. F.Y.I. will not, and will not permit any of its Subsidiaries to, engage in any line or lines of business activity other than the businesses in which they are engaged on the Closing Date and lines of business reasonably related thereto. F.Y.I. will not, without the prior written consent of the Required Lenders, become an operating company and will not engage in any business activity except for business activities relating to its ownership and management of its Subsidiaries substantially consistent with its current business activities. F.Y.I. shall not and shall not permit any of its Subsidiaries to own Property or conduct any material business operations outside the U.S., Canada or, to the extent permitted by the last proviso in the definition of Permitted Acquisitions, Mexico and the Caribbean. Section 9.11 Environmental Protection. F.Y.I. will not, and will not permit any of its Subsidiaries to, (a) use (or permit any tenant to use) any of its Properties for the handling, processing, storage, transportation or disposal of any Hazardous Material except in compliance with applicable Environmental Laws, (b) generate any Hazardous Material except in compliance with applicable Environmental Laws, (c) conduct any activity that is likely to cause a Release or threatened Release of any Hazardous Material in violation of any Environmental Law, or (d) otherwise conduct any activity or use any of its Properties in any manner that violates or is likely AMENDED AND RESTATED CREDIT AGREEMENT - Page 75 82 to violate any Environmental Law or create any Environmental Liabilities for which F.Y.I. or any of its Subsidiaries would be responsible, except for circumstances or events described in clauses (a) through (d) preceding that could not have, individually or in the aggregate, a Material Adverse Effect. Section 9.12 Intercompany Transactions. Except as may be expressly permitted or required by the Loan Documents, F.Y.I. will not, and will not permit any of its Subsidiaries to, create or otherwise cause or permit to exist or become effective any consensual encumbrance or restriction of any kind on the ability of any Subsidiary to (a) pay dividends or make any other distribution to F.Y.I. or any of its Subsidiaries in respect of such Subsidiary's Capital Stock or with respect to any other interest or participation in, or measured by, its profits, (b) pay any indebtedness owed to F.Y.I. or any of its Subsidiaries, (c) make any loan or advance to F.Y.I. or any of its Subsidiaries, or (d) sell, lease or transfer any of its Property to F.Y.I. or any of its Subsidiaries. Section 9.13 Management Fees. F.Y.I. will not, and will not permit any of its Subsidiaries to, pay any management, consulting or similar fees (excluding directors' fees) to any Affiliate of F.Y.I. or to any director, officer or employee of F.Y.I. or any Affiliate of F.Y.I.; provided, however, that any Subsidiary of F.Y.I. may pay management or similar fees to F.Y.I. to the extent that the amount of such fees paid in any year does not exceed ten percent of the gross revenues of the paying Subsidiary for that year. Section 9.14 Modification of Other Agreements. F.Y.I. will not, and will not permit any of its Subsidiaries to, consent to or implement any termination, amendment, modification, supplement or waiver of (a) the F.Y.I. Equity Documents, if the same could have a Material Adverse Effect or otherwise could be materially adverse to the Agent or the Lenders, (b) the certificate of incorporation or bylaws (or analogous constitutional documents) of F.Y.I. or any of its Subsidiaries if the same could have a Material Adverse Effect or otherwise could be materially adverse to the Agent or the Lenders, or (c) any other Material Contract to which it is a party or any Permit which it possesses if the same could have a Material Adverse Effect; provided, however, that F.Y.I. and its Subsidiaries may amend or modify the agreements, documents and instruments referred to in clause (c) preceding if and to the extent that such amendment or modification is not substantive or material and could not have a Material Adverse Effect. Section 9.15 ERISA Plans. F.Y.I. will not, and will not permit any of its Subsidiaries to: (a) allow, or take (or permit any ERISA Affiliate to take) any action which would cause, any unfunded or unreserved liability for benefits under any Plan (exclusive of any Multiemployer Plan) to exist or to be created that exceeds $25,000 with respect to any such Plan or $50,000 with respect to all such Plans in the aggregate on either a going concern or a wind-up basis; or (b) with respect to any Multiemployer Plan, allow, or take (or permit any ERISA Affiliate to take) any action which would cause, any unfunded or unreserved liability for benefits under any Multiemployer Plan to exist or to be created, either individually as to any such Plan or in the AMENDED AND RESTATED CREDIT AGREEMENT - Page 76 83 aggregate as to all such Plans, that could, upon any partial or complete withdrawal from or termination of any such Multiemployer Plan or Plans, have a Material Adverse Effect. Section 9.16 Dividend Restrictions. F.Y.I. will not permit any of its Subsidiaries to be party to or bound by any agreement, document, instrument, covenant or other restriction (other than this Agreement) which restricts the ability of such Subsidiary to pay dividends to, make distribution to, and make advance to, F.Y.I. or any Subsidiary of F.Y.I. AMENDED AND RESTATED CREDIT AGREEMENT - Page 77 84 ARTICLE 10 Financial Covenants F.Y.I. covenants and agrees that, as long as the Obligations or any part thereof are outstanding or any Lender has any Commitment hereunder or any Letter of Credit remains outstanding, it will perform and observe, or cause to be performed and observed, the following covenants: Section 10.1 Consolidated Net Worth. F.Y.I. will at all times maintain Consolidated Net Worth in an amount not less than the sum of (a) $90,000,000 plus (b) 75% of cumulative Consolidated Net Income, if positive, for any fiscal quarter, i.e., exclusive of negative Consolidated Net Income for any fiscal quarter, after December 31, 1997, plus (c) all Net Proceeds of each Equity Issuance after December 31, 1997, minus the amount of any stock repurchase consummated under the terms of Section 9.4(c). Section 10.2 Ratio of Total Debt to EBITDA. (a) F.Y.I. will not permit the ratio, calculated as of the end of each fiscal quarter of F.Y.I. commencing with the fiscal quarter ended December 31, 1997, of (i) Total Debt to (ii) EBITDA (the "Total Debt to EBITDA Ratio") for the four fiscal quarters then ended for F.Y.I. and its Subsidiaries to exceed the ratio set forth below for the period during which such fiscal quarter end occurs:
Period Ratio ------ ----- From December 31,1997, through December 31, 2000 3.00 to 1.00 From January 1, 2001 through December 31, 2001 2.50 to 1.00 From January 1, 2002 and at all times thereafter 2.00 to 1.00
(b) F.Y.I. will not permit the ratio, calculated as of the end of each fiscal quarter of F.Y.I. commencing with the fiscal quarter ended June 30, 1996, of (i) the sum of (A) Total Debt, plus (B) the highest possible amount of all unpaid Seller Earn Out payable pursuant to an Acquisition contract in cash over any period of time, whether the payment of such Seller Earn Out is contingent or otherwise, to (ii) the sum of (A) EBITDA for the four fiscal quarters then ended for F.Y.I. and its Subsidiaries plus (B) the EBITDA or EBIT required by the applicable Acquisition contract(s) to generate the amount of Seller Earn Out set forth in (i)(B) above (the "Adjusted Total Debt to EDITDA Ratio") to exceed the ratio set forth below for the period during which such fiscal quarter end occurs: AMENDED AND RESTATED CREDIT AGREEMENT - Page 78 85
Period Ratio ------ ----- From December 31, 1997, through December 31, 2000 3.25 to 1.00 From January 1, 2001 through December 31, 2001 2.75 to 1.00 From January 1, 2002, and at all times thereafter 2.25 to 1.00
Section 10.3 Consolidated Fixed Charge Coverage Ratio. F.Y.I. will not permit the Consolidated Fixed Charge Coverage Ratio, calculated as of the end of each fiscal quarter of F.Y.I.. commencing with the fiscal quarter ended December 31, 1997, for the four fiscal quarters of F.Y.I. then ended, to be less than 1.50 to 1.00. Section 10.4 Consolidated Interest Coverage Ratio. F.Y.I. will not permit the Consolidated Interest Coverage Ratio, calculated as of the end of each fiscal quarter of F.Y.I. commencing with the fiscal quarter ended December 31, 1997, for the four fiscal quarters of F.Y.I. then ended, to be less than the ratio set forth below for the period during which such fiscal quarter end occurs:
Period Ratio ------ ----- From December 31, 1997, through December 31, 2000 4.00 to 1.00 From January 1, 2001 through December 31, 2001 4.50 to 1.00 From January 1, 2002, and at all times thereafter 5.00 to 1.00
Section 10.5 Capital Expenditures. F.Y.I. will not permit the aggregate Capital Expenditures of F.Y.I. and its Subsidiaries during any fiscal year of F.Y.I. to exceed the sum of (a) $10,000,000 ("Permitted Capital Expenditures") plus (b) an amount equal to 110% of the annual depreciation of any entity acquired in a Permitted Acquisition (i) for the fiscal year in which such Permitted Acquisition is made, for the twelve-month period preceding the date of the Permitted Acquisition multiplied by a fraction the numerator of which is the number of calendar days remaining in the fiscal year in which such Permitted Acquisition is consummated after the date of consummation of such Permitted Acquisition and the denominator of which is 365, and (ii) for each subsequent fiscal year, increasing at a rate of three percent (3%). AMENDED AND RESTATED CREDIT AGREEMENT - Page 79 86 ARTICLE 11 Default Section 11.1 Events of Default. Each of the following shall be deemed an "Event of Default": (a) F.Y.I. or any of its Subsidiaries shall fail to pay, repay or prepay when due any amount of principal owing to the Agent or any Lender pursuant to this Agreement or any other Loan Document, or shall fail to pay within two days after the due date thereof any interest, fee or other amount or other Obligation owing to the Agent or any Lender pursuant to this Agreement or any other Loan Document. (b) Any representation or warranty made or deemed made by F.Y.I. or any of its Subsidiaries or by any Loan Party in any Loan Document or in any certificate, report, notice or financial statement furnished at any time in connection with this Agreement or any other Loan Document shall be false, misleading or erroneous in any material respect when made or deemed to have been made. (c) F.Y.I. or any of its Subsidiaries shall fail to perform, observe or comply with any covenant, agreement or term contained in Sections 5.1, 5.2, 8.1(g), 8.1(j), 8.2 (other than the last sentence of Section 8.2), 8.6, or 8.7, Article 9 (other than Section 9.7, 9.11 and 9.15) or Article 10 of this Agreement; F.Y.I. or any of its Subsidiaries shall fail to perform, observe or comply with any covenant, agreement or term contained in Sections 5.3, 8.1 (other than Sections 8.1(g), or 8.1(j)), 8.4, 8.5, 8.8, 8.9, 8.10, 8.12, 9.7 or 9.11) and such failure is not remedied or waived within ten days after such failure commenced; F.Y.I. or any of its Subsidiaries shall fail to perform, observe or comply with any covenant, agreement or term contained in any Security Agreement other than in Section 4.05, 4.08, 4.11(b), 4.11(c), 4.12 or 4.16 thereof; F.Y.I. or any of its Subsidiaries shall fail to perform, observe or comply with any covenant, agreement or term contained in any Mortgage executed by it and such failure shall continue beyond any grace or cure period specified in such Mortgage; any Guarantor shall fail to perform, observe or comply with any covenant, agreement or term contained in its Guaranty, subject to any grace period applicable to such covenant, agreement or term in this Agreement to the extent this Agreement is incorporated therein by reference; or any Loan Party shall fail to perform, observe or comply with any other covenant, agreement or term contained in this Agreement or any other Loan Document (other than covenants to pay the Obligations) and such failure is not remedied or waived within the earlier to occur of 30 days after such failure commenced or, if a different grace period is expressly made applicable in such other Loan Documents, such applicable grace period. (d) F.Y.I. ceases to be Solvent or any other Loan Party (other than a Nonmaterial Subsidiary) ceases to be Solvent for a period exceeding 15 days from the earlier of the date notice of such failure to remain Solvent is given by the Agent to F.Y.I. or the date F.Y.I. is obligated to give AMENDED AND RESTATED CREDIT AGREEMENT - Page 80 87 notice of such Default to the Agent under Section 8.1(g), or any Loan Party (other than a Nonmaterial Subsidiary) shall admit in writing its inability to, or be generally unable to, pay its debts as such debts become due; provided, however, that if any Loan Party shall cease to be Solvent more than once in any twelve-month period, such occurrence shall immediately become an Event of Default. (e) Any Loan Party (other than a Nonmaterial Subsidiary) shall (i) apply for or consent to the appointment of, or the taking of possession by, a receiver, custodian, trustee, examiner, liquidator or the like of itself or of all or any substantial part of its Property, (ii) make a general assignment for the benefit of its creditors, (iii) commence a voluntary case under the United States Bankruptcy Code as now or hereafter in effect (the "Bankruptcy Code"), (iv) institute any proceeding or file a petition seeking to take advantage of any other law relating to bankruptcy, insolvency, reorganization, liquidation, dissolution, winding-up or composition or readjustment of debts, (v) fail to controvert in a timely and appropriate manner, or acquiesce in writing to, any petition filed against it in an involuntary case under the Bankruptcy Code, or (vi) take any corporate or other action for the purpose of effecting any of the foregoing. (f) A proceeding or case shall be commenced, without the application, approval or consent of any of the Loan Parties in (other than a Nonmaterial Subsidiary) any court of competent jurisdiction, seeking (i) its reorganization, liquidation, dissolution, arrangement or winding-up, or the composition or readjustment of its debts, (ii) the appointment of a receiver, custodian, trustee, examiner, liquidator or the like of any of the Loan Parties or of all or any substantial part of its Property, or (iii) similar relief in respect of any of the Loan Parties under any law relating to bankruptcy, insolvency, reorganization, winding-up or composition or adjustment of debts, and such proceeding or case shall continue undismissed, or an order, judgment or decree approving or ordering any of the foregoing shall be entered and continue unstayed and in effect, for a period of 60 or more days; or an order for relief against any of the Loan Parties shall be entered in an involuntary case under the Bankruptcy Code. (g) Any one or more of the Loan Parties shall fail to discharge within a period of 30 days after the commencement thereof any attachment, sequestration, forfeiture or similar proceeding or proceedings involving an aggregate amount in excess of $1,000,000 against any of its or their Properties. (h) A final judgment or judgments for the payment of money in excess of $1,000,000 in the aggregate shall be rendered by a court or courts against the Loan Parties or any of them on claims not covered by insurance or as to which the insurance carrier has denied responsibility and the same shall not be paid or discharged, or a stay of execution thereof shall not be procured, within 30 days from the date of entry thereof and the Loan Parties shall not, within said period of 30 days, or such longer period during which execution of the same shall have been stayed, appeal therefrom and cause the execution thereof to be stayed during such appeal. (i) Any of the Loan Parties shall fail to pay when due any principal of or interest on any AMENDED AND RESTATED CREDIT AGREEMENT - Page 81 88 Debt (other than the Obligations) having (either individually or in the aggregate) a principal amount of at least $1,000,000, or the maturity of any such Debt shall have been accelerated, or any such Debt shall have been required to be prepaid prior to the stated maturity thereof, or any event shall have occurred (and shall not have been waived or otherwise cured) that permits (or, with the giving of notice or lapse of time or both, would permit) any holder or holders of such Debt or any Person acting on behalf of such holder or holders to accelerate the maturity thereof or require any such prepayment. (j) This Agreement or any other Loan Document shall cease to be in full force and effect or shall be declared null and void or the validity or enforceability thereof shall be contested or challenged by any Permitted Holder, any Loan Party, or any of its Affiliates, or any Loan Party shall deny that it has any further liability or obligation under any of the Loan Documents, or any Lien created by the Loan Documents shall for any reason cease to be a valid, first priority perfected Lien (except for Permitted Liens, if any, which are expressly permitted by the Loan Documents to have priority over the Liens in favor of the Agent) upon any of the Collateral purported to be covered thereby. (k) Any of the following events shall occur or exist with respect to any Loan Party or any ERISA Affiliate: (i) any Prohibited Transaction involving any Plan; (ii) any Reportable Event with respect to any Pension Plan; (iii) the filing under Section 4041 of ERISA of a notice of intent to terminate any Pension Plan or the termination of any Pension Plan; (iv) any event or circumstance that might constitute grounds entitling the PBGC to institute proceedings under Section 4042 of ERISA for the termination of, or for the appointment of a trustee to administer, any Pension Plan, or the institution by the PBGC of any such proceedings; (v) any "accumulated funding deficiency" (as defined in Section 406 of ERISA or Section 412 of the Code), whether or not waived, shall exist with respect to any Plan; or (vi) complete or partial withdrawal under Section 4201 or 4204 of ERISA from a Plan or the reorganization, insolvency or termination (other than in connection with an Acquisition and in compliance with ERISA and other applicable laws) of any Pension Plan; and in each case above, such event or condition, together with all other events or conditions, if any, have subjected or could in the reasonable opinion of Required Lenders subject any Loan Party or any ERISA Affiliate to any tax, penalty or other liability to a Plan, a Multiemployer Plan, the PBGC or otherwise (or any combination thereof) which in the aggregate exceed or could reasonably be expected to exceed $2,000,000. (l) The occurrence of a Change of Control. (m) If, at any time, the subordination provisions of any of the Seller Subordinated Debt shall be invalidated or shall otherwise cease to be in full force and effect. (n) The occurrence of any Material Adverse Effect; provided, however, that, for purposes of this Section 11.1(n), no Material Adverse Effect shall be deemed to have occurred under clause (a) of the definition of Material Adverse Effect in Section 1.1 unless, based upon the financial condition or financial performance of F.Y.I., it is not reasonable to expect that F.Y.I. will be able to AMENDED AND RESTATED CREDIT AGREEMENT - Page 82 89 comply with all its financial covenants set forth in Article 10. Section 11.2 Remedies. If any Event of Default shall occur and be continuing, the Agent may (subject to Section 13.11 with respect to clauses (a) and (b) below) and, if directed by the Required Lenders, the Agent shall do any one or more of the following: (a) Acceleration. Declare all outstanding principal of and accrued and unpaid interest on the Loans and all other amounts payable by F.Y.I. or any of its Subsidiaries under the Loan Documents immediately due and payable, and the same shall thereupon become immediately due and payable, without notice, demand, presentment, notice of dishonor, notice of acceleration, notice of intent to accelerate, protest or other formalities of any kind, all of which are hereby expressly waived by F.Y.I.; (b) Termination of Commitments. Terminate the Commitments (including, without limitation, the obligation of the Issuing Bank to issue Letters of Credit) without notice to F.Y.I.; (c) Judgment. Reduce any claim to judgment; (d) Foreclosure. Foreclose or otherwise enforce any Lien granted to the Agent for the benefit of the Agent and the Lenders to secure payment and performance of the Obligations in accordance with the terms of the Loan Documents; or (e) Rights. Exercise any and all rights and remedies afforded by the laws of the State of Texas or any other jurisdiction, by any of the Loan Documents, by equity or otherwise, including, without limitation, the right of setoff provided by Section 5.6 of this Agreement; provided, however, that upon the occurrence of an Event of Default under Section 11.1(e) or Section 11.1(f), the Commitments of all of the Lenders (including, without limitation, the obligation of the Issuing Bank to issue Letters of Credit) shall immediately and automatically terminate, and the outstanding principal of and accrued and unpaid interest on the Loans and all other amounts payable by F.Y.I. under the Loan Documents shall thereupon become immediately and automatically due and payable, all without notice, demand, presentment, notice of dishonor, notice of acceleration, notice of intent to accelerate, protest or other formalities of any kind, all of which are hereby expressly waived by the F.Y.I. Section 11.3 Cash Collateral. If an Event of Default shall have occurred and be continuing the F.Y.I. shall, if requested by the Agent or the Required Lenders, pledge to the Agent as security for the Obligations an amount in immediately available funds equal to the then outstanding Letter of Credit Liabilities, such funds to be held in a cash collateral account satisfactory to the Agent without any right of withdrawal by F.Y.I. or any of its Subsidiaries. Section 11.4 Performance by the Agent. If any Loan Party shall fail to perform any covenant or agreement in accordance with the terms of the Loan Documents, the Agent may, at the AMENDED AND RESTATED CREDIT AGREEMENT - Page 83 90 direction of the Required Lenders, perform or attempt to perform such covenant or agreement on behalf of such Loan Party. In such event, F.Y.I. or any of its Subsidiaries shall, at the request of the Agent, promptly pay any amount expended by the Agent or the Lenders in connection with such performance or attempted performance to the Agent at the Principal Office, together with interest thereon at the applicable Default Rate from and including the date of such expenditure to but excluding the date such expenditure is paid in full. Notwithstanding the foregoing, it is expressly agreed that neither the Agent nor any Lender shall have any liability or responsibility for the performance of any obligation of F.Y.I. or any of its Subsidiaries or any other Loan Party under this Agreement or any of the other Loan Documents. ARTICLE 12 The Agent Section 12.1 Appointment, Powers and Immunities. Each Lender hereby irrevocably appoints and authorizes the Agent to act as its agent hereunder and under the other Loan Documents with such powers as are specifically delegated to the Agent by the terms of this Agreement and the other Loan Documents, together with such other powers as are reasonably incidental thereto. Neither the Agent nor any of its Affiliates, officers, directors, employees, attorneys or agents shall be liable to any Lender for any action taken or omitted to be taken by any of them hereunder or otherwise in connection with this Agreement or any of the other Loan Documents except for its or their own gross negligence or willful misconduct. Without limiting the generality of the preceding sentence, the Agent (a) may treat the payee of any Note as the holder thereof until the Agent receives written notice of the assignment or transfer thereof signed by such payee and in form satisfactory to the Agent, (b) shall have no duties or responsibilities except those expressly set forth in this Agreement and the other Loan Documents, and shall not by reason of this Agreement or any other Loan Document be a trustee or fiduciary for any Lender, (c) shall not be required to initiate any litigation or collection proceedings hereunder or under any other Loan Document except to the extent requested by the Required Lenders, (d) shall not be responsible to the Lenders for any recitals, statements, representations or warranties contained in this Agreement or any other Loan Document, or any certificate or other document referred to or provided for in, or received by any of them under, this Agreement or any other Loan Document, or for the value, validity, effectiveness, enforceability or sufficiency of this Agreement or any other Loan Document or any other document referred to or provided for herein or therein or for any failure by any Person to perform any of its obligations hereunder or thereunder, (e) may consult with legal counsel (including counsel for any Loan Party), independent public accountants and other experts selected by it and shall not be liable to any Lender for any action taken or omitted to be taken in good faith by it in accordance with the advice of such counsel, accountants or experts, and (f) shall incur no liability under or in respect of any Loan Document to any Lender by acting upon any notice, consent, certificate or other instrument or writing reasonably believed by it to be genuine and signed or sent by the proper party or parties. As to any matters not expressly provided for by this Agreement, the Agent shall in all cases be fully protected in acting, or in refraining from acting, hereunder in accordance with instructions signed AMENDED AND RESTATED CREDIT AGREEMENT - Page 84 91 by the Required Lenders, and such instructions of the Required Lenders and any action taken or failure to act pursuant thereto shall be binding on all of the Lenders; provided, however, that the Agent shall not be required to take any action which exposes the Agent to liability or which is contrary to this Agreement or any other Loan Document or applicable law. Section 12.2 Rights of Agent as a Lender. With respect to its Commitments, the Loans made by it and the Notes issued to it, Banque Paribas (and any successor acting as Agent) in its capacity as a Lender hereunder shall have the same rights and powers hereunder as any other Lender and may exercise the same as though it were not acting as the Agent, and the term "Lender" or "Lenders" shall, unless the context otherwise indicates, include the Agent in its individual capacity. The Agent and its Affiliates may (without having to account therefor to any Lender) accept deposits from, lend money to, act as trustee under indentures of, provide merchant banking services to, own securities of, and generally engage in any kind of banking, trust or other business with, the Loan Parties or any of their Affiliates and any other Person who may do business with or own securities of the Loan Parties or any of their Affiliates, all as if it were not acting as the Agent and without any duty to account therefor to the Lenders. Each Lender acknowledges the potential conflict of interest between Banque Paribas (i) as a Lender holding disproportionate interests in the various Commitments and Loans and (ii) as the Agent under this Agreement and each Lender expressly consents to, and waives any claim based upon, such potential conflicts of interest. Section 12.3 Defaults. The Agent shall not be deemed to have knowledge or notice of the occurrence of a Default (other than the non-payment of principal of or interest on the Loans or of commitment fees) unless the Agent has received notice from a Lender or F.Y.I. specifying such Default and stating that such notice is a "notice of default". In the event that the Agent receives such a notice of the occurrence of a Default, the Agent shall give prompt notice thereof to the Lenders (and shall give each Lender prompt notice of each such non-payment). The Agent shall (subject to Section 12.1) take such action with respect to such Default as shall be directed by the Required Lenders, provided that unless and until the Agent shall have received such directions, the Agent may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to such Default as it shall seem advisable and in the best interest of the Lenders. SECTION 12.4 INDEMNIFICATION. EACH LENDER HEREBY AGREES TO INDEMNIFY THE AGENT FROM AND HOLD THE AGENT HARMLESS AGAINST (TO THE EXTENT NOT REIMBURSED UNDER SECTIONS 13.1 AND 13.2, BUT WITHOUT LIMITING THE OBLIGATIONS OF F.Y.I. UNDER SECTIONS 13.1 AND 13.2), RATABLY IN ACCORDANCE WITH ITS PRO RATA SHARE (CALCULATED ON THE BASIS OF THE AGGREGATE COMMITMENT PERCENTAGES), ANY AND ALL LIABILITIES (INCLUDING, WITHOUT LIMITATION, ENVIRONMENTAL LIABILITIES), OBLIGATIONS, LOSSES, DAMAGES, PENALTIES, ACTIONS, JUDGMENTS, DEFICIENCIES, SUITS, COSTS, EXPENSES (INCLUDING ATTORNEYS' FEES) AND DISBURSEMENTS OF ANY KIND OR NATURE WHATSOEVER WHICH MAY BE IMPOSED ON, INCURRED BY OR ASSERTED AGAINST THE AGENT IN ANY WAY RELATING TO OR ARISING OUT OF ANY OF THE LOAN DOCUMENTS OR ANY AMENDED AND RESTATED CREDIT AGREEMENT - Page 85 92 ACTION TAKEN OR OMITTED TO BE TAKEN BY THE AGENT UNDER OR IN RESPECT OF ANY OF THE LOAN DOCUMENTS; PROVIDED, FURTHER, THAT NO LENDER SHALL BE LIABLE FOR ANY PORTION OF THE FOREGOING TO THE EXTENT CAUSED BY THE AGENT'S GROSS NEGLIGENCE OR WILLFUL MISCONDUCT. WITHOUT LIMITATION OF THE FOREGOING, IT IS THE EXPRESS INTENTION OF THE LENDERS THAT THE AGENT SHALL BE INDEMNIFIED HEREUNDER FROM AND HELD HARMLESS AGAINST ALL OF SUCH LIABILITIES (INCLUDING, WITHOUT LIMITATION, ENVIRONMENTAL LIABILITIES), OBLIGATIONS, LOSSES, DAMAGES, PENALTIES, ACTIONS, JUDGMENTS, DEFICIENCIES, SUITS, COSTS, EXPENSES (INCLUDING ATTORNEYS' FEES) AND DISBURSEMENTS OF ANY KIND OR NATURE DIRECTLY OR INDIRECTLY ARISING OUT OF OR RESULTING FROM THE SOLE OR CONTRIBUTORY NEGLIGENCE OF THE AGENT (EXCEPT TO THE EXTENT THE SAME ARE CAUSED BY THE AGENT'S GROSS NEGLIGENCE OR WILLFUL MISCONDUCT). WITHOUT LIMITING ANY OTHER PROVISION OF THIS SECTION 12.4, EACH LENDER AGREES TO REIMBURSE THE AGENT PROMPTLY UPON DEMAND FOR ITS PRO RATA SHARE (CALCULATED ON THE BASIS OF THE AGGREGATE COMMITMENT PERCENTAGES) OF ANY AND ALL OUT-OF-POCKET EXPENSES (INCLUDING REASONABLE ATTORNEYS' FEES) REASONABLY INCURRED BY THE AGENT IN CONNECTION WITH THE PREPARATION, EXECUTION, DELIVERY, ADMINISTRATION, MODIFICATION, AMENDMENT OR ENFORCEMENT (WHETHER THROUGH NEGOTIATIONS, LEGAL PROCEEDINGS OR OTHERWISE) OF, OR LEGAL ADVICE IN RESPECT OF RIGHTS OR RESPONSIBILITIES UNDER, THE LOAN DOCUMENTS, TO THE EXTENT THAT THE AGENT IS NOT PROMPTLY REIMBURSED FOR SUCH EXPENSES BY F.Y.I.. Section 12.5 Independent Credit Decisions. Each Lender agrees that it has independently and without reliance on the Agent or any other Lender, and based on such documents and information as it has deemed appropriate, made its own credit analysis of F.Y.I. and its Subsidiaries and the other Loan Parties and its own decision to enter into this Agreement and that it will, independently and without reliance upon the Agent or any other Lender, and based upon such documents and information as it shall deem appropriate at the time, continue to make its own analysis and decisions in taking or not taking action under this Agreement or any of the other Loan Documents. The Agent shall not be required to keep itself informed as to the performance or observance by any Loan Party of this Agreement or any other Loan Document or to inspect the Properties or books of any Loan Party. Except for notices, reports and other documents and information expressly required to be furnished to the Lenders by the Agent hereunder or under the other Loan Documents, the Agent shall not have any duty or responsibility to provide any Lender with any credit or other financial information concerning the affairs, financial condition or business of any Loan Party (or any of their Affiliates) which may come into the possession of the Agent or any of its Affiliates. Section 12.6 Several Commitments. The Commitments and other obligations of the AMENDED AND RESTATED CREDIT AGREEMENT - Page 86 93 Lenders under this Agreement are several. The default by any Lender in making a Loan in accordance with its Commitment shall not relieve the other Lenders of their obligations under this Agreement. In the event of any default by any Lender in making any Loan, each nondefaulting Lender shall be obligated to make its Loan but shall not be obligated to advance the amount which the defaulting Lender was required to advance hereunder. In no event shall any Lender be required to advance an amount or amounts with respect to any of the Loans which would in the aggregate exceed such Lender's Commitment with respect to such Loans. No Lender shall be responsible for any act or omission of any other Lender. Section 12.7 Successor Agent. Subject to the appointment and acceptance of a successor Agent as provided below, the Agent may resign at any time by giving notice thereof to the Lenders and F.Y.I.. Upon any such resignation, the Required Lenders will have the right to appoint another Lender as a successor Agent. If no successor Agent shall have been so appointed by the Required Lenders and shall have accepted such appointment within 30 days after the retiring Agent's giving of notice of resignation, then the retiring Agent may, on behalf of the Lenders, appoint a successor Agent, which shall be a commercial bank organized under the laws of the U.S. or any state thereof or of a foreign country if acting through its U.S. branch and having combined capital and surplus of at least $100,000,000. F.Y.I. shall have the right to approve any successor Agent appointed under this Section 12.7, which approval shall not unreasonably be withheld. Upon the acceptance of its appointment as successor Agent, such successor Agent shall thereupon succeed to and become vested with all rights, powers, privileges, immunities and duties of the resigning Agent, and the resigning Agent shall be discharged from its duties and obligations under this Agreement and the other Loan Documents. After any Agent's resignation as Agent, the provisions of this Article 12 shall continue in effect for its benefit in respect of any actions taken or omitted to be taken by it while it was the Agent. ARTICLE 13 Miscellaneous Section 13.1 Expenses. Whether or not the transactions contemplated hereby are consummated, F.Y.I. hereby agrees, on demand, to pay or reimburse the Agent and each of the Lenders for paying: (a) all reasonable out-of-pocket costs and expenses of the Agent in connection with the preparation, negotiation, execution and delivery of this Agreement and the other Loan Documents, and any and all waivers, amendments, modifications, renewals, extensions and supplements thereof and thereto, and the syndication of the Commitments and the Loans, including, without limitation, the reasonable fees and expenses of legal counsel for the Agent, (b) all reasonable out-of-pocket costs and expenses of the Agent and the Lenders in connection with any Default, the exercise of any right or remedy and the enforcement of this Agreement or any other Loan Document or any term or provision hereof or thereof, including, without limitation, the reasonable fees and expenses of legal counsel for the Agent and the Lenders, (c) all transfer, stamp, documentary or other similar taxes, assessments or charges levied by any Governmental Authority in respect of this AMENDED AND RESTATED CREDIT AGREEMENT - Page 87 94 Agreement or any of the other Loan Documents, (d) all costs, expenses, assessments and other charges incurred in connection with any filing, registration, recording or perfection of any Lien contemplated by this Agreement or any other Loan Document, and (e) all reasonable out-of-pocket costs and expenses incurred by the Agent in connection with due diligence, computer services, copying, appraisals, audits (including environmental audits and collateral audits), field exams, insurance, consultants and search reports. SECTION 13.2 INDEMNIFICATION. F.Y.I. HEREBY AGREES TO INDEMNIFY THE AGENT AND EACH LENDER AND EACH AFFILIATE THEREOF AND THEIR RESPECTIVE OFFICERS, DIRECTORS, EMPLOYEES, ATTORNEYS AND AGENTS FROM, AND HOLD EACH OF THEM HARMLESS AGAINST, ANY AND ALL LOSSES, LIABILITIES (INCLUDING, WITHOUT LIMITATION, ENVIRONMENTAL LIABILITIES), CLAIMS, DAMAGES, PENALTIES, JUDGMENTS, DISBURSEMENTS, COSTS AND EXPENSES (INCLUDING REASONABLE ATTORNEYS' AND CONSULTANTS' FEES) TO WHICH ANY OF THEM MAY BECOME SUBJECT WHICH DIRECTLY OR INDIRECTLY ARISE FROM OR RELATE TO (A) THE NEGOTIATION, EXECUTION, DELIVERY, PERFORMANCE, ADMINISTRATION OR ENFORCEMENT OF ANY OF THE LOAN DOCUMENTS, (B) ANY OF THE TRANSACTIONS CONTEMPLATED BY THE LOAN DOCUMENTS, (C) THE RELATED TRANSACTIONS, (D) ANY BREACH BY ANY LOAN PARTY OF ANY REPRESENTATION, WARRANTY, COVENANT OR OTHER AGREEMENT CONTAINED IN ANY OF THE LOAN DOCUMENTS, (E) THE USE OR PROPOSED USE OF ANY LOAN OR LETTER OF CREDIT, (F) ANY AND ALL TAXES, LEVIES, DEDUCTIONS AND CHARGES IMPOSED ON THE AGENT, THE ISSUING BANK OR ANY LENDER IN RESPECT OF ANY LETTER OF CREDIT, (G) THE PRESENCE, RELEASE, THREATENED RELEASE, DISPOSAL, REMOVAL OR CLEANUP OF ANY HAZARDOUS MATERIAL LOCATED ON, ABOUT, WITHIN OR AFFECTING ANY OF THE PROPERTIES OF ANY LOAN PARTY, EXCEPT TO THE EXTENT THAT THE LOSS, DAMAGE OR CLAIM IS THE DIRECT RESULT OF AN INTENTIONAL AND AFFIRMATIVE ACT BY THE PERSON TO BE INDEMNIFIED THAT CONSTITUTES GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF SUCH PERSON, OR (H) ANY INVESTIGATION, LITIGATION OR OTHER PROCEEDING, INCLUDING, WITHOUT LIMITATION, ANY THREATENED INVESTIGATION, LITIGATION OR OTHER PROCEEDING RELATING TO ANY OF THE FOREGOING; BUT EXCLUDING ANY OF THE FOREGOING TO THE EXTENT CAUSED BY THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF THE PERSON TO BE INDEMNIFIED. THE OBLIGATIONS OF F.Y.I. UNDER THIS SECTION 13.2 SHALL SURVIVE THE REPAYMENT OF THE LOANS AND LETTER OF CREDIT LIABILITIES AND TERMINATION OF THE COMMITMENTS. Section 13.3 Limitation of Liability. None of the Agent, any Lender or any Affiliate, officer, director, employee, attorney or agent thereof shall be liable for any error of judgment or act done in good faith, or be otherwise liable or responsible under any circumstances whatsoever (including such Person's negligence), except for such Person's gross negligence or willful AMENDED AND RESTATED CREDIT AGREEMENT - Page 88 95 misconduct. None of the Agent, any Lender or any Affiliate, officer, director, employee, attorney or agent thereof shall have any liability with respect to, and F.Y.I. hereby waives, releases and agrees not to sue any of them upon, any claim for any special, indirect, incidental or consequential damages suffered or incurred by F.Y.I. or any other Loan Party in connection with, arising out of or in any way related to this Agreement or any of the other Loan Documents, or any of the transactions contemplated by this Agreement or any of the other Loan Documents. F.Y.I. hereby waives, releases and agrees not to sue the Agent or any Lender or any of their respective Affiliates, officers, directors, employees, attorneys or agents for exemplary or punitive damages in respect of any claim in connection with, arising out of or in any way related to this Agreement or any of the other Loan Documents, or any of the transactions contemplated by this Agreement or any of the other Loan Documents. Section 13.4 No Duty. All attorneys, accountants, appraisers and other professional Persons and consultants retained by the Agent and the Lenders shall have the right to act exclusively in the interest of the Agent and the Lenders and shall have no duty of disclosure, duty of loyalty, duty of care or other duty or obligation of any type or nature whatsoever to F.Y.I. or any of its Subsidiaries or any of their shareholders or any other Person. Section 13.5 No Fiduciary Relationship. The relationship between F.Y.I. and each Lender is solely that of debtor and creditor, and neither the Agent nor any Lender has any fiduciary or other special relationship with F.Y.I. or any other Loan Party, and no term or condition of any of the Loan Documents shall be construed so as to deem the relationship between F.Y.I. and any Lender, or any other Loan Party and any Lender, to be other than that of debtor and creditor. No joint venture or partnership is created by this Agreement among the Lenders or among F.Y.I. or any other Loan Party and the Lenders. Section 13.6 Equitable Relief. F.Y.I. recognizes that, in the event it fails to pay, perform, observe or discharge any or all of the Obligations, any remedy at law may prove to be inadequate relief to the Agent and the Lenders. F.Y.I. therefore agrees that the Agent and the Lenders, if the Agent or the Lenders so request, shall be entitled to temporary and permanent injunctive relief in any such case without the necessity of proving actual damages. Section 13.7 No Waiver; Cumulative Remedies. No failure on the part of the Agent or any Lender to exercise and no delay in exercising, and no course of dealing with respect to, any right, power or privilege under this Agreement or any other Loan Document shall operate as a waiver thereof, nor shall any single or partial exercise of any right, power or privilege under this Agreement or any other Loan Document preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies provided for in this Agreement and the other Loan Documents are cumulative and not exclusive of any rights and remedies provided by law. AMENDED AND RESTATED CREDIT AGREEMENT - Page 89 96 Section 13.8 Successors and Assigns. (a) This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns. Neither F.Y.I. nor any other Loan Party may assign or transfer any of its rights or obligations under this Agreement or any other Loan Document without the prior written consent of the Agent and the Required Lenders. Any Lender may sell participations in all or a portion of its rights and obligations under this Agreement and the other Loan Documents (including, without limitation, all or a portion of its Commitments and the Loans owing to it); provided, however, that (i) such Lender's obligations under this Agreement and the other Loan Documents (including, without limitation, its Commitments) shall remain unchanged, (ii) such Lender shall remain solely responsible to F.Y.I. for the performance of such obligations, (iii) such Lender shall remain the holder of its Notes for all purposes of this Agreement, (iv) F.Y.I. shall continue to deal solely and directly with such Lender in connection with such Lender's rights and obligations under this Agreement and the other Loan Documents, and (v) such Lender shall not sell a participation that conveys to the participant the right to vote or give or withhold consents under this Agreement or any other Loan Document, other than (if and to the extent that such Lender so agrees) the right to vote upon or consent to (A) any increase of such Lender's Commitments (other than an increase resulting from an assignment to or in favor of such Lender from another Lender in accordance with this Agreement), (B) any reduction of the principal amount of, or interest to be paid on, the Loans of such Lender, (C) any reduction of any commitment fee or other amount payable to such Lender under any Loan Document if and to the extent that such reduction would decrease the fee or other amount payable to the participant, (D) any postponement of any date for the payment of any amount payable in respect of the Loans of such Lender, (E) any release of a material portion of the Collateral from the Liens created by the Security Documents and not otherwise expressly authorized by the Loan Documents, and (F) any release of any Loan Party from liability under the Loan Documents. (b) F.Y.I. and each of the Lenders agree that any Lender (the "Assigning Lender") may at any time assign to one or more Eligible Assignees all, or a proportionate part of all, of its rights and obligations under this Agreement and the other Loan Documents (including, without limitation, its Commitments, Loans, Letters of Credit (each an "Assignee"); provided, however, that (i) each such assignment shall be of a constant percentage of the Assigning Lender's rights and obligations under this Agreement and the other Loan Documents and (ii) except in the case of an assignment of all of a Lender's rights and obligations under this Agreement and the other Loan Documents, the amount of the Commitments, Loans and Letters of Credit of the Assigning Lender being assigned pursuant to each assignment (determined as of the date of the Assignment and Acceptance with respect to such assignment) shall in no event be less than an aggregate amount equal to $5,000,000, and (iii) the parties to each such assignment shall execute and deliver to the Agent for its acceptance and recording in the Register (as defined below), an Assignment and Acceptance, together with the Notes subject to such assignment, and a processing and recordation fee of $4,000. Upon such execution, delivery, acceptance and recording, from and after the effective date specified in each Assignment and Acceptance, which effective date shall be at least five Business Days after the execution thereof or such other date as may be approved by the Agent, (1) the Assignee thereunder AMENDED AND RESTATED CREDIT AGREEMENT - Page 90 97 shall be a party hereto as a "Lender" and, to the extent that rights and obligations hereunder have been assigned to it pursuant to such Assignment and Acceptance, have the rights and obligations of a Lender hereunder and under the Loan Documents, and (2) the Assigning Lender thereunder shall, to the extent that rights and obligations hereunder have been assigned by it pursuant to such Assignment and Acceptance, relinquish its rights and be released from its obligations under this Agreement and the other Loan Documents (and, in the case of an Assignment and Acceptance covering all or the remaining portion of a Lender's rights and obligations under the Loan Documents, such Lender shall cease to be a party thereto, provided that such Lender's rights under Article 4, Section 13.1 and Section 13.2 accrued through the date of assignment shall continue. (c) By executing and delivering an Assignment and Acceptance, the Assigning Lender thereunder and the Assignee thereunder confirm to and agree with each other and the other parties hereto as follows: (i) other than as provided in such Assignment and Acceptance, such Assigning Lender makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with the Loan Documents or the execution, legality, validity, enforceability, genuineness, sufficiency or value of the Loan Documents or any other instrument or document furnished pursuant thereto; (ii) such Assigning Lender makes no representation or warranty and assumes no responsibility with respect to the financial condition or results of operations of any Loan Party or the performance or observance by any Loan Party of its obligations under the Loan Documents; (iii) such Assignee confirms that it has received a copy of the other Loan Documents, together with copies of the financial statements referred to in Section 7.2 and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into such Assignment and Acceptance; (iv) such Assignee will, independently and without reliance upon the Agent or such Assigning Lender and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under this Agreement and the other Loan Documents; (v) such Assignee confirms that it is an Eligible Assignee; (vi) such Assignee appoints and authorizes the Agent to take such action as agent on its behalf and exercise such powers under the Loan Documents as are delegated to the Agent by the terms thereof, together with such powers as are reasonably incidental thereto; and (vii) such Assignee agrees that it will perform in accordance with their terms all of the obligations which by the terms of the Loan Documents are required to be performed by it as a Lender. (d) The Agent shall maintain at its Principal Office a copy of each Assignment and Acceptance delivered to and accepted by it and a register for the recordation of the names and addresses of the Lenders and the Commitments of, and principal amount of the Loans owing to, each Lender from time to time (the "Register"). The entries in the Register shall be conclusive and binding for all purposes, absent manifest error, and F.Y.I., the Agent and the Lenders may treat each Person whose name is recorded in the Register as a Lender hereunder for all purposes under the Loan Documents. The Register shall be available for inspection by any Borrower any Lender at any reasonable time and from time to time upon reasonable prior notice. (e) Upon its receipt of an Assignment and Acceptance executed by an Assigning Lender AMENDED AND RESTATED CREDIT AGREEMENT - Page 91 98 and Assignee representing that it is an Eligible Assignee, together with the Notes subject to such assignment, the Agent shall, if such Assignment and Acceptance has been completed and is in substantially the form of Exhibit A hereto, (i) accept such Assignment and Acceptance, (ii) record the information contained therein in the Register, and (iii) give prompt written notice thereof to F.Y.I. Within five Business Days after its receipt of such notice, F.Y.I., at its expense, shall execute and deliver to the Agent in exchange for each surrendered Note evidencing particular Loans, a new Note evidencing each such Loans payable to the order of such Eligible Assignee in an amount equal to such Loans assigned to it and, if the Assigning Lender has retained any Loans, a new Note evidencing each such Loans payable to the order of the Assigning Lender in the amount of such Loans retained by it (each such promissory note shall constitute a "Note" for purposes of the Loan Documents). Such new Notes shall be dated the effective date of such Assignment and Acceptance and shall otherwise be in substantially the form of Exhibits C and D hereto, as applicable. (f) Any Lender may, in connection with any assignment or participation or proposed assignment or participation pursuant to this Section 13.8, disclose to the Assignee or participant or proposed Assignee or participant any information relating to F.Y.I. or any of its Subsidiaries or any other Loan Party furnished to such Lender by or on behalf of F.Y.I. or any of its Subsidiaries or any other Loan Party provided that F.Y.I. shall have no liability for the accuracy of any such information except (i) to the Agent and the Lenders to the extent expressly provided herein or (ii) as of the date it was furnished by F.Y.I.; provided that each such actual or proposed Assignee or participant shall agree to be bound by the provisions of Section 13.20. (g) Any Lender may assign and pledge all or any of the Notes held by it to any Federal Reserve Bank or the U.S. Treasury as collateral security pursuant to Regulation A of the Board of Governors of the Federal Reserve System and any operating circular issued by such Federal Reserve System and/or Federal Reserve Bank; provided, that, any payment made by F.Y.I. for the benefit of such assigning and/or pledging Lender in accordance with the terms of the Loan Documents shall satisfy F.Y.I.'s obligations under the Loan Documents in respect thereof to the extent of such payment. No such assignment and/or pledge shall release the assigning and/or pledging Lender from its obligations hereunder. (h) F.Y.I. shall maintain, or cause to be maintained, a register (the "Registered Note Register") (which, at the request of F.Y.I., shall be kept by the Agent on behalf of F.Y.I. at no extra charge to F.Y.I. at the address to which notices to the Agent are to be sent hereunder) on which it enters the name of the registered owner of each of the Loans evidenced by a Registered Note. Notwithstanding anything to the contrary contained in this Section 13.8, a Registered Note and the Loans evidenced thereby may be assigned or otherwise transferred in whole or in part only by registration of such assignment or transfer of such Registered Note and the Loans evidenced thereby on the Registered Note Register (and each Registered Note shall expressly so provide). Any assignment or transfer of all or part of such Loans and the Registered Note evidencing the same shall be registered on the Registered Note Register only upon surrender for registration of assignment or transfer of the Registered Note evidencing such Loans, duly endorsed by (or accompanied by a written instrument of assignment or transfer duly executed by) the registered noteholder thereof, and AMENDED AND RESTATED CREDIT AGREEMENT - Page 92 99 thereupon one or more new Registered Notes in the same aggregate principal amount shall be issued to the designated assignee(s) or transferee(s). Prior to the due presentment for registration of transfer of any Registered Note, F.Y.I. and the Agent shall treat the Person in whose name such Loans and the Registered Note(s) evidencing the same are registered as the owner thereof for the purpose of receiving all payments thereon and for all other purposes, notwithstanding any notice to the contrary. The Registered Note Register shall be available for inspection by F.Y.I. and any Lender at any reasonable time upon reasonable prior notice. Section 13.9 Survival. All representations and warranties made or deemed made in this Agreement or any other Loan Document or in any document, statement or certificate furnished in connection with this Agreement shall survive the execution and delivery of this Agreement and the other Loan Documents and the making of the Loans, and no investigation by the Agent or any Lender or any closing shall affect the representations and warranties or the right of the Agent or any Lender to rely upon them. Without prejudice to the survival of any other obligation of F.Y.I. hereunder, the obligations of F.Y.I. under Article 4 and Sections 13.1 and 13.2 shall survive repayment of the Loans and the Letter of Credit Liabilities, but shall not survive the expiration of any applicable statute of limitations. SECTION 13.10 ENTIRE AGREEMENT. THIS AGREEMENT, THE NOTES AND THE OTHER LOAN DOCUMENTS REFERRED TO HEREIN EMBODY THE FINAL, ENTIRE AGREEMENT AMONG THE PARTIES HERETO AND SUPERSEDE ANY AND ALL PRIOR COMMITMENTS, TERM SHEETS, AGREEMENTS, REPRESENTATIONS AND UNDERSTANDINGS, WHETHER WRITTEN OR ORAL, RELATING TO THE SUBJECT MATTER HEREOF AND MAY NOT BE CONTRADICTED OR VARIED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OR DISCUSSIONS OF THE PARTIES HERETO. THERE ARE NO UNWRITTEN ORAL AGREEMENTS AMONG THE PARTIES HERETO. Section 13.11 Amendments. No amendment or waiver of any provision of this Agreement, the Notes or any other Loan Document to which F.Y.I. is a party, nor any consent to any departure by F.Y.I. therefrom, shall in any event be effective unless the same shall be agreed or consented to by the Required Lenders and F.Y.I. in writing, and each such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given; provided, that no amendment, waiver or consent shall, unless in writing and signed by all of the Lenders and F.Y.I., do any of the following: (a) increase the Commitments of the Lenders or subject the Lenders to any additional obligations; (b) reduce the principal of, or interest on, the Loans, Letter of Credit Liabilities or any fees or other amounts payable hereunder; (c) postpone any date fixed for any payment (including, without limitation, any mandatory prepayment) of principal of, or interest on, the Loans, Letter of Credit Liabilities or any fees or other amounts payable hereunder; (d) change the Commitment Percentages or the aggregate unpaid principal amount of the Loans, Letter of Credit Liabilities or the number or interests of the Lenders which shall be required for the Lenders or any of them to take any action under this Agreement; (e) change any provision contained in this Section 13.11 or modify the definition of "Required Lenders" contained in Section 1.1; or (f) except AMENDED AND RESTATED CREDIT AGREEMENT - Page 93 100 as expressly authorized by this Agreement, release any Collateral from any of the Liens created by the Security Documents, except for Collateral which, in the aggregate for all such Collateral released, has a value of $1,000,000 or less, or release any guaranty of all or any portion of the Obligations. The Agent shall not terminate a Payment Blockage Period under any Subordination Agreement without the consent of the Required Lenders. Notwithstanding anything to the contrary contained in this Section 13.11, no amendment, waiver or consent shall be made with respect to Article 12 hereof without the prior written consent of the Agent. If at any time a Lender becomes a Nonconsenting Lender (as identified in this Section 13.11), F.Y.I. shall have the right to replace such Lender with another Person; provided that (i) such new Person shall be an Eligible Assignee acceptable to the Agent and such new Person shall execute an Assignment and Acceptance, (ii) F.Y.I. shall have no right to replace Banque Paribas, (iii) neither the Agent nor any Lender shall have any obligation to F.Y.I. to find such other Person, and (iv) in the event of a replacement of a Nonconsenting Lender, in order for F.Y.I. to be entitled to replace such a Lender, such replacement must take place no later than 180 days after the date the Nonconsenting Lender shall notify F.Y.I. and the Agent of its failure to agree to any requested consent, waiver or other modification. Each Lender (other than Banque Paribas) agrees to its replacement at the option of F.Y.I. pursuant to this Section 13.11 and in accordance with Section 13.8; provided that the successor Lender shall purchase without recourse such Lender's interest in the Obligations of F.Y.I. to such Lender for cash in an aggregate amount equal to the aggregate unpaid principal thereof, all unpaid interest accrued thereon, all unpaid commitment fees accrued for the account of such Lender, any breakage costs incurred by the selling Lender because of the prepayment of any Eurodollar Loans, all other fees (if any) applicable thereto and all other amounts (including any amounts under Article 4) then owing to such Lender hereunder or under any other Loan Document and the Loan Parties shall execute a release addressed to such Lender releasing such Lender from all claims arising in connection with the Loan Documents. In the event that (x) F.Y.I. or the Agent has requested the Lenders to consent to a departure or waiver of any provisions of the Loan Documents or to agree to any other modification thereto, (y) the consent, waiver or other modification in question requires the agreement of all Lenders in accordance with the terms of this Section 13.11 and (z) Required Lenders have agreed to such consent, waiver or other modification, then any Lender who does not agree to such consent, waiver or other modification shall be deemed a "Nonconsenting Lender". Section 13.12 Maximum Interest Rate. (a) No interest rate specified in this Agreement or any other Loan Document shall at any time exceed the Maximum Rate. If at any time the interest rate (the "Contract Rate") for any Obligation shall exceed the Maximum Rate, thereby causing the interest accruing on such Obligation to be limited to the Maximum Rate, then any subsequent reduction in the Contract Rate for such Obligation shall not reduce the rate of interest on such Obligation below the Maximum Rate until the aggregate amount of interest accrued on such Obligation equals the aggregate amount of interest which would have accrued on such Obligation if the Contract Rate for such Obligation had at all times been in effect. (b) Notwithstanding anything to the contrary contained in this Agreement or the other AMENDED AND RESTATED CREDIT AGREEMENT - Page 94 101 Loan Documents, none of the terms and provisions of this Agreement or the other Loan Documents shall ever be construed to create a contract or obligation to pay interest at a rate in excess of the Maximum Rate; and neither the Agent nor any Lender shall ever charge, receive, take, collect, reserve or apply, as interest on the Obligations, any amount in excess of the Maximum Rate. The parties hereto agree that any interest, charge, fee, expense or other obligation provided for in this Agreement or in the other Loan Documents which constitutes interest under applicable law shall be, ipso facto and under any and all circumstances, limited or reduced to an amount equal to the lesser of (i) the amount of such interest, charge, fee, expense or other obligation that would be payable in the absence of this Section 13.12(b) or (ii) an amount, which when added to all other interest payable under this Agreement and the other Loan Documents, equals the Maximum Rate. If, notwithstanding the foregoing, the Agent or any Lender ever contracts for, charges, receives, takes, collects, reserves or applies as interest any amount in excess of the Maximum Rate, such amount which would be deemed excessive interest shall be deemed a partial payment or prepayment of principal of the Obligations and treated hereunder as such; and if the Obligations, or applicable portions thereof, are paid in full, any remaining excess shall promptly be paid to F.Y.I. (as appropriate). In determining whether the interest paid or payable, under any specific contingency, exceeds the Maximum Rate, F.Y.I., the Agent and the Lenders shall, to the maximum extent permitted by applicable law, (i) characterize any nonprincipal payment as an expense, fee or premium rather than as interest, (ii) exclude voluntary prepayments and the effects thereof, and (iii) amortize, prorate, allocate and spread in equal or unequal parts the total amount of interest throughout the entire contemplated term of the Obligations, or applicable portions thereof, so that the interest rate does not exceed the Maximum Rate at any time during the term of the Obligations; provided that, if the unpaid principal balance is paid and performed in full prior to the end of the full contemplated term thereof, and if the interest received for the actual period of existence thereof exceeds the Maximum Rate, the Agent and/or the Lenders, as appropriate, shall refund to F.Y.I. the amount of such excess and, in such event, the Agent and the Lenders shall not be subject to any penalties provided by any laws for contracting for, charging, receiving, taking, collecting, reserving or applying interest in excess of the Maximum Rate. (c) Pursuant to Chapter 346 of the Texas Finance Code, as amended, F.Y.I. agrees that such Chapter (which regulates certain revolving credit loan accounts and revolving tri-party accounts) shall not govern or in any manner apply to the Obligations. Section 13.13 Notices. All notices and other communications provided for in this Agreement and the other Loan Documents to which F.Y.I. or any of its Subsidiaries is a party shall be given or made by telecopy or in writing and telecopied, mailed by certified mail return receipt requested or delivered to the intended recipient at the "Address for Notices" specified below its name on the signature pages hereof (or, with respect to a Lender that becomes a party to this Agreement pursuant to an assignment made in accordance with Section 13.8, in the Assignment and Acceptance executed by it); or, as to any party, at such other address as shall be designated by such party in a notice to each other party given in accordance with this Section 13.13. Except as otherwise provided in this Agreement, all such communications shall be deemed to have been duly given when transmitted by telecopy or personally delivered or, in the case of a mailed notice, upon receipt, in AMENDED AND RESTATED CREDIT AGREEMENT - Page 95 102 each case given or addressed as aforesaid; provided, however, that notices to the Agent shall be deemed given when received by the Agent. AMENDED AND RESTATED CREDIT AGREEMENT - Page 96 103 SECTION 13.14 GOVERNING LAW; SUBMISSION TO JURISDICTION; SERVICE OF PROCESS. EXCEPT AS MAY BE EXPRESSLY STATED TO THE CONTRARY IN CERTAIN LOAN DOCUMENTS, THIS AGREEMENT, THE NOTES AND THE OTHER LOAN DOCUMENTS SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF TEXAS (WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES) AND APPLICABLE LAWS OF THE U.S.; PROVIDED, HOWEVER, THAT THE LAWS (WITHOUT REGARD TO CONFLICTS OF LAW PRINCIPLES) OF THE STATE OF ILLINOIS SHALL GOVERN ISSUES RELATING TO THE MAXIMUM AMOUNT OF INTEREST (OR CONSIDERATION DEEMED TO BE INTEREST) WHICH MAY BE CONTRACTED FOR, CHARGED, RECEIVED, TAKEN, COLLECTED, RESERVED OR APPLIED WITH RESPECT TO THE OBLIGATIONS. F.Y.I. AND EACH OF ITS SUBSIDIARIES HEREBY SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF EACH OF (1) THE U.S. DISTRICT COURT FOR THE NORTHERN DISTRICT OF TEXAS OR THE NORTHERN DISTRICT OF ILLINOIS, (2) ANY TEXAS STATE COURT SITTING IN DALLAS COUNTY, TEXAS, (3) ANY ILLINOIS STATE COURT SITTING IN COOK COUNTY, ILLINOIS FOR THE PURPOSES OF ALL LEGAL PROCEEDINGS ARISING OUT OF OR RELATING TO THIS AGREEMENT, ANY OTHER LOAN DOCUMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY. EACH OF F.Y.I. AND EACH OF ITS SUBSIDIARIES HEREBY IRREVOCABLY CONSENTS TO THE SERVICE OF ANY AND ALL PROCESS IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF COPIES OF SUCH PROCESS TO SUCH PERSON AT ITS ADDRESS SET FORTH UNDERNEATH ITS SIGNATURE HERETO. EACH OF F.Y.I. AND EACH OF ITS SUBSIDIARIES HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF THE VENUE OF ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT AND ANY CLAIM THAT ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. Section 13.15 Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. Section 13.16 Severability. Any provision of this Agreement held by a court of competent jurisdiction to be invalid or unenforceable shall not impair or invalidate the remainder of this Agreement and the effect thereof shall be confined to the provision held to be invalid or illegal. Section 13.17 Headings. The headings, captions and arrangements used in this Agreement are for convenience only and shall not affect the interpretation of this Agreement. Section 13.18 Construction. Each of F.Y.I. and each of its Subsidiaries, the Agent and each Lender acknowledges that it has had the benefit of legal counsel of its own choice and has been afforded an opportunity to review this Agreement and the other Loan Documents with its legal AMENDED AND RESTATED CREDIT AGREEMENT - Page 97 104 counsel and that this Agreement and the other Loan Documents shall be construed as if jointly drafted by the parties hereto. Section 13.19 Independence of Covenants. All covenants hereunder shall be given independent effect so that if a particular action or condition is not permitted by any of such covenants, the fact that it would be permitted by an exception to, or be otherwise within the limitations of, another covenant shall not avoid the occurrence of a Default if such action is taken or such condition exists. Section 13.20 Confidentiality. Each Lender agrees to exercise its best efforts to keep any information delivered or made available by any Loan Party to it which is clearly indicated to be confidential information, confidential from anyone other than Persons employed or retained by such Lender who are or are expected to become engaged in evaluating, approving, structuring or administering the Loans; provided that nothing herein shall prevent any Lender from disclosing such information (a) to any other Lender, (b) to any Person if reasonably incidental to the administration of the Loans, (c) upon the order of any court or administrative agency, (d) upon the request or demand of any regulatory agency or authority having jurisdiction over such Lender, (e) which has been publicly disclosed, (f) in connection with any litigation to which the Agent, any Lender or their respective Affiliates may be a party, (g) to the extent reasonably required in connection with the exercise of any remedy under the Loan Documents, (h) to such Lender's legal counsel, independent auditors and affiliates, and (i) to any actual or proposed participant or Assignee of all or part of its rights hereunder, so long as such actual or proposed participant or Assignee agrees to be bound by the provisions of this Section 13.20. SECTION 13.21 WAIVER OF JURY TRIAL. TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY AND EXPRESSLY WAIVES ALL RIGHT TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED UPON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO ANY OF THE LOAN DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED THEREBY OR THE ACTIONS OF ANY LOAN PARTY, THE AGENT OR ANY LENDER IN THE NEGOTIATION, ADMINISTRATION OR ENFORCEMENT THEREOF. Section 13.22 Approvals and Consent. Except as may be expressly provided to the contrary in this Agreement or in the other Loan Documents (as applicable), in any instance under this Agreement or the other Loan Documents where the approval, consent or exercise of judgment of the Agent or any Lender is requested or required, (a) the granting or denial of such approval or consent and the exercise of such judgment shall be within the sole discretion of the Agent and such Lender, and the Agent and such Lender shall not, for any reason or to any extent, be required to grant such approval or consent or to exercise such judgment in any particular manner, regardless of the reasonableness of the request or the action or judgment of the Agent or such Lender, and (b) no approval or consent of the Agent or any Lender shall in any event be effective unless the same shall be in writing and the same shall be effective only in the specific instance and for the specific purpose AMENDED AND RESTATED CREDIT AGREEMENT - Page 98 105 for which given. Section 13.23 Agent for Services of Process. Each of F.Y.I. and each of its Subsidiaries hereby irrevocably designates Margot T. Lebenberg, Timothy J. Barker or any other officer of F.Y.I., at the offices of F.Y.I. at 3232 McKinney Avenue, Suite 900, Dallas, Texas 75204, to receive, for and on behalf of such Person, service of process in the State of Texas and the State of Illinois, such service being hereby acknowledged by such Person to be effective and binding service in every respect. Each of F.Y.I. and each of its Subsidiaries agrees that the failure of its agent for service of process to give any notice of any such service of process to such Person shall not impair or affect the validity of such service or of any judgment based thereon. If, despite the foregoing, there is for any reason no agent for service of process of such Person available to be served, then such Person further irrevocably consents to the service of process by the mailing thereof by the Agent or the Required Lenders by registered or certified mail, postage prepaid, to such Person at its address listed on the signature pages hereof. Nothing in this Section 13.23 shall affect the right of the Agent or the Lenders to serve legal process in any other manner permitted by law or affect the right of the Agent or any Lender to bring any action or proceeding against F.Y.I. or any of its Subsidiaries or its Property in the court of any jurisdiction. Section 13.24 Amendment and Restatement of Prior Agreement. Effective as of the Closing Date and upon satisfaction of the conditions precedent set forth in Section 6.1 (including, but not without limitation, Section 6.1(p)), this Agreement shall constitute an amendment and restatement of, but not an extinguishment of the Obligations (as defined in the Prior Agreement) outstanding under, the Prior Agreement in its entirety; provided, however, that the Prior Agreement shall remain in full force and effect unless and until such amendment and restatement occurs. Section 13.25 Assignments and Assumptions. The Lenders hereby agree among themselves (and F.Y.I. and each of the Loan Parties hereby consents to such agreement) that, concurrently with the Closing Date, there shall be deemed to have occurred assignments and assumptions with respect to the Debt, Liens, rights and obligations under this Agreement and the other Loan Documents (including, without limitation, the Commitments, the Loans and the Letters of Credit) such that, after giving effect to such assignments and assumptions, the Commitments and the outstanding Loans and Letters of Credit of each of the Lenders are as stated in this Agreement, and the Lenders hereby make such assignments and assumptions. The Lenders shall make all appropriate payments and adjustments among themselves to effectuate the appropriate purchase price for and other amounts payable with respect to such assignments and assumptions. AMENDED AND RESTATED CREDIT AGREEMENT - Page 99 106 IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the day and year first above written. F.Y.I. INCORPORATED By: /s/ David Lowenstein -------------------- Name: David Lowenstein Title: Executive Vice President Address for Notices: ------------------- 3232 McKinney Avenue, Suite 900 Dallas, Texas 75204 Telecopy No.: 214-953-7556 Telephone No.: 214-953-7555 Attention: Margot T. Lebenberg General Counsel AMENDED AND RESTATED CREDIT AGREEMENT - Page 100 107 BANQUE PARIBAS, as Agent and a Lender Commitment: By: /s/ Clark C. King, III - ---------- ---------------------- Name: Clark C. King, III $20,000,000 Title: Director By: /s/ Nicholas C. Mast -------------------- Name: Nicholas C. Mast Title: Regional General Manager Address for Notices: ------------------- 227 West Monroe Street, Suite 3300 Chicago, Illinois 60606 Telecopy No.: 312-853-6020 Telephone No.: 312-853-6000 Attention: Corporate Banking Group Lending Office for Prime Rate Loans: ----------------------------------- 227 West Monroe Street, Suite 3300 Chicago, Illinois 60606 Attention: Judy Wu Administration Lending Office for Eurodollar Loans: ----------------------------------- 227 West Monroe Street, Suite 3300 Chicago, Illinois 60606 Attention: Judy Wu Administration AMENDED AND RESTATED CREDIT AGREEMENT - Page 101 108 BANK OF AMERICA TEXAS, N.A., as Co-Agent and a Lender Commitment: By: /s/ Connor J. Duffey - ---------- -------------------- Name: Connor J. Duffey $20,000,000 Title: Vice President Address for Notices: ------------------- Bank of America Texas, N.A. 1925 West John Carpenter Freeway Irving, Texas 75063-3297 Telecopy No.: (972) 444-7167 Telephone No.: (972) 444-5195 Attention: Connor J. Duffey Lending Office for Prime Rate Loans: ----------------------------------- Bank of America Texas, N.A. 1925 West John Carpenter Freeway Irving, Texas 75063-3297 Telecopy No.: (972) 444-7167 Telephone No.: (972) 444-7414 Attention: Lyn Ridgeway Lending Office for Eurodollar Loans: ----------------------------------- Bank of America Texas, N.A. 1925 West John Carpenter Freeway Irving, Texas 75063-3297 Telecopy No.: (972) 444-7167 Telephone No.: (972) 444-7414 Attention: Lyn Ridgeway AMENDED AND RESTATED CREDIT AGREEMENT - Page 102 109 BANK ONE, TEXAS, N.A. Commitment: By: /s/ Scott Rhea - ---------- -------------- $10,000,000 Name: Scott Rhea Title: Vice President Address for Notices: ------------------- Bank One, Texas, N.A. 1717 Main Street Dallas, Texas 75201 Telecopy No.: (214) 290-2765 Telephone No.: (214) 290-290-2637 Attention: Scott Rhea Lending Office for Prime Rate Loans: ----------------------------------- Bank One, Texas, N.A. 1717 Main Street Dallas, Texas 75201 Telecopy No.: (214) 290-2765 Telephone No.: (214) 290-290-2637 Attention: Scott Rhea Lending Office for Eurodollar Loans: ----------------------------------- Bank One, Texas, N.A. 1717 Main Street Dallas, Texas 75201 Telecopy No.: (214) 290-2765 Telephone No.: (214) 290-290-2637 Attention: Scott Rhea AMENDED AND RESTATED CREDIT AGREEMENT - Page 103 110 The undersigned Prior Borrowers hereby consent to the terms and provisions of this Agreement and hereby agree that this Agreement shall constitute an amendment and restatement of the Prior Agreement. PRIOR BORROWERS: IMAGENT ACQUISITION CORP. RESEARCHERS ACQUISITION CORP. RECORDEX ACQUISITION CORP. DPAS ACQUISITION CORP. LEONARD ARCHIVES ACQUISITION CORP. DELIVEREX ACQUISITION CORP. PERMANENT RECORDS ACQUISITION CORP. DELIVEREX SACRAMENTO ACQUISITION CORP. B&B (BALTIMORE-WASHINGTON) ACQUISITION CORP. PREMIER ACQUISITION CORP. ROBERT A. COOK ACQUISITION CORP. PENINSULA RECORD MANAGEMENT, INC. RAC (CALIFORNIA) ACQUISITION CORP. CALIFORNIA MEDICAL RECORD SERVICE ACQUISITION CORP. MINNESOTA MEDICAL RECORD SERVICE ACQUISITION CORP. TEXAS MEDICAL RECORD SERVICE ACQUISITION CORP. ZIA INFORMATION ANALYSIS GROUP, INC. CH ACQUISITION CORP. and DISC ACQUISITION CORP. By: /s/ David Lowenstein -------------------- Name: David Lowenstein Title: Vice President, acting on behalf of each of the Prior Borrowers AMENDED AND RESTATED CREDIT AGREEMENT - Page 104 EX-10.38 9 FORM OF AGREEMENT 1 EXHIBIT 10.38 AGREEMENT Contract No. C-140162 ------------------------ Agreement dated the 21st day of January, 1998 between the New York State Workers' Compensation Board (Board) and QCSinet Acquisition Corp. (hereinafter "QCSinet" or "Contractor"), a corporation with its principal place of business located at 1150 NW 72d Avenue, Suite 600, Miami, Florida 33126. Whereas the Board has issued a Request for Proposal dated September 9, 1997 and entitled Request for Proposal For Paper to Image Conversion Services (hereinafter "RFP"); and Whereas, in response to this RFP, QCSinet has submitted a proposal which includes a Volume 1 Technical Proposal and Volume 2 Cost Proposal; and Whereas, by letter dated December 30, 1997 the Board has awarded QCSinet the within described contract; NOW THEREFORE, in consideration of the foregoing, and the mutual promises and covenants contained herein, it is mutually agreed as follows: 1 GENERAL CONTRACTOR DUTIES AND OBLIGATIONS 1.1 GENERAL CONTRACTOR DUTIES The Contractor shall: 1.1.1 Assume responsibility for the cost, delivery of services, and timely accomplishment of all obligations and duties required by the Agreement whether or not such obligations or duties are performed by the Contractor, its subcontractor, or its supplier. Subcontracting assignments are allowed under this contract under the terms set forth in section 12 of this Agreement. The Contractor shall carry out its obligations and duties in a competent and timely manner. 1.1.2 Be the sole point of contact with regard to contractual matters. 1.1.3 Maintain a dedicated administrative organization sufficient to discharge its contractual duties, obligations and responsibilities. 1.1.4 Maintain a level of liaison and cooperation with the Board necessary for proper performance of all contractual responsibilities. 1.1.5 Provide access to its main operation team through key personnel such as Managing Executive and Operation Manager. 2 1.1.6 Maintain operation staffing levels and personnel as required for performance of its duties under this Agreement. 1.1.7 Notwithstanding the circumstances under which the employment of a "key personnel" is terminated with the Contractor, subject to prior approval of the Board, designate an equally qualified alternate with full authority to act in that "key position" for full performance under this Agreement. Such designee will have no authority to alter or modify any of the terms and conditions of the Agreement. 1.1.8 Agree that, except as specified in this Agreement and section 2-3 of the RFP, no aspect of Contractor performance under this Agreement will be contingent upon Board personnel or the availability of Board resources. 1.1.9 Immediately notify the Board upon learning of any situation which can reasonably be expected to adversely affect the operation of this project. If such notification was verbal, then submit within three (3) days of learning of the circumstance, a written description of the situation and a recommendation for its resolution. 1.1.10 Cooperate fully with any other contractors that may be engaged by the Board. 1.1.11 Refrain from honoring any requests to perform work outside the scope of the Agreement unless such request(s) are pursuant to the Scope of Work Alteration procedures set forth in section 13 of this Agreement. 1.1.12 Cooperate with the Board, any other authorized State agency, and any law enforcement authority, in the investigation, documentation and litigation of any alleged illegal act, misconduct or unethical behavior related to this contract or which may affect the Board's operations. 1.1.13 Perform in accordance with the Performance Standards set forth in the RFP or as otherwise required in this Agreement. 1.1.14 Modify, at its own cost, the application or technical configuration to meet the Performance Standards set forth in this RFP or as otherwise required in this Agreement. 1.1.15 Honor any written commitment within the scope of this Agreement and the Contractor's proposal. Failure of the Contractor to fulfill any such commitment shall render the Contractor liable under the default provisions for damages due to the Board under the terms of this Agreement. For the purpose of this Agreement, a written commitment by the Contractor includes commitments specified by this Agreement, the proposal submitted by the Contractor, and specific written amendments to its proposal. Written commitments by the Contractor are further defined as including: (1) any warranty or representation made by the Contractor in a proposal as to performance; (2) any warranty or representation made by the Contractor described in (1) above, made in any literature descriptions, drawings, or specifications accompanying or referred to in a proposal; and (3) any modification of or affirmation or representation as to the above which is made by the Contractor in or during the course of negotiations, whether or not incorporated into a formal amendment to the proposal. 2 3 2 SPECIFIC CONTRACTOR DUTIES AND OBLIGATIONS 2.1 SPECIFIC CONTRACTOR DUTIES The Contractor shall: 2.1.1 Convert the Board's paper-based claims documents to electronic-based claims documents; and deliver the images and their associated indices as accurate reproductions of the original documents to the Board, as described in the Contractor's proposal. Contractor specifically agrees to: (a) provide a paper-to-image conversion operation and maintain at its expense, all facility(ies) necessary to perform required services within New York State, with space adequate to house all staff, equipment, materials and supplies and paper documents to support the operational needs of the system as specified in section 2-5 of the RFP; (b) obtain, maintain, and pay for all permits and licenses legally required to transact business and pay all fees and comply with all laws, rules and regulations applicable to the paper-to-image conversion operations at no additional cost to the Board; (c) provide all hardware and software necessary to perform the required services; (d) provide all staff required to manage and operate the paper-to-image conversion facility(ies); (e) establish and demonstrate that controls are in place to monitor the accuracy and authenticity of data, the reliability of hardware and software, and the integrity and security of the system before any paper-to-image conversion operations are commenced, as specified in section 2-8.3 of the RFP; (f) provide "backfile" paper-to-image conversion services to convert all claims documents associated with open case folders and reopened case files, from each district office of the Workers' Compensation Board, and deliver the images and their associated indices as accurate reproductions of the original documents to the Board within seven (7) calendar days of receipt; (g) convert "no-claims" documents from paper to images from each district office and deliver images and their associated indices as accurate reproductions of the original documents to the Board within seven (7) calendar days of receipt; (h) store paper case folders, no-claims documents, and incoming claims documents for at least six (6) months after conversion; (i) provide secured destruction of the paper documents after completion of statewide conversion in accordance with a plan and schedule developed by the Board; (j) correct any defects identified by the Board's quality control process; 3 4 (k) complete the duties specified in paragraphs f - j of section 2.1.1 herein as quickly as possible, with completion no later than December 31, 1998; (l) convert all incoming claims documents to generate images from the paper documents and deliver the images and their associated indices as accurate reproductions of the original documents to the Board within twenty-four (24) hours after receipt of the daily documents. 2.1.2 Accept responsibility for full knowledge of the Office for Technology Policy 96-10, titled Guidelines for the Legal Acceptance of Electronically Stored Documents; State Archives and Records Administration brochure titled Guidelines for the Acceptance of Public Records in an Emerging Electronic Environment. 2.1.3 Provide reliable systems and processes which are capable of producing trustworthy records, and manage the paper-to-image conversion facility, the operations, the functional areas and staff in a manner that will ensure the legal admissibility of the image records in a court of law in accordance with the guidelines listed in section 2.1.2 herein and provide for complete documentation of all operational procedures. 2.1.4 Design, develop, install, implement, maintain and manage the systems as required by this Agreement and the RFP, and provide all staff, hardware, software and facilities necessary to perform required services at the prices stated in Contractor's Cost Proposal, Volume 2. 2.1.5 Maintain confidentiality of documents through appropriate non-disclosure agreements with employees. 2.1.6 Permit Board staff to be present when Board documents are being converted. 2.1.7 Warrant that Product(s) furnished pursuant to this Agreement shall, when used in accordance with the Product documentation, be able to accurately process date/time data (including, but not limited to, calculating, comparing, and sequencing) from, into, and between the twentieth and twenty-first centuries, and the years 1999 and 2000, including leap year calculations. Where a purchase requires that specific Products must perform as a package or system, this warranty shall apply to the Products as a system. In the event of any breach of this warranty, Contractor shall restore the Product to the same level of performance as warranted herein, or repair or replace the Product with conforming Product so as to minimize interruption to the Board's ongoing business processes, time being of the essence, at Contractor's sole cost and expense. This warranty does not extend to correction of the Board's errors in data conversion. For the purposes of this warranty, the following definitions shall apply: "PRODUCT" shall include, without limitations: any piece or component of equipment, hardware, firmware, middleware, custom or commercial software, or internal components or subroutines therein which perform any date/time data recognition function, calculation, comparing or sequencing. Where services are being furnished, e.g. consulting, systems integration, code or data conversion or data entry, the term "Product" shall include resulting deliverables. 4 5 "CONTRACTOR'S PRODUCT" shall include all Product delivered under this Agreement by Contractor other than Third Party Product. "THIRD PARTY PRODUCT" shall include product manufactured or developed by a corporate entity independent from Contractor and provided by Contractor on a non-exclusive licensing or other distribution Agreement with the third party manufacturer. "Third Party Product" does not include product where Contractor is: a) a corporate subsidiary or affiliate of the third party manufacturer/developer; and/or b) the exclusive re-seller or distributor of product manufactured or developed by said corporate entity. This warranty shall survive beyond termination or expiration of the Agreement. Nothing in this warranty shall be construed to limit any rights or remedies otherwise available under this agreement. 2.1.8 Meet the performance standards specified in section 2-6 of the RFP for each of the paper-to-image conversion operations defined in section 2-4 of the RFP. 2.1.9 Restore the paper-to-image conversion functions as specified in section 2-7 of the RFP, at the performance levels specified in section 2-6 of the RFP, within seventy-two (72) hours of a disaster. "Disaster" shall include, but not be limited to: theft, fire and smoke damage, water damage, damage or unauthorized destruction caused by employees, and fatal system problems (such as non-functioning critical hardware, internal personnel- induced disasters (hacking and/or sabotage)). 2.1.10 Ensure that the images and indices produced by contractor on behalf of the Board can be confidently used as the Board's primary record, enabling the elimination of paper records, as specified in section 2-8 of the RFP. Convert paper documents so that the delivered documents are retrievable, readable and clear enough that reasonable hardcopy output can be obtained at a later point. 2.1.11 Receive, protect and preserve all original documents transferred possession of by the Board and safeguard such documents from damage or destruction until completion of paper-to-image conversion and, further, until such time as the Board authorizes the secure destruction of such documents. 2.1.12 Provide 100 percent (100%) retrievability of paper documents prior to their secured destruction pursuant to section 2.1.1(i) herein. 2.1.13 Return to the Board, at Contractor's expense, sample numbers of open case folders and original paper documents transferred to Contractor by the Board, upon the Board's request, within five (5) days of the request. 2.1.14 Provide training and regular retraining of staff as specified in section 2-8.2 of the RFP before any paper-to- image conversion operations are commenced by Contractor. 2.1.15 Closely supervise employees and inspect employees' work to detect deficiencies including the 5 6 use of unauthorized procedures, employees in need of additional training, any inefficiencies in existing hardware and software, and to receive ideas as to how to improve the system. 2.1.16 Keep complete logs to trace the activities of employees, subcontractors and intruders to enable the thorough investigation of any suspicious activity as part of monitoring the accuracy and authenticity of data, the reliability of hardware and software, and the integrity and security of the system. 2.1.17 Establish and follow employee exit procedures for all employees with access to Board documents which include all of the following: (a) unambiguous notice of termination; (b) an exit interview; (c) signed and dated records of communications between the overseeing supervisor and employee; (d) reminder of confidentiality and nondisclosure of Board information and a copy of confidentiality agreement for employee's use; (e) retrieval of property, documents, keys, ID cards in the employee's possession; (f) escort of employee to his or her workstation to obtain personal effects; (g) escort out of building; and (h) immediate disablement of all employee's access codes, passwords and authorizations. 2.1.18 Provide management reports as specified in section 2-9 of the RFP. 2.1.19 Attend formal weekly status meetings with the Board's management team, as specified in section 2-9 of the RFP. 2.1.20 Permit Board and Office of State Comptroller (OSC) audit staff access to records and computer resources as specified in section 2-10 of the RFP. 3 GENERAL BOARD DUTIES AND OBLIGATIONS The Board shall: 3.1 Provide reasonable accommodation at the Board's premises to enable Contractor to carry out its work under this Agreement. 3.2 Provide responses to reasonable requests for information; provide data, documentation and staff cooperation as appropriate. 6 7 4 SPECIFIC BOARD DUTIES AND OBLIGATIONS 4.1 Identify all incoming claims documents to be directed for paper-to-image conversion; manually count the mail and complete a transmittal slip. 4.2 Pull the no-claims documents, prepare a transmittal slip, and provide all no-claims documents and transmittal slip to the Contractor on the first day of conversion. 4.3 Pull open case folders, prepare a transmittal slip, and provide the open case folders and transmittal slip to the Contractor at a rate mutually agreed upon by the parties, commencing no later than May 1998 and finishing no later than December 31, 1998. . 4.4 Provide for transportation of all incoming claims documents from all district offices to the Contractor. The Board may elect to contract with the Contractor for transportation of the incoming claims documents at the prices stated in Contractor's Cost Proposal, Volume 2. 4.5 Implement a quality control process prior to the end of six (6) months from the date documents are received by the Contractor to ensure that all performance standards are met, including, but not limited to, those relating to accuracy, quality and volume. 4.6 Refer problems immediately to the Contractor for identification and corrective action. 5 BOARD ADMINISTRATION 5.1 The parties acknowledge that joint administration and control is essential to the success of the Board operation. Therefore, the parties shall use agreed upon processes and forms to report progress and to identify, track and resolve problems and issues associated with the operation. 5.2 Each party shall, within five (5) days after this Agreement becomes effective pursuant to section 18.1 herein, appoint a Managing Executive and Operation Manager. 5.3 The Operation Managers may clarify, explain, provide further details, handle necessary technical matters, implement technical changes, develop administrative procedures, and act as the primary contact persons between the entities, but shall have no authority to affect, change, alter, amend or modify any of the terms and conditions of this Agreement. 5.4 The Managing Executive shall be authorized to: (a) receive and resolve issues regarding this operation as escalated by the Operation Manager(s), and (b) negotiate amendments affecting the contract price and the terms and conditions of the Agreement subject to final approval by the Board and the Comptroller of the State of New York. 7 8 5.5 Any good faith dispute arising under the terms of this Agreement which is not resolved within a reasonable period of time by the Operation Managers shall be brought to the attention of the representatives of the parties as set forth below:
ESCALATION TIMETABLE CONTRACTOR BOARD (BUSINESS DAYS) REPRESENTATIVE REPRESENTATIVE Not to exceed 2 days Operation Manager Operation Manager Not to exceed 5 days Managing Executive Deputy Executive Director Not to exceed 10 days To be named Chair
Both the Board and the Contractor agree that this dispute resolution process shall precede the assertion of any legal rights, including the Board's right to assess liquidated damages, and the parties will continue without delay all their respective responsibilities under this Agreement. 6 BILLINGS TO THE BOARD 6.1 The Contractor shall bill the Board using invoices satisfactory to the Board and the Office of the State Comptroller of the State of New York. Billings will be based on the actual volume of pages converted by the Contractor at the per-page price designated in Contractor's proposal for each of the three categories. A single invoice will be submitted for each month of the contract. All charges for a month shall be billed during the month immediately following the month in which the charges took place. Payments, minus any liquidated damages as stated in section 8 of this Agreement, shall be made in accordance with Article XI-A of the New York State Finance Law. 6.2 The Contractor is responsible for all travel, meals, and lodging costs for their staff associated with delivery of services under this Agreement. 7 ASSURANCES/LETTER OF CREDIT Prior to the adoption of this Agreement by the parties, the Contractor shall demonstrate proof of financial responsibility by filing with the Chair of the Workers' Compensation Board an irrevocable letter of credit from a New York State or federally chartered bank qualified to do business in New York State and insured by the Federal Deposit Insurance Corporation. In the event of damages occurring as a result of disaster, default, abandonment, or nonperformance, and/or in the event of breach of this Agreement resulting in liquidated damages, as per the terms identified elsewhere in this Agreement, the Board may demand disbursement of all or any portion(s) of the face value of the letter of credit to recover said damages and/or liquidated damages. Such disbursements, pursuant to the demand of all or any portion(s) of the face value of this letter of credit, may be effected by the Board's submission of a written demand for payment to the institution that issued the letter of credit on behalf of the Contractor. Partial disbursement(s), pursuant to demand, shall not terminate the letter of credit, but the balance shall 8 9 be diminished by any amounts disbursed and shall otherwise remain in effect. The Board shall follow the dispute escalation procedures contained in section 5.5 of this Agreement prior to making any demand for disbursement of all or any portion of the letter of credit. The letter of credit shall name the Chair of the Workers' Compensation Board as beneficiary and be in the amount of ten million dollars ($10,000,000). If, in the Board's discretion, the Contractor has satisfactorily performed its duties during the first year of the contract, such letter of credit may be reduced in the second year to the amount of five million dollars ($5,000,000). The letter of credit shall authorize the New York State Workers' Compensation Board to draw a draft on sight, when accompanied by a Certificate from the New York State Workers' Compensation Board certifying that the amount demanded is due because of the failure of Contractor to perform under this Agreement as specified in sections 8, 9, 11, and/or 14 of this Agreement; and authorize partial drawings from the face of the letter of credit. The letter of credit shall not be canceled, revoked, or terminated during the term of the Agreement between the Workers' Compensation Board and the Contractor and for a period of ninety (90) days thereafter. 8 CONTRACTOR FAILURE TO MEET WORK PERFORMANCE STANDARDS In the event the Contractor fails, in the reasonable judgment of the Board, to properly achieve the performance standards for each of the areas below, the following specific actions may be taken. 8.1 FAILURE TO MEET QUALITY AND/OR TECHNICAL PERFORMANCE STANDARDS (a) As used in this provision and consistent with section 2.6 of the RFP, the term "batch" is defined as follows: (1) A "batch" of incoming daily mail consists of all incoming claims documents transferred from the Board to the Contractor each day. (2) A "batch" of no-claims documents consists of all no-claims documents transferred from the Board to the Contractor on the first day of conversion. (3) A "batch" of open case folders consists of all folders transferred from the Board to the Contractor each day. (b) If any information which is readable and recognizable in an original document cannot be read and recognized on the digital image at the quality and technical capabilities specified in section 2-6 of the RFP, Contractor shall, at the Board's request, reconvert the document. (c) If the number of documents from a batch which reveal missing documents, poor image quality, poor retrievability, or technical non-compliance exceeds 5 percent (5%) of the batch, Contractor shall, at Contractor's expense, reconvert the entire batch. Failure by the Board to timely review, accept or reject a batch shall not constitute acceptance of a 9 10 batch by the Board. If, in such circumstance, the Board subsequently requires material changes to the delivered images, the parties shall fairly consider and mutually agree as to the effect of the untimely rejection or acceptance on the delivery or implementation schedules. In no event shall the Contractor be entitled to any price increase due to the need to correct deficient deliverables. The Board shall not assess liquidated damages greater than one day until such time as the Board has provided notice to the Contractor of the failure to achieve a performance standard. Liquidated damages as provided in section 8.2 herein shall only be assessed for that period of time subsequent to providing such notice. 8.2 FAILURE TO MEET VOLUME AND ACCESSIBILITY PERFORMANCE STANDARDS The Board will be committing considerable financial and personnel resources to meet the time frames specified in this Agreement and the RFP. Contractor agrees to pay liquidated damages proportionate to the extent of the failure to meet volume and accessibility performance standards as specified below. Liquidated damages are not limited to the amount of the monthly billing. Liquidated damages will be recovered solely against either the current month's billing, or subsequent monthly billings, or, if such billings are insufficient to cover such damages, from the face value of the letter of credit upon the Board's written demand for payment, as authorized in section 7 of this Agreement. 8.2.1 LATE DELIVERY OF CONVERTED INCOMING DAILY DOCUMENTS Contractor shall convert all pages of incoming daily mail and deliver the file images and indices to the Board within twenty-four (24) hours to achieve 100 percent (100%) performance. For each day that performance falls below the quantity or time frame standard for transmission, liquidated damages shall be assessed as follows: More than twenty-four (24) hours, one thousand dollars ($1,000) per day. More than forty-eight (48) hours, two thousand dollars ($2,000) per day. More than seventy-two (72) hours, three thousand dollars ($3,000) per day. More than ninety-six (96) hours, four thousand dollars($4,000) per day.
8.2.2 LATE DELIVERY OF CONVERTED OPEN CASE FOLDERS Contractor shall complete the paper-to-image conversion of open case folders and older cases which are reopened, from each of the district offices, and deliver the images and associated indices to the Board within seven (7) calendar days of Contractor's receipt of the folders to achieve 100 percent (100%) performance. For each day that performance falls below the time standard for delivery of the images and indices to the Board, liquidated damages shall be assessed as follows: More than seven (7) days, one thousand dollars ($1,000) per day. More than fourteen (14) days, two thousand dollars ($2,000) per day. More than twenty-one (21) days, three thousand dollars ($3,000) per day. More than twenty-eight (28) days, four thousand dollars ($4,000) per day.
10 11 8.2.3 LATE DELIVERY OF CONVERTED NO-CLAIMS DOCUMENTS Contractor shall complete the paper-to-image conversion of the 1997 and 1998 no-claims documents from each of the district offices and deliver the images and associated indices to the Board within seven (7) calendar days of Contractor's receipt of the documents to achieve 100 percent (100%) performance. For each day that performance falls below the time standard for delivery of the images and indices to the Board, liquidated damages shall be assessed as follows: More than seven (7) days, one thousand dollars ($1,000) per day. More than fourteen (14) days, two thousand dollars ($2,000) per day. More than twenty-one (21) days, three thousand dollars ($3,000) per day. More than twenty-eight (28) days, four thousand dollars ($4,000) per day.
8.3 FAILURE TO MEET DISASTER RECOVERY STANDARDS The Board commits considerable financial and personnel resources to maintain its on-going operations. Failure to maintain routine, on-going operations results in downtime. Downtime results in loss of productivity and is costly to the Board. Contractor agrees to pay liquidated damages proportionate to the extent of the failure to meet disaster recovery standards as specified in section 2-7 of the RFP. Liquidated damages are not limited to the amount of the monthly billing. Liquidated damages will be recovered solely against either the current month's billing, or subsequent monthly billings, or, if such billings are insufficient to cover such damages, from the face value of the letter of credit upon the Board's written demand for payment, as authorized in section 7 of this Agreement. For each day there is an inability to restore the paper-to-image conversion functions at the performance levels specified in section 2-6 of the RFP within seventy-two (72) hours of a disaster, liquidated damages shall be assessed as follows: More than seventy-two (72) hours, one thousand dollars ($1,000) More than eighty-four (84) hours, two thousand dollars ($2,000). More than ninety-six (96) hours, five thousand dollars ($5,000). More than one hundred eight (108) hours, ten thousand dollars ($10,000). More than one hundred twenty (120) hours, fifteen thousand dollars ($15,000). More than one hundred forty-eight (148) hours, twenty thousand dollars($20,000).
8.4 FAILURE TO MEET MANAGEMENT REPORTING REQUIREMENTS The Board will be committing considerable financial and personnel resources to meet the time frames specified in this Agreement and the RFP. Reliance on timely management reports is crucial to meeting timely completion of this operation. Contractor agrees to pay liquidated damages proportionate to the extent of the failure to meet the management reporting requirements as specified in section 2-9 of the RFP. Liquidated damages are not limited to the amount of the monthly billing. Liquidated damages will be recovered solely against either the current month's billing, or subsequent monthly billings, or, if such billings are insufficient to cover such damages, from the face value of the letter of credit upon the Board's written demand for payment, as authorized in section 7 of this Agreement. 11 12 The amount of liquidated damages for failure to meet the management reporting requirements will amount to three thousand dollars ($3,000) multiplied by the quantity of management reports not delivered within three (3) days of the end of a reporting period divided by the total management reports due. 8.5 FAILURE TO CURE If the Contractor continues to be deficient for ten (10) days beyond the due date of any performance standard, or in the case of any ongoing or recurring failure to meet a performance standard, then ten (10) days after the end of the calendar month in which the deficiency is manifest, the Board shall notify the Contractor in writing that the Contractor has ten (10) days from receipt of the notice to comply. The ten (10) days shall be designated as the "cure" period. Liquidated damages of five thousand ($5,000) dollars per day for each day or part thereof beyond the cure period shall accrue against the Contractor if the Contractor fails to comply within the "cure" period. Liquidated damages are not limited to the amount of the monthly billing. Liquidated damages will be recovered solely against either the current month's billing, or subsequent monthly billings, or, if such billings are insufficient to cover such damages, from the face value of the letter of credit upon the Board's written demand for payment, as authorized in section 7 of this Agreement. 9 CONFIDENTIALITY OF BOARD-RELATED DOCUMENTS 9.1 CONFIDENTIALITY OF BOARD-RELATED INFORMATION The Contractor, its officers, agents and employees and subcontractors, shall treat all workers' compensation documents and information, with particular emphasis on information relating to claimants, their employers, and their insurance carriers, which is obtained by it through its performance under this Agreement, as confidential information to the extent required by the laws of the State of New York and the United States and any regulations promulgated thereunder. Unauthorized disclosure of personal, confidential, and/or medical information may result in civil and/or criminal penalties under New York State and Federal laws. 9.1.1 Except as provided in section 9.1.2 herein, all individual identifiable information relating to any claimant, employer, or insurance carrier shall be held confidential and shall not be disclosed by the Contractor, its officers, agents and employees or subcontractors without the prior written approval of the Executive Director of the Workers' Compensation Board or a designee. 9.1.2 The use of information obtained by the Contractor in the performance of its duties under this Agreement shall be limited to purposes directly connected with such duties. 9.1.3 Contractor agrees its officers, agents, employees and subcontractors shall not disclose, show or otherwise make available any portion of the materials or their contents to any one other than its employees and subcontractors in connection with the performance of its duties under this Agreement. 9.1.4 The Contractor shall be responsible for assuring that any agreement between the Contractor and any of its officers, agents, and employees or subcontractors contains a provision which strictly comports to the provisions of this section 9 herein. 12 13 9.1.5 The Contractor shall advise the Board of all requests made to Contractor for information described in section 9 herein within twenty-four (24) hours of such request. 13 14 9.2 CONTRACTOR BREACH OF CONFIDENTIAL INFORMATION 9.2.1 Contractor shall, at its expense, defend and satisfy the amount of any final judgment for the unauthorized disclosure of workers' compensation data brought against the State or the Board resulting in violation of privacy or injury to a claimant, employer or insurer arising from the actions of Contractor, its officers, agents, and employees or subcontractors. The Board shall give Contractor written notice of such claim or suit. 9.2.2 In addition to any penalties as authorized by law, Contractor shall pay liquidated damages to the Board for the unauthorized disclosure of workers' compensation data at the rate of ten thousand dollars ($10,000) per instance per claim. 10 PRESERVATION AND SAFEGUARDING OF BOARD DOCUMENTS 10.1 Contractor agrees to locate its paper-to-image conversion facilities/off-site work area(s) used for the performance of activities specified under this Agreement within the State of New York and apprise the Board of the location and address of such facilities. 10.2 If files and/or documents are lost due to the negligence or wrongdoing of Contractor or subcontractors in failing to preserve or safeguard such documents prior to their secure destruction as authorized by the Board, Contractor shall bear the cost of replacing lost files and/or lost documents therefrom, including the cost of making the Board and/or claimant whole. 11 DATA TAMPERING 11.1 Contractor acknowledges that "data tampering" is the alteration or destruction of computerized information without proper authority and purpose. 11.1.2 Contractor acknowledges that a false record is a misrepresentation. 11.1.3 Contractor agrees not to alter, modify, forge, eliminate information from or add information to, or otherwise tamper with Board documents. Contractor further agrees not to destroy documents without proper authority and purpose from the Board. 11.1.4 Contractor agrees its officers, agents, employees and subcontractors shall not alter, modify, forge, eliminate information from or add information to, or otherwise tamper with Board documents. Contractor further agrees its officers, agents, employees and subcontractors shall not destroy documents without proper authority and purpose from the Board. 11.1.5 Contractor shall be responsible for assuring that any agreement between the Contractor and any of its officers, agents, and employees or subcontractors contains a provision which strictly comports to the provisions of this section 11 herein. 11.2 Contractor shall, at its expense, defend and satisfy the amount of any final judgment for data tampering of workers' compensation data brought against the State or the Board. The Board shall give Contractor written notice of such claim or suit. 14 15 11.3 Contractor shall pay liquidated damages to the Board for data tampering of workers' compensation data at the rate of ten thousand dollars ($10,000) per instance per claim. 12 SUBCONTRACTING 12.1 Prior written approval of the Board shall be required for all subcontracts. This requirement does not apply to individual employer-employee contracts, or management incentives for same, or subcontracts executed prior to the date of release of the RFP. Any subcontract related to performance of this Agreement shall be subject to the provisions of law set forth in sections 220, 220-d, and 220-e of the Labor Law of the State of New York, Article 15 of the Executive Law of the State of New York and to the provisions set forth herein. The Board reserves the right to request information about any subcontracting relationship. 12.2 All subcontracts shall be in writing and shall contain provisions which are consistent with the provisions of this Agreement. All subcontracts shall contain a provision for assignment of the subcontract to the Board or its successor contractors. 12.3 A copy of any subcontract, once approved by the Board and executed by the Contractor and the subcontractor, shall be furnished to the Board within thirty (30) days of execution. 12.4 The Contractor shall give the Board immediate notice in writing of any legal action or suit filed, and prompt notice of any claim made, against the Contractor by any subcontractor or vendor which may result in litigation related in any way to this Agreement or which may affect the performance of duties under this Agreement. 12.5 The requirement of prior approval of any subcontract by the Board under this Agreement shall not make the State of New York a party to any subcontract or create any right, claim or interest in or by the subcontractor or proposed subcontractor against the State. 12.6 The Contractor shall be considered the prime contractor and sole point of contact in regard to any contractual items specified or required in this Agreement or RFP. Contractor is not to be relieved in any way of any responsibility, duty or obligation of this Agreement by a subcontract. 13 SCOPE OF WORK ALTERATION 13.1 The parties agree that the Agreement, including the RFP and the Proposal, fairly delineates the Scope of Work to be performed under the Agreement at the prices named in Contractor's Cost Proposal, Volume 2. However, they further agree that events may occur which could alter the scope of the operation. If an alteration in scope is desired by the Board, the Board shall issue a change request in writing on an Operation Change Request Form. The Board shall then provide the Operation Change Request Form to the Contractor Operation Manager. Such change request must include a description of the proposed change and a statement of why the change is desired. Contractor will review the change request and provide, at no additional charge to the Board, a proposal setting forth the impact of the change request. 13.2 It is recognized that Change Order requests may cause changes in price. The parties will enter into good faith negotiations in order to reach agreement on the actions, if any, to be taken in 15 16 order to achieve an equitable adjustment to the Agreement terms. The Contractor's Proposal shall be used as the basis for negotiating any proposed changes in cost related to a Scope of Work Alteration. The Contractor's rates for such services shall conform to the rates included in this Agreement. 13.3 Contractor shall implement an operation change request only upon written agreement of the parties in a Memorandum of Understanding signed by the Managing Executives specifying the changes, related prices and revisions to timetables. All substantive changes to the Statement of Work contained in a Memorandum of Understanding shall require an Amendment to this Agreement approved by the Comptroller of the State of New York. 14 BASIS FOR TERMINATION 14.1 The Agreement may be terminated: (a) By mutual written agreement of the contracting parties. (b) By the Board, whenever the Contractor shall default in performance of the Agreement in accordance with its terms and shall fail to cure such default within a period of ten (10) days after receipt from the Board of a written notice specifying the default. If it is subsequently determined for any reason that the Contractor was not in default or that the Contractor's failure to perform or make progress in performances was due to causes beyond the control and without the fault or negligence of the Contractor, either in part or in full, the Board shall have the option to either deem the Notice of Termination to have been issued under section 14.2 herein as a termination for convenience and the rights and obligations of the parties shall be governed accordingly, or allow the Contractor to resume performance under this Agreement. In the event of a termination for default, the Contractor shall be paid the following: (1) the per-page cost for the number of pages converted to images, indexed, and delivered in specified format to the Board (calculated monthly and not previously paid) minus any liquidated damages assessed; (2) costs allowable in the discretion of the Board of settling and paying subcontractor and supplier claims arising out of the termination of work when costs were incurred prior to termination and such claims are properly chargeable to the terminated portion of the Agreement. 14.2 The Agreement may be terminated by the Board for any reason. Such termination shall be referred to herein as "termination for convenience." Upon receipt of sixty (60) days written notice of termination for convenience, the Contractor shall be paid the following: (a) the per-page cost for the number of pages converted, indexed, and delivered in specified format to the Board (calculated monthly and not previously paid) to the date of termination; (b) costs allowable in the discretion of the Board of settling and paying subcontractor and 16 17 supplier claims arising out of the termination of work when costs were incurred prior to termination and such claims are properly chargeable to the terminated portion of the Agreement. (c) reasonable costs arising from the settlement process, including accounting, legal, clerical and other justifiable expenses, necessary for the preparation of settlement claims and supporting data with respect to the terminated portion of this Agreement, and for the termination and settlement of subcontracts thereunder. 14.3 Upon filing of a petition in bankruptcy or insolvency by or against the Contractor or subcontractor, if such petition is not vacated within thirty (30) days of its filing, the Board shall deem the Agreement terminated without termination services or costs, but payments for services rendered, subject to the status of the Board as a creditor in possession, shall be made as provided in section 14 herein. The Board shall not be precluded during the thirty (30)-day vacatur period from terminating the Agreement under other bases provided for in section 14 herein. 14.4 Should State funds for this Agreement become unavailable, the Board may deem this Agreement terminated. 15 PROCEDURES FOR TERMINATION Upon receipt of a written notice of termination, the Contractor shall: 15.1 Make provision for turning over any remaining records to the Board which are held after the completion of the final accounting as provided in this section 15 herein. Additionally, the Contractor shall assist the Board or a successor contractor in completing any activities undertaken before the termination of the Agreement including, without limitation, any judicial and administrative proceedings. 15.2 Stop work under this Agreement on the date and to the extent specified in the notice of termination. 15.3 Place no further orders or subcontracts for materials, services or facilities, except as may be necessary for completion of such portion of the work under this Agreement as is not terminated. 15.4 Terminate all orders and subcontracts to the extent that they relate to the performance of work terminated by the notice of termination. 15.5 Assign to the Board, in the manner and to the extent directed by the Board, all of the rights, title and interests of the Contractor under the orders of subcontracts so terminated, in which case the Board shall have the right, in its reasonable judgment, to settle or pay any or all claims arising out of termination of such orders and subcontracts. 15.6 With the approval or ratification of the Board, to the extent it may require, which approval or ratification shall be final and conclusive for all purposes of this clause, settle all outstanding liabilities and all claims rising out of such termination or orders or subcontracts, the cost of which would be reimbursable in whole or in part, in accordance with the provisions of this 17 18 Agreement. 15.7 Complete the performance of such part of the work as shall not have been terminated by the notice of termination. 15.8 Take such action as may be necessary, or as the Board may direct, for the protection and preservation of the property related to the Agreement which is in the possession or control of the Contractor and in which the Board has or may acquire an interest. 15.9 After receipt of a notice of termination, the Contractor shall submit to the Board its termination claim in the form and with the certification prescribed by the Board. Such claim shall be submitted promptly but in no event later than two (2) months from the effective date of termination. Upon failure of the Contractor to submit its termination claims within the time allowed, the Board may, subject to any review required by the State's procedures in effect as of the date of execution of the Agreement, determine, on the basis of information available to it, the amount, if any, due to the Contractor by reason of the termination and shall thereupon cause to be paid to the Contractor the amount so determined. 15.10 Subject to the provisions of section 15.9 herein, and subject to any review required by the Board's procedures in effect as of the date of execution of this Agreement, the Contractor and the Board may agree upon the whole or any part of the amount or amounts to be paid to the Contractor by reason of the total or partial termination of work pursuant to section 15 herein. This Agreement shall be amended accordingly, and the Contractor shall be paid the agreed amount. 15.11 In the event of the failure of the Contractor and the Board to agree in whole or in part, as provided in section 15.9 herein, as to the amounts with respect to charges to be paid to the Contractor in connection with the termination of work pursuant to section 15 herein, the Board shall determine, on the basis of information available to it and as provided in section 14, the amount, if any, due to the Contractor by reason of termination and shall pay to the Contractor the amount so determined. 15.12 The Contractor shall have the right to appeal under section 19 of the Agreement, entitled "Disputes," from any such determination made by the Board, except that, if the Contractor has failed to submit its claim within the time provided in section 15.9 herein, it shall have no such right of appeal. 15.13 In any case where the Board has made such determination of the amount due, the Board shall pay to the Contractor the following: (a) If no timely appeal has been taken, the amount so determined by the Board; or (b) If an appeal has been timely taken, the amount finally determined on such appeal. 15.14 In arriving at the amount due the Contractor under section 15 herein, there shall be deducted: (a) All payments theretofore made to the Contractor, applicable to the terminated portion of 18 19 this Agreement and (b) Any claim which the Board may have against the Contractor in connection with this Agreement. 15.15 The Board may from time to time, under such terms and conditions as it may prescribe, make partial payments and payments on account against costs incurred by the Contractor in connection with the termination portion of this Agreement whenever, in the opinion of the Board, the aggregate of such payments shall be within the amount to which the Contractor will be entitled hereunder. If the total of such payments is in excess of the amount finally determined to be due under section 15 herein, such excess shall be payable by the Contractor to the Board upon demand, together with simple interest computed at the rate of twelve percent (12%) per year, for the period from the date excess payment is received by the Contractor to the date on which such excess is repaid to the Board. 16 PARTICIPATION OF CERTAIN BUSINESS ENTERPRISES In accordance with Article 15-A of the New York State Executive Law, the Contractor shall ensure that certified minority and women-owned business enterprises (M/WBEs) are provided the opportunity for meaningful participation in the performance of the Agreement. The Board has established a goal of four and one-half percent (4 1/2%) participation by NYS Certified Minority Business Enterprises on this contract. The participation goals are expressed as a percentage of the total bid price of the contract. As set forth in detail in Appendix J of the RFP, the Contractor shall secure participation in the work of the contract by M/WBEs in satisfaction of the goals or document good-faith efforts taken to fulfill the goals. This participation may be as suppliers of goods. As a monitoring measure, the contractor shall submit a Contractor utilization report on forms provided by the Board, as set forth in Appendix J of the RFP. Any goal percentages established herein are subject to the requirements of Article 15-A of the Executive Law and regulations adopted pursuant thereto. The Board and Contractor agree as a condition of the State contract to be bound by the provisions of section 316 of Article 15-A of the Executive Law. 17 MACBRIDE FAIR EMPLOYMENT PRINCIPLES The Contractor must comply with section 165 of the State Finance Law (MacBride Fair Employment Principles) wherein the Contractor agrees to stipulate that they have no business in Northern Ireland or, if they do have business in Northern Ireland, they shall comply with the MacBride Fair Employment Principles, and shall permit independent monitoring of such principles. 18 AGREEMENT DURATION 18.1 TERM OF THE AGREEMENT The effective date of this Agreement shall be the date upon which the signatures of authorized State officials from the Department of Law and the Office of the State Comptroller shall be duly 19 20 affixed to the face of this Agreement, as required under section 33 herein. The term of this Agreement shall be for five (5) years from such effective date. 19 DISPUTES This Disputes provision shall apply to any dispute of the parties relating to performance under the Agreement except liquidated damages. Any dispute concerning any question of fact or law arising under the Agreement which is not disposed of by mutual agreement of the parties shall be initially decided by the designee of the Chair of the Board. A copy of the written decision shall be furnished to the Contractor. Upon issuance of such decision, the parties shall proceed diligently with the performance of the Agreement and shall comply with the provisions of such decision and continue to so comply pending further resolution of any such dispute as provided herein. The decision of the designee of the Chair shall be final and conclusive unless, within ten days from the receipt of such decision, the Contractor furnishes the Chair a written appeal. In the event of an appeal, the Chair shall promptly review the initial decision, and confirm, annul, or modify it. The decision of the Chair shall be final and conclusive unless it is overruled or modified by a court of competent jurisdiction. In connection with any appeal as provided herein, the Contractor shall be afforded an opportunity to be heard de novo and to offer evidence in support of its appeal. Pending final decision of any legal action or proceeding hereunder by a court of competent jurisdiction, both parties shall proceed diligently with the performance of the Agreement in accordance with the Chair's decision. 20 ACCESS REQUIREMENTS 20.1 ACCESS TO PREMISES 20.1.1 To assure compliance with this Agreement and for any other reason the Board deems appropriate for the effective and continuing operation of the paper-to-image conversion and indexing operation, the Board, the Office of the State Comptroller, or other State officials, and their authorized representatives and designees, shall at all times have the right to enter into any premises of the Contractor used in performance of this Agreement or such other place where duties under the Agreement are being performed, to inspect, monitor or otherwise evaluate the work performed or being performed therein, or to elicit information concerning the functions and management of this operation. Provisions shall be made by the Contractor to provide permanent identification cards for all on-site personnel and a limited number of other State personnel. No additional access requirements will be imposed on State personnel that are not required of the Contractor's employees. The Board shall have final authority in determining the extent of access to the Contractor's facilities for all on-site personnel, State personnel, key personnel and any other individuals whom the Board deems appropriate. For any such instance of access by authorized representatives or designees of any State agency or successor contractor, the Contractor shall provide, and shall require any subcontractor to provide, all reasonable facilities, cooperation and assistance to such representatives or designees in the performance of their duties. All such instance of access shall be undertaken in such a manner as will not unduly disrupt the Contractor's operations or performance under the Agreement. The right of access provided for herein shall include on-site visits, as directed and limited by the Board, by representatives of competitors in the process or procurement of a successor contractor. 20 21 20.1.2 Contractor shall give the Board advance notice of all visits to or tours of the paper-to-image conversion and indexing operations site(s) by other than Contractor staff. 20.1.3 The Contractor shall be responsible for assuring that the provisions of this section 20 shall apply to any subcontract related to performance under this Agreement. 21 22 21 RECORDS RETENTION 21.1 The Contractor agrees to preserve all Agreement-related records for the term this Agreement is in effect and for six (6) years thereafter, with disposal by the Contractor of any records during said period permitted only upon prior written approval by the Board. Records involving matters in litigation shall be kept for a period of not less than three (3) years following the termination of the litigation. Open-case folders, no-claims documents, reopened cases, and incoming daily documents do not constitute "Agreement-related records." Microfilm or imaged copies of any Agreement-related documents may be substituted for the originals with the prior written approval of the Board, provided that the microfilming or imaging procedures are accepted by the Board as reliable and are supported by an adequate retrieval system. 21.2 The Contractor shall be responsible for assuring that the provisions of section 21.1 herein shall apply to any subcontract related to performance under this Agreement. 22 INDEMNIFICATION The Contractor shall indemnify, defend and save harmless the Board, the State, its officers, agents or employees from any and all claims and losses accruing to or resulting from any and all contractors, subcontractors, materialmen, laborers, and any other person, firm, or corporation furnishing or supplying work, services, materials, or supplies in connection with the performance of the Agreement, and from all claims and losses accruing to or resulting from any person, firm, or corporation who may be injured or damaged by the Contractor, its officers, agents, or employees or subcontractors in the performance of the Agreement and against any liability, including costs and expenses, for violation of rights of privacy, arising out of the publication, translation, reproduction, delivery, performance, use or disposition of any data furnished under the Agreement or based on any libelous or otherwise unlawful matter contained in such data. 23 GENERAL PROVISIONS 23.1 DOCUMENT INCORPORATION AND ORDER OF PRECEDENCE 23.1.1 The Agreement consists of: (a) The body of this Agreement; (b) The appendices attached to the Agreement body; (c) The Request for Proposal issued by the Board dated September 9, 1997 and entitled Request For Proposal For Paper to Image Conversion Services as modified by the Board and by official Board responses to questions (i.e., Questions and Answers), the foregoing being herein incorporated by reference; and (d) The Contractor's Proposal submitted to the Board consisting of a Technical Proposal, Volume 1, and a Cost Proposal, Volume 2, the foregoing proposal elements being herein incorporated by reference. 22 23 23.1.2 In the event of any inconsistency in or conflict among the document elements of the Agreement identified in section 23.1.1 herein, such inconsistency or conflict shall be resolved by giving precedence to the document elements in the following order: (a) First, Appendix A, Standard Clauses for All New York State Contracts, attached to the Agreement; (b) Second, body of the Agreement; (c) Third, appendices other than Appendix A, attached to the body of the Agreement; (d) Fourth, the RFP, as amended; and (e) Fifth, the Contractor's Proposal. 23.2 INDEPENDENT CAPACITY OF CONTRACTOR The parties hereto agree that the Contractor is an independent contractor, and the Contractor, its agents, officers and employees, in the performance of the Agreement, shall act in an independent capacity and not as officers or employees of the State or the Board. 23.3 NO THIRD-PARTY BENEFICIARIES Nothing contained in the Agreement, expressed or implied, is intended to confer upon any person, corporation or other entity, other than the parties hereto and their successors in interest and assigns, any rights or remedies under or by reason of the Agreement. 23.4 NONASSIGNABILITY In accordance with section 138 of the State Finance Law, this contract may not be assigned by the Contractor or its right, title, or interest therein assigned, transferred, conveyed, sublet or otherwise disposed of without the previous consent, in writing, of the State, which shall not be unreasonably withheld, and any attempts to assign the contract without the State's written consent are null and void. The Contractor may, however, assign its right to receive payment without the State's prior written consent unless this contract concerns Certificates of Participation pursuant to Article 5-A of the State Finance Law. 23.5 CONTRACTOR PERSONNEL The Board reserves the right to require the Contractor to discharge, from performance of any or all duties under the Agreement, specified Contractor employees. The Board will not exercise this authority unreasonably. The Contractor agrees to replace any employee so discharged with an employee of equal or better qualifications. If the Board exercises its right under this provision, it agrees to provide written notice to the Contractor setting forth its reasons with specificity. 23 24 23.6 EMPLOYMENT PRACTICES 23.6.1 The Contractor shall comply with the nondiscrimination clause contained in Federal Executive Order 11246, as amended by Federal Executive Order 11375, relating to Equal Employment Opportunity for all persons without regard to race, color, religion, sex or national origin, and the implementing rules and regulations prescribed by the Secretary of Labor and with 41 Code of Federal Regulations, Chapter 60. The Contractor and any of its subcontractors shall comply with the Executive Law of the State of New York, sections 290-299 thereof and any rules or regulations promulgated in accordance therewith. 23.6.2 The Contractor shall comply with the provisions of the Federal Americans with Disabilities Act ("ADA"), Public Law 101-336, 42 U.S.C. 12101 et seq., and implementing regulations by the Federal Government including 29 CFR Part 1630 (equal employment opportunity for individuals with disabilities), 29 CFR Parts 1602 and 1627 (record keeping and reporting under Title VII of the Civil Rights Act of 1964 and the ADA), 28 CFR Part 35 (nondiscrimination on the basis of disability in state and local government services) and 28 CFR Part 36 (nondiscrimination on the basis of disability by public accommodations and in commercial facilities) as well as regulations issued by the Secretary of Labor of the United States at 41 CFR Part 60, pursuant to the provisions of Executive Order 11758 and its Federal Rehabilitation Act of 1973. The Contractor shall likewise be responsible for compliance with the above-mentioned regulations by subcontractors with whom the Contractor enters into a contractual relationship in furtherance of this Agreement. 23.6.3 The Contractor shall comply with regulations issued by the Secretary of Labor of the United States in 41 Code of Federal Regulations, Chapter 60, pursuant to the provisions of Executive Order 11758 and the Federal Rehabilitation Act of 1973. The Contractor shall likewise be responsible for compliance with the above- mentioned regulations by subcontractors with whom the Contractor enters into a contractual relationship in furtherance of this Agreement. Employment practices of the Contractor shall be consistent with corporate personnel policy and shall be uniformly applied to all contract staff. 23.6.4 The Contractor agrees to cooperate in implementing Board policies intended to achieve equal opportunity employment and, accordingly, warrants that it will not discriminate against employees or applicants for employment because of race, creed, color, national origin, sex, age, disability, sexual preference or marital status. The Contractor will state, in all solicitations, or advertisements for employees placed by or on behalf of the Contractor, that all qualified applicants will be afforded equal employment opportunities without discrimination because of race, creed, color, national origin, sex, age, disability, sexual preference or marital status. 23.6.5 The Contractor agrees to undertake or continue existing programs of affirmative action to ensure that minority group members and women are afforded equal employment opportunities without discrimination because of race, creed, color, national origin, sex, disability or marital status. For these purposes, affirmative action shall apply in the areas of recruitment, employment, job assignment, promotion, upgradings, demotion, transfer, layoff or termination and rates of pay or other forms of compensation. 24 25 23.6.6 The Contractor's affirmative action program shall be specified in an Affirmative Action Plan which shall contain but not be limited to goals and time frames for employment of protected classes, and procedures for preparation and submission of periodic affirmative action reports. 24 LEGAL ASSURANCE OF AUTHORITY TO PERFORM In consideration of the within premises, the Contractor represents to the Board that: (a) The Contractor has corporate authority to perform all duties required of it by the Agreement; and (b) The Contractor is qualified to do business in the State of New York. The Contractor shall give immediate notice to the Board of any event or circumstance which may affect the validity of the representations herein contained and shall take any and all actions required to preserve its legal authority to perform the Agreement. 25 FORCE MAJEURE Neither party shall be liable or deemed to be in default for any delay or failure in performance under the Agreement resulting directly or indirectly from acts of God, civil or military authority, acts of public enemy, wars, riots, civil disturbances, insurrections, earthquakes, the elements, acts or omissions of public utilities, or strikes, work stoppages, slow downs or other labor interruptions due to labor/management disputes involving entities other than the parties to the Agreement, or any other causes not reasonably foreseeable or beyond the control of a party. The parties are required to use best efforts to eliminate or minimize the effect of such events during performance of the Agreement and adhere to the performance standards as specified in section 2.1.9 of this Agreement. 26 NOTIFICATION Any notice required by the Agreement to be given between the Contractor and the Board shall be sent to the Board's Deputy Executive Director for this operation or the Contractor's designated Operation Director by registered or certified mail, return receipt requested, or shall be delivered in hand and a receipt granted. 27 DELEGATIONS OF AUTHORITY Whenever, by any provision of the Agreement, any right, power or duty is imposed or conferred on the Board, the right, power or duty so imposed or conferred shall be possessed and exercised by the Chair of the Board unless any such right, power or duty is specifically delegated to the duly appointed agents or employees of the Board. Any such delegation of authority shall be reduced to writing by the Chair and a copy thereof furnished to the Contractor. 25 26 28 PATENT OR COPYRIGHT INFRINGEMENT 28.1 The Contractor, solely at its expense, shall defend any claim or suit which may be brought against the Board or the State for the infringement of United States patents or copyrights arising from the Contractor's or the Board's use of any equipment materials or information prepared, developed or furnished by the Contractor in connection with performance of the Agreement, and in any such suit shall satisfy any final judgement for such infringement. The Board will give the Contractor written notice of such claim or suit and full right and opportunity to conduct the defense thereof, together with full information and all reasonable cooperation. 28.2 If principles of governmental or public law are involved, the State may participate in the defense of any action identified in section 28.1 herein, but no costs or expense shall be incurred upon the account of the Contractor without the Contractor's written consent. 28.3 If, in the Contractor's opinion, any equipment, materials or information mentioned in section 28.1 herein is likely to or does become the subject of a claim of infringement of a United States patent or copyright, then, without diminishing the Contractor's obligation to satisfy final award, the Contractor may, with the Board's prior written approval, substitute other equally suitable equipment, materials and information, or at the Contractor's option and expense, obtain the right for the Board to continue the use of such equipment, materials and information. 28.4 In the event that an action at law or in equity is commenced against the State arising out of claim that the State's use of the software under the Agreement infringes on any patent, copyright or proprietary right, and such action is forwarded by the State to the Contractor for defense and indemnification pursuant to section 28 herein, the Board shall send copies of all pleadings and documents forwarded to the Contractor, together with the forwarding correspondence, to the Office of the Attorney General of the State of New York, together with a copy of the Agreement. If upon receipt of such request for defense, or at any time thereafter, the Contractor is of the opinion that the allegations in such action, in whole or in part, are not covered by the indemnification set forth in section 28 herein, the Contractor shall immediately notify the Board and the Office of the Attorney General of the State of New York in writing and shall specify to what extent the Contractor believes they are and are not obligated to defend and indemnify under the terms and conditions of the Agreement. The Contractor shall in such event protect the interests of the State of New York and secure a continuance to permit the State of New York to appear and defend its interests in cooperation with the Contractor as is appropriate, including any jurisdictional defenses which the State shall have. 29 CONFLICT OF INTEREST If during the term of the Agreement and any extension thereof the Contractor becomes aware of an actual or potential relationship which may be considered a conflict of interest, the Contractor shall notify the Board in writing immediately. Should the Contractor engage any current or former New York State Workers' Compensation Board employee as its own employee or as an independent contractor because of such employee's knowledge of New York State finances, operations or knowledge of the Workers' Compensation Board program, or any current or former New York State Workers' Compensation Board employee who in the course of his or her State employment had frequent contact with management level Contractor employees, the Contractor 26 27 shall notify the Board, in writing, immediately. Should the Board thereafter determine that such employment is inconsistent with State or Federal Law, the Board shall so advise the Contractor, in writing, specifying its basis for so determining, and may request that the employee's relationship with the Board with respect to matters set forth in this Agreement be terminated. In addition, the Contractor shall not offer any Board employee or agent of the Board any gratuity or benefit without prior written approval of the Board. 30 STANDARD OF INTERPRETATION This Agreement shall be subject to liberal interpretation to accomplish the parties' evident purpose. The Contractor and the Board shall perform under this Agreement in a manner to fully ensure smooth, non-disruptive paper-to-image conversion operations of the Board's documents, whether such operation by the Contractor or by the Board or a successor contractor, consistent with the terms of this Agreement. Performance by the Contractor and the Board, under this Agreement shall at all times be consistent with those fundamental premises and this Agreement shall be construed accordingly. Disagreement between the parties concerning interpretation of this Agreement shall be subject to the "Disputes" provisions set forth in section 19 herein. 31 WAIVER OF BREACH No term or provision of this Agreement shall be deemed waived and no breach excused, unless such waiver or consent shall be in writing and signed by the party claimed to have waived or consented. Any consent by a party to, or waiver of, a breach under this Agreement shall not constitute a consent to, a waiver of, or excuse for any other, different or subsequent breach. 32 TAXES It shall be understood that the Board, as an agency of the State of New York, is not liable for the payment of any sales, use, excise or other form of tax, however designated, levied or imposed and shall agree to reimburse the Contractor for same only if taxes would have been incurred through the Board's normal business operations. 33 AGREEMENT APPROVAL The State Finance Law of the State of New York, section 112, requires that any contract made by a State department which exceeds ten thousand dollars in amount be first approved by the Office of the State Comptroller before becoming effective. The parties recognize that the Agreement is wholly executory and not binding until and unless approved by the Office of the State Comptroller, and the Department of Law. 27 28 34 CONTRACT EXTENSION WITHIN THE STATE Contractor acknowledges and agrees that by entering this Agreement, it grants the State of New York the option to extend this Agreement and the terms and conditions contained herein to any other state agency or authorized purchasers pursuant to Article XI of the New York State Finance Law. 35 CHOICE OF LAW The parties agree that the Agreement shall be interpreted according to the laws of the State of New York. The Contractor shall be required to bring any legal proceeding against the Board or the State arising from the Agreement in New York State courts. 36 STANDARD NEW YORK STATE CONTRACT CLAUSES Appendix A, Standard Clauses for all New York State Contracts, attached hereto, is hereby fully incorporated into the Agreement. 37 SEVERABILITY Should any provision of the Agreement be declared or found to be illegal, unenforceable, ineffective or void, then each party shall be relieved of any obligation arising from such provision; the balance of the Agreement, if capable of performance, shall remain in full force and effect. 28 29 IN WITNESS WHEREOF, THE PARTIES HERETO EXECUTE THIS AGREEMENT THE DAY AND YEAR WRITTEN BELOW, AND HEREBY ACKNOWLEDGE THAT THEY HAVE REVIEWED THE TERMS AND CONDITIONS SET FORTH HEREIN AND AGREE TO BE LEGALLY BOUND BY THE SAME. SIGNATURES CONTRACT NO. C-140162 ------------------- BOARD CERTIFICATION (IN ADDITION TO THE ACCEPTANCE OF THIS CONTRACT, I ALSO CERTIFY THAT ORIGINAL COPIES OF THIS SIGNATURE PAGE WILL BE ATTACHED TO ALL OTHER EXACT COPIES OF THIS CONTRACT). PRINCIPAL PLACE OF BUSINESS IS THE LOCATION OF THE PRIMARY CONTROL, DIRECTION AND MANAGEMENT OF THE ENTERPRISE. STATE OF ------------------------------- QCSINET's PRINCIPAL PLACE OF BUSINESS NEW YORK STATE WORKERS' CONTRACTOR COMPENSATION BOARD - ---------------------------------- --------------------------------------- SIGNATURE SIGNATURE - ---------------------------------- --------------------------------------- PRINT NAME PRINT NAME - ---------------------------------- --------------------------------------- TITLE TITLE - ---------------------------------- --------------------------------------- DATE COMPANY --------------------------------------- ADDRESS --------------------------------------- CITY STATE/ZIP --------------------------------------- TELEPHONE NUMBER --------------------------------------- FEDERAL I.D. NUMBER --------------------------------------- DATE DEPARTMENT OF LAW OFFICE OF THE STATE COMPTROLLER DENNIS C. VACCO H. CARL MCCALL new YORK STATE NEW YORK STATE ATTORNEY GENERAL COMPTROLLER BY: BY: ------------------------------- ------------------------------------ 30 ASSISTANT ATTORNEY GENERAL - ---------------------------------- --------------------------------------- DATE DATE ACKNOWLEDGMENT OF CORPORATION STATE OF ------------------------ COUNTY OF SS: --------------------- ON THIS ______ DAY OF ____________________, 1998, BEFORE ME PERSONALLY CAME _________________________________________ ________, TO ME KNOWN, WHO, BEING BY ME DULY SWORN, DID DEPOSE AND SAY THAT HE RESIDES IN _______________________________ ___, THAT HE IS THE ____________________________________ OF QCSINET ACQUISITION CORP. DESCRIBED IN AND WHICH EXECUTED THE ABOVE INSTRUMENT; THAT HE KNOWS THE SEAL OF SAID CORPORATION; THAT THE SEAL AFFIXED TO SAID INSTRUMENT IS SUCH CORPORATE SEAL; THAT IT WAS SO AFFIXED BY ORDER OF THE BOARD OF DIRECTORS OF SAID CORPORATION, AND THAT HE SIGNED HIS NAME THERETO BY LIKE ORDER. ------------------------------- NOTARY PUBLIC EX-10.39 10 1ST AMDMT TO AMENDED/RESTATED EMPLOYMENT AGREEMENT 1 EXHIBIT 10.39 FIRST AMENDMENT TO THE AMENDED AND RESTATED EMPLOYMENT AGREEMENT This First Amendment to the Amended and Restated Employment Agreement (the "Agreement") by and between F.Y.I. Incorporated, a Delaware corporation (the "Company"), and Ed H. Bowman, Jr. ("Employee") is hereby entered into and effective as of March 5, 1998. Paragraph 2(c)(x) is hereby amended and restated as follows: 2. Compensation. For all services rendered by Employee, the Company shall compensate Employee as follows: (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: (x) The Company shall provide Employee with additional warrants (the "Additional Warrants") to acquire (i) 50,000 shares of Common Stock of the Company at an exercise price equal to $20.00 per share at such time as the Common Stock has closed at or above $20.00 per share for five consecutive days. The Company shall provide Employee with additional options (the "Additional Options") to acquire (i) 50,000 shares of Common Stock of the Company at an exercise price equal to $25.00 per share at such time as the Common Stock has closed at or above $25.00 per share for five consecutive days; and (ii) 50,000 shares of Common Stock of the Company at an exercise price equal to $35.00 per share as of March 5, 1998. The Additional Warrants and the Additional Options shall become exercisable as to 50% of the underlying shares of Common Stock on the first anniversary of their issuance and as to the remaining 50% of the shares on the second anniversary of their issuance. The Additional Warrants expire on the fifth anniversary of the initial exercise date. The Additional Options shall expire on the tenth anniversary of the date of grant. Upon the grant of the Additional Warrants and the Additional Options, Employee may exercise the Additional Options until they expire. Dated: March 5, 1998 EMPLOYEE: /s/ ED H. BOWMAN, JR. --------------------------------- Ed H. Bowman, Jr. F.Y.I. INCORPORATED By: /s/ THOMAS C. WALKER ------------------------------ Title: Chairman and Chief Development Officer EX-21 11 SUBSIDIARIES OF THE REGISTRANT 1 EXHIBIT 21 SUBSIDIARIES Acadian Consultants Corp. ACT Medical Record Services, Inc. APS Services Acquisition Corp. Associate Record Technician Services Acquisition Corp. B&B (Baltimore-Washington) Acquisition Corp. California Medical Record Service Acquisition Corp. CH Acquisition Corp. Computer Central Corporation DeBari Associates Acquisition Corp. Delaware Major Acquisition Corp. Deliverex Acquisition Corp. Deliverex Sacramento Acquisition Corp. DISC Acquisition Corp. DPAS Acquisition Corp. Imagent Acquisition Corp. Information Management Acquisition Corp. Input of Texas, Inc. Leonard Archives Acquisition Corp. Lifo Systems, Inc. MAVRICC Management Systems, Inc. Medicopy Acquisition Corp. Micro Publication Systems, Inc. Minnesota Medical Record Service Acquisition Corp. MMS Escrow and Transfer Agency, Inc. Permanent Records Acquisition Corp. Premier Accusation Corp. QCS Inet Acquisition Corp. Quality Copy Acquisition Corp. RAC (California) Acquisition Corp. Recordex Acquisition Corp. Researchers Acquisition Corp. Robert A. Cook Acquisition Corp. Rust Federal Systems, Inc. Texas Medical Record Service Acquisition Corp. The Rust Consulting Group, Inc. ZIA Information Analysis Group, Inc. Zip Shred Canada Acquisition Corp. EX-23.1 12 CONSENT OF ARTHUR ANDERSEN LLP 1 EXHIBIT 23.1 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the use of our reports (and to all references to our Firm) included in or made a part of this Annual Report on Form 10-K of F.Y.I. Incorporated for the year ended December 31, 1997. We hereby consent to the incorporation by reference of our report in Registration Statements Nos. 333-5493 and 333-26785 on Form S-8. Arthur Andersen LLP Dallas, Texas March 9, 1998 EX-27 13 FINANCIAL DATA SCHEDULE
5 1,000 YEAR DEC-31-1997 JAN-01-1997 DEC-31-1997 6,926 0 29,468 3,122 1,675 40,554 36,352 16,464 126,238 18,449 6,548 0 0 109 100,407 126,238 8,318 154,142 5,949 132,566 (469) 1,631 1,851 15,090 6,083 9,007 0 0 0 9,007 .86 .85
-----END PRIVACY-ENHANCED MESSAGE-----