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0001104659-01-502024.txt : 20010820 0001104659-01-502024.hdr.sgml : 20010820 ACCESSION NUMBER: 0001104659-01-502024 CONFORMED SUBMISSION TYPE: 10-Q/A PUBLIC DOCUMENT COUNT: 10 CONFORMED PERIOD OF REPORT: 20010630 FILED AS OF DATE: 20010817 FILER: COMPANY DATA: COMPANY CONFORMED NAME: FYI INC CENTRAL INDEX KEY: 0000936931 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-BUSINESS SERVICES, NEC [7389] IRS NUMBER: 752560895 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q/A SEC ACT: 1934 Act SEC FILE NUMBER: 000-27444 FILM NUMBER: 1718320 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-Q/A 1 j1582_10qa.htm 10-Q/A Prepared by MerrillDirect

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q/A
(Amendment No. 1)

ý	Quarterly report pursuant to Section 13 or 15(d) of the Securities and Exchange Act of 1934

for the quarterly period ended June 30, 2001

	or

o	Transition report pursuant to Section 13 or 15(d) of the Securities and Exchange Act of 1934.

for the transition period from ____________ to ____________

Commission file number 0-27444

F.Y.I. INCORPORATED

(Exact name of registrant as specified in its charter)

DELAWARE	75-2560895
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

3232 MCKINNEY AVENUE, SUITE 1000 DALLAS, TEXAS	75204
(Address of principal executive offices)	(Zip code)

REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (214) 953-7555

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes ý No o

As of July 31, 2001, 16,989,155 shares of the registrant's Common Stock, $.01 par value per share, were outstanding.

F.Y.I. INCORPORATED AND SUBSIDIARIES
FORM 10-Q/A FOR THE PERIOD ENDED JUNE 30, 2001

This Amendment No. 1 to the F.Y.I. Incorporated Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2001 is being filed to correct certain typographical and similar errors in Items 1 and 2 of Part I and to add conformed signatures to exhibits.

INDEX

PART I.	FINANCIAL INFORMATION

Item 1	Financial Statement

	Consolidated Balance Sheets – December 31, 2000 and June 30, 2001 (unaudited)

	Consolidated Statements of Operations – Three and Six months ended June 30, 2000 and 2001 (unaudited)

	Consolidated Statements of Cash Flows – Six months ended June 30, 2000 and 2001 (unaudited)

	Notes to Consolidated Financial Statements

Item 2	Management's Discussion and Analysis of Financial Condition and Results of Operations

Item 3	Quantitative and Qualitative Disclosures about Market Risk

PART II.	OTHER INFORMATION

Item 1	Legal Proceedings

Item 4	Submission of Matters to a Vote of Security Holders

Item 5	Other Information

Item 6	Exhibits and Reports on Form 8-K

	SIGNATURES

PART I.	FINANCIAL INFORMATION

Item 1.	Financial Statements

F.Y.I. INCORPORATED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)

				December 31,			June 30,
				2000			2001

ASSETS							(Unaudited)

CURRENT ASSETS:
	Cash and cash equivalents			$	9,504		$	8,205
	Accounts and notes receivable, less allowance for doubtful accounts of $14,111 and $20,686, respectively			93,583			101,651
	Income tax receivable			-			7,843
	Deferred income taxes			3,935			6,019
	Prepaid expenses and other current assets			11,859			10,304
	Net assets held for sale			-			6,283

		Total current assets		118,881			140,305

PROPERTY, PLANT AND EQUIPMENT, net of accumulated depreciation $46,326 and $43,967, respectively				50,341			43,805
GOODWILL AND OTHER INTANGIBLES, net of amortization of $19,241 and $17,653, respectively				278,709			286,807
OTHER NONCURRENT ASSETS				6,778			7,452

			Total assets	$	454,709		$	478,369

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
	Accounts payable and accrued liabilities			$	57,351		$	79,176
	Current maturities of long-term obligations			851			572
	Income tax payable			4,759			-

		Total current liabilities		62,961			79,748

LONG-TERM OBLIGATIONS, net of current maturities				123,784			139,021
DEFERRED INCOME TAX				3,541			971
OTHER LONG-TERM OBLIGATIONS				11,031			19,488

			Total liabilities	201,317			239,228

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' EQUITY:
	Preferred stock, $.01 par value, 1,000,000 shares authorized, no shares issued and outstanding			—			—
	Common stock, $.01 par value, 26,000,000 shares authorized, 16,191,416 and 16,919,111 shares issued and outstanding at December 31, 2000 and June 30, 2001, respectively			162			170
	Additional paid-in-capital			166,608			187,452
	Accumulated other comprehensive loss			—			(662		)
	Retained earnings			87,286			52,845

				254,056			239,805
	Less – Treasury stock, $.01 par value, 42,605 shares at December 31, 2000 and June 30, 2001			(664		)	(664		)

			Total stockholders' equity	253,392			239,141

			Total liabilities and stockholders' equity	$	454,709		$	478,369

The accompanying notes are an integral part of these consolidated financial statements.

F.Y.I. INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)

			Three Months Ended						Six Months Ended
			June 30,						June 30,

			2000			2001			2000			2001

			(unaudited)						(unaudited)

REVENUE			$	114,400		$	119,813		$	222,165		$	241,217

COST OF SERVICES			68,140			70,817			133,813			142,495
SPECIAL CHARGES			—			417			—			417
DEPRECIATION			3,571			4,236			6,687			8,148

	Gross profit		42,689			44,343			81,665			90,157
SELLING, GENERAL, AND ADMINISTRATIVE EXPENSES			25,331			27,101			48,805			54,193
SPECIAL CHARGES			—			67,908			—			67,908
AMORTIZATION			2,046			2,560			3,936			5,052

	Operating income (loss)		15,312			(53,226		)	28,924			(36,996		)

OTHER (INCOME) EXPENSE:
	Interest expense		2,458			3,120			4,310			5,461
	Interest income		(111		)	(27		)	(212		)	(132		)
	Other income, net		(143		)	-			(219		)	(29		)

		Income (loss) before income taxes	13,108			(56,319		)	25,045			(42,296		)

PROVISION (BENEFIT) FOR INCOME TAXES			5,243			(13,188		)	10,018			(7,859		)


NET INCOME (LOSS)			$	7,865		$	(43,131	)	$	15,027		$	(34,437	)


NET INCOME (LOSS) PER COMMON SHARE
	Basic		$	0.52		$	(2.60	)	$	1.01		$	(2.10	)

	Diluted		$	0.50		$	(2.60	)	$	0.96		$	(2.10	)


WEIGHTED AVERAGE
COMMON SHARES OUTSTANDING
	Basic		15,050			16,575			14,807			16,379

	Diluted		15,715			16,575			15,617			16,379

The accompanying notes are an integral part of these consolidated financial statements.

F.Y.I. INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)

					Six Months Ended
					June 30,

					2000			2001

					(Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
	Net income (loss)				$	15,027		$		(34,437	)
	Adjustments to reconcile net income (loss) to net cash provided by operating activities:
		Special Charges			-			68,325
		Depreciation and amortization			10,623			13,200
	Change in operating assets and liabilities:
			Accounts and notes receivable		(2,874		)	(11,602			)
			Prepaid expenses and other assets		(3,066		)	(4,919			)
			Accounts payable and other current liabilities		(6,576		)	(5,645			)

				Net cash provided by operating activities	13,134			24,922

CASH FLOWS FROM INVESTING ACTIVITIES:
	Purchase of property, plant and equipment				(6,656		)	(8,777			)
	Proceeds from sale of operating company assets				-			1,250
	Cash paid for acquisitions, net of cash acquired				(61,008		)	(44,924			)

				Net cash used for investing activities	(67,664		)	(52,451			)

CASH FLOWS FROM FINANCING ACTIVITIES:
	Proceeds from common stock issuance, net of underwriting
	discounts and other costs				7,075			12,573
	Distribution to shareholders of pooled companies				(174		)	-
	Proceeds from long-term obligations				69,500			88,932
	Principal payments on long-term obligations				(17,747		)	(73,815			)
	Cash paid for debt issuance costs				-			(1,460			)

				Net cash provided by financing activities	58,654			26,230

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS					4,124			(1,299			)

CASH AND CASH EQUIVALENTS, beginning of period					9,396			9,504


CASH AND CASH EQUIVALENTS, end of period					$	13,520		$	8,205

The accompanying notes are an integral part of these consolidated financial statements.

F.Y.I. INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. Basis of Presentation:

The accompanying consolidated financial statements and related notes to consolidated financial statements include the accounts of F.Y.I. Incorporated and our subsidiaries.

In the opinion of our management, the accompanying consolidated financial statements include all of our accounts and the adjustments necessary to present fairly our financial position at June 30, 2001, our results of operations for the three and six months ended June 30, 2000 and 2001, and our cash flows for the six months ended June 30, 2000 and 2001. All significant intercompany transactions have been eliminated. Although we believe that the disclosures are adequate to make the information presented not misleading, certain information and footnote disclosures normally included in annual financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission (the "Commission"). These consolidated financial statements should be read in conjunction with our consolidated financial statements and the related notes thereto in our Annual Report on Form 10-K filed with the Commission on June 30, 2001. The results of operations for the three and six month periods ended June 30, 2000 and 2001 may not be indicative of the results for the full year.

2. Special Charges

During the second quarter, the Company completed several steps of its Business Process Outsourcing realignment strategic plan. The Company completed a strategic review of its operations and determined markets that it intends to concentrate on for future growth. Additionally, the Company identified certain non-strategic operating units for divestiture or closure, and accordingly, developed and committed to a divestiture plan. The non-strategic operating units were evaluated based on criteria such as market growth potential, current operating performance, revenue and earning growth potential, and expected sources and uses of capital. As a result of the divestiture plan and the completed actions discussed, the Company recorded $68.3 million of pre-tax special charges. Also, the Company recorded a $0.5 million charge to write-off deferred debt costs due to the refinancing of long-term obligations, which is included in interest expense. The following details the components of the charges discussed (in millions):

Net loss on sale of assets		$		53.4
Net loss on assets held for sale		7.3
Costs to exit certain non-strategic activities/locations			6.1
Nonrecurring legal charge		1.5

	Total Special Charges	$		68.3
	Write-down of deferred financing cost	0.5

	Total Pre-tax Charges	68.8

In June 2001, the Company completed the sale of four automated litigation support companies two legal copy companies, two records acquisition companies and its commercial systems integration consulting services company. Additionally, the Company was in the process of finalizing the sale of three print on demand companies and its investors' service company. These sales were completed early in the third quarter. The Company expects that the sale of the print on demand companies will result in a loss. Therefore, at June 30, 2001 the net assets to be sold were written down to the proceeds to be received resulting in a $7.3 million charge. The Company expects that the investors' services company will be sold for a gain of approximately $ 9.2 million, which will be recognized upon completion of the sale. The Company's net assets to be sold at June 30, 2001 have been reclassified as "Net assets for sale" in the current asset section of the balance sheet.

The net loss on the completed and planned divestitures (the “Divestitures”) and the related net book value of the assets sold are summarized as follows (in thousands):

		Total

Assets Sold:
	Total consideration (1)	$	7,088
	Net book value of assets and liabilities	57,334
	Selling Expenses	3,131

	Net Loss on Sale	$	53,377

Assets Held for Sale:
	Expected total consideration	$	1,725
	Net book value of assets and liabilities as of June 30, 2001	7,966
	Expected selling expenses	1,084

	Net Loss on Assets Held for Sale	$	7,325


(1)	As a part of the total consideration, the Company received notes receivable in the amount of $6.2 million. The notes receivable have payment terms between 3 and 18 months.

During June 2001, the Company developed plans to exit certain non-strategic activities/locations. Management currently anticipates that these closures will be substantially completed by September 30, 2001. The components of the charges related to these activities recorded during the second quarter are summarized below (in thousands):

Long-lived asset impairment	$	4,302
Contract termination cost and related commitments	529
Excess and obsolete inventory	417
Allowance for doubtful accounts	400
Other	525

Total	$	6,173

With respect to the contract termination costs and other cash charges, $43,000 was paid in the second quarter, and the remaining $1,011,000 is anticipated to be paid by the end of June 30, 2003.

Also, during the second quarter, the Company recorded $1.5 million in non-recurring legal charges. This item is presented as a part of the $67.9 million special charge.

In connection with the divestitures and closures, the Company has reduced the number of segments from four to two to reflect the go-forward segment focus. The identified segments are as follows:

Information Management and Distribution. This segment includes companies that provide the following services: (i) imaging; (ii) conversion of paper documents to microfilm; (iii) data capture and database management; (iv) document conversion services for state government disability; workers compensation claims and other government agencies; (v) full-service printing; and (vi) statement processing.

Healthcare, Regulatory and Legal Compliance . This segment includes companies that provide the following services: (i) processing a request for a patient’s medical records; (ii) off-site active storage of a healthcare institutions medical records; (iii) online delivery of images of selected medical records; (iv) document and data conversion services for healthcare institutions; (v) temporary staffing services; (vi) providing attending physicians’ statements for life and health insurance underwriting; (vii) managed care compliance reviews; (viii) legal claims administration; and (ix) professional services related to labor discrimination, forensic analysis and other trial support services.

We measure segment profit as income before income taxes. We have reclassified the 2000 amounts to agree with our new segment reporting. Information on the revised segments follows (in thousands):

			THREE MONTHS ENDED JUNE 30, 2001

			Information Management & Distribution		Healthcare, Regulatory and Legal Compliance		Divestitures and Closures		Special Charges (1)		Consolidated


	Revenue		$	55,671	$	50,206	$	13,936	$	-	$	119,813

	Income (loss) before income taxes		$	7,626	$	6,955	$	(2,101)	$	(68,799)	$		(56,319	)


(1)		Includes $0.5 million of charges writing-down deferred financing cost


	THREE MONTHS ENDED JUNE 30, 2000

	Information Management & Distribution		Healthcare, Regulatory and Legal Compliance		Divestitures and Closures		Special Charges		Consolidated


Revenue	$	40,056	$	47,206	$	27,138	$	-	$	114,400

Income before income taxes	$	3,318	$	8,659	$	1,131	$	-	$		13,108


			SIX MONTHS ENDED JUNE 30, 2001

			Information Management & Distribution		Healthcare, Regulatory and Legal Compliance		Divestitures and Closures			Special Charges (1)		Consolidated


	Revenue		$	102,951	$	103,060	$	35,206		$	-	$	241,217

	Income (loss) before income taxes		$	13,252	$	16,228	$	(2,977	)	$	(68,799)	$		(42,296	)

(1)		Includes $0.5 million of charges writing-down deferred financing cost

	SIX MONTHS ENDED JUNE 30, 2000

	Information Management & Distribution		Healthcare, Regulatory and Legal Compliance		Divestitures and Closures		Special Charges		Consolidated


Revenue	$	80,849	$	87,279	$	54,037	$	-	$	222,165

Income before income taxes	$	7,941	$	15,054	$	2,050	$	-	$		25,045

3. Recent Accounting Pronouncement

In June 2001, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards (“SFAS”) No. 141, “Business Combinations” and SFAS No. 142, “Goodwill and Other Intangible Assets.” SFAS No. 141 requires the use of the purchase method of accounting for all business combinations initiated after June 30, 2001, thereby eliminating the pooling-of-interests method of accounting. SFAS No. 141 also addresses the recognition and measurement of goodwill and other intangible assets acquired in a business combination. The adoption of SFAS No. 141 by the Company on July 1, 2001, will not have a significant effect on the Company’s financial statements.

Upon the adoption of SFAS No. 142, goodwill and intangible assets that have indefinite useful lives will not be amortized but rather will be tested at least annually for impairment. The Company will adopt the provisions of SFAS No. 142 on January 1, 2002. Goodwill amortization will be approximately $9.6 million for fiscal 2001, $5.8 million of which is deductible for tax purposes. The Company will complete its assessment of goodwill impairment by March 31, 2002. The impact of an impairment, if any determined during such assessment, would be recorded as a cumulative effect of a change in accounting principle during the first quarter of fiscal 2002

4. Weighted Average Shares Outstanding

Basic and diluted net income per common share were computed in accordance with Statement of Financial Accounting Standards No. 128, "Earnings Per Share." The differences between basic weighted average common shares and diluted weighted average common shares and common stock equivalents are as follows (in thousands):

	Three Months Ended		Six Months Ended
	June 30,		June 30,

	2000	2001	2000	2001


Basic weighted average common shares	15,050	16,575	14,807	16,379

Weighted average options, warrants and other contingent consideration	665	—	810	—


Diluted weighted average common shares	15,715	16,575	15,617	16,379

5. Business Combinations

2001 Acquisitions

During the first six months of 2001, we acquired five business process outsourcing solutions businesses, which were accounted for as purchases (the "Purchased Companies"). These acquisitions were (i) STAT Healthcare Consultants, Inc., (ii) Micromedia of New England, Inc., (iii) Image Entry Inc., Image Entry of Owsley County Inc., Image Entry of Indianapolis Inc., Image Entry Federal Systems Inc., Image Entry of Arkansas Inc., and Image Entry of Alabama Inc (collectively “Image Entry”), (iv) Kinsella Communications, Ltd., and (v) Digital Data Resources, Inc. The aggregate consideration paid for the Purchased Companies consisted of $44.4 million in cash and 180,714 shares of common stock. The preliminary allocation of the purchase price is set forth below (in thousands):

Consideration Paid	$	49,433
Estimated Fair Value of Identifiable Assets	13,869
Estimated Fair Value of Liabilities	5,685
Goodwill	41,249

The weighted average fair market values of the shares of common stock used in calculating the consideration paid for the Purchased Companies was $28.08 per share, which represents a 20% 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 from the final allocations.

Contingent Consideration

Certain of our acquisitions are subject to adjustments in their overall consideration based upon the achievement of specified earning targets over one to three year periods. During the first six months of 2001, we paid consideration of $1.5 million in cash and 132,069 shares of common stock at an average price of $28.17 in relation to contingent consideration agreements that have been finalized. Based upon the evaluation of cumulative earnings through June 30, 2001 against the specified earnings targets, we have accrued aggregate contingent consideration of approximately $36.0 million, of which $20.1 million is classified as accounts payable and accrued liabilities and will be settled in cash and $15.9 million is classified as long-term obligations and will be settled in common stock. All of the periods applicable for the earnout targets have not been completed, and additional amounts may be payable in future periods under the terms of the agreements.

Intangible Assets

Intangibles consist primarily of goodwill. Based on the historical profitability of the purchased companies and trends in the legal, healthcare and other industries regarding the outsourcing of document management functions in the foreseeable future, goodwill is being amortized over periods not to exceed 30 years. Management continually evaluates whether events and circumstances indicate that the remaining estimated useful life of intangible assets might warrant revisions or that the remaining balance of intangibles or other long-lived assets may not be recoverable. To make this evaluation, management compares the estimated undiscounted future cash flows over the remaining life of the intangibles or other long-lived assets to the carrying amount of the assets being evaluated.

If the expected future cash flows do not exceed the carrying amount of the assets being evaluated, an impairment loss is recognized based on the excess of the carrying amount of the impaired assets over their fair value. The goodwill associated with a majority of our acquisitions is not deductible for income tax purposes.

On January 1, 2002, the Company will adopt SFAS No. 142, which will change the Company's current goodwill amortization policy. See Note 3 to F.Y.I. Incorporated and Subsidiaries Notes to Consolidated Financial Statements.

6. New Credit Facility

On April 3, 2001, we entered into a new $297.5 million line of credit with Bank of America as arrangement agent and SunTrust Bank and Wells Fargo Bank as co-agents. The Annual interest rate applicable to borrowings under this facility is, at our option, (i) grid pricing ranging from 0.0% to 0.5% plus the prime rate based on the ratio of funded debt to EBITDA (as defined in the credit agreement) or (ii) grid pricing ranging from 1.125% to 2.0% plus LIBOR based on the ratio of funded debt to EBITDA. This credit facility replaced the previous $175 million facility. This new credit facility matures in April 2004 and is subject to customary borrowing capacity requirements.

7. Derivatives and Other Comprehensive Loss

Effective January 1, 2001, the Company adopted Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities." This statement requires that all derivative financial instruments be recognized as either assets or liabilities in the balance sheet and carried at fair value. Gains or losses on derivatives designated as cash flow hedges are initially reported as a component of other comprehensive income and later classified into earnings in the period in which the hedged item also affects earnings.

The Company has entered into an interest rate swap for a notional amount of $50 million to hedge, through March 31, 2003, its exposure to fluctuations in interest rates on $50 million of its debt. The swap has been designated by the Company as a cash flow hedge. As of June 30, 2001, the fair value of the interest rate swap was a liability of $1.1 million ($0.7 million, net of tax), which was recorded in the accompanying consolidated balance sheet in other long-term obligations with an offset recorded in equity as other comprehensive loss. This swap has the effect of fixing the interest rate on $50 million of the Company’s debt at 5.775% plus the applicable floating spread.

Comprehensive income (loss) is defined as the change in equity during a period from transactions and other events, except those resulting from investments by and distributions to stockholders. The components of comprehensive income (loss) for the three and six month periods ended June 30, 2000 and 2001 are as follows (in thousands):

	Three Months Ended					Six Months Ended
	June 30,					June 30,

	2000		2001			2000		2001


Net income (loss)	$	7,865	$	(43,131	)	$	15,207	$	(34,437	)
Other comprehensive income (loss):
Change in fair value of interest rate swap, net of tax benefit of $0 and $406, respectively	–		–				–	(662		)

Total comprehensive income (loss)	$	7,865	$	(43,131	)	$	15,207	$	(35,099	)

Item 2.

Management's Discussion and Analysis of Financial Condition and Results of Operations

The following discussion should be read in conjunction with our financial statements and the related notes thereto appearing elsewhere in this Report on Form 10-Q/A.

Introduction

We are a leading provider of business process outsourcing solutions. We offer customers in information intensive industries – such as legal, financial services and government – the solutions to manage key information and document intensive business processes, enabling these organizations to concentrate on their core competencies.

Since our inception, we have acquired 71 and divested approximately 12 companies. We evaluate candidates for acquisition and periodically for divestiture as a part of our strategic plan of providing customers a single solution for business process outsourcing. The criteria for evaluation include geographic need, additional technology, market growth potential, industry expertise, service expansion to broaden service offerings, expansion of our customer base, revenue and earnings growth potential, and expected sources and uses of capital.

Significant Developments

During the second quarter, we completed several steps involved with our Business Process Outsourcing realignment strategic plan. We completed a strategic review of our operations and determined markets that we intend to concentrate on for future growth. Additionally, we identified certain non-strategic operating units for divestiture or closure, and accordingly, developed and committed to a divestiture plan. The divested operating units were evaluated based on criteria such as market growth potential, current operating performance, revenue and earning growth potential, and expected sources and uses of capital. When completed, this plan will result in divestitures comprising approximately 23% of 2000 revenues and 4% of 2000 operating income.

Effective June 1, 2001, we completed the sale of 10 operating units pursuant to the divestiture plan. These units related to the following services: (i) automated litigation support; (ii) high-speed, multiple-set reproduction of documents; (iii) records acquisition in the form of subpoena of business documents and service of process; and (iv) a commercial system integration services company. The total proceeds received from these transactions were $7 million and resulted in a loss of $53.4 million. The proceeds from these divestitures will be used to pay down amounts outstanding under our credit facility and should provide $0.5 million in annualized interest expense savings (using the company's current incremental borrowing rate). The full effect of the interest expense benefit should begin during the 3^rd quarter of fiscal 2002 once the full amount of proceeds is collected.

Also, we were in the process of finalizing the sale of three print-on-demand companies and our investor's services company. These sales were completed early in the third quarter. The sale of the print-on-demand companies resulted in a loss. Therefore, at June 30, 2001 the net assets to be sold were written down to the proceeds to be received resulting in a charge of $7.3 million. The investor's services company was sold for a gain of approximately $9.2 million. The Company's net assets to be sold at June 30, 2001 were reclassified as"Net assets for sale" in the current asset section of the balance sheet.

Additionally, we closed two non-strategic business units in June 2001. The $6.1 million charge recorded for these closures resulted from long-lived asset impairment, contract termination costs and related commitments, obsolete inventory write-downs, and allowance for doubtful accounts.

Business Segments

After the effect of the divestitures and closures, the Company reduced the number of segments from four to two to reflect the go-forward segment focus. The identified segments are as follows:

Information Management and Distribution. This segment includes companies that provide the following services: (i) imaging; (ii) conversion of paper documents to microfilm; (iii) data capture and database management; (iv) document conversion services for state government disability; workers compensation claims and other government agencies; (v) full-service printing; and (vi) statement processing.

Healthcare, Regulatory and Legal Compliance. This segment includes companies that provide the following services: (i) processing a request for a patient’s medical records; (ii) off-site active storage of a healthcare institutions medical records; (iii) online delivery of images of selected medical records; (iv) document and data conversion services for healthcare institutions; (v) temporary staffing services; (vi) providing attending physicians’ statements for life and health insurance underwriting; (vii) managed care compliance reviews, (viii) legal claims administration, and (ix) professional services related to labor discrimination, forensic analysis, and other trial support services.

Basis for Management Discussion and Analysis

Cost of services consists primarily of compensation and benefits to employees providing goods and services to our clients, occupancy costs, equipment costs and supplies. Our cost of services also includes the cost of products sold for micrographics supplies and equipment, computer hardware and software and business imaging supplies and equipment.

Selling, general and administrative expenses ("SG&A") consist primarily of: (i) compensation and related benefits to sales and marketing, executive management, accounting, human resources and other administrative employees; (ii) other sales and marketing costs; (iii) communications costs; (iv) insurance costs; and (v) legal and accounting professional fees and expenses.

The 2001 results include pre-tax special charges totaling $68.3 million due to the divestiture of non-strategic operating companies, closures of two non-strategic business units, and non-recurring legal charges. Also, the Company recognized charges for the write-down of deferred debt costs due to refinancing long-term obligations. Additionally, included as a reduction to June 30, 2001 revenue was $1 million of bad debt expense related specifically to a single project within the Healthcare, Regulatory and Legal Compliance Segment. These items are discussed above in Note 2 "Special Charges" to the consolidated financial statements. To understand the ongoing company, the results from operations for the divested companies and closed facilities, the effect of the special charges, write-down of deferred financing cost, and the aforementioned bad debt expense have been removed from the 2000 and 2001 results in the following discussions.

THREE MONTHS ENDED JUNE 30, 2001 COMPARED TO THREE MONTHS ENDED JUNE 30, 2000

Revenue

Revenue increased 22% from $87.3 million for the three months ended June 30, 2000 to $106.9 million for the three months ended June 30, 2001. This increase was largely due to revenue from the acquisitions completed subsequent to June 30, 2000 and internal revenue growth, excluding acquired revenue, of 5.7%. This revenue growth was primarily attributable to an increase in government services and other document imaging and higher revenue from data capture services and healthcare professional services.

Gross profit

Gross profit increased 27% from $34.4 million for the three months ended June 30, 2000 to $43.6 million for the three months ended June 30, 2001. This increase is largely due to acquisitions completed subsequent to June 30, 2000. Gross profit as a percentage of revenue, increased from 39% for the three months ended June 30, 2000 to 41% for the three months ended June 30, 2001, primarily due to the favorable operating leverage afforded from revenue growth in the government business and higher margins earned on data capture services.

Selling, general and administrative expenses

SG&A increased 24% from $18.7 million, or 21% of revenue, for the three months ended June 30, 2000 to $23.1 million, or 22% of revenue, for the three months ended June 30, 2001. This increase was a result of SG&A at companies acquired subsequent to June 30, 2000 and increased outside services primarily related to legal and tax planning, and planned annual salary increases occurring during the first quarter of 2001.

Operating income

Operating income increased 28% from $14.2 million, or 16% of revenue, for the three months ended June 30, 2000 to $18.2 million, or 17% of revenue, for the three months ended June 30, 2001, largely attributable to the factors discussed above.

Income before income taxes and net income

Income before income taxes increased 30% from $12.0 million for the three months ended June 30, 2000 to $15.6 million for the three months ended June 30, 2001. Net income increased 35% from $7.2 million for the three months ended June 30, 2000 to $9.7 million for the three months ended June 30, 2001, largely attributable to the factors discussed above, and to the change in the effective tax rate from 40% to 38%. The effective tax rate of approximately 38% exceeded the federal statutory rate of 35% due primarily to the amortization of certain acquisition-related costs that are non-deductible for tax purposes, plus the net effect of state income taxes.

SIX MONTHS ENDED JUNE 30, 2001 COMPARED TO SIX MONTHS ENDED JUNE 30, 2000

Revenue

Revenue increased 23% from $168.1 million for the six months ended June 30, 2000 to $207.0 million for the six months ended June 30, 2001. This increase was largely due to revenue from the acquisitions completed subsequent to June 30, 2000 and internal revenue growth, excluding acquired revenue, of 8.5%. This revenue growth was primarily attributable to an increase in revenue for data capture services, class action administrative services, and healthcare professional services.

Gross profit

Gross profit increased 29% from $65.2 million for the six months ended June 30, 2000 to $83.9 million for the six months ended June 30, 2001. This increase is largely due to acquisitions completed subsequent to June 30, 2000. Gross profit as a percentage of revenue, increased from 39% for the six months ended June 30, 2000 to 41% for the six months ended June 30, 2001, primarily due to higher than average margins on acquisitions completed subsequent to June 30, 2000 and data capture and imaging services.

Selling, general and administrative expenses

SG&A increased 26% from $35.2 million, or 21% of revenue, for the six months ended June 30, 2000 to $44.3 million, or 21% of revenue, for the six months ended June 30, 2001. This increase was a result of SG&A at companies acquired subsequent to June 30, 2000 and increased outside services primarily related to legal and tax planning, and planned annual salary increases occurring during the first quarter of 2001.

Operating income

Operating income increased 32% from $26.9 million, or 16% of revenue, for the six months ended June 30, 2000 to $35.4 million, or 17% of revenue, for the six months ended June 30, 2001, largely attributable to the factors discussed above.

Income before income taxes and net income

Income before income taxes increased 33% from $23.0 million for the six months ended June 30, 2000 to $30.5 million for the six months ended June 30, 2001. Net income increased 37% from $13.8 million for the six months ended June 30, 2000 to $18.9 million for the six months ended June 30, 2001, largely attributable to the factors discussed above, and to the change in the effective tax rate from 40% to 38%. The effective tax rate of approximately 38% exceeded the federal statutory rate of 35% due primarily to the amortization of certain acquisition-related costs that are non-deductible for tax purposes, plus the net effect of state income taxes.

LIQUIDITY AND CAPITAL RESOURCES

At June 30, 2001, we had $60.6 million of working capital and $8.2 million of cash. Cash flows provided by operating activities for the six months ended June 30, 2001 were $24.9 million. Net cash provided by operating activities was approximately 132% of net income for the six months ended June 30, 2001, mostly due to cash savings from our tax planning, as well as strong cash flow from some recent business additions. Additionally, we do not anticipate the effect of the divestiture plan to significantly impact operating cash flow. Net cash used in investing activities was $52.5 million for the six months ended June 30, 2001, as we paid $44.9 million for acquisitions, net of cash acquired, including contingent consideration related to prior year acquisitions. Net cash provided by financing activities was $26.2 million for the six months ended June 30, 2001, primarily due to proceeds of $88.9 million on our line of credit, net of paydowns of $73.8 million on long-term obligations.

On April 3, 2001, we entered into a new $297.5 million line of credit with Bank of America as arrangement agent and SunTrust Bank and Wells Fargo Bank as co-agents. The annual interest rate applicable to borrowings under this facility is, at our option, (i) grid pricing ranging from 0.0% to 0.5% plus the prime rate based on the ratio of funded debt to EBITDA (as defined in the credit agreement) or (ii) grid pricing ranging from 1.125% to 2.0% plus the Eurodollar rate based on the ratio of funded debt to EBITDA. This credit facility replaced the previous $175 million facility. This new credit facility matures in April 2004 and is subject to customary borrowing capacity requirements.

On June 27, 2001, we amended our credit facility to permit the completion of certain divestitures. On August 2, 2001, we received a waiver from our lenders under our credit facility, waiving a technical debt covenant noncompliance resulting from the timing of certain of the divestitures.

In January 2000, we registered on Form S-4 (Registration No. 333-92981) 3,012,217 shares of common stock for issuance in connection with our acquisition program (the "Acquisition Shelf"), of which 1,894,418 shares were available as of June 30, 2001.

RISKS ASSOCIATED WITH FORWARD-LOOKING STATEMENTS

This Report contains certain forward-looking statements such as our intentions, hopes, beliefs, expectations, strategies, predictions or any other variation thereof or comparable phraseology of our future activities or other future events or conditions within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Act"), and Section 21E of the Securities Exchange Act of 1934, as amended, which are intended to be covered by the safe harbors created thereby. Investors are cautioned that all forward-looking statements involve risks and uncertainty, including, without limitation, variations in quarterly results, volatility of our stock price, development by competitors of new or superior products, technology or services, the entry into the market by new competitors, the sufficiency of our working capital and our ability to realize benefits from consolidating certain general and administrative functions, to assimilate and integrate acquisitions, to continue our acquisition program, to manage our growth, to retain management, to implement our focused business strategy, to expand our document and information management services geographically, to attract and retain customers, to increase revenue by cross-selling services and to successfully defend our company in ongoing and future litigation. Although we believe that the assumptions underlying the forward-looking statements contained herein are reasonable, any of the assumptions could be inaccurate, and, therefore, there can be no assurance that the forward-looking statements included in this Report will prove to be accurate. In light of the significant uncertainties inherent in the forward-looking statements included herein, the inclusion of such information should not be regarded as a representation by us or any other person that our objectives and plans will be achieved. Further, we disclaim any obligation to update any such forward-looking statements.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

The Company is subject to interest rate risk on its term loans and revolving credit facility. Interest rates are fixed on the indenture and capital lease obligations. The Company has entered into an interest rate swap for a notional amount of $50 million to hedge, through March 31, 2003, its exposure to fluctuations in interest rates on $50 million of its debt. This swap has the effect of fixing the interest rate on $50 million of the Company’s debt at 5.775% plus the applicable floating spread. The swap has been designated by the Company as a cash flow hedge. As of June 30, 2001, the fair value of the interest rate swap was a liability of $1.1 million, which was recorded in the accompanying consolidated balance sheet in other long-term obligations with an offset recorded in equity as other comprehensive loss

PART II. OHER INFORMATION

Item 1. Legal Proceedings

After receiving a notice from Identitech, Inc. alleging that our registered trademark "F.Y.I. INCORPORATED" infringed Identitech's registered trademark "FYI", on April 7, 2000, we filed an action in the United States District Court for the Northern District of Texas seeking a declaration that our use of this mark and certain other of our trademarks for document management services did not infringe Identitech, Inc.'s registered trademark "FYI" for computer software. Identitech answered the complaint and brought counterclaims alleging infringement of its mark by us. On May 22, 2001, the Company and Identitech reached an agreement that settled their dispute on mutually acceptable terms.

Item 4. Submission of Matters to a Vote of Security Holders

On May 10, 2001, we held our annual meeting of stockholders. The stockholders elected eight (8) directors. The director nominees received the following votes:

	Number of Votes

Nominee	For	Against/Withheld	Abstentions	Broker Non-Votes

Ed H. Bowman, Jr.	13,638,058	761,534	-	-
Michael J. Bradley	13,650,833	748,759	-	-
David Lowenstein	13,634,678	764,914	-	-
Donald F. Moorehead, Jr.	13,649,733	749,859	-	-
Joe A. Rose	13,634,778	764,814	-	-
Hon. Edward M. Rowell	13,649,603	749,989	-	-
Jonathan B. Shaw	13,550,736	848,856	-	-
Thomas C. Walker	11,949,162	2,450,430	-	-

Additionally, the proposed warrants were approved and adopted with the following votes:

Number of Votes

For	Against/Withheld	Abstentions	Broker Non-Votes

8,410,392	4,545,730	81,822	1,361,648

Item 5. Other Information

RECENT DEVELOPMENTS

Acquisitions

Since March 31, 2001, we have acquired the following business process outsourcing solutions businesses: (i) Kinsella Communications, Ltd., a class-action lawsuit notification service located in Washington D.C., and (ii) Digital Data Resources, Inc., a document imaging business located in Iowa.

Divestitures

During the second quarter and the first part of the third quarter, the Company sold the stock or assets of the following companies as part of the Divestitures: Advanced Digital Graphics, Inc.; CH Acquisition Corp.; T.C.H. Group, Inc.; TCH Mailhouse, Inc.; Eagle Legal Services Acquisition Corp.; Pinnacle Legal Management Limited Partnership; Researchers Acquisition Corp.; The Rust Consulting Group, Inc; PMI Imaging Systems, Inc.; F.Y.I. Discovery Services Incorporated; MAVRICC Management Systems, Inc.; MMS Escrow and Transfer Agency, Inc.; and MMS Securities, Inc.

Item 6. Exhibits and Reports on Form 8-K

(a)	Exhibits

	10.84	Amended and Restated Employment Agreement, dated as of May 18, 2001 between F.Y.I. Incorporated and Barry L. Edwards.

	10.85	Amended and Restated Employment Agreement, dated as of May 18, 2001, between F.Y.I. Incorporated and Charles S. Gilbert.

	10.86	Amended and Restated Employment Agreement, dated as of May 18, 2001 between F.Y.I. Incorporated and Ed H. Bowman, Jr.

	10.87	Amended and Restated Employment Agreement, dated as of May 18, 2001, between F.Y.I. Incorporated and Joe A. Rose.

	10.88	Employment Agreement, dated as of May 18, 2001, between F.Y.I Incorporated and Kerry D. Walbridge.

	10.89	Amended and Restated Employment Agreement, dated as of May 18, 2001, between F.Y.I. Incorporated and Michael S. Rupe.

	10.90	Amended and Restated Employment Agreement, dated as of May 18, 2001, between F.Y.I. Incorporated and Ronald Zazworsky.

	10.91	Amended and Restated Employment Agreement, dated as of May 18, 2001, between F.Y.I. Incorporated and Thomas C. Walker.

	10.92	First Amendment to Credit Agreement, dated as of June 27, 2001, by and among F.Y.I. Incorporated, Bank of America, N.A., and the other signatories thereto.

(b)	Reports on Form 8-K.

	During the Quarter ended June 30, 2001, the Company filed on April 12, 2001, a Current Report on Form 8-K with the Commission dated March 31, 2001, reporting under Item 2 thereto, the acquisition of Image Entry Inc., Image Entry of Owsley County Inc., Image Entry of Indianapolis Inc., Image Entry Federal Systems Inc., Image Entry of Arkansas Inc. and Image Entry of Alabama Inc.

	During the Company's third quarter, the Company filed on August 10, 2001, a Current Report on Form 8-K with the Commission dated August 9, 2001, reporting under Item 5 thereto, the Company's press release relating to earnings for the Quarter ended June 30, 2001.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Report on Form
10-Q/A to be signed on its behalf by the undersigned thereunto duly authorized.

	F.Y.I. Incorporated

Date: August 17, 2001	By: /s/ Ed H. Bowman, Jr.

		Ed H. Bowman, Jr.
		Chief Executive Officer and President


Date: August 17, 2001	By: /s/ Barry L. Edwards

		Barry L. Edwards
		Executive Vice President and Chief
		Financial Officer (Principal Financial
		and Accounting Officer)

EX-10.84 3 j1582_ex10d84.htm EX-10.84 Prepared by MerrillDirect

AMENDED AND RESTATED EMPLOYMENT AGREEMENT
(Barry L. Edwards)

This Employment Agreement (the "Agreement") by and between F.Y.I. Incorporated, a Delaware corporation (the "Company"), and Barry L. Edwards ("Employee") is hereby entered into and effective as of May 18, 2001. This Agreement hereby supersedes any other employment agreements or understandings, written or oral, between the Company and Employee.

R E C I T A L S

The following statements are true and correct:

As of the date of this Agreement, the Company is engaged primarily in the business of providing document and information management outsourcing solutions.

Employee is employed hereunder by the Company in a confidential relationship wherein Employee, in the course of his employment with the Company, has and will continue to become familiar with and aware of information as to the Company's customers, specific manner of doing business, including the processes, techniques and trade secrets utilized by the Company, and future plans with respect thereto, all of which has been and will be established and maintained at great expense to the Company; this information is a trade secret and constitutes the valuable goodwill of the Company.

Therefore, in consideration of the mutual promises, terms, covenants and conditions set forth herein and the performance of each, it is hereby agreed as follows:

A G R E E M E N T S

1. Employment and Duties.

(a) The Company hereby employs Employee as an Executive Vice President and Chief Financial Officer. As such, Employee shall have responsibilities, duties and authority reasonably accorded to and expected of an Executive Vice President and Chief Financial Officer and will report directly to the Company’s Chief Executive Officer. Employee hereby accepts this employment upon the terms and conditions herein contained and, subject to paragraph 1(b), agrees to devote his working time, attention and efforts to promote and further the business of the Company.

(b) Employee shall not, during the term of his employment hereunder, be engaged in any other business activity pursued for gain, profit or other pecuniary advantage except to the extent that such activity (i) does not interfere with Employee's duties and responsibilities hereunder and (ii) does not violate paragraph 3 hereof. The foregoing limitations shall not be construed as prohibiting Employee from (A) serving on the boards of directors of other companies or (B) making personal investments in such form or manner as will neither 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, the Company shall compensate Employee as follows:

(b) Incentive Bonus Plan. Employee shall be eligible for a bonus opportunity of up to 65% of his annual base salary in accordance with the Company’s Incentive Bonus Plan as modified from time to time, payable in cash and/or equity of the Company (at the Company’s discretion). The bonus payment and the Company's targeted performance shall be determined and approved by the Board or the compensation committee thereof. For 2001, Employee has already been awarded Warrant No. 60 as payment for any 2001 bonus opportunity.

(c) Executive Perquisites, Benefits and Other Compensation. Employee shall be entitled to receive additional benefits and compensation from the Company in such form and to such extent as specified below:

(i) Payment of all premiums for coverage for Employee and his dependent family members under health, hospitalization, disability, dental, life and other insurance plans that the Company may have in effect from time to time, and not less favorable than the benefits provided to other Company executives.

(ii) Reimbursement for all business travel and other out-of-pocket expenses reasonably incurred by Employee in the performance of his services pursuant to this Agreement. All reimbursable expenses shall be appropriately documented in reasonable detail by Employee upon submission of any request for reimbursement, and in a format and manner consistent with the Company's expense reporting policy.

(iii) Four (4) weeks paid vacation for each year during the period of employment or such greater amount as may be afforded officers and key employees generally under the Company's policies in effect from time to time (prorated for any year in which Employee is employed for less than the full year).

(iv) An automobile allowance in the amount of $1,000 per month (increased from $500 per month effective March 2001).

(v) The Company shall provide Employee with other executive perquisites as may be available to or deemed appropriate for Employee by the Board and participation in all other Company-wide employee benefits as available from time to time, which will include participation in the Company's Incentive Compensation Plan.

(vi) Participation in the Company’s 401(k) Plan and Non-Qualified Plan.

(vii) The Company shall reimburse Employee up to $6,000 per year for expenditures on health, insurance, financial planning or tax planning benefits (or similar benefits at the discretion of the Company) or club dues selected by Employee.

3. Non-Competition Agreement.

(a) Subject to Section 3(a) and Section 12, Employee will not, during the period of his employment by or with the Company, and for a period of two (2) years immediately following the termination of his employment under this Agreement, for any reason whatsoever, directly or indirectly, for himself or on behalf of or in conjunction with any other person, company, partnership, corporation, business or entity of whatever nature:

(i) engage, as an officer, director, shareholder, owner, partner, joint venturer, or in a managerial capacity, whether as an employee, independent contractor, consultant or advisor, or as a sales representative, in any business selling any products or services in direct competition with the Company, within 100 miles of (i) the principal executive offices of the Company or (ii) any place to which the Company provides products or services or in which the Company (including the subsidiaries thereof) is in the process of initiating business operations during the term of this covenant (the "Territory");

(ii) call upon, hire, attempt to hire, contact or solicit with respect to hiring (for Employee or on behalf of another) any person who is, at that time, or who has been within one (1) year prior to that time, an employee of the Company (including the subsidiaries thereof) in a managerial or sales capacity, provided that Employee shall be permitted to call upon and hire any member of his immediate family;

(iii) call upon, solicit, divert or take away or attempt to call upon, solicit, divert or take away any person or entity which is, at that time, or which has been, within one (1) year prior to that time, a customer of the Company (including the subsidiaries thereof) for the purpose of soliciting or selling products or services in direct competition with the Company;

(iv) call upon any prospective acquisition candidate, on Employee's own behalf or on behalf of any competitor, with which candidate the Company (including the subsidiaries thereof) entered into substantive discussions or for which candidate the Company made an acquisition analysis, for the purpose of acquiring such entity; or

(v) disclose customers, whether current or proposed, of the Company (or the subsidiaries thereof) to any person, firm, partnership, corporation or business for any reason or purpose whatsoever.

Notwithstanding the above, the foregoing covenant shall not be deemed to prohibit Employee from acquiring as an investment not more than three percent (3%) of the capital stock of a competing business, whose stock is traded on a national securities exchange or over-the-counter.

(b) Because of the difficulty of measuring economic losses to the Company as a result of a breach of the foregoing covenant, and because of the immediate and irreparable damage that could be caused to the Company for which it would have no other adequate remedy, Employee agrees that the foregoing covenant may be enforced by the Company in the event of breach by him by injunctions and restraining orders without the necessity of posting any bond therefor.

(c) In the course of Employee’s employment with the Company, Employee will become exposed to certain of the Company’s confidential information and business relationships, which the above covenants are designed to protect. It is agreed by the parties that the foregoing covenants in this paragraph 3 impose a reasonable restraint on Employee in light of the activities and business of the Company (including the Company's subsidiaries) on the date of the execution of this Agreement and the current plans of the Company (including the Company's subsidiaries); but it is also the intent of the Company and Employee that such covenants be construed and enforced in accordance with the changing activities, business and locations of the Company (including the Company's subsidiaries) throughout the term of this covenant, whether before or after the date of termination of the employment of Employee, subject to the following paragraph. For example, if, during the Term of this Agreement, the Company (including the Company's subsidiaries) engages in new and different activities, enters a new business or established new locations for its current activities or business in addition to or other than the activities or business enumerated under the Recitals above or the locations currently established therefor, then Employee will be precluded from soliciting the customers or employees of such new activities or business or from such new location and from directly competing with such new business within 100 miles of its then-established operating location(s) through the term of this covenant.

It is further agreed by the parties hereto that, in the event that Employee shall cease to be employed hereunder, and shall enter into a business or pursue other activities not in competition with the Company (including the Company's subsidiaries), or similar activities or business in locations the operation of which, under such circumstances, does not violate clause (i) of this paragraph 3, and in any event such new business, activities or location are not in violation of this paragraph 3 or of Employee's obligations under this paragraph 3, if any, Employee shall not be chargeable with a violation of this paragraph 3 if the Company (including the Company's subsidiaries) shall thereafter enter the same, similar or a competitive (i) business, (ii) course of activities or (iii) location, as applicable.

(d) The covenants in this paragraph 3 are severable and separate, and the unenforceability of any specific covenant shall not affect the provisions of any other covenant. Moreover, in the event any court of competent jurisdiction shall determine that the scope, time or territorial restrictions set forth are unreasonable, then it is the intention of the parties that such restrictions be enforced to the fullest extent that the court deems reasonable, and the Agreement shall thereby be reformed to such extent.

(e) All of the covenants in this paragraph 3 shall be construed as an agreement independent of any other provision in this Agreement, and the existence of any claim or cause of action of Employee against the Company, whether predicated on this Agreement or otherwise, shall not constitute a defense to the enforcement by the Company of such covenants. It is specifically agreed that the period of two (2) years following Employee’s employment set forth at the beginning of this paragraph 3, during which the agreements and covenants of Employee made in this paragraph 3 shall be effective, shall be computed by excluding from such computation any time during which Employee is in violation of any provision of this paragraph 3.

4. Place of Performance.

(a) Employee’s place of employment is the Company’s headquarters in Dallas, Texas. Employee understands that he may be requested by the Board to relocate from his present residence to another geographic location in order to more efficiently carry out his duties and responsibilities under this Agreement or as part of a promotion or other increase in duties and responsibilities. In the event that Employee is requested to relocate and agrees to do so, the Company will pay all relocation costs to move Employee, his immediate family and their personal property and effects. Such costs may include, by way of example, but are not limited to, pre-move visits to search for a new residence, investigate schools or for other purposes; temporary lodging and living costs prior to moving into a new permanent residence; duplicate home carrying costs; all closing costs on the sale of Employee's present residence and on the purchase of a comparable residence in the new location; and added income taxes that Employee may incur, as a result of any payment hereunder, to the extent any relocation costs are not deductible for tax purposes. The general intent of the foregoing is that Employee shall not personally bear any out-of-pocket cost as a result of the relocation, with an understanding that Employee will use his best efforts to incur only those costs which are reasonable and necessary to effect a smooth, efficient and orderly relocation with minimal disruption to the business affairs of the Company and the personal life of Employee and his family.

(b) Notwithstanding the above, if Employee is requested by the Board to relocate and Employee refuses, such refusal shall not constitute "good cause" for termination of this Agreement under the terms of paragraph 5(c).

5. Term; Termination; Rights on Termination. The term of this Agreement shall begin on the date hereof and continue through December 31, 2002 (the "Term"). This Agreement and Employee's employment may be terminated earlier in any one of the following ways:

(a) Death. The death of Employee shall immediately terminate the Agreement with no severance compensation due to Employee's estate.

(b) Disability. If, as a result of incapacity due to physical or mental illness or injury, Employee shall have been absent from his full-time duties hereunder for four (4) consecutive months, then thirty (30) days after receiving written notice (which notice may occur before or after the end of such four (4) month period, but which shall not be effective earlier than the last day of such four (4) month period), the Company may terminate Employee's employment hereunder provided Employee is unable to resume his full-time duties at the conclusion of such notice period. Also, Employee may terminate his employment hereunder if his health should become impaired to an extent that makes the continued performance of his duties hereunder hazardous to his physical or mental health or his life, provided that Employee shall have furnished the Company with a written statement from a qualified doctor to such effect and provided, further, that, at the Company's request made within thirty (30) days of the date of such written statement, Employee shall submit to an examination by a doctor selected by the Company who is reasonably acceptable to Employee or Employee's doctor and such doctor shall have concurred in the conclusion of Employee's doctor. In the event this Agreement is terminated as a result of Employee's disability, Employee shall receive from the Company, in a lump-sum payment due within ten (10) days of the effective date of termination, the base salary, at the rate then in effect, for one (1) year.

(c) Good Cause. The Company may terminate the Agreement ten (10) days after written notice to Employee for good cause, which shall be: (1) Employee's material and irreparable breach of this Agreement; (2) Employee's gross negligence in the performance or intentional nonperformance (continuing for ten (10) days after receipt of the written notice) of any of Employee's material duties and responsibilities hereunder; (3) Employee's dishonesty, fraud or misconduct with respect to the business or affairs of the Company which materially and adversely affects the operations or reputation of the Company; (4) Employee's conviction of a felony crime; or (5) chronic alcohol abuse or illegal drug abuse by Employee. In the event of a termination for good cause, as enumerated above, Employee shall have no right to any severance compensation.

(d) Without Cause. At any time after the commencement of employment, the Company may, without cause, terminate this Agreement and Employee's employment, effective thirty (30) days after written notice is provided to the Employee. Should Employee be terminated by the Company without cause, Employee shall receive from the Company, in a lump-sum payment due on the effective date of termination, one (1) times the base salary at the rate then in effect, as severance pay. Further, any termination without cause by the Company shall operate to shorten the period set forth in paragraph 3(a) and during which the terms of paragraph 3 apply to one (1) year from the date of termination of employment.

(e) Termination by Employee for Good Reason. Employee may terminate his employment hereunder for "Good Reason." As used herein, "Good Reason" shall mean the continuance of any of the following after ten (10) days' prior written notice by Employee to the Company, specifying the basis for such Employee's having Good Reason to terminate this Agreement:

(i) the assignment to Employee of any duties materially and adversely inconsistent with Employee's position as specified in paragraph 1 hereof (or such other position to which he may be promoted), including status, offices, responsibilities or persons to whom Employee reports as contemplated under paragraph 1 of this Agreement, or any other action by the Company which results in a material and adverse change in such position, status, offices, titles or responsibilities;

(ii) Employee's removal from, or failure to be reappointed or reelected to, Employee's position under this Agreement during the term of this Agreement (though this provision shall not entitle Employee to any extension or renewal of the Term of this Agreement), except as contemplated by paragraphs 5(a), (b), (c) and (e); or

(iii) any other material breach of this Agreement by the Company that is not cured within the ten (10) day time period set forth in paragraph 5(f) above, including the failure to pay Employee on a timely basis the amounts to which he is entitled under this Agreement.

In the event of any termination by the Employee for Good Reason, as determined by a court of competent jurisdiction or pursuant to the provisions of paragraph 16 below, the Company shall pay all amounts and damages (which damages shall not include payment of salary for the then unexpired Term in light of the Severance Pay set forth below), to which Employee may be entitled as a result of such breach, including interest thereon and all reasonable legal fees and expenses and other costs incurred by Employee to enforce his rights hereunder. In addition, Employee shall be entitled to receive from the Company in a lump-sum payment due on the effective date of termination, one (1) times the base salary at the rate then in effect, as severance pay. Further, none of the provisions of paragraph 3 shall apply in the event this Agreement is terminated by Employee for Good Reason.

(f)	Termination by Employee Without Good Reason. If Employee resigns or otherwise terminates his employment without Good Reason pursuant to paragraph 5(f), Employee shall receive no severance compensation.

(g)	Change of Control. Refer to paragraph 12, below.

Upon termination of this Agreement for any reason provided in clauses (a) through (g) above, Employee shall be entitled to receive all compensation earned and all benefits vested and reimbursements due through the effective date of termination. Additional compensation subsequent to termination, if any, will be due and payable to Employee only to the extent and in the manner expressly provided above or in paragraph 16. All other rights and obligations of the Company and Employee under this Agreement shall cease as of the effective date of termination, except that the Company's obligations under paragraph 9 herein and Employee's obligations under paragraphs 3, 6, 7, 8, 9 and 10 herein shall survive such termination in accordance with their terms.

6. Return of Company Property. All records, designs, patents, business plans, financial statements, manuals, memoranda, lists and other property delivered to or compiled by Employee by or on behalf of the Company (including the Company’s subsidiaries) or its representatives, vendors or customers which pertain to the business of the Company (including the Company’s subsidiaries) shall be and remain the property of the Company and be subject at all times to its discretion and control. Likewise, all correspondence, reports, records, charts, advertising materials and other similar data pertaining to the business, activities or future plans of the Company (including the Company’s subsidiaries) that is collected by Employee shall be delivered promptly to the Company without request by it upon termination of Employee's employment.

7. Inventions. Employee shall disclose promptly to the Company any and all significant conceptions and ideas for inventions, improvements and valuable discoveries, whether patentable or not, which are conceived or made by Employee, solely or jointly with another, during the period of employment or within one (1) year thereafter, and which are directly related to the business or activities of the Company (including the Company’s subsidiaries) and which Employee conceives as a result of his employment by the Company. Employee hereby assigns and agrees to assign all his interests therein to the Company or its nominee. Whenever requested to do so by the Company, Employee shall execute any and all applications, assignments or other instruments that the Company shall deem necessary to apply for and obtain letters patent of the United States or any foreign country or to otherwise protect the Company's interest therein.

8. Trade Secrets. Employee agrees that he will not, during or after the term of this Agreement with the Company, disclose the specific terms of the Company's (including the Company’s subsidiaries) relationships or agreements with its significant vendors or customers or any other significant and material trade secret of the Company (including the Company’s subsidiaries), whether in existence or proposed, to any person, firm, partnership, corporation or business for any reason or purpose whatsoever, except as is disclosed in the ordinary course of business.

9. Indemnification. In the event Employee is made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by the Company against Employee), by reason of the fact that he is or was performing services under this Agreement, then the Company shall indemnify Employee against all expenses (including attorneys' fees), judgments, fines and amounts paid in settlement, as actually and reasonably incurred by Employee in connection therewith. In the event that both Employee and the Company are made a party to the same third-party action, complaint, suit or proceeding, the Company agrees to engage competent legal representation, and Employee agrees to use the same representation, provided that if counsel selected by the Company shall have a conflict of interest that prevents such counsel from representing Employee, Employee may engage separate counsel and the Company shall pay all attorneys' fees of such separate counsel. Further, while Employee is expected at all times to use his best efforts to faithfully discharge his duties under this Agreement, Employee cannot be held liable to the Company for errors or omissions made in good faith where Employee has not exhibited gross, willful and wanton negligence and misconduct or performed criminal and fraudulent acts which materially damage the business of the Company.

10. No Prior Agreements. Employee hereby represents and warrants to the Company that the execution of this Agreement by Employee and his employment by the Company and the performance of his duties hereunder will not violate or be a breach of any agreement with a former employer, client or any other person or entity. Further, Employee agrees to indemnify the Company for any claim, including, but not limited to, attorneys' fees and expenses of investigation, by any such third party that such third party may now have or may hereafter come to have against the Company based upon or arising out of any non-competition agreement, invention or secrecy agreement between Employee and such third party which was in existence as of the date of this Agreement.

11. Assignment; Binding Effect. Employee understands that he has been selected for employment by the Company on the basis of his personal qualifications, experience and skills. Employee agrees, therefore, he cannot assign all or any portion of his performance under this Agreement and the Company agrees not to assign all or any portion of its obligations under this Agreement (other than to a successor as a result of a Change in Control). Subject to the preceding two (2) sentences and the express provisions of paragraph 12 below, this Agreement shall be binding upon, inure to the benefit of and be enforceable by the parties hereto and their respective heirs, legal representatives, successors and assigns.

12. Change in Control.

(a) Unless he elects to terminate this Agreement pursuant to (c) below, Employee understands and acknowledges that the Company may be merged or consolidated with or into another entity and that such entity shall automatically succeed to the rights and obligations of the Company hereunder.

(b) In the event of a pending Change in Control wherein the Employee has not received written notice at least fifteen (15) business days prior to the anticipated closing date of the transaction giving rise to the Change in Control from the successor to all or a substantial portion of the Company's business and/or assets that such successor is willing as of the closing to assume and agree to perform the Company's obligations under this Agreement in the same manner and to the same extent that the Company is hereby required to perform, such Change in Control shall be deemed to be a termination of this Agreement by the Company and the amount of the lump-sum severance payment due to Employee shall be 2 times Employee’s annual salary immediately prior to the Change in Control and the non-competition provisions of paragraph 3 shall not apply whatsoever. Payment shall be made either at closing of the transaction if notice is served at least five (5) days before closing or within ten (10) days of Employee’s written notice.

(c) In any Change in Control situation in which Employee has received written notice from the successor to the Company that such pending successor is willing to assume the Company's obligations hereunder or Employee receives notice after (or within 15 business days prior to) the Change in Control that Employee is being terminated, Employee may nonetheless, at his sole discretion, elect to terminate this Agreement by providing written notice to the Company at any time prior to closing of the transaction and up to two (2) years after the closing of the transaction giving rise to the Change in Control. In such case, the amount of the lump-sum severance payment due to Employee shall be 2 times Employee’s annual salary in effect immediately prior to the Change in Control and the non-competition provisions of paragraph 3 shall all apply. Payment shall be made either at closing if notice is served at least five (5) days before closing or within ten (10) days of written notice by Employee.

(d) For purposes of applying paragraph 5 under the circumstances described in (b) and (c) above, the effective date of termination will be the later of the closing date of the transaction giving rise to the Change in Control or Employee’s notice as described above, and all compensation, reimbursements and lump-sum payments due Employee must be paid in full by the Company at such time. Further, Employee will be given sufficient time in order to comply with then Securities and Exchange Commission’s regulations to elect whether to exercise and sell all or any of his vested options to purchase Common Stock of the Company, including any options with accelerated vesting under the provisions of the Company's 1995 Stock Option Plan, as amended (and as modified by the related option agreement/certificate in accordance with such Plan) or any warrants, such that he may convert such options or warrants to shares of Common Stock of the Company at or prior to the closing of the transaction giving rise to the Change in Control, if he so desires.

(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 30% or more of the total voting power of all of the then-outstanding voting securities of the ompany;

(ii) the individuals (A) who, as of the closing date of the Company's 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 of the Company, 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 holders of at least 75% of the 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) If any portion of the severance benefits, Change in Control benefits or any other payment under this Agreement, or under any other agreement with, or plan of the Company, including but not limited to stock options, warrants and other long-term incentives (in the aggregate “Total Payments”) would be subject to the excise tax imposed by Section 4999 of the Code, as amended (or any similar tax that may hereafter be imposed) or any interest or penalties with respect to such excise tax (such excise tax, together with any such interest and penalties, are hereinafter collectively referred to as the “Excise Tax”), then Employee shall be entitled to receive from the Company an additional payment (the “Gross-up Payment”) in an amount such that the net amount of Total Payments and Gross-up Payment retained by Employee, after the calculation and deduction of all Excise Tax on the Total Payments and all federal, state and local income tax, employment tax and Excise Tax on the Gross-up Payment, shall be equal to the Total Payments.

For purposes of this paragraph Employee’s applicable Federal, state and local taxes shall be computed at the maximum marginal rates, taking into account the effect of any loss of personal exemptions resulting from receipt of the Gross-Up Payment.

All determinations required to be made under this paragraph 12, including whether a Gross-Up Payment is required under this paragraph, and the assumptions to be used in determining the Gross-Up Payment, shall be made by the Company’s current independent accounting firm, or such other firm as the Company may designate in writing prior to a Change in Control (the “Accounting Firm”), which shall provide detailed supporting calculations both to the Company and Employee within twenty business days of the receipt of notice from Employee that there will likely be a Change in Control, or such earlier time as is requested by the Company. In the event that the Accounting Firm is serving as accountant or auditor for the party effecting the Change in Control or is otherwise unavailable, Employee (together with all other employees with comparable appointment rights in their respective employment agreements such that all such employees may collectively select a single accounting firm) may appoint another nationally recognized accounting firm to make the determinations required hereunder (which accounting firm shall then be referred to as the Accounting Firm hereunder). All fees and expenses of the Accounting Firm with respect to such determinations described above shall be borne solely by the Company.

Employee agrees (unless requested otherwise by the Company) to use reasonable efforts to contest in good faith any subsequent determination by the Internal Revenue Service that Employee owes an amount of Excise Tax greater than the amount determined pursuant to this paragraph; provided, that Employee shall be entitled to reimbursement by the Company (on an after tax basis) of all fees and expenses reasonably incurred by Employee in contesting such determination. In the event the Internal Revenue Service or any court of competent jurisdiction determines that Employee owes an amount of Excise Tax that is greater than the amount previously taken into account and paid under this Agreement (such additional Excise Tax being the “Additional Excise Tax”), the Company shall promptly pay to Employee the amount of such shortfall. In the case of any payment that the Company is required to make to Employee pursuant to the preceding sentence (a “Later Payment”), the Company shall also pay to Employee an additional amount such that after payment by Employee of all of Employee’s applicable Federal, state and local taxes, including any interest and penalties assessed by any taxing authority, on the Later Payment, Employee will retain from the Later Payment an amount equal to the Additional Excise Tax, which Employee shall use to pay the Additional Excise Tax.

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 1000
	Dallas, Texas 75204
	Attn: President

with a copy to:	F.Y.I. Incorporated
	3232 McKinney Avenue
	Suite 1000
	Dallas, Texas 75204
	Attn: General Counsel

with a copy to:	Locke Liddell & Sapp LLP
	2200 Ross Avenue
	Suite 2200
	Dallas, Texas 75201
	Attn: Charles C. Reeder, Esq.

To Employee:	Barry L. Edwards
	3900 Greenbrier Dr.
	Dallas, TX 75225

Notice shall be deemed given and effective three (3) days after the deposit in the U.S. mail of a writing addressed as above and sent first class mail, certified, return receipt requested, or when actually received. Either party may change the address for notice by notifying the other party of such change in accordance with this paragraph 14.

15. Severability; Headings. If any portion of this Agreement is held invalid or inoperative, the other portions of this Agreement shall be deemed valid and operative and, so far as is reasonable and possible, effect shall be given to the intent manifested by the portion held invalid or inoperative. The paragraph headings herein are for reference purposes only and are not intended in any way to describe, interpret, define or limit the extent or intent of the Agreement or of any part hereof.

16. Arbitration. Any unresolved dispute or controversy arising under or in connection with this Agreement shall be settled exclusively by arbitration, conducted before a panel of three (3) arbitrators in Dallas, Texas, in accordance with the rules of the American Arbitration Association then in effect. The arbitrators shall not have the authority to add to, detract from, or modify any provision hereof nor to award punitive damages to any injured party. The arbitrators shall have the authority to order back-pay, severance compensation, vesting of options (or cash compensation in lieu of vesting of options), reimbursement of costs, including those incurred to enforce this Agreement, and interest thereon in the event the arbitrators determine that Employee was terminated without disability or good cause, as defined in paragraphs 5(b) and 5(c), respectively, or that the Company has otherwise materially breached this Agreement. A decision by a majority of the arbitration panel shall be final and binding. Judgment may be entered on the arbitrators' award in any court having jurisdiction. The costs of any arbitration proceeding shall be borne by the party or parties not prevailing in such proceeding determined by the arbitrators.

17. Governing Law. This Agreement shall in all respects be construed according to the laws of the State of Delaware.

[Balance of sheet intentionally left blank]

	EMPLOYEE
	/s/ Barry L. Edwards

	Barry L. Edwards


	F.Y.I. INCORPORATED


	By: /s/ Ed H. Bowman, Jr.

	Title:		President and Chief Executive Officer

EX-10.85 4 j1582_ex10d85.htm EX-10.85 Prepared by MerrillDirect

AMENDED AND RESTATED EMPLOYMENT AGREEMENT
(Charles S. Gilbert)

This Employment Agreement (the "Agreement") by and between F.Y.I. Incorporated, a Delaware corporation (the "Company"), and Charles S. Gilbert ("Employee") is hereby entered into and effective as of May 18, 2001. This Agreement hereby supersedes any other employment agreements or understandings, written or oral, between the Company and Employee.

R E C I T A L S

The following statements are true and correct:

As of the date of this Agreement, the Company is engaged primarily in the business of providing document and information management outsourcing solutions.

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 Senior Vice President, General Counsel and Secretary. As such, Employee shall have responsibilities, duties and authority reasonably accorded to and expected of a Senior Vice President, General Counsel and Secretary and will report directly to the Company’s Chief Executive Officer. Employee hereby accepts this employment upon the terms and conditions herein contained and, subject to paragraph 1(b), agrees to devote his working time, attention and efforts to promote and further the business of the Company.

2. Compensation. For all services rendered by Employee, the Company shall compensate Employee as follows:

(a) Base Salary. The base salary payable to Employee shall be $220,000 per year (effective January 1, 2001), payable on a regular basis in accordance with the Company's standard payroll procedures but not less than bi-weekly.

(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:

(iv) An automobile allowance in the amount of $1,000 per month (increased from $500 per month effective March 2001).

(vi) Participation in the Company’s 401(k) Plan and Non-Qualified Plan.

(vii) The Company shall pay Employee’s bar association and CLE (continuing legal education) related expenses (including travel and lodging if required).

(viii) The Company shall reimburse Employee up to $5,000 per year for expenditures on health, insurance, financial planning or tax planning benefits (or similar benefits at the discretion of the Company) or club dues selected by Employee.

3. Non-Competition Agreement.

(v) disclose customers, whether current or proposed, of the Company (or the subsidiaries thereof) to any person, firm, partnership, corporation or business for any reason or purpose whatsoever.

4. Place of Performance.

(a) Death. The death of Employee shall immediately terminate the Agreement with no severance compensation due to Employee's estate.

In the event of any termination by the Employee for Good Reason, as determined by a court of competent jurisdiction or pursuant to the provisions of paragraph 16 below, the Company shall pay all amounts and damages (which damages shall not include payment of salary for the then unexpired Term in light of the Severance Pay set forth below), to which Employee may be entitled as a result of such breach, including interest thereon and all reasonable legal fees and expenses and other costs incurred by Employee to enforce his rights hereunder. In addition, Employee shall be entitled to receive from the Company, in a lump-sum payment due on the effective date of termination, one (1) times the base salary at the rate then in effect, as severance pay. Further, none of the provisions of paragraph 3 shall apply in the event this Agreement is terminated by Employee for Good Reason.

(f)	Termination by Employee Without Good Reason. If Employee resigns or otherwise terminates his employment without Good Reason pursuant to paragraph 5(f), Employee shall receive no severance compensation.

(g)	Change of Control. Refer to paragraph 12, below.

12. Change in Control.

(e) A "Change in Control" shall be deemed to have occurred if:

(f) If any portion of the severance benefits, Change in Control benefits or any other payment under this Agreement, or under any other agreement with, or plan of the Company, including but not limited to stock options, warrants and other long-term incentives (in the aggregate “Total Payments”) would be subject to the excise tax imposed by Section 4999 of the Code, as amended (or any similar tax that may hereafter be imposed) or any interest or penalties with respect to such excise tax (such excise tax, together with any such interest and penalties, are hereinafter collectively referred to as the “Excise Tax”), then Employee shall be entitled to receive from the Company an additional payment (the “Gross-up Payment”) in an amount such that the net amount of Total Payments and Gross-up Payment retained by the Employee, after the calculation and deduction of all Excise Tax on the Total Payments and all federal, state and local income tax, employment tax and Excise Tax on the Gross-up Payment, shall be equal to the Total Payments.

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 1000
	Dallas, Texas 75204
	Attn: President

with a copy to:	F.Y.I. Incorporated
	3232 McKinney Avenue
	Suite 1000
	Dallas, Texas 75204
	Attn: General Counsel

with a copy to:	Locke Liddell & Sapp LLP
	2200 Ross Avenue
	Suite 2200
	Dallas, Texas 75201
	Attn: Charles C. Reeder, Esq.

To Employee:	Charles S. Gilbert
	5520 Emerson
	Dallas, TX 75209

17. Governing Law. This Agreement shall in all respects be construed according to the laws of the State of Delaware.

[Balance of sheet intentionally left blank]


	EMPLOYEE:
	/s/ Charles S. Gilbert

	Charles S. Gilbert


	F.Y.I. INCORPORATED


	By: /s/ Ed H. Bowman, Jr.

	Title:		President and Chief Executive Officer

EX-10.86 5 j1582_ex10d86.htm EX-10.86 Prepared by MerrillDirect

AMENDED AND RESTATED EMPLOYMENT AGREEMENT
(Ed H. Bowman, Jr.)

This 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 May 18, 2001. This Agreement hereby supersedes any other employment agreements or understandings, written or oral, between the Company and Employee.

R E C I T A L S

The following statements are true and correct:

As of the date of this Agreement, the Company is engaged primarily in the business of providing document and information management outsourcing solutions.

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 President and Chief Executive Officer. As such, Employee shall have responsibilities, duties and authority reasonably accorded to and expected of a President and Chief Executive Officer and will report directly to the Board of Directors of the Company (the "Board"). 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. Compensation. For all services rendered by Employee, the Company shall compensate Employee as follows:

(a) Base Salary. The base salary payable to Employee shall be $575,000 per year (effective January 1, 2001), payable on a regular basis in accordance with the Company's standard payroll procedures but not less than bi-monthly. On at least an annual basis, the Board will review Employee's performance and may make increases to such base salary if, in its discretion, any such increase is warranted. Such recommended increase would, in all likelihood, require approval by the Board or a duly constituted committee thereof.

(b) Incentive Bonus Plan. Employee shall be eligible for a bonus opportunity of up to 100% of his annual base salary in accordance with the Company’s Incentive Bonus Plan as modified from time to time, payable in cash and/or equity of the Company (at the Company’s discretion). The bonus payment and the Company's targeted performance shall be determined and approved by the Board or the compensation committee thereof. For 2001, Employee has already been awarded Warrant No. 58 as payment for any 2001 bonus opportunity.

(iv) An automobile allowance in the amount of $1,000 per month (increased from $500 per month effective March 2001).

(v) The Company shall reimburse Employee up to $300 per month for club dues actually incurred by Employee, provided that such club is used at least 50% of the time for business purposes.

(vi) The Company shall provide Employee with other executive perquisites as may be available to or deemed appropriate for Employee by the Board and participation in all other Company-wide employee benefits as available from time to time, which will include participation in the Company's Incentive Compensation Plan.

(vii) The Company shall provide Employee with reasonable assistance in personal tax planning from Arthur Andersen LLP.

(viii) Participation in the Company’s 401(k) Plan and Non-Qualified Plan.

(ix) The Company shall, under Employee’s direction, establish a Supplemental Retirement Plan/Survivor Protection Plan to be placed inside the Company’s Non-Qualified Plan and provide Employee with such benefit.

(x) The Company shall reimburse Employee up to $15,000 per year for expenditures on health, insurance, financial planning or tax planning benefits (or similar benefits, or such other benefits at the discretion of the Company) or club dues, all as selected by Employee.

3. Non-Competition Agreement.

(a) Subject to Section 3(a), Employee will not, during the period of his employment by or with the Company, and for a period of two (2) years immediately following the termination of his employment under this Agreement, for any reason whatsoever, directly or indirectly, for himself or on behalf of or in conjunction with any other person, company, partnership, corporation, business or entity of whatever nature:

(ii) call upon any person who is, at that time, within the Territory, an employee of the Company (including the subsidiaries thereof) in a managerial capacity for the purpose or with the intent of enticing such employee away from or out of the employ of the Company (including the subsidiaries thereof), provided that Employee shall be permitted to call upon and hire any member of his immediate family;

(iii) call upon any person or entity which is, at that time, or which has been, within one (1) year prior to that time, a customer of the Company (including the subsidiaries thereof) within the Territory for the purpose of soliciting or selling products or services in direct competition with the Company within the Territory;

(iv) call upon any prospective acquisition candidate, on Employee's own behalf or on behalf of any competitor, which candidate was either called upon by the Company (including the subsidiaries thereof) or for which the Company made an acquisition analysis, for the purpose of acquiring such entity; or

(v) disclose customers, whether in existence or proposed, of the Company (or the subsidiaries thereof) to any person, firm, partnership, corporation or business for any reason or purpose whatsoever.

As used in paragraph 3(a), references to the business, customers, Territory, etc. of the Company refer to the status of the Company prior to any Change in Control (i.e., such breadth of business, customers, Territory, etc. shall not automatically be expanded to include those of a successor to the Company resulting from a Change in Control). Notwithstanding the above, the foregoing covenant shall not be deemed to prohibit Employee from acquiring as an investment not more than three percent (3%) of the capital stock of a competing business, whose stock is traded on a national securities exchange or over-the-counter.

(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 to such extent.

4. Place of Performance.

5. Term; Termination; Rights on Termination. The term of this Agreement shall begin on the date hereof and continue through December 31, 2005, and, unless terminated sooner as herein provided, shall continue thereafter on a five-year rolling basis on the same terms and conditions contained herein until written notice is given by the Company or Employee, not less than sixty (60) days prior to the December 31^st of any anniversary date of this Agreement during the Initial Term or thereafter, that the balance of the term of the Agreement shall be five (5) years from the January 1^st following such notice (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.

(d) Without Cause. At any time after the commencement of employment, the Company may, without cause, terminate this Agreement and Employee's employment, effective thirty (30) days after written notice is provided to the Employee. Should Employee be terminated by the Company without cause, Employee shall receive from the Company, in a lump-sum payment due on the effective date of termination, the base salary at the rate then in effect for whatever time period is remaining under the Term of this Agreement or for two (2) years, whichever amount is greater ("Severance Pay"). Further, any termination without cause by the Company shall operate to shorten the period set forth in paragraph 3(a) and during which the terms of paragraph 3 apply to one (1) year from the date of termination of employment.

(e) Change in Control. Refer to paragraph 12 below.

(f) Termination by Employee for Good Reason. Employee may terminate his employment hereunder for "Good Reason." As used herein, "Good Reason" shall mean the continuance of any of the following after ten (10) days' prior written notice by Employee to the Company, specifying the basis for such Employee's having Good Reason to terminate this Agreement:

(ii) Employee's removal from, or failure to be reappointed or reelected to, Employee's position under this Agreement, except as contemplated by paragraphs 5(a), (b), (c) and (e); or

In the event of any termination by the Employee for Good Reason, as determined by a court of competent jurisdiction or pursuant to the provisions of paragraph 16 below, the Company shall pay all amounts and damages to which Employee may be entitled as a result of such breach, including interest thereon and all reasonable legal fees and expenses and other costs incurred by Employee to enforce his rights hereunder. In addition, Employee shall be entitled to receive Severance Pay for whatever time period is remaining under the Term of this Agreement or for two (2) years, whichever amount is greater. Further, none of the provisions of paragraph 3 shall apply in the event this Agreement is terminated by Employee for Good Reason.

(g) Termination by Employee Without Cause. If Employee resigns or otherwise terminates his employment without Good Reason pursuant to paragraph 5(f), Employee shall receive no severance compensation.

Upon termination of this Agreement for any reason provided in clauses (a) through (g) above, Employee shall be entitled to receive all compensation earned and all benefits vested and reimbursements due through the effective date of termination. Additional compensation subsequent to termination, if any, will be due and payable to Employee only to the extent and in the manner expressly provided above or in paragraph 16. All other rights and obligations of the Company and Employee under this Agreement shall cease as of the effective date of termination, except that the Company's obligations under paragraph 9 herein and Employee's obligations under paragraphs 3, 6, 7, 8 and 10 herein shall survive such termination in accordance with their terms.

6. Return of Company Property. All records, designs, patents, business plans, financial statements, manuals, memoranda, lists and other property delivered to or compiled by Employee by or on behalf of the Company (including the Company’s subsidiaries) or its representatives, vendors or customers which pertain to the business of the Company (including the Company’s subsidiaries) shall be and remain the property of the Company and be subject at all times to its discretion and control. Likewise, all correspondence, reports, records, charts, advertising materials and other similar data pertaining to the business, activities or future plans of the Company (including the Company’s subsidiaries) which is collected by Employee shall be delivered promptly to the Company without request by it upon termination of Employee's employment.

12. Change in Control.

(b) In the event of a pending Change in Control wherein the Employee has not received written notice at least fifteen (15) business days prior to the anticipated closing date of the transaction giving rise to the Change in Control from the successor to all or a substantial portion of the Company's business and/or assets that such successor is willing as of the closing to assume and agree to perform the Company's obligations under this Agreement in the same manner and to the same extent that the Company is hereby required to perform, such Change in Control shall be deemed to be a termination of this Agreement by the Company and the amount of the lump-sum severance payment due to Employee shall be ten (10) times Employee’s annual salary immediately prior to the Change in Control and the non-competition provisions of paragraph 3 shall not apply whatsoever. Payment shall be made either at closing of the transaction if notice is served at least five (5) days before closing or within ten (10) days of Employee’s written notice.

(c) In any Change in Control situation in which Employee has received written notice from the successor to the Company that such pending successor is willing to assume the Company's obligations hereunder or Employee receives notice after (or within 15 business days prior to) the Change in Control that Employee is being terminated, Employee may nonetheless, at his sole discretion, elect to terminate this Agreement by providing written notice to the Company at any time prior to closing of the transaction and up to two (2) years after the closing of the transaction giving rise to the Change in Control. In such case, the amount of the lump-sum severance payment due to Employee shall be ten times Employee’s annual salary in effect immediately prior to the Change in Control and the non-competition provisions of paragraph 3 shall all apply. Payment shall be made either at closing if notice is served at least five (5) days before closing or within ten (10) days of written notice by Employee.

(d) For purposes of applying paragraph 5 under the circumstances described in (b) and (c) above, the effective date of termination will be the later of the closing date of the transaction giving rise to the Change in Control or Employee’s notice as described above, and all compensation, reimbursements and lump-sum payments due Employee must be paid in full by the Company at such time. Further, Employee will be given sufficient time in order to comply with the Securities and Exchange Commission’s regulations to elect whether to exercise and sell all or any of his vested options to purchase Common Stock of the Company, including any options with accelerated vesting under the provisions of the Company's 1995 Stock Option Plan, as amended or any warrants, such that he may convert the options or warrants to shares of Common Stock of the Company at or prior to the closing of the transaction giving rise to the Change in Control, if he so desires.

(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 30% or more of the total voting power of all of the then-outstanding voting securities of the Company;

(ii) the individuals (A) who, as of the closing date of the Company’s 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 of the Company, 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 holders of at least 75% of the 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

(f) Continuation of Benefits. (i) Following the termination of the Executive’s employment in connection with a Change in Control (as contemplated by paragraph 12(b) or 12(c) of this Agreement) (a “Change in Control Termination”) and until the earlier of (A) three (3) years following such Change in Control Termination or (B) the date on which the Executive becomes employed by a new employer (other than to the successor to the Company following such Change in Control), the Company shall, at its expense, provide the Executive with medical, dental, life insurance, disability and accidental death and dismemberment benefits (“Insurance Benefits”) at the highest level provided to the Executive immediately prior to the Change in Control; provided, however, if the Executive becomes employed by a new employer that maintains Insurance Benefits that either (x) do not cover the Executive with respect to a pre-existing condition that was covered under the Company’s Insurance Benefits, or (y) do not cover the Executive for a designated waiting period, or (z) do not provide for a certain benefit, the Executive’s coverage under the Company’s Insurance Benefits shall continue (with respect to such area of non-coverage described in (x), (y) or (z), as applicable), without limitation, until the earlier of the end of the applicable period of non-coverage under the new employer’s Insurance Benefits or the third anniversary of the Change in Control.

(ii) Following a Change in Control Termination the special benefit allowance of $15,000 contemplated by paragraph 2(c)(x) of this Agreement will continue for 3 years thereafter.

(iii) The Company shall reimburse all reasonable expenses incurred by the Executive for reasonable office and secretarial expenses and for reasonable professional outplacement services by qualified consultants selected by the Executive for up to 3 years after a Change in Control Termination.

(iv) The Executive shall not be required to seek other employment following a Change in Control Termination and any compensation earned from other employment shall not reduce the amounts otherwise payable under this Agreement.

(g) If any portion of the severance benefits, Change in Control benefits or any other payment under this Agreement, or under any other agreement with, or plan of the Company, including but not limited to stock options, warrants and other long-term incentives (in the aggregate “Total Payments”) would be subject to the excise tax imposed by Section 4999 of the Code, as amended (or any similar tax that may hereafter be imposed) or any interest or penalties with respect to such excise tax (such excise tax, together with any such interest and penalties, are hereinafter collectively referred to as the “Excise Tax”), then Employee shall be entitled to receive from the Company an additional payment (the “Gross-up Payment”) (i.e., in addition to such other severance benefits, Change in Control benefits or any other payments under this Agreement) in an amount such that the net amount of Total Payments and Gross-up Payment retained by the Employee, after the calculation and deduction of all Excise Tax on the Total Payments and all federal, state and local income tax, employment tax and Excise Tax on the Gross-up Payment, shall be equal to the Total Payments.

(h) In the event of a Change in Control, the Company shall require that the ultimate parent entity (or if no parent entity, the acquiring entity itself) of any entity that acquires control (through ownership of securities or assets, consistent with the definitional triggers of a Change in Control set forth above) of the Company in connection with such Change in Control assume or guaranty the Company’s obligations under paragraphs 12(f) and 12(g) of this Agreement.

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, including without limitation Employee’s Amended and Restated Employment Agreement dated January 1, 1999, which is superseded and replaced in its entirety by this Agreement. This written Agreement may not be later modified except by a further writing signed by a duly authorized officer of the Company and Employee, and no term of this Agreement may be waived except by writing signed by the party waiving the benefit of such term.

14. Notice. Whenever any notice is required hereunder, it shall be given in writing addressed as follows:

To the Company:	F.Y.I. Incorporated
	3232 McKinney Avenue
	Suite 1000
	Dallas, Texas 75204
	Attn: Chairman

with a copy to:	F.Y.I. Incorporated
	3232 McKinney Avenue
	Suite 1000
	Dallas, Texas 75204
	Attn: General Counsel

with a copy to:	Charles C. Reeder, Esq.
	Locke Liddell & Sapp LLP
	2200 Ross Avenue
	Suite 2200
	Dallas, Texas 75201

To Employee:	Ed H. Bowman, Jr.
	3102 Drexel Drive
	Dallas, Texas 75205

[Balance of page intentionally left blank]

17. Governing Law. This Agreement shall in all respects be construed according to the laws of the State of Delaware.

	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-10.87 6 j1582_ex10d87.htm EX-10.87 Prepared by MerrillDirect

AMENDED AND RESTATED EMPLOYMENT AGREEMENT
(Joe A. Rose)

THIS EMPLOYMENT AGREEMENT (the "Agreement") is made and entered into effective as of May 18, 2001 by and between Joe A. Rose ("Employee") and F.Y.I. Incorporated, a Delaware corporation (the "Company"). This Agreement hereby supersedes any other employment agreements or understandings, written or oral, between the Company and Employee.

R E C I T A L S

The following statements are true and correct:

As of the date of this Agreement, the Company is engaged primarily in the document and information management outsourcing solutions business (the “Business”).

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 an Executive Vice President and Chief Operating Officer. As such, Employee shall have responsibilities, duties and authority reasonably accorded to and expected of an Executive Vice President and Chief Operating Officer. Employee hereby accepts this employment upon the terms and conditions herein contained and, subject to paragraph 1(b), agrees to devote his working time, attention and efforts to promote and further the business of the Company.

(b) Employee shall not, during the term of his employment hereunder, be engaged in any other business activity pursued for gain, profit or other pecuniary advantage except to the extent that such activity (i) does not interfere with Employee's duties and responsibilities hereunder and (ii) does not violate paragraph 9 hereof. The foregoing limitations shall not be construed as prohibiting Employee from (A) serving on the board of directors of other companies or (B) making personal investments in such form or manner as will neither 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 9 hereof.

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 $365,000 per year (effective January 1, 2001), 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). On at least an annual basis the Board (as defined below) will review Employee’s performance and make increases to such base salary if, in its discretionary, any such increase is warranted. Such recommended increase would, in all likelihood, require approval by the Board of Directors (the “Board”) or a duly constituted committee thereof. For 2001 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 80% of Employee's annual base salary payable in cash and/or equity (at the Company’s discretion) in accordance with this Incentive Bonus Plan. The award of any bonus shall be based on the Company’s overall performance 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 or the compensation committee thereof. For 2001, Employee has already been awarded Warrant No. 59 as payment for any 2001 bonus opportunity.

(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 $1,000 per month (effective March 2001) car allowance (determined on a pre-tax basis). All reimbursable expenses shall be appropriately documented in reasonable detail by Employee upon submission of any request for reimbursement, and in a format and manner consistent with the Company's expense reporting policy.

(iii) Four (4) weeks paid vacation for each year during the period of employment or such greater amount as may be afforded officers and key employees generally under the Company's policies in effect from time to time (pro-rated for any year in which Employee is employed for less than the full year).

(iv) The Company shall provide Employee with other executive perquisites as may be available to or deemed appropriate for Employee by the Board and participation in all other Company-wide employee benefits as available from time to time.

(v) The Company shall reimburse Employee up to $8,000 per year for expenditures on health, insurance, financial planning or tax planning benefits (or similar benefits, or such other benefits at the discretion of the Company) or club dues, all as selected by Employee.

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 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 (the “Term”) of this Agreement shall begin on the date hereof and continue through December 31, 2003. On each December 31, the agreement shall automatically renew for a three-year period (such that upon such renewal, the new remaining term shall be three years), unless written notice is given that it will not be renewed. 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, the base salary at the rate then in effect for whatever time period is remaining under the Term of this Agreement.

(c) Good Cause. The Company may terminate the Agreement five (5) days after written notice to Employee (which notice was actually received by 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 equivalent to the remaining Term of this Agreement.

(e) Change in Control. Refer to paragraph 20 below.

(f) 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), (c) and (e); or

(ii) Any other material breach of this Agreement by the Company that is not cured within the fifteen (15) day time period set forth in paragraph 4(f), 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 equivalent to the remaining Term of this Agreement.

(g) Termination by Employee Without Cause. If Employee resigns or otherwise terminates his employment without Good Reason pursuant to paragraph 4(f), Employee shall receive no severance compensation.

Upon termination of this Agreement for any reason provided in clauses (a) through (g) above, Employee shall be entitled to receive all compensation earned and all benefits and reimbursements vested or due through the effective date of termination. Additional compensation subsequent to termination, if any, will be due and payable to Employee only to the extent and in the manner expressly provided above or in paragraph 16. All other rights and obligations 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, 8, 9 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.

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 used (prior to the termination of this Agreement) by the Company or its affiliates.

As used in paragraph 9(a), references to the business, customers, Territory, etc. of the Company refer to the status of the Company prior to any Change in Control (i.e., such breadth of business, customers, Territory, etc. shall not automatically be expanded to include those of a successor to the Company resulting from a Change in Control). In the course of Employee’s employment with the Company, Employee will become exposed to certain of the Company’s confidential information and business relationships, which the above covenants are designed to protect. 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 and the Company agrees not to assign all or any portion of its obligations under this Agreement (other than to a successor as a result of a Change in Control). 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 1000
		Dallas, Texas 75204
		Attn: President

with a copy to:	F.Y.I. Incorporated
		3232 McKinney Avenue
		Suite 1000
		Dallas, Texas 75204
		Attn: General Counsel

with a copy to:	Locke Liddell & Sapp LLP
		2200 Ross Avenue
		Suite 2200
		Dallas, Texas 75201
		Attn: Charles C. Reeder, Esq.

To Employee:		Joe A. Rose
		3924 Southwestern Boulevard
		Dallas, Texas 75225

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.

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.

20. Change in Control.

(a) Employee understands and acknowledges that the Company may be merged or consolidated with or into another entity.

(b) In the event of a pending Change in Control wherein the Employee has not received written notice at least fifteen (15) business days prior to the anticipated closing date of the transaction giving rise to the Change in Control from the successor to all or a substantial portion of the Company’s business and/or assets that such successor is willing as of the closing to assume and agree to perform the Company’s obligations under this Agreement in the same manner and to the same extent that the Company is hereby required to perform, such Change in Control shall be deemed to be a termination of this Agreement by the Company and the amount of the lump-sum severance payment due to Employee shall be five (5) times the Employee’s annual salary immediately prior to Change in Control and the non-competition provisions of paragraph 9 shall not apply whatsoever. Payment shall be made either at closing of the transaction if notice is served at least five (5) days before closing or within ten (10) days of Employee’s written notice.

(c) In any Change in Control situation in which Employee has received written notice from the successor to the Company that such pending successor is willing to assume the Company’s obligations hereunder or Employee receives notice after (or within fifteen (15) business days prior to) the Change in Control that Employee is being terminated, Employee may nonetheless, at his sole discretion, elect to terminate this Agreement by providing written notice to the Company at any time prior to closing of the transaction and up to two (2) years after the closing of the transaction giving rise to the Change in Control. In such case, the amount of the lump-sum severance payment due to Employee shall be five (5) times Employee’s annual salary in effect immediately prior to Change in Control and the non-competition provisions of paragraph 9 shall all apply. Payment shall be made either at closing if notice is served at least five (5) days before closing or within ten (10) days of written notice by Employee.

(d) For purposes of applying paragraph 4 under the circumstances described in (b) and (c) above, the effective date of termination will be the later of the closing date of the transaction giving rise to the Change in Control or Employee’s notice as described above, and all compensation, reimbursements and lump-sum payments due Employee must be paid in full by the Company at such time. Further, Employee will be given sufficient time in order to comply with then Securities and Exchange Commission’s regulations to elect whether to exercise and sell all or any of his vested options to purchase Common Stock of the Company, including any options with accelerated vesting under the provisions of the Company's 1995 Stock Option Plan, as amended or any warrants, such that he may convert the options or warrants to shares of Common Stock of the Company at or prior to the closing of the transaction giving rise to the Change in Control, if he so desires.

(e) A "Change in Control" shall be deemed to have occurred if:

(f) Continuation of Benefits. (i) Following the termination of the Executive’s employment in connection with a Change in Control (as contemplated by paragraph 20(b) or 20(c) of this Agreement) (a “Change in Control Termination”) and until the earlier of (A) three (3) years following such Change in Control Termination or (B) the date on which the Executive becomes employed by a new employer (other than to the successor to the Company following such Change in Control), the Company shall, at its expense, provide the Executive with medical, dental, life insurance, disability and accidental death and dismemberment benefits (“Insurance Benefits”) at the highest level provided to the Executive immediately prior to the Change in Control; provided, however, if the Executive becomes employed by a new employer that maintains Insurance Benefits that either (x) do not cover the Executive with respect to a pre-existing condition that was covered under the Company’s Insurance Benefits, or (y) do not cover the Executive for a designated waiting period, or (z) do not provide for a certain benefit, the Executive’s coverage under the Company’s Insurance Benefits shall continue (with respect to such area of non-coverage described in (x), (y) or (z), as applicable), without limitation, until the earlier of the end of the applicable period of non-coverage under the new employer’s Insurance Benefits or the third anniversary of the Change in Control.

(ii) Following a Change in Control Termination the special benefit allowance of $8,000 contemplated by paragraph 2(b)(v) of this Agreement will continue for 3 years thereafter.

All determinations required to be made under this paragraph 20, including whether a Gross-Up Payment is required under this paragraph, and the assumptions to be used in determining the Gross-Up Payment, shall be made by the Company’s current independent accounting firm, or such other firm as the Company may designate in writing prior to a Change in Control (the “Accounting Firm”), which shall provide detailed supporting calculations both to the Company and Employee within twenty business days of the receipt of notice from Employee that there will likely be a Change in Control, or such earlier time as is requested by the Company. In the event that the Accounting Firm is serving as accountant or auditor for the party effecting the Change in Control or is otherwise unavailable, Employee may (together with all other employees with comparable appointment rights in their respective employment agreements such that all such employees may collectively select a single accounting firm) appoint another nationally recognized accounting firm to make the determinations required hereunder (which accounting firm shall then be referred to as the Accounting Firm hereunder). All fees and expenses of the Accounting Firm with respect to such determinations described above shall be borne solely by the Company.

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/ Joe A. Rose

	JOE A. ROSE

EX-10.88 7 j1582_ex10d88.htm EX-10.88 Prepared by MerrillDirect

EMPLOYMENT AGREEMENT
(Kerry D. Walbridge)

This Employment Agreement (the "Agreement") by and between F.Y.I. Incorporated, a Delaware corporation (the "Company"), and Kerry D. Walbridge ("Employee") is hereby entered into effective as of May 18, 2001 (the “Effective Date”). This Agreement hereby supersedes any other employment agreements or understandings, written or oral, between the Company and Employee.

R E C I T A L S

The following statements are true and correct:

As of the date of this Agreement, the Company is engaged primarily in the business of providing document and information management outsourcing solutions.

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 Division President of Conversion and Distribution Services. As such, Employee shall have responsibilities, duties and authority reasonably accorded to and expected of a Division President and will report directly to the Company’s Chief Operating Officer or such other officer designated by 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. Compensation. For all services rendered by Employee, the Company shall compensate Employee as follows:

(a) Base Salary. The base salary payable to Employee shall be $250,000 per year (effective March 19, 2001), payable on a regular basis in accordance with the Company's standard payroll procedures but not less than bi-weekly.

(b) Incentive Bonus Plan. Beginning for the year 2001, Employee shall be eligible for a bonus opportunity of up to 50% of his annual base salary in accordance with the Company’s Incentive Bonus Plan as modified from time to time, payable in cash and/or equity of the Company (at the Company’s discretion). The bonus payment and the Company's targeted performance shall be determined and approved by the Board or the compensation committee thereof. For the year in which this Employment Agreement is executed, the bonus opportunity shall be prorated for the length of time Employee is actually employed by the Company. For 2001, Employee has already been awarded Warrant No. 79 as payment for any 2001 bonus opportunity.

(iv) An automobile allowance in the amount of $1,000 per month.

(v) Participation in the Company’s 401(k) Plan and Non-Qualified Plan.

3. Non-Competition Agreement.

(v) disclose customers, whether current or proposed, of the Company (or the subsidiaries thereof) to any person, firm, partnership, corporation or business for any reason or purpose whatsoever.

4. Place of Performance.

(a) Employee’s place of employment is the Company’s headquarters in Dallas, Texas. Employee understands that he may be requested by the Board to relocate from his present residence to another geographic location in order to more efficiently carry out his duties and responsibilities under this Agreement or as part of a promotion or other increase in duties and responsibilities. In the event that Employee is requested to relocate from Dallas and agrees to do so, the Company will pay all reasonable relocation costs to move Employee, his immediate family and their personal property and effects. Such costs may include, by way of example, but are not limited to, pre-move visits to search for a new residence, investigate schools or for other purposes; temporary lodging and living costs prior to moving into a new permanent residence; duplicate home carrying costs; all closing costs on the sale of Employee's present residence and on the purchase of a comparable residence in the new location; and added income taxes that Employee may incur, as a result of any payment hereunder, to the extent any relocation costs are not deductible for tax purposes. The general intent of the foregoing is that Employee shall not personally bear any out-of-pocket cost as a result of the relocation, with an understanding that Employee will use his best efforts to incur only those costs which are reasonable and necessary to effect a smooth, efficient and orderly relocation with minimal disruption to the business affairs of the Company and the personal life of Employee and his family.

5. Term; Termination; Rights on Termination. The term of this Agreement shall begin on the date hereof and continue through one year following the Effective Date (the "Term"). This Agreement and Employee's employment may be terminated earlier in any one of the following ways:

(a) Death. The death of Employee shall immediately terminate the Agreement with no severance compensation due to Employee's estate.

(c) Good Cause. The Company may terminate the Agreement ten (10) days after written notice to Employee for good cause, which shall be: (1) Employee's material and irreparable breach of this Agreement; (2) Employee's gross negligence in the performance or intentional nonperformance (continuing for ten (10) days after receipt of the written notice) of any of Employee's material duties and responsibilities hereunder or Employee’s material failure to meet mutually agreed-upon targets as set forth in Employee’s performance plan; (3) Employee's dishonesty, fraud or misconduct with respect to the business or affairs of the Company which materially and adversely affects the operations or reputation of the Company; (4) Employee's conviction of a felony crime; or (5) chronic alcohol abuse or illegal drug abuse by Employee. In the event of a termination for good cause, as enumerated above, Employee shall have no right to any severance compensation.

(d) Without Cause. At any time after the commencement of employment, the Company may, without cause, terminate this Agreement and Employee's employment, effective thirty (30) days after written notice is provided to the Employee. Should Employee be terminated by the Company without cause, Employee shall receive from the Company, on or before the effective date of termination, a standard Company executive separation agreement providing for a gross lump-sum severance payment equivalent to the base salary at the rate then in effect for the greater of (i) whatever time period is remaining under the Term of this Agreement or (ii) six (6) months (“Severance Pay”). Further, any termination without cause by the Company shall operate to shorten the period set forth in paragraph 3(a) and during which the terms of paragraph 3 apply to one (1) year from the date of termination of employment.

(i) the assignment to Employee of any duties materially and adversely inconsistent with Employee’s position as specified in paragraph 1 hereof.

(ii) any material breach of this Agreement by the Company that is not cured within the ten (10) day time period set forth in paragraph 5(f) above, including the failure to pay Employee on a timely basis the amounts to which he is entitled under this Agreement.

In the event of any termination by the Employee for Good Reason, as determined by a court of competent jurisdiction or pursuant to the provisions of paragraph 16 below, the Company shall pay all amounts and damages (which damages shall not include payment of salary for the then unexpired Term in light of the Severance Pay set forth below), to which Employee may be entitled as a result of such breach, including interest thereon and all reasonable legal fees and expenses and other costs incurred by Employee to enforce his rights hereunder. In addition, Employee shall be entitled to receive Severance Pay from the Company, in a lump-sum payment due on the effective date of termination, equal to the base salary then in effect for the greater of (i) whatever time period is remaining under the Term of this Agreement or (ii) six (6) months. Further, none of the provisions of paragraph 3 shall apply in the event this Agreement is terminated by Employee for Good Reason.

(f)	Termination by Employee Without Good Reason. If Employee resigns or otherwise terminates his employment without Good Reason pursuant to paragraph 5(f), Employee shall receive no severance compensation.

(g)	Change of Control. Refer to paragraph 12, below.

12. Change in Control.

(b) Provided that Employee would have been an employee of the Company for at least one year at the time of such Change in Control, then in the event of a pending Change in Control wherein the Employee has not received written notice at least fifteen (15) business days prior to the anticipated closing date of the transaction giving rise to the Change in Control from the successor to all or a substantial portion of the Company's business and/or assets that such successor is willing as of the closing to assume and agree to perform the Company's obligations under this Agreement in the same manner and to the same extent that the Company is hereby required to perform, such Change in Control shall be deemed to be a termination of this Agreement by the Company and the amount of the lump-sum severance payment due to Employee shall be 1 times Employee’s annual salary immediately prior to the Change in Control and the non-competition provisions of paragraph 3 shall not apply whatsoever. Payment shall be made either at closing of the transaction if notice is served at least five (5) days before closing or within ten (10) days of Employee’s written notice.

(c) Provided that Employee would have been an employee of the Company for at least one year at the time of such Change in Control, then in any Change in Control situation in which Employee has received written notice from the successor to the Company that such pending successor is willing to assume the Company's obligations hereunder or Employee receives notice after the Change in Control that Employee is being terminated, Employee may nonetheless, at his sole discretion, elect to terminate this Agreement by providing written notice to the Company at any time prior to closing of the transaction and up to two (2) years after the closing of the transaction giving rise to the Change in Control. In such case, the amount of the lump-sum severance payment due to Employee shall be 1 times Employee’s annual salary in effect immediately prior to the Change in Control and the non-competition provisions of paragraph 3 shall all apply. Payment shall be made either at closing if notice is served at least five (5) days before closing or within ten (10) days of written notice by Employee.

(e) A "Change in Control" shall be deemed to have occurred if:

(f) If any portion of the severance benefits, Change in Control benefits or any other payment under this Agreement, or under any other agreement with, or plan of the Company, including but not limited to stock options, warrants and other long-term incentives (in the aggregate “Total Payments”) would be subject to the excise tax imposed by Section 4999 of the Code, as amended (or any similar tax that may hereafter be imposed) or any interest or penalties with respect to such excise tax (such excise tax, together with any such interest and penalties, are hereinafter collectively referred to as the “Excise Tax”), then Employee shall be entitled to receive from the Company an additional payment (the “Gross-up Payment”) in an amount such that the net amount of Total Payments and Gross-up Payment retained by the Employee, after the calculation and deduction of all Excise Tax on the Total Payments and all federal, state and local income tax, employment tax and Excise Tax on the Gross-up Payment, shall be equal to the Total Payments.

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 1000
	Dallas, Texas 75204
	Attn: Chief Operating Office

with a copy to:	F.Y.I. Incorporated
	3232 McKinney Avenue
	Suite 1000
	Dallas, Texas 75204
	Attn: General Counsel


with a copy to:	Locke Liddell & Sapp LLP
	2200 Ross Avenue
	Suite 2200
	Dallas, Texas 75201
	Attn: Charles C. Reeder, Esq.

To Employee:	Kerry D. Walbridge
	5335 Willow Wood Lane
	Dallas, Texas 75252

15. Severability; Headings. If any portion of this Agreement is held invalid or inoperative in any circumstance, (i) such portion shall remain valid and operative in all other circumstances; (ii) the other portions of this Agreement shall be deemed valid and operative; and (iii) 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.

17. Governing Law. This Agreement shall in all respects be construed according to the laws of the State of Delaware.

[Balance of sheet intentionally left blank]

	EMPLOYEE:

	/s/ Kerry D. Walbridge

	Kerry D. Walbridge



	F.Y.I. INCORPORATED



	By: /s/ Ed H. Bowman, Jr.

	Title:		President and Chief Executive Officer

EX-10.89 8 j1582_ex10d89.htm EX-10.89 Prepared by MerrillDirect

AMENDED AND RESTATED EMPLOYMENT AGREEMENT
(Michael S. Rupe)

This Employment Agreement (the "Agreement") by and between F.Y.I. Incorporated, a Delaware corporation (the "Company"), and Michael S. Rupe ("Employee") is hereby entered into effective as of May 18, 2001. This Agreement hereby supersedes any other employment agreements or understandings, written or oral, between the Company and Employee.

R E C I T A L S

The following statements are true and correct:

As of the date of this Agreement, the Company is engaged primarily in the business of providing document and information management outsourcing solutions.

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 Division President of Enabling Technology and Services. As such, Employee shall have responsibilities, duties and authority reasonably accorded to and expected of a Division President and will report directly to the Company’s Chief Operating Officer. Employee hereby accepts this employment upon the terms and conditions herein contained and, subject to paragraph 1(b), agrees to devote his working time, attention and efforts to promote and further the business of the Company.

2. Compensation. For all services rendered by Employee, the Company shall compensate Employee as follows:

(a) Base Salary. The base salary payable to Employee shall be $275,000 per year (effective January 1, 2001), payable on a regular basis in accordance with the Company's standard payroll procedures but not less than bi-weekly. On at least an annual basis the Board of Directors (the “Board”) will review Employee’s performance and make increases to such base salary if, in its discretion, any such increase is warranted.

(b) Incentive Bonus Plan. Beginning for the year 2001, Employee shall be eligible for a bonus opportunity of up to 75% of his annual base salary in accordance with the Company’s Incentive Bonus Plan as modified from time to time, payable in cash and/or equity of the Company (at the Company’s discretion). The bonus payment and the Company's targeted performance shall be determined and approved by the Board or the compensation committee thereof. For 2001, Employee has already been awarded Warrant No. 62 as payment for any 2001 bonus opportunity.

(iv) An automobile allowance in the amount of $1,000 per month (increased from $500 per month effective March 2001).

(vi) Participation in the Company’s 401(k) Plan and Non-Qualified Plan.

(vii) The Company shall, to the extent it has not already, reimburse Employee for reasonably incurred and documented out of pocket relocation expenses for Employee’s move to Dallas, not to exceed $70,000 in the aggregate without prior written approval; provided, that Employee shall promptly repay the Company for a prorated portion of such reimbursement to the extent the Employee is employed by the Company for less than two years (unless such employment is terminated before such two years, or this Agreement is not extended through such two years, by the Company without cause).

(viii) The Company shall reimburse Employee up to $6,000 per year for expenditures on health, insurance, financial planning or tax planning benefits (or similar benefits at the discretion of the Company) or club dues selected by Employee.

3. Non-Competition Agreement.

(v) disclose customers, whether current or proposed, of the Company (or the subsidiaries thereof) to any person, firm, partnership, corporation or business for any reason or purpose whatsoever.

4. Place of Performance.

(a) Death. The death of Employee shall immediately terminate the Agreement with no severance compensation due to Employee's estate.

In the event of any termination by the Employee for Good Reason, as determined by a court of competent jurisdiction or pursuant to the provisions of paragraph 16 below, the Company shall pay all amounts and damages (which damages shall not include payment of salary for the then unexpired Term in light of the Severance Pay set forth below), to which Employee may be entitled as a result of such breach, including interest thereon and all reasonable legal fees and expenses and other costs incurred by Employee to enforce his rights hereunder. In addition, Employee shall be entitled to receive from the Company, in a lump-sum payment due on the effective date of termination, one (1) times the base salary at the rate then in effect, as severance pay. Further, none of the provisions of paragraph 3 shall apply in the event this Agreement is terminated by Employee for Good Reason.

(f)	Termination by Employee Without Good Reason. If Employee resigns or otherwise terminates his employment without Good Reason pursuant to paragraph 5(f), Employee shall receive no severance compensation.

(g)	Change of Control. Refer to paragraph 12, below.

12. Change in Control.

(c) In any Change in Control situation in which Employee has received written notice from the successor to the Company that such pending successor is willing to assume the Company's obligations hereunder or Employee receives notice after (or within fifteen (15) business days prior to) the Change in Control that Employee is being terminated, Employee may nonetheless, at his sole discretion, elect to terminate this Agreement by providing written notice to the Company at any time prior to closing of the transaction and up to two (2) years after the closing of the transaction giving rise to the Change in Control. In such case, the amount of the lump-sum severance payment due to Employee shall be 2 times Employee’s annual salary in effect immediately prior to the Change in Control and the non-competition provisions of paragraph 3 shall all apply. Payment shall be made either at closing if notice is served at least five (5) days before closing or within ten (10) days of written notice by Employee.

(e) A "Change in Control" shall be deemed to have occurred if:

(f) If any portion of the severance benefits, Change in Control benefits or any other payment under this Agreement, or under any other agreement with, or plan of the Company, including but not limited to stock options, warrants and other long-term incentives (in the aggregate “Total Payments”) would be subject to the excise tax imposed by Section 4999 of the Code, as amended (or any similar tax that may hereafter be imposed) or any interest or penalties with respect to such excise tax (such excise tax, together with any such interest and penalties, are hereinafter collectively referred to as the “Excise Tax”), then Employee shall be entitled to receive from the Company an additional payment (the “Gross-up Payment”) in an amount such that the net amount of Total Payments and Gross-up Payment retained by the Employee, after the calculation and deduction of all Excise Tax on the Total Payments and all federal, state and local income tax, employment tax and Excise Tax on the Gross-up Payment, shall be equal to the Total Payments.

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 1000
	Dallas, Texas 75204
	Attn: President

with a copy to:	F.Y.I. Incorporated
	3232 McKinney Avenue
	Suite 1000
	Dallas, Texas 75204
	Attn: General Counsel

with a copy to:	Locke Liddell & Sapp LLP
	2200 Ross Avenue
	Suite 2200
	Dallas, Texas 75201
	Attn: Charles C. Reeder, Esq.

To Employee:	Michael S. Rupe
	4569 Belfort Place
	Dallas, Texas 75205

17. Governing Law. This Agreement shall in all respects be construed according to the laws of the State of Delaware.

[Balance of sheet intentionally left blank]

	EMPLOYEE:
	/s/ Michael S. Rupe

	Michael S. Rupe



	F.Y.I. INCORPORATED


	By: /s/ Ed H. Bowman, Jr.

	Title:		President and Chief Executive Officer

EX-10.90 9 j1582_ex10d90.htm EX-10.90 Prepared by MerrillDirect

AMENDED AND RESTATED EMPLOYMENT AGREEMENT
(Ronald Zazworsky)

THIS EMPLOYMENT AGREEMENT (the "Agreement") is made and entered into effective as of May 28, 2001 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 and information management outsourcing solutions business (the “Business”).

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 Division President of Health and Government Services and Officer of the Company. As such, Employee shall have responsibilities, duties and authority reasonably accorded to and expected of a Division President of the Company. Employee hereby accepts this employment upon the terms and conditions herein contained and, subject to paragraph 1(b), agrees to devote his working time, attention and efforts to promote and further the business of the Company.

(b) Employee shall not, during the term of his employment hereunder, be engaged in any other business activity pursued for gain, profit or other pecuniary advantage except to the extent that such activity (i) does not interfere with Employee's duties and responsibilities hereunder and (ii) does not violate paragraph 9 hereof. The foregoing limitations shall not be construed as prohibiting Employee from making personal investments in such form or manner as will neither require his services, 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 9.

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 $275,000 per year (effective January 1, 2001), 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). On at least an annual basis the Board of Directors (the “Board”) will review Employee’s performance and make increases to such base salary if, in its discretion, any such increase is warranted. For 2001 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 75% of Employee's annual base salary payable in cash and/or equity of the Company (at the Company’s discretion) in accordance with the Incentive Bonus Plan. The award of any bonus shall be based on the Company’s overall performance and the total performance of the business 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 or the compensation committee thereof. For 2001, Employee has already been awarded Warrant No. 63 as payment for any 2001 bonus opportunity.

(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:

(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 $1,000 per month car allowance (determined on a pre-tax basis) (increased from $500 per month effective March 2001). 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).

(v) The Company shall reimburse Employee up to $6,000 per year for expenditures on health, insurance, financial planning or tax planning benefits (or similar benefits at the discretion of the Company) or club dues selected by Employee.

3. [INTENTIONALLY LEFT BLANK]

4. Term; Termination; Rights on Termination. The term of this Agreement shall begin on the date hereof and continue through December 31, 2002. On each December 31, the agreement shall automatically renew for a two (2) year period (such that upon such renewal, the new remaining term shall be two years), unless prior written notice is provided to Employee that it will not be renewed (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.

(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.

(e) Change in Control. Refer to paragraph 20 below.

(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), (c) and (e); or

(ii) Any other material breach of this Agreement by the Company that is not cured within the fifteen (15) day time period set forth in paragraph 4(f) above, including the failure to pay Employee on a timely basis the amounts to which he is entitled under this Agreement.

In the event of any 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.

(g) Termination by Employee Without Cause. If Employee resigns or otherwise terminates his employment without Good Reason pursuant to paragraph 4(f), Employee shall receive no severance compensation.

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 (including the Company’s subsidiaries) or their representatives, vendors or customers which pertain to the business of the Company (including the Company’s subsidiaries) shall be and remain the property of the Company, 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 (including the Company’s subsidiaries) 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 (including the Company’s subsidiaries) 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 (including the Company’s subsidiaries) relationships or agreements with their respective significant vendors or customers or any other significant and material trade secret of the Company (including the Company’s subsidiaries), whether in existence or proposed, to any person, firm, partnership, corporation or business for any reason or purpose whatsoever.

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 (or those existing within one (1) year prior to that time) customers, suppliers, businesses, or accounts of the Company (including the subsidiaries thereof) in connection with any business substantially similar to 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 defined as 100 miles in and around the Company’s and its affiliates’ operations (the “Territory”);

In the course of Employee’s employment with the Company, Employee will become exposed to certain of the Company’s confidential information and business relationships, which the above covenants are designed to protect. 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.

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 1000
	Dallas, Texas 75204
	Attn: President

with a copy to:	F.Y.I. Incorporated
	3232 McKinney Avenue
	Suite 1000
	Dallas, Texas 75204
	Attn: General Counsel

with a copy to:	Locke Liddell & Sapp
	2200 Ross Avenue
	Suite 2200
	Dallas, Texas 75201
	Attn: Charles C. Reeder, Esq.

To Employee:	Ronald Zazworsky
	456 Ivy Park Lane
	Atlanta, Georgia 30342

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 costs of any arbitration proceeding shall be borne by the party or parties not prevailing in such proceeding as determined by the arbitrators.

17. Governing Law. This Agreement shall in all respects be construed according to the laws of the State of Texas.

20. Change in Control.

(b) In the event of a pending Change in Control wherein the Employee has not received written notice at least fifteen (15) business days prior to the anticipated closing date of the transaction giving rise to the Change in Control from the successor to all or a substantial portion of the Company’s business and/or assets that such successor is willing as of the closing to assume and agree to perform the Company’s obligations under this Agreement in the same manner and to the same extent that the Company is hereby required to perform, such Change in Control shall be deemed to be a termination of this Agreement by the Company and the amount of the lump-sum severance payment due to Employee shall be 3 times Employee’s annual salary immediately prior to the Change in Control and the non-competition provisions of paragraph 9 shall not apply whatsoever. Payment shall be made either at closing of the transaction if notice is served at least five (5) days before closing or within ten (10) days of Employee’s written notice.

(c) In any Change in Control situation in which Employee has received written notice from the successor to the Company that such pending successor is willing to assume the Company’s obligations hereunder or Employee receives notice after (or within fifteen (15) business days prior to) the Change in Control that Employee is being terminated, Employee may nonetheless, at his sole discretion, elect to terminate this Agreement by providing written notice to the Company at any time prior to closing of the transaction and up to two (2) years after the closing of the transaction giving rise to the Change in Control. In such case, the amount of the lump-sum severance payment due to Employee shall be 3 times Employee’s annual salary in effect immediately prior to the Change in Control and the non-competition provisions of paragraph 9 shall all apply. Payment shall be made either at closing if notice is served at least five (5) days before closing or within ten (10) days of written notice by Employee.

(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 30% or more of the total voting power of all of the then-outstanding voting securities 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 of the Company, 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 the holders of at least 75% 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

(f) If any portion of the severance benefits, Change in Control benefits or any other payment under this Agreement, or under any other agreement with, or plan of the Company, including but not limited to stock options, warrants and other long-term incentives (in the aggregate “Total Payments”) would be subject to the excise tax imposed by Section 4999 of the Code, as amended (or any similar tax that may hereafter be imposed) or any interest or penalties with respect to such excise tax (such excise tax, together with any such interest and penalties, are hereinafter collectively referred to as the “Excise Tax”), then Employee shall be entitled to receive from the Company an additional payment (the “Gross-up Payment”) in an amount such that the net amount of Total Payments and Gross-up Payment retained by the Employee, after the calculation and deduction of all Excise Tax on the Total Payments and all federal, state and local income tax, employment tax and Excise Tax on the Gross-up Payment, shall be equal to the Total Payments.

All determinations required to be made under this paragraph 20, including whether a Gross-Up Payment is required under this paragraph, and the assumptions to be used in determining the Gross-Up Payment, shall be made by the Company’s current independent accounting firm, or such other firm as the Company may designate in writing prior to a Change in Control (the “Accounting Firm”), which shall provide detailed supporting calculations both to the Company and Employee within twenty business days of the receipt of notice from Employee that there will likely be a Change in Control, or such earlier time as is requested by the Company. In the event that the Accounting Firm is serving as accountant or auditor for the party effecting the Change in Control or is otherwise unavailable, Employee (together with all other employees with comparable appointment rights in their respective employment agreements such that all such employees may collectively select a single accounting firm) may appoint another nationally recognized accounting firm to make the determinations required hereunder (which accounting firm shall then be referred to as the Accounting Firm hereunder). All fees and expenses of the Accounting Firm with respect to such determinations described above shall be borne solely by the Company.

[Balance of page intentionally left blank]

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

EX-10.91 10 j1582_ex10d91.htm EX-10.91 Prepared by MerrillDirect

AMENDED AND RESTATED EMPLOYMENT AGREEMENT
(Thomas C. Walker)

This Employment Agreement (the "Agreement") by and between F.Y.I. Incorporated, a Delaware corporation (the "Company"), and Thomas C. Walker ("Employee") is hereby entered into and effective as of May 18, 2001. This Agreement hereby supersedes any other employment agreements or understandings, written or oral, between the Company and Employee.

R E C I T A L S

The following statements are true and correct:

As of the date of this Agreement, the Company is engaged primarily in the business of providing document and information management outsourcing solutions.

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 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 the Company (the “Board”). 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. Compensation. For all services rendered by Employee, the Company shall compensate Employee as follows:

(a) Base Salary. The base salary payable to Employee shall be $330,000 per year (effective January 1, 2001), payable on a regular basis in accordance with the Company's standard payroll procedures but not less than bi-monthly.

(iv) An automobile allowance in the amount of $1,000 per month (increased from $500 per month effective March 2001).

(v) The Company shall reimburse Employee up to $300 per month for club dues actually incurred by Employee, provided that such club is used at least 50% of the time for business purposes.

(vii) The Company shall provide Employee with reasonable assistance in personal tax planning from Arthur Andersen LLP.

(viii) Participation in the Company’s 401(k) Plan and Non-Qualified Plan.

(x) The Company shall reimburse Employee up to $7,000 per year for expenditures on health, insurance, financial planning or tax planning benefits (or similar benefits, or such other benefits at the discretion of the Company) or club dues, all as selected by Employee.

3. Non-Competition Agreement.

(v) disclose customers, whether in existence or proposed, of the Company (or the subsidiaries thereof) to any person, firm, partnership, corporation or business for any reason or purpose whatsoever.

(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 to such extent.

4. Place of Performance.

(a) Death. The death of Employee shall immediately terminate the Agreement with no severance compensation due to Employee's estate.

(d) Without Cause. At any time after the commencement of employment, the Company may, without cause, terminate this Agreement and Employee's employment, effective thirty (30) days after written notice is provided to the Employee. Should Employee be terminated by the Company without cause, Employee shall receive from the Company, in a lump-sum payment due on the effective date of termination, two (2) times the base salary at the rate then in effect, as severance pay. Further, any termination without cause by the Company shall operate to shorten the period set forth in paragraph 3(a) and during which the terms of paragraph 3 apply to one (1) year from the date of termination of employment.

(e) Change in Control. Refer to paragraph 12 below.

(ii) Employee's removal from, or failure to be reappointed or reelected to, Employee's position under this Agreement, except as contemplated by paragraphs 5(a), (b), (c) and (e); or

In the event of any termination by the Employee for Good Reason, as determined by a court of competent jurisdiction or pursuant to the provisions of paragraph 16 below, the Company shall pay all amounts and damages to which Employee may be entitled as a result of such breach, including interest thereon and all reasonable legal fees and expenses and other costs incurred by Employee to enforce his rights hereunder. In addition, Employee shall be entitled to receive from the Company, in a lump-sum payment due on the effective date of termination, two (2) times the base salary at the rate then in effect, as severance pay. Further, none of the provisions of paragraph 3 shall apply in the event this Agreement is terminated by Employee for Good Reason.

Upon termination of this Agreement for any reason provided in clauses (a) through (g) above, Employee shall be entitled to receive all compensation earned and all benefits vested and reimbursements due through the effective date of termination. Additional compensation subsequent to termination, if any, will be due and payable to Employee only to the extent and in the manner expressly provided above or in paragraph 16. All other rights and obligations of the Company and Employee under this Agreement shall cease as of the effective date of termination, except that the Company's obligations under paragraph 9 herein and Employee's obligations under paragraphs 3, 6, 7, 8 and 10 herein shall survive such termination in accordance with their terms.

6. Return of Company Property. All records, designs, patents, business plans, financial statements, manuals, memoranda, lists and other property delivered to or compiled by Employee by or on behalf of the Company (including the Company’s subsidiaries) or its representatives, vendors or customers which pertain to the business of the Company (including the Company’s subsidiaries) shall be and remain the property of the Company and be subject at all times to its discretion and control. Likewise, all correspondence, reports, records, charts, advertising materials and other similar data pertaining to the business, activities or future plans of the Company (including the Company’s subsidiaries) which is collected by Employee shall be delivered promptly to the Company without request by it upon termination of Employee's employment.

12. Change in Control.

(b) In the event of a pending Change in Control wherein the Employee has not received written notice at least fifteen (15) business days prior to the anticipated closing date of the transaction giving rise to the Change in Control from the successor to all or a substantial portion of the Company's business and/or assets that such successor is willing as of the closing to assume and agree to perform the Company's obligations under this Agreement in the same manner and to the same extent that the Company is hereby required to perform, such Change in Control shall be deemed to be a termination of this Agreement by the Company and the amount of the lump-sum severance payment due to Employee shall be six (6) times Employee’s annual salary immediately prior to the Change in Control and the non-competition provisions of paragraph 3 shall not apply whatsoever. Payment shall be made either at closing of the transaction if notice is served at least five (5) days before closing or within ten (10) days of Employee’s written notice.

(c) In any Change in Control situation in which Employee has received written notice from the successor to the Company that such pending successor is willing to assume the Company's obligations hereunder or Employee receives notice after (or within fifteen (15) business days prior to) the Change in Control that Employee is being terminated, Employee may nonetheless, at his sole discretion, elect to terminate this Agreement by providing written notice to the Company at any time prior to closing of the transaction and up to one (1) year after the closing of the transaction giving rise to the Change in Control. In such case, the amount of the lump-sum severance payment due to Employee shall be six (6) times Employee’s annual salary in effect immediately prior to the Change in Control and the non-competition provisions of paragraph 3 shall all apply. Payment shall be made either at closing if notice is served at least five (5) days before closing or within ten (10) days of written notice by Employee.

(d) For purposes of applying paragraph 5 under the circumstances described in (b) and (c) above, the effective date of termination will be the later of the closing date of the transaction giving rise to the Change in Control or Employee’s notice as described above, and all compensation, reimbursements and lump-sum payments due Employee must be paid in full by the Company at such time. Further, Employee will be given sufficient time in order to comply with the Securities and Exchange Commission’s regulations to elect whether to exercise and sell all or any of his vested options to purchase Common Stock of the Company, including any options with accelerated vesting under the provisions of the Company's 1995 Stock Option Plan, as amended or any warrants, such that he may convert the options or warrants to shares of Common Stock of the Company at or prior to the closing of the transaction giving rise to the Change in Control, if he so desires.

(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 30% or more of the total voting power of all of the then-outstanding voting securities of the Company;

(ii) Following a Change in Control Termination the special benefit allowance of $7,000 contemplated by paragraph 2(c)(x) of this Agreement will continue for 3 years thereafter.

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 written Agreement may not be later modified except by a further writing signed by a duly authorized officer of the Company and Employee, and no term of this Agreement may be waived except by writing signed by the party waiving the benefit of such term.

14. Notice. Whenever any notice is required hereunder, it shall be given in writing addressed as follows:

To the Company:	F.Y.I. Incorporated
	3232 McKinney Avenue
	Suite 1000
	Dallas, Texas 75204
	Attn: President

with a copy to:	F.Y.I. Incorporated
	3232 McKinney Avenue
	Suite 1000
	Dallas, Texas 75204
	Attn: General Counsel

with a copy to:	Locke Liddell & Sapp LLP
	2200 Ross Avenue
	Suite 2200
	Dallas, Texas 75201
	Attn: Charles C. Reeder, Esq.

To Employee:	Thomas C. Walker
	3510 Turtle Creek Blvd., #10-A
	Dallas, Texas 75219

[Balance of sheet intentionally left blank]

17. Governing Law. This Agreement shall in all respects be construed according to the laws of the State of Delaware.

	EMPLOYEE:



	Thomas C. Walker



	F.Y.I. INCORPORATED



	By: /s/ Ed H. Bowman, Jr.

	Title:		President and Chief Executive Officer

EX-10.92 11 j1582_ex10d92.htm EX-10.92 Prepared by MerrillDirect

FIRST AMENDMENT TO CREDIT AGREEMENT

THIS FIRST AMENDMENT TO CREDIT AGREEMENT (the “Amendment”), dated as of June 27, 2001, is by and among F.Y.I. INCORPORATED, a Delaware corporation (“F.Y.I”), BANK OF AMERICA, N.A., as Administrative Agent (the “Administrative Agent”), and the Lenders under the Credit Agreement (as hereinafter defined) which are signatories hereto.

R E C I T A L S:

A. F.Y.I., the Administrative Agent and the Lenders have entered into that certain Credit Agreement dated as of April 3, 2001 (the “Credit Agreement”).

B. F.Y.I. has requested, and the Administrative Agent and the Lenders which are signatories hereto (which Lenders constitute Required Lenders) have agreed, to amend the Credit Agreement, subject to the terms and conditions contained herein.

NOW, THEREFORE, in consideration of the premises herein contained and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows:

ARTICLE 1.

Definitions

Section 1.1 Definitions. Capitalized terms used in this Amendment, to the extent not otherwise defined herein, shall have the same meanings as in the Credit Agreement, as amended hereby.

ARTICLE 2.

Amendments and Consent

Section 2.1 Amendments to Section 1.1.

(a) The following defined terms contained in Section 1.1 of the Credit Agreement are hereby amended and restated to read in their entirety as follows:

“Master Guaranty” means a guaranty of the Domestic Subsidiaries of F.Y.I. (other than MMS Securities, Inc.) in favor of the Administrative Agent, for the benefit of the Administrative Agent and the Lenders, in substantially the form of Exhibit H, as the same may be modified pursuant to one or more Joinder Agreements and as the same may otherwise be modified from time to time.

(b) The following new defined terms are hereby added to Section 1.1 of the Credit Agreement, which defined terms shall read in their entirety as follows:

“MMS Securities, Inc.” means MMS Securities, Inc., a Michigan corporation.

Section 2.2 Amendment to Section 5.2. Section 5.2 of the Credit Agreement is hereby amended and restated to read in its entirety as follows:

Section 5.2 Guaranties. Each Domestic Subsidiary of F.Y.I. in existence on the Closing Date (other than MMS Securities, Inc.) shall guarantee the payment and performance of the Obligations pursuant to the Master Guaranty.

Section 2.3 Amendment to Section 9.1. Section 9.1(e) of the Credit Agreement is hereby amended and restated to read in its entirety as follows:

(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 Administrative Agent which will be pledged to the Administrative Agent for the benefit of the Administrative Agent and the Lenders and shall be subordinated to the Obligations pursuant to a subordination agreement in form and substance satisfactory to the Administrative Agent (the foregoing being referred to as "Intercompany Debt"); provided also that the aggregate sum of Intercompany Debt loaned by F.Y.I. or any of its Subsidiaries to MMS Securities, Inc. (to the extent permitted by this Section 9.1(e)) plus other Investments made by F.Y.I. or any of its Subsidiaries in MMS Securities, Inc. (to the extent permitted by Section 9.5(g)) shall not exceed $1,000,000; provided also that the aggregate sum of (i) the outstanding principal amount of the loans, advances and other extensions of credit made to Foreign Subsidiaries by F.Y.I. and its Domestic Subsidiaries plus (ii) the Investments by F.Y.I. in any Foreign Subsidiary (collectively, the "Foreign Debt and Investment") shall not at any time exceed an amount equal to the product of the book value of the total assets of F.Y.I. and its Subsidiaries, on a consolidated basis in accordance with GAAP, multiplied by 5% (such product herein the "Maximum Foreign Amount").

Section 2.4 Amendment to Section 9.5. Section 9.5(g) of the Credit Agreement is hereby amended and restated to read in its entirety as follows:

(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.; provided, that the Foreign Debt and Investments shall not at any time exceed an amount equal to the Maximum Foreign Amount; provided also that the aggregate sum of Intercompany Debt loaned by F.Y.I. or any of its Subsidiaries to MMS Securities, Inc. (to the extent permitted by Section 9.1(e)) plus other Investments made by F.Y.I. or any of its Subsidiaries in MMS Securities, Inc. (to the extent permitted by this Section 9.5(g)) shall not exceed $1,000,000.

Section 2.5 Conditional Consent. F.Y.I. has, pursuant to a letter dated June 21, 2001 from Barry L. Edwards, Executive Vice President and Chief Financial Officer of F.Y.I., to Todd M. Burns, Senior Vice President of the Administrative Agent (the “Asset Disposition Letter”) informed the Administrative Agent and the Lenders that it intends to dispose of the assets and/or stock of the Subsidiaries listed on Schedule 1 hereto (each an “Asset Disposition” and collectively the “Asset Dispositions”), which Asset Dispositions would exceed the $250,000 annual cap on Net Proceeds from asset dispositions to unaffiliated entities set forth in Section 9.8(b) of the Credit Agreement (the “Asset Disposition Covenant”). In connection therewith, F.Y.I. has requested that the Administrative Agent and the Required Lenders consent to the Asset Dispositions and that the Administrative Agent release any Subsidiaries listed on Schedule 1 hereto whose stock has been sold and/or who have been dissolved (the “Released Subsidiaries”) from the Master Guaranty and from the Security Agreements (if and to the extent that the Released Subsidiaries are party to any of the Security Agreements). Subject to the satisfaction of the conditions set forth in the proviso at the end of this Section 2.5 and the conditions set forth in Section 3.1 below, the Administrative Agent and the undersigned Lenders (which Lenders constitute Required Lenders) hereby consent to the Asset Dispositions and, concurrently with the consummation (if any) of the Asset Dispositions, the Administrative Agent agrees to release the Released Subsidiaries from the Security Documents to which such Subsidiaries are parties (the “Releases”); provided, however, that the consent to the Asset Dispositions and the Releases are subject to the satisfaction of the condition precedents that (i) the Asset Dispositions shall be consummated on or before August 30, 2001 and (ii) the aggregate value of assets and stock disposed of in connection with the Asset Dispositions shall not exceed $80,000,000.

ARTICLE 3.

Miscellaneous

Section 3.1 Conditions to Effectiveness. This Amendment shall be effective upon the execution hereof by F.Y.I., the Administrative Agent and the Required Lenders and the satisfaction of the following conditions precedent:

(a) Reaffirmation of Master Guaranty Agreement. The parties to the Master Guaranty Agreement shall have executed and delivered to the Administrative Agent the Reaffirmation of Master Guaranty attached hereto.

(b) Asset Disposition Documents. F.Y.I. shall have delivered to the Administrative Agent such documents as the Administrative Agent may reasonably require to evidence the sale of the stock or the dissolution of the Released Subsidiaries.

(c) Payment of Fees and Expenses. F.Y.I. shall have paid all fees and expenses of or incurred by the Administrative Agent and its counsel to the extent billed on or before the date hereof and payable pursuant to this Amendment.

(d) Additional Information. Such additional agreements, documents, instruments and information as the Administrative Agent or its legal counsel may reasonably request to effect the transactions contemplated hereby.

Section 3.2 Agreement Relating to the Leased Properties. Subject to the terms and conditions hereof, each of the undersigned Lenders hereby agrees that the failure of F.Y.I. to deliver an executed Mortgage to the Administrative Agent relating to the leased property of F.Y.I. and its Subsidiaries listed on Schedule 1.1(a) to the Credit Agreement (the “Leased Properties”) prior to such time as the Funded Debt to EBITDA Ratio exceeds 2.50 to 1.00 for two consecutive fiscal quarters of F.Y.I. (the “Lien Attachment Date”), will not result in an Event of Default under the Agreement; provided that (a) prior to the Lien Attachment Date, F.Y.I. will deliver to the Administative Agent executed Mortgages relating to the Leased Properties, in form and substance reasonably satisfactory to the Administrative Agent, within 45 days of request for such Mortgages by the Administrative Agent or Required Lenders, and (b) F.Y.I. will deliver to the Administative Agent executed Mortgages relating to the Leased Properties, in form and substance reasonably satisfactory to the Administrative Agent, within 45 days of the Lien Attachment Date.

Section 3.3 Limited Nature of Consent. The consent set forth in Section 2.5 of this Amendment shall not be deemed a consent to the departure from or waiver of (a) the Asset Disposition Covenant for any purpose other than to permit the Asset Dispositions or (b) any other covenant or condition in any Loan Document or (c) any Event of Default that otherwise may arises as a result of the Asset Disposition.

Section 3.4 Representations and Warranties. F.Y.I. hereby represents and warrants to the Administration Agent and the Lenders that (a) the execution, delivery and performance of this Amendment and any and all other Loan Documents executed and/or delivered in connection herewith have been authorized by all requisite action on the part of each of the Loan Parties party thereto and will not violate the articles of incorporation or bylaws of any Loan Party, (b) the representations and warranties contained in the Credit Agreement, as amended hereby, and any other Loan Document are true and correct on and as of the date hereof as though made on and as of the date hereof (except to the extent that such representations and warranties were expressly, in the Credit Agreement, made only in reference to a specific date), (c) after giving effect to this Amendment, no Default or Event of Default has occurred and is continuing, and (d) F.Y.I. is in full compliance with all covenants and agreements contained the Credit Agreement, as amended hereby, and the other Loan Documents.

Section 3.5 Survival of Representations and Warranties. All representations and warranties made in this Amendment or any other Loan Document shall survive the execution and delivery of this Amendment and the other Loan Documents, and no investigation by the Administration Agent or any Lender shall affect the representations and warranties or the right of the Administrative Agent or any Lender to rely upon them.

Section 3.6 Ratifications. Except as expressly modified and superseded by this Amendment, the terms and provisions of the Credit Agreement are ratified and confirmed and shall continue in full force and effect. F.Y.I., the Administrative Agent and the Lenders agree that the Credit Agreement as amended hereby shall continue to be legal, valid, binding and enforceable in accordance with its terms.

Section 3.7 Reference to Credit Agreement. Each of the Loan Documents, including the Credit Agreement and any and all other agreements or documents now or hereafter executed and/or delivered pursuant to the terms hereof or pursuant to the terms of the Credit Agreement as amended hereby, is hereby amended so that any reference in such Loan Document to the Credit Agreement shall mean a reference to the Credit Agreement as amended hereby.

Section 3.8 Severability. Any provision of this Amendment held by a court of competent jurisdiction to be invalid or unenforceable shall not impair or invalidate the remainder of this Amendment and the effect thereof shall be confined to the provision so held to be invalid or unenforceable.

Section 3.9 Applicable Law. This Amendment shall be governed by and construed in accordance with the laws of the State of Texas and the applicable laws of the United States of America.

Section 3.10 Successors and Assigns. This Amendment is binding upon and shall inure to the benefit of F.Y.I., the Administrative Agent and the Lenders and their respective successors and permitted assigns, except F.Y.I. may not assign or transfer any of its rights or obligations hereunder without the prior written consent of the Administrative Agent and the Required Lenders.

Section 3.11 Counterparts. This Amendment may be executed in one or more Counterparts, each of which when so executed shall be deemed to be an original, but all of which when taken together shall constitute one and the same agreement.

Section 3.12 Headings. The headings, captions and arrangements used in this Amendment are for convenience only and shall not affect the interpretation of this Amendment.

Section 3.13 ENTIRE AGREEMENT. THIS AMENDMENT AND ALL OTHER INSTRUMENTS, DOCUMENTS AND AGREEMENTS EXECUTED AND DELIVERED IN CONNECTION WITH THIS AMENDMENT EMBODY THE FINAL, ENTIRE AGREEMENT AMONG THE PARTIES HERETO AND SUPERSEDE ANY AND ALL PRIOR COMMITMENTS, AGREEMENTS, REPRESENTATIONS AND UNDERSTANDINGS, WHETHER WRITTEN OR ORAL, RELATING TO THIS AMENDMENT, AND MAY NOT BE CONTRADICTED OR VARIED BY EVIDENCE OR PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OR DISCUSSIONS OF THE PARTIES HERETO. THERE ARE NO ORAL AGREEMENTS AMONG THE PARTIES HERETO.

IN WITNESS WHEREOF, the parties hereto have duly executed this Amendment as of the day and year first written above.

F.Y.I. INCORPORATED

By:	/s/ Barry L. Edwards

Name:	Barry L. Edwards

Title:	Executive Vice President and Chief Financial Officer


ADMINISTRATIVE AGENT:

BANK OF AMERICA, N.A., as Administrative Agent

By:	/s/ Suzanne M. Paul

Name:	Suzanne M. Paul

Title:	Vice President

LENDERS:

BANK OF AMERICA, N.A., as a Lender

By:	/s/ Steven A. MacKenzie

Name:	Steven A. MacKenzie

Title:	Vice President


SUNTRUST BANK, as syndication agent and as a Lender

By:	/s/ Daniel S. Komitor

Name:	Daniel S. Komitor

Title:	Vice President


WELLS FARGO BANK TEXAS, NATIONAL ASSOCIATION, as documentation agent and as a Lender

By:	/s/ Zach Johnson

Name:	Zach Johnson

Title:	Vice President


BANK ONE, NA, as a Lender

By:	/s/ Thomas R. Freas

Name:	Thomas R. Freas

Title:	Authorized Signatory


BNP PARIBAS, as a Lender

By:	/s/ Jeff Tebeaux

Name:	Jeff Tebeaux

Title:	Associate


By:	/s/ Henry F. Setina

Name:	Henry F. Setina

Title:	Vice President

FIRST UNION NATIONAL BANK, as a Lender

By:	/s/ Nicholas A.J. Hahn

Name:	Nicholas A.J. Hahn

Title:	AVP


THE BANK OF NOVA SCOTIA, as a Lender

By:	/s/ F.C.H. Ashby

Name:	F.C.H. Ashby

Title:	Senior Manager Loan Operations


THE CHASE MANHATTAN BANK, as a Lender

By:	/s/ Michael D.S. Kerner

Name:	Michael D.S. Kerner

Title:	Vice President


WACHOVIA BANK, N.A., as a Lender

By:	/s/ Bradford L. Watkins

Name:	Bradford L. Watkins

Title:	Vice President


WASHINGTON MUTUAL BANK, as a Lender

By:	/s/ Bruce Kendrex

Name:	Bruce Kendrex

Title:	Vice President


TEXAS CAPITAL BANK, NATIONAL ASSOCIATION, as a Lender

By:	/s/ Paul Howell

Name:	Paul Howell

Title:	Vice President

RAYMOND JAMES BANK, FSB, as a Lender

By:	/s/ William C. Beiler

Name:	William C. Beiler

Title:	Executive Vice President Chief Credit Officer

REAFFIRMATION OF MASTER GUARANTY AGREEMENT

Reference is made to that certain Credit Agreement dated as of April 3, 2001 among F.Y.I. Incorporated (“F.Y.I.”), Bank of America, N.A., as administrative agent (the “Administrative Agent”), and the Lenders party thereto (as amended, the “Credit Agreement”) and that certain First Amendment to Credit Agreement dated as of June 27, 2001 among F.Y.I., the Administrative Agent and the Lenders (the “First Amendment”). Each of the undersigned parties (individually a “Guarantor” and collectively the “Guarantors”) hereby (a) consents to the terms of the First Amendment; (b) agrees that the Master Guaranty Agreement dated as of April 3, 2001 executed by the Guarantors (the “Master Guaranty Agreement”) is and shall continue in full force and effect for the benefit of the Lender with respect to the Obligations; and (c) agrees that (i) the Master Guaranty Agreement is not released, diminished or impaired in any way by the transactions contemplated by the First Amendment, including, without limitation, the Asset Dispositions described in Section 2.5 of the First Amendment and the exclusion of MMS Securities, Inc. from the guarantee requirement contained in Section 5.2 of the Credit Agreement, (ii) the representations and warranties of such Guarantor in the Master Guaranty Agreement remain true and correct as if made on the date hereof and (iii) the Master Guaranty Agreement is hereby ratified and confirmed in all respects; provided that, with respect to the Guarantors whose capital stock is to be sold or who will be dissolved in connection with the Asset Dispositions (as such term is defined in the First Amendment), such Guarantors will be released by the Administrative Agent from their obligations under the Master Guaranty Agreement and the other Loan Documents concurrently with or immediately after such capital stock sale or dissolution.

Unless otherwise defined herein, each capitalized term used in this Reaffirmation of Master Guaranty Agreement has the meaning given to such term in the Credit Agreement, as amended by the First Amendment.

This Reaffirmation of Master Guaranty Agreement may be executed in any number of counterparts, all of which taken together shall constitute one and the same agreement, but in making proof of this Reaffirmation of Master Guaranty Agreement, it shall not be necessary to account for more than one such counterpart.

IN WITNESS WHEREOF, the undersigned parties have duly executed this Reaffirmation of Master Guaranty Agreement effective as of the date of the First Amendment.

GUARANTORS:

ADVANCED DIGITAL GRAPHICS, INC.

AMERICAN ECONOMICS GROUP ACQUISITION CORP.

AMERICAN ECONOMICS GROUP, INC.

APS SERVICES ACQUISITION CORP.

ASSOCIATE RECORD TECHNICIAN SERVICES ACQUISITION CORP.

B&B (BALTIMORE-WASHINGTON) ACQUISITION CORP.

BANKNOTE PRINTING COMPANY

CALIFORNIA MEDICAL RECORD SERVICE ACQUISITION CORP.

CH ACQUISITION CORP.

COPY RIGHT ACQUISITION CORP.

COPY RIGHT, INC.

CREATIVE MAILINGS, INC.

DATA ENTRY & INFORMATIONAL SERVICES ACQUISITION CORP.

DATA ENTRY & INFORMATIONAL SERVICES, INC.

DELIVEREX ACQUISITION CORP.

DISC ACQUISITION CORP.

DOCTEX ACQUISITION CORP.

DPAS ACQUISITION CORP.

EAGLE LEGAL SERVICES ACQUISITION CORP.

ECONOMIC RESEARCH SERVICES, INC.

EXIGENT COMPUTER GROUP ACQUISITION CORP.

EXIGENT COMPUTER GROUP, INC.

F.Y.I. CORPORATE ACQUISITION CORP.

F.Y.I. DIRECT INC.

FYIDOCS.COM INC.

F.Y.I.ETRIEVE INCORPORATED

F.Y.I. GOVERNMENT SERVICES INC.

F.Y.I. HEALTHSERVE INCORPORATED

F.Y.I. IMAGE INC.

F.Y.I. INPUT INC.

F.Y.I. INTEGRATED SOLUTIONS INC.

F.Y.I. INVESTMENTS HOLDING, INC.

F.Y.I. LEGAL INCORPORATED

F.Y.I. LEGALSERVE INCORPORATED

F.Y.I. MANAGEMENT, INC.

F.Y.I. PRINT INC.

F.Y.I. RADIOLOGY, INC.

F.Y.I. RECORDS INC.

F.Y.I. STORAGE INC.

GLOBAL DIRECT ACQUISITION CORP.

GLOBAL DIRECT, INC.

HEALTHSERVE V.C. CORP.

IMAGENT ACQUISITION CORP.

IMC MANAGEMENT, INC.

INFORMATION MANAGEMENT SERVICES ACQUISITION CORP.

INFORMATION MANAGEMENT SERVICES, INC.

INPUT MANAGEMENT, INC.

LEXICODE ACQUISITION CORP.

LEXICODE CORPORATION

LIFO MANAGEMENT, INC.

MAILING & MARKETING ACQUISITION CORP.

MAILING & MARKETING, INC.

MANAGED CARE PROFESSIONALS ACQUISITION CORP.

MANAGED CARE PROFESSIONALS, INC.

MAVRICC MANAGEMENT SYSTEMS, INC.

MICRO PUBLICATION SYSTEMS, INC.

MICROFILM DISTRIBUTION SERVICES, INC.

MICROFILMING SERVICES, INC.

MICROMEDIA OF NEW ENGLAND ACQUISITION CORP.

MICROMEDIA OF NEW ENGLAND, INC.

MMS ESCROW AND TRANSFER AGENCY, INC.

NBDE ACQUISITION CORP.

NEWPORT BEACH DATA ENTRY, INC.

NEWPORT BEACH DATA ENTRY, LLC

PENINSULA RECORD MANAGEMENT, INC.

PERMANENT RECORDS MANAGEMENT, INC.

PINNACLE MANAGEMENT, INC.

PMI IMAGING SYSTEMS ACQUISITION CORP.

PMI IMAGING SYSTEMS, INC.

PREMIER ACQUISITION CORP.

QCS INET ACQUISITION CORP.

QUALITY COPY ACQUISITION CORP.

QUALITY DATA CONVERSIONS, INC.

RAC (CALIFORNIA) ACQUISITION CORP.

RECORDEX ACQUISITION CORP.

RESEARCHERS ACQUISITION CORP.

RTI LASER PRINT SERVICES ACQUISITION CORP.

RUST CONSULTING ACQUISITION CORP.

RUST CONSULTING, INC.

STAT HEALTHCARE CONSULTANTS ACQUISITION CORP.

STAT HEALTHCARE CONSULTANTS, INC.

SYNERGEN, LLC

TAPS ACQUISITION CORP.

T.C.H. GROUP, INC.

TCH MAILHOUSE, INC.

THE RUST CONSULTING GROUP, INC.

ZIA INFORMATION ANALYSIS GROUP, INC.

By:	/s/ Barry L. Edwards

	Barry L. Edwards, Authorized Officer for each of the Original Guarantors

F.Y.I. DISCOVERY SERVICES INCORPORATED

By:		/s/ William Gregerson

Name:			William Gregerson
Title:			Vice President

F.Y.I. INVESTMENTS, INC.
By:		/s/ Ron Zazworsky

Name:			Ron Zazworsky
Title:			President

F.Y.I. MANAGEMENT, L.P.
By:		F.Y.I. Management, Inc., its general partner
			By:	/s/ Barry L. Edwards

			Name:		Barry L. Edwards
			Title:		Vice President

IMC, L.P.
By: IMC Management, Inc., its general partner

	By:	/s/ Barry L. Edwards

	Name:		Barry L. Edwards
	Title:		Vice President

INPUT OF TEXAS, L.P.
By: Input Management, Inc., its general partner

	By:	/s/ Barry L. Edwards

	Name:		Barry L. Edwards
	Title:		Vice President

LIFO SYSTEMS, L.P.
By: LIFO Management, Inc., its general partner

	By:	/s/ Barry L. Edwards

	Name:		Barry L. Edwards
	Title:		Vice President

PERMANENT RECORDS, L.P.
By: Permanent Records Management, Inc., its general partner

	By:	/s/ Barry L. Edwards

	Name:		Barry L. Edwards
	Title:		Vice President

PINNACLE LEGAL MANAGEMENT LIMITED PARTNERSHIP
By: Pinnacle Management, Inc., its general partner

	By:	/s/ Barry L. Edwards

	Name:		Barry L. Edwards
	Title:		Vice President



Address for Notices to each of the Guarantors:
3232 McKinney Avenue, Suite 900
Dallas, Texas 75204
Attn: Barry L. Edwards

SCHEDULE 1
TO
FIRST AMENDMENT TO CREDIT AGREEMENT

ASSET DISPOSITIONS

PMI Imaging Systems, Inc. by PMI Imaging Systems Acquisition Corp.
F.Y.I. Discovery Services Incorporated
Eagle Legal Services Acquisition Corp.
Researchers Acquisition Corp.
The Rust Consulting Group, Inc.
Pinnacle Legal Management Limited Partnership
MAVRICC Management Systems, Inc.
MMS Escrow and Transfer Agency, Inc.
MMS Securities, Inc.
Advanced Digital Graphics, Inc.
T.C.H. Group, Inc.
TCH Mailhouse, Inc.

CH Acquisition Corp.