STOCK PURCHASE AGREEMENT
BY
AND AMONG
F.Y.I. INCORPORATED
IMAGE ENTRY ACQUISITION CORP.
IMAGE ENTRY INC.
IMAGE ENTRY OF XXXXXX COUNTY INC.
IMAGE ENTRY OF INDIANAPOLIS INC.
IMAGE ENTRY FEDERAL SYSTEMS INC.
IMAGE ENTRY OF ARKANSAS INC.
IMAGE ENTRY OF ALABAMA INC.
AND
THE SHAREHOLDERS OF
IMAGE ENTRY INC.
IMAGE ENTRY OF XXXXXX COUNTY INC.
IMAGE ENTRY OF INDIANAPOLIS COUNTY INC.
IMAGE ENTRY FEDERAL SYSTEMS INC.
IMAGE ENTRY OF ARKANSAS INC.
IMAGE ENTRY OF ALABAMA INC.
March 31, 2001
TABLE OF CONTENTS
ARTICLE I. PURCHASE AND SALE............................................2
1.1 Purchase of Stock............................................2
1.2 Purchase Price Adjustment....................................2
1.3 Closing Price Adjustment.....................................2
1.4 Earnouts.....................................................3
1.5 Earnings Treatment...........................................3
ARTICLE II. REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS...........3
2.1 Authorization................................................3
2.2 Organization, Existence and Good Standing of the Company.....3
2.3 Capital Stock of the Companies...............................4
2.4 Subsidiaries.................................................5
2.5 Financial Statements.........................................5
2.6 Accounts and Notes Receivable................................6
2.7 Permits and Intangibles......................................6
2.8 Tax Matters..................................................6
2.9 Assets and Properties........................................9
2.10 Real Property Leases; Options...............................10
2.11 Environmental Laws and Regulations..........................10
2.12 Contracts...................................................11
2.13 No Violations...............................................13
2.14 Government Contracts........................................13
2.15 Consents....................................................13
2.16 Litigation and Related Matters..............................13
2.17 Compliance with Laws........................................14
2.18 Intellectual Property Rights................................14
2.19 Employee Benefit Plans......................................14
2.20 Employees; Employee Relations...............................16
2.21 Insurance...................................................18
2.22 Interests in Customers, Suppliers, Etc......................18
2.23 Business Relations..........................................18
2.24 Officers and Directors......................................19
2.25 Bank Accounts and Powers of Attorney........................19
2.26 Absence of Certain Changes or Events........................19
2.27 Document Management Services and Storage....................20
2.28 Disclosure..................................................20
2.29 Authority; Ownership; Other Interests.......................21
2.30 Preemptive Rights...........................................21
2.31 Validity of Obligations.....................................21
2.32 Absence of Claims Against the Company.......................21
ARTICLE III. REPRESENTATIONS AND WARRANTIES OF FYI AND BUYER.............21
3.1 Organization and Authorization..............................21
3.2 No Violations...............................................21
3.3 Consents....................................................22
TABLE OF CONTENTS
(Continued)
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3.4 FYI Stock...................................................22
3.5 Capitalization of FYI and Ownership of FYI Stock............22
3.6 Business; Real Property; Material Agreements; Financial
Information.................................................22
3.7 Conformity with Law and Litigation..........................23
3.8 Disclosure..................................................23
ARTICLE IV. COVENANTS OF THE PARTIES....................................23
4.1 Course of Conduct by the Companies..........................23
4.2 Approvals and Consents......................................25
4.3 Investigations..............................................26
4.4 Environmental Inspection....................................26
4.5 Records Pertaining to the Companies.........................26
4.6 Tax Elections...............................................27
4.7 No Solicitation.............................................27
4.8 Permitted/Required Payments of Compensation/Distributions
by the Companies............................................27
4.9 Preparation and Filing of Tax Returns.......................28
4.10 Covenants of the Companies Concerning Termination of
S Elections.................................................29
4.11 Loan Agreement and Other Obligations........................32
4.12 Receivables Guaranteed......................................33
4.13 Option to Acquire Order Resource............................34
4.14 Resale of FYI Stock.........................................35
4.15 Operations of the Companies.................................35
4.16 Credit and Debit Cards......................................35
4.17 Affiliated Leases...........................................36
ARTICLE V. CONDITIONS TO OBLIGATIONS OF BUYER..........................36
5.1 Representations and Warranties..............................36
5.2 Covenants of the Shareholders and the Companies.............36
5.3 Certificates of the Companies and the Shareholders..........36
5.4 Absence of Litigation.......................................36
5.5 Consents and Approvals......................................36
5.6 Certificates................................................37
5.7 Estoppel Certificates.......................................37
5.8 Final Financial Statements..................................37
5.9 Compliance with Section 4.1.................................37
5.10 Opinion of Counsel..........................................37
5.11 No Material Adverse Effect..................................38
5.12 No Transfers to Affiliates..................................38
5.13 Due Diligence Review........................................38
5.14 Noncompetition Agreements...................................39
5.15 Termination of Related Party Agreements and Benefit Plans...39
5.16 Shareholders' Release.......................................39
5.17 Broker Release..............................................39
TABLE OF CONTENTS
(Continued)
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5.18 Employment Agreements.......................................39
5.19 Stock Certificates..........................................39
5.20 Resignations and Releases of Directors and Officers.........39
5.21 Allocations of Consideration................................39
ARTICLE VI. CONDITIONS TO OBLIGATIONS OF THE SHAREHOLDERS...............40
6.1 Representations and Warranties..............................40
6.2 Covenants of FYI and Buyer..................................40
6.3 Certificate of Buyer........................................40
6.4 Absence of Litigation.......................................40
6.5 Allocations of Consideration................................40
6.6 Consents and Approvals......................................40
6.7 Certificates................................................40
6.8 Effectiveness of Registration Statement.....................41
6.9 Transfer of Funds and FYI Stock.............................41
6.10 Noncompetition Agreements...................................41
6.11 FYI Material Adverse Effect.................................41
6.12 Opinion of Counsel..........................................41
ARTICLE VII. CLOSING.....................................................42
7.1 Closing.....................................................42
7.2 Delivery of the Company Shares..............................42
7.3 Payments to the Shareholders................................42
ARTICLE VIII. TERMINATION PRIOR TO CLOSING................................42
8.1 Termination.................................................42
ARTICLE IX. INDEMNIFICATION.............................................43
9.1 Buyer's Losses..............................................43
9.2 Environmental Indemnity.....................................44
9.3 Employee Compensation and Benefits..........................45
9.4 Seller Losses...............................................45
9.5 Indemnification for Certain Tax Matters.....................46
9.6 Notice of Loss..............................................46
9.7 Right to Defend.............................................46
9.8 Cooperation.................................................48
9.9 Limitations on Damages......................................48
ARTICLE X. THE SHAREHOLDERS' REPRESENTATIVE............................49
10.1 Appointment of the Shareholders' Representative.............49
10.2 Acceptance of Appointment...................................49
10.3 Appointment Independent, Severable and Binding..............50
10.4 Successor Shareholders' Representative......................50
ARTICLE XI. MISCELLANEOUS...............................................50
TABLE OF CONTENTS
(Continued)
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11.1 Entire Agreement............................................50
11.2 Successors and Assigns......................................50
11.3 Counterparts................................................50
11.4 Headings....................................................50
11.5 Construction................................................50
11.6 Modification and Waiver.....................................51
11.7 Schedules, Etc..............................................51
11.8 Notices.....................................................51
11.9 GOVERNING LAW; CONSENT TO JURISDICTION......................52
11.10 Survival of Covenants, Agreements, Representations and
Warranties..................................................53
11.11 Publicity...................................................53
11.12 Expenses....................................................53
11.13 Third Party Beneficiaries...................................53
11.14 Number and Gender of Words..................................53
11.15 Specific Performance; Other Rights and Remedies.............54
11.16 Prorations..................................................54
11.17 Further Assurances..........................................54
11.18 Brokers and Agents..........................................54
11.19 Guaranty....................................................54
11.20 Arbitration.................................................54
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (the "Agreement") is made and entered into
as of the 31st day of March, 2001 by and among F.Y.I. INCORPORATED, a Delaware
corporation ("FYI"), IMAGE ENTRY ACQUISITION CORP., a Delaware corporation
("Buyer"), IMAGE ENTRY INC., a Kentucky corporation ("Image Entry"), IMAGE ENTRY
OF XXXXXX COUNTY INC., a Kentucky corporation ("Image Xxxxxx"), IMAGE ENTRY OF
INDIANAPOLIS INC., an Indiana corporation ("Image Indianapolis"), IMAGE ENTRY
FEDERAL SYSTEMS INC., a Kentucky corporation ("Image Federal"), IMAGE ENTRY OF
ARKANSAS, INC., a Kentucky corporation ("Image Arkansas"), and IMAGE ENTRY OF
ALABAMA, INC., an Alabama corporation ("Image Alabama") (each of Image Entry,
Image Xxxxxx, Image Indianapolis, Image Federal, Image Arkansas and Image
Alabama, a "Company" and collectively, the "Companies"), and Xxxx X. Xxxxxx,
Xxxx X. Xxxxxx, Xxxxxxxxxxx X. Xxxxxx, Xxxx Xxxxxx-Xxx, Xxxxxx X. Xxxxxx,
Xxxxxxxxxxx X. Xxxxxx, as Guardian for Xxxx Xxxxxx, a Minor Child, and the
Xxxxxxx Xxxxxx Irrevocable Family GSTT Trust (each a "Shareholder" and
collectively the "Shareholders") who constitute all of the shareholders of the
Companies as described on Schedule 1.1 hereto, certain of which are members of
Order Xxxxxxxx.xxx, LLC, and Xxxx X. Xxxxxx as the Shareholders' representative
(the "Shareholders' Representative"). Capitalized terms shall have the meanings
ascribed to them in Annex I hereto.
W I T N E S S E T H:
WHEREAS, the Shareholders own all of the issued and outstanding shares of
capital stock of the Companies;
WHEREAS, the Shareholders desire to sell and convey to Buyer, and Buyer
desires to purchase from the Shareholders, all of the outstanding capital stock
of the Companies;
WHEREAS, in connection with the purchase by Buyer from the Shareholders of
all of the outstanding shares of capital stock of the Companies, Buyer and each
of the Shareholders will enter into noncompetition agreements (the
"Noncompetition Agreements");
WHEREAS, the Boards of Directors of FYI, Buyer and of each of the
Companies have approved and adopted this Agreement and intend that this
transaction be treated as a "qualified stock purchase" by Buyer of the capital
stock of each of the Companies and be subject to the application of Section
338(h)(10) of the Internal Revenue Code of 1986, as amended (the "Code");
NOW, THEREFORE, for and in consideration of the premises and of the mutual
representations, warranties, covenants and agreements contained herein, and of
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, and upon the terms and subject to the conditions
hereinafter set forth, the parties do hereby agree as follows:
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ARTICLE I
PURCHASE AND SALE
1.1 Purchase of Stock. On the Closing Date, Buyer agrees to purchase from
the Shareholders, and the Shareholders agree to sell to Buyer, all of the issued
and outstanding shares of common stock of the Companies, as set forth on
Schedule 1.1 hereto (collectively, the "Company Shares") for a total
consideration of $43,750,000 (the "Total Consideration"), with (i) $32,812,500
in cash payable to the Shareholders' Representative at the Closing, and (ii)
shares of common stock of FYI, par value $.01 per share ("FYI Stock"), with a
value of $10,937,500 as determined in the manner set forth in Schedule 1.1
hereto, to be issued by FYI, which FYI Stock shall be held by FYI and Buyer
pursuant to the terms and conditions set forth in the following sentence. The
$10,937,500 in FYI Stock shall be delivered by FYI and Buyer to the
Shareholders' Representative upon satisfaction of certain aggregate earnings
targets of the Companies following the Closing and as described on Schedule 1.1
hereto, with such shares of FYI Stock to be available as security and as an
offset for any breach of the representations, warranties, covenants and
agreements of the Companies and the Shareholders, including without limitation
those warranties set forth in Section 4.12 hereof, and for the Shareholders'
indemnification obligations, each as set forth herein, following which times the
applicable amounts shall be available for release by Buyer to the Shareholders'
Representative on behalf of the Shareholders less the amount of any claims then
asserted by FYI or Buyer pursuant to Article IX hereof and dependent upon
achievement of such above-described earnings targets.
1.2 Purchase Price Adjustment. The Total Consideration shall be adjusted
(i) upward (or downward) on a dollar-for-dollar basis to the extent the
aggregate tangible net worth of the Companies as reflected on the balance sheets
of the Companies at the close of business on the Effective Date (the "Effective
Date Balance Sheets") as determined in accordance with generally accepted
accounting principles consistently applied ("GAAP"), is above (or below)
$10,000,000 and (ii) downward $6.25 for each dollar ($1.00) that the Companies'
cumulative earnings as determined in accordance with GAAP and including all
operating expenses before (A) taxes, (B) goodwill related to the transaction
described in this Agreement and (C) interest expense (such earnings as adjusted
above, "EBIT") for the twelve-month period ended December 31, 2000 is less than
$7,000,000. The parties stipulate that any earnings of the Companies reported
for periods on or after January 1, 2001 (for purposes of the calculation above
in this Section 1.2) or March 1, 2001 (for purposes of calculation of the Annual
Share Release and the Earnouts) shall not be allocated to any prior time
periods. The adjustments to the Total Consideration made pursuant to this
Section 1.2 are hereinafter collectively referred to as the "Closing Price
Adjustment."
1.3 Closing Price Adjustment. The Effective Date Balance Sheets shall be
prepared in accordance with GAAP. Buyer shall have reasonable input into the
preparation and verification of such Effective Date Balance Sheets. Within five
(5) days following the Closing, the Companies and the Shareholders'
Representative shall promptly deliver a copy of the Effective Date Balance Sheet
to Buyer after completion thereof. Within forty-five (45) days following the
Closing, the Total Consideration shall be adjusted in an amount equal to the
Closing Price Adjustment, if any, and the Shareholders shall promptly receive
such Closing Price
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Adjustment in the event of an upward adjustment or shall promptly return to FYI
and Buyer such Closing Price Adjustment in the event of a downward adjustment.
1.4 Earnouts. In accordance with, and subject to Schedule 1.1 hereto, the
Shareholders shall be eligible to receive from FYI and Buyer up to $25,000,000
in cash and shares of FYI Stock based upon the financial performance of the
Companies upon the terms and subject to the conditions set forth in Schedule 1.1
hereto (the "Earnouts").
1.5 Earnings Treatment. All earnings and net cash flow of the Companies
from and after January 1, 2001 (the "Effective Date") shall be for the benefit
of Buyer and shall be acquired by Buyer at the Closing.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS
Each of the Shareholders of the Companies, jointly and severally,
represent and warrant to Buyer as follows:
(A) Representations and Warranties of the Shareholders. Each of the
Shareholders, jointly and severally, represent and warrant that all of the
following representations and warranties with respect to such Company and its
business and operations set forth in this Section 2(A) are true and correct as
of the time of this Agreement and at the time of the Closing. Each of the
Shareholders shall make the following representations and warranties only with
respect to the Company or the Companies of which he, she or it is a Shareholder.
2.1 Authorization. This Agreement has been duly executed and delivered by
the Company and the Shareholders and constitutes the valid and binding
obligation of each such party, enforceable in accordance with its terms, except
that (i) such enforcement may be subject to bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors' rights
generally, (ii) the remedies of specific performance and injunctive relief are
subject to certain equitable defenses and to the discretion of the court before
which any proceedings may be brought and (iii) rights to indemnification
hereunder may be limited under applicable securities laws (the "Equitable
Exceptions"). The Company has full corporate power, capacity and authority to
execute this Agreement and all other agreements and documents contemplated
hereby.
2.2 Organization, Existence and Good Standing of the Company. The Company
is a corporation duly organized, validly existing and in good standing under the
laws of the state of its incorporation with all requisite corporate power and
authority to own, lease and operate its properties and to carry on its business
as now being conducted. The Company is duly qualified or licensed as a foreign
corporation and in good standing in each jurisdiction in which the character or
location of the property owned, leased or operated by it or the nature of the
business conducted by it makes such qualification necessary, except where the
failure to be so duly qualified or licensed would not have a Material Adverse
Effect. Set forth on Schedule 2.2 is a list of the jurisdictions in which the
Company is qualified or licensed to do business as a foreign corporation. Set
forth in Schedule 2.2 is a listing of all names of all predecessor companies for
the past five (5) years of the Company, including the names of any entities from
whom the
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Company previously acquired material assets (and in the event of any such
acquisitions, a copy of the related asset purchase agreements). In addition, set
forth on Schedule 2.2 is a complete list of all the names under the Company does
or has done business since its incorporation. Except as disclosed in Schedule
2.2, the Company has not been a subsidiary or division of another corporation or
a part of an acquisition that was later rescinded. True, complete and correct
copies of the Articles of Incorporation of the Company (certified copies of
which shall be provided to Buyer within thirty (30) days after Closing) by and
of the bylaws of the Company are attached hereto on Schedule 2.2 (the "Charter
Documents"). Except as set forth on Schedule 2.2 the minute books of the
Company, as heretofore made available to Buyer, are correct and complete in all
material respects.
2.3 Capital Stock of the Companies.
(a) Image Entry's authorized capital stock consists of 20,000 shares
of Common Stock, no par value per share, of which 400 shares are issued
and outstanding; Image Xxxxxx'x authorized capital stock consists of
20,000 shares of Common Stock, no par value per share, of which 100 shares
are issued and outstanding; Image Indianapolis' authorized capital stock
consists of 20,000 shares of Common Stock, no par value per share, of
which 100 shares are issued and outstanding; Image Federal's authorized
capital consists of 20,000 shares of Common Stock, no par value per share,
of which 100 shares are issued and outstanding; Image Arkansas' authorized
capital stock consists of 2,000 shares of Common Stock, no par value per
share, of which 100 shares are issued and outstanding; and Image Alabama's
authorized capital stock consists of 1,000 shares of Common Stock, no par
value per share, of which 100 shares are issued and outstanding; and such
issued and outstanding Company Shares are held by the Shareholders as
described in Schedules 1.1 and 2.3. All of the Company Shares have been
validly issued and are fully paid and nonassessable and no holder thereof
is entitled to any preemptive rights (except any statutory preemptive
rights, which the Shareholders hereby waive). There are no outstanding
conversion or exchange rights, subscriptions, options, warrants or other
arrangements or commitments obligating the Company to issue any shares of
capital stock or other securities or to purchase, redeem or otherwise
acquire any shares of capital stock or other securities, or to pay any
dividend or make any distribution in respect thereof, except as set forth
on Schedule 2.3. The membership interests of Order Xxxxxxxx.xxx, LLC, a
Kentucky limited liability company ("Order Resource"), are held by certain
of the Shareholders as members in the manner set forth on Schedule 2.3.
(b) The Shareholders (i) own of record and beneficially and have
good and marketable title to all of the issued and outstanding Company
Shares in the manner set forth on Schedules 1.1 and 2.3, free and clear of
any and all liens, mortgages, security interests, encumbrances, pledges,
charges, adverse claims, options, buy-sell agreements, rights of first
refusal agreements, property settlement or marital dissolution agreements,
rights or restrictions of any character whatsoever other than standard
state and federal securities law private offering legends and restrictions
(collectively, "Liens"), and (ii) have the right to vote the Company
Shares on any matters as to which any shares of the Common Stock of the
Company are entitled to be voted under the laws of the state of
incorporation of the Company and the Company's Charter Documents, free of
any right of any other person.
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2.4 Subsidiaries. The Company does not presently own, of record or
beneficially, or control directly or indirectly, any capital stock, securities
convertible into capital stock or any other equity interest in any corporation,
association or business entity, nor is the Company, directly or indirectly, a
participant in any joint venture, partnership or other non-corporate entity.
2.5 Financial Statements.
(a) The Companies have previously furnished to Buyer the reviewed
consolidated balance sheet of the Companies as of December 31, 1999 and
the related consolidated statements of operations, shareholders' equity
and cash flows for the three (3) fiscal years then ended, each as reviewed
by Xxxxx, Xxxxxx & Company, P.S.C., certified public accountants, together
with the Companies unaudited consolidated balance sheets, management's
statements of operations and shareholders' equity for the twelve-month
period ended December 31, 2000 (collectively, the "Financial Statements").
The Financial Statements present fairly the financial position and results
of operations of the Companies as of the indicated dates and for the
indicated periods and have been prepared in accordance with GAAP. The
Companies have previously permitted Buyer full access to papers pertaining
to the Financial Statements, including those work papers in the possession
of or prepared by Xxxxx, Xxxxxx & Company, P.S.C.
(b) Except to the extent (and not in excess of the amounts)
disclosed on Schedule 2.5 or reflected in the December 31, 2000 balance
sheet included in the Financial Statements, the Companies have no
liabilities or obligations (including, without limitation, Taxes (as
defined in Section 2.8) payable and deferred Taxes or interest accrued
since December 31, 2000) required to be reflected in the Financial
Statements (or the notes thereto) in accordance with GAAP other than
current liabilities incurred in the ordinary course of business,
consistent with past practice, subsequent to December 31, 2000. The
Companies have also disclosed to Buyer on Schedule 2.5, in the case of
those liabilities that are contingent and required to be reflected on the
Financial Statements in accordance with GAAP, a reasonable estimate of the
maximum amount that may be payable. For each such contingent liability,
the Companies have provided to Buyer the following information:
(i) A summary description of the liability together with the
following:
(A) Copies of all relevant documentation relating
thereto;
(B) Amounts claimed and any other action or relief
sought; and
(C) Name of claimant and all other parties to the
claim, suit or proceeding.
(ii) The name of each court or agency before which such claim,
suit or proceeding is pending;
(iii) The date such claim, suit or proceeding was instituted;
and
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(iv) A reasonable best estimate by the Companies of the maximum
amount, if any, which is likely to become payable with respect to each
such liability. If no estimate is provided, the Companies' best estimate
shall for purposes of this Agreement be deemed to be zero.
2.6 Accounts and Notes Receivable. Set forth on Schedule 2.6 is an
accurate list of the accounts and notes receivable of the Company, as of
December 31, 2000 included within the Financial Statements, and including
receivables from and advances to employees and the Shareholders. The Company
shall provide Buyer with an aging of all accounts and notes receivable showing
amounts due in 30-day aging categories. Except to the extent reflected on
Schedule 2.6, all such accounts and notes are legal, valid and binding
obligations of the obligors collectible in the amount shown on Schedule 2.6, net
of reserves reflected in such balance sheet. The Companies' invoices to
customers are accurate in respect to services provided, except for matters that
would not be reasonably likely to have a Material Adverse Effect (individually
or in the aggregate).
2.7 Permits and Intangibles. The Company holds all licenses, franchises,
permits, orders, approvals, variances and other governmental authorizations,
including permits, titles (including motor vehicle titles and current
registrations), fuel permits or certificates, the absence of any of which would
have a Material Adverse Effect (the "Material Permits"). An accurate list and
summary description is set forth on Schedule 2.7 hereto of all such Material
Permits. The Material Permits are valid, and the Company has not received any
notice that any governmental authority intends to cancel, terminate or not renew
any such Material Permit. The Companies have conducted and are conducting their
businesses in compliance with the requirements, standards, criteria and
conditions set forth in applicable licenses, franchises, permits, orders,
approvals, variances, rules and regulations and are not in violation of any of
the foregoing except where such noncompliance or violation individually or in
the aggregate would not have a Material Adverse Effect with respect to the
Companies. Except as specifically provided on Schedule 2.7, the transactions
contemplated by this Agreement will not result in a default under or a breach or
violation of, or adversely affect the rights and benefits afforded to each
Company by, any such Material Permits.
2.8 Tax Matters. Except as set forth on Schedule 2.8:
(a) The Company has filed all income tax returns required to be
filed by the Company and all returns, reports and forms of other Taxes (as
defined below) required to be filed by the Company (including the timely
filing of any extensions with respect to such returns, reports and forms),
and has paid or provided for all Taxes shown to be due on such returns and
all such returns are accurate and correct in all material respects. No
action or proceeding for the assessment or collection of any Taxes is
pending against the Company and no notice of any claim for Taxes, whether
pending or threatened, has been received; no deficiency, assessment or
other formal claim for any Taxes has been asserted or made against the
Company that has not been fully paid or finally settled; and no issue has
been formally raised by any taxing authority in connection with an audit
or examination of any return of Taxes. No federal, state or foreign income
tax returns of the Company have been examined, and there are no
outstanding agreements or waivers extending the applicable statutory
periods of limitation for such Taxes for any period.
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All Taxes that the Company has been required to collect or withhold have
been duly withheld or collected and, to the extent required, have been
paid to the proper taxing authority. No Taxes will be assessed on or after
the Closing Date against the Company for any tax period ending on or prior
to the Closing Date other than those listed on Schedule 2.8, which Taxes
(including without limitation the Taxes to be assessed as a result of the
consummation of the transactions described herein such as the Clay County
Business License Tax, the Laurel County Business License Tax, the City of
Mount Xxxxxx, Kentucky Occupational/Net Profits Tax, the Tennessee
Franchise, Excise Tax, the Kentucky License Tax and the Indiana
Non-Resident Shareholder Withholding, together with any similar Taxes not
reflected on such schedule but excluding Taxes arising as a result of the
ordinary course operations of the Companies with respect to such period)
shall be accrued for on the Effective Date Balance Sheets or reflected in
the Closing Price Adjustment. For purposes of this Agreement, "Taxes"
shall mean all taxes, charges, fees, levies or other assessments
including, without limitation, income, excise, property, withholding,
sales and franchise taxes, imposed by the United States, or any state,
county, local or foreign government or subdivision or agency thereof, and
including any interest, penalties or additions attributable thereto.
(b) The Company is not a party to any Tax allocation or sharing
agreement.
(c) None of the assets of the Company constitute tax-exempt bond
financed property or tax-exempt use property, within the meaning of
Section 168 of the Code. The Company is not a party to any "safe harbor
lease" that is subject to the provisions of Section 168(f)(8) of the Code
as in effect prior to the Tax Reform Act of 1986, or to any "long-term
contract" within the meaning of Section 460 of the Code.
(d) The Company is not under jurisdiction of a court in a Title 11
or similar case within the meaning of Section 368(a)(3)(A) of the Code.
(e) The liabilities of the Company were incurred by the Company in
the ordinary course of its trade or business.
(f) The cash and FYI Stock to be received by the Shareholders in
this transaction will be approximately equal to the fair value of the
Company Shares surrendered in connection with the consummation of the
transactions contemplated under this Agreement.
(g) The Company has not made and has not agreed to make an
"extraordinary distribution" (as determined under Treasury regulations
Section 1.368-1T(e)(1)(ii)(A)) to its shareholders in connection with the
transactions contemplated under this Agreement and no such distribution
pursuant to Section 4.8 hereof shall be deemed an "extraordinary
distribution".
(h) Neither the Company nor a "Related Corporation" has within the
last two (2) years redeemed or acquired any capital stock of the Company
or entered into any agreement, arrangement or understanding to redeem or
acquire any capital stock of the Company, nor will it redeem or acquire,
or enter into any such agreement, arrangement or
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understanding to redeem or acquire, any capital stock of the Company at
any time through the Closing Date. For purposes of this Section 2.8(h), a
"Related Corporation" with respect to another corporation means (i) a
corporation that is a member of the same "affiliated group" as determined
under Section 1504(a) of the Code without regard to Section 1504(b), or
(ii) a corporation that owns, or in which the other corporation owns,
directly or indirectly, stock possessing at least fifty percent (50%) of
the total combined voting power of all classes of stock entitled to vote,
or at least fifty percent (50%) of the total value of shares of all
classes of stock (determined by taking into account the constructive
ownership of stock rules under Code Section 318(a) as modified by Code
Section 304(c)). For purposes of the foregoing, a corporation will be
considered as acquiring shares of stock acquired by a partnership (as
determined for federal income tax purposes) in which it is a partner (as
determined for federal income tax purposes).
(i) There is no intercorporate indebtedness existing between Buyer
and the Company that was issued, acquired or will be settled at a
discount.
(j) No stock of Buyer will be issued in the transaction.
(k) The Company effected a valid election under Section 1362 of the
Code to be taxed as an S corporation and has qualified and properly
reported its operations as an S corporation within the meaning of
Subchapter S of the Code and corresponding provisions of the laws of the
state in which it is subject to tax at all times since the date set forth
on Schedule 2.8. The Company will be required to utilize an accrual method
of accounting after the consummation of the transactions set forth herein.
The Company and the Shareholders are eligible to make an election under
Section 338(h)(10) of the Code and any comparable election under any
applicable state law.
(l) The Company is not a "consenting corporation" within the meaning
of Section 341(f)(1) of the Code, or comparable provisions of any state
statutes, and none of the assets of the Company are subject to an election
under Section 341(f) of the Code or comparable provisions of any state
statutes.
(m) The Company is not a party to any joint venture, partnership or
other arrangement that is treated as a partnership for federal income Tax
purposes.
(n) There are no accounting method changes of the Company that could
give rise to an adjustment under Section 481 of the Code for periods after
the Closing Date.
(o) The Company has substantial authority for the treatment of, or
has disclosed (in accordance with Section 6662(d)(2)(B)(ii) of the Code)
on its Federal income returns, all positions taken therein that could give
rise to a substantial understatement of Federal income tax within the
meaning of Section 6662(d) of the Code.
(p) The Company has not been a member of an affiliated group filing
a consolidated federal income tax return and does not have any liability
for Taxes for any Person other than the Company (i) under Section 1.1502-6
of the Treasury regulations (or any similar provision of state, local or
foreign law), (ii) as a transferee or successor, (iii) by contract or (iv)
otherwise.
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(q) The Company's Tax basis in its assets for purposes of
determining its future amortization, depreciation and other federal income
Tax deductions is accurately reflected on the Company's Tax books and
records.
(r) The Company is not, and has not been at any time, a "United
States real property holding corporation" within the meaning of Section
897(c)(2) of the Code.
(s) At the end of the last taxable year, the Company did not have
aggregate Tax Losses for federal income Tax purposes except as set forth
in Schedule 2.8.
2.9 Assets and Properties.
(a) Real Property. The Company does not own or hold any interest in
real property (the "Real Property") other than as set forth in Schedule
2.10. Except as set forth on such schedule, the Company has good and
marketable title to all Real Property and none of the Real Property is
subject to any Lien.
(b) Personal Property. Except as set forth on Schedule 2.9 and
except for inventory, supplies and other personal property disposed of or
consumed, and accounts receivable collected or written off, and cash
utilized, all in the ordinary course of business consistent with past
practice, the Company owns all of its inventory, equipment and other
personal property (both tangible and intangible) reflected on the latest
balance sheet included in the Financial Statements or acquired since
December 31, 1999, not disposed of in the ordinary course consistent with
past good business practice, free and clear of any Liens, except for
statutory Liens for current taxes, assessments or governmental charges or
levies on property not yet due and payable.
(c) Condition of Properties. The Real Property and the leasehold
estates that are the subject of the Real Property Leases (as defined in
Section 2.10) and the tangible personal property owned or leased by the
Company are, except as set forth on Schedule 2.9, in good operating
condition and repair, ordinary wear and tear excepted; and neither the
Company nor the Shareholders have any Knowledge of any condition not
disclosed herein of any such Real Property or leasehold estate that would
materially affect the fair market value, use or operation of any Real
Property or leasehold estate or otherwise have a Material Adverse Effect.
(d) Compliance. The continued ownership, operation, use and
occupancy of the Real Property and the improvements thereto, and the
continued use and occupancy of the leasehold estates the subject of the
Real Property Leases as currently operated, used and occupied will not
violate any zoning, building, health, flood control, fire or other law,
ordinance, order or regulation or any restrictive covenant, the violation
of which would be reasonably likely to have a Material Adverse Effect on
the Companies. There are no violations of any federal, state, county or
municipal law, ordinance, order, regulation or requirement affecting any
portion of Real Property or the leasehold estates the subject of the Real
Property Leases and no written notice of any such violation has been
issued by any governmental authority, which violation would be reasonably
likely to have a Material Adverse Effect.
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2.10 Real Property Leases; Options. Schedule 2.10 sets forth a list
(summarizing the parties, lessor addresses, monthly rentals, square footages,
the terms and any extensions and the function of any such property) and copies
of (i) all leases and subleases under which the Company is lessor or lessee or
sublessor or sublessee of any real property, together with all amendments,
supplements, nondisturbance agreements, brokerage and commission agreements and
other agreements pertaining thereto ("Real Property Leases"), (ii) all material
options held by the Company or contractual obligations on the part of the
Company to purchase or acquire any interest in real property, and (iii) all
options granted by the Company or contractual obligations on the part of the
Company to sell or dispose of any material interest in real property. Copies of
all Real Property Leases and such options and contractual obligations have been
delivered to Buyer. The Company has not assigned any Real Property Leases or any
such options or obligations. There are no disputes, oral agreements or
forbearance programs in effect as to any Real Property Lease; all facilities
leased under the Real Property Leases (including alterations constructed by the
Company) have received all approvals of governmental authorities (including
licenses and permits) required in connection with the operation thereof; and all
facilities leased under the Real Property Leases are supplied with utilities and
other services necessary for the operation of said facilities. There are no
liens on the interest of the Company in the Real Property Leases, with the
exception of (i) Liens for taxes and assessments not yet due and payable and
(ii) those matters set forth on Schedule 2.10. The Real Property Leases and
options and contractual obligations listed on Schedule 2.10 are in full force
and effect and constitute binding obligations of the Company and the other
parties thereto, and (x) there are no defaults thereunder and (y) no event has
occurred that with notice, lapse of time or both would constitute a default by
the Company or, to the best Knowledge of the Company and the Shareholders, by
any other party thereto.
2.11 Environmental Laws and Regulations.
(a) To the best Knowledge of the Company and the Shareholders, (i)
during the occupancy and operation of the "Subject Property" (as defined
below) by the Company and prior to its occupancy and operation, the
operations of the Subject Property, and any use, storage, treatment,
disposal or transportation of "Hazardous Substances" (as defined below)
that has occurred in, on, to, from or under the Subject Property prior to
the date of this Agreement have been in compliance with all "Environmental
Requirements" (as defined below); (ii) during the occupancy and operation
of the Subject Property by the Company and prior to its occupancy or
operation, no release, leak, discharge, spill, disposal, migration or
emission of Hazardous Substances has occurred in, on, to, from or under
the Subject Property in a quantity or manner that violates or requires
further investigation or remediation under Environmental Requirements;
(iii) the Subject Property is free of Hazardous Substances as of the date
of this Agreement, except for the presence of small quantities of
Hazardous Substances utilized by the Company or other tenants of the
Subject Property in compliance with Environmental Requirements and in the
ordinary course of their business; (iv) there is no pending or threatened
litigation or administrative investigation or proceeding concerning the
Subject Property or the Company or the Shareholders involving Hazardous
Substances or Environmental Requirements; (v) there are no
asbestos-containing materials or above-ground or underground storage tank
systems located at the Subject Property; (vi) except as set forth on
Schedule 2.11, the Company has never owned,
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operated, or leased any real property other than the Subject Property;
(vii) the Company's transportation to or disposal at any off-site location
of any Hazardous Substances from property now or formerly owned, operated
or leased by the Company at the time of the Company's ownership, operation
or lease thereof was conducted in full compliance with applicable
Environmental Requirements; and (viii) the Shareholders are not aware of
any facts, conditions or circumstances that could reasonably be expected
to form the basis for a claim against the Company or Buyer of or relating
to the Company's compliance or failure to comply with any Environmental
Requirements.
(b) Definitions. As used in this Agreement, the following terms
shall have the following meanings:
"Environmental Requirements" means all laws, statutes, rules,
regulations, ordinances, guidance documents, judgments, decrees, orders,
agreements and other restrictions and requirements (whether now or
hereafter in effect) of any governmental authority, including, without
limitation, federal, state and local authorities, relating to the
regulation or protection of human health and safety, worker health and
safety, natural resources, conservation, the environment, or the storage,
treatment, disposal, transportation, handling or other management of
industrial or solid waste, hazardous waste, hazardous or toxic substances
or chemicals, pollutants or Hazardous Substances, including without
limitation, CERCLA (as defined below); the Resource Conservation and
Recovery Act, as amended, 42 U.S.C.ss.6901 et seq.; the Federal Water
Pollution Control Act, as amended, 33 U.S.C.ss.1251 et seq.; the Toxic
Substances Control Act, 15 U.S.C. ss.2601 et seq.; the Clean Air Act, 42
U.S.C.ss.7401 et seq.; the Safe Drinking Water Act, 42 U.S.C. 300f et
seq.; the 0.1 Pollution Act of 1990, 33 U.S.C.ss.2701 et seq.; and their
state and local counterparts and equivalents.
"Hazardous Substance" means (i) any "hazardous substance" as defined
in ss.101(14) of the Comprehensive Environmental Response, Compensation,
and Liability Act of 1980, as amended from time to time (42 U.S.C. xx.xx.
9601 et seq.) ("CERCLA"), or any regulations promulgated thereunder, or
the Occupational Safety and Health Act of 1970, as amended from time to
time (29 U.S.C. ss. 651 et seq.), or any regulations promulgated
thereunder; (ii) petroleum and petroleum by-products, asbestos and
asbestos-containing materials, polychlorinated biphenyls and pesticides;
or (iii) any additional substances or materials that have been or are
currently classified or considered to be pollutants, hazardous or toxic
under Environmental Requirements.
"Subject Property" means all Real Property, all property subject to
the Real Property Leases and any properties listed on Schedules 2.10 and
2.11.
2.12 Contracts.
(a) Set forth on Schedule 2.12(a) is a list of the contracts,
leases (except Real Property Leases, which are listed on Schedule
2.10), agreements, arrangements and commitments (whether oral
(summaries only) or written) to which the Company is a party or by
which its assets or business are bound (the following, "Contracts")
including, without limitation, contracts, agreements, arrangements
or commitments that relate to (i)
-11-
the sale, lease or other disposition by the Company of all or any
substantial part of its business or assets or the purchase by the
Company of a substantial amount of assets (in each event other than
in the ordinary course of business), (ii) the employment of any
person other than personnel employed at the pleasure of the Company
in the ordinary course of its business at rates of compensation and
on terms consistent with good business practice; (iii) collective
bargaining with, or any representation of any employees by, any
labor union or association; (iv) the acquisition of services,
supplies, equipment or other personal property involving more than
$5,000 or that is not terminable by the Company upon not more than
thirty (30) days' notice without obligation on the part of the
Company; (v) noncompetition or nondisclosure; (vi) the purchase or
sale of real property or any interest therein; (vii) distribution,
agency or construction; (viii) lease of personal property as lessor
or lessee or sublessor or sublessee; (ix) lending or advancing of
funds other than the extension of credit to trade purchasers in the
ordinary course of the Company's business consistent with past good
business practice or any guarantee of indebtedness to a third party;
(x) borrowing of funds or receipt of credit other than by the
Company in the ordinary course of business consistent with past good
business practice and except for trade payables in amounts and on
terms consistent with past good business practice; (xi) incurring of
any obligation or liability except for transactions engaged in by
the Company in the ordinary course of business consistent with past
good business practice; (xii) the sale of personal property (other
than sales of inventory in the ordinary course of business
consistent with past good business practice) or services under which
payments due after the date of this Agreement exceed $5,000; and
(xiii) any matter or transaction not in the ordinary course of the
business of the Company or that is inconsistent with past good
business practice of the Company. Notwithstanding the foregoing,
Schedule 2.12(b) only lists, and the Company has only provided Buyer
or its representatives with copies of, all of the Material
Contracts, which for purposes of this Agreement shall be (i) all
Contracts with the Companies' top fifteen (15) customers (in terms
of revenues) for the twelve (12) months ended December 31, 2000 and
the Companies' top fifteen (15) customers (in terms of revenues) for
the two-month period ended February 28, 2001 and (ii) all Contracts
that are not terminable by the Companies upon not more than thirty
(30) days written notice without penalty or payment. The Company has
no agreements with customers which require the Company to provide
storage or services at no charge or at rates significantly below the
average of rates for such storage or services set forth in the
Company's written customer contracts, except for immaterial
discounts and/or free storage or services provided as incentives to
certain accounts. Except as set forth on Schedule 2.12(a), the
Company has delivered invoices to its customers or received monies
therefrom only with respect to completed work.
(b) Except as set forth on Schedule 2.12(b), each Contract is in
full force and effect on the date hereof (except that with respect to oral
Contracts or Contracts that are not signed, such representation shall be
to the best Knowledge of the Company and the Shareholders), the Company is
not in default under any Contract, the Company has not given or received
notice of any default under any Contract, invoices with respect to
Contracts have been disseminated only with respect to completed work, and
to the best Knowledge of the Company and the Shareholders, no other party
to any Contract is in default thereunder.
-12-
2.13 No Violations. The execution, delivery and performance of this
Agreement and the other agreements and documents contemplated hereby by the
Company and the Shareholders and the consummation of the transactions
contemplated hereby will not (i) violate any provision of any Charter Document,
(ii) violate any statute, rule, regulation, order or decree of any public body
or authority by which the Company or the Shareholders or its or their respective
properties or assets are bound, or (iii) except as set forth on Schedule 2.13,
result in a violation or breach of, or constitute a default under, or result in
the creation of any encumbrance upon, or create any rights of termination,
cancellation or acceleration in any person with respect to any Contract or any
material license, franchise or permit of the Company or any other agreement,
contract, indenture, mortgage or instrument to which the Company is a party or
by which any of its properties or assets is bound.
2.14 Government Contracts. Except as set forth on Schedule 2.14, the
Company is not a party to any governmental contract and has no ongoing liability
or obligation under any governmental contract that has terminated, expired or
been cancelled.
2.15 Consents. Except as set forth on Schedule 2.15, no consent, approval,
notice to, registration or filing with, authorization or order, of any
governmental authority or under any Contract or other agreement or commitment to
which the Company or the Shareholders are parties or by which its or their
respective assets are bound is required as a result of or in connection with the
execution or delivery of this Agreement and the other agreements and documents
to be executed by the Company and the Shareholders or the consummation by the
Company and the Shareholders of the transactions contemplated hereby, which
consent, approval, notice to, registration or filing with, authorization or
order the failure of which to obtain or deliver would be reasonably likely to
have a Material Adverse Effect on the Companies.
2.16 Litigation and Related Matters. Set forth on Schedule 2.16 is a list
of all actions, suits, proceedings, investigations or grievances pending against
the Company or, to the best knowledge of the Company and the Shareholders,
threatened against the Company, the business or any property or rights of the
Company, at law or in equity, before or by any arbitration board or panel, court
or federal, state, municipal or other governmental department, commission,
board, bureau, agency or instrumentality, domestic or foreign ("Agencies"). None
of the actions, suits, proceedings, investigations or grievances listed on
Schedule 2.16 either (i) results in or would, if adversely determined, have a
Material Adverse Effect on the Companies or (ii) affects or would, if adversely
determined, affect the right or ability of the Company to carry on its business
substantially as now conducted. The Company is not subject to any continuing
court or Agency order, writ, injunction or decree applicable specifically to its
business, operations or assets or its employees, nor in default with respect to
any order, writ, injunction or decree of any court or Agency with respect to its
assets, business, operations or employees. Schedule 2.16 lists (x) all worker's
compensation claims as furnished by the Companies' carrier(s) and outstanding
against the Company as of February 1, 2001 and (y) all other actions, suits or
proceedings filed by or against the Company since December 31, 1999. The Company
has not during the last two (2) years been required to make any indemnification
payment as a result of any actual or alleged act or omission of the Company or
any person under its control.
-13-
2.17 Compliance with Laws. Except as set forth on Schedule 2.17, the
Companies are in compliance with all applicable laws, regulations (including
federal, state and local procurement regulations), orders, judgments and
decrees, except where the failure to so comply would be likely to have a
Material Adverse Effect with respect to the Companies.
2.18 Intellectual Property Rights. Schedule 2.18 lists the domestic and
foreign trade names, trademarks, service marks, trademark registrations and
applications, service xxxx registrations and applications, patents, patent
applications, patent licenses, software licenses and copyright registrations and
applications owned by the Company or used thereby in the operation of its
business and any and all web sites (including such sites' home page addresses)
and intranets of the Company (collectively, the "Intellectual Property"), which
Schedule indicates (i) the term and exclusivity of its rights with respect to
the Intellectual Property and (ii) whether each item of Intellectual Property is
owned or licensed by the Company, and if licensed, the licensor and the license
fees therefor. Unless otherwise indicated on Schedule 2.18, the Company has the
right to use the Intellectual Property, and the consummation of the transactions
contemplated hereby will not result in the loss or material impairment of any
rights of the Company in the Intellectual Property. Each item constituting part
of the Intellectual Property has been, to the extent indicated on Schedule 2.18,
registered with, filed in or issued by, as the case may be, the United States
Patent and Trademark Office or such other government entity, domestic or
foreign, as is indicated on Schedule 2.18; all such registrations, filings and
issuances remain in full force and effect; and all fees and other charges with
respect thereto are current. Except as stated on Schedule 2.18, there are no
pending proceedings or adverse claims made or, to the best Knowledge of the
Company and the Shareholders, threatened against the Company with respect to the
Intellectual Property; there has been no litigation commenced or threatened in
writing within the past five (5) years with respect to the Intellectual Property
or the rights of the Company therein; the Intellectual Property performs in all
respects in the manner described or represented by the Company in all proposals,
bids, specifications, documentation, promotional materials and sales literature
prepared thereby or delivered on behalf of it and performs in all respects the
functions necessary for the conduct of the Company's business and operations,
free of any deficiency, imperfection or insufficiency that would be reasonably
likely to have a Material Adverse Effect; and, to the best Knowledge of the
Company and the Shareholders, (i) the Intellectual Property or the use thereof
by the Company does not conflict with any trade names, trademarks, service
marks, trademark or service xxxx registrations or applications, patents, patent
applications, patent licenses or copyright registrations or applications of
others ("Third Party Intellectual Property"), and (ii) such Third Party
Intellectual Property or its use by others or any other conduct of a third party
does not conflict with or infringe upon the Intellectual Property or its use by
the Company.
2.19 Employee Benefit Plans.
(a) Each employee benefit, stock or compensation plan, including
without limitation employee benefit plans within the meaning of Section
3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), maintained or contributed to by the Company or any of its Group
Members (as defined below) (collectively, the "Plans") is listed on
Schedule 2.19, is in substantial compliance with applicable law and has
been administered and operated in all material respects in accordance with
its terms. Each Plan that is intended to be "qualified" within the
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meaning of Section 401(a) of the Code has received a favorable
determination letter from the Internal Revenue Service (the "IRS") and no
event has occurred and no condition exists that could be expected to
result in the revocation of any such determination. No event that
constitutes a "reportable event" (within the meaning of Section 4043(b) of
ERISA) for which the thirty (30) day notice requirement has not been
waived by the Pension Benefit Guaranty Corporation (the "PBGC") has
occurred with respect to any Plan. For purposes of this Agreement, the
term "Plan" shall include each bonus, incentive or deferred compensation,
severance, termination, retention, change of control, stock option, stock
appreciation, stock purchase, stock ownership, SEPP, phantom stock or
equity-based, performance or other employee or retiree benefit or
compensation plan, welfare benefit program, arrangement, agreement, policy
or understanding, whether written or unwritten.
(b) No Plan is subject to Title IV of ERISA, and neither the Company
nor any Group Member has made any contributions to or participated in any
"multiple employer plan" (within the meaning of the Code or ERISA) or
"multi-employer plan" (as defined in Section 4001(a)(3) of ERISA). Full
payment has been made of all amounts that the Company was required under
the terms of the Plans to have paid as contributions to such Plans on or
prior to the date hereof (excluding any amounts not yet due) and all
amounts properly accrued to date as liabilities of the Company that have
not been paid have been properly recorded on the Financial Statements, and
no Plan that is subject to Part 3 of Subtitle B of Title 1 of ERISA has
incurred any "accumulated funding deficiency" (within the meaning of
Section 302 of ERISA or Section 412 of the Code), whether or not waived.
Neither the Company nor, to the best Knowledge of the Company and the
Shareholders, any other "disqualified person" or "party in interest"
(within the meaning of Section 4975(e)(2) of the Code and Section 3(14) of
ERISA, respectively) has engaged in any transactions in connection with
any Plan that could be expected to result in the imposition of a material
penalty pursuant to Section 502(i) of ERISA, damages pursuant to Section
409 of ERISA or a tax pursuant to Section 4975(a) of the Code. No material
claim, action, proceeding or litigation has been made, commenced or, to
the best Knowledge of the Company and the Shareholders, threatened with
respect to any Plan (other than for benefits payable in the ordinary
course and PBGC insurance premiums). No Plan or related trust owns any
securities in violation of Section 407 of ERISA. Neither the Company nor
any Group Member has incurred any liability or taken any action, or has
any knowledge of any action or event, that could cause it to incur any
liability (i) under Section 412 of the Code or Title IV of ERISA with
respect to any "single employer plan" (within the meaning of Section
4001(a)(15) of ERISA), (ii) on account of a partial or complete withdrawal
(within the meaning of Section 4205 and 4203 of ERISA, respectively) with
respect to any "multi-employer plan" (within the meaning of Section 3(37)
of ERISA), (iii) on account of unpaid contributions to any such
multi-employer plan, or (iv) to provide health benefits or other
non-pension benefits to retired or former employees, except as
specifically required by Section 4980B(f) of the Code.
(c) Except as set forth on Schedule 2.19, neither the execution and
delivery of this Agreement by the Company nor the consummation of the
transactions contemplated hereby will (i) entitle any current or former
employee of the Company to severance pay,
-15-
unemployment compensation or any similar payment, (ii) accelerate the time
of payment or vesting, or increase the amount of, any compensation due to
any such employee or former employee except as required by Section
411(d)(3) of the Code, or (iii) directly or indirectly result in any
payment made or to be made to or on behalf of any person to constitute a
"parachute payment" (within the meaning of Section 280G of the Code). For
purposes of this Agreement, "Group Member" shall mean any member of any
"affiliated service group" or "controlled group" as defined in Sections
414(m) and 414(b) of the Code that includes the Company, any member of any
"controlled group of corporations" as defined in Section 1563 of the Code
that includes the Company or any member of any group of "trades or
businesses under common control" as defined by Section 414(c) of the Code
that includes the Company.
(d) With respect to each Plan, the Company has delivered or will
upon request deliver to Buyer a true and complete copy of such plan
document, including any amendments and a copy of any related trust
agreement or insurance contract, the most recent summary plan description,
together with any summaries of material modifications, the most recently
filed Form 5500, as applicable, and other material related documents.
2.20 Employees; Employee Relations.
(a) Schedule 2.20 sets forth (i) the name and current annual salary
(or rate of pay) and other compensation (including, without limitation,
normal bonus, profit-sharing and other compensation) now payable by the
Company to each employee (which for all purposes shall include employees
leased by the Company from a third party) whose current total annual
compensation or estimated compensation is $35,000 or more, (ii) any
increase to become effective after the date of this Agreement in the total
compensation or rate of total compensation payable by the Company to each
such person, (iii) any increase to become payable after the date of this
Agreement by the Company to employees other than those specified in clause
(i) of this Section 2.20(a) (other than in the ordinary course of business
consistent with past practice), (iv) all presently outstanding loans and
advances (other than routine travel advances to be repaid or formally
accounted for within sixty (60) days) made by the Company to, or made to
the Company by, any director, officer or employee, (v) all other
transactions between the Company and any director, officer or employee
thereof since December 31, 2000 other than as described in clauses
(i)-(iv) of this Section 2.20(a) (other than in the ordinary course of
business consistent with past practice), (vi) all accrued but unpaid
vacation pay owing to any officer or employee that is not disclosed on the
Financial Statements, (vii) any relative of any of the Shareholders
(whether by blood, marriage or adoption) employed by the Company and the
position and salary and other compensation payable thereto, and (viii) any
engagement or use by the Company in any material manner of the employees
of another entity or the engagement or use of the Company's employees in
any material manner by another entity since January 1, 1999 or any
outstanding obligations of the Company to engage any such third-party
employees or make available its employees.
(b) Except as disclosed on Schedule 2.20, the Company is not a party
to, or bound by, the terms of any collective bargaining agreement, and the
Company has not experienced any material labor difficulties during the
last five (5) years and, during the
-16-
last five (5) years, none of the employees of the Company has been
represented by any labor union or other employee collective bargaining
organization, was a party to, or bound by, any labor or other collective
bargaining agreement or has been subject to or involved in or, to the best
Knowledge of the Company and the Shareholders, threatened with, any union
elections, petitions or other organizational or recruiting activities.
Except as set forth on Schedule 2.20, there are no labor disputes
existing, or to the best Knowledge of the Company and the Shareholders,
threatened involving, by way of example, strikes, work stoppages,
slowdowns, picketing, or any other interference with work or production,
or any other concerted action by employees. No charges or proceedings
before the National Labor Relations Board, or similar agency, exist, or to
the best Knowledge of the Company and the Shareholders, are threatened.
(c) The Company and the Shareholders have no Knowledge of any facts
that would indicate that the employees of the Company will not continue in
the employ thereof following the Closing on a basis similar to that
existing on the date of this Agreement. Since December 31, 1998, except as
set forth on Schedule 2.20, the Company has not experienced any
difficulties in obtaining any qualified personnel necessary for the
operations of its business and, to the best knowledge of the Company and
the Shareholders, no such shortage of qualified personnel is threatened or
pending. Except as disclosed on Schedule 2.20, the Company is not a party
to any employment contract with any individual or employee, either express
or implied. No legal proceedings, charges, complaints or similar actions
exist under any federal, state or local laws affecting the employment
relationship including, but not limited to: (i) anti-discrimination
statutes such as Title VII of the Civil Rights Act of 1964, as amended (or
similar state or local laws prohibiting discrimination because of race,
sex, religion, national origin, age and the like); (ii) the Fair Labor
Standards Act or other federal, state or local laws regulating hours of
work, wages, overtime and other working conditions; (iii) requirements
imposed by federal, state or local governmental contracts such as those
imposed by Executive Order 11246; (iv) state laws with respect to tortious
employment conduct, such as slander, harassment, false light, invasion of
privacy, negligent hiring or retention, intentional infliction of
emotional distress, assault and battery, or loss of consortium; or (v) the
Occupational Safety and Health Act, as amended, as well as any similar
state laws, or other regulations respecting safety in the workplace; and,
to the best Knowledge of the Shareholders, (A) no proceedings, charges or
complaints are threatened under any such laws or regulations and (B) no
facts or circumstances exist that would give rise to any such proceedings,
charges, complaints or claims, whether valid or not. The Company is not
subject to any settlement or consent decree with any present or former
employee, employee representative or any government or Agency relating to
claims of discrimination or other claims in respect to employment
practices and policies; and no government or Agency has issued a judgment,
order, decree or finding with respect to the labor and employment
practices (including practices relating to discrimination) of the Company.
Since December 31, 1998 the Company has not incurred any liability or
obligation under the Worker Adjustment and Retraining Notification Act or
similar state laws; and the Company has not laid off more than ten percent
(10%) of its employees at any single site of employment in any ninety (90)
day period during the twelve (12) month period ending at the Closing Date.
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(d) Schedule 2.20 sets forth information provided by the Companies'
insurer with respect to (i) the loss history on an annual basis for each
Company over the last three (3) fiscal years (with such report dated
August 2000); (ii) each injury (without any individually identifiable
information), with a summary of (A) the nature of the reported injury, and
(B) the aggregate medical expenses incurred for such claim; and (iii) each
Company's workers compensation open claims report dated February 2001 (as
furnished by the Companies' carriers).
(e) The Company is in compliance in all material respects with the
provisions of the Americans with Disabilities Act.
2.21 Insurance. Schedule 2.21 contains an accurate list of the policies
and contracts (including insurer, named insured, type of coverage, limits of
insurance, required deductibles or co-payments, annual premiums and expiration
date) for fire, casualty, liability and other forms of insurance maintained by,
or for the benefit of, the Company. All such policies are in full force and
effect and shall remain in full force and effect through the Closing Date and,
to the best Knowledge of the Company and the Shareholders, have coverages that
are commercially reasonable for the business engaged in by the Company. Neither
the Company nor the Shareholders have received any notice of cancellation or
non-renewal or of significant premium increases with respect to any such policy.
Except as disclosed on Schedule 2.21, no pending claims made by or on behalf of
the Company under such policies have been denied or are being defended against
third parties under a reservation of rights by an insurer thereof. All premiums
due prior to the date hereof for periods prior to the date hereof with respect
to such policies have been timely paid.
2.22 Interests in Customers, Suppliers, Etc. Except as set forth on
Schedule 2.22, no shareholder, officer, director or affiliate of the Company
possesses, directly or indirectly, any financial interest in, or is a director,
officer, employee or affiliate of, any corporation, firm, association or
business organization that is a client, supplier, customer, lessor, lessee or
competitor of the Company. Ownership of securities of a corporation whose
securities are registered under the Securities Exchange Act of 1934 not in
excess of five percent (5%) of any class of such securities shall not be deemed
to be a financial interest for purposes of this Section 2.22.
2.23 Business Relations. Schedule 2.23 contains an accurate list of (i)
all customers of the Companies representing five percent (5%) or more of the
Companies' aggregate revenues for the twelve (12) months ended December 31, 2000
or (ii) the ten (10) largest revenue-generating customers of the Companies
(determined on an aggregate basis) with respect to such period and (a) all
suppliers representing five percent (5%) or more of the Companies' aggregate
operating expenses for the twelve (12) months ended December 31, 2000 or (b) the
ten (10) suppliers with the largest aggregate invoice amounts submitted to the
Companies with respect to such period. Except as set forth on Schedule 2.23, to
the best Knowledge of the Companies and the Shareholders, no customer or
supplier of the Company has or will cease to do business therewith after the
consummation of the transactions contemplated hereby, which cessation would have
a Material Adverse Effect on the Companies. Except as set forth on Schedule
2.23, since December 31, 1998, no Company has experienced any difficulties in
obtaining any inventory items necessary to the operation of its business, and,
to the best Knowledge of the Companies
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and the Shareholders, no such shortage of supply of inventory items is
threatened or pending. Except as set forth on Schedule 2.23, no Company is
required to provide any bonding or other financial security arrangements in any
material amount in connection with any transactions with any of its customers or
suppliers. Except as set forth on Schedule 2.23, no customer records have been
lost or improperly destroyed.
2.24 Officers and Directors. Set forth on Schedule 2.24 is a list of the
current officers and directors of the Company.
2.25 Bank Accounts and Powers of Attorney. Schedule 2.25 sets forth each
bank, savings institution and other financial institution with which the Company
has an account or safe deposit box and the names of all persons authorized to
draw thereon or to have access thereto. Each person holding a power of attorney
or similar grant of authority on behalf of the Company is identified on Schedule
2.25. Except as disclosed on such Schedule, the Company has not given any
revocable or irrevocable powers of attorney to any person, firm, corporation or
organization relating to its business for any purpose whatsoever.
2.26 Absence of Certain Changes or Events. Except as set forth on Schedule
2.26 or as otherwise contemplated by this Agreement, since December 31, 2000,
there has not been (a) any material damage, destruction or casualty loss to the
physical properties of the Company or to the physical properties of any third
parties that are located on the Company's premises or within the Company's
control (whether or not covered by insurance), (b) any event or circumstance
that would have a Material Adverse Effect, (c) any entry into any transaction,
commitment or agreement (including, without limitation, any borrowing) material
to the Company, except transactions, commitments or agreements in the ordinary
course of business consistent with past practice, (d) any declaration, setting
aside or payment of any dividend or other distribution in cash, stock or
property with respect to the capital stock or other securities of the Company,
any repurchase, redemption or other acquisition by the Company of any capital
stock or other securities, or any agreement, arrangement or commitment by the
Company to do so, (e) any increase that is material in the compensation payable
or to become payable by the Company to its directors, officers, employees or
agents or any increase in the rate or terms of any bonus, pension or other
employee benefit plan, payment or arrangement made to, for or with any such
directors, officers, employees or agents, (f) any sale, transfer or other
disposition of, or the creation of any Lien upon, any part of the assets of the
Company, tangible or intangible, except for sales of inventory and use of
supplies and collections of accounts receivables in the ordinary course of
business consistent with past practice, or any cancellation or forgiveness of
any debts or claims by the Company, (g) any change in the relations of the
Company with or loss of its customers or suppliers, or any loss of business or
increase in the cost of inventory items or change in the terms offered to
customers, in either event which could reasonably be expected to have a Material
Adverse Effect, (h) any capital expenditure (including any capital leases) or
commitment therefor by the Companies in excess of $35,000 in the aggregate, or
(i) any action the purpose or effect of which is to shift income from
post-Effective Date periods to the pre-Effective Date period or to defer
expenses from the pre-Effective Date period to post-Effective Date periods other
than in the ordinary course of business consistent with past good business
practice.
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2.27 Document Management Services and Storage.
(a) All charts, records and other materials received by the Company
from its customers have been entered into the Company's software system
and can be located through the use of such system, and all such charts,
records and other materials received by the Company have been returned to
the customer after such items have been photocopied by the Company, except
where the failure to enter such items into or locate such items on the
Company's software system or where the failure to return such items after
they have been photocopied would not have a Material Adverse Effect on the
Companies. Since December 31, 1998, the Company has not in any material
respect lost, destroyed or mutilated any charts, records or other
materials received by it, other than as requested by its clients. No
material documents have been released without the prior receipt by the
Company of an executed authorization form in accordance with the Company's
customer contract and no material information has been released by the
Company in violation of any applicable law.
(b) The Company has not violated any confidentiality provisions of
any customer contract and the Company has complied in all respects with
all rules, regulations, policies and procedures of such customers, which
violation or noncompliance would have a Material Adverse Effect. The
Company has policies in place and has consistently followed such policies
to insure confidentiality of customer records. Other than items withdrawn
or destroyed at the respective customers' request, all items received and
stored by the Company on behalf of each of the Company's customers are
held in storage by the Company (except to the extent such storage has been
subcontracted in the ordinary course of business) and are locatable and
accessible without extraordinary effort, except for (i) items withdrawn or
destroyed at the applicable customer's request and (ii) such failures to
be held in storage and such failures to be able to locate and access as
would not have a Material Adverse Effect. Since December 31, 1998, except
as set forth on Schedule 2.27, to the Company's knowledge, no material
amount of customer records in storage have suffered damage (including
damage from water) or been lost or improperly destroyed.
2.28 Disclosure. All written agreements, schedules to this Agreement,
exhibits to this Agreement, and certificates furnished pursuant to this
Agreement to Buyer are and will be complete and accurate in all material
respects. No representation or warranty by the Shareholders and the Company
contained in this Agreement, in the schedules attached hereto or in any
certificate furnished or to be furnished by the Shareholders or the Company to
Buyer in connection herewith or pursuant hereto contains or will contain any
untrue statement of a material fact or omits or will omit to state any material
fact necessary in order to make any statement contained herein or therein not
misleading. Neither the Company nor the Shareholders have entered into any
letter of intent, preliminary agreement or other contract with any other party
that would be inconsistent with the terms of this Agreement.
(B) Representations and Warranties of the Shareholders. Each Shareholder
severally represents that the representations and warranties in this Section
2(B) as they apply to him or her are true and correct as of the date of this
Agreement and at the time of the Closing.
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2.29 Authority; Ownership; Other Interests. The Shareholder has the full
legal right, power and authority to enter into this Agreement. The Shareholder
owns beneficially and of record and has good and marketable title to the
outstanding Company Shares set forth opposite the Shareholder's name on Schedule
1.1 and Schedule 2.3; such Company Shares, together with the other Company
Shares set forth on Schedules 1.1 and 2.3, constitute all of the outstanding
shares of capital stock of the Company; and, except as set forth on Schedule
2.29 hereof, such Company Shares owned by the Shareholder are owned free and
clear of all Liens other than standard state and federal securities laws private
offering restrictions. The Shareholder has owned the Company Shares set forth
opposite his or her name since the date(s) set forth on Schedule 1.1. Except as
set forth on Schedule 2.29, the Shareholder does not have any ownership interest
in, or act as a principal, officer, director, agent, manager, employer, employee
or consultant of or for, any entity other than the Companies; provided, however,
that the ownership of up to 5.0% in the aggregate of any class of securities
listed on a national securities exchange or reported on Nasdaq shall not be
deemed to violate this representation.
2.30 Preemptive Rights. The Shareholder does not have, or hereby waives,
any preemptive or other right to acquire Company Shares that the Shareholder has
or may have had.
2.31 Validity of Obligations. This Agreement and the Noncompetition
Agreement have each been or will be duly executed and delivered and are the
legal, valid and binding obligations of the Shareholder or the Shareholders'
Representative who is a party thereto in accordance with their respective terms.
2.32 Absence of Claims Against the Company. Except as set forth on
Schedule 2.32, the Shareholder does not have any claims against the Company.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES OF FYI AND BUYER
FYI and Buyer, jointly and severally, represent and warrant to the
Companies and the Shareholders as follows:
3.1 Organization and Authorization. Each of FYI and Buyer is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware with all requisite corporate power and authority to own, lease
and operate its properties and to carry on its business as now being conducted.
Each of FYI and Buyer has all requisite corporate power, capacity and authority
to execute and deliver this Agreement and all other agreements and documents
contemplated hereby. The execution and delivery of this Agreement and such other
agreements and documents by FYI and by Buyer and the consummation by FYI and by
Buyer of the transactions contemplated hereby have been duly authorized by each
of FYI and Buyer and no other corporate action on the part of FYI or Buyer is
necessary to authorize the transactions contemplated hereby. This Agreement has
been duly executed and delivered by each of FYI and Buyer and constitutes the
valid and binding obligation of each of FYI and Buyer, enforceable in accordance
with its terms, subject to the Equitable Exceptions.
3.2 No Violations. The execution and delivery of this Agreement and the
other agreements and documents contemplated hereby by FYI and Buyer and the
consummation of the
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transactions contemplated hereby will not (a) violate any provision of the
certificate of incorporation or bylaws of FYI or of Buyer, (b) violate any
statute, rule, regulation, order or decree of any public body or authority by
which either of FYI or Buyer or its properties or assets are bound, or (c)
result in a violation or breach of, or constitute a default under or result in
the creation of any encumbrance upon, or create any rights of termination,
cancellation or acceleration in any person with respect to any agreement,
contract, indenture, mortgage or instrument to which FYI or Buyer is a party or
any of its properties or assets is bound.
3.3 Consents. Except as set forth in Schedule 3.3, no consent, approval or
other authorization of any governmental authority or third party is required as
a result of or in connection with the execution and delivery of this Agreement
and the other agreements and documents to be executed by FYI and Buyer or the
consummation by FYI and Buyer of the transactions contemplated hereby.
3.4 FYI Stock. The FYI Stock to be delivered to the Shareholders at the
Closing Date and thereafter pursuant to the terms of this Agreement (including
Schedule 1.1 hereto) shall, upon issuance in accordance with this Agreement,
constitute valid and legally issued shares of FYI, fully paid and nonassessable,
(a) will be free and clear of all Liens (other than those created by the
holder), (b) will be legally equivalent in all respects to the FYI Stock issued
and outstanding as of the date hereof, and (c) will be registered under the
Securities Act of 1933, as amended (the "1933 Act"), and listed for trading on
the Nasdaq Stock Market and conform in all material respects to the information
with respect thereto contained in FYI's registration statement described in
Section 3.6 hereof, and (d) will remain publicly tradeable shares of stock in a
manner consistent with the registered shares of FYI Stock outstanding on the
date of this Agreement.
3.5 Capitalization of FYI and Ownership of FYI Stock. As of December 31,
2000, the authorized capital stock of FYI consists of twenty-six million
(26,000,000) shares of FYI Stock, of which sixteen million one hundred seventy
thousand and ninety-nine (16,170,099) shares were issued and outstanding, and
one million (1,000,000) shares of Preferred Stock, $.01 par value per share, of
which no shares are issued and outstanding. All issued and outstanding shares of
FYI Stock are duly authorized, validly issued, fully paid and nonassessable.
There are no obligations of FYI to repurchase, redeem or otherwise acquire any
shares of FYI capital stock.
3.6 Business; Real Property; Material Agreements; Financial Information.
FYI has provided to the Company and the Shareholders FYI's audited historical
financial statements for the year ended December 31, 2000 as filed on Form 10-K
with the Securities and Exchange Commission (the "SEC") and its Form 10-Q
quarterly reports with respect to its fiscal quarters ended March 31, 2000, June
30, 2000 and September 30, 2000 containing unaudited financial information. Such
FYI financial statements have been prepared in accordance with GAAP and present
fairly the financial position of FYI as of the indicated dates and for the
indicated periods. Except as set forth in Schedule 3.6, there has been no event
that resulted in or caused an FYI Material Adverse Effect (as defined in Section
3.7 hereof) since September 30, 2000. FYI has provided the Company and the
Shareholders with true, complete and correct copies of its Registration
Statement on Form S-4 (Registration No. 333-92981). Buyer was formed on March
29, 2001, and has no historical financial statements or information.
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3.7 Conformity with Law and Litigation. Neither FYI nor Buyer is in
violation of any law or regulation or any order of any court or federal, state,
municipal or other governmental department, commission, board, bureau, agency or
instrumentality having jurisdiction over either of them that would have a
material adverse effect on the business, operations, affairs, properties, assets
or condition (financial or otherwise), results of operations or prospects of FYI
and the subsidiaries of FYI taken as a whole (an "FYI Material Adverse Effect").
Except as set forth on Schedule 3.7, there are no claims, actions, suits or
proceedings, pending or, to the knowledge of FYI or Buyer, threatened, against
or affecting FYI or Buyer, at law or in equity, or before or by any Agency
having jurisdiction over either of them and no notice of any claim, action, suit
or proceeding, whether pending or threatened, has been received. FYI has
conducted and is conducting its business in compliance with the requirements,
standards, criteria and conditions set forth in applicable Federal, state and
local statutes, ordinances, orders, approvals, variances, rules and regulations
and is not in violation of any of the foregoing that would have an FYI Material
Adverse Effect.
3.8 Disclosure. All written agreements, schedules to this Agreement,
exhibits to this Agreement, and certificates furnished pursuant to this
Agreement to the Shareholders are and will be complete and accurate in all
material respects. No representation or warranty by Buyer or FYI contained in
this Agreement, in the schedules attached hereto or in any certificate furnished
or to be furnished by Buyer or FYI to the Shareholders in connection herewith or
pursuant hereto contains or will contain any untrue statement of a material fact
or omits or will omit to state any material fact necessary in order to make any
statement contained herein or therein not misleading. Neither Buyer nor FYI has
entered into any letter of intent, preliminary agreement or other contract with
any other party that would be inconsistent with the terms of this Agreement.
ARTICLE IV.
COVENANTS OF THE PARTIES
4.1 Course of Conduct by the Companies. From the date hereof through and
until the Closing Date, except as set forth on Schedule 4.1 hereto or as
approved in writing by Buyer or as otherwise permitted or contemplated by this
Agreement, the business of each of the Companies shall be conducted only in the
ordinary course of business consistent with past practice, and the Shareholders
thereof shall cause each of the Companies to comply with the following
covenants:
(a) Capital Expenditures. The Company shall not make any capital
expenditures or commitments therefor which, when combined with capital
expenditures or commitments therefor after December 31, 2000 individually
or in the aggregate with respect to the other Companies, would exceed
$35,000.
(b) Articles of Incorporation; Bylaws. The Company shall not make
any change in its Charter Documents.
(c) Stock Issuance: Redemptions: Reorganizations. The Company shall
not (i) issue, grant or dispose of, or make any agreement, arrangement or
commitment obligating the Company to issue, grant or dispose of any
capital shares or other securities
-23-
of the Company, (ii) redeem or acquire, or make any agreement, arrangement
or commitment obligating the Company to redeem or acquire, any shares of
capital stock or other securities of the Company, or (iii) authorize or
effect or make any agreement, arrangement or commitment obligating the
Company to effect, any reorganization, recapitalization or split-up of
such capital stock of the Company.
(d) Employee Matters. The Company shall not (i) make any increase
that is material in the compensation payable or to become payable to any
of the officers, employees or agents of the Company, or (ii) make, amend
or enter into any employment contract or any Plan, hospitalization,
medical reimbursement, insurance, severance benefit or other similar plan
or arrangement or make any voluntary contribution to any such plan or
arrangement.
(e) Shareholder Compensation. The Company shall not, except for
payments in a manner consistent with its past practice for compensation
for services rendered or as expressly set forth in Section 4.8, pay or
distribute any amounts to the Shareholders thereof after the date of this
Agreement and prior to the Closing Date.
(f) Insurance Coverage. The Company shall maintain, or have
maintained on its behalf, insurance coverage for the benefit of the
Company on the same basis as, or on a substantially equivalent basis to,
the current insurance coverage with respect thereto described in Schedule
2.21.
(g) Business Organization. The Company shall use commercially
reasonable efforts to preserve intact its business organization and to
keep available the services of its present officers and employees as a
group.
(h) Maintenance of Property. The Company shall maintain its real
property, equipment and other tangible personal property in its present
operating condition and repair, ordinary wear and tear excepted. The
Company will fully perform and pay for all maintenance, painting, repairs,
alterations and other work required to be performed by the Company as
lessee under the Real Property Leases with respect thereto listed on
Schedule 2.10.
(i) Relations with Suppliers, Customers, Etc. The Company will use
commercially reasonable efforts to preserve its relationships with its
material suppliers, customers and others having material business dealings
with it and shall not change or modify or commit to change or modify any
terms offered to customers. The Company promptly shall notify Buyer if the
Company is informed by any of its customers or suppliers that such
customer or supplier will or may cease to do business with the Company
either prior to or following the Closing, the cessation of which,
individually or in the aggregate, would be reasonably likely to have a
Material Adverse Effect on the Companies.
(j) Incurrence of Debt. The Company will not voluntarily incur or
assume, whether directly or by way of guaranty or otherwise, any material
obligation or liability,
-24-
except obligations and liabilities incurred in the ordinary course of
business, consistent with past good business practice.
(k) Liens. The Company will not mortgage, pledge, encumber, create
or allow any Liens not existing on the date hereof upon any of its
properties or assets, tangible or intangible, except Liens created in the
ordinary course of business, consistent with past good business practice.
(l) Disposition of Assets. The Company will not sell, transfer or
otherwise dispose of any of its tangible or intangible property or assets,
except for inventory and supplies sold, disposed of or consumed and
accounts receivable collected or written off in the ordinary course of
business, consistent with past good business practice. The Company will
not cancel or forgive any debts or claims except or in the ordinary course
of business, consistent with past good business practice.
(m) Agreements, Leases and Licenses. The Company will not amend,
terminate before the end of its term, or allow to lapse any material
agreement, lease, license or permit to which it is a party or of which it
is the holder, except upon prior notice to Buyer and in the ordinary
course of business, consistent with past good business practice.
(n) Accounting Practices. The Company will not make any material
changes in its accounting methods, principles or practices, except as
required by GAAP.
(o) Changes in Business Practice. The Company will not take any
action, the purpose or effect of which is to shift income from
post-Effective Date periods to the pre-Effective Date period or to defer
expenses from the pre-Effective Date period to post-Effective Date
periods, which action is not in the ordinary course of business consistent
with past good business practice.
(p) Transactions with Affiliates. The Company will not enter into
any agreement, arrangement or transaction with, or make any payment,
distribution, loan or advance to, any affiliate of the Company or any
officer, director or shareholder of the Company, except for salaries and
travel advances consistent with past good business practice or as
otherwise specifically permitted by this Agreement.
(q) Material Transactions. The Company will not enter into any other
agreement, course of action or transaction material to it, except in the
ordinary course of business, consistent with past good business practice.
4.2 Approvals and Consents. The Companies and the Shareholders, on the one
hand, and FYI and Buyer, on the other hand, shall use their respective best
efforts (i) to cause all conditions to the obligations of the other parties
under this Agreement over which they are able to exercise influence or control
to be satisfied prior to the Closing Date and (ii) to obtain promptly and to
comply with all requisite statutory, regulatory or court approvals, third party
releases and consents, and other requirements necessary for the valid and legal
consummation of the transactions contemplated hereby.
-25-
4.3 Investigations. Following the date of this Agreement, to the extent it
has not already done so, each of the Companies shall provide Buyer and its
representatives and agents such access to the books and records of such Company
and furnish to Buyer such financial and operating data and other information
with respect to the businesses and property of such Company as it may reasonably
request from time to time, and permit Buyer and its representatives and agents
to make such inspections of such Company's real and personal properties as they
may reasonably request. The Shareholders of each Company shall promptly arrange
for Buyer and its representatives and agents to meet with such directors,
officers, employees and agents of such Company as requested.
4.4 Environmental Inspection. Following the date of this Agreement, to the
extent it has not already done so, each of the Companies shall provide to Buyer
access to all records and information in the Companies' possession or otherwise
available to them concerning all Hazardous Substances, used, stored, generated,
treated or disposed of by the Companies, all environmental or safety studies
conducted by or on behalf of the Companies and all reports, correspondence or
filings to governmental agencies with jurisdiction over Environmental
Requirements concerning the compliance of the Subject Property or the operation
of the Subject Property with Environmental Requirements, all policies and
procedures manuals or guidelines utilized by the Companies to comply with
Environmental Requirements, and any other information reasonably requested by
Buyer pertaining to environmental, health and safety issues (the "Environmental
Information").
4.5 Records Pertaining to the Companies.
(a) Turnover of Records. At the Closing, each of the Shareholders
will deliver or cause to be delivered to the Companies any records or
files (i) in such Shareholder's possession, (ii) applicable primarily to
the Companies, and (iii) of which the Companies do not already have
copies.
(b) Retention of Records. The Shareholders shall, for a period of
six (6) years after the Closing Date, neither dispose of nor destroy any
of the business records or files of the Shareholders that pertain in part
to any of the Companies without first offering to turn over possession of
copies thereof to the applicable Company at such Company's expense, by
written notice to such Company, at least thirty (30) days prior to the
proposed date of such disposition or destruction.
(c) Access to Records. The Shareholders shall allow the Companies
and their representatives access to all business records and files of the
Shareholders that pertain in part to any of the Companies, during normal
working hours at the principal place of business of the Shareholders, or
at any locations where such records are stored, and each Company shall
have the right, at its own expense, to make copies of any such records and
files.
(d) Assistance with Records. From and after the Closing Date, the
Shareholders shall make available to Buyer, upon written request, (i)
personnel of the Shareholders, if any, to assist Buyer in locating and
obtaining records and files maintained by the Shareholders, and (ii) any
of the personnel of the Shareholders, if any,
-26-
whose assistance or participation is reasonably required by Buyer in
anticipation of, or preparation for, any existing or future third party
actions, Tax or other matters in which any of the Companies or any of its
past, present or future affiliates is involved and which relate to the
business of such Company.
(e) Accountants' Work Papers. The Shareholders shall use their
respective best efforts (including, without limitation, furnishing any
certificates reasonably requested, and complying with other reasonable
requests as a prerequisite to availability) to cause Xxxxx, Xxxxxx &
Company, P.S.C. and any other independent accounting firm that has
reviewed or prepared a report on any Financial Statements or other
financial statements of the Companies to make available to Buyer for
inspection and copying, at Buyer's expense and upon its written request
therefor, such accounting firm's work papers with respect to any such
Financial Statements or other financial statements and any general ledger
and bank reconciliation materials in the possession of such accounting
firm and shall take all such actions as required by any such accounting
firm in connection with such request. Each of the Shareholders covenants
and agrees that from and after the Closing all rights and title to any
such accounting or audit work papers shall remain with the Companies.
4.6 Tax Elections. No new elections with respect to Taxes or any changes
in current elections with respect to Taxes affecting the Companies shall be made
after the date of this Agreement without the prior written consent of Buyer.
4.7 No Solicitation. Except with respect to Buyer and its affiliates,
after the date hereof and prior to April 6, 2001, the Shareholders shall not,
and the Shareholders shall cause the Companies and the respective officers,
directors, employees, agents and representatives of the Shareholders and the
Companies (including, without limitation, any investment banker, attorney or
accountant retained by any of them) not to (i) initiate or solicit, directly or
indirectly, any inquiries or the making of any proposal with respect to a
merger, consolidation, sale of shares of capital stock or similar transaction
involving, or any purchase of all or any significant portion of the assets
(other than in the ordinary course of business) of, or any equity interest in,
any of the Companies (an "Acquisition Transaction"), or (ii) engage in any
negotiations concerning, or provide to any other person any information or data
relating to any of the Companies for the purposes of or have any discussions
with any person relating to, or otherwise cooperate in any way with, or assist
or participate in, facilitate or encourage any effort or attempt by any other
person to seek or effect, an Acquisition Transaction. The Shareholders shall
promptly advise Buyer of, and communicate to Buyer the terms of, any such
inquiry or proposal any Company or the Shareholders may receive.
4.8 Permitted/Required Payments of Compensation/Distributions by the
Companies. Buyer acknowledges and agrees that from and after January 1, 2001 and
prior to the Closing Date, the Companies may pay in a manner consistent with its
past business practices, compensation for services consisting of salaries to the
Shareholders not to exceed (in the aggregate) the sum of $61,556.01. To the
extent not previously distributed to the Shareholders prior to the Closing Date,
FYI and Buyer shall cause the Companies to pay the Shareholders distributions
equal to the federal, state and local income Tax liabilities incurred by the
Shareholders of the Companies as S corporations related to income from the
Effective Date
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through the Closing Date and assuming that each Shareholder is in the highest
marginal federal income Tax bracket. Such distributions, if any, shall be
considered Taxes for any calculation of EBIT.
4.9 Preparation and Filing of Tax Returns.
(a) The Shareholders shall prepare and execute on behalf of each
Company of which they are Shareholders and shall timely file or cause to
be prepared and timely filed, all federal and state income Tax returns for
all taxable periods of each such Company ending on or prior to the Closing
Date the failure of which to properly and/or timely file could result in
any liability or obligation on the part of the Company, Buyer or FYI,
including without limitation all federal and state income Tax returns for
any S Short Year and all Tax returns due prior to the Closing Date
("Shareholder Tax Returns"). All such Shareholder Tax Returns shall be
accurate and correct in all material respects. Such Shareholder Tax
Returns shall be prepared on a basis consistent with past practice. The
Shareholders shall be responsible for the payment of all income Taxes
attributable to the income reported on such Shareholder Tax Returns;
provided, that amounts with respect to the Shareholders' Tax liability for
the S Short Year shall be paid to the Shareholders upon the terms and
subject to the conditions set forth in Section 4.8. The Shareholders shall
provide to Buyer drafts of all such Shareholder Tax Returns required to be
prepared and filed by the Shareholders pursuant to this Section 4.9(a) at
least sixty (60) days prior to the due date (including extensions) for the
filing of such Tax returns. In the event of a disagreement between Buyer
and the Shareholders over the calculation of taxable income for such
Shareholder Tax Returns, the Shareholders shall be required to obtain and
produce a letter from an accounting firm reasonably acceptable to FYI and
Buyer concluding that the treatment of the specific item at issue should
more likely than not be sustained upon examination by the IRS. Buyer shall
prepare all Tax returns attributable to the year of the Closing Date other
than the Shareholder Tax Returns described in the first sentence of this
Section 4.9(a). Except for the Taxes described in the third parenthetical
in Section 2.8(a), Buyer shall be responsible for the payment of all
amounts due on such other Tax returns. The Shareholders shall cooperate
with Buyer in the filing of such other Tax returns. Buyer shall be
responsible for the preparation of all Tax returns of the Companies for
all taxable periods ending after the Closing Date, including without
limitation all Tax returns for the C Short Year. The Companies shall be
responsible for the payment of all amounts due on such Tax returns.
(b) The Shareholders shall have responsibility for the conduct of
any audit by a taxing authority of each Company of which they are
Shareholders of any taxable period ending on or prior to the Closing Date;
provided, however, that in the event that any of the parties to this
Agreement receives notice of a claim from the IRS or any other taxing
authority for any taxable period ending or prior to the Closing Date such
party shall promptly, but in any event within five (5) business days,
notify the other parties of such claim and of any action taken or proposed
to be taken. In the event Buyer wishes to participate in such audit it may
do so at its own cost and expense. Notwithstanding any indication in this
Agreement to the contrary, the Shareholders shall not agree to an
adjustment in a federal or state income tax audit, appeals procedure or
judicial proceeding that will adversely impact any of the Companies in tax
periods after the Closing Date
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without the prior written consent of Buyer, which consent shall not be
unreasonably withheld.
(c) On or before April 6, 2001, each of the Companies and the
Shareholders and Buyer will agree to, and will set forth in writing as
Schedule 4.9(c) to this Agreement, an allocation of the consideration for
the Company Shares that includes an allocation for asset values
appropriate for Section 338(h)(10) of the Code and corresponding
provisions of state and local law. The Companies and the Shareholders and
Buyer shall prepare and file promptly valid elections pursuant to Section
338(h)(10) of the Code and corresponding provisions of state and local law
and in any event within the time allowed by applicable law with respect to
the purchase of the Company Shares. Consistent with such elections
pursuant to Section 338(h)(10) of the Code and corresponding provisions of
state and local law each of the Companies shall be treated as having sold
all of its assets to Buyer (as opposed to the Shareholders selling the
Company Shares to Buyer), and Buyer shall be treated as having purchased
the assets of each such Company. Accordingly, the gain or loss
attributable to the deemed sale of such assets shall be reported by each
of these Companies on such Company's S corporation tax return and such
gain or loss shall be allocated to the Shareholders thereof.
Notwithstanding anything in this Agreement to the contrary, any Tax
liability attributable to such deemed sale of assets shall be the
responsibility of the Shareholders, and the Shareholders shall indemnify
the Companies and Buyer against any such Tax liability.
4.10 Covenants of the Companies Concerning Termination of S Elections.
(a) Definitions. The following terms, as used herein, have the
following meanings when used hereinafter:
"C Corporation Period" means the period commencing on the S Termination
Date with respect to a Company.
"C Short Year" means that portion of the S Termination Year of a Company
as defined in Section 1362(e)(1)(B) of the Code.
"S Corporation Period" means, as to any Company the period commencing on
the effective date of its S election and ending on the date immediately
preceding the S Termination Date.
"S Corporation Taxable Income" means the taxable income of a Company from
all sources during the S Corporation Period.
"S Short Year" means that portion of the S Termination Year of a Company
as defined in Section 1362(e)(1)(A) of the Code.
"S Termination Date" means the date on which the S corporation status of a
Company is terminated pursuant to Section 1362(d)(2) of the Code.
"S Termination Year" has the meaning set forth in Section 1362(e)(4) of
the Code.
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(b) Termination of S Election; S Termination Year.
(i) Termination of S Status. Each of the Companies made a
valid election under Section 1362(a) of the Code to be taxed in
accordance with the provisions of Subchapter S of the Code for its
tax year beginning and ending on the dates set forth with respect to
such Company on Schedule 2.8 hereof (the "S Election"). Each of the
Shareholders acknowledges that the purchase and sale of the Company
Shares with respect to the Companies in which they are Shareholders
as described in this Agreement will terminate each such Company's S
Election pursuant to Section 1362(d)(2) of the Code.
(ii) Effective Date. The S Termination Date shall be on the
date of the Closing.
(iii) S Termination Year. The fiscal year in which the S
corporation status of a Company is terminated will be an S
Termination Year with respect to such Company for federal income tax
purposes, as defined in Section 1362(e)(4) of the Code.
(iv) S Short Year. Pursuant to Section 1362(e)(1)(A) of the
Code, the S Termination Year of a Company shall be divided into two
short taxable years: an S Short Year and a C Short Year. As defined
in Section 1362(e)(1)(A) of the Code, the S Short Year of such
Company shall be that portion of its S Termination Year beginning on
the initial day of its fiscal year and ending on the day immediately
preceding the S Termination Date. For federal income tax purposes,
such Company will be treated as an S corporation during its S Short
Year.
(v) C Short Year. Pursuant to Section 1362(e)(1)(B) of the
Code, the portion of the S Termination Year beginning on the S
Termination Date and ending on the last day of the fiscal year,
shall be the C Short Year of the applicable Company. For federal
income tax purposes, such Company will be taxed as a C corporation
during the C Short Year.
(c) Allocation of Income
(i) Allocation Election. Tax items shall be allocated to the S
Short Year and the C Short Year pursuant to normal tax accounting
rules (that is, the "closing of the books method") rather than by
the pro rata allocation method contained in Section 1362(e)(2) of
the Code.
(ii) Filing of Tax Returns. All Tax returns prepared pursuant
to Section 9.3(a) shall allocate the tax items to the S Short Year
and the C Short Year pursuant to normal tax accounting rules (that
is, the "closing of the books method") rather than the pro rata
allocation method contained in Section 1362(e)(2) of the Code.
(d) If any Shareholder receives notice of an intention by a taxing
authority to audit any return of such Shareholder that includes any item
of income, gain, deduction,
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loss or credit reported by any Company in which he or she was a
Shareholder with respect to the S Corporation Period that such Shareholder
has reason to believe may affect such Company's tax returns during the C
Corporation Period, such Shareholder shall inform Buyer and such Company,
in writing, of the audit promptly after receipt of such notice. If any
Shareholder receives notice from a taxing authority of any proposed
adjustment for which such Company or Buyer may be required to indemnify
hereunder (a "Proposed Adjustment"), such Shareholder shall give notice to
Buyer of the Proposed Adjustment promptly after receipt of such notice
from a taxing authority. Upon receipt of such notice from the applicable
Shareholder, Buyer may request that such Shareholder contest such Proposed
Adjustment and such Shareholder shall permit Buyer and the applicable
Company to participate in (but not to control) such proceedings. If Buyer
requests that any Proposed Adjustment be contested, then the applicable
Shareholder shall, at Buyer's expense, contest the Proposed Adjustment or
at the option of Buyer permit Buyer or the applicable Company to contest
the Proposed Adjustment (including pursuing all administrative and
judicial appeals and processes). Buyer or the applicable Company shall pay
to the applicable Shareholder all reasonable costs and expenses (including
reasonable attorneys' and accountants' fees) that such Shareholder may
incur in contesting such Proposed Adjustment. No Shareholder shall make,
accept or enter into a settlement or other compromise, with respect to any
Taxes indemnified hereunder, or forego or terminate any proceeding
undertaken hereunder without the consent of the Buyer, which consent shall
not be unreasonably withheld. The applicable Shareholders will reasonably
assist at Buyer's expense if Buyer or such Company contests any Proposed
Adjustment.
(e) If Buyer or any Company receives notice of an intention by a
taxing authority to audit any return of such Company that includes any
item of income, gain, deduction, loss or credit reported by such Company
with respect to any period after the S Corporation Period that Buyer or
such Company has reason to believe may affect the tax returns of such
Company's Shareholders during the S Corporation Period, such Company and
Buyer shall inform such Shareholders in writing of the audit promptly
after receipt of such notice. If Buyer or any Company receives notice from
a taxing authority of any proposed adjustment for which any of such
Company's Shareholders may be required to indemnify such Company hereunder
(a "Surviving Corporation Proposed Adjustment"), Buyer or such Company
shall give notice to the applicable Shareholders of the Surviving
Corporation Proposed Adjustment promptly after receipt of such notice from
a taxing authority. Upon receipt of such notice from Buyer or such
Company, any Shareholder thereof may, by in turn giving prompt written
notice to Buyer or such Company, request that Buyer or such Company
contest such Surviving Corporation Proposed Adjustment. If any of the
applicable Shareholders requests that any Surviving Corporation Proposed
Adjustment be contested, then Buyer or such Company shall contest the
Surviving Corporation Proposed Adjustment (including pursuing all
administrative and judicial appeals and processes) at such Shareholder's
expense and shall permit such Shareholder to participate in (but not to
control) such proceeding.
(f) Buyer, each of the Companies and the Shareholders shall
cooperate fully with each other in all matters relating to Taxes and in
the determination of amounts payable hereunder. In the case of
disagreement as to the course of action to be pursued in
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dealing with taxing authorities (including, without limitation, matters
with respect to preparation and filing of tax returns, conduct of audits
(including appeals) and judicial proceedings), the decision of the party
(Buyer and the Companies, on the one hand, or the Shareholders, on the
other hand) who will economically benefit from or be burdened by the
course of action (or in the case both parties benefit and/or are burdened,
the decision of the party with the greatest benefit or burden) shall
control.
(g) The Shareholders of a Company shall be entitled to all refunds
of any and all income Taxes for the S Short Year with respect to such
Company and all other tax periods prior thereto. Buyer and each of the
Companies shall be entitled to all refunds of any and all Taxes for the C
Short Year and other tax periods subsequent thereto. The Shareholders and
Buyer and each of the Companies shall cooperate in obtaining any refund of
income Taxes available from the relevant taxing authority.
4.11 Loan Agreement and Other Obligations.
(a) Simultaneous with the Closing, any loan agreement with respect
to which any Company is a debtor, obligor or guarantor and all obligations
of such Company thereunder, including without limitation indebtedness of
such Company to the Shareholders thereof existing at the Closing Date,
shall have been terminated by such Company and there shall be no
continuing obligations of such Company thereunder; provided, however, that
the Shareholders' Representative shall attempt to get the indebtedness set
forth in Schedule 4.11 (approximately $1,318,354.70 at December 31, 2000)
assigned to a person or entity other than the Companies. In such event,
FYI and Buyer shall withhold an amount equal to such outstanding
indebtedness from the Total Consideration to be paid to the Shareholders
at the Closing. If such indebtedness has been assigned (with a full and
complete release of the applicable Company or Companies) within sixty (60)
days following the Closing, FYI and Buyer shall promptly deliver to the
Shareholders' Representative that portion of the Total Consideration
withheld with respect to such indebtedness. If such indebtedness has not
been so assigned within sixty (60) days following the Closing, FYI and
Buyer shall satisfy and discharge such indebtedness from the portion of
the Total Consideration withheld by FYI and Buyer at the Closing. Any
additional amounts required by FYI and Buyer to satisfy and discharge such
indebtedness shall be the responsibility of the Shareholders and shall not
be subject to the Basket, and any amount remaining with FYI and Buyer
after such payment and discharge shall be delivered to the Shareholders'
Representative. The Shareholders of each of the Companies shall provide
evidence reasonably satisfactory to Buyer of the release of all of each
such lender's security interests in the stock and assets of the respective
Companies. Each of the Companies shall have obtained and prepared for
filing in the appropriate jurisdictions at or within fifteen (15) days
following the Closing Termination Statements properly executed by any
parties holding a security interest or other Encumbrance with respect to
such Company, the Company Shares issued by such Company or the assets of
such Company as identified by lien searches conducted with respect to such
Company; provided, however, that with respect to the indebtedness set
forth on Schedule 4.11 the Shareholders shall cause Termination Statements
to be filed within fifteen (15) days following the assignment of such
indebtedness to the applicable Shareholder or Shareholders or the
discharge thereof by FYI and Buyer.
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(b) The Shareholders acknowledge and agree that all of the
outstanding interest-bearing indebtedness and financial obligations of the
Companies, including without limitation indebtedness of the Companies to
the Shareholders existing at the Closing Date, shall be satisfied and
discharged prior to or at the Closing Date, and in the event that such
obligations are not satisfied prior to the Closing, that Buyer may direct
that a portion of the Total Consideration payable at the Closing be paid
directly to the parties to whom such indebtedness or obligations are owed
to the extent necessary to satisfy and discharge the same.
(c) Buyer and FYI acknowledge and agree that certain of the
Shareholders are guarantors or otherwise personally liable with respect to
certain equipment leases and other personal property leases in place at
the Closing, and the Shareholders' Representative shall deliver to Buyer a
list of such leases not later than thirty (30) days following the Closing.
Buyer shall cooperate with and reasonably assist such Shareholders in an
effort to release such Shareholders from their guaranties on such
equipment and personal property leases.
4.12 Receivables Guaranteed. The Shareholders of each of the Companies
warrant to Buyer that the accounts receivable of such Company as of the Closing
Date as set forth on the Effective Date Balance Sheet (such accounts receivable,
the "Receivables") will be collected by such Company in the aggregate full face
amount thereof, net of reserves therefor as shown on such Company's Effective
Date Balance Sheet, no later than one hundred eighty (180) days from the date of
the Closing. If a Company shall fail to collect the aggregate full face amount
of its Receivables, net of such reserves set forth therefor on such Company's
Effective Date Balance Sheet, by one hundred eighty (180) days from the date of
the Closing, then (i) the Shareholders of such Company may acquire by assignment
from such Company any funds (only when and to the extent received by such
Company) with respect to such uncollected Receivables by payment to the
applicable Company of an amount in cash equal to such uncollected Receivables,
net of such reserves, on or before one hundred eighty (180) days from the date
of Closing, or (ii) Buyer may, at its option exercisable in its sole discretion,
(A) seek indemnification against the Shareholders of the applicable Company, or
(B) reduce the amount of FYI Stock payable to the Shareholders of such Company
pursuant to Section 1.1 hereto, or if the amount of FYI Stock earned by such
Shareholders is not sufficient to compensate for such Company's uncollected
Receivables, Buyer and the applicable Company may seek indemnification against
the Shareholders for the amount of uncollected Receivables, net of reserves
therefor as shown on the Effective Date Balance Sheet of such Company, in
accordance with Article IX hereof, or effect a combination of the foregoing.
Buyer and the Companies shall provide written notice to the Shareholders within
twenty (20) days following the end of such one hundred eighty (180) day period
as to which alternative ((i) or (ii)) set forth in the foregoing sentence they
have elected with respect to such uncollected Receivables. Upon exercise of
either alternative, such uncollected Receivables shall be deemed to have been
collected for purposes of this Section 4.12 to the extent of the monies or FYI
stock received and/or offset by Buyer. Proceeds from Receivables of a Company
collected after one hundred eighty (180) days from the date of the Closing and
for which such Company has received payment under this Section 4.12, shall be
promptly and in any event within five (5) business days of collection delivered
by such Company to the former Shareholders of such Company.
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4.13 Option to Acquire Order Resource.
(a) Each of the members of Order Resource grants to Buyer an
irrevocable option exercisable on or after the second anniversary of the
Closing (the "Option") to purchase all but not less than all of the
membership interests of Order Resource at a purchase price equal to the
sum of (i) the "Pre-Option Exercise EBIT Payment" plus (ii) the
"Post-Option Exercise Earnout Payment," each as defined below. The
"Pre-Option Exercise EBIT Payment" shall be equal to the following
multiples applied with respect to the indicated periods, but only to the
extent that such periods end prior to the exercise of the Option: (A) the
product of Order Resource's EBIT (as defined below) for the twelve-month
period from July 1, 2001 through June 30, 2002 multiplied by 3.0, plus (B)
the product of Order Resource's EBIT for the twelve-month period from July
1, 2002 through June 30, 2003 multiplied by 3.0, and plus (C) the product
of Order Resource's EBIT on an annualized basis for the nine-month period
from July 1, 2003 through February 29, 2004 (i.e., with such EBIT for such
nine-month period divided by nine (9) and the quotient multiplied by
twelve (12)) multiplied by 4.0, subject to the adjustments set forth in
Section 4.13(c) below. In the event that there is not EBIT for any
twelve-month included within the calculation of the Pre-Option Exercise
EBIT Payment, the price payable with respect to such period shall be zero
($0). The Option shall expire one (1) month following (i) the payment to
the Shareholders of the Thirty-Six Month Earnout or (ii) the final
determination pursuant to the procedures set forth in Schedule 1.1 hereof
that no amount is due to the Shareholders under the Thirty-Six Month
Earnout, whichever the case may be.
(b) The "Post-Option Exercise Earnout Payment" shall equal the
incremental amount that would be due in the event that Order Resource's
EBIT for any twelve-month period ending subsequent to the exercise of the
Option was aggregated with the EBIT of the Companies for purposes of
calculation of the Earnout as described in Schedule 1.1 hereto. Further,
the amount of any net loss for such period shall be deducted from the
following twelve-month period included within the calculation prior to
aggregation with the Companies' EBIT for calculation of the Earnout. In no
event shall the aggregate consideration for Order Resource exceed
$20,000,000.
(c) The foregoing purchase price is based upon a tangible net worth
for Order Resource as determined in accordance with GAAP equal to
twenty-five percent (25%) of the purchase price as calculated pursuant to
Section 4.13(a), and such purchase price shall be adjusted upward (or
downward) on a dollar-for-dollar basis to the extent of the excess (or
shortfall) of the tangible net worth of Order Resource from such threshold
but in no event to a purchase price less than zero ($0).
(d) Each of the members of Order Resource does hereby covenant and
undertake, on his own behalf and on behalf of his successors and assigns,
that in the event Buyer determines that an acquisition of all or
substantially all of the assets of Order Resource (which must be effected
together with an assumption of all related liabilities) or a merger of
Order Resource pursuant to this Section 4.13 is the most advantageous
manner of acquisition from a financial or legal point of view, he shall
cause such shares of beneficial interest or membership interests in Order
Resource to be voted in favor of
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such asset purchase and sale transaction or merger transaction, whichever
the case may be, to effect such acquisition.
(e) In the event Buyer wishes to exercise the Option it shall give
written notice to the members of Order Resource specifying the
contemplated closing date, the purchase price as calculated pursuant to
Section 4.13(a) and the desired transaction structure, and the parties
shall use all reasonable efforts to consummate such transaction within
ninety (90) days following such notice from Buyer. In effecting such
transaction, the parties shall make representations and warranties with
respect to Order Resource of the type and scope set forth in Articles II
and III hereof.
(f) For purposes of this Section 4.13, EBIT shall have the meaning
set forth in Section 1.2 hereof.
(g) If Buyer exercises the Option, Buyer and FYI shall pay the
members of Order Resource an amount equal to all federal and state tax
credits and HubZone matters available to Order Resource and in place as of
the closing of the Order Resource purchase which are similar to the
programs referenced in Schedule 1.1, paragraph (d) hereof and utilized by
Order Resource through July 2011, and the payments of such amounts shall
be made on the same terms and conditions as described in Schedule 1.1,
paragraph (d) hereof.
4.14 Resale of FYI Stock. The Shareholders covenant to FYI and Buyer that
(i) they have received copies of and have reviewed FYI's Policy Against Trading
on the Basis of Inside Information and its Stock Trading Policy for Directors,
Officers and Other Members of Management and shall abide by all applicable
provisions of such policies and (ii) for a period of six (6) months following
the Closing, without the prior written consent of FYI, they shall not sell,
assign, exchange, trade, transfer or distribute any of the shares of FYI Stock
received by the Shareholders for the Company Shares. FYI nor Buyer shall have no
obligation to register the shares of FYI Stock received by the Shareholders
pursuant to this Agreement for resale pursuant to the 1933 Act or any state
securities laws.
4.15 Operations of the Companies. Unless the Shareholders' Representative
provides his prior written consent, Buyer, FYI and the Companies agree that
during the period from the Closing Date through the period for determination of
the Thirty-Six Month Earnout (as defined in Schedule 1.1) no Company shall be
required to (i) change the nature or line of business in which it is engaged in
at Closing, (ii) accept business from FYI or any entity controlled by FYI on
terms or conditions substantially dissimilar to the terms under which it accepts
similar business from unaffiliated third parties or (iii) make capital
expenditures other than in a manner consistent with its past practice; provided,
however, that such consent shall not be required if the Companies' EBIT for two
(2) consecutive quarters during the term of the Earnout shall fail to meet
eighty percent (80%) of the mutually agreed budget goals designed to achieve the
EBIT Targets for the Annual Share Release or Revised Annual Share Release (each
as defined on Schedule 1.1), whichever the case may be, for such quarterly
periods.
4.16 Credit and Debit Cards. The Company will cancel (with such
cancellation to be effective at or within thirty (30) days following the
Closing) any and all credit, debt, gas and
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other cards issued to or otherwise payable by the Company effective prior to the
Closing. FYI and Buyer shall consult with the Companies as to which cards are to
be replaced.
4.17 Affiliated Leases. The Shareholders and Buyer agree that the Real
Property Leases set forth on Schedule 4.17 ("the Affiliated Leases") shall each
have five-year terms commencing at the Closing, and that with respect to each
twelve-month period in which the Companies achieve the EBIT Targets set forth
with respect to the Annual Share Release or Revised Annual Share Release in
Schedule 1.1, the terms of such Affiliated Leases shall be extended for one (1)
year. At or within thirty (30) days following the Closing, the Shareholders
shall cause such Affiliated Leases to be amended solely to reflect such lease
terms as described above.
ARTICLE V.
CONDITIONS TO OBLIGATIONS OF BUYER
The obligation of Buyer to purchase the Company Shares, and to cause the
other transactions contemplated hereby to occur at the Closing, shall be
subject, except as Buyer may waive in writing, to the satisfaction of each of
the following conditions at or prior to the Closing, except that no such waiver
shall be deemed to affect the survival of the representations and warranties of
the Companies and the Shareholders contained in Article II hereof:
5.1 Representations and Warranties. Each representation and warranty of
the Companies and the Shareholders contained in this Agreement and in any
Schedule shall be true and correct when made, and shall be true and correct on
and as of the Closing Date with the same effect as though such representation
and warranty had been made on and as of the Closing Date.
5.2 Covenants of the Shareholders and the Companies. All of the terms,
covenants, conditions and agreements herein on the part of the Shareholders and
the Companies to be complied with or performed on or before the Closing Date
shall have been fully complied with and performed.
5.3 Certificates of the Companies and the Shareholders. There shall be
delivered to Buyer certificates dated the Closing Date and signed by the
Presidents of each of the Companies and the Shareholders thereof to the effect
set forth in Sections 5.1 and 5.2, which certificate shall have the effect of a
representation and warranty made by such Company and its Shareholders on and as
of the Closing Date.
5.4 Absence of Litigation. No inquiry, action, suit or proceeding shall
have been asserted, threatened or instituted (i) in which it is sought to
restrain or prohibit the carrying out of the transactions contemplated by this
Agreement or to challenge the validity of such transactions or any part thereof,
(ii) which could, if adversely determined, result in any Material Adverse Effect
or (iii) as a result of which, in the reasonable judgment of Buyer, Buyer would
be deprived of the material benefits of the ownership of the Company Shares.
5.5 Consents and Approvals. All material authorizations, consents,
approvals, waivers and releases, if any, necessary for the Shareholders and the
Companies to consummate
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the transactions contemplated hereby shall have been obtained and copies thereof
shall be delivered to Buyer.
5.6 Certificates. Each of the Companies and the Shareholders thereof shall
have delivered to Buyer (i) certificates of the appropriate governmental
authorities, dated as of a date not more than twenty (20) days prior to the
Closing Date, attesting to the existence and good standing of such Company in
the jurisdiction of its incorporation and the jurisdictions in which it is
qualified as set forth on Schedule 2.2 and attesting to the payment of all
franchise taxes owed thereby; (ii) copies, certified by the Secretary of State
of the jurisdiction of its incorporation as of a date not more than twenty (20)
days prior to the Closing Date, of such Company's Articles of Incorporation and
all amendments thereto; (iii) copies certified by the Secretary of such Company,
dated the Closing Date, of the bylaws of such Company; and (iv) a certificate,
dated the Closing Date, of the Secretary of such Company relating to the
incumbency and corporate proceedings in connection with the consummation of the
transactions contemplated hereby.
5.7 Estoppel Certificates. The Shareholders shall have delivered to Buyer
duly executed estoppel certificates in form and substance satisfactory to Buyer
from the lessors under each of the Real Property Leases.
5.8 Final Financial Statements. Prior to the Closing Date, Buyer shall
have had sufficient time to review the unaudited balance sheets, statements of
income, cash flows and retained earnings of each of the Companies for the fiscal
month ended December 31, 2000, disclosing no material adverse changes in the
financial conditions thereof or the results of their operations from the
financial statements as of November 30, 2000. The S Elections of the Companies
shall be valid and in full force and effect and shall not have been revoked or
terminated, and the parties shall have agreed to allocations of the
consideration in accordance with Section 4.9(c) of the Agreement and shall have
delivered to each other Schedule 4.9(c) to this Agreement.
5.9 Compliance with Section 4.1. None of the Companies shall have entered
into any agreement, commitment or transaction nor shall have taken any other
action that would not be in compliance with each provision of Section 4.1.
5.10 Opinion of Counsel. Buyer shall have received an opinion of Xxxxx
Xxxx Xxxxxxx Xxxxxxx & Xxxxxxx PLLC, counsel to the Shareholders and the
Companies, dated the Closing Date and in form and substance satisfactory to
Buyer, substantially to the effect that: (a) each of the Companies is a
corporation duly incorporated, validly existing and in good standing under the
laws of the jurisdiction of its incorporation; (b) the authorized capital stock
of each of the Companies consists of the number of authorized shares with the
par value and the number of outstanding shares as set forth with respect thereto
in Schedule 2.3 hereof; to counsel's knowledge (subject to compliance with
applicable federal and state securities laws), all of such shares are validly
issued, fully paid and nonassessable and were not issued in violation of any
preemptive rights of any shareholder of any of the Companies; such shares are
owned of record as set forth in Schedules 1.1 and 2.3 and such counsel has no
knowledge of any outstanding securities convertible into, exchangeable for or
carrying the right to acquire capital stock of the Companies, or any
subscriptions, warrants, options, rights or other arrangements or commitments
obligating any Company to issue or dispose of any capital stock or any ownership
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therein; (c) upon endorsement by the Shareholders of the Company Shares and
delivery of the certificates representing the Company Shares in accordance with
the terms of this Agreement, Buyer will be vested with good and marketable title
to the Company Shares of each of the Companies, free and clear of any adverse
claim; (d) the execution and delivery of this Agreement and all other agreements
and documents contemplated hereby by the Companies and the Shareholders and the
performance by the Companies and the Shareholders of their respective
obligations under this Agreement and such other agreements and documents do not
constitute a violation of or a default under the Companies' Charter Documents or
any agreements, arrangements, commitments, orders, judgments or decrees to which
any of the Companies is a party or by which it or its respective assets are
bound of which such counsel has knowledge; (e) each of the Companies has the
corporate power and authority to execute, deliver and perform its obligations
under this Agreement and the other agreements and documents contemplated hereby
(to which each is a party); (f) the execution and delivery of this Agreement and
the other agreements and documents by each of the Companies and the performance
by such Company of its obligations hereunder and under the other agreements and
documents have been duly authorized by all requisite corporate action on the
part of such Company; (g) this Agreement and each other agreement and document
contemplated hereby is a valid and binding obligation of the Companies and the
Shareholders, respectively, enforceable against each of the Companies and each
of the Shareholders (to the extent each is a party) in accordance with their
respective terms, except that (i) such enforcement may be subject to bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting creditors'
rights generally, (ii) the remedy of specific performance and injunctive relief
are subject to certain equitable defenses and to the discretion of the court
before which any proceedings may be brought, and (iii) rights to indemnification
hereunder may be limited under applicable securities laws; (h) to such counsel's
knowledge, there are no actions, suits or proceedings pending or threatened that
are required by the terms of Section 2.16 to be described in Schedule 2.16 that
are not described therein; and (i) no consent, approval, authorization or other
action by, or filing with, any governmental authority, regulatory body or other
person is required to be obtained by the Companies or the Shareholders in
connection with the execution, delivery or performance by them of their
respective obligations under this Agreement, except for such as have been duly
obtained or made.
5.11 No Material Adverse Effect. There shall not have been any Material
Adverse Effect.
5.12 No Transfers to Affiliates. Since December 31, 2000, except as
otherwise expressly contemplated by this Agreement or as set forth on Schedule
5.12, the Companies shall not have distributed or transferred any of their
assets or properties, or made any payments, to or for the benefit of any of
their affiliates.
5.13 Due Diligence Review.
(a) The due diligence review of the Companies (including, without
limitation, legal, financial, operational and environmental matters) to be
conducted by or on behalf of Buyer shall have been completed in a manner
satisfactory to Buyer and shall not reveal or produce adverse facts with
respect to the Companies, their premises, business, operations, financial
condition or prospects which are not otherwise disclosed in this Agreement
or any Schedule attached.
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(b) No condition shall exist that was not disclosed in writing to
Buyer prior to the date hereof that would have a Material Adverse Effect.
5.14 Noncompetition Agreements. Each of the Shareholders shall have
executed and delivered to Buyer a noncompetition agreement in the form attached
hereto as Exhibit A (the "Noncompetition Agreements").
5.15 Termination of Related Party Agreements and Benefit Plans. Except as
disclosed on Schedule 5.15, all existing agreements between the Companies and
the Shareholders or business or personal affiliates of the Companies or the
Shareholders and all existing bonus and incentive plans and arrangements of the
Companies shall have been cancelled or terminated.
5.16 Shareholders' Release. The Shareholders shall have executed and
delivered to Buyer immediately prior to the Closing Date an instrument dated the
Closing Date in the form of Exhibit B hereto (the "Shareholders' Release")
releasing the Companies from any and all claims of the Shareholders against the
Companies and obligations of any of the Companies to the Shareholders, except
for items specifically identified thereon or on Schedule 5.16 hereto as being
claims of or obligations to the Shareholders.
5.17 Broker Release. The Companies and the Shareholders shall have
delivered to Buyer a broker release in the form attached hereto as Exhibit C
(the "Broker Release") executed by each broker or agent set forth on Schedule
11.18 hereto releasing the Companies and Buyer from any and all claims of such
broker or agent with respect to the fees, commissions and other amounts and
expenses thereof that may be payable thereto in connection with the transactions
set forth in this Agreement.
5.18 Employment Agreements. Each of Xxxx Xxxxxx and Xxxxx Xxxxxx shall
have executed and delivered to Buyer employment agreements in the forms attached
hereto as Exhibit D (the "Employment Agreements").
5.19 Stock Certificates. The Shareholders shall have tendered certificates
representing the Company Shares, duly endorsed in blank or accompanied by
appropriate stock powers, in proper form for transfer, with all transfer taxes
paid.
5.20 Resignations and Releases of Directors and Officers. Buyer shall have
received the resignations of and releases from each of the directors and
officers of each of the Companies, effective as of the Closing.
5.21 Allocations of Consideration. The parties shall have agreed to
allocations of the Total Consideration, subject to adjustment upon any
adjustments described in Article I hereof, in accordance with Section 4.9(c) of
this Agreement and shall have delivered to each other Schedule 4.9(c).
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ARTICLE VI.
CONDITIONS TO OBLIGATIONS OF THE SHAREHOLDERS
The obligations of the Shareholders to sell the Company Shares and to
cause the other transactions contemplated hereby to occur at the Closing shall
be subject, except as the Shareholders may waive in writing, to the satisfaction
of each of the following conditions at or prior to the Closing, except that no
such waiver shall be deemed to affect the survival of the representations and
warranties of FYI and Buyer contained in Article III hereof:
6.1 Representations and Warranties. Each representation and warranty of
FYI and of Buyer contained in this Agreement and in any Schedule shall be true
and correct when made, and shall be true and correct on and as of the Closing
Date with the same effect as though such representation and warranty had been
made on and as of the Closing Date.
6.2 Covenants of FYI and Buyer. All of the terms, covenants, conditions
and agreements herein on the part of FYI and of Buyer to be complied with or
performed on or before the Closing Date shall have been fully complied with and
performed.
6.3 Certificate of Buyer. Each of FYI and Buyer shall have delivered to
the Shareholders a certificate dated the Closing Date and signed by the
President or a Vice President of FYI and of Buyer to the effect set forth in
Sections 6.1 and 6.2, which certificate shall have the effect of a
representation and warranty made by such party on and as of the Closing Date.
6.4 Absence of Litigation. No inquiry, action, suit or proceeding shall
have been asserted, threatened or instituted in which it is sought to restrain
or prohibit the carrying out of the transactions contemplated by this Agreement
or to challenge the validity of such transactions or any part thereof.
6.5 Allocations of Consideration. The parties shall have agreed to
allocations of the Total Consideration, subject to adjustment upon any
adjustments described in Article I hereof, in accordance with Section 4.9(c) of
this Agreement and shall have delivered to each other Schedule 4.9(c).
6.6 Consents and Approvals. All material authorizations, consents,
approvals, waivers and releases, if any, necessary for Buyer to consummate the
transactions contemplated hereby shall have been obtained and delivered to the
Shareholders.
6.7 Certificates. Each of FYI and Buyer shall have delivered to the
Shareholders (i) a certificate of the appropriate governmental authority, dated
as of a date not more than twenty (20) days prior to the Closing Date, attesting
to the existence and good standing of each of FYI and Buyer in the State of
Delaware; (ii) copies, certified by the Secretary of State of Delaware as of a
date not more than twenty (20) days prior to the Closing Date, of the
certificate of incorporation and all amendments thereto of FYI and of Buyer;
(iii) copies, certified by the Secretary of FYI and the Secretary of Buyer, each
dated the Closing Date, of the bylaws of FYI and Buyer; and (iv) certificates,
each dated the Closing Date, of the Secretary of FYI and the Secretary of Buyer
relating to the incumbency and corporate proceedings in connection with the
consummation of the transactions contemplated hereby.
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6.8 Effectiveness of Registration Statement. FYI's Form S-4 Registration
Statement (Registration No. 333-92981) shall be effective under the 1933 Act and
no SEC stop orders suspending the effectiveness of such Registration Statement
shall have been issued and no proceedings for that purpose instituted.
6.9 Transfer of Funds and FYI Stock. FYI and Buyer shall have delivered to
the Shareholders' Representative the cash and shares of FYI Stock specified in
Section 7.3 to be delivered at the Closing.
6.10 Noncompetition Agreements. Buyer shall have executed and delivered to
the Shareholders the Noncompetition Agreements.
6.11 FYI Material Adverse Effect. There shall not have been any FYI
Material Adverse Effect.
6.12 Opinion of Counsel. The Companies and the Shareholders shall have
received an opinion of Xxxxx Xxxxxxx & Xxxx LLP, counsel to FYI and Buyer, dated
the Closing Date and in form and substance satisfactory to the Companies and the
Shareholders, substantially to the effect that: (a) each of FYI and Buyer is a
corporation duly incorporated, validly existing and in good standing under the
laws of the State of Delaware; (b) to counsel's knowledge (subject to compliance
with applicable federal and state securities laws), all shares of FYI Stock to
be issued to the Shareholders pursuant to this Agreement will, when issued, be
validly issued, fully paid and nonassessable and will not be issued in violation
of any preemptive rights of any shareholder of FYI; (c) the execution and
delivery of this Agreement and all other agreements and documents contemplated
hereby by FYI and Buyer and the performance by FYI and Buyer of their respective
obligations under this Agreement and such other agreements and documents do not
constitute a violation of or a default under the certificates of incorporation
or bylaws of FYI or Buyer, each as amended, or any agreements, arrangements,
commitments, orders, judgments or decrees to which either of them is a party or
by which either of them or their respective assets are bound of which such
counsel has knowledge; (d) each of FYI and Buyer has the corporate power and
authority to execute, deliver and perform its obligations under this Agreement
and the other agreements and documents contemplated hereby (to which each is a
party); (e) the execution and delivery of this Agreement and the other
agreements and documents by FYI and Buyer and the performance by FYI and Buyer
of their respective obligations hereunder and under the other agreements and
documents have been duly authorized by all requisite corporate action on the
part of FYI and Buyer; (f) this Agreement and each other agreement and document
contemplated hereby is a valid and binding obligation of FYI and Buyer,
respectively, enforceable against FYI and Buyer (to the extent each is a party)
in accordance with their respective terms, except that (i) such enforcement may
be subject to bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting creditors' rights generally, (ii) the remedy of specific performance
and injunctive relief are subject to certain equitable defenses and to the
discretion of the court before which any proceedings may be brought, and (iii)
rights to indemnification hereunder may be limited under applicable securities
laws; and (g) to such counsel's knowledge, no consent, approval, authorization
or other action by, or filing with, any governmental authority, regulatory body
or other person is required to be obtained by FYI or Buyer in connection with
the execution, delivery or performance by them of their respective obligations
under this Agreement, except for such as have been duly obtained or made.
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ARTICLE VII.
CLOSING
7.1 Closing. Unless this Agreement is first terminated as provided in
Section 8.1, and subject to the satisfaction or waiver of all the conditions set
forth in Articles V and VI, the closing of the transactions contemplated hereby
(the "Closing") shall take place at the offices of Xxxxx Liddell & Xxxx LLP in
Dallas, Texas, or such other place or by such other means (e.g., telecopy and
overnight delivery of original execution materials) as is agreed to by Buyer and
the Shareholders, on March 31, 2001, or such other date as the parties may agree
upon in writing (the "Closing Date").
7.2 Delivery of the Company Shares. At the Closing, each of the
Shareholders shall deliver or cause to be delivered to Buyer the stock
certificate(s) evidencing all of the Company Shares owned by such Shareholder,
duly endorsed or accompanied by duly executed stock powers assigning the Company
Shares to Buyer and otherwise in good form for transfer.
7.3 Payments to the Shareholders. At the Closing, Buyer shall deliver, by
wire transfer of immediately available funds to the accounts designated by the
Shareholders' Representative, the $32,812,500 cash portion of the Total
Consideration payable at the Closing (as adjusted pursuant to Section 1.2 hereof
and less any amounts paid on behalf of the Shareholders to satisfy the Company's
outstanding interest-bearing indebtedness as described in this Agreement).
ARTICLE VIII.
TERMINATION PRIOR TO CLOSING
8.1 Termination.
(a) This Agreement may be terminated and abandoned at any time prior
to the Closing:
(i) By the written mutual consent of FYI, Buyer and the
Shareholders;
(ii) By FYI and Buyer on the Closing Date if any of the
conditions set forth in Article V shall not have been fulfilled on
or prior to the Closing Date;
(iii) By the Shareholders on the Closing Date if any of the
conditions set forth in Article VI shall not have been fulfilled on
or prior to the Closing Date;
(iv) By either FYI and Buyer or the Shareholders if the
Closing shall not have occurred on or before March 31, 2001; and
(v) By FYI and Buyer, upon written notice to the Shareholders,
if the examination of the Companies, including the assets,
liabilities, operations, business and prospects thereof, by FYI and
Buyer, or its representatives or agents, discloses the existence or
nonexistence of any matters or things that, in the sole
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judgment of Buyer, would be reasonably likely to result in a
material loss or damage to FYI, Buyer or a Company or a material
diminution in value of any Company.
(b) Any termination pursuant to this Article VIII shall be without
prejudice to the terminating party's rights and remedies under this
Agreement by reason of any violation of this Agreement occurring prior to
such termination. In the event of a termination pursuant to this Article
VIII, each party shall bear its own costs and expenses incurred with
respect to the transactions contemplated hereby.
ARTICLE IX.
INDEMNIFICATION
9.1 Buyer's Losses.
(a) Each of the Shareholders, jointly and severally, agrees to
indemnify and hold harmless FYI, Buyer, each Company of which he or she
was a Shareholder immediately prior to the Closing, and their respective
directors, officers, employees, representatives, agents and attorneys
from, against and in respect of any and all Buyer's Losses (as defined
below) suffered, sustained, incurred or required to be paid by any of them
by reason of (i) any representation or warranty made by each Company of
which he or she was a Shareholder immediately prior to the Closing or the
Shareholders thereof in or pursuant to this Agreement (including, without
limitation, the representations and warranties contained in any schedule
or certificate delivered pursuant hereto) being untrue or incorrect in any
respect and without regard to any "knowledge," "materiality," "material
adverse effect" or "substantial compliance" or similar exception or
qualifier; (ii) any liability arising from or based upon the operation of
each such Company of which he or she was a Shareholder immediately prior
to the Closing through the Closing Date (other than ordinary operating,
trade or contractual liabilities through the Closing Date arising in the
ordinary course of the Companies' operations but including without
limitation liabilities, obligations or commitments arising out of a
breach, default or omission by the Company or the Shareholders with
respect to such matters); (iii) the items described in Schedule 2.11,
Schedule 2.16 or the third parenthetical of Section 2.8 relating to each
such Company of which he or she was a Shareholder immediately prior to the
Closing except in any instance and to the extent Buyer's Losses result
from the negligence or misconduct of FYI or Buyer; (iv) any failure by
each such Company of which he or she was a Shareholder immediately prior
to the Closing or the Shareholders thereof to observe or perform its or
their covenants and agreements set forth in this Agreement or in any other
agreement or document executed by it or them in connection with the
transactions contemplated hereby; (v) any liability arising from or based
upon the engagement by each such Company of which he or she was a
Shareholder immediately prior to the Closing or the Shareholders thereof
of any broker or agent, whether or not disclosed on Schedule 11.18; (vi)
any liability arising from or based upon the required consents set forth
in Schedule 2.15 hereof and not obtained within thirty (30) days following
the Closing with respect to Real Property Leases and sixty (60) days
following the Closing with respect to all other items set forth on
Schedule 2.15; or (vii)
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the MCI Telecommunications Corp. Inc. matter described in Section A.1 of
Schedule 2.16, except in any instance and to the extent Buyer's Losses
result from the negligence or misconduct of Buyer, FYI or their respective
agents or attorneys (excluding for purposes of this exception the
Shareholders in their capacities as agents of FYI and Buyer following the
Closing).
(b) "Buyer's Losses" shall mean all damages (including, without
limitation, amounts paid in settlement with the Shareholders' consent,
which consent may not be unreasonably withheld), losses, obligations,
liabilities, claims, deficiencies, costs and expenses (including, without
limitation, reasonable attorneys' fees), penalties, fines, interest and
monetary sanctions, including, without limitation, reasonable attorneys'
fees and costs incurred to comply with injunctions and other court and
Agency orders, and other costs and expenses incident to any suit, action,
investigation, claim or proceeding or to establish or enforce the rights
of FYI or Buyer or such other persons to indemnification hereunder.
9.2 Environmental Indemnity.
(a) Each of the Shareholders, jointly and severally, agrees to
indemnify and hold harmless FYI, Buyer, each Company of which he or she
was a Shareholder immediately prior to the Closing, and their respective
directors, officers, employees, representatives, agents and attorneys
from, against and in respect of any and all Environmental Costs (as
defined below), arising in any manner in connection with: (i) the presence
at or on any Subject Property of any Hazardous Substances or the release,
leak, discharge, spill, disposal, migration or emission of Hazardous
Substances from any such Subject Property prior to the Closing Date; (ii)
the failure of each such Company of which he or she was a Shareholder
immediately prior to the Closing to comply with any applicable
Environmental Requirements prior to the Closing Date; or (iii) the
transportation to, disposal at, or migration onto or into adjacent
property or any off-site location of any Hazardous Substances from any
Subject Property prior to the Closing Date, whether or not the
transportation or disposal was conducted in full compliance with
Environmental Requirements.
(b) The obligations of this Section 9.2 shall include the obligation
to defend the Indemnified Parties (as defined below) against any claim or
demand for Environmental Costs, the obligation to pay and discharge any
Environmental Costs imposed on Indemnified Parties, and the obligation to
reimburse Indemnified Parties for any Environmental Costs incurred or
suffered, provided in each instance that the claim for Environmental Costs
arises in connection with a matter for which Indemnified Parties are
entitled to indemnification under this Agreement. The obligation to
reimburse the Indemnified Parties shall also include the costs and
expenses (including, without limitation, reasonable attorneys' fees) to
establish or enforce the rights of FYI, Buyer, each applicable Company or
such other persons to indemnification hereunder.
(c) "Environmental Costs" shall mean any of the following that arise
in any manner regardless of whether based in contract, tort, implied or
express warranty, strict liability, Environmental Requirements or
otherwise: all liabilities, losses, judgments,
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damages, punitive damages, consequential damages, treble damages, costs
and expenses (including, without limitation, reasonable attorneys' fees
and the allocable cost of in-house counsel and fees and disbursements of
environmental consultants, all costs related to the performance of any
required or necessary assessment, investigation, remediation, response,
containment, closure, restoration, repair, cleanup or detoxification of
any impacted property, the preparation and implementation of any
maintenance, monitoring, closure, remediation, abatement or other plans
required by any governmental agency or by Environmental Requirements and
any other costs recovered or recoverable under any Environmental
Requirement), fines, penalties, or monetary sanctions. Environmental Costs
shall include without limitation: (i) damages for personal injury or
death, or injury to property or to natural resources; (ii) damage to real
property or damage resulting from the loss of the use of all or any part
of the property, including but not limited to business loss; and (iii) the
cost of any demolition, rebuilding or repair of any property required by
Environmental Requirements or necessary to restore such property to its
condition prior to damage caused by an environmental condition or by the
remediation of an environmental condition.
9.3 Employee Compensation and Benefits. Each of the Shareholders, jointly
and severally, agrees to indemnify and hold FYI, Buyer, each Company of which he
or she was a Shareholder immediately prior to the Closing, and their respective
directors, officers, employees, representatives, agents and attorneys harmless
from, against and in respect of any and all claims made by employees of each
such Company of which he or she was a Shareholder immediately prior to the
Closing, regardless of when made, for wages, salaries, bonuses, pension,
workmen's compensation, medical insurance, disability, vacation, severance, pay
in lieu of notice, sick benefits or other compensation or benefit arrangements
to the extent the same are based on employment service rendered to each such
Company prior to the Closing Date or injury or sickness occurring prior to the
Closing Date and are not reserved for on the Financial Statements (collectively,
"Employee Claims").
9.4 Seller Losses.
(a) Each of FYI and Buyer, jointly and severally, agrees to
indemnify and hold harmless the Shareholders and their respective agents
and attorneys from, against and in respect of any and all Seller Losses
(as defined below) suffered, sustained, incurred or required to be paid by
any of them by reason of (i) any representation or warranty made by FYI or
Buyer in or pursuant to this Agreement (including, without limitation, the
representations and warranties contained in any schedule or certificate
delivered pursuant hereto) being untrue or incorrect in any respect and
without regard to any "knowledge," "materiality," "material adverse
effect" or "substantial compliance" or similar exception or qualifier;
(ii) any failure by FYI or Buyer to observe or perform its covenants and
agreements set forth in this Agreement or any other agreement or document
executed by it in connection with the transactions contemplated hereby; or
(iii) any liability for claims arising from or based upon the operation of
the Companies subsequent to the Closing Date, except in any instance and
to the extent Seller Losses result from the negligence or misconduct of
the Shareholders or any of them or their respective agents or attorneys.
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(b) "Seller Losses" shall mean all damages (including, without
limitation, amounts paid in settlement with the consent of FYI and Buyer,
which consent may not be unreasonably withheld), losses, obligations,
liabilities, claims, deficiencies, costs and expenses (including, without
limitation, reasonable attorneys' fees), penalties, fines, interest and
monetary sanctions, including, without limitation, reasonable attorneys'
fees and costs incurred to comply with injunctions and other court and
Agency orders, and other costs and expenses incident to any suit, action,
investigation, claim or proceeding or to establish or enforce the right of
the Shareholders or such other persons to indemnification hereunder.
9.5 Indemnification for Certain Tax Matters. Each of the Shareholders,
jointly and severally, agrees to indemnify and hold harmless FYI, Buyer, each
Company of which he or she was a Shareholder immediately prior to the Closing,
and their respective directors, officers, employees, representatives, agents and
attorneys from, against and in respect of (i) any and all Tax liabilities of
each such Company incurred prior to the Closing and not reserved for on the
Effective Date Balance Sheet and (ii) the liability of Buyer or each such
Company with respect to all Taxes, including interest and additions to Taxes,
resulting from any final determination (or settlement) that the purchase and
sale transaction set forth in this Agreement fails to qualify for tax treatment
as a sale of assets under Section 338(h)(10) of the Code as a result of any
breach of a representation, warranty or covenant of any such Company of which he
or she was a Shareholder immediately prior to the Closing or of the Shareholders
thereof (e.g., by virtue of a Company not being qualified under Subchapter S of
the Code).
9.6 Notice of Loss. Except to the extent set forth in the next sentence, a
party to this Agreement will not have any liability under the indemnity
provisions of this Agreement with respect to a particular matter unless a notice
setting forth in reasonable detail the breach or other matter which is asserted
has been given to the Indemnifying Party (as defined below) and, in addition, if
such matter arises out of a suit, action, investigation, proceeding or claim,
such notice is given promptly, but in any event within fifteen (15) days after
the Indemnified Party (as defined below) is given notice of the claim or the
commencement of the suit, action, investigation or proceeding. Notwithstanding
the preceding sentence, failure of the Indemnified Party to give notice
hereunder shall not release the Indemnifying Party from its obligations under
this Article IX, except to the extent the Indemnifying Party is actually
prejudiced by such failure to give notice. With respect to Buyer's Losses,
Environmental Costs, Employee Claims and the matters described in Section 9.5,
the Shareholders shall be the Indemnifying Party and FYI, Buyer and the
Companies and their respective directors, officers, employees, representatives,
agents and attorneys shall be the Indemnified Party. With respect to Seller
Losses, FYI and Buyer shall be the Indemnifying Party and the Shareholders and
their respective agents and attorneys shall be the Indemnified Party.
9.7 Right to Defend.
(a) Upon receipt of notice of any suit, action, investigation, claim
or proceeding for which indemnification might be claimed by an Indemnified
Party, the Indemnified Party shall have thirty (30) days from receipt to
elect whether or not to defend, contest or otherwise protect against such
suit, action, investigation, claim or proceeding, with the costs and
expenses of such defense to be borne by the Indemnifying
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Party, and the Indemnifying Party must cooperate in any such defense or
other action; provided, however, that upon prompt written request by the
Indemnifying Party to the Indemnified Party, the Indemnified Party shall
permit the Indemnifying Party to assume the defense with counsel
reasonably satisfactory to the Indemnified Party upon (i) the Indemnified
Party determining in its reasonable judgment that it is not reasonably
likely that there will be additional or differing legal defenses among the
parties with respect to the matter to be indemnified against or that the
interests of the Indemnified Party and the Indemnifying Party will differ
in the defense of such matter, and (ii) the Indemnifying Party providing
evidence to the Indemnified Party in form and substance reasonably
satisfactory to it of the Indemnifying Party's financial capacity to
assume the cost and expenses of such defense in an adequate fashion and to
provide indemnification against the claims being contested. Such financial
capacity shall be deemed satisfied if the Indemnifying Party presents
evidence reasonably satisfactory to the Indemnified Party that it
possesses net assets of an amount equal to or greater than the sum of the
third party claims or amounts reasonably determined to be at issue and the
anticipated costs and expenses of defending, contesting or otherwise
protecting against the same. In the event the Indemnifying Party assumes
the defense of such a matter, (i) such assumption must be effected within
thirty (30) days of its receipt of notice of the applicable suit, action,
investigation, claim or proceeding, and (ii) such assumption by the
Indemnifying Party shall conclusively establish for purposes of this
Agreement that the claims made in the proceeding are within the scope of
and subject to indemnification hereunder. In the event the Indemnified
Party reasonably determines that it is reasonably likely that there will
be additional or differing legal defenses among the parties with respect
to the matters to be indemnified against or that the interests of the
parties will differ in the defense of such matter or matters, the
Indemnified Party may, upon written notice to the Indemnifying Party,
participate with the Indemnifying Party in the defense of such matter with
separate counsel reasonably satisfactory to the Indemnifying Party or, at
the option of the Indemnifying Party, assume the defense of such matter,
in each event at the Indemnifying Party's expense. If the Indemnified
Party is defending against the relevant suit, action, claim, investigation
or proceeding, the Indemnifying Party shall have the right, but not the
obligation, to participate at its own expense in a defense thereof by
counsel of its own choosing, but except as described above the Indemnified
Party shall be entitled to control the defense unless otherwise determined
by the Indemnified Party or if the Indemnified Party fails to assume
defense of the matter.
(b) In the event the Indemnified Party shall fail to defend, contest
or otherwise protect in a timely manner against any such suit, action,
investigation, claim or proceeding, the Indemnifying Party shall defend,
contest or otherwise protect against the same and make any compromise or
settlement thereof, and shall pay all costs thereof, including, without
limitation, reasonable attorneys' fees, disbursements and all amounts paid
as a result of such suit, action, investigation, claim or proceeding or
the compromise or settlement thereof. The Indemnified Party shall have the
right to effect a settlement or compromise over the objection of the
Indemnifying Party; provided, that if the Indemnifying Party has assumed
the defense from the Indemnified Party under this Section 9.7(b), the
Indemnified Party waives any right to indemnity therefor. If the
Indemnifying Party undertakes the defense of such matters under this
Section 9.7(b), the Indemnified Party shall not, so long as the
Indemnifying Party does not abandon the
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defense thereof, be entitled to recover from the Indemnifying Party any
legal or other expenses subsequently incurred by the Indemnified Party in
connection with the defense thereof other than the reasonable costs of
investigation undertaken by the Indemnified Party with the prior written
consent of the Indemnifying Party.
9.8 Cooperation. The parties acknowledge and agree that with respect to
the period between the Effective Date and the Closing Date, they contemplate
that the liabilities of the Companies arising or accrued for in the ordinary
course of business consistent with past practice for such period are not to be
the subject of indemnification by the Shareholders pursuant to this Article IX
except as described in Section 9.1(a)(ii) hereof, and that it is extraordinary
events, acts or omissions outside of the ordinary course of the operations of
the Companies that are to be the subject of indemnification pursuant to this
Article IX for such Effective Date to Closing Date period. Each of FYI, Buyer,
the Shareholders and the Companies, and each of their affiliates, successors and
assigns, shall cooperate with each other in the defense of any suit, action,
investigation, proceeding or claim by a third party and, during normal business
hours, shall afford each other access to their books and records and employees
relating to such suit, action, investigation, proceeding or claim and shall
furnish each other all such further information that they have the right and
power to furnish as may reasonably be necessary to defend such suit, action,
investigation, proceeding or claim, including, without limitation, reports,
studies, correspondence and other documentation relating to the Environmental
Protection Agency, Occupational Safety and Health Administration and Equal
Employment Opportunity Commission matters.
9.9 Limitations on Damages.
(a) The persons or entities indemnified pursuant to this Article IX
shall not assert any claim for indemnification hereunder until such time
as and solely to the extent that the aggregate of all claims that such
persons may have against the Indemnifying Party shall exceed $437,500 with
respect to all claims, but upon reaching such amount, from the first
dollar of all such claims (the "Basket"); provided, however, that the
Basket shall not be applicable to claims based upon a breach of the
representations and warranties set forth in Sections 2.1, 2.2 and 2.3 or
Sections 3.1, 3.2 and 3.4 hereof or the matter described in Section
9.1(a)(vii) hereof; and provided further, that the maximum liability of an
Indemnifying Party for indemnification under this Article IX shall be the
sum of the Total Consideration actually paid plus the aggregate amount
actually received by the Shareholders under paragraph (c) of Schedule 1.1
in accordance with the provisions thereof.
(b) Buyer's Losses, Environmental Costs, Employee Claims, the
matters set forth in Section 9.5 hereof and Seller Losses shall, in each
event, be net of any insurance recoveries actually received by the
Indemnified Party with respect to such losses or claims. An Indemnified
Party shall use commercially reasonable efforts to obtain recovery under
applicable insurance policies before seeking recovery from the
Indemnifying Party under this Article IX.
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ARTICLE X.
THE SHAREHOLDERS' REPRESENTATIVE
10.1 Appointment of the Shareholders' Representative. By the execution and
delivery of this Agreement, each of the Shareholders hereby irrevocably
constitutes and appoints Xxxx X. Xxxxxx as his or her true and lawful agent and
attorney-in-fact (the "Shareholders' Representative"), with full power of
substitution in the premises, (i) to receive the Total Consideration, to make
provision for the payment of, and to pay, all fees and expenses to be borne by
the Shareholders as provided in Section 11.12 hereof from the proceeds of the
Total Consideration, to effect adjustments to the Total Consideration in
accordance with Sections 1.2 and 1.3 hereof; (ii) to waive or modify any
condition to the obligations of the Shareholders to consummate the transactions
contemplated by this Agreement; (iii) to execute and deliver all ancillary
agreements, certificates and documents, and to make any representations or
warranties therein, which the Shareholders' Representative may deem necessary or
appropriate in connection with the consummation of the transactions contemplated
by this Agreement; and (iv) to do or to refrain from doing any act or deed on
behalf of the Shareholders that the Shareholders' Representative may, in his
sole discretion, deem necessary or appropriate in order to consummate the
transactions contemplated by this Agreement, as fully and as completely as each
such Shareholder could do if personally present. Each of the Shareholders hereby
acknowledges and agrees that, while the Shareholders' Representative shall act
on behalf of the Shareholders in the manner that the Shareholders'
Representative believes to be in the best interest of the Shareholders and
consistent with their obligations under this Agreement, the Shareholders'
Representative shall not be responsible to the Shareholders for any loss or
damage that any of the Shareholders may suffer by reason of the exercise by the
Shareholders' Representative of his rights or the performance of his duties
under this Agreement, other than such loss or damage arising from gross
negligence or willful misconduct in the exercise of such rights or performance
of such duties. Further, the Shareholders hereby agree, severally and not
jointly, to indemnify the Shareholders' Representative from and against any
loss, damage, cost or expense, including attorneys' fees or expenses, which the
Shareholders' Representative may incur or suffer that arise out of or relate to
the exercise of his rights or the performance of his duties under this
Agreement, other than such losses, damages, costs or expenses that the
Shareholders' Representative may incur or suffer as a direct consequence of the
Shareholders' Representative's gross negligence or willful misconduct in the
exercise of such rights or performance of such duties. By execution and delivery
of this Agreement, each of the Shareholders acknowledges that such Shareholder
has read and understands this provision and has had the opportunity to have such
Shareholder's independent counsel or other advisor review this Article X.
Further, each Shareholder acknowledges and agrees, severally and not jointly, to
indemnify and hold harmless FYI, Buyer, the Companies and their respective
directors, officers, employees, representatives, agents and attorneys from,
against and in respect of any loss, damage, cost or expense incurred or suffered
thereby and arising out of any act or omission of the Shareholders'
Representative acting in such capacity.
10.2 Acceptance of Appointment. By execution and delivery of this
Agreement, Xxxx Xxxxxx hereby accepts appointment as the Shareholders'
Representative and acknowledges and agrees that he shall exercise his rights and
perform his duties under this Agreement in good faith
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and in the manner that he believes to be in the best interest of the
Shareholders and consistent with their obligations under this Agreement. The
Shareholders' Representative also agrees to provide the Shareholders with such
information as they may reasonably request from time to time regarding the
transactions contemplated by this Agreement and the performance by the
Shareholders' Representative of its duties hereunder, including, without
limitation, the payment of fees and expenses to be paid as provided in Section
11.12 and any adjustments to, and the distribution of, the Total Consideration
under this Agreement.
10.3 Appointment Independent, Severable and Binding. The provisions of
this Article X are independent and severable, shall constitute an irrevocable
power of attorney, coupled with an interest and surviving death or dissolution,
granted by the Shareholders to the Shareholders' Representative and shall be
binding upon the heirs, legal representatives, successors and assigns of each of
the Shareholders.
10.4 Successor Shareholders' Representative. In the event that after the
Closing the Shareholders' Representative is subsequently unwilling or unable to
serve, then Xxxx Xxxxxx shall be the successor Shareholders' Representative and
shall possess all powers and responsibilities of the Shareholders'
Representative as described in this Article X.
ARTICLE XI.
MISCELLANEOUS
11.1 Entire Agreement. This Agreement (including the exhibits and
schedules hereto) constitutes the entire agreement and supersedes all prior
agreements and understandings, both written and oral, between the parties hereto
with respect to the subject matter hereof, and no party shall be liable or bound
to the other in any manner by any representations or warranties not set forth
herein.
11.2 Successors and Assigns. The terms and conditions of this Agreement
shall inure to the benefit of and be binding upon the parties hereto and their
respective successors and permitted assigns. Neither this Agreement nor any
rights, interests, or obligations hereunder may be assigned by any party hereto
without the prior written consent of all other parties hereto, and any purported
assignment in violation of this Section 11.2 shall be null and void.
11.3 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall for all purposes be deemed to be an original
and all of which shall constitute the same instrument.
11.4 Headings. The headings of the articles and sections of this Agreement
are inserted for convenience only and shall not be deemed to constitute part of
this Agreement or to affect the construction hereof.
11.5 Construction. As used in this Agreement, the words "herein," "hereof"
and "hereunder" and other words of similar import refer to this Agreement as a
whole and not to any particular article, section, paragraph or other
subdivision.
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11.6 Modification and Waiver. Any of the terms or conditions of this
Agreement may be waived in writing at any time by the party which is entitled to
the benefits thereof, and this Agreement may be modified or amended by a written
instrument executed by Buyer, the Companies and the Shareholders. No supplement,
modification or amendment of this Agreement shall be binding unless executed in
writing by all of the parties hereto. No waiver of any of the provisions of this
Agreement shall be deemed or shall constitute a waiver of any other provision
hereof (whether or not similar) nor shall such waiver constitute a continuing
waiver.
11.7 Schedules, Etc. All exhibits and schedules annexed hereto are
expressly made a part of this Agreement as though fully set forth herein.
11.8 Notices. All notices of communication required or permitted hereunder
shall be in writing and may be given by (a) depositing the same in United States
mail, addressed to the party to be notified, postage prepaid and registered or
certified with return receipt requested, (b) delivering the same in person to an
officer or agent of such party, (c) telecopying the same with electronic
confirmation of receipt.
(i) If to FYI or Buyer, addressed to it at:
F.Y.I. Incorporated
Image Entry Acquisition Corp.
0000 XxXxxxxx Xxxxxx, Xxxxx 0000
Xxxxxx, Xxxxx 00000
Telecopy No.: (000) 000-0000
Attn: General Counsel
with copies to:
Xxxxx Liddell & Xxxx LLP
0000 Xxxx Xxxxxx, Xxxxx 0000
Xxxxxx, Xxxxx 00000-0000
Telecopy No.: (000) 000-0000
Attn: Xxxx Xxxxxxx, Esq.
(ii) If to the Shareholders, addressed to them at the
respective addresses set forth on Schedule 1.1, with
copies to counsel as set forth below:
G. Xxxxxx Xxxxx XX
Xxxxx Xxxx Xxxxxxx Xxxxxxx & Xxxxxxx PLLC
Victorian Square, Suite 314
000 Xxxx Xxxx Xxxxxx
Xxxxxxxxx, Xxxxxxxx 00000
Telecopy No.: (000) 000-0000
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(iii) If to the Companies, addressed to it at:
Image Entry, Inc.
000 Xxxxx Xxxx Xxxxxx
Xxxxxx, Xxxxxxxx 00000
Telecopy No.: (000) 000-0000
Attn: Xx. Xxxx X. Xxxxxx
and marked "Personal and Confidential"
in each event, with copies to:
G. Xxxxxx Xxxxx XX
Xxxxx Xxxx Xxxxxxx Xxxxxxx & Xxxxxxx PLLC
Victorian Square, Suite 314
000 Xxxx Xxxx Xxxxxx
Xxxxxxxxx, Xxxxxxxx 00000
Telecopy No.: (000) 000-0000
or to such other address or counsel as any party hereto shall specify pursuant
to this Section 11.8 from time to time.
11.9 GOVERNING LAW; CONSENT TO JURISDICTION. THIS AGREEMENT SHALL BE
CONSTRUED IN ACCORDANCE WITH LAWS OF THE STATE OF TEXAS (WITHOUT REGARD TO ITS
CONFLICTS OF LAW PROVISIONS). ALL REMEDIES AT LAW, IN EQUITY, BY STATUTE OR
OTHERWISE SHALL BE CUMULATIVE AND MAY BE ENFORCED CONCURRENTLY OR FROM TIME TO
TIME AND, SUBJECT TO THE EXPRESS TERMS OF THIS AGREEMENT, THE ELECTION OF ANY
REMEDY OR REMEDIES SHALL NOT CONSTITUTE A WAIVER OF THE RIGHT TO PURSUE ANY
OTHER AVAILABLE REMEDIES. SUBJECT TO SECTION 11.20 HEREOF, THE PARTIES AGREE
THAT ANY DISPUTE, CONTROVERSY, LEGAL ACTION OR OTHER PROCEEDING THAT ARISES
UNDER, RESULTS FROM, CONCERNS OR RELATES TO THIS AGREEMENT SHALL FIRST BE
BROUGHT IN THE FEDERAL OR STATE COURTS IN AND OF THE STATE OF OHIO AND THE
PARTIES HERETO DO HEREBY ACKNOWLEDGE THAT SAID COURTS HAVE JURISDICTION OVER
SUCH DISPUTE OR CONTROVERSY AND HEREBY WAIVE ANY OBJECTION TO PERSONAL
JURISDICTION OR VENUE IN SUCH COURTS OR THAT SUCH COURTS ARE AN INCONVENIENT
FORUM; PROVIDED, THAT IF THE COURTS IN SUCH JURISDICTION DETERMINE THAT THEY
LACK JURISDICTION, THEN SUCH DISPUTE, CONTROVERSY, LEGAL ACTION OR OTHER
PROCEEDING SHALL THEREAFTER BE BROUGHT IN THE FEDERAL OR STATE COURTS IN AND OF
THE STATE OF TEXAS IF ANY OF THE SHAREHOLDERS IS THE INITIATING PARTY AND IN THE
FEDERAL OR STATE COURTS IN AND OF THE COMMONWEALTH OF KENTUCKY IF ANY OF FYI,
BUYER OR A COMPANY (FROM AND AFTER THE CLOSING) IS THE INITIATING PARTY.
-52-
11.10 Survival of Covenants, Agreements, Representations and Warranties.
(a) Covenants and Agreements. All covenants and agreements made
hereunder or pursuant hereto or in connection with the transactions
contemplated hereby shall survive the Closing and shall continue in full
force and effect thereafter according to their terms without limit as to
duration.
(b) Representations and Warranties. All representations and
warranties contained herein shall survive the Closing and shall continue
in full force and effect thereafter for a period of two (2) years
following the Closing, except that (a) the representations and warranties
contained in Section 2.8 hereof shall survive until the earlier of (i) the
expiration of the applicable periods (including any extensions) of the
respective statutes of limitation applicable to the payment of the Taxes
to which such representations and warranties relate without an assertion
of a deficiency in respect thereof by the applicable taxing authority or
(ii) the completion of the final audit and determinations by the
applicable taxing authority and final disposition of any deficiency
resulting therefrom, (b) the representations and warranties contained in
Section 2.11 hereof shall serve for a period of five (5) years following
the Closing, (c) the representations and warranties contained in Section
2.19 hereof shall survive until the expiration of the applicable period of
the statutes of limitation applicable to ERISA matters, and (d) the
representations and warranties contained in Sections 2.1, 2.2 and 2.3
shall survive indefinitely.
(c) Claims Made Prior to Expiration. Notwithstanding the foregoing
survival periods set forth in this Section 11.10, the termination of a
survival period shall not affect the rights of an Indemnified Party in
respect of any claim made by such party with specificity, in good faith
and in writing to the Indemnifying Party in accordance with Sections 9.6
and 11.8 hereof prior to expiration of the applicable survival period.
11.11 Publicity. Except as required by law, no party hereto shall issue
any press release or make any public statement, in either case relating to or in
connection with or arising out of this Agreement or the matters contained herein
without obtaining the prior written approval of the other parties to the content
and manner of presentation and publication thereof, which consent shall not be
unreasonably withheld or delayed.
11.12 Expenses. The Shareholders, on the one hand, and FYI and Buyer, on
the other hand, shall be solely responsible for their respective costs and
expenses incurred in connection with the transactions contemplated hereby.
11.13 Third Party Beneficiaries. Except as otherwise specifically provided
in Article IX, no individual or firm, corporation, partnership or other entity
shall be a third-party beneficiary of the representations, warranties, covenants
and agreements made by any party hereto.
11.14 Number and Gender of Words. Whenever the singular number is used,
the same shall include the plural where appropriate, and words of any gender
shall include each other gender where appropriate.
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11.15 Specific Performance; Other Rights and Remedies. Each party
recognizes and agrees that in the event the other party or parties should refuse
to perform any of its or their obligations under this Agreement, the remedy at
law would be inadequate and agrees that for breach of such provisions each party
shall, in addition to such other remedies as may be available to it at law or in
equity, be entitled to injunctive relief and to enforce its rights by an action
for specific performance to the extent permitted by applicable law. Each party
hereby waives any requirement for security or the posting of any bond or other
surety in connection with any temporary or permanent award of injunctive,
mandatory or other equitable relief.
11.16 Prorations. Any amounts prepaid by the Companies under the Real
Property Leases and Contracts with respect to any period after the Closing shall
be reimbursed to the applicable Shareholders at the Closing. The Shareholders
shall reimburse Buyer for any amounts due under such Real Property Leases and
Contracts with respect to any period before the Closing and paid by Buyer.
11.17 Further Assurances. From time to time after the Closing, at the
request of any other party but at the expense of the requesting party, FYI,
Buyer, the Companies or the Shareholders, as the case may be, will execute and
deliver any such other instruments of conveyance, assignment and transfer, and
take such other action as the other party may reasonably request in order to
consummate or evidence the transactions contemplated hereby.
11.18 Brokers and Agents. Except as disclosed on Schedule 11.18, each
party represents and warrants that it has employed no broker or agent in
connection with this transaction and agrees to indemnify and hold harmless the
other parties against all loss, cost, damages or expense arising out of claims
for fees or commissions of brokers employed or alleged to have been employed by
such indemnifying party.
11.19 Guaranty. All covenants, obligations, representations, warranties,
and duties of Buyer herein are unconditionally and absolutely guaranteed by FYI.
Further, FYI waives any right to require any Shareholder(s) to require that
enforcement be brought against Buyer prior to FYI, it being understood that both
FYI and Buyer are jointly and severally liable and responsible for all such
covenants, obligations, representations, warranties and duties.
11.20 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 Cincinnati, Ohio, 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.
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 and related attorneys'
fees (including the allocable cost of in-house counsel) shall be borne by the
party or parties not substantially prevailing in such proceeding as determined
by the arbitrators.
[Balance of page intentionally left blank.]
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IN WITNESS WHEREOF, the parties have executed and delivered this Agreement
as of the date first above written.
FYI:
F.Y.I. INCORPORATED
By: /s/ Xx X. Xxxxxx
----------------------------------------
Name: Xx X. Xxxxxx
Title: President
BUYER:
IMAGE ENTRY ACQUISITION CORP.
By: /s/ Xxx X. Xxxx
----------------------------------------
Name: Xxx X. Xxxx
Title: Chief Executive Officer
THE COMPANIES:
IMAGE ENTRY INC.
By: /s/ Xxxx X. Xxxxxx
----------------------------------------
Name: Xxxx X. Xxxxxx
Title: President and Chief Executive
Officer
THE SHAREHOLDERS OF IMAGE ENTRY INC.:
/s/ Xxxx X. Xxxxxx
--------------------------------------------
Xxxx X. Xxxxxx
/s/ Xxxx X. Xxxxxx
--------------------------------------------
Xxxx X. Xxxxxx
/s/ Xxxxxxxxxxx X. Xxxxxx
--------------------------------------------
Xxxxxxxxxxx X. Xxxxxx
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/s/ Xxxxxx X. Xxxxxx
--------------------------------------------
Xxxxxx X. Xxxxxx
/s/ Xxxx Xxxxxx-Xxx
--------------------------------------------
Xxxx Xxxxxx-Xxx
XXXXXXX XXXXXX IRREVOCABLE FAMILY
GSTT TRUST
By: /s/ Xxxx X. Xxxxxx
----------------------------------------
Name: Xxxx X. Xxxxxx
Title: Trustee
IMAGE ENTRY OF XXXXXX COUNTY INC.
By: /s/ Xxxx X. Xxxxxx
----------------------------------------
Name: Xxxx X. Xxxxxx
Title: President and Chief Executive
Officer
THE SHAREHOLDERS OF IMAGE ENTRY OF
XXXXXX COUNTY INC.:
/s/ Xxxx X. Xxxxxx
--------------------------------------------
Xxxx X. Xxxxxx
/s/ Xxxx X. Xxxxxx
--------------------------------------------
Xxxx X. Xxxxxx
/s/ Xxxxxxxxxxx X. Xxxxxx
--------------------------------------------
Xxxxxxxxxxx X. Xxxxxx
/s/ Xxxxxx X. Xxxxxx
--------------------------------------------
Xxxxxx X. Xxxxxx
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/s/ Xxxx Xxxxxx-Xxx
--------------------------------------------
Xxxx Xxxxxx-Xxx
XXXX XXXXXX
By: /s/ Xxxxxxxxxxx X. Xxxxxx
----------------------------------------
Name: Xxxxxxxxxxx X. Xxxxxx
Title: Guardian
XXXXXXX XXXXXX IRREVOCABLE FAMILY
GSTT TRUST
By: /s/ Xxxx X. Xxxxxx
----------------------------------------
Name: Xxxx X. Xxxxxx
Title: Trustee
IMAGE ENTRY OF INDIANAPOLIS INC.
By: /s/ Xxxx X. Xxxxxx
----------------------------------------
Name: Xxxx X. Xxxxxx
Title: President and Chief Executive
Officer
THE SHAREHOLDERS OF IMAGE ENTRY OF
INDIANAPOLIS INC.:
/s/ Xxxx X. Xxxxxx
--------------------------------------------
Xxxx X. Xxxxxx
/s/ Xxxx X. Xxxxxx
--------------------------------------------
Xxxx X. Xxxxxx
/s/ Xxxxxxxxxxx X. Xxxxxx
--------------------------------------------
Xxxxxxxxxxx X. Xxxxxx
/s/ Xxxxxx X. Xxxxxx
--------------------------------------------
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Xxxxxx X. Xxxxxx
/s/ Xxxx Xxxxxx-Xxx
--------------------------------------------
Xxxx Xxxxxx-Xxx
XXXXXXX XXXXXX IRREVOCABLE FAMILY
GSTT TRUST
By: /s/ Xxxx X. Xxxxxx
----------------------------------------
Name: Xxxx X. Xxxxxx
Title: Trustee
IMAGE ENTRY FEDERAL SYSTEMS INC.
By: /s/ Xxxx X. Xxxxxx
----------------------------------------
Name: Xxxx X. Xxxxxx
Title: President and Chief Executive
Officer
THE SHAREHOLDERS OF IMAGE ENTRY
FEDERAL SYSTEMS INC.:
/s/ Xxxx X. Xxxxxx
--------------------------------------------
Xxxx X. Xxxxxx
/s/ Xxxx X. Xxxxxx
--------------------------------------------
Xxxx X. Xxxxxx
/s/ Xxxxxxxxxxx X. Xxxxxx
--------------------------------------------
Xxxxxxxxxxx X. Xxxxxx
/s/ Xxxxxx X. Xxxxxx
--------------------------------------------
Xxxxxx X. Xxxxxx
/s/ Xxxx Xxxxxx-Xxx
--------------------------------------------
Xxxx Xxxxxx-Xxx
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XXXX XXXXXX
By: /s/ Xxxxxxxxxxx X. Xxxxxx
----------------------------------------
Name: Xxxxxxxxxxx X. Xxxxxx
Title: Guardian
XXXXXXX XXXXXX IRREVOCABLE FAMILY
GSTT TRUST
By: /s/ Xxxx X. Xxxxxx
----------------------------------------
Name: Xxxx X. Xxxxxx
Title: Trustee
IMAGE ENTRY OF ARKANSAS INC.
By: /s/ Xxxx X. Xxxxxx
----------------------------------------
Name: Xxxx X. Xxxxxx
Title: President and Chief Executive
Officer
THE SHAREHOLDERS OF IMAGE ENTRY OF
ARKANSAS INC.:
/s/ Xxxx X. Xxxxxx
--------------------------------------------
Xxxx X. Xxxxxx
/s/ Xxxx X. Xxxxxx
--------------------------------------------
Xxxx X. Xxxxxx
/s/ Xxxxxxxxxxx X. Xxxxxx
--------------------------------------------
Xxxxxxxxxxx X. Xxxxxx
/s/ Xxxxxx X. Xxxxxx
--------------------------------------------
Xxxxxx X. Xxxxxx
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/s/ Xxxx Xxxxxx-Xxx
--------------------------------------------
Xxxx Xxxxxx-Xxx
IMAGE ENTRY OF ALABAMA INC.
By: /s/ Xxxx X. Xxxxxx
----------------------------------------
Name: Xxxx X. Xxxxxx
Title: President and Chief Executive
Officer
THE SHAREHOLDERS OF IMAGE ENTRY OF
ALABAMA INC.:
/s/ Xxxx X. Xxxxxx
--------------------------------------------
Xxxx X. Xxxxxx
/s/ Xxxx X. Xxxxxx
--------------------------------------------
Xxxx X. Xxxxxx
/s/ Xxxxxxxxxxx X. Xxxxxx
--------------------------------------------
Xxxxxxxxxxx X. Xxxxxx
/s/ Xxxxxx X. Xxxxxx
--------------------------------------------
Xxxxxx X. Xxxxxx
/s/ Xxxx Xxxxxx-Xxx
--------------------------------------------
Xxxx Xxxxxx-Xxx
-60-
ANNEX I
TO THAT CERTAIN
STOCK PURCHASE AGREEMENT
DATED AS OF MARCH 31, 2001
BY AND AMONG
F.Y.I. INCORPORATED
IMAGE ENTRY ACQUISITION CORP.
IMAGE ENTRY INC.
IMAGE ENTRY OF XXXXXX COUNTY INC.
IMAGE ENTRY OF INDIANAPOLIS INC.
IMAGE ENTRY FEDERAL SYSTEMS INC.
IMAGE ENTRY OF ARKANSAS INC.
IMAGE ENTRY OF ALABAMA INC.
AND
THE SHAREHOLDERS NAMED THEREIN
DEFINITIONS
In this Agreement, the following terms shall have the meanings set forth
below unless the context requires otherwise.
"1933 Act" means the Securities Act of 1933, as amended, as described in
Section 3.4.
"Acquisition Transaction" has the meaning given in Section 4.7.
"Affiliated Leases" has the meaning given in Section 4.17.
"Agencies" has the meaning given in Section 2.16.
"Annual Share Release" has the meaning given in Schedule 1.1.
"Basket" has the meaning given in Section 9.9.
"Broker Release" means the Broker Release to be executed by each and every
broker or agent of the Company and attached to this Agreement as Exhibit C, as
described in Section 5.18.
"Buyer" shall mean Image Entry Acquisition Corp., a Delaware corporation.
"Buyer's Losses" has the meaning given in Section 9.1(b).
"C Corporation Period" has the meaning given in Section 4.10.
"Charter Documents" means, with respect to a Company, the true, complete
and correct copies of such Company's Articles of Incorporation and its Bylaws,
as described in Section 2.2.
"Closing" means the closing of the transactions contemplated by this
Agreement, as described in Section 7.1.
-1-
"Closing Date" shall mean the date of the Closing, as described in Section
7.1.
"Closing Price Adjustment" has the meaning given in Section 1.2.
"Code" means the Internal Revenue Code of 1986, as amended.
"Company" shall mean any of Image Entry Inc., a Kentucky corporation,
Image Entry of Xxxxxx County, a Kentucky corporation, Image Entry of
Indianapolis Inc., an Indiana corporation, Image Entry Federal Systems Inc., a
Kentucky corporation, Image Entry of Arkansas Inc., a Kentucky corporation, or
Image Entry of Alabama Inc., an Alabama corporation as the context shall
require, and "Companies" shall mean some or all of the foregoing, as the context
shall require.
"Company Shares" means the issued and outstanding shares of common stock
or membership interests of the Companies, as described in Section 1.1.
"Contracts" has the meaning given in Section 2.12(a).
"C Short Year" has the meaning given in Section 4.10.
"Earnout" means the Twelve-Month Earnout, Twenty-Four Month Earnout or the
Thirty-Six Month Earnout as described in Schedule 1.1 (collectively,
"Earnouts").
"EBIT" has the meaning given in Section 1.2.
"EBIT Target" has the meaning given in Schedule 1.1.
"Effective Date" means January 1, 2001.
"Effective Date Balance Sheets" means the balance sheets of the Companies
at the close of business on the Effective Date, as described in Section 1.2.
"Employee Claims" has the meaning given in Section 9.3.
"Employment Agreements" means the Employment Agreements to be entered into
between Buyer and each of Xxxx Xxxxxx and Xxxxx Xxxxxx at the Closing and
attached to this Agreement as Exhibit D, as described in Section 5.18.
"Environmental Costs" has the meaning given in Section 9.2(c).
"Environmental Information" has the meaning given in Section 4.4.
"Environmental Requirements" has the meaning given in Section 2.11(b).
"Equitable Exceptions" has the meaning given in Section 2.1.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, as described in Section 2.19(a).
-2-
"Financial Statements" has the meaning given in Section 2.5(a).
"FYI" shall mean F.Y.I. Incorporated, a Delaware corporation.
"FYI Material Adverse Effect" has the meaning given in Section 3.7.
"FYI Stock" means the shares of common stock of FYI, $.01 par value per
share, as described in Section 1.1.
"GAAP" means generally accepted accounting principles consistently
applied, as described in Section 1.1.
"Group Member" has the meaning given in Section 2.19(c).
"Hazardous Substance" has the meaning given in Section 2.11(b).
"Image Alabama" means Image Entry of Alabama Inc., an Alabama corporation.
"Image Arkansas" means Image Entry of Arkansas Inc., a Kentucky
corporation.
"Image Entry" means Image Entry Inc., a Kentucky corporation.
"Image Federal" means Image Entry of Federal Systems Inc., a Kentucky
corporation.
"Image Indianapolis" means Image Entry of Indianapolis Inc., an Indiana
corporation.
"Image Xxxxxx" means Image Entry of Xxxxxx County Inc., a Kentucky
corporation.
"Intellectual Property" has the meaning given in Section 2.18(a).
"IRS" means the United States Internal Revenue Service, as described in
Section 2.19(a).
"Knowledge" with respect to the Companies shall mean the actual knowledge
of members of the Companies' management with supervisory, oversight or reporting
responsibilities.
"Liens" has the meaning given in Section 2.3(b).
"Material Adverse Effect" means a material adverse effect on the business,
operations, properties, assets or condition (financial or otherwise), results of
operations or prospects of the Companies taken as a whole.
"Material Contracts" has the meaning given in Section 2.12(a).
"Material Permits" has the meaning given in Section 2.7.
"Noncompetition Agreements" means the Noncompetition Agreements to be
entered into between Buyer and each of the Shareholders at the Closing and
attached to this Agreement as Exhibit A, as described in Section 5.14.
-3-
"Option" has the meaning given in Section 4.13(a).
"Order Resource" has the meaning given in Section 2.3(a).
"PBGC" means the Pension Benefit Guaranty Corporation, as described in
Section 2.19(a).
"Plans" has the meaning given in Section 2.19(a).
"Post-Option Exercise Earnout Payment" has the meaning set forth in
Section 4.13(b).
"Pre-Option Exercise EBIT Payment" has the meaning set forth in Section
4.13(a).
"Real Property" has the meaning given in Section 2.9(a).
"Real Property Leases" has the meaning given in Section 2.10.
"Receivables" means the accounts receivable of the Companies as of the
Closing Date as set forth on the Effective Date Balance Sheets, as described in
Section 4.12.
"Related Corporation" has the meaning given in Section 2.8(i).
"Rollover" has the meaning given in Schedule 1.1.
"S Corporation Period" has the meaning given in Section 4.10.
"S Corporation Taxable Income" has the meaning given in Section 4.10.
"SEC" means the United States Securities and Exchange Commission, as
described in Section 3.6.
"Seller Losses" has the meaning given in Section 9.4(b).
"Shareholder Tax Returns" has the meaning given in Section 4.9(a).
"Shareholders" shall mean Xxxx Xxxxxx, Xxxx X. Xxxxxx, Xxxxxxxxxxx X.
Xxxxxx, Xxxx Xxxxxx-Xxx, Xxxxxx X. Xxxxxx, Xxxxxxxxxxx X. Xxxxxx, as Guardian
for Xxxx Xxxxxx, a Minor Child, and the Xxxxxxx Xxxxxx Irrevocable Family GSTT
Trust, Xxxx X. Xxxxxx as Trustee.
"Shareholders' Release" means the Shareholders' Release to be executed by
the Shareholders and attached as Exhibit B, as described in Section 5.17.
"Shareholders' Representative" has the meaning given in Section 10.1.
"S Short Year" has the meaning given in Section 4.10.
"S Termination Date" has the meaning given in Section 4.10.
"S Termination Year" has the meaning given in Section 4.10.
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"Subject Property" has the meaning given in Section 2.11(b).
"Taxes" has the meaning given in Section 2.8(a).
"Third Party Intellectual Property" has the meaning given in Section
2.18(a).
"Thirty-Six Month Earnout" has the meaning given in Schedule 1.1.
"Thirty-Six Month Earnout Payment" has the meaning given in Schedule 1.1.
"Total Consideration" has the meaning given in Section 1.1.
"Twelve-Month Earnout" has the meaning given in Schedule 1.1.
"Twelve-Month Earnout Payment" has the meaning given in Schedule 1.1.
"Twenty-Four Month Earnout" has the meaning given in Schedule 1.1.
"Twenty-Four Month Earnout Payment" has the meaning given in Schedule 1.1.
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LIST OF OMITTED EXHIBITS AND SCHEDULES
Exhibit A Non-Competition Agreements
Exhibit B Shareholder's Release
Exhibit C Broker Release
Exhibit D Employment Agreements
Schedule 1.1 List of shareholders, descriptions relating to the
delivery by F.Y.I. of $32,812,500 in cash
consideration at the Closing, calculations,
conditions, financial targets and potential offsets
related to the delivery of up to $10,937,500 in
shares of F.Y.I. common stock payable at designated
times over an approximate three year period
following the Closing, and a description of the
additional earnout opportunities based on the
performance of the acquired companies over each of
the three years following the Closing.
Schedule 2.2 Organization, Existence and Good Standing of the
Company
Schedule 2.3 Capital Stock of the Companies
Schedule 2.5 Financial Statements
Schedule 2.6 Accounts and Notes Receivable
Schedule 2.7 Permits and Intangibles
Schedule 2.8 Tax Matters
Schedule 2.9 Assets and Properties
Schedule 2.10 Real Property Leases; Options
Schedule 2.11 Environmental Laws and Regulations
Schedule 2.12 Contracts
Schedule 2.13 No Violations
Schedule 2.14 Government Contracts
Schedule 2.15 Consents
Schedule 2.16 Litigation and Related Matters
Schedule 2.17 Compliance with Laws
Schedule 2.18 Intellectual Property Rights
Schedule 2.19 Employee Benefit Plans
Schedule 2.20 Employees; Employee Relations
Schedule 2.21 Insurance
Schedule 2.22 Interests in Customers, Suppliers, Etc.
Schedule 2.23 Business Relations
Schedule 2.24 Officers and Directors
Schedule 2.25 Bank Accounts and Powers of Attorney
Schedule 2.26 Absence of Certain Changes or Events
Schedule 2.27 Document Management Services and Storage
Schedule 2.29 Authority; Ownership; Other Interests
Schedule 2.32 Absence of Claims Against the Company
Schedule 3.3 Consents
Schedule 3.6 Business; Real Property; Material Agreements;
Financial Information
Schedule 3.7 Conformity with Law and Litigation
Schedule 4.1 Course of Conduct by the Companies
Schedule 4.9 Preparation and Filing of Tax Returns
Schedule 4.11 Loan Agreement and Other Obligations
Schedule 4.17 Affiliated Leases
Schedule 5.12 No Transfers to Affiliates
Schedule 5.15 Termination of Related Party Agreements and Benefit
Plans
Schedule 5.16 Shareholders' Release
Schedule 11.18 Brokers and Agents
