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SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec. 240.14a-11(c) or sec. 240.14a-12
F.Y.I. INCORPORATED
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(l) and
0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:*
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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* Set forth the amount on which the filing fee is calculated and state how it
was determined.
[ ] Fee paid previously with preliminary materials:
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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[FYI LOGO]
March 23, 1998
Dear Stockholder:
You are cordially invited to attend the 1998 Annual Meeting of Stockholders
of F.Y.I. Incorporated ("F.Y.I." or the "Company"), which will be held at the
Melrose Hotel, 3015 Oak Lawn Avenue, Dallas, Texas 75219, on Wednesday, May 6,
1998, commencing at 10:00 a.m. (local time). We look forward to greeting as many
of our stockholders as are able to be with us.
At the meeting, you will be asked to consider and vote upon: (1) the
election of ten (10) Directors; (2) a proposal by the Board of Directors to
approve the 1995 Stock Option Plan; and (3) such other business as may properly
come before the meeting and any adjournment thereof.
We hope you will find it convenient to attend the meeting in person.
WHETHER OR NOT YOU EXPECT TO ATTEND, TO ASSURE YOUR REPRESENTATION AT THE
MEETING AND THE PRESENCE OF A QUORUM, PLEASE COMPLETE, DATE, SIGN AND MAIL
PROMPTLY THE ENCLOSED PROXY, for which a return envelope is provided. No postage
need be affixed to the Proxy if it is mailed in the United States.
The Company's Annual Report to Stockholders for the fiscal year ended
December 31, 1997 is being mailed to you together with the enclosed proxy
materials.
Sincerely,
/s/ THOMAS C. WALKER
Thomas C. Walker
Chairman and Chief Development
Officer
/s/ ED H. BOWMAN, JR.
Ed H. Bowman, Jr.
President and Chief Executive
Officer
3232 MCKINNEY AVENUE - SUITE 900 - DALLAS, TEXAS 75204
<PAGE> 3
F.Y.I. INCORPORATED
3232 MCKINNEY AVENUE, SUITE 900
DALLAS, TEXAS 75204
---------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 6, 1998
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of F.Y.I.
Incorporated, a Delaware corporation ("F.Y.I." or the "Company"), will be held
at the Melrose Hotel, 3015 Oak Lawn Avenue, Dallas, Texas 75219 on Wednesday,
May 6, 1998, at 10:00 a.m. (local time), for the following purposes:
(1) To elect ten (10) Directors, each to serve for a term of one year
and until his successor is duly elected and qualified;
(2) To approve the 1995 Stock Option Plan; and
(3) To transact such other business as may properly come before the
Annual Meeting and any adjournment thereof.
The Company's Annual Report to Stockholders for the fiscal year ended
December 31, 1997, Proxy Statement and form of Proxy are being mailed together
with this Notice.
Only stockholders of record as of the close of business on March 10, 1998
are entitled to notice of, and to vote at, the Annual Meeting and any
adjournment thereof. Such stockholders may vote in person or by proxy.
You are cordially invited to be present at the Annual Meeting. It is
important to you and to the Company that your shares be voted at the Annual
Meeting.
By Order of the Board of Directors
/s/ MARGOT T. LEBENBERG
Margot T. Lebenberg
Vice President, General Counsel and
Secretary
March 23, 1998
IMPORTANT NOTICE:
WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING IN PERSON, YOU ARE
URGED TO READ THE ATTACHED PROXY STATEMENT CAREFULLY AND THEN TO SIGN, DATE AND
RETURN THE ACCOMPANYING PROXY IN THE ENCLOSED STAMPED AND ADDRESSED ENVELOPE. AS
SET FORTH IN THE PROXY STATEMENT, THE GIVING OF THE PROXY WILL NOT AFFECT YOUR
RIGHT TO ATTEND AND TO VOTE AT THE ANNUAL MEETING.
<PAGE> 4
F.Y.I. INCORPORATED
---------------------
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 6, 1998
This Proxy Statement and the accompanying form of proxy ("Proxy") are being
furnished to the stockholders of F.Y.I. Incorporated, a Delaware corporation
("F.Y.I." or the "Company"), in connection with the solicitation of Proxies by
the Board of Directors of the Company for use at the Annual Meeting of
Stockholders (the "Annual Meeting") to be held at the Melrose Hotel, 3015 Oak
Lawn Avenue, Dallas, Texas 75219, on Wednesday, May 6, 1998, at 10:00 a.m.
(local time), and at any adjournment thereof. Only stockholders of record as of
the close of business on March 10, 1998 (the "Record Date") will be entitled to
notice of, and to vote at, the Annual Meeting.
This Proxy Statement and the accompanying Proxy materials, together with a
copy of the Company's Annual Report to Stockholders for the fiscal year ended
December 31, 1997 (the "Annual Report"), are being sent or given to stockholders
of the Company commencing on or about March 31, 1998.
At the Annual Meeting, the stockholders of the Company will be asked to
consider and vote upon: (i) the election of ten (10) Directors of the Company;
(2) a proposal by the Board of Directors to approve the 1995 Stock Option Plan;
and (3) such other business that may properly come before the Annual Meeting and
any adjournment thereof.
The principal executive offices of the Company are located at 3232 McKinney
Avenue, Suite 900, Dallas, Texas 75204, and the Company's telephone number at
that address is (214) 953-7555.
STOCKHOLDERS ARE REQUESTED TO COMPLETE, DATE AND SIGN THE ACCOMPANYING FORM
OF PROXY AND RETURN IT PROMPTLY TO THE COMPANY IN THE ENCLOSED POSTAGE-PAID
ENVELOPE.
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VOTING RIGHTS AND VOTES REQUIRED
Holders of record of the Common Stock as of the close of business on the
Record Date will be entitled to one vote for each share held on all matters to
come before the Annual Meeting. As of the close of business on the Record Date,
there were 11,782,614 shares of the Common Stock outstanding (including 36,670
shares of the Common Stock held by a wholly-owned subsidiary of the Company).
The presence, in person or by Proxy, of stockholders entitled to cast a majority
of all votes entitled to be cast at the Annual Meeting will constitute a quorum.
Assuming a quorum, the nominees receiving a plurality of the votes cast at the
Annual Meeting for the election of Directors will be elected as Directors. The
proposal to approve the 1995 Stock Option Plan requires the affirmative vote of
the holders of a majority of the shares of Common Stock present in person or by
Proxy at the Annual Meeting and entitled to vote on such proposal.
With regard to the election of Directors, votes may be cast in favor or
withheld; votes that are withheld will be counted for purposes of determining
the presence or absence of a quorum but will have no other effect. With regard
to the proposal to approve the 1995 Stock Option Plan, stockholders may cast
their votes in favor or abstain. Abstentions will be counted for purposes of
determining the presence or absence of a quorum and will have the same effect as
a vote against such proposal. Broker non-votes, if any, will be counted for
purposes of determining the presence or absence of a quorum but will have no
effect on the outcome of the election of Directors or on the proposal to approve
the 1995 Stock Option Plan.
VOTING OF PROXIES
If the accompanying Proxy is properly executed and returned, the shares
represented thereby will be voted in accordance with the instructions specified
in the Proxy. In the absence of instructions to the contrary, such shares will
be voted in favor of the nominees for election to the Board of Directors listed
in this Proxy Statement and named in the accompanying Proxy and the approval of
the 1995 Stock Option Plan. The Board of Directors does not intend to bring any
other matters before the Annual Meeting and is not aware of any matters that
will come before the Annual Meeting other than as described herein. In the
absence of instructions to the contrary, however, it is the intention of each of
the persons named in the accompanying Proxy to vote all properly executed
Proxies on behalf of the stockholders they represent in accordance with their
discretion with respect to any such other matters properly coming before the
Annual Meeting.
REVOCATION OF PROXIES
Any stockholder may revoke such stockholder's Proxy at any time prior to
the voting thereof on any matter (without, however, affecting any vote taken
prior to such revocation). A Proxy may be revoked by filing with Margot T.
Lebenberg, Vice President, General Counsel and Secretary of F.Y.I. Incorporated,
at 3232 McKinney Avenue, Suite 900, Dallas, Texas 75204, a written notice of
revocation or a subsequently dated, executed Proxy at any time prior to the time
it has been voted at the Annual Meeting, or by attending the Annual Meeting and
voting in person (although attendance at the Annual Meeting will not in and of
itself constitute revocation of a Proxy).
SOLICITATION OF PROXIES
The accompanying Proxy is solicited by the Board of Directors, and the cost
of such solicitation will be borne by the Company. Proxies may be solicited by
Directors, officers and employees of the Company, none of whom will receive any
additional compensation for his or her services. Solicitation of Proxies may be
made personally or by mail, telephone, facsimile or messenger. The Company will
pay persons holding shares of the Common Stock in their names or in the names of
nominees, but not owning such shares beneficially, such as brokerage houses,
banks and other fiduciaries, for the reasonable expense of forwarding soliciting
materials to their principals. The Company has engaged American Stock Transfer
and Trust Company as proxy solicitor for a fee of approximately $1,000 plus
out-of-pocket costs and expenses.
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PROPOSAL 1 -- ELECTION OF DIRECTORS
Ten Directors are to be elected to hold office until the next annual
meeting and until their respective successors are elected and qualified.
The following information is furnished with respect to the 10 nominees for
election as Directors. The Board of Directors has recommended the nominees named
below. Unless otherwise instructed, it is the intention of the persons named in
the accompanying Proxy to vote all shares of the Common Stock represented by
properly executed Proxies for the nominees named below. Although such nominees
have indicated that they will serve as Directors of the Company, should any of
them be unable to serve, the Proxies will be voted for the election of a
substitute nominee designated by the Board of Directors or the Board of
Directors will elect to reduce the number of Directors constituting the Board of
Directors. There is no cumulative voting for Directors.
Nominees for Directors
Thomas C. Walker, age 65, has been Chairman of the Board of the Company
since its inception in September 1994 and has been Chief Development Officer of
the Company since November 1995. From September 1994 until November 1995, Mr.
Walker held the positions of President and Chief Executive Officer. From August
1991 to December 1994, Mr. Walker was Vice President, Corporate Development, of
Laidlaw Waste Systems, Inc., a subsidiary of Laidlaw, Inc., a waste management
company, where he was responsible for its acquisition and divestiture program in
the United States and Mexico. From May 1989 until he joined Laidlaw Waste
Systems, Inc., Mr. Walker was President of Thomas C. Walker Associates, Inc., a
company providing merger, acquisition and financial consulting services focusing
on the waste management industry. During his career, Mr. Walker has been
responsible for the acquisition or divestiture of over 150 businesses over a
30-year period. Mr. Walker holds a B.S. in Industrial Engineering from Lafayette
College.
In May 1989, Mr. Walker resigned from a senior executive position with a
former employer and received a severance payment under the terms of his
employment agreement. In July 1989, such employer commenced a proceeding in
bankruptcy, and, after emerging from such proceeding and in connection with its
liquidation, sought to recover Mr. Walker's severance payment as a preference
claim. Mr. Walker litigated this claim but ultimately entered into a judgment
requiring him to make significant payments to his former employer. In April
1993, Mr. Walker filed a voluntary petition in bankruptcy in order to discharge
such judgment and two mortgage notes relating to two condominiums in Dallas, the
holders of which were unwilling to renegotiate the terms of the mortgages. Mr.
Walker did not seek any other relief from creditors, and the bankruptcy was
discharged in February 1994.
Ed H. Bowman, Jr., age 51, has been President and Chief Executive Officer
and a Director of the Company since November 1995. From May 1993 to June 1995,
Mr. Bowman was Executive Vice President and Chief Operating Officer of the
Health Systems Group of First Data Corporation, a financial services company.
Mr. Bowman was responsible for the day-to-day operations of research and
development, marketing and customer service. From 1983 to 1993, Mr. Bowman
served in a number of executive positions with HBO & Co., a healthcare systems
and services company, including VP -- International, VP -- Marketing, Senior
VP -- Customer Services, Group Senior VP -- Research and Development, and last
serving as Executive Vice President and Chief Operating Officer of the Star
Business Unit with responsibility for domestic operations. Prior to joining HBO,
Mr. Bowman was with Andersen Consulting for 10 years, where he was elected a
Partner. Mr. Bowman became a C.P.A. in 1973 and holds an M.S. from Georgia
Institute of Technology and a B.B.A. from Georgia State University. Mr. Bowman
is an investor and former board member of several early-stage, high-technology
companies.
David Lowenstein, age 36, has been Executive Vice President -- Corporate
Development and Acquisitions and a Director of the Company since February 1995.
In November 1997, Mr. Lowenstein was named Treasurer. From July 1996 through
November 1997, Mr. Lowenstein held the additional position of Chief Financial
Officer. Prior to joining the Company, Mr. Lowenstein served, since February
1994, as Vice President, Business Development of Laidlaw Waste Systems, Inc.,
with overall responsibility for Laidlaw Waste System's acquisition and
divestiture program in North America. From April 1990 until February 1994,
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Mr. Lowenstein served in a variety of capacities, including Director
-- Corporate Development, for Laidlaw, Inc. From November 1988 to March 1990,
he served as a business analyst for Tricil, Ltd., a solid and hazardous waste
company that was acquired by Laidlaw, Inc. in 1990. Mr. Lowenstein has been
responsible for the acquisition or divestiture of over 75 businesses in North
America and Europe. Mr. Lowenstein holds a B.A. in Economics from Sir Wilfred
Laurier University and an M.S. in Public and Business Administration from
Carnegie Mellon University. Mr. Lowenstein is a citizen of the Dominion of
Canada.
G. Michael Bellenghi, age 49, has been a Director of the Company and the
Chairman of the Board and Chief Executive Officer of Recordex Acquisition Corp.
("Recordex"), a wholly-owned subsidiary of the Company, since the closing of the
IPO. Prior to joining Recordex's predecessor in October 1991, Mr. Bellenghi
served as Partner-in-Charge and Director of Deloitte & Touche's Philadelphia
office Healthcare Practice for 10 years. Mr. Bellenghi has also served as a
graduate professor in Financial Management of Healthcare Institutions at LaSalle
University. Mr. Bellenghi is a director of Home Health Corporation of America,
Inc., a publicly-held company. Mr. Bellenghi is a certified public accountant
and holds a B.A. in Accounting from LaSalle University.
Kyle C. Kerbawy, age 52, has been Chairman of the Board of MAVRICC
Management Systems, Inc. ("MAVRICC"), a wholly-owned subsidiary of the Company,
since 1981. MAVRICC provides administrative and securities record-keeping
services to limited partnerships, REITS, fiduciaries and employee stock option
and stock purchase plans. Mr. Kerbawy holds a B.A. in Journalism and an M.B.A.
from Michigan State University.
Greg Melanson, age 44, has been Senior Vice President since February 1998
and a Director of the Company and the Chairman of the Board, President and Chief
Executive Officer of Researchers Acquisition Corp. ("Researchers"), a
wholly-owned subsidiary of the Company, since the closing of the IPO. Prior to
the IPO and since 1978, Mr. Melanson held such offices with the predecessor of
Researchers. Mr. Melanson has been in the litigation support services business
since 1975. Mr. Melanson holds a B.A. from the University of Southern
California.
Jonathan B. Shaw, age 42, has been a Director of the Company and the
Chairman of the Board, President and Chief Executive Officer of Imagent
Acquisition Corp. ("Imagent"), a wholly-owned subsidiary of the Company, since
the closing of the IPO. Prior to the IPO and since 1990, Mr. Shaw held such
offices with the predecessor of Imagent. Mr. Shaw has been active with Imagent
for 16 years. Mr. Shaw attended the University of Vermont and George Washington
University.
Michael J. Bradley, age 53, has been a Director of the Company since the
closing of the IPO. Since January 1991, Mr. Bradley has served as a principal
and as a member of the Board of Directors of the predecessor of Recordex. Mr.
Bradley is Vice-Chairman and a director of Republic Bancorp Inc., a bank holding
company. From May 1994 through 1997, Mr. Bradley was Executive Vice President of
Mercy Health Corporation of Southeast Pennsylvania. Prior to joining Mercy
Health Corporation, Mr. Bradley served as President and Chief Executive Officer
of several healthcare organizations, including Thomas Jefferson University
Hospital and North Philadelphia Health System, both of which are located in
Philadelphia, and the Columbia Presbyterian Medical Center in New York City. Mr.
Bradley is a certified public accountant and holds a B.S. in Business
Administration from Drexel University.
Donald F. Moorehead, Jr., age 47, has been a Director of the Company since
January 1995. Since May 1994 and until recently, Mr. Moorehead was founder, Vice
Chairman of the Board and Chief Development Officer of U.S.A. Waste Services,
Inc., a national waste management company whose shares are listed on the New
York Stock Exchange. From October 1990 to May 1994, he served as its Chairman of
the Board and Chief Executive Officer. Mr. Moorehead was Chairman of the Board
and Chief Executive Officer of Mid-American Waste Systems, Inc., a waste
management company, from its inception in December 1985 until August 1990 and
continued as a director until February 1991. Mr. Moorehead is a director of
Metal Management, Inc., a scrap-metal company. From 1977 until 1984, Mr.
Moorehead served in various management positions with Waste Management, Inc. Mr.
Moorehead holds a B.S. in Engineering from the University of Tulsa.
4
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Hon. Edward M. Rowell, age 66, has been a Director of the Company since the
closing of the IPO. From April 1990 to August 1994, Mr. Rowell served as the
United States Ambassador to Luxembourg. Mr. Rowell also served from January 1988
to April 1990 as the United States Ambassador to Portugal and from August 1985
to January 1988 as the Ambassador to Bolivia. Mr. Rowell is currently President
of the Association for Diplomatic Studies and Training, an organization that
promotes the quality preparation of persons who represent the United States
abroad. He is also a Senior Associate of Global Business Access, Ltd., a private
trade development firm in Washington, D.C., and an independent lecturer on
European Monetary Union. Mr. Rowell holds a B.A. in International Relations from
Yale University and was a Sloan Executive Fellow at the Stanford University
Graduate School of Business.
VOTE REQUIRED FOR APPROVAL
The 10 nominees receiving a plurality of the votes cast at the Annual
Meeting for the election of Directors will be elected as Directors.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ITS NOMINEES TO THE BOARD OF
DIRECTORS
COMPENSATION OF DIRECTORS
Directors who are employees of the Company do not receive additional
compensation for serving as Directors. Each Director who is not an employee of
the Company receives a fee of $1,500 for attendance at each Board of Directors'
meeting and $1,000 for attendance of the committee meetings (unless held on the
same day as a Board of Directors' meeting) and an initial grant of non-qualified
options to purchase 10,000 shares of Common Stock under the Company's 1995 Stock
Option Plan, as amended (the "Stock Option Plan"). Non-employee Directors also
receive annual grants of non-qualified options to purchase 5,000 shares of
Common Stock. All Directors of the Company are reimbursed for out-of-pocket
expenses incurred in their capacity as Directors of the Company.
BOARD AND COMMITTEE MEETINGS
The Board of Directors met four times during 1997. All of the Directors
attended at least 75% of the aggregate of all meetings of the Board of Directors
and the committees on which they served during 1997.
The Board of Directors has an Executive Committee, an Audit Committee, a
Compensation Committee and a Nominating Committee. The members of the Executive
Committee presently consist of Mr. Walker, Mr. Bowman, Mr. Lowenstein and Mr.
Bellenghi.
The members of the Audit Committee presently consist of Mr. Bradley, Mr.
Moorehead and Mr. Rowell. The Audit Committee is generally responsible for
recommending the appointment of the Company's independent auditors and
overseeing the accounting and internal audit functions of the Company, including
reviewing, with the Company's independent auditors: (i) the general scope of
their audit services and the annual results of their audit; (ii) the reports and
recommendations made to the Audit Committee by the independent auditors; and
(iii) the Company's internal control structure. The Audit Committee held four
meetings during 1997.
The members of the Compensation Committee presently consist of Mr. Bradley,
Mr. Moorehead and Mr. Rowell. The Compensation Committee is responsible for
reviewing and making recommendations to the Board of Directors concerning
remuneration of the Company's executive officers. The Compensation Committee
also determines stock options to be granted to executive officers pursuant to
the Stock Option Plan. The Compensation Committee held five meetings during
1997.
The members of the Nominating Committee presently consist of Mr. Walker,
Mr. Leonard and Mr. Rowell. The Nominating Committee is responsible for making
recommendations to the Board of Directors concerning nominees for election to
the Board of Directors. The Nominating Committee held one meeting during 1997.
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EXECUTIVE OFFICERS
The executive officers of the Company are appointed annually by the Board
of Directors of the Company and serve at the discretion of the Board. The
executive officers of the Company, other than Messrs. Barker, Rose, Zazworsky,
Kearney and Patton and Ms. Lebenberg, their respective ages and positions and
certain other information with respect to each of them are set forth herein
under the section entitled "Election of Directors."
Timothy J. Barker has been Senior Vice President and Chief Financial
Officer of the Company since November 1997. From November 1995 to November 1997,
Mr. Barker held the positions of Chief Accounting Officer and Controller of the
Company. Prior to joining the Company as a full-time consultant in June 1995,
Mr. Barker was a manager with Arthur Andersen LLP, where he served in various
capacities over a nine-year period. Mr. Barker served as Vice President of
Financial Planning and Analysis for Sunbelt National Mortgage Corporation from
June 1993 to October 1994. Mr. Barker holds a B.A. in Accounting from Texas Tech
University and has been a C.P.A. since 1985.
Joe A. Rose has been Senior Vice President of the Company since July 1997.
From May 1995 through January 1997, Mr. Rose was President and CEO of FormMaker
Software, Inc. From May 1993 through May 1995, Mr. Rose was Corporate Vice
President with John H. Harland Company, a financial services company, and
President and CEO of its subsidiary, Formation Technology, Inc. From July 1988
through May 1993, Mr. Rose served as Executive Vice President with National Data
Corporation. Mr. Rose holds a B.A. from Texas Tech University.
Ronald Zazworsky has been Senior Vice President of the Company since
October 1997. From February 1994 until joining the Company, Mr. Zazworsky was
Senior Vice President at Medaphis Corporation, a healthcare systems and services
company. From April 1992 to February 1994, Mr. Zazworsky was President and CEO
at Habersham Banking Solutions, Inc. Prior to 1992, Mr. Zazworsky was employed
at HBO and Co. as Regional Vice President for eight years. Previously, Mr.
Zazworsky held various sales, marketing and management positions at IBM. Mr.
Zazworsky holds a B.A. from Gettysburg College and an M.B.A. from Emory
University.
John D. Kearney, Sr. has been Vice President of Corporate Development of
the Company since January 1998. From July 1995 until joining the Company, Mr.
Kearney was a Managing Director and Senior Vice President of Corporate Finance
at Dain Rauscher, formerly known as Rauscher Pierce Refsnes, Inc., where he
directed the firm's information technology investment banking team. From
September 1991 until July 1995, Mr. Kearney was a Senior Vice President of
Corporate Finance at Raymond James & Associates, Inc. Mr. Kearney holds a B.A.
in Political Science from the State University of New York at Oneonta and a J.D.
and an M.B.A. from Duke University.
Margot T. Lebenberg has been Vice President, General Counsel and Secretary
of the Company since May 1996. From 1992 until joining the Company, Ms.
Lebenberg was an attorney with Morgan, Lewis & Bockius LLP in New York, where
she practiced law primarily in the areas of securities and mergers and
acquisitions, specializing in consolidation transactions. Ms. Lebenberg holds a
B.A. in Economics and History from the State University of New York at
Binghamton and a J.D. from Fordham University School of Law.
Gary Patton has been Vice President of Human Resources and Director of
Corporate Programs of the Company since November 1997 and Director of Corporate
Programs since October 1996. From 1992 until joining the Company, Mr. Patton was
Vice President of Human Resources at Sunbelt Corporation. From 1987 until 1992,
Mr. Patton was Vice President of Human Resources at International Claim Service
Corporation. Mr. Patton holds a B.A. degree from University of North Texas.
6
<PAGE> 10
EXECUTIVE COMPENSATION
REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
The Compensation Committee, subject to the employment agreements described
below, reviews and recommends to the Board of Directors for its approval the
salaries and bonuses of the Company's officers, including its ten executive
officers -- Thomas C. Walker, Chairman of the Board and Chief Development
Officer; Ed H. Bowman, Jr., President and Chief Executive Officer; David
Lowenstein, Executive Vice President -- Corporate Development and Acquisitions
and Treasurer; Timothy J. Barker, Senior Vice President and Chief Financial
Officer; Gregory R. Melanson, Senior Vice President; Joe A. Rose, Senior Vice
President; Ronald Zazworsky, Senior Vice President; John D. Kearney, Vice
President -- Corporate Development; Margot T. Lebenberg, Vice President, General
Counsel and Secretary; and Gary Patton, Vice President of Human Resources and
Director of Corporate Programs. In addition, the Compensation Committee grants
stock options under the Stock Option Plan to selected Directors, executive
officers and other key employees.
Compensation Philosophy
The Company's executive compensation program is designed to integrate
compensation with the achievement of the Company's short and long-term business
objectives and to assist the Company in attracting, motivating and retaining the
highest quality executives.
Executive compensation is comprised of three components: (i) a base salary,
which attracts talented managers and contributes to motivating and rewarding
individual performance; (ii) an incentive bonus of cash, stock, options or
warrants, which integrates financial reward to the achievement of the Company's
short-term performance objectives; and (iii) a stock option program, which is
intended to promote the achievement of long-term performance goals and to align
the long-term interests of the Company's executive officers with those of the
stockholders.
The base salary and incentive bonus payable to each of the Company's
executive officers are presently governed by employment agreements entered into
by the Company with each of such executive officers, except Mr. Patton. See
"Employment Contracts, Termination of Employment and Change-in-Control
Arrangements." The Compensation Committee conducts ongoing reviews of such
employment agreements to ensure that they are consistent with the Compensation
Committee's then current philosophy.
The Committee generally intends that compensation paid to the Company's
Chief Executive Officer and the other executive officers named in the Summary
Compensation Table not be subject to the limitation on tax deductibility under
Section 162(m) of the Internal Revenue Code, as amended (the "Code"), so long as
this can be achieved in a manner consistent with the Committee's other
objectives. Section 162(m) generally eliminates a corporation's tax deduction in
a given year for payments to certain named executive officers in excess of $1
million, unless such payments result from "qualified performance-based
compensation." The Committee has been advised that compensation paid in 1997
should not be subject to the limitation on deductibility under Code Section
162(m).
Base Salary Compensation
The Compensation Committee continues to believe that the retention of
executives who have developed the skills and expertise required to lead the
organization is vital to the Company's competitive strength. It further believes
that attracting other key employees who can supplement the efforts of its
existing executives is absolutely critical. To this end, it is the Compensation
Committee's policy to continue to establish base pay at a competitive level.
Incentive Bonus Compensation
The Compensation Committee believes that compensation should vary with
corporate performance and that a significant portion of compensation should
continue to be linked to the achievement of business goals. Under the Company's
employment agreements with its executive officers, the incentive bonus award
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<PAGE> 11
component of their compensation is based on the achievement of certain levels of
operating profitability, and awards are payable only if current year's operating
profits meet certain projected results. Such incentive bonus award component is
subject to annual review by the Compensation Committee.
Pursuant to the 1998 incentive bonus plan (the "1998 Incentive Bonus
Plan"), the executive officers were granted options to purchase Common Stock of
the Company, which will vest upon the Company achieving certain earnings targets
for 1998, in lieu of cash bonuses.
Stock Option Grants
It is the policy of the Compensation Committee to award stock options to
executive officers and other key employees of the Company to align their
interests with those of the Company's long-term investors and to help attract
and retain such persons. The options, therefore, provide value to the recipients
only if and when the market price of the Common Stock increases above the option
grant price. To that end, there is ongoing review by the Committee of the market
price of Common Stock and the grant price of options. It is the Committee's goal
to preserve this incentive as an effective tool in motivating and retaining
executives.
Options to purchase 982,300 shares of Common Stock were granted during 1997
to certain employees who were hired during 1997 and to the executive officers,
other current management level employees and select key employees and
consultants. The Compensation Committee believes that granting such options,
including in particular with respect to the executive officers, not only
provides a meaningful long-term incentive to those individuals who have been
identified as key to the future success of the Company and to help retain the
services of such personnel, but also further links compensation to the overall
performance of the Company.
Compensation of the Chief Executive Officer
The Compensation Committee considers several factors in establishing the
Chief Executive Officer's compensation package, including market pay practices,
performance level, contributions toward achievement of strategic goals and the
overall financial and operating success of the Company. Compensation paid during
1997 to Mr. Bowman was composed of the base salary set forth in Mr. Bowman's
amended employment agreement and options granted pursuant to his employment
agreement. See "Employment Contracts, Termination of Employment and
Change-in-Control Arrangements."
8
<PAGE> 12
Mr. Bowman's employment agreement, as amended provides for options to
purchase 80,000 shares of Common Stock issued in November 1995 which vest in 20%
increments beginning on May 1996 and warrants to purchase 100,000 shares of
Common Stock issued in November 1995 which vest 50% in March 1997 and 50% in
January 1998. In addition, his agreement provides for additional option/warrant
grants to be made at such time as the market price of the Company's Common Stock
reaches certain specified levels. Pursuant to this provision, the following
options/warrants have been issued: (i) warrants to purchase 50,000 shares of
Common Stock were issued in May 1996 which vest 50% in May 1997 and 50% in May
1998; (ii) options to purchase 50,000 shares of Common Stock were issued in
September 1997 which vest 50% in September 1998 and 50% in September 1999; and
(iii) options to purchase 50,000 shares of Common Stock were issued in March
1998 which vest 50% in March 1999 and 50% in March 2000. In addition to the
above, in April 1997, Mr. Bowman was issued options to purchase 25,000 shares of
Common Stock, which are fully exercisable. In December 1997, Mr. Bowman was
issued options to purchase 35,000 shares of Common Stock, in lieu of a cash
bonus, which fully vest on March 31, 1998; options to purchase 25,000 shares of
Common Stock, which vest in 20% increments beginning in June 1998; and options
to purchase 60,000 shares of Common Stock, in lieu of cash bonus, which fully
vest upon the Company achieving certain earnings targets for 1998.
THE COMPENSATION COMMITTEE
Michael J. Bradley
Donald F. Moorehead, Jr.
Hon. Edward M. Rowell
9
<PAGE> 13
SUMMARY COMPENSATION TABLE
The following table sets forth information concerning the annual and
long-term compensation earned during the last three fiscal years by the
Company's Chief Executive Officer and each of the other four most highly
compensated executive officers of the Company (collectively, the "named
executive officers").
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
----------------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
-------------------------------------- ------------------ -------
SECURITIES LTIP
OTHER ANNUAL UNDERLYING PAYOUTS ALL OTHER
NAME AND PRINCIPAL POSITION(1) YEAR SALARY($) BONUS($) COMPENSATION($) OPTIONS/SARS(#)(4) $ COMPENSATION($)
------------------------------ ---- --------- -------- --------------- ------------------ ------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
Thomas C. Walker 1995 150,000 -- -- -- -- --
Chairman of the Board 1996 150,000 -- -- -- -- --
and Chief Development Officer 1997 150,000 -- -- 67,500 -- --
Ed H. Bowman, Jr. 1995 25,000 -- -- 100,000 -- --
President and Chief 1996 200,000 -- 76,060(2) 130,000 -- --
Executive Officer 1997 250,000 107,417 60,538(3) 195,000 -- --
David Lowenstein 1995 130,000 -- -- -- -- --
Executive Vice 1996 120,000 -- -- -- -- --
President -- Corporate 1997 120,000 -- -- 62,000 -- --
Development and Acquisitions and
Treasurer
Timothy J. Barker 1995 82,528 -- -- 15,000 -- --
Senior Vice President and 1996 91,250 50,937 -- 40,000 -- --
Chief Financial Officer 1997 112,500 57,500 35,000 -- --
Margot T. Lebenberg 1995 -- -- -- -- -- --
Vice President, 1996 60,256 35,000 -- 55,000 -- --
General Counsel and Secretary 1997 112,500 57,500 -- 20,000 -- --
</TABLE>
- ---------------
(1) Mr. Walker commenced employment with the Company upon the Company's
inception, September 1994. Mr. Bowman and Mr. Lowenstein commenced
employment with the Company in November 1995 and February 1995,
respectively, and Mr. Barker became a consultant to the Company in June
1995 and an employee in November 1995, respectively. Ms. Lebenberg
commenced employment with the Company in May 1996.
(2) Includes $70,560 in moving related expenses and $5,500 in automobile
related expenses.
(3) Includes $48,605 of reimbursement of additional federal income taxes
incurred by Mr. Bowman due to his receipt of certain payments in respect to
his relocation in 1996, $6,000 in automobile related expenses and $5,933 in
insurance premiums paid by the Company on behalf of Mr. Bowman.
(4) Represents options or warrants granted to purchase the stated number of
shares of Common Stock.
10
<PAGE> 14
STOCK OPTION GRANTS IN LAST FISCAL YEAR
The following table contains information concerning the grants of stock
options to the named executive officers during fiscal 1997.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
-------------------------------------------------- POTENTIAL REALIZABLE
PERCENT VALUE AT ASSUMED
OF ANNUAL RATES OF
NUMBER OF TOTAL EXERCISE STOCK PRICE
SECURITIES OPTIONS OR APPRECIATION FOR
UNDERLYING GRANTED TO BASE OPTION TERM(6)
OPTIONS EMPLOYEES PRICE EXPIRATION --------------------
NAME GRANTED(#) IN 1997(%) ($/SH) DATE 5%($) 10%($)
---- ---------- ---------- -------- ---------- ------- ---------
<S> <C> <C> <C> <C> <C> <C>
Thomas C. Walker 15,000(1) 1.5 19.25 04/02/07 181,593 460,193
Chairman of the Board 15,000(2) 1.5 21.75 12/30/07 205,177 519,958
and Chief Development 15,000(3) 1.5 21.75 12/30/07 205,177 519,958
Officer 22,500(4) 2.3 21.75 12/30/07 307,765 779,938
Ed H. Bowman, Jr. 25,000(1) 2.6 19.25 04/02/07 302,656 766,989
President and Chief 50,000(5) 5.1 25.00 09/08/07 786,118 1,992,178
Executive Officer 25,000(2) 2.6 21.75 12/30/07 341,961 866,597
35,000(3) 3.6 21.75 12/30/07 478,746 1,213,236
60,000(4) 6.1 21.75 12/30/07 820,707 2,079,834
David Lowenstein 15,000(1) 1.5 19.25 04/02/07 181,593 460,193
Executive Vice President 15,000(2) 1.5 21.75 12/30/07 205,177 519,958
- -- Corporate Development 12,000(3) 1.2 21.75 12/30/07 165,141 415,967
and Acquisitions and 20,000(4) 2.0 21.75 12/30/07 273,569 693,278
Treasurer
Timothy J. Barker 5,000(1) 0.5 19.25 04/02/07 60,531 153,398
Senior Vice President and 15,000(2) 1.5 21.75 12/30/07 205,177 519,958
Chief Financial Officer 15,000(4) 1.5 21.75 12/30/07 205,177 519,958
Margot T. Lebenberg 5,000(1) 0.5 19.25 04/02/07 60,531 153,398
Vice President, General 15,000(4) 1.5 21.75 12/30/07 205,177 519,958
Counsel and Secretary
</TABLE>
- ---------------
(1) These non-qualified stock options were granted under the Company's Stock
Option Plan and entitle the holder to purchase shares of the Common Stock at
an exercise price equal to the fair market value per share of the Common
Stock as of the date the option was granted. These options vested
immediately on the date of the option grant.
(2) These non-qualified stock options were granted under the Company's Stock
Option Plan and entitle the holder to purchase shares of the Common Stock at
an exercise price equal to the fair market value per share of the Common
Stock as of the date the option was granted. These options are exercisable
six months after the date of grant as to 20% of the underlying shares, and
as to an additional 20% on each of the next four anniversaries of the date
of the option grant.
(3) These non-qualified stock options were granted under the Company's Stock
Option Plan and entitle the holder to purchase shares of the Common Stock at
an exercise price equal to the fair market value per share of the Common
Stock as of the date the option was granted. These options vest in full on
March 31, 1998.
(4) These non-qualified stock options were granted under the Company's Stock
Option Plan and entitle the holder to purchase shares of the Common Stock at
an exercise price equal to the fair market value per share of the Common
Stock as of the date the option was granted. These options vest in 1999 upon
the Company achieving certain earnings targets in 1998.
(5) These non-qualified stock options were granted under the Company's Stock
Option Plan and entitle the holder to purchase shares of the Common Stock at
an exercise price equal to the fair market value per share of the Common
Stock as of the date each of the options was granted. These options are
exercisable as to 50% of the underlying shares on September 8, 1998 and are
exercisable as to the remaining 50% of the underlying shares on September 8,
1999.
(6) The potential realizable values are the results of calculations at assumed
annual rates of stock price appreciation of five percent and ten percent.
These assumed rates of growth were selected by the Securities and Exchange
Commission for illustration purposes only. They are not intended to forecast
possible future appreciation, if any, of the Company's stock price. No gain
to optionees is possible without an increase in stock prices, which will
benefit all stockholders. Options become immediately exercisable in the
event of a change-in-control as defined in the Stock Option Plan.
11
<PAGE> 15
FISCAL YEAR END OPTION VALUES
The following table provides information, with respect to the named
executive officers, concerning options exercised during fiscal 1997 and the
options and warrants held as of December 31, 1997.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED IN-THE-
OPTIONS AND WARRANTS AT MONEY OPTIONS AND WARRANTS
FISCAL YEAR END(#) AT FISCAL YEAR END(1)($)
SHARES ACQUIRED VALUE --------------------------- ----------------------------
NAME ON EXERCISE(#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- --------------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Thomas C. Walker........... -- -- 15,000 52,500 56,250 65,625
Chairman of the Board and
Chief Development Officer
Ed H. Bowman, Jr........... -- -- 148,000 277,000 1,298,750 1,195,000(2)
President and Chief
Executive Officer
David Lowenstein........... -- -- 15,000 47,000 56,250 58,750
Executive Vice President --
Corporate Development
and Acquisitions and
Treasurer
Timothy J. Barker.......... 4,000 49,000 27,500 58,500 214,250 267,000
Senior Vice President and
Chief Financial Officer
Margot T. Lebenberg........ 10,000 92,500 17,000 48,000 86,750 225,750
Vice President, General
Counsel and Secretary
</TABLE>
- ---------------
(1) The value of an unexercised option or warrant at December 31, 1997 is
determined by subtracting the exercise price of such option or warrant from
the last sale price of a share of Common Stock on December 31, 1997
($23.00), as reported by The Nasdaq Stock Market.
(2) Excludes the value of 50,000 unexercisable options which were not
in-the-money at December 31, 1997.
12
<PAGE> 16
PERFORMANCE GRAPH
The graph below compares, on a dividend reinvestment basis, the cumulative
total return of the Company with two selected peer groups of document and
information management services companies and the S&P 500 Composite Stock Price
Index for the period from January 23, 1996 (the effective date of the Company's
IPO) through December 31, 1997 assuming $100 was invested on January 23, 1996 in
each case. The first selected peer group of document management services
companies consists of Iron Mountain, Inc. and Lason, Inc. The second peer group
of document management services companies consists of Iron Mountain, Inc.,
Lason, Inc., Pierce Leahy, Inc., Vestcom, Inc. and ImageMax, Inc. The additional
companies in the second peer group all became public companies during 1997.
These companies were selected based on SIC code or are considered by the
Company's management to be competitors of the Company. The returns of each peer
group company have been weighted according to its stock market capitalization
for purposes of arriving at a peer group average. The performance of the
Company's Common Stock reflected below is not necessarily indicative of future
performance.
<TABLE>
<CAPTION>
Measurement Period F.Y.I. Peer Group Peer Group
(Fiscal Year Covered) Incorporated S & P 500 #1 #2
<S> <C> <C> <C> <C>
1995 100.00 100.00 100.00 100.00
1996 160.58 122.96 150.56 150.56
1997 176.93 163.97 184.27 178.46
</TABLE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
In 1997, the Compensation Committee consisted of Mr. Bradley, Mr. Moorehead
and Mr. Rowell. All of the members of the Compensation Committee are
non-employee Directors of the Company and are not former officers of the
Company. During 1997, no executive officer of the Company served as a member of
the Board of Directors or on the compensation committee of a corporation where
one of whose executives officers served on the Compensation Committee or on the
Board of Directors of the Company.
EMPLOYMENT CONTRACTS, TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL
ARRANGEMENTS
Messrs. Walker, Lowenstein, Bowman, Barker, Melanson, Rose, Zazworsky,
Kearney and Ms. Lebenberg entered into employment agreements, as amended with
the Company in December 1994, February 1995, November 1995, July 1997, January
1996, July 1997, October 1997, January 1998 and July 1996, respectively.
Pursuant to such agreements, each of such persons receives an annual base salary
and
13
<PAGE> 17
is eligible for additional year-end bonus compensation. The employment agreement
for each of Mr. Bowman, Mr. Melanson and Ms. Lebenberg is for a term of three
years, and Mr. Barker's employment agreement is for a term of two years and five
months. The remaining employment agreements are for a term of one year. Each
employment agreement automatically renews at the end of its initial term (and
each succeeding term) for an additional one year, unless terminated or not
renewed by the Company or the employee.
Each of the employment agreements provides that, in the event of a
termination of employment by the Company without cause, such employee shall be
entitled to receive from the Company such employee's then current salary for the
greater of two years (one year in the case of Mr. Barker; 50% of one year's
salary in the case of Mr. Walker and Mr. Lowenstein; and the greater of the
period remaining under the agreement or six months, in the case of Mr. Rose, Mr.
Zazworsky and Mr. Kearney) or whatever period is remaining under the term of the
agreement. In the event of a change in control of the Company, if the employee
has not received notice 15 days prior to the event resulting in such change of
control that such employee's employment will be continued by the successor to
the Company, it shall be deemed a termination without cause, except that the
amount of the lump-sum payment to be made to such employee shall be triple (150%
in the case of Mr. Barker and one year's salary in the case of Mr. Rose, Mr.
Zazworsky and Mr. Kearney) the amount ordinarily due upon a termination without
cause. In addition, in the event of a change in control of the Company, each
employee may elect to terminate his or her employment agreement and receive 150%
of the amount ordinarily due upon a termination without cause (one year's salary
in the case of Mr. Rose, Mr. Zazworsky and Mr. Kearney).
Each employment agreement contains a covenant not to compete with the
Company for a period of two years following termination of employment, provided
that: (i) in the event of a termination of employment by the Company without
cause, the term of the covenant not to compete contained in the employment
agreement will be shortened to one year; and (ii) in the event of a change in
control of the Company wherein the employee does not receive notice 15 days
prior to the event resulting in such change of control of the continuation of
such employee's employment, the covenant-not-to-compete shall not apply. If
applicable law reduces the time period during which the employee is prohibited
from competing with the Company, the covenant not to compete shall be reduced to
the maximum period permitted by law.
14
<PAGE> 18
SECURITY OWNERSHIP OF PRINCIPAL STOCKHOLDERS,
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth certain information, as of March 10, 1998,
regarding the beneficial ownership of the Common Stock by (i) each person known
to the Company to beneficially own more than 5% of the Common Stock; (ii) each
Director and each named executive officer; and (iii) all Directors and named
executive officers as a group. Unless otherwise indicated, the address of each
person listed below is c/o F.Y.I. Incorporated, 3232 McKinney Avenue, Suite 900,
Dallas, Texas 75204. All persons listed have sole voting and investment power
with respect to their shares unless otherwise indicated. At March 10, 1998,
there were 11,782,614 shares of the Common Stock outstanding (including 36,670
shares held by a wholly-owned subsidiary of the Company).
NAME OF BENEFICIAL OWNER
<TABLE>
<CAPTION>
PERCENT OF
OUTSTANDING
SHARES COMMON
GREATER THAN 5% STOCKHOLDERS: OWNED COMMON STOCK
----------------------------- --------- ------------
<S> <C> <C>
Dresdner RCM Global Investors, LLC.......................... 1,009,000 8.3
RCM Limited L.P.
RCM General Corporation
Four Embarcadero Center
San Francisco, California 94111
Wasatch Advisors, Inc....................................... 765,519 6.3
68 South Main Street,
Suite 400
Salt Lake City, Utah 84101
DIRECTORS AND EXECUTIVE OFFICERS:
Greg Melanson............................................... 379,260 3.2
Kyle C. Kerbawy............................................. 320,000 2.7
Thomas C. Walker(1)......................................... 300,000 2.5
Jerry F. Leonard, Jr........................................ 253,274 2.1
Ed H. Bowman, Jr.(2)........................................ 243,000 2.0
David Lowenstein(3)......................................... 239,000 2.0
Jonathan B. Shaw............................................ 200,198 1.7
Donald F. Moorehead, Jr.(4)................................. 75,284 *
Michael J. Bradley(4)....................................... 55,000 *
G. Michael Bellenghi........................................ 50,000 *
Timothy J. Barker(5)........................................ 36,000 *
Margot T. Lebenberg(6)...................................... 26,200 *
Hon. Edward M. Rowell(4).................................... 15,000 *
All Directors and named executive officers as a group (13
persons)(7)............................................... 2,192,216 17.9
</TABLE>
- ---------------
* Represents less than 1%.
(1) Does not include 37,500 shares which may be acquired upon the exercise of
options and warrants not exercisable within 60 days.
(2) Does not include 192,000 shares which may be acquired upon the exercise of
options and warrants not exercisable within 60 days.
(3) Does not include 35,000 shares which may be acquired upon the exercise of
options and warrants not exercisable within 60 days.
(4) Does not include 5,000 shares which may be acquired upon the exercise of
options not exercisable within 60 days.
15
<PAGE> 19
(5) Does not include 51,000 shares which may be acquired upon the exercise of
options and warrants not exercisable within 60 days.
(6) Does not include 39,000 shares which may be acquired upon the exercise of
options not exercisable within 60 days.
(7) Does not include 369,500 shares which may be acquired upon the exercise of
options and warrants not exercisable within 60 days.
PROPOSAL 2 -- APPROVAL OF THE F.Y.I. INCORPORATED
1995 STOCK OPTION PLAN
In October 1995, the Board of Directors adopted, and the Company's
stockholders at such time approved, the F.Y.I. Incorporated 1995 Stock Option
Plan (the "Plan"). Under the terms of the Plan, employees and consultants of the
Company and its subsidiaries, as well as non-employee members of the Board of
Directors, have from time to time been granted options to purchase shares of
Common Stock. The Plan was amended on March 5, 1997 and March 5, 1998 by action
of the Board of Directors.
In order to retain the exemption from the potential loss of deductibility
under Section 162(m) of the Internal Revenue Code of 1986, as amended (the
"Code") (described below), for certain compensation attributable to option
grants under the Plan to certain senior executive officers of the Company, the
stockholders are now requested to approve the Plan.
DESCRIPTION OF THE PLAN
The Plan (incorporating all amendments to date) is set forth as Exhibit A
to this Proxy Statement, and the description of the Plan contained herein is
qualified in its entirety by reference to Exhibit A.
The Plan provides for the issuance of options to purchase Common Stock. The
total number of shares of Common Stock that may be subject to outstanding
options, determined immediately after the grant of any Option to purchase Common
Stock, may not exceed the greater of 650,000 shares or sixteen percent (16%) of
the total number of shares of Common Stock outstanding. The number of shares
that may be delivered to optionees under the Plan upon exercise of incentive
stock options ("ISOs") may not exceed 650,000, provided that shares of Common
Stock subject to ISOs will not be deemed delivered if such options are
forfeited, expire or otherwise terminate without delivery of the underlying
shares. No person may receive in any one calendar year options to purchase more
than 500,000 shares of Common Stock.
Under the Plan, employees of the Company or its subsidiaries, including
officers and Directors of the Company or its subsidiaries who are also
employees, and consultants who perform services for the Company or its
subsidiaries, are eligible to receive option grants. In addition, non-employee
members of the Board of Directors receive automatic, nondiscretionary grants of
options under the Plan. Options granted to employees and consultants of the
Company may be either ISOs, which may entitle the optionee to favorable tax
treatment, or non-qualified stock options (see the tax discussion below).
Options granted to non-employee members of the Board of Directors must be
non-qualified stock options. The Plan is administered by the Compensation
Committee (the "Committee"). Among other things, the Committee determines,
subject to the provisions of the Plan, the employees and consultants to whom
options should be granted, the nature of the options to be granted, the number
of options to be granted and the exercise price, the vesting schedule, the term
of the options and all other terms and conditions of the options.
With respect to grants of options to employees and consultants, the Plan
provides that: (i) each option will have a per share exercise price equal to not
less than 100% (or, in the case of an ISO granted to a person owning stock
possessing more than 10% of the total combined voting power or value of all
classes of Common Stock of the Company or subsidiary (a "Control Person"), 110%)
of the fair market value of a share of stock on the date the option is granted;
(ii) the term of each option may not be longer than 10 years from the date of
grant (and not longer than five years from the date of grant with respect to an
ISO granted to a Control Person); (iii) unless otherwise determined by the
Committee, upon termination of an optionee's employment or consultancy with the
Company, the optionee may exercise the option only during the three-month period
16
<PAGE> 20
following such termination; (iv) all options terminate upon a grantee's
termination of employment for cause (as determined by the Committee) except for
certain options granted to certain executive officers and those options granted
pursuant to the 1998 Incentive Plan; and (v) the Committee will determine the
vesting period or periods for each option, provided that all options will become
immediately vested and exercisable in the event of a "change in control" of the
Company as defined in the Plan, unless otherwise determined by the Committee.
With respect to grants of options to non-employee members of the Board of
Directors, the Plan provides that: (i) no later than the day after each of the
Company's annual meetings, each non-employee director on such date will receive
an automatic grant of options to purchase 5,000 shares of Common Stock; (ii)
each person who is a new, first time non-employee member of the Board of
Directors on such date will be automatically granted options to purchase 10,000
shares of Common Stock; (iii) each option will have a per share exercise price
equal to the fair market value of a share of Common Stock on the date of grant;
(iv) each option will vest and become exercisable as to one-third of the shares
on the date of grant, and one-third on each of the next two anniversaries of the
date of grant, and will become immediately vested and exercisable in the event
of a change in control of the Company; and (v) each option will terminate five
years from the date of grant, or, if earlier, will terminate three months
following termination of the optionee's directorship.
An optionee may pay the option price in cash or, if permitted by the
Committee, by delivering to the Company shares that have a fair market value
equal to the option price or a combination of cash and shares and any income tax
required to be withheld.
The Board of Directors may amend or terminate the Plan at any time without
stockholder approval unless such approval is required by law or regulation or
under the rules of any stock exchange or automated quotation system on which the
Common Stock is then listed or quoted. Thus, stockholder approval will not
necessarily be required for amendments which might increase the cost of the Plan
or broaden eligibility. Stockholder approval will not be deemed to be required
under laws or regulations that condition favorable treatment of participants on
such approval, although the Board of Directors, may, in its discretion, seek
stockholder approval in any circumstances in which it deems such approval
advisable. The Plan has no expiration date, except that ISOs may not be granted
after the tenth anniversary of the date of initial adoption of the Plan by the
Board of Directors.
TAX CONSEQUENCES TO OPTIONEES
Under present tax law, the federal income tax treatment of options granted
under the Plan is generally as described below. Local and state tax authorities
may also tax incentive compensation awarded under the Plan.
Non-Qualified Stock Options. With respect to options which do not qualify
as ISOs, the optionee will recognize no income upon grant of the option. Upon
exercise, an optionee, in general, will recognize ordinary income to the extent
of the difference between the amount paid by the optionee for the shares and the
fair market value of the shares on the date of option exercise. Upon a
subsequent disposition of the shares received under the option, the optionee
generally will recognize capital gain or loss, as the case may be, to the extent
of the difference between the amount realized on the disposition and the tax
basis of such shares (generally the fair market value of the shares on the date
the optionee is first subject to tax liability following exercise). At present,
capital gain on the sale of a property held for over 18 months is taxable at a
maximum rate of 20%, capital gain on the sale of property held for over one year
but not for over 18 months is taxable at a maximum rate of 28%, and capital gain
on the sale of a property held for one year or less is taxable at ordinary
income rates.
Incentive Stock Options. With respect to options which qualify as ISOs, an
optionee will not recognize income for Federal income tax purposes at the time
options are granted or exercised. If the optionee disposes of shares acquired by
exercise of the options before the expiration of two years from the date the
options are granted or within one year after the issuance of shares upon
exercise of the options (a "disqualifying disposition"), the optionee generally
will recognize in the year of disposition (i) ordinary income, to the extent
that the lesser of either (a) the fair market value of the shares on the date of
option exercise or (b) the amount realized on disposition, exceeds the option
exercise price, and (ii) capital gain (or loss), to the extent
17
<PAGE> 21
that the amount realized on disposition differs from the fair market value of
the shares on the date of option exercise. If the shares are sold after
expiration of these holding periods, the optionee will realize capital gain or
loss equal to the difference between the amount realized on disposition and the
option exercise price.
With respect to all optionees, where previously acquired stock is used to
exercise an outstanding ISO or nonqualified stock option, appreciation on such
stock will not be recognized as income. However, if such stock was acquired
pursuant to the exercise of an ISO, a disqualifying disposition will be deemed
to have occurred if such stock is used to exercise another incentive stock
option prior to the expiration of the applicable holding periods.
TAX CONSEQUENCES TO THE COMPANY
The Company will generally be entitled to a deduction for federal income
tax purposes at the same time and in the same amount as an optionee is required
to recognize ordinary income as described above. To the extent an optionee
realizes capital gains as described above, the Company will not be entitled to
any deduction for federal income tax purposes. Therefore, the Company will not
be entitled to any tax deduction in connection with incentive stock options with
respect to which there is no disqualifying disposition.
Section 162(m) to the Code generally disallows a public company's tax
deduction for compensation (including compensation attributable to the exercise
of stock options) to the chief executive officer and the four other most highly
compensated executive officers in excess of $1 million in any taxable year.
Compensation that qualifies as "performance-based compensation" is excluded from
the $1 million deductibility cap, and therefore remains fully deductible. The
Company believes that compensation attributable to the exercise options granted
under the Plan prior to the Annual Meeting will be exempt from Section 162(m)
under a special transition rule that applies to companies that become publicly
traded through an initial public offering. Assuming the Plan is approved at the
Annual Meeting, the Company believes that compensation attributable to the
exercise of options granted thereafter will be exempt from Section 162(m) as
performance-based compensation.
OPTIONS GRANTED
During the Company's most recent fiscal year, options relating to 982,300
shares of Common Stock were granted under the Plan, including 614,600 to
executive officers and 15,000 to outside directors. As of March 10, 1998, a
total of 218,807 shares were available under the Plan. Because option grants
(other than to outside directors) are discretionary, it is not possible to
determine at this time how future option grants will be allocated.
The Plan is not intended to be the exclusive means by which the Company may
issue options or warrants to acquire its Common Stock. To the extent permitted
by applicable law and the requirements of The Nasdaq Stock Market requirements,
the Company may issue any other options, warrants, or awards other than pursuant
to the Plan without stockholder approval.
VOTE REQUIRED FOR APPROVAL
The proposal to approve the Plan requires the affirmative vote of the
holders of a majority of shares present in person or represented by Proxy at the
Annual Meeting and entitled to vote for its approval.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE APPROVAL OF THE PLAN.
18
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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
REAL ESTATE TRANSACTIONS
Leonard leases two properties from Leonard Investments, a partnership
consisting of Mr. Leonard and his father. The aggregate rental expenses for
these properties were approximately $213,000 for the year ended December 31,
1997. The Company also leases one other facility from Mr. Leonard's father. The
rental expenses for this property were approximately $148,000 for the year ended
December 31, 1997. The Company believes that the amounts paid for such
properties do not exceed the fair market rental thereof.
Researchers leases office facilities and certain equipment from Mr.
Melanson. The total lease payments to Mr. Melanson were approximately $383,000
for the year ended December 31, 1997. Researchers is also required to pay the
taxes and insurance on the properties. The Company believes that the amounts
paid for such properties do not exceed the fair market rental thereof.
CERTAIN LOANS
At December 31, 1997, one company which was wholly-owned by Mr. Leonard and
his relatives was obligated to the Company in the amount of approximately
$255,000.
COMPANY POLICY
It is the Company's policy that transactions with affiliates of the Company
will be approved by a majority of the disinterested members of the Board of
Directors, and will be made on terms no less favorable to the Company than could
be obtained from unaffiliated third parties.
INDEPENDENT ACCOUNTANTS
Upon the recommendation of the Audit Committee, the Board of Directors
selected Arthur Andersen LLP as its independent public accountants for fiscal
1998. Arthur Andersen LLP audited the Company's books, records and accounts for
fiscal 1997, and representatives of the firm will attend the Annual Meeting,
will have the opportunity to make a statement and will be available to answer
questions that may be asked by stockholders.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's officers and directors and persons who own more than 10% of a
registered class of the Company's equity securities to file initial reports of
ownership and reports of changes in ownership with the Securities and Exchange
Commission (the "SEC"). Such persons are required by SEC regulation to furnish
the Company with copies of all Sections 16(a) forms they file.
Based solely on its review of the copies of such forms received by it with
respect to fiscal 1997, or written representations from certain reporting
persons, to the best of the Company's knowledge, all reports were filed on a
timely basis except for the filing with respect to options granted pursuant to
the Company's 1995 Stock Option Plan and 1998 Incentive Plan of 120,000, 52,500,
47,000, 30,000, 15,000, 16,500, 15,000 and 15,000 shares of the Company's Common
Stock on Form 5, respectively, by Messrs. Bowman, Walker, Lowenstein, Barker,
Melanson, Rose, Zazworsky and Ms. Lebenberg of the Company.
OTHER MATTERS
The Board of Directors does not know of any matters to be presented for
consideration at the Annual Meeting other than the matters described in the
Notice of Annual Meeting, but if other matters are presented, it is the
intention of the persons named in the accompanying Proxy to vote on such matters
in accordance with their judgment.
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<PAGE> 23
STOCKHOLDER PROPOSALS FOR THE 1999
ANNUAL MEETING OF STOCKHOLDERS
Stockholder proposals to be presented at the 1999 Annual Meeting of
Stockholders must be received, in writing, by the Secretary of the Company at
the Company's principal executive offices no later than November 20, 1998 in
order to be included in the Company's Proxy materials relating to that meeting.
REPORT ON FORM 10-K
THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR ENDED DECEMBER
31, 1997, FILED WITH THE SECURITIES AND EXCHANGE COMMISSION, IS AVAILABLE TO
STOCKHOLDERS, WITHOUT CHARGE, UPON WRITTEN REQUEST. EXHIBITS TO THE FORM 10-K
WILL BE FURNISHED UPON PAYMENT OF $.50 PER PAGE, WITH A MINIMUM CHARGE OF $5.00.
REQUESTS FOR COPIES SHOULD BE DIRECTED TO F.Y.I. INCORPORATED, 3232 MCKINNEY
AVENUE, SUITE 900, DALLAS, TEXAS 75204, ATTENTION: MARGOT T. LEBENBERG, ESQ.
By Order of the Board of Directors
/s/ MARGOT T. LEBENBERG
Margot T. Lebenberg
Vice President, General Counsel and
Secretary
Dallas, Texas
March 23, 1998
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<PAGE> 24
EXHIBIT A
F.Y.I. INCORPORATED
1995 STOCK OPTION PLAN*
SECTION 1. Purpose
The Plan (i) authorizes the Committee to provide to Employees and
Consultants of the Corporation and its Subsidiaries, who are in a position to
contribute materially to the long-term success of the Corporation, with options
to acquire Common Stock, par value $.01 per share, of the Corporation, and (ii)
provides for the automatic grant of options to Non-Employee Directors of the
Corporation in accordance with the terms specified herein. The Corporation
believes that this incentive program will cause those persons to increase their
interest in the Corporation's welfare, and aid in attracting and retaining
Employees, Consultants and Directors of outstanding ability.
SECTION 2. Definitions
Unless the context clearly indicates otherwise, the following terms, when
used in this Plan, shall have the meanings set forth in this Section:
(a) "Board" shall mean the Board of Directors of the Corporation.
(b) A "Change in Control" shall be deemed to have occurred if:
(i) any person, other than the Corporation or an employee benefit plan
of the Corporation, acquires directly or indirectly the Beneficial
Ownership (as defined in Section 13(d) of the Exchange Act) of any voting
security of the Corporation and immediately after such acquisition such
Person is, directly or indirectly, the Beneficial Owner of voting
securities representing 50% or more of the total voting power of all of the
then-outstanding voting securities of the Corporation;
(ii) the individuals (A) who, as of the closing date of the Initial
Public Offering, constitute the Board (the "Original Directors") or (B) who
thereafter are elected to the Board and whose election, or nomination for
election, to the Board was approved by a vote of at least two-thirds ( 2/3)
of the Original Directors then still in office (such directors becoming
"Additional Original Directors" immediately following their election) or
(C) who are elected to the Board and whose election, or nomination for
election, to the Board was approved by a vote of at least two-thirds ( 2/3)
of the Original Directors and Additional Original Directors then still in
office (such directors also becoming "Additional Original Directors"
immediately following their election) (such individuals being the
"Continuing Directors"), cease for any reason to constitute a majority of
the members of the Board;
(iii) the stockholders of the Corporation shall approve a merger,
consolidation, recapitalization, or reorganization of the Corporation, a
reverse stock split of outstanding voting securities, or consummation of
any such transaction if stockholder approval is not sought or obtained,
other than any such transaction which would result in at least 75% of the
total voting power represented by the voting securities of the surviving
entity outstanding immediately after such transaction being Beneficially
Owned by at least 75% of the holders of outstanding voting securities of
the Corporation immediately prior to the transaction, with the voting power
of each such continuing holder relative to other such continuing holders
not substantially altered in the transaction; or
(iv) the stockholders of the Corporation shall approve a plan of
complete liquidation of the Corporation or an agreement for the sale or
disposition by the Corporation of all or a substantial portion of the
Corporation's assets (i.e., 50% or more of the total assets of the
Corporation).
(c) "Code" shall mean the Internal Revenue Code of 1986 as it may be
amended from time to time.
- ---------------
* Incorporating amendments through March 5, 1998.
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(d) "Committee" shall mean the Board, or any Committee of two or more
Directors that may be designated by the Board to administer the Plan.
(e) "Consultant" shall mean (i) any person who is engaged to perform
services for the Corporation or its Subsidiaries, other than as an Employee or
Director, or (ii) any person who has agreed to become a consultant within the
meaning of clause (i).
(f) "Control Person" shall mean any person who, as of the date of grant of
an Option, owns (within the meaning of Section 422(b)(6) of the Code) stock
possessing more than ten percent (10%) of the total combined voting power or
value of all classes of stock of the Corporation or of any parent or Subsidiary.
(g) "Corporation" shall mean F.Y.I. Incorporated, a Delaware corporation.
(h) "Director" shall mean any member of the Board.
(i) "Employee" shall mean (i) any full-time employee of the Corporation or
its Subsidiaries (including Directors who are otherwise employed on a full-time
basis by the Corporation or its Subsidiaries), or (ii) any person who has agreed
to become an employee within the meaning of clause (i).
(j) "Exchange Act" shall mean the Securities Exchange Act of 1934 as it may
be amended from time to time.
(k) "Fair Market Value" of the Stock on a given date shall be based upon:
(i) if the Stock is listed on a national securities exchange or quoted in an
interdealer quotation system, the last sales price or, if unavailable, the
average of the closing bid and asked prices per share of the Stock on such date
(or, if there was no trading or quotation in the Stock on such date, on the next
preceding date on which there was trading or quotation) as provided by one of
such organizations; or (ii) if the Stock is not listed on a national securities
exchange or quoted in an interdealer quotation system, as determined by the
Board in good faith in its sole discretion; provided, however, that the "fair
market value" of Stock on the date on which shares of Stock are first issued and
sold pursuant to a registration statement filed with and declared effective by
the Securities and Exchange Commission shall be the Initial Public Offering
price of the shares so issued and sold, as set forth in the first final
prospectus used in such offering.
(l) "Grantee" shall mean a person granted an Option under the Plan.
(m) "Initial Public Offering" shall mean an initial public offering of
shares of Stock in a firm commitment underwriting registered with the Securities
and Exchange Commission in compliance with the provisions of the 1933 Act.
(n) "ISO" shall mean an Option granted pursuant to the Plan to purchase
shares of the Stock and intended to qualify as an incentive stock option under
Section 422 of the Code, as now or hereafter constituted.
(o) "1933 Act" shall mean the Securities Act of 1933, as amended.
(p) "Non-Employee Director" shall mean a Director of the Corporation who is
not an Employee, nor has been an Employee at any time during the prior one year
period.
(q) "NQSO" shall mean an Option granted pursuant to the Plan to purchase
shares of the Stock that is not an ISO.
(r) "Options" shall refer collectively to NQSOs and ISOs issued under and
subject to the Plan.
(s) "Parent" shall mean any parent corporation as defined in Section 424 of
the Code.
(t) "Plan" shall mean this 1995 Stock Option Plan as set forth herein and
as amended from time to time.
(u) "Stock" shall mean shares of the Common Stock of the Corporation.
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(v) "Stock Option Agreement" shall mean a written agreement between the
Corporation and the Grantee, or a certificate accepted by the Grantee,
evidencing the grant of an Option hereunder and containing such terms and
conditions, not inconsistent with the Plan, as the Committee shall approve.
(w) "Subsidiary" shall mean (i) any corporation with respect to which the
Corporation owns, directly or indirectly, 50% or more of the total combined
voting power of all classes of stock of such corporation, or (ii) any entity
which the Committee reasonably expects to become a subsidiary within the meaning
of clause (i).
SECTION 3. Shares of Stock Subject to the Plan
The total amount of Stock that may be subject to outstanding Options,
determined immediately after the grant of any Option, shall not exceed the
greater of 650,000 shares or sixteen percent (16%) of the total number of shares
of Stock outstanding. Notwithstanding the foregoing, the number of shares that
may be delivered upon exercise of ISOs shall not exceed 650,000, provided,
however, that shares subject to ISOs shall not be deemed delivered if such
Options are forfeited, expire or otherwise terminate without delivery of shares
to the Grantee. Any shares of Stock delivered pursuant to an Option may consist,
in whole or in part, of authorized and unissued shares or treasury shares.
SECTION 4. Administration of the Plan
The Plan shall be administered by the Committee. Subject to the express
provisions of the Plan, the Committee shall have the authority to interpret the
Plan, to prescribe, amend and rescind rules and regulations relating to the
Plan, to determine the terms and provisions of Stock Option Agreements
thereunder and to make all other determinations necessary or advisable for the
administration of the Plan. Any controversy or claim arising out of or related
to this Plan or the Options granted thereunder shall be determined unilaterally
by, and at the sole discretion of, the Committee. Any action of the Committee
with respect to the Plan shall be final, conclusive, and binding on all persons,
including the Corporation, its Subsidiaries, Grantees, any person claiming any
rights under the Plan from or through any Grantee, and stockholders. The express
grant of any specific power to the Committee, and the taking of any action by
the Committee, shall not be construed as limiting any power or authority of the
Committee. The Committee may delegate to officers or managers of the Corporation
or any Subsidiary of the Corporation the authority, subject to such terms as the
Committee shall determine, to perform such functions as the Committee may
determine, to the extent permitted under applicable law. Other provisions of the
Plan notwithstanding, the Board may perform any function of the Committee under
the Plan. In any case in which the Board is performing a function of the
Committee under the Plan, each reference to the Committee herein shall be deemed
to refer to the Board.
SECTION 5. Types of Options
Options granted under the Plan may be of two types: ISOs or NQSOs. The
Committee shall have the authority and discretion to grant to an eligible
Employee either ISOs, NQSOs or both, but shall clearly designate the nature of
each Option at the time of grant in the Stock Option Agreement. Grantees who are
not Employees (determined with reference to Section 2(i)(i) only) of the
Corporation or a Subsidiary (determined with reference to Section 2(w)(i) only)
on the date an Option is granted shall only receive NQSOs.
SECTION 6. Grant of Options to Employees and Consultants
(a) Employees and Consultants of the Corporation and its Subsidiaries shall
be eligible to receive Options under the Plan.
(b) The exercise price per share of Stock subject to an Option granted to
an Employee or Consultant shall be determined by the Committee and specified in
the Stock Option Agreement, provided, however, that the exercise price of each
share subject to an Option shall be not less than 100%, or, in the case of an
ISO granted to a Control Person, 110%, of the Fair Market Value of a share of
the Stock on the date such Option is granted.
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(c) The term of each Option granted to an Employee or Consultant shall be
determined by the Committee and specified in a Stock Option Agreement, provided
that no Option shall be exercisable more than ten years from the date such
Option is granted, and provided further that no ISO granted to a Control Person
shall be exercisable more than five years from the date of Option grant.
(d) The Committee shall determine and designate from time to time Employees
or Consultants who are to be granted Options, and shall specify in the Stock
Option Agreement the nature of each Option granted and the number of shares of
Stock subject to each such Option, provided, however, that in any calendar year,
no Employee or Consultant may be granted an Option to purchase more than 500,000
shares of Stock (determined without regard to when such Option is exercisable),
subject to adjustment pursuant to Section 10.
(e) Notwithstanding any other provisions hereof, the aggregate Fair Market
Value (determined at the time the ISO is granted) of the Stock with respect to
which ISOs are exercisable for the first time by any Employee during any
calendar year under all plans of the Corporation and any Parent or Subsidiary
corporation shall not exceed $100,000. To the extent the limitation set forth in
the preceding sentence is exceeded, the Options with respect to such excess
shall be treated as NQSOs.
(f) The Committee shall determine whether any Option granted to an Employee
or Consultant shall become exercisable in one or more installments and specify
the installment dates in the Stock Option Agreement. The Committee may also
specify in the Stock Option Agreement such other provisions, not inconsistent
with the terms of this Plan, as it may deem desirable, including such provisions
as it may deem necessary to qualify any ISO under the provisions of Section 422
of the Code. Unless otherwise determined by the Committee and specified in the
Stock Option Agreement, all Options shall immediately become exercisable upon a
Change in Control.
(g) All Options granted hereunder prior to the Initial Public Offering
shall be conditional upon, and for all purposes hereunder, deemed granted upon,
the Initial Public Offering.
(h) The Committee may, at any time, grant new or additional options to any
eligible Employee or Consultant who has previously received Options under this
Plan, or options under other plans, whether such prior Options or other options
are still outstanding, have been exercised previously in whole or in part, or
have been canceled. The exercise price of such new or additional Options may be
established by the Committee, subject to Section 6(b) hereof, without regard to
such previously granted Options or other options.
SECTION 7. Grants of Options to Non-Employee Directors
(a) Non-Employee Directors of the Corporation shall be eligible to receive
Options under the Plan only pursuant to the provisions of this Section 7. Each
individual who agrees to become a Non-Employee Director prior to the
consummation of the Corporation's Initial Public Offering shall receive, without
the exercise of the discretion of any person, an NQSO under the Plan relating to
the purchase of 10,000 shares of Stock at an exercise price per share equal to
the Initial Public Offering price per share. Such option grant shall be
conditional upon, and for all purposes hereunder, deemed granted upon, the
Initial Public Offering. Thereafter, on the day after the first annual meeting
of stockholders next following the date of an Initial Public Offering, and no
later than the day after each subsequent annual meeting, each person who is a
continuing Non-Employee Director on any such date shall receive, without the
exercise of the discretion of any person, an NQSO under the Plan relating to the
purchase of 5,000 shares of Stock, and each person who is a new, first-time
Non-Employee Director on any such date shall receive, without the exercise of
the discretion of any person, an NQSO under the Plan relating to the purchase of
10,000 shares of Stock. In the event that there are not sufficient shares
available under this Plan to allow for the grant to each Non-Employee Director
of an NQSO for the number of shares provided herein, each Non-Employee Director
shall receive an NQSO for his pro rata share of the total number of shares of
Stock available under the Plan.
(b) Except as set forth in Section 7(a), the exercise price of each share
of Stock subject to an Option granted to a Non-Employee Director shall equal the
Fair Market Value of a share of Stock on the date such Option is granted.
Payment of the exercise price for the shares being purchased shall be made in
cash.
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(c) Each Option granted to a Non-Employee Director shall become exercisable
in equal annual installments on the date of grant and on each of the first two
anniversaries of the date of grant; provided, however, that each such Option
shall immediately become exercisable upon a Change in Control. The Option shall
have a term of five years from the date of grant; provided, however, that upon
termination of a Non-Employee Director's period of directorship for any reason,
such Non-Employee Director may exercise any Options until the earlier to occur
of (i) the end of such five year period, or (ii) the date which is three-months
after the date of such termination, but only to the extent such Option was
exercisable immediately prior to such termination.
SECTION 8. Exercise of Options
(a) A Grantee shall exercise an Option by delivery of written notice to the
Corporation setting forth the number of shares with respect to which the Option
is to be exercised, together with cash, certified check, bank draft, wire
transfer, or postal or express money order payable to the order of the
Corporation for an amount equal to the Option price of such shares and any
income tax required to be withheld. The Committee may, in its sole discretion,
permit a Grantee to pay all or a portion of the exercise price by delivery of
Stock or other property (including notes or other contractual obligations of
Grantees to make payment on a deferred basis, such as through "cashless
exercise" arrangements, to the extent permitted by applicable law), and the
methods by which Stock will be delivered or deemed to be delivered to Grantees.
(b) Except as provided pursuant to Section 9(a), no Option granted to an
Employee or Consultant shall be exercised unless at the time of such exercise
the Grantee is then an Employee (determined with reference to Section 2(i)(i)
only) or Consultant (determined with reference to Section 2(e)(i) only) of the
Corporation or a Subsidiary (determined with reference to Section 2(w)(i) only).
(c) Except as provided in Section 9(a), no Option granted to a Non-Employee
Director shall be exercised unless at the time of such exercise the Grantee is
then a Non-Employee Director.
SECTION 9. Exercise of Options upon Termination
(a) Unless otherwise determined by the Committee, upon termination of
(other than a Non-Employee Director) with the Corporation and its Subsidiaries,
such Grantee may exercise any Options during the three month period following
such termination, but only to the extent such Option was exercisable immediately
prior to such termination. Notwithstanding the foregoing, if the Committee
determines that such termination is for cause, all Options held by such Grantee
shall immediately terminate. In addition, all Options granted on the basis of
clause (ii) of Section 2(e), (i) or (w) shall immediately terminate if the
Committee determines, in its sole discretion, that the Consultant, Employee, or
Subsidiary, as the case may be, will not become a Consultant, Employee or
Subsidiary within the meaning of clause (i) of such Sections.
(b) Unless otherwise determined by the Committee and specified in the Stock
Option Agreement, in no event shall any Option be exercisable for more than the
maximum number of shares that the Grantee was entitled to purchase at the date
of termination of the relationship with the Corporation and its Subsidiaries.
(c) The sale of any Subsidiary shall be treated as a termination of
employment with respect to any Grantee employed by such Subsidiary.
(d) Subject to the foregoing, in the event of death, Options may be
exercised by a Grantee's legal representative.
SECTION 10. Adjustment Upon Changes in Capitalization
In the event of any dividend or other distribution (whether in the form of
cash, Stock, or other property), recapitalization, forward or reverse split,
reorganization, merger, consolidation, spin-off, combination, repurchase, or
share exchange, or other similar corporate transaction or event, affects the
Stock such that an adjustment is appropriate in order to prevent dilution or
enlargement of the rights of Grantees under the Plan, then the Committee shall,
in such manner as it may deem equitable, adjust any or all of (i) the number and
kind of shares of Stock deemed to be available thereafter for grants of Options
under Section 3, (ii) the
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number and kind of shares of Stock that may be delivered or deliverable in
respect of outstanding Options, (iii) the number of shares with respect to which
Options may be granted to a given Grantee in the specified period as set forth
in Section 6(d), and (iv) the exercise price (or, if deemed appropriate, the
Committee may make provision for a cash payment with respect to any outstanding
Option). In addition, the Committee is authorized to make adjustments in the
terms and conditions of, and the criteria included in, Options (including,
without limitation, cash payments in exchange for an Option or substitution of
Options using stock of a successor or other entity) in recognition of unusual or
nonrecurring events (including, without limitation, events described in the
preceding sentence) affecting the Corporation or any Subsidiary or the financial
statements of the Corporation or any Subsidiary, or in response to changes in
applicable laws, regulations, or accounting principles.
SECTION 11. Restrictions on Issuing Shares
The Corporation shall not be obligated to deliver Stock upon the exercise
or settlement of any Option or take other actions under the Plan until the
Corporation shall have determined that applicable federal and state laws, rules,
and regulations have been complied with and such approvals of any regulatory or
governmental agency have been obtained and contractual obligations to which the
Option may be subject have been satisfied. The Corporation, in its discretion,
may postpone the issuance or delivery of Stock under any Option until completion
of such stock exchange listing or registration or qualification of such Stock or
other required action under any federal or state law, rule, or regulation as the
Corporation may consider appropriate, and may require any Grantee to make such
representations and furnish such information as it may consider appropriate in
connection with the issuance or delivery of Stock under the Plan.
SECTION 12. Tax Withholding
The Corporation shall have the right to require that the Grantee make such
provision, or furnish the Corporation such authorization, necessary or desirable
so that the Corporation may satisfy its obligation, under applicable laws, to
withhold or otherwise pay for income or other taxes of the Grantee attributable
to the grant or exercise of Options granted under the Plan or the sale of Stock
issued with respect to Options. This authority shall include authority to
withhold or receive Stock or other property and to make cash payments in respect
thereof in satisfaction of a Grantee's tax obligations.
SECTION 13. Transferability
Unless otherwise determined by the Committee, no Option shall be subject to
anticipation, sale, assignment, pledge, encumbrance, charge or transfer except
by will or the laws of descent and distribution, and an Option shall be
exercisable during the Grantee's lifetime only by the Grantee. In the case of
any transfer, the transferee's rights and obligations with respect to the Option
shall be determined by reference to the Grantee and the Grantee's rights and
obligations with respect to the Option had no transfer been made.
Notwithstanding such transfer, the Grantee shall remain obligated pursuant to
Section 12 if required by applicable law.
SECTION 14. General Provisions
(a) Each Option shall be evidenced by a Stock Option Agreement. The terms
and provisions of such Stock Option Agreements may vary among Grantees and among
different Options granted to the same Grantee.
(b) The grant of an Option in any year shall not give the Grantee any right
to similar grants in future years, any right to continue such Grantee's
employment relationship with the Corporation or its Subsidiaries, or, until such
Option is exercised and share certificates are issued, any rights as a
Stockholder of the Corporation. All Grantees shall remain subject to discharge
to the same extent as if the Plan were not in effect.
(c) No Grantee, and no beneficiary or other persons claiming under or
through the Grantee shall have any right, title or interest by reason of any
Option to any particular assets of the Corporation or its
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Subsidiaries, or any shares of Stock allocated or reserved for the purposes of
the Plan or subject to any Option except as set forth herein. The Corporation
shall not be required to establish any fund or make any other segregation of
assets to assure the payment of any Option.
(d) The issuance of shares of Stock to Grantees or to their legal
representatives shall be subject to any applicable taxes and other laws or
regulations of the United States or of any state having jurisdiction thereof.
SECTION 15. Amendment or Termination
The Board may, at any time, alter, amend, suspend, discontinue or terminate
this Plan; provided, however, that no such action shall adversely affect the
rights of Grantees to Options previously granted hereunder and, provided
further, however, that any shareholder approval necessary or desirable in
connection with any federal or state law or regulation or the rules of any stock
exchange or automated quotation system on which the Common Stock may then be
listed or quoted, shall be obtained in an appropriate manner. The Committee may
waive any conditions or rights under, or amend, alter, suspend, discontinue, or
terminate, any Option theretofore granted and any Stock Option Agreement
relating thereto; provided, however, that, without the consent of an affected
Grantee, no such action may materially impair the rights of such Grantee under
such Option.
SECTION 16. Effective Date of Plan
This Plan is effective upon its adoption by the Board and shall continue in
effect until terminated by the Board. No ISO may be granted more than ten years
after such date.
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F.Y.I. INCORPORATED
ANNUAL MEETING OF STOCKHOLDERS - MAY 6, 1998
The undersigned hereby appoints Thomas C. Walker and Ed H. Bowman, Jr.,
and each of them, proxies, with full power of substitution, to appear on behalf
of the undersigned and to vote all shares of Common Stock (par value $.01) of
F.Y.I. Incorporated (the "Company") which the undersigned is entitled to vote
at the Annual Meeting of Stockholders to be held at the Melrose Hotel, 3015 Oak
Lawn Avenue, Dallas, Texas 75219 on Wednesday, May 6, 1998, commencing at 10:00
a.m. (local time), and at any adjournment thereof.
WHEN PROPERLY EXECUTED, THIS PROXY WILL BE VOTED AS DIRECTED, BUT IF NO
INSTRUCTIONS ARE SPECIFIED, THIS PROXY WILL BE VOTED FOR THE ELECTION OF THE
LISTED NOMINEES AS DIRECTORS AND APPROVAL OF THE 1995 STOCK OPTION PLAN.
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
(CONTINUED AND TO BE SIGNED ON REVERSE SIDE)
<PAGE> 32
PLEASE DATE, SIGN AND MAIL YOUR
PROXY CARD BACK AS SOON AS POSSIBLE!
ANNUAL MEETING OF STOCKHOLDERS
F.Y.I. INCORPORATED
MAY 6, 1998
PLEASE DETACH AND MAIL IN THE ENVELOPE PROVIDED
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[X] PLEASE MARK YOUR
VOTES AS IN THIS
EXAMPLE.
FOR all WITHHOLD
nominees listed at right AUTHORITY
(except as marked to (.) for all nominees
1. Election of the contrary below) listed at right
Directors [ ] [ ]
NOMINEES: THOMAS C. WALKER
ED H. BOWMAN, JR.
DAVID LOWENSTEIN
G. MICHAEL BELLENGHI
GREGORY R. MELANSON
JONATHAN B. SHAW
MICHAEL J. BRADLEY
DONALD F. MOOREHEAD, JR.
EDWARD M. ROWELL
KYLE C. KERBAWY
2. Approval of the 1995 Stock Option Plan.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
3. In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the Annual Meeting and any adjournment
thereof.
(INSTRUCTIONS: To withhold authority to vote for any individual nominee, mark
the "For" box and write that nominee's name in the space provided below.)
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PLEASE SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
PLEASE CHECK HERE IF YOU PLAN TO ATTEND THE ANNUAL MEETING [ ]
Signature _______________ Signature _______________ Dated: ____________, 1998
Note: Please sign exactly as YOUR name appears above. When signing as an
attorney, executor, administrator, trustee or guardian, please give your
full title. If shares are held jointly, each holder should sign.
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