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SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
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<S> <C>
Filed by the Registrant / /
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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 Section240.14a-11(c) or
Section240.14a-12
F.Y.I. INCORPORATED
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the
Registrant)
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Payment of Filing Fee (Check the appropriate box):
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<S> <C> <C>
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11.
(1) Title of each class of securities to which transaction
applies:
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(2) Aggregate number of securities to which transaction
applies:
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(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (set forth the
amount on which the filing fee is calculated and state how
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(5) Total fee paid:
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/ / 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
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(1) Amount Previously Paid:
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(4) Date Filed:
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LOGO
April 3, 2000
Dear Stockholder:
You are cordially invited to attend our 2000 Annual Meeting of Stockholders,
which will be held at the Melrose Hotel, 3015 Oak Lawn Avenue, Dallas, Texas
75219, on Thursday, May 11, 2000, 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 eight (8) Directors; (2) a proposal by the Board of Directors to
approve the warrants described herein; 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.
Our Annual Report to Stockholders for the fiscal year ended December 31,
1999 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
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F.Y.I. INCORPORATED
3232 MCKINNEY AVENUE, SUITE 900
DALLAS, TEXAS 75204
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 11, 2000
------------------------
NOTICE IS HEREBY GIVEN that our Annual Meeting of Stockholders will be held
at the Melrose Hotel, 3015 Oak Lawn Avenue, Dallas, Texas 75219 on Thursday,
May 11, 2000, at 10:00 a.m. (local time), for the following purposes:
(1) To elect eight (8) Directors, each to serve for a term of one year and
until his successor is duly elected and qualified;
(2) To approve the warrants described herein; and
(3) To transact such other business as may properly come before the Annual
Meeting and any adjournment thereof.
Our Annual Report to Stockholders for the fiscal year ended December 31,
1999, 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 17, 2000
are entitled to notice of, and to vote at, our Annual Meeting and any
adjournment thereof. Such stockholders may vote in person or by proxy.
You are cordially invited to be present at our Annual Meeting. It is
important to you and to us that your shares be voted at our Annual Meeting.
By Order of our Board of Directors
/s/ MARGOT T. LEBENBERG
Margot T. Lebenberg
SENIOR VICE PRESIDENT,
GENERAL COUNSEL AND SECRETARY
April 3, 2000
IMPORTANT NOTICE:
WHETHER OR NOT YOU PLAN TO ATTEND OUR 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 OUR ANNUAL MEETING.
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F.Y.I. INCORPORATED
----------------
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 11, 2000
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This Proxy Statement and the accompanying form of proxy ("Proxy") are being
furnished to our stockholders in connection with the solicitation of Proxies by
our Board of Directors 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 Thursday, May 11, 2000, at 10:00 a.m. (local time), and at any
adjournment thereof. Only stockholders of record as of the close of business on
March 17, 2000 (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 our Annual Report to our Stockholders for the fiscal year ended
December 31, 1999 (the "Annual Report"), are being sent or given to our
stockholders commencing on or about April 6, 2000.
At the Annual Meeting, our stockholders will be asked to consider and vote
upon: (1) the election of eight (8) Directors; (2) the approval of certain
warrants described herein; and (3) such other business as may properly come
before the Annual Meeting and any adjournment thereof.
Our principal executive offices are located at 3232 McKinney Avenue,
Suite 900, Dallas, Texas 75204, and our 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 US IN THE ENCLOSED POSTAGE-PAID ENVELOPE.
VOTING RIGHTS AND VOTES REQUIRED
Holders of record of our 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 15,103,435 shares of our common stock outstanding (including 36,670
shares of our common stock held by one of our wholly-owned subsidiaries). 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 warrants requires the affirmative vote of the holders of
a majority of the shares of our 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 warrants, 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 the proposal to approve the warrants.
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, these shares will
be voted in favor of the nominees for election to our Board of Directors listed
in this Proxy Statement and named in the accompanying Proxy and the approval of
the warrants. Our 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.
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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,
our Senior Vice President, General Counsel and Secretary, 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 our Board of Directors, and the cost
of such solicitation will be borne by us. Proxies may be solicited by our
Directors, officers and employees, 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. We will pay persons
holding shares of our 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. We have engaged American Stock Transfer and Trust Company
as proxy solicitor for a fee of approximately $1,000 plus out-of-pocket costs
and expenses.
PROPOSAL 1--ELECTION OF DIRECTORS
Eight 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 our eight nominees
for election as Directors. Our 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 our common stock
represented by properly executed Proxies for the nominees named below. Although
such nominees have indicated that they will serve as our Directors, should any
of them be unable to serve, the Proxies will be voted for the election of a
substitute nominee designated by our Board of Directors or our Board of
Directors will elect to reduce the number of Directors constituting our Board of
Directors. There is no cumulative voting for Directors.
NOMINEES FOR DIRECTORS
Thomas C. Walker, age 67, has been our Chairman of the Board since our
inception in September 1994 and has been our Chief Development Officer 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. Mr. Walker has been responsible for the acquisition or
divestiture of several hundred businesses over a 30-year period. Mr. Walker
holds a B.S. in Industrial Engineering from Lafayette College.
Ed H. Bowman, Jr., age 53, has been our President and Chief Executive
Officer and a Director 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 HBOC, 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 with responsibility for
domestic operations. Prior to joining HBOC, Mr. Bowman was with Andersen
Consulting for 10 years, where he was elected a Partner. Mr. Bowman
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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 a board member of
711.Net, an internet company, and is an investor and former board member of
several early-stage, high technology companies.
David Lowenstein, age 38, has been one of our Directors since February 1995.
Since January 2000, Mr. Lowenstein has also been a Consultant to us. From
February 1995 to December 1999, Mr. Lowenstein was our Executive Vice
President--Corporate Development and Acquisitions. From November 1997 through
December 1999, Mr. Lowenstein was our Treasurer. From July 1996 through November
1997, Mr. Lowenstein held the additional position of our Chief Financial
Officer. Prior to joining us, 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. 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.
Joe A. Rose, age 49, has been our Chief Operating Officer since January 2000
and a Director since March 2000. From August 1999 through December 1999,
Mr. Rose was an Executive Vice President. From June 1997 through August 1999,
Mr. Rose was a Senior Vice President. From May 1995 through January 1997,
Mr. Rose was President and CEO of FormMaker Software, Inc., a document
technology company which merged with Image Sciences Corp. to form Docucorp
International. From May 1993 through May 1995, Mr. Rose was Corporate Vice
President of 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 of National Data
Corporation, where he was responsible for the credit card and cash management
divisions. Mr. Rose began his information services career at EDS in sales.
Mr. Rose holds a B.A. from Texas Tech University.
Jonathan B. Shaw, age 44, has been one of our Directors since January 1996.
From January 1996 through January 1999, Mr. Shaw was President and Chief
Executive Officer and Chairman of the Board of one of our subsidiaries, Imagent.
Since January 1999, Mr. Shaw has been a business segment leader and an officer
of several subsidiaries. Prior to January 1996 and since 1990, Mr. Shaw was
President, Chief Executive Officer and Chairman of the Board of the predecessor
to 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 55, has been one of our Directors since January
1996. Since January 1991 and through January 1996, Mr. Bradley has served as a
principal and as a member of the Board of Directors of the predecessor of one of
our subsidiaries, Recordex. Currently, Mr. Bradley is the Senior Associate Dean
of MCP Hahnemann University School of Medicine and 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 49, has been one of our Directors since
January 1995. Since January 1998, Mr. Moorehead has been Vice Chairman of the
Board and assumed his current position of Chairman of the Board and Chief
Executive Officer of EarthCare Company, a liquid waste company, on July 1, 1998.
Mr. Moorehead is the founder of U.S.A. Waste Services, Inc. From October 1990
through 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 United Road Services, Inc., a publicly-held
company. From 1977 until 1984,
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Mr. Moorehead served in various management positions with Waste
Management, Inc. Mr. Moorehead holds a B.S. in Engineering Mathematics from the
University of Tulsa.
Hon. Edward M. Rowell, age 68, has been one of our Directors since January
1996. 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 United States 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 the 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 eight (8) nominees receiving a plurality of the votes cast at the Annual
Meeting for the election of Directors will be elected as Directors.
OUR BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ITS NOMINEES TO OUR BOARD OF
DIRECTORS
COMPENSATION OF DIRECTORS
Directors who are our employees do not receive additional compensation for
serving as Directors. Each Director who is not our employee receives a fee of
$1,500 for attendance at each Board of Directors' meeting and $1,000 for
attendance at 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 our common stock under our 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 our common stock. All of our
Directors are reimbursed for out-of-pocket expenses incurred in their capacity
as Directors.
BOARD AND COMMITTEE MEETINGS
Our Board of Directors met four times during 1999. 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 1999.
Our Board of Directors has an Executive Committee, an Audit Committee, a
Compensation Committee and a Nominating Committee. The members of the Executive
Committee are Mr. Walker, Mr. Bowman and Mr. Lowenstein.
The members of our Audit Committee presently are Mr. Bradley, Mr. Moorehead
and Mr. Rowell. Our Audit Committee is generally responsible for recommending
the appointment of our independent auditors and overseeing our accounting and
internal audit functions, including reviewing, with our independent auditors:
(i) the general scope of their audit services and the annual results of their
audit; (ii) the reports and recommendations made to our Audit Committee by the
independent auditors; and (iii) our internal control structure. Our Audit
Committee held four meetings during 1999.
The members of our Compensation Committee presently are Mr. Bradley,
Mr. Moorehead and Mr. Rowell. Our Compensation Committee is responsible for
reviewing and making recommendations to our Board of Directors concerning
remuneration of our executive officers. Our Compensation Committee also
determines warrants and stock options to be granted to our executive officers
pursuant to our Stock Option Plan. Our Compensation Committee held four meetings
during 1999.
The members of our Nominating Committee presently are Mr. Walker, Mr. Shaw
and Mr. Rowell. Our Nominating Committee is responsible for making
recommendations to our Board of Directors concerning nominees for election to
our Board of Directors. Our Nominating Committee held one meeting during 1999.
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EXECUTIVE OFFICERS
Our executive officers are appointed annually by our Board of Directors and
serve at the discretion of our Board. Our executive officers (other than
Messrs. Barker, Byerley and Zazworsky 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, age 37, has been an Executive Vice President and Chief
Financial Officer since January 2000 and our Senior Vice President and Chief
Financial Officer since November 1997. From November 1995 to November 1997,
Mr. Barker was our Chief Accounting Officer and Controller. Prior to joining us
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.
David M. Byerley, age 38, has been our Senior Vice President--Corporate
Development since November 1998. From August 1996 until October 1998,
Mr. Byerley was Executive Vice President of IKON's Business Information Services
Division. From February 1995 until August 1996, Mr. Byerley was Senior Vice
President of Product Development and Marketing with Dataplex Corporation, a
wholly-owned subsidiary of Affiliated Computer Services. From August 1994 until
February 1995, Mr. Byerley was employed by Eastman Kodak. Mr. Byerley holds a
B.S. degree from Dickinson College, an M.S. degree from Temple University, and a
J.D. from Temple University Law School.
Margot T. Lebenberg, age 32, has been our Senior Vice President, General
Counsel and Secretary since October 1998. From May 1996 until October 1998,
Ms. Lebenberg held the positions of Vice President, General Counsel and
Secretary. From 1992 until joining us, Ms. Lebenberg was an associate with
Morgan, Lewis & Bockius LLP in New York, where she practiced law in the business
and finance group primarily in the areas of securities and mergers and
acquisitions. 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.
Ronald Zazworsky, age 55, has been our Senior Vice President--HealthSERVE
since October 1997. From February 1994 until July 1997, Mr. Zazworsky was Senior
Vice President at Medaphis Corporation. From April 1992 to February 1994,
Mr. Zazworsky was President and CEO at Habersham Banking Solutions, Inc. Prior
to 1992, Mr. Zazworsky was employed at HBOC 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.
EXECUTIVE COMPENSATION
REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
The Compensation Committee, subject to the employment agreements described
below, reviews and recommends to our Board of Directors for its approval the
salaries and bonuses of our officers, including our seven executive
officers--Thomas C. Walker, Chairman of the Board and Chief Development Officer;
Ed H. Bowman, Jr., President and Chief Executive Officer; Joe A. Rose, Executive
Vice President and Chief Operating Officer; Timothy J. Barker, Executive Vice
President and Chief Financial Officer; David M. Byerley, Senior Vice
President--Corporate Development; Margot T. Lebenberg, Senior Vice President,
General Counsel and Secretary; and Ronald Zazworsky, Senior Vice
President--HealthSERVE. In addition, the Compensation Committee grants stock
options under our Stock Option Plan and/or warrants to selected Directors,
executive officers and other key employees.
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COMPENSATION PHILOSOPHY
Our executive compensation program is designed to integrate compensation
with the achievement of our short and long-term business objectives and to
assist us in attracting, motivating and retaining the highest quality
executives.
Executive compensation is comprised of three components: (i) a base salary,
which attracts talented employees and contributes to motivating and rewarding
individual performance; (ii) an incentive bonus of cash, stock, options and/or
warrants, which integrates financial reward to the achievement of our 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 our executive officers with those of our stockholders.
The base salary and incentive bonus payable to each of our executive
officers are presently governed by employment agreements entered into by us with
each of these executive officers. See "Employment Contracts, Termination of
Employment and Change-in-Control Arrangements." The Compensation Committee
conducts ongoing reviews of these employment agreements to ensure that they are
consistent with the Compensation Committee's then current philosophy.
The Compensation Committee generally intends that compensation paid to our
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 the payments result from "qualified performance-based
compensation." The Compensation Committee has been advised that compensation
paid in 1999 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 our
organization is vital to our competitive strength. The Compensation Committee
further believes that attracting other key employees who can supplement the
efforts of our existing executives is absolutely critical. To this end, it is
the Compensation Committee's policy to continue to establish base pay at
competitive levels.
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 our employment
agreements with our executive officers, the incentive bonus award 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. This incentive bonus award component is subject
to annual review by the Compensation Committee.
Pursuant to the 2000 incentive bonus plan (the "2000 Incentive Bonus Plan"),
our executive officers were granted warrants to purchase shares of our common
stock. These warrants are subject to stockholder approval and will vest upon our
achieving certain earnings targets for 2000, substantially in lieu of cash
bonuses.
GRANTS OF STOCK OPTIONS AND WARRANTS
It is the policy of the Compensation Committee to award stock options and
warrants to our executive officers and other key employees to align their
interests with those of our long-term investors and to help attract and retain
these persons. The options or warrants, therefore, provide value to the
recipients only if and when the market price of our common stock increases above
the option or warrant grant price. To that
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end, there is ongoing review by the Committee of the market price of our common
stock and the grant price of options or warrants. It is the Committee's goal to
preserve this incentive as an effective tool in motivating and retaining
executives.
Options and warrants to purchase approximately 484,000 shares of our common
stock were granted during 1999 to certain employees who were hired during 1999
and to the executive officers, other current management level employees and
select key employees and consultants. The Compensation Committee believes that
granting these options and warrants, 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 our future success, helps retain
the services of these persons and further links compensation to our overall
performance.
COMPENSATION OF OUR CHIEF EXECUTIVE OFFICER
The Compensation Committee considers several factors in establishing our
Chief Executive Officer's compensation package, including market pay practices,
performance level, contributions toward achievement of strategic goals and our
overall financial and operating success. Compensation paid during 1999 to
Mr. Bowman was composed of the base salary set forth in Mr. Bowman's amended
employment agreement plus warrants and options granted pursuant to his
employment agreement. See "Employment Contracts, Termination of Employment and
Change-in-Control Arrangements."
Mr. Bowman's employment agreement, as amended, provides for options to
purchase 80,000 shares of our common stock issued in November 1995, which are
fully vested and warrants to purchase 100,000 shares of our common stock issued
in November 1995 which are fully vested. The following options and warrants have
been issued: (i) warrants to purchase 50,000 shares of our common stock were
issued in May 1996 which are fully vested; (ii) options to purchase 50,000
shares of our common stock were issued in September 1997 which are fully vested;
and (iii) options to purchase 50,000 shares of our common stock were issued in
March 1998 which are fully vested as of March 2000. In addition to the above, in
April 1997, Mr. Bowman was issued options to purchase 25,000 shares of our
common stock, which are fully vested. In December 1997, Mr. Bowman was issued
options to purchase 35,000 shares of our common stock, in lieu of a cash bonus,
which were fully vested on March 31, 1998; options to purchase 25,000 shares of
our common stock, which vest annually in 20% increments beginning in June 1998;
and options to purchase 60,000 shares of our common stock, in lieu of a cash
bonus, which were fully vested upon achievement by us of certain earnings
targets for 1998. In September 1998, Mr. Bowman was issued options to purchase
40,000 shares of our common stock which vested in 33% increments beginning in
September 1998; and options to purchase 62,500 shares of our common stock, in
lieu of a cash bonus, which were fully vested upon our achieving certain earning
targets for 1999. In May 1999, Mr. Bowman was issued warrants to purchase 65,000
shares of our common stock in lieu of a cash bonus which will vest upon our
achieving certain earnings targets for 2000. Also in May 1999, Mr. Bowman was
issued options to purchase 50,000 shares of our common stock which vest annually
in 33% increments beginning in May 1999.
If any of these benfits, either alone or together with any other payments or
benefits covered to senior executive employees, including named executive
officers, would constitute an "excess parachute payment" subject to the excise
tax under certain provisions of the Internal Revenue Code, the senior executive
employment agreements provide that an additional payment would be made to each
effected covered employee so that such excise tax is reimbursed on a net
after-tax basis.
THE COMPENSATION COMMITTEE
Michael J. Bradley
Donald F. Moorehead, Jr.
Hon. Edward M. Rowell
7
<PAGE>
SUMMARY COMPENSATION TABLE
The following table sets forth information concerning the annual and
long-term compensation earned during the last three fiscal years by our Chief
Executive Officer and each of our other four most highly compensated executive
officers (collectively, the "named executive officers").
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
------------------------
AWARDS PAYOUTS
------------- --------
SECURITIES
ANNUAL COMPENSATION UNDERLYING
-------------------------------------- OPTIONS/SARS/ LTIP
NAME AND SALARY BONUS OTHER ANNUAL WARRANTS PAYOUTS ALL OTHER
PRINCIPAL POSITION YEAR ($) ($)(6) COMPENSATION ($) (#)(3) $ COMPENSATION ($)
- ------------------ -------- -------- -------- ---------------- ------------- -------- ----------------
<S> <C> <C> <C> <C> <C> <C> <C>
Ed H. Bowman, Jr................ 1997 250,000 107,417 60,538(1) 195,000 -- --
President and Chief 1998 300,000 -- -- 152,500 -- --
Executive Officer 1999 374,998 -- -- 115,000 -- --
Thomas C. Walker................ 1997 150,000 -- -- 67,500 -- --
Chairman of the Board and 1998 225,000 -- -- 42,083 -- --
Chief Development Officer 1999 264,992 -- -- 44,000 -- --
Joe A. Rose(4).................. 1997 80,471 54,000 21,114(2) 81,500 -- --
Executive Vice President 1998 165,000 15,000 -- 32,750 -- --
and Chief Operating Officer 1999 259,032 -- -- 53,300 -- --
Timothy J. Barker............... 1997 112,500 57,500 -- 62,000 -- --
Executive Vice President 1998 150,000 -- -- 38,000 -- --
and Chief Financial Officer 1999 199,423 -- -- 37,800 -- --
Ronald Zazworsky(5)............. 1997 26,000 -- -- 65,000 -- --
Senior Vice President-- 1998 156,667 20,000 -- 27,833 -- --
HealthSERVE 1999 190,000 -- -- 27,100 -- --
</TABLE>
- ------------------------------
(1) 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 us on behalf of Mr. Bowman.
(2) Includes $17,810 in moving related expenses and $3,304 in automobile and
insurance related expenses.
(3) Represents options and warrants granted to purchase the stated number of
shares of our common stock.
(4) Mr. Rose commenced employment with us in July 1997.
(5) Mr. Zazworsky commenced employment with us in October 1997.
(6) In addition, in 1997, 1998 and 1999 options and warrants were issued in lieu
of cash bonuses.
8
<PAGE>
STOCK OPTION AND WARRANT GRANTS IN LAST FISCAL YEAR
The following table contains information concerning the grants of stock
options and warrants to the named executive officers during fiscal 1999.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
------------------------------------------------------------ VALUE AT ASSUMED
NUMBER OF PERCENT OF TOTAL ANNUAL RATES OF STOCK
SECURITIES OPTIONS/WARRANTS PRICE APPRECIATION FOR
UNDERLYING GRANTED TO EXERCISE OR OPTION/WARRANT TERM(3)
OPTIONS/WARRANTS EMPLOYEES IN BASE PRICE -----------------------
NAME GRANTED (#) 1999 (%) ($/SH) DATE 5% ($) 10%($)
- ---- ---------------- ---------------- ----------- -------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Ed H. Bowman, Jr........ 50,000(1) 10.3 26.75 05/19/09 841,147 2,131,631
President and Chief 65,000(2) 13.4 26.75 05/19/09 1,093,491 2,771,120
Executive Officer
Thomas C. Walker........ 22,000(1) 4.5 26.75 05/19/09 370,104 937,917
Chairman of the Board 22,000(2) 4.5 26.75 05/19/09 370,104 937,917
and Chief Development
Officer
Joe A. Rose............. 14,000(1) 2.9 26.75 05/19/09 235,521 596,857
Executive Vice 19,300(2) 4.0 26.75 05/19/09 324,683 822,809
President
and Chief Operating 20,000(2) 4.1 26.75 05/19/09 336,459 852,652
Officer
Timothy J. Barker....... 11,700(1) 2.4 26.75 05/19/09 196,828 498,802
Executive Vice 16,100(2) 3.3 26.75 05/19/09 270,849 686,385
President
and Chief Financial 10,000(2) 2.1 26.75 05/19/09 168,229 426,326
Officer
Ronald Zazworsky........ 11,400(1) 2.4 26.75 05/19/09 191,781 486,012
Senior Vice 15,700(2) 3.2 26.75 05/19/09 264,120 669,332
President--
HealthSERVE
</TABLE>
- ------------------------
(1) These non-qualified stock options were granted under our 1995 Stock Option
Plan and entitle the holder to purchase shares of our common stock at an
exercise price equal to the fair market value per share of our common stock
as of the date the option was granted. These options are exercisable as to
33% of the underlying shares upon the grant date and as to 33% on each of
the two subsequent grant anniversary dates.
(2) These warrants were granted to selected executives as described below in
Proposal No. 2 and entitle the holder to purchase shares of our common stock
at an exercise price equal to the fair market value per share of our common
stock as of the date the warrant was granted.
(3) 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 our stock price. No gain to
optionees is possible without an increase in stock prices, which will
benefit all stockholders. Options and warrants become immediately
exercisable in the event of a change-in-control as defined in the Stock
Option Plan and the warrant agreements.
9
<PAGE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR END OPTION VALUES
The following table provides information, with respect to the named
executive officers, concerning options and warrants exercised during fiscal 1999
and the options and warrants held as of December 31, 1999.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF
UNDERLYING UNEXERCISED UNEXERCISED IN-THE-MONEY
OPTIONS AND WARRANTS AT OPTIONS AND WARRANTS AT
FISCAL YEAR END (#) FISCAL YEAR END(1) ($)
SHARES ACQUIRED VALUE --------------------------- ------------------------------
NAME ON EXERCISE (#) REALIZED ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- --------------- ------------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Ed H. Bowman, Jr. ......... -- -- 483,333 209,167 7,347,083(2) 1,631,667(2)
President and Chief
Executive Officer
Thomas C. Walker .......... -- -- 67,167 71,416 762,792 641,205
Chairman of the Board and
Chief Development Officer
Joe A. Rose ............... 36,300 397,267 30,700 98,050 336,888 920,087
Executive Vice President
and Chief Operating
Officer
Timothy J. Barker ......... 35,000 680,125 47,900 64,733 596,025 606,521
Executive Vice President
and Chief
Financial Officer
Ronald Zazworsky .......... -- -- 56,800 63,133 602,800 582,171
Senior Vice President--
HealthSERVE
</TABLE>
- ------------------------------
(1) The value of an unexercised option or warrant at December 31, 1999 is
determined by subtracting the exercise price of the option or warrant from
the last sale price of a share of our common stock on December 31, 1999
($34.00), as reported by The Nasdaq Stock Market.
(2) Excludes the value of 25,000 exercisable options and 25,000 unexercisable
options which were not in-the-money at December 31, 1999.
10
<PAGE>
PERFORMANCE GRAPH
The graph below compares, on a dividend reinvestment basis, our cumulative
total return with a selected peer group 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 our initial public offering)
through December 31, 1999, assuming $100 was invested on January 23, 1996 in
each case. The selected peer group of document management services companies
consists of Lason, Inc., Vestcom, Inc., IKON Office Solutions, Inc. and
ImageMax, Inc. These companies were selected based on SIC code or are considered
by management to be our competitors. 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 our common stock reflected
below is not necessarily indicative of future performance.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
DOLLARS F.Y.I. INCORPORATED S&P 500 PEER GROUP
1995 100.0 100.0 100.0
1996 160.6 123.0 117.5
1997 176.9 164.0 86.7
<S> <C> <C> <C>
1998 246.2 210.7 142.2
1999 261.5 255.1 34.0
</TABLE>
11
<PAGE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
In 1999, our Compensation Committee consisted of Mr. Bradley, Mr. Moorehead
and Mr. Rowell. All of the members of the Compensation Committee are
non-employee Directors and are not former officers. During 1999, no executive
officer served as a member of the board of directors or on the compensation
committee of a corporation where any of its executive officers served on our
Compensation Committee or on our Board of Directors.
EMPLOYMENT CONTRACTS, TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL
ARRANGEMENTS
Messrs. Walker, Bowman, Rose, Barker, Zazworsky and Byerley and
Ms. Lebenberg entered into amended and restated employment agreements with us in
January 2000. Each of Messrs. Walker's and Byerley's and Ms. Lebenberg's
employment agreements is for a term of two years. Mr. Bowman's employment
agreement is for a term of five years. Each of Messrs. Rose's, Barker's and
Zazworsky's employment agreements is for a term of three years. Mr. Bowman's
agreement has an automatic five-year renewal unless terminated by us or him
according to the terms of the agreement. Ms. Lebenberg's agreement has automatic
one-year renewals unless terminated by us or her according to the terms of the
agreement. Mr. Rose's agreement has automatic three-year annual renewals unless
terminated by us or him in accordance with the terms of the agreement. Each of
Messrs. Barker's and Zazworsky's agreements has automatic two-year annual
renewals unless terminated by us or them in accordance with the terms of their
agreement. Pursuant to the employment agreements, each employee named above
receives an annual base salary and is eligible for additional year-end bonus
compensation.
Each of the employment agreements provides that, in the event of a
termination of employment by us without cause or by the employee for good
reason, the employee will be entitled to receive from us a lump-sum payment
equal to the employee's then current salary for the greater of two years or the
remainder under the employment agreement in the case of Messrs. Bowman and Rose
and Ms. Lebenberg; two years' salary in the case of Messrs. Barker and Walker;
and the employee's then current salary for the greater of the period remaining
under the agreement or six months, in the case of Mr. Byerley. In the case of
Mr. Zazworsky's employment agreement, in the event of a termination of
employment by us without cause, Mr. Zazworksy will be entitled to receive a
lump-sum payment equal to his then current salary for the time remaining under
the agreement; and in the event of termination by Mr. Zazworsky for good reason,
he will be entitled to a lump-sum payment of his current salary for the greater
of the period remaining under his employment agreement or six months.
In the event of a change in control, 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 our successor, the amount of the
lump-sum payment to be made to the employee shall be 10 times annual salary in
the case of Mr. Bowman; six times annual salary in the case of Mr. Walker and
Ms. Lebenberg; four times annual salary in the case of Mr. Rose; two and
one-half times annual salary in the case of Messrs. Barker and Zazworksy; and
two year's annual salary in the cases of Mr. Byerley. In addition, in the event
of a change in control with notice that the employee's agreement will be assumed
by our successor, the amount of the lump-sum payment to be made to the employee
upon resignation shall be six times annual salary in the case of Mr. Walker; 10
times annual salary in the case of Mr. Bowman; four times annual salary in the
case of Mr. Rose; three times annual salary in the case of Ms. Lebenberg; two
times annual salary in the case of Mr. Byerley; and two and one half times
annual salary in the case of Messrs. Barker and Zazworsky. Ms. Lebenberg and
Mr. Walker shall each have one year to determine whether or not to resign and
receive their lump-sum payment. Messrs. Bowman, Rose, Barker and Zazworsky shall
each have two years to determine whether or not to resign and receive their
lump-sum payment.
Each of Messrs. Bowman's, Walker's and Barker's and Ms. Lebenberg's
employment agreements contains a covenant not to compete with us for a period of
two years following termination of employment,
12
<PAGE>
provided that: (i) in the event of a termination of employment by us 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 termination of
employment by the employee for good reason or in the event we experience a
change in control wherein the employee does not receive notice 15 days prior to
the event resulting in such change of control of the continuation of the
employee's employment, the covenant-not-to-compete with us shall not apply. Each
of Messrs. Rose's and Zazworsky's employment agreements contains a covenant not
to compete with us for a period of three years following termination of
employment. In the case of both Mr. Rose and Mr. Zazworsky, in the event of a
change in control wherein the employee does not receive notice 15 days prior to
the event resulting in the change of control of the continuation of such
employee's employment, the covenant-not-to-compete with us will not apply.
Mr. Byerley's employment agreement contains a covenant not to compete with us
for a period of two years (one year if employment is terminated by us without
cause) following termination of employment, provided that in the event of a
change in control of us wherein the employee does not receive notice 15 days
prior to the event resulting in the change of control of the continuation of the
employee's employment, the covenant-not-to-compete with us will not apply. If
applicable law reduces the time period during which any employee is prohibited
from competing with us, the covenant not to compete with us shall be reduced to
the maximum period permitted by law.
CONSULTING AGREEMENT
Mr. Lowenstein entered into a consulting agreement with us in January 2000.
Mr. Lowenstein's consulting agreement is for a term of two years and will
automatically renew on a yearly basis thereafter unless terminated by him or us
in accordance with the terms of the agreement.
We may terminate this agreement effective as of December 31, 2000 by
providing written notice of termination to Mr. Lowenstein on or before
October 1, 2000. Upon termination of this agreement, we will pay to
Mr. Lowenstein all aggregate monies due and owing to him with respect to
acquisitions closed on or before the date of termination.
In the event of a change in control, if Mr. Lowenstein has not received
notice 15 days prior to the event resulting in such change of control that the
terms of this agreement will not be continued by our successor, Mr. Lowenstein
will receive a lump-sum termination payment in the amount of $1.5 million. In
addition, in the event of a change in control of the Company with notice that
this agreement will be assumed by our successor, the amount of the lump-sum
payment to be made to Mr. Lowenstein, upon termination of his consulting
agreement, will be $1.5 million. Mr. Lowenstein shall have one year to determine
whether or not to terminate his consulting agreement and receive the lump-sum
payment.
Additionally, Mr. Lowenstein's consulting agreement contains a
covenant-not-to-compete with us during the term of the consulting agreement and
for a period of two years immediately following the termination of the
agreement.
13
<PAGE>
SECURITY OWNERSHIP OF PRINCIPAL STOCKHOLDERS,
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth certain information, as of March 17, 2000
regarding the beneficial ownership of our common stock by (i) each person known
to beneficially own more than 5% of our 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 17, 2000,
there were 15,103,435 shares of our common stock outstanding (including 36,670
shares held by one of our wholly-owned subsidiaries).
<TABLE>
<CAPTION>
PERCENT OF
OUTSTANDING
COMMON
COMMON
NAME OF BENEFICIAL OWNER SHARES OWNED STOCK
- ------------------------ ------------ -----------
<S> <C> <C>
GREATER THAN 5% STOCKHOLDERS
T. Rowe Price Associates, Inc.**............................ 895,200 5.9%
100 East Pratt Street
Baltimore, MD 21202
Goldman Sachs............................................... 752,543 5.0%
1 New York Plaza
New York, NY 10004
Ed H. Bowman, Jr.(1)........................................ 580,834 3.8%
Thomas C. Walker(2)......................................... 269,251 1.8%
Gregory R. Melanson(3)...................................... 242,093 1.6%
David Lowenstein(4)......................................... 224,667 1.5%
Jonathan B. Shaw(5)......................................... 98,532 *
Ronald Zazworsky(6)......................................... 72,633 *
Timothy J. Barker(7)........................................ 64,733 *
Michael J. Bradley(3)....................................... 54,133 *
Margot T. Lebenberg(8)...................................... 50,684 *
Joe A. Rose(9).............................................. 49,451 *
G. Michael Bellenghi........................................ 45,800 *
David M. Byerley(10)........................................ 23,750 *
Donald F. Moorehead, Jr.(3)................................. 23,333 *
Hon. Edward M. Rowell(3).................................... 23,333 *
All Directors and named executive officers as a group
(14 persons)(11).......................................... 1,823,227 12.1%
</TABLE>
- ------------------------
* Represents less than 1%.
** These securities are owned by various individuals and institutional
investors, which T. Rowe Price Associates, Inc. (Price Associates) serves
as investment advisor with power to direct investments and/or sole power to
vote the securities. For purposes of the reporting requirements of the
Securities and Exchange Act of 1934, Price Associates is deemed to be a
beneficial owner of such securities; however, Price Associates expressly
disclaims that it is, in fact, the beneficial owner of such securities.
(1) Does not include 121,667 shares which may be acquired upon the exercise of
options and warrants not exercisable within 60 days.
(2) Does not include 49,333 shares which may be acquired upon the exercise of
options and warrants not exercisable within 60 days.
14
<PAGE>
(3) Does not include 1,667 shares which may be acquired upon the exercise of
options and warrants not exercisable within 60 days.
(4) Does not include 25,333 shares which may be acquired upon the exercise of
options and warrants not exercisable within 60 days.
(5) Does not include 6,666 shares which may be acquired upon the exercise of
options and warrants not exercisable within 60 days.
(6) Does not include 47,300 shares which may be acquired upon the exercise of
options and warrants not exercisable within 60 days.
(7) Does not include 48,900 shares which may be acquired upon the exercise of
options and warrants not exercisable within 60 days.
(8) Does not include 22,666 shares which may be acquired upon the exercise of
options and warrants not exercisable within 60 days.
(9) Does not include 79,300 shares which may be acquired upon the exercise of
options and warrants not exercisable within 60 days.
(10) Does not include 35,000 shares which may be acquired upon the exercise of
options and warrants not exercisable within 60 days.
(11) Does not include 442,833 shares which may be acquired upon the exercise of
options and warrants not exercisable within 60 days.
15
<PAGE>
PROPOSAL NO. 2
TO RATIFY AND APPROVE THE ISSUANCE OF WARRANTS
TO CERTAIN OF OUR EXECUTIVE OFFICERS
BACKGROUND
During 1999, we issued warrants to Messrs. Walker, Bowman, Rose, Barker,
Patton and Zazworsky and to Ms. Lebenberg to purchase an aggregate of 186,300
shares of our common stock at an exercise price of $26.75 per share, which was
the fair market value of our common stock as of the effective date of issuance.
During 2000, we issued warrants to Messrs. Rose, Barker, Zazworsky, Byerley and
Shaw and Ms. Lebenberg to purchase an aggregate of 174,160 shares of our common
stock at an exercise price of $26.375 per share, which was the fair market value
of our common stock as of the effective date of issuance. The reasons for our
issuance of the warrants are described below under the caption "REASONS FOR OUR
BOARD'S RECOMMENDATION AND FOR THIS PROPOSAL NO. 2."
The persons to whom the warrants were issued and the number of shares
issuable to each of such persons upon exercise of the warrants are as follows:
<TABLE>
<CAPTION>
NUMBER OF SHARES
ISSUABLE UPON EXERCISE
NAME OF THE WARRANTS
- ---- ----------------------
<S> <C>
Thomas C. Walker......................................... 22,000
Ed H. Bowman, Jr......................................... 65,000
Joe A. Rose.............................................. 139,300
Timothy J. Barker........................................ 46,100
Margot T. Lebenberg...................................... 23,200
Gary Patton.............................................. 5,000
Ronald Zazworsky......................................... 35,700
David M. Byerley......................................... 11,785
Jonathan B. Shaw......................................... 12,375
</TABLE>
The warrants issued in 1999 may be exercised as to 100% of the underlying
shares at any time following the date of receipt by the Compensation Committee
of our Board of Directors of our audited financial statements showing our actual
earnings per share for the year ended December 31, 2000 ("fiscal 2000"),
provided that such earnings are not less than $1.93 per share. We are required
to use our best efforts to deliver to the Compensation Committee the audited
financial statements showing our actual fiscal 2000 fiscal earnings by March 5,
2001. If our actual 2000 fiscal earnings are less than $1.93 per share, then the
warrants will be exercisable as to 100% of the underlying shares at any time
following the date of receipt by the Compensation Committee of our Board of
Directors of our audited financing statements showing our actual earnings per
share for the year ended December 31, 2001 ("fiscal 2001"), provided that such
earnings are not less than $2.39 per share. We are required to use our best
efforts to deliver to the Compensation Committee the audited financial
statements showing our actual fiscal 2001 earnings by March 5, 2002. However, in
any case, the warrants will vest as to 100% of the underlying shares on
March 5, 2008. The warrants expire at 5:00 P.M., New York City time, on May 19,
2009. In addition, in the event of a Change in Control (as defined in the
warrants) of our Company, the right to exercise 100% of the underlying shares
will immediately vest.
The warrants issued to Mr. Rose, Mr. Barker, Ms. Lebenberg and
Mr. Zazworsky in 2000 may be exercised to purchase (i) 33 1/3% of the underlying
shares commencing March 16, 2001; (ii) 33 1/3% of the underlying shares
commencing March 16, 2002; and (iii) 33 1/3% of the underlying shares commencing
March 16, 2003. These warrants expire at 5:00 p.m., New York City time, on
March 16, 2010. In the event of a Change of Control (as defined in the
warrants), the right to exercise 100% of the underlying shares will immediately
vest.
16
<PAGE>
The warrant issued to Mr. Shaw in 2000 may be exercised as to 100% of the
underlying shares upon achieving certain earning targets for 2000 (as defined in
the warrants). We are required to complete our calculation of these earnings for
2000 on or before May 15, 2001. If the performance threshold is met, this
warrant shall be fully exercisable to and including 5:00 p.m., New York City
time, on March 16, 2010. In the event of a Termination Without Cause or For Good
Reason Following a Change of Control (as defined in the warrant), the right to
exercise 100% of the underlying shares will immediately vest.
The warrant issued to Mr. Byerley in 2000 may be exercised as to 100% of the
underlying shares upon achieving certain acquisition targets for 2000. If this
performance threshold is met, the warrant shall be fully exercisable to and
including 5:00 p.m., New York City, time on March 16, 2010. In the event of a
Termination Without Cause Following a Change of Control (or for Good Reason) (as
defined in the warrant), the right to exercise 100% of the underlying shares
will immediately vest.
There are no federal income tax consequences to the holders of the warrants
or to us upon the issuance of the warrants. Upon the exercise of the warrants,
the holders will recognize ordinary compensation income in an amount equal to
the excess of the fair market value of our common stock at the time of exercise
over the exercise price of the warrants, and the holders will be entitled to a
corresponding deduction for federal income tax purposes. Upon the sale of shares
acquired by exercise of any warrant, the holder generally will realize a capital
gain or loss.
We have registered the shares of our common stock underlying the warrants
issued in 1999 under the Securities Act. Accordingly, upon receipt, these shares
will be freely tradable except to the extent they are held by affiliates of
ours, in which case they may be resold pursuant to an effective registration
statement under the Securities Act or pursuant to an exemption from
registration, such as the one provided by Rule 144 under the Securities Act. The
shares receivable upon exercise of the warrants issued in 2000 will be
registered under the Securities Act.
NASDAQ STOCK MARKET RULE 4460(i)(1)(A)
Rule 4460(i)(1)(A) of the rules of the Nasdaq Stock Market requires
stockholder approval of any arrangement where stock can be acquired by officers
or directors, except for warrants or rights issued generally to stockholders or
broadly based plans or arrangements including other employees (E.G., ESOPs).
Stockholder approval is not necessary when the number of shares issuable does
not exceed the lesser of:
(1) 1% of the number of shares of common stock;
(2) 1% of the voting power outstanding; or
(3) 25,000 shares.
Because the warrants were not issued under any broad-based plan of ours and
because the number of shares of our common stock issuable upon exercise of the
warrants exceeds the de minimus limitations provided for in the Rule, we are
seeking stockholder approval of our issuance of the warrants to certain of our
executive officers.
BENEFITS TO EXECUTIVE OFFICERS IF THIS PROPOSAL NO. 2 IS APPROVED
Each of the persons we issued the warrants to is an officer of F.Y.I. Each
of these executive officers would personally benefit from stockholder approval
of this proposal since each would receive the warrants described in this
Proposal. At the time the warrants were issued, they were issued at fair market
value. Three of these executive officers also are our Directors.
REASONS FOR OUR BOARD'S RECOMMENDATION AND FOR THIS PROPOSAL NO. 2
During 1999 and 2000, our Board of Directors, including all of our
independent Directors, approved the issuance by us of the warrants to certain of
our executive officers. Certain of the warrants were issued
17
<PAGE>
by us in lieu of cash bonuses under employment agreements between us and the
executive officers, and certain of the warrants were issued as additional
compensation in lieu of cash payments and, in each case, the warrants were
issued as an additional incentive to retain, reward and motivate our executive
officers who are essential to our long-term growth and success. Our Board
determined to have us issue the warrants in part to encourage further stock
ownership in F.Y.I. and in lieu of receiving cash bonuses or other cash
compensation.
Assuming ratification and approval of Proposal No. 2 by our stockholders, if
all of the warrants that are the subject of this Proposal were exercised in full
as of the date hereof, 360,460 additional shares would be issued, resulting in
an additional 2.4% of outstanding shares of our common stock. The proceeds from
the exercise of these warrants would be used by us for general corporate and
working capital purposes.
If Proposal No. 2 is not ratified and approved by our stockholders, we would
attempt to obtain the agreement of our executive officers to rescind the
warrants and compensate the warrantholders for the loss of the warrants, most
likely resulting in cash payments per the executive officers employment
agreements. If, however, the warrants nevertheless remain issued, our common
stock could be delisted by Nasdaq. If this were to occur, our common stock
likely would be traded in the over-the-counter market on the OTC Electronic
Bulletin Board. In such an event, the market price of our common stock would be
adversely impacted and a stockholder could find it difficult to dispose, or
obtain accurate quotations as to market value, of our common stock.
OUR BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE
"FOR" APPROVING THE ISSUANCE OF THE
WARRANTS TO CERTAIN OF OUR EXECUTIVE OFFICERS
VOTE REQUIRED FOR APPROVAL
The proposal to approve the warrants requires the affirmative vote of the
holders of a majority of shares of our common stock present in person or
represented by Proxy at the Annual Meeting and entitled to vote on this
proposal.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
REAL ESTATE TRANSACTIONS
One of our subsidiaries leases office facilities and certain equipment from
Mr. Melanson. The total lease payments to Mr. Melanson were approximately
$394,700 for the year ended December 31, 1999. Our subsidiary is also required
to pay the taxes and insurance on the properties. We believe that the amounts
paid for such properties do not exceed the fair market rental thereof.
Mr. Melanson has entered into an agreement with us to terminate these leases in
2000.
COMPANY POLICY
It is our policy that transactions with our affiliates will be approved by a
majority of the disinterested members of our Board of Directors, and will be
made on terms no less favorable to us than could be obtained from unaffiliated
third parties.
INDEPENDENT ACCOUNTANTS
Upon the recommendation of our Audit Committee, our Board of Directors
selected Arthur Andersen LLP as our independent public accountants for fiscal
2000. Arthur Andersen LLP audited our books, records and accounts for fiscal
1999, and representatives of the firm will attend our Annual Meeting, will have
the opportunity to make a statement and will be available to answer questions
that may be asked by our stockholders.
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SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
our officers and directors and persons who own more than 10% of our common stock
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 us with copies of all Sections 16(a) forms they file.
Based solely on our review of the copies of such forms received by us with
respect to fiscal 1999, or written representations from certain reporting
persons, to the best of our knowledge, all reports were filed on a timely basis.
OTHER MATTERS
Our 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.
STOCKHOLDER PROPOSALS FOR OUR 2001
ANNUAL MEETING OF STOCKHOLDERS
Stockholder proposals to be presented at our 2001 Annual Meeting of
Stockholders must be received, in writing, by our Secretary at our principal
executive offices no later than November 28, 2000 in order to be included in our
Proxy materials relating to that meeting.
REPORT ON FORM 10-K
OUR ANNUAL REPORT ON FORM 10-K FOR OUR FISCAL YEAR ENDED DECEMBER 31, 1999,
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION, IS AVAILABLE TO OUR
STOCKHOLDERS, WITHOUT CHARGE, UPON WRITTEN REQUEST. EXHIBITS TO OUR 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: INVESTOR RELATIONS.
By Order of our Board of Directors
/s/ MARGOT T. LEBENBERG
Margot T. Lebenberg
SENIOR VICE PRESIDENT,
GENERAL COUNSEL AND SECRETARY
Dallas, Texas
April 3, 2000
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F.Y.I. INCORPORATED
ANNUAL MEETING OF STOCKHOLDERS - MAY 11, 2000
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 our common stock (par
value $.01) of F.Y.I. Incorporated which the undersigned is entitled to vote
at our Annual Meeting of Stockholders to be held at the Melrose Hotel, 3015
Oak Lawn Avenue, Dallas, Texas 75219 on Thursday, May 11, 2000, 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 FOR THE APPROVAL OF THE WARRANTS.
THIS PROXY IS SOLICITED BY OUR BOARD OF DIRECTORS
(CONTINUED AND TO BE SIGNED ON REVERSE SIDE)
PLEASE DATE, SIGN AND MAIL YOUR
PROXY CARD BACK AS SOON AS POSSIBLE!
ANNUAL MEETING OF STOCKHOLDERS
F.Y.I. INCORPORATED
MAY 11, 2000
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 contrary below) listed at right
Directors [ ] [ ]
NOMINEES: THOMAS C. WALKER
ED H. BOWMAN, JR.
DAVID LOWENSTEIN
JOE A. ROSE
JONATHAN B. SHAW
MICHAEL J. BRADLEY
DONALD F. MOOREHEAD, JR.
EDWARD M. ROWELL
(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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FOR AGAINST ABSTAIN
2. Approval of Warrants [ ] [ ] [ ]
3. In their discretion, the proxies are authorized to vote upon such
other business as may properly come before our Annual Meeting and any
adjournment thereof.
PLEASE SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
PLEASE CHECK HERE IF YOU PLAN TO ATTEND OUR ANNUAL MEETING [ ]
Signature __________________________ Dated: ___________________, 2000
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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