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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
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 (S) 240.14a-11(c) or (S)240.14a-12
FTI CONSULTING, INC.
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(Name of the Registrant as Specified in its Charter)
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(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rule 14a-6(i)(1) 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 (set forth the amount on which
the filing fee is calculated and state how it was determined):
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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 filing by registration
statement number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
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4) Date Filed:
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[LOGO] F T I
900 Bestgate Road, Suite 100
Annapolis, Maryland 21401
(410) 224-8770
April 10, 2002
Dear Stockholder:
On behalf of the Board of Directors, I cordially invite you to attend the
2002 Annual Meeting of Stockholders of FTI Consulting, Inc. on May 22, 2002, at
9:30 a.m., EDT, at FTI Consulting's business office, located at 909 Commerce
Road, Annapolis, Maryland 21401.
Enclosed with this letter is a Notice of the Annual Meeting, a Proxy
Statement, a proxy card, and a return envelope. Both the Notice of the Annual
Meeting and the Proxy Statement provide details of the business that we will
conduct at the Annual Meeting and other information about FTI Consulting. Also
enclosed with this letter is FTI Consulting's Annual Report to Stockholders for
2001.
At the Annual Meeting, we will ask you to:
. Elect two Class III directors;
. Approve an amendment of our 1997 Stock Option Plan, as amended;
. Approve an amendment of our Employee Stock Purchase Plan, as amended;
. Ratify the selection of Ernst & Young LLP as our independent accountants
for 2002; and
. Transact any other business that is properly presented at the Annual
Meeting.
Whether or not you plan to attend the Annual Meeting, please sign, date and
promptly return the proxy card in the enclosed prepaid return envelope. Your
shares of Common Stock will be voted at the Annual Meeting in accordance with
your proxy instructions. Of course, if you attend the Annual Meeting you may
vote in person. If you plan to attend the meeting, please mark the appropriate
box on the enclosed proxy card.
Sincerely,
/s/ Jack B. Dunn, IV
Jack B. Dunn, IV
Chief Executive Officer and
Chairman of the Board of Directors
Your Vote Is Important
Please Sign, Date and Return Your Proxy Card Before the Annual Meeting.
If you have any questions about voting your shares, please contact Theodore I.
Pincus, Executive
Vice President, Chief Financial Officer and Secretary, FTI Consulting, Inc.,
900 Bestgate Road, Suite 100
Annapolis, Maryland 21401, Telephone No. (410) 224-8770.
FTI CONSULTING, INC.
NOTICE OF 2002 ANNUAL MEETING OF STOCKHOLDERS
Date: May 22, 2002
Time: 9:30 a.m., EDT
Place: 909 Commerce Road, Annapolis, Maryland 21401
Dear Stockholder:
At the Annual Meeting, we will ask you to:
. Elect two Class III directors;
. Approve an amendment of our 1997 Stock Option Plan, as amended;
. Approve an amendment of our Employee Stock Purchase Plan, as amended;
. Ratify the selection of Ernst & Young LLP as our independent accountants
for 2002; and
. Transact any other business that is properly presented at the Annual
Meeting.
You will be able to vote your shares of Common Stock at the Annual Meeting
if you were a stockholder of record at the close of business on March 22, 2002.
By Order of the Board of Directors
/s/ Theodore I. Pincus
Theodore I. Pincus
Secretary
April 10, 2002
YOUR VOTE AT THE ANNUAL MEETING IS IMPORTANT.
Please indicate your vote on the enclosed proxy card and return it in the
enclosed envelope as soon as possible, even if you plan to attend the meeting.
If you have questions about voting your shares, please contact Theodore I.
Pincus, Executive Vice President, Chief Financial Officer and Secretary, FTI
Consulting, Inc., 900 Bestgate Road, Suite 100, Annapolis, Maryland 21401,
Telephone No. (410) 224-8770.
If you attend the meeting, you will be able to revoke your proxy and vote in
person.
[LOGO] F T I
900 Bestgate Road, Suite 100
Annapolis, Maryland 21401
April 10, 2002
PROXY STATEMENT FOR ANNUAL MEETING
This Proxy Statement provides information that you should read before you
vote on the proposals that will be presented to you at the 2002 Annual Meeting
of Stockholders of FTI Consulting, Inc. The 2002 Annual Meeting will be held on
May 22, 2002, at 9:30 a.m., EDT, at FTI Consulting's business office, located
at 909 Commerce Road, Annapolis, Maryland 21401.
This Proxy Statement provides information about the Annual Meeting, the
proposals on which you will be asked to vote at the Annual Meeting and other
relevant information.
On April 10, 2002, we began mailing information to people who, according to
our records, owned shares of our Common Stock at the close of business on March
22, 2002. We have mailed with that information a copy of FTI Consulting's
Annual Report to Stockholders for 2001.
INFORMATION ABOUT THE 2002 ANNUAL MEETING AND VOTING
The Annual Meeting
The Annual Meeting will be held on May 22, 2002 at 9:30 a.m., EDT, at FTI
Consulting's business office, located at 909 Commerce Road, Annapolis, Maryland
21401.
This Proxy Solicitation
We are sending you this Proxy Statement because FTI Consulting's Board of
Directors is seeking a proxy to vote your shares of our Common Stock at the
Annual Meeting. This Proxy Statement is intended to assist you in deciding how
to vote your shares. On April 10, 2002, we began mailing this Proxy Statement
to all people who, according to our stockholder records, owned shares of our
Common Stock at the close of business on March 22, 2002.
FTI Consulting is paying the cost of requesting these proxies. FTI
Consulting's directors, officers and employees may request proxies in person or
by telephone, mail, facsimile or letter. FTI Consulting also has retained
Mellon Investor Services to assist in seeking proxies. FTI Consulting will pay
Mellon a fee of approximately $9,500 plus reasonable out-of-pocket expenses,
for this assistance. FTI Consulting will reimburse brokers and other nominees
their reasonable out-of-pocket expenses for forwarding proxy materials to
beneficial owners of our Common Stock.
Voting Your Shares
You have one vote for each share of our Common Stock that you owned of
record at the close of business on March 22, 2002. The number of shares you own
(and may vote at the Annual Meeting) is listed on the enclosed proxy card.
You may vote your shares of our Common Stock at the Annual Meeting either in
person or by proxy. To vote in person, you must attend the Annual Meeting and
submit a ballot. Ballots for voting in person will be available at the Annual
Meeting. To vote by proxy, you must complete and return the enclosed proxy
card. By completing and returning the proxy card, you will be directing the
person or persons designated on the proxy card to vote your shares of our
Common Stock at the Annual Meeting in accordance with the instructions you give
on the proxy card.
IF YOU DECIDE TO VOTE BY PROXY, YOUR PROXY CARD WILL BE VALID ONLY IF YOU
SIGN, DATE AND RETURN IT BEFORE THE ANNUAL MEETING.
If you complete the proxy card except for the voting instructions, then your
shares will be voted FOR the election of the Class III directors, FOR the
amendment to our 1997 Stock Option Plan, FOR the amendment to our Employee
Stock Purchase Plan and FOR the ratification of the selection of Ernst & Young
LLP as our independent accountants for the year 2002.
Revoking Your Proxy
If you decide to change your vote, you may revoke your proxy at any time
before it is voted. You may revoke your proxy in any one of three ways:
. You may notify the Secretary of FTI Consulting in writing that you wish
to revoke your proxy.
. You may submit a proxy dated later than your original proxy.
. You may attend the Annual Meeting and vote. Merely attending the Annual
Meeting will not by itself revoke a proxy. You must submit a ballot and
vote your shares of Common Stock.
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Vote Required for Approval
Proposal 1: Election of Two Class III Directors The two nominees for election as Class III directors
who receive the most votes will be elected. So, if
you do not vote for a particular nominee, or you
indicate "withhold authority to vote" for a particular
nominee on your proxy card, your vote will not
count either for or against the nominee.
Proposal 2: Amendment to Our 1997 Stock Option Plan The affirmative vote of a majority of the votes cast
at the Annual Meeting is required, provided that the
total vote cast on the proposal represents over 50%
in interest of all securities entitled to vote on the
proposal. So, an abstention or a broker non-vote will
have the effect of a vote against the proposal unless
holders of over 50% in interest of all securities
entitled to vote on the proposal cast votes, in which
case your abstention or a broker non-vote will not
count as a vote for or against the proposal.
Proposals 3 and 4: Amendment to Our The affirmative vote of a majority of the votes cast
Employee Stock Purchase Plan and Ratification of at the Annual Meeting is required. So, an abstention
Selection of Our Independent Accountants will not count as a vote for or against the proposal.
If you hold your shares with a broker and you do not tell your broker how to
vote, your broker has the authority to vote on Proposals 1, 3 and 4.
Quorum. On March 22, 2002, the record date for the Annual Meeting,
19,967,712 shares of our Common Stock were issued and outstanding. A quorum
must be present at the Annual Meeting in order to transact business. A quorum
will be present if a majority of the shares of Common Stock entitled to vote
are represented at the Annual Meeting, either in person or by proxy. If a
quorum is not present, a vote cannot occur, except the Annual Meeting may be
adjourned until such time as a quorum is present. In deciding whether a quorum
is present, abstentions will be counted as shares of Common Stock that are
represented at the Annual Meeting.
Additional Information
FTI Consulting's Annual Report to Stockholders for the year ended December
31, 2001, including our consolidated financial statements, is being mailed to
all stockholders entitled to vote at the Annual Meeting together with this
Proxy Statement. The Annual Report does not constitute a part of the proxy
solicitation material. The Annual Report provides you with additional
information about FTI Consulting.
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PROPOSALS TO BE PRESENTED AT THE ANNUAL MEETING
We will present the following four proposals at the Annual Meeting. We have
described in this Proxy Statement all the proposals that we expect will be made
at the Annual Meeting. If we or a stockholder properly presents any other
proposal at the meeting, we will, to the extent permitted by applicable law,
use your proxy to vote your shares of Common Stock on the proposal in our best
judgment.
PROPOSAL 1. ELECTION OF DIRECTORS
FTI Consulting's Amended and Restated Articles of Incorporation provide that
its Board of Directors will consist of three classes. The members of each class
are elected for three-year terms. We currently have seven directors, of which
the two directors constituting the Class III directors are to be elected at the
2002 Annual Meeting. The terms of the Class I and Class II directors will
expire at the Annual Meetings of Stockholders to be held in 2003 and 2004,
respectively.
The Nominating and Corporate Governance Committee of our Board of Directors
has recommended to the Board that the following individuals be nominated for
election to our Board of Directors as Class III directors:
Jack B. Dunn, IV
Stewart J. Kahn
Based upon the recommendation of the Nominating and Corporate Governance
Committee, our Board of Directors has nominated Messrs. Dunn and Kahn for
election to our Board of Directors as Class III directors. Each director will
be elected to serve for a three-year term, or thereafter until his replacement
is chosen and qualifies. Messrs. Dunn and Kahn are currently members of the
Board of Directors, and each has agreed to continue to serve as a director if
elected. More detailed information about each of the nominees is provided in
the section of this Proxy Statement titled "The Board of Directors."
If either of the nominees cannot serve for any reason (which is not
anticipated), the Board of Directors may designate a substitute nominee. If
that happens, we will vote all valid proxies for the election of the substitute
nominee or nominees. The Board of Directors may also decide to leave the Board
seat or seats open until a suitable candidate or candidates are located, or it
may decide to reduce the size of the Board.
The Board of Directors unanimously recommends that you vote FOR
the nominees for election as Class III directors.
PROPOSAL 2. AMEND THE 1997 STOCK OPTION PLAN
We are asking you to approve an amendment to our 1997 Stock Option Plan, as
amended, to increase the number of shares of Common Stock authorized under the
Plan from 6,225,000 to 7,725,000. We primarily use the Plan to recruit, reward,
and retain employees and non-employee directors and in connection with our
acquisitions of businesses. The following is a summary of our Stock Option Plan
as it will be if the stockholders approve the amendment. The share numbers
described in the summary have been adjusted to reflect the three-for-two stock
split on our Common Stock paid as a stock dividend on January 16, 2002. This
summary is qualified in all respects by the full text of the amended Plan, a
copy of which is attached to this Proxy Statement as Exhibit A.
Summary of the Plan
Plan Administration. The Compensation Committee of our Board of Directors
administers the Plan but our Board of Directors may also administer the Plan.
The Plan administrator is responsible for the general operation and
administration of the Plan, including determining the recipients of grants and
the terms of the options granted.
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Participants. The administrator may grant options to our employees,
directors and service providers, a total of about 632 persons as of March 22,
2002. The administrator may also make grants of Common Stock to our employees,
a total of about 617 persons as of March 22, 2002. The administrator may also
grant new options or options to replace options when we acquire another company
and, where appropriate, to mirror the terms of those replaced options.
Shares Available Under the Plan. The administrator may grant awards under
the Plan, in the form of incentive stock options, nonqualified stock options or
direct stock awards, with respect to up to 7,725,000 shares of Common Stock. Of
this amount, as of March 29, 2002, awards with respect to 5,527,707 shares have
already been granted. In addition, of this 7,725,000 aggregate share limit, no
more than 7,500,000 shares may be issued under incentive stock options and no
more than 375,000 shares may be issued as direct stock awards. If any option
under the Plan expires or terminates before the optionee has fully exercised
it, the shares subject to that option will be available for future grants under
the Plan.
The shares of Common Stock to be issued under the Plan will come from either
authorized but unissued shares or from previously issued shares that we
reacquire, including shares we purchase on the open market. Shares under the
Plan will be adjusted for stock dividends, stock splits, reclassifications and
other changes that affect our Common Stock. Because the Plan provides for
discretionary grants of options and Common Stock, we cannot predict the
specific amounts particular persons will receive.
Individual Grant Limits. Under the Plan, the administrator may not grant
options or direct stock awards, in any combination, for more than 750,000
shares to any individual in any calendar year.
Incentive Stock Option Limits. Three special limits apply to incentive stock
options under the Plan. The first limitation is that treatment of incentive
stock options is limited based on when the options first become exercisable;
only the first $100,000 of shares of Common Stock (valued as of the date of
grant) that become exercisable under an individual's incentive stock options in
a given year will be eligible to receive incentive stock option tax treatment.
The second limitation is that the exercise price must at least equal 100% of
the fair market value of the shares on the date of grant of the option. The
third limitation is that the exercise price for stockholders holding more than
10% of our outstanding Common Stock must at least equal 110% of the fair market
value of our Common Stock.
Exercise Price. The exercise price for all options is based on the market
price when granted. On March 22, 2002, the closing price of our Common Stock on
the New York Stock Exchange was $28.60 per share. The administrator must grant
nonqualified stock options with an exercise price at least equal to 50% of the
fair market value on the date of grant. We do not receive separate
consideration for the granting of awards, other than the services the
participants provide.
Option Exercise and Transfer Restrictions. An optionee can normally only
exercise an option while employed by us, unless his or her employment or option
agreement provides otherwise. If an optionee becomes disabled or dies, he or
his estate will have up to 12 months to exercise the options. An optionee
generally cannot transfer his options other than to someone upon death.
Director Options. The Plan provides for an automatic grant of a
nonqualified stock option for 90,000 shares when a non-employee director (an
"Eligible Director") joins the board and every three years thereafter that he
remains on the Board. The option becomes exercisable one-third a year after the
date of grant, another third two years after the grant, and the final third
three years after the grant. Options will also become exercisable at the first
to occur of the director's death, disability or attainment of age 70. The
exercise price for options granted to Eligible Directors will be the fair
market value of the Common Stock on the date the option is granted. These
options expire if not already exercisable when an Eligible Director leaves the
Board. Exercisable options remain in place for their original term.
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Option Expiration. Options will terminate no later than ten years after
their date of grant. However, options intended to be incentive stock options
under the Plan will expire no later than five years after the date of grant if
the optionee owns (or is treated as owning) more than ten percent of the
outstanding shares of Common Stock when the option is granted. The
administrator may not grant options under the Plan after March 25, 2007.
Termination of Service. The administrator has discretion to fix the period
in which options granted to employees may be exercised after termination of
employment. Exercisable options granted to Eligible Directors remain
exercisable for the remaining term of the option unless the Board specifies
otherwise.
Substantial Corporate Changes. If we experience a "substantial corporate
change" (examples of which include total liquidation, sale of all of our
shares, a merger in which we do not survive, or sale of all or substantially
all of our assets), all options will automatically vest. In some circumstances,
either an acquirer must assume or replace the options or the optionees will
have some period of time before the transaction occurs to exercise options or
take other actions with the options after which time the Plan will terminate.
Stockholder Approval. In general, stockholder approval will only be
required for changes to the number of incentive stock options that may be
granted, to the extent necessary to preserve their tax treatment, or to the
individual grant limit, and when required by the New York Stock Exchange.
Amendments and Termination. The Board may at any time suspend, terminate,
modify or amend the Plan. No suspension, termination, modification or amendment
of the Plan may adversely affect any option previously granted, unless the
optionee consents.
Tax Consequences
Nonqualified Stock Options. An optionee will not be taxed when he receives
a nonqualified stock option. When he exercises a nonqualified stock option, he
will generally owe taxes on ordinary income on the difference between the value
of the shares of Common Stock he receives and the price he pays, with the
"spread" treated like additional salary for an employee. He may then owe taxes
again if and when he sells the shares. That tax would be on the excess, if any,
of the price he receives for the shares over his "tax basis," which is the
value at exercise of the shares on which he originally paid income taxes.
Depending upon how long he held the shares before selling, he may be eligible
for favorable tax rates for long-term capital gains. In addition, we generally
will receive an income tax deduction for any amounts of "ordinary income"
recognized by him.
Incentive Stock Options. An optionee will not be taxed when he receives an
incentive stock option and will not be taxed when he exercises the incentive
stock option, unless he is subject to the alternative minimum tax. If he holds
the shares of Common Stock purchased upon exercise of the incentive stock
option (the "ISO Shares") for more than one year after the date he exercised
the option and for more than two years after the option grant date, he
generally will realize long-term capital gain or loss (rather than ordinary
income or loss) when he sells or otherwise disposes of the ISO Shares. This
gain or loss will equal the difference between the amount realized upon such
disposition and the amount paid for the ISO Shares.
If the optionee sells the ISO Shares in a "disqualifying disposition" (that
is, within one year from the date he exercised the incentive stock option or
within two years from the date of the incentive stock option grant), he
generally will recognize ordinary compensation income equal to the lesser of
(i) the fair market value of the shares on the date of exercise minus the price
he paid or (ii) the excess of the amount he realized on the sale over the
adjusted tax basis of the shares. For a gift or another disqualifying
disposition where a loss, if sustained, would not usually be recognized, he
will recognize ordinary income equal to the fair market value of the shares on
the date of exercise minus the price he paid. Any amount realized on a
disqualifying disposition that exceeds the amount treated as ordinary
compensation income (or any loss realized) will be a long-term or a short-term
capital gain (or loss), depending, under current law, on whether he held the
shares for more than 12 months. We can generally take a tax deduction on a
disqualifying disposition corresponding to the ordinary compensation income he
recognizes but cannot deduct the amount of the capital gains.
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Potential Limitation on Our Deductions. Internal Revenue Code Section
162(m) denies a deduction to any publicly held corporation for compensation it
pays to certain employees in a taxable year to the extent that compensation
exceeds $1,000,000 for a covered employee. The possibility exists that
compensation attributable to awards under the Plan, when combined with all
other types of compensation a covered employee receives for the year from us,
may cause this limitation to be exceeded in any particular year.
The tax rules disregard some kinds of compensation, including qualified
"performance-based compensation" for purposes of the deduction limitation.
Compensation attributable to options will qualify as performance-based
compensation, provided that: (i) the plan contains a per-employee limitation on
the number of shares for which options may be granted during a specified
period; (ii) the stockholders approve that per-employee limitation; (iii) the
option is granted by a compensation committee with voting members comprised
solely of "outside directors"; and (iv) either the exercise price of the option
is at least equal to the fair market value of the shares on the date of grant,
or the option is granted (or exercisable) only upon the achievement (as
certified by the compensation committee) of an objective performance goal
established by the compensation committee while the outcome is substantially
uncertain. We expect the options to qualify as performance-based compensation.
This Tax Consequences section summarizes the general principles of current
federal income tax law applicable to the purchase of shares of Common Stock
under the Plan. While we believe that the description accurately summarizes
existing provisions of the Internal Revenue Code of 1986, as amended, and its
legislative history and regulations, and the applicable administrative and
judicial interpretations, these statements are only summaries, and the rules in
question are quite detailed and complicated. Moreover, legislative,
administrative, regulatory or judicial changes or interpretations may occur
that would modify such statements. Individual financial situations may vary,
and state and local tax consequences may be significant. Therefore, no one
should act based on this description without consulting his own tax advisors
concerning the tax consequences of purchasing shares under the Plan and the
disposing of those shares. In addition, different rules may apply if the
optionee is subject to foreign tax laws or pays the exercise price using shares
he already owns.
New Plan Benefits
Other than the grants to Eligible Directors, the Plan administrator makes
grants under the Plan at its discretion. Consequently, we cannot fully
determine at this time the amount or dollar value of benefits to be provided
under the Plan, other than to note that the administrator has not granted
options contingent on approval of the increase in shares under the Plan.
The Board of Directors unanimously recommends that you vote FOR this proposal.
PROPOSAL 3. AMEND THE EMPLOYEE STOCK PURCHASE PLAN
We are asking you to approve an amendment to our Employee Stock Purchase
Plan, as amended, to increase from 750,000 to 950,000 the number of shares of
Common Stock that we can issue under the Plan. The following is a summary of
our Employee Stock Purchase Plan as it will be if the stockholders approve the
amendment. The share numbers described in the summary have been adjusted to
reflect the three-for-two stock split on our Common Stock paid as a stock
dividend on January 16, 2002. This summary is qualified in all respects by the
full text of the amended Plan, a copy of which is attached to this Proxy
Statement as Exhibit B.
General
Purpose. The Plan offers eligible employees the opportunity to purchase
shares of our Common Stock through after-tax payroll withholdings. The Plan
permits employees to acquire an equity interest in us, thereby creating a
stronger incentive to expend maximum effort for our growth and success. Funds
received by us under the Plan may be used for any general corporate purpose.
6
Eligibility. All of our employees are eligible to participate in the Plan
(unless they hold more than 5% of our Common Stock), so long as they are
regularly scheduled to work at least 20 hours per week. As of March 22, 2002,
about 617 employees were eligible to participate in the Plan.
Shares Available Under the Plan. The Plan authorizes the issuance of up to
950,000 shares of our authorized but unissued Common Stock. The number of
shares issuable under the Plan will be adjusted for stock dividends, stock
splits, reclassifications and other changes that affect our Common Stock.
Because the Plan permits participants to choose their own level of
participation, subject to overall tax and program limits, the specific amounts
to be granted to particular persons cannot be determined in advance. As of
March 22, 2002, 608,350 shares of our Common Stock have been issued under the
Plan.
Administration. The Plan is administered by our Compensation Committee. The
Compensation Committee has the authority and discretion to specify the terms
and conditions of options granted to employees (within the limitations of the
Plan) and to otherwise interpret and construe the terms of the Plan and any
agreements governing options granted under the Plan. In addition, the
Compensation Committee has the authority and discretion to modify the
eligibility requirements for participation in the Plan from time to time, so
long as those modifications do not require stockholder approval in order for
the Plan to continue to qualify under Section 423 of the Internal Revenue Code
and they do not materially increase our cost of maintaining the Plan.
Options Granted Under the Plan
General. All options granted under the Plan are evidenced by participation
agreements. The Compensation Committee has broad discretion to determine the
timing, amount, exercisability, and other terms and conditions of options
granted to employees. No options granted or funds accumulated under the Plan
are assignable or transferable, other than by will or in accordance with the
laws of descent and distribution. Offering periods for the Plan run from
January 1 to June 30 and July 1 to December 31 of each calendar year.
Election to Participate. Employees must elect before the beginning of a
given offering period to participate; however, once an employee has elected to
participate, that election carries forward to future offering periods until
revoked. The employee may elect to have between 1% and 15% of compensation set
aside for use in purchasing shares of our Common Stock at the end of the
offering period. The employee may not change the elected percentage during an
offering period but may withdraw entirely, so long as the withdrawal is made at
least 30 days before the end of the offering period.
Exercise Price. The exercise price for options under the Plan is the lesser
of 85% of the fair market value on the first day of the offering period and 85%
of the fair market value on the last day of the offering period. No participant
may purchase more than $25,000 worth of our Common Stock in all offering
periods ending during the same calendar year. The closing price of a share of
our Common Stock, as reported on the New York Stock Exchange on March 22, 2002
was $28.60.
Exercise. Options granted under the Plan to employees are automatically
exercised as of the last day of the offering period, unless the employee has
requested withdrawal of his payroll contributions at least 30 days earlier. The
number of shares to be purchased is determined by dividing the dollars
accumulated through payroll withholding by the exercise price and rounding down
to the nearest whole number of shares.
The option price is ordinarily paid through payroll withholding, but the
Compensation Committee is authorized to accept payment (i) through the
tendering of shares of Common Stock that the optionee has held for at least six
months or acquired under an option granted not less than six months prior and
that will be valued at the fair market value on the date of exercise or (ii)
through attestation that the optionee holds shares equal to the number required
to pay the purchase price (in which case we will issue the net number of shares
required by the exercise). An optionee does not have any of the rights of a
stockholder until payment in full for the share is received and a stock
certificate is issued.
7
The Compensation Committee may prescribe in the participation agreement that
the optionee may elect to satisfy any federal, state or local withholding tax
requirements by directing us to apply shares of our Common Stock to which the
optionee is entitled as a result of the exercise of the option in order to
satisfy such withholding requirements.
Termination of Service. Employees who terminate their employment or die
during an offering period will be deemed to have elected withdrawal of all
payroll contributions.
Substantial Corporate Changes. If we have a "substantial corporate change"
(examples of which include total liquidation, sale of all of our shares, a
merger in which we do not survive, or sale of substantially all of our assets),
employees would be permitted to make an early election to exercise their
options.
Stockholder Approval. In general, stockholder approval is required for
changes to the extent necessary to preserve the Plan's status as a plan under
Section 423 of the Internal Revenue Code.
Amendment or Termination. Our Board of Directors may amend or terminate the
Plan at any time. Unless we extend the Plan, no offering periods will begin
after December 31, 2006.
Tax Consequences
The following summarizes the federal income tax consequences of
participation in the Plan. The summary does not cover employment taxes except
as specified and does not cover state, local, or foreign tax consequences, if
any.
Rights granted under the Plan are intended to qualify for the favorable
federal income tax treatment provided by an employee stock purchase plan that
qualifies under Section 423 of the Internal Revenue Code. An employee's
withheld compensation will be post-tax. In other words, the employee will be
taxed on amounts withheld for the purchase of shares of our Common Stock as if
he had instead received his full salary or wages. Other than this, no income
will be taxable to an employee until disposition of the shares acquired, and
the method of taxation will depend on how long he held the shares before
disposition.
If the purchased shares of Common Stock are disposed of more than two years
after the beginning of the applicable offering period (July 1 or January 1) and
more than one year after the exercise date or if the employee dies at any time
while holding the stock, then the lesser of (a) the excess of the fair market
value of the stock at the time of such disposition or death over the purchase
price or (b) 15% of the fair market value of the stock as of the beginning of
the applicable offering period will be treated as ordinary income. Any further
gain or any loss will be taxed as a long-term capital gain or loss. Net
long-term capital gains for individuals are currently subject to a maximum
marginal federal income tax rate that is less than the maximum marginal rate
for ordinary income.
If the employee sells or disposes of the stock before expiration of either
of the holding periods described above (a "disqualifying disposition"), the
excess of the fair market value of the stock on the exercise date over the
exercise price will be treated as ordinary income at the time of such
disposition. The balance of any gain on a sale will be treated as capital gain.
Even if the stock is sold for less than its fair market value on the exercise
date, the same amount of ordinary income is attributed to the employee, and a
capital loss is recognized equal to the difference between the sales price and
the fair market value of the stock on the exercise date. Any capital gain or
loss will be long- or short-term depending on whether the stock has been held
for more than one year.
There are no federal income tax consequences to us by reason of the grant or
exercise of rights under the Plan. We are generally entitled to a deduction to
the extent amounts are taxed as ordinary income to an employee by reason of a
disqualifying disposition of the purchased shares of stock, but we are not
entitled to a deduction in respect of any ordinary income realized by an
employee upon a later disposition or upon death. Our deduction may be limited
under Internal Revenue Code Section 162(m) and may be subject to disallowance
for failure to report the optionee's income (which could arise if an optionee
does not notify us of the sale of stock in a disqualifying disposition).
8
New Plan Benefits
Benefits to be awarded under the Plan have not been determined at this time.
The Board of Directors unanimously recommends that you vote FOR this proposal.
PROPOSAL 4. RATIFY ERNST & YOUNG LLP AS INDEPENDENT ACCOUNTANTS
Upon the recommendation of the Audit Committee, the Board of Directors has
appointed Ernst & Young LLP to serve as FTI Consulting's independent
accountants for its year ending December 31, 2002. The Board of Directors is
seeking ratification of the appointment of Ernst & Young. A representative from
Ernst & Young will be available at the Annual Meeting to answer your questions
and make a statement if he or she desires.
Audit Fees
Fees for professional services rendered in connection with the audit of our
consolidated financial statements and the reviews of our consolidated financial
statements included in our quarterly reports filed with the Securities and
Exchange Commission (the "SEC") for the year 2001 were $138,253.
Financial Information Systems Design and Implementation Fees
For the year 2001, Ernst & Young did not provide us any professional
services for financial information systems design and implementation.
All Other Fees
For the year 2001, fees for all other professional services rendered to us
were $120,193, all of which was for tax and accounting research, tax planning
and compliance matters.
The Board of Directors unanimously recommends that you vote FOR this proposal.
9
STOCK OWNERSHIP
There were 19,967,712 shares of our Common Stock issued and outstanding on
March 22, 2002. The following table shows the beneficial ownership of our
Common Stock as of March 22, 2002 by: (1) each person or entity that we know
beneficially owns more than 5% of our Common Stock; (2) each of our current
executive officers and directors; and (3) all of our current directors and
executive officers as a group.
Number of Shares Percentage of Shares
Name of Beneficial Owner (1)(2) Beneficially Owned (3) Beneficially Owned (3)
------------------------------- ---------------------- ----------------------
Executive Officers and Directors:
Jack B. Dunn, IV (4)....................................... 285,353 1.42%
Stewart J. Kahn (5)........................................ 233,292 1.16
Theodore I. Pincus (6)..................................... 43,000 *
Glenn R. Baker (7)......................................... 7,500 *
Denis J. Callaghan (8)..................................... 8,550 *
James A. Flick, Jr. (9).................................... 77,147 *
Peter F. O'Malley (10)..................................... 63,750 *
Dennis J. Shaughnessy (11)................................. 3,750 *
George P. Stamas (12)...................................... 31,273 *
All directors and executive officers as a group (9 persons) 753,615 3.68
Other Stockholders:
T. Rowe Price Associates, Inc. (13)........................ 1,569,150 7.86
Wasatch Advisors, Inc. (14)................................ 1,692,439 8.48
--------
* Less than 1%.
(1) Unless otherwise specified, the address of these persons is c/o FTI
Consulting, Inc., 900 Bestgate Road, Suite 100, Annapolis, Maryland 21401.
(2) We use the SEC's definition of beneficial ownership. This means that the
persons named in this table have sole or shared voting and/or investment
power over the shares shown. Beneficial ownership also includes shares
underlying options currently exercisable or exercisable within 60 days.
(3) Amounts have been adjusted to reflect the three-for-two stock split on our
Common Stock paid as a stock dividend on January 16, 2002.
(4) Includes 82,316 shares of Common Stock and 190,737 shares of Common Stock
issuable upon the exercise of options. Includes 12,000 shares of Common
Stock over which Mr. Dunn and his wife share voting and investment power
and includes 300 shares over which Mr. Dunn and his son share voting and
investment power.
(5) Includes 83,292 shares of our Common Stock and 150,000 shares of our
Common Stock issuable upon exercise of stock options.
(6) Includes 3,000 shares of our Common Stock and 40,000 shares of our Common
Stock issuable upon exercise of stock options.
(7) Represents 7,500 shares of our Common Stock issuable upon exercise of
stock options.
(8) Represents 8,550 shares of our Common Stock.
(9) Includes 20,597 shares of our Common Stock and 55,050 shares of our Common
Stock issuable upon exercise of stock options. Includes 1,500 shares of
Common Stock owned by Mr. Flick's wife.
(10) Includes 15,000 shares of our Common Stock and 48,750 shares of our Common
Stock issuable upon exercise of stock options.
(11) Represents 3,750 shares of our Common Stock.
(12) Includes 1,273 shares of our Common Stock over which Mr. Stamas and his
wife share voting and investment power and 30,000 shares of our Common
Stock issuable upon exercise of stock options.
(13) T. Rowe Price Associates, Inc.'s address is 100 East Pratt Street,
Baltimore, Maryland 21202. Information is based on a Schedule 13G filed
with the SEC on February 12, 2002.
(14) Wasatch Advisors, Inc.'s address is 150 Social Hall Avenue, Salt Lake
City, Utah 84111. Information is based on a Schedule 13G filed with the
SEC on February 14, 2002.
10
THE BOARD OF DIRECTORS
We have set forth below information about the members of our Board of
Directors. We have nominated Jack B. Dunn, IV and Stewart J. Kahn for
re-election as the Class III directors.
Class III Director Nominees
Director Principal Occupation and
Name Age Since Business Experience Other Directorships
---- --- -------- ------------------------ -------------------
Jack B. Dunn, IV 51 1992 Mr. Dunn became Chairman of our Board of None
Directors in December 1998. Since October
1995, he has served as our Chief Executive
Officer. From October 1995 to December 1998,
he also served as our President. From May 1994
to October 1995, he served as our Chief
Operating Officer. From October 1992 through
September 1995, he served as our Chief
Financial Officer. Mr. Dunn is a limited partner
of the Baltimore Orioles. Prior to joining us, he
was a member of the Board of Directors of, and a
Managing Director of Legg Mason Wood
Walker, Incorporated and directed its Baltimore
corporate finance and investment banking
activities.
Stewart J. Kahn 58 1999 Mr. Kahn has served as our President since None
December 1998 and as our Chief Operating
Officer since September 1999. Mr. Kahn is also
a director of Kahn Consulting, Inc., which
became one of our subsidiaries in September
1998. Mr. Kahn has been a director of Kahn
Consulting since 1989.
Class I Directors
Director Principal Occupation and
Name Age Since Business Experience Other Directorships
---- --- -------- ------------------------ -------------------
James A. Flick, Jr. 67 1992 Mr. Flick is President and Chief Executive Mr. Flick is a director of Capital One
Officer of Winnow, Inc., a management Financial Corporation.
consulting firm. From 1994 to 2001, Mr. Flick
was also Chairman, President and Chief
Executive Officer of Dome Corporation, a real
estate development and management services
company. Mr. Flick is a certified public
accountant.
Peter F. O'Malley 63 1992 Mr. O'Malley is President of Aberdeen Creek Mr. O'Malley is a director of Potomac
Corporation, a privately-held company engaged Electric Power Company and Legg
in investment, business consulting and Mason, Inc.
development activities. He is a founder of, and
since 1989 has been Of Counsel to, the law firm
of O'Malley, Miles, Nylen & Gilmore.
11
Class II Directors
Director Principal Occupation and
Name Age Since Business Experience Other Directorships
---- --- -------- ------------------------ -------------------
Denis J. Callaghan 60 2000 Mr. Callaghan retired from Deutsche Banc. Alex. None
Brown in February 2000, where he was the
Director of North American Equity Research.
Prior to becoming Director of Equity Research in
1992, Mr. Callaghan was responsible for Alex.
Brown's Insurance and Financial Services
Research Groups. Prior to joining Alex. Brown
in 1988, he was a Senior Insurance Analyst and
First Vice President with PaineWebber.
Dennis J. Shaughnessy 54 1992 Mr. Shaughnessy is a General Partner of Mr. Shaughnessy is a director of TESSCO
Grotech Capital Group, Inc., a venture capital Technologies, Inc. and U.S. Vision, Inc.
firm headquartered in Timonium, Maryland.
Prior to becoming a General Partner of Grotech
Capital Group in 1989, Mr. Shaughnessy was the
Chief Executive Officer of CRI International,
Inc.
George P. Stamas 51 1992 Mr. Stamas is a senior partner of the national law None
firm of Kirkland & Ellis. Mr. Stamas is also a
venture partner of New Enterprise Associates, a
venture capital firm. From 1999 to January 2002,
Mr. Stamas was vice chairman of the Board of
Directors of Deutsche Banc Alex. Brown. Mr.
Stamas is a limited partner of the Baltimore
Orioles, the Washington Capitals and the
Washington Wizards. From 1996 to 1999, Mr.
Stamas was a partner in the law firm of Wilmer,
Cutler & Pickering LLP.
Board Organization and Meetings
During 2001, our Board of Directors met eight times. Each of the nominees
and our other directors attended at least 75% of the total Board meetings and
meetings of committees of the Board of Directors on which he served.
The Board of Directors has the following committees:
Audit Committee. The Audit Committee makes recommendations to the Board of
Directors concerning the engagement of independent accountants; reviews with
our independent accountants the plans and results of the annual audit
engagement; approves other professional services provided to us by our
independent accountants; reviews the independence of our accountants; considers
the range of audit and non-audit fees; and reviews the adequacy of internal
accounting controls. In 2001, the Audit Committee met five times. The current
members of the Audit Committee are: Messrs. Flick, Chair, Callaghan, O'Malley,
Shaughnessy and Stamas.
Compensation Committee. The Compensation Committee makes recommendations to
the Board of Directors with respect to the compensation of our executive
officers and administers our stock option, incentive and employee benefit
plans. The Compensation Committee met three times in 2001. The current members
of the Compensation Committee are: Messrs. Shaughnessy, Chair, Callaghan,
Flick, O'Malley and Stamas.
Nominating and Corporate Governance Committee. The Nominating and Corporate
Governance Committee (1) reviews and recommends the size and composition of the
Board, (2) reviews and recommends Board committee charters, members and
chairpersons, (3) recommends to the full Board nominees for election as
directors at annual meetings of our stockholders, (4) assists our chairman of
the board in identifying, evaluating,
12
recruiting, nominating and retaining new candidates for election as directors,
(5) evaluates annually the performance of the Board and (6) reviews corporate
governance policies and practices. The Nominating and Corporate Governance
Committee was formed by the Board in 2002. The current members of the
Nominating and Corporate Governance Committee are: Messrs. O'Malley, Chair,
Callaghan and Shaughnessy.
Compensation of Directors
We reimburse our directors for their out-of-pocket expenses incurred in the
performance of their duties as our directors. We do not pay fees to our
directors for attendance at meetings. Non-employee directors are eligible to
receive options to acquire shares of our Common Stock under our 1997 Stock
Option Plan. Under this plan, when a non-employee director joins our Board of
Directors and every three years thereafter that he remains on the Board, he
receives an option for 90,000 shares of Common Stock, exercisable at the fair
market value of our Common Stock on the date of grant. These options become
exercisable one-third per year for three years and have a term of ten years. As
of March 22, 2002, there were currently outstanding 193,800 non-qualified stock
options that have been granted to non-employee directors, 43,800 of which are
currently exercisable and 90,000 of which will become exercisable within 60
days.
EXECUTIVE OFFICERS AND COMPENSATION
We have set forth below information about each of our executive officers who
is not also a director.
Officer
Name Age Since Principal Business Experience for Past Five Years
---- --- ------- -------------------------------------------------
Glenn R. Baker 60 1998 Mr. Baker has been the President of our Applied Sciences division since September 1998. Prior
to joining us, he was Chief Executive Officer and President of S.E.A., Inc., which we acquired
in September 1998. Mr. Baker co-founded SEA in 1970. He is a certified fire investigator and
obtained his MBA in 1966.
Theodore I. Pincus 59 1999 Mr. Pincus has been our Executive Vice President and Chief Financial Officer since April 1999.
Prior to joining us, Mr. Pincus was Executive Vice President and Chief Financial Officer of
Nitinol Medical Technologies from May 1995 to March 1999. Before then, he was President of
the Pincus Group, a financial consulting firm, from December 1989 to May 1995.
Our executive officers are elected by the Board of Directors, and they serve
at the pleasure of our Board, subject to the terms of the employment agreements
that we have with some of them.
13
SUMMARY COMPENSATION TABLE
We have set forth below information concerning the cash and non-cash
compensation earned by (1) our Chief Executive Officer, (2) three of our other
most highly compensated persons who were serving as our executive officers on
December 31, 2001 and (3) one of our former executive officers.
Long Term
Compensation
Awards
Annual Compensation --------------
------------------------------------ Securities
Other Annual Underlying All Other
Name and Principal Position Year Salary(1) Bonus Compensation(2) Options (#)(3) Compensation(4)
--------------------------- ---- --------- ---------- --------------- -------------- ---------------
Jack B. Dunn, IV............. 2001 $750,000 $ 550,000 $ 5,539 210,000 $2,849
Chairman and Chief 2000 600,000 400,000 5,628 210,000 2,837
Executive Officer 1999 330,012 200,000 12,300 60,000 2,900
Stewart J. Kahn (5).......... 2001 750,000 550,000 5,539 150,000 3,843
President and Chief 2000 600,000 400,000 4,841 112,500 4,856
Operating Officer 1999 506,694 115,000 2,100 -- 2,300
Theodore I. Pincus (6)....... 2001 350,000 200,000 5,539 112,500 2,833
Executive Vice President 2000 300,000 125,000 1,514 52,500 2,335
and Chief Financial Officer 1999 185,000 75,000 626 30,000 1,751
Glenn R. Baker (7)........... 2001 500,000 145,000 5,539 -- 665
President, Applied 2000 409,000 50,000 4,841 22,500 665
Sciences Division 1999 321,419 50,000 5,300 -- 700
Barry M. Monheit (8)......... 2001 700,000 -- 5,539 -- --
Former President, Financial 2000 504,799 1,055,750 4,241 60,000 --
Consulting Division 1999 504,798 315,000 1,400 -- --
--------
(1) Includes amounts earned but deferred at the election of the executive
officer, such as salary deferrals under our 401(k) Plan.
(2) These amounts represent our payment of matching contributions to our 401(k)
Plan and payments of premiums on life insurance and long-term disability
coverage. Our 401(k) contributions for 2001 for Messrs. Dunn, Kahn, Pincus,
Baker and Monheit were $5,100 each. The life insurance premiums paid by us
for 2001 for Messrs. Dunn, Kahn, Pincus, Baker and Monheit were $288 each.
(3) Share amounts have been adjusted to reflect the three-for-two stock split
on our Common Stock paid as a stock dividend on January 16, 2002.
(4) These amounts represent our payments of automobile expenses on behalf of
the named officers.
(5) Mr. Kahn joined us in September 1998 upon our acquisition of Kahn
Consulting, Inc. and became our President on December 29, 1998. Mr. Kahn
did not earn any compensation in that position during 1998 and 1999. Mr.
Kahn is also employed under a written employment agreement as Managing
Director of Kahn Consulting, Inc., one of our subsidiaries.
(6) Mr. Pincus joined us in March 1999 and became our Executive Vice President
and Chief Financial Officer.
(7) Mr. Baker joined us in September 1998 upon our acquisition of S.E.A., Inc.
and became President of our Applied Sciences Division at that time. He
became an executive officer of FTI Consulting in May 1999.
(8) Mr. Monheit joined us in September 1998 upon our acquisition of Kahn
Consulting, Inc. and became President of our Financial Consulting Division
and one of our executive officers in May 1999. He was also employed under a
written employment agreement as a Managing Director of Kahn Consulting,
Inc., one of our subsidiaries. Mr. Monheit resigned as President of the
Financial Consulting Division and as an executive officer of FTI Consulting
effective November 30, 2001. He currently serves as a strategic and
acquisition advisor to our Chief Executive Officer and Chief Operating
Officer and continues to directly serve our clients.
14
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth the options granted to our named officers
during 2001:
Individual Grants Potential Realizable
----------------------------------------------- Value at Assumed
Number of Percent of Annual Rates of Stock
Securities Total Options Price Appreciation for
Underlying Granted to Option Term
Options Employees in Exercise Expiration ----------------------
Name Granted(1) Fiscal Year Price(1)(2) Date 5%(3) 10%(3)
---- ---------- ------------- ----------- ---------- ---------- ----------
Jack B. Dunn, IV (4) 150,000 17.7% $18.54 10-2011 $1,807,650 $4,755,510
15,000 1.8 8.70 2-2011 84,825 223,155
15,000 1.8 12.03 4-2011 117,292 308,569
15,000 1.8 16.06 7-2011 156,585 411,939
15,000 1.8 21.20 10-2011 206,700 543,780
Stewart J. Kahn..... 150,000 17.7 18.54 10-2011 1,807,650 4,755,510
Theodore I. Pincus.. 30,000 3.5 8.00 3-2011 156,000 410,400
37,500 4.4 14.64 7-2011 356,850 938,790
45,000 5.3 18.54 10-2011 542,295 1,426,653
Glenn R. Baker...... -- -- -- -- -- --
Barry M. Monheit.... -- -- -- -- -- --
--------
(1) Except for the options granted to Mr. Dunn as described in note (4) below,
all options become exercisable one-third on the first anniversary of the
date of grant, two-thirds on the second anniversary of the date of grant
and in full on the third anniversary of the date of grant. Share amounts
underlying options and the exercise price of such options have been
adjusted to reflect the three-for-two stock split on our Common Stock paid
as a stock dividend on January 16, 2002.
(2) All options were granted at or above the fair market value of our Common
Stock on the date of grant.
(3) The dollar amounts are the result of calculations at assumed 5% and 10%
compounded rates of stock appreciation from the date of grant to the
expiration date of the options. The potential realizable value is reported
net of the option price but before income taxes associated with exercise.
These assumed rates of growth were selected by the SEC for illustration
purposes only. They are not intended to forecast possible future
appreciation, if any, of our stock price. No gain to the optionees is
possible without an increase in stock price.
(4) Mr. Dunn receives an option grant for 15,000 shares of our Common Stock
(adjusted to reflect the three-for-two stock split on our Common Stock) on
the day following each quarterly earnings release. These options are
granted with an exercise price 10% higher than the fair market value of our
Common Stock on the date of grant and become fully exercisable upon an
increase of 25% in the market value of the Common Stock but not earlier
than one year after the date of grant.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND YEAR END VALUE OF OPTIONS
The following table sets forth information about outstanding options held by
the named officers as of December 31, 2001:
Number of Securities
Underlying Unexercised Value of Unexercised
Options Held at In-the-Money Options at
Fiscal Year-End(1)(2) Fiscal Year-End($)(2)(3)
Shares Acquired ------------------------- -------------------------
Name on Exercise(#) Value Realized($) Exercisable Unexercisable Exercisable Unexercisable
---- --------------- ----------------- ----------- ------------- ----------- -------------
Jack B. Dunn, IV.. 411,911 $4,248,775 200,227 310,000 $3,062,599 $2,720,850
Stewart J. Kahn... 75,000 1,415,500 112,500 225,000 2,031,750 1,833,000
Theodore I. Pincus 37,500 322,574 -- 157,500 -- 1,645,425
Glenn R. Baker.... 37,500 353,232 -- 15,000 -- 266,700
Barry M. Monheit.. 117,272 1,408,763 7,728 40,000 140,650 711,600
--------
(1) Represents only "in-the-money" options.
(2) Share amounts underlying options and the exercise price of such options
have been adjusted to reflect the three-for-two stock split on our Common
Stock paid as a stock dividend on January 16, 2002.
(3) Based on the market price of our Common Stock on December 31, 2001, as
adjusted to reflect the three-for-two stock split on our Common Stock paid
as a stock dividend on January 16, 2002, which was $21.87 per share.
15
Employment Arrangements
Mr. Dunn. We entered into an employment agreement with Mr. Dunn as of
January 1, 1996. This agreement had an initial rolling three-year term that is
automatically extended by one year on each December 31 unless by that date
either we or Mr. Dunn give the other notice of an intention not to further
extend the term. The agreement expires at the end of 2005 but would
automatically terminate earlier if Mr. Dunn dies or becomes disabled. If we
terminate Mr. Dunn's employment without cause or Mr. Dunn resigns for a
specified good reason, he remains entitled to his salary and benefits through
the end of the then current term of the agreement and a bonus equal to the
average annual bonus he received for the prior three years through the end of
the then current term. Under the agreement, Mr. Dunn receives an annual base
salary, set at $900,000 for 2002. His annual salary is subject to annual
increases at our discretion. If Mr. Dunn dies or becomes totally disabled, he
is entitled to continue his salary for three years as in effect when he dies or
becomes totally disabled. Our obligation to continue his salary, however, is
reduced by any life insurance proceeds we pay to his estate as a result of
insurance policies we owned or any disability insurance proceeds paid directly
to him. Mr. Dunn's agreement contains a non-competition clause that lasts for
one year from the end of his employment. The clause prohibits Mr. Dunn from
soliciting any entity or person that was our client, customer, employee or
consultant at any time from January 1, 1996 to the date Mr. Dunn leaves us.
Mr. Kahn. Mr. Kahn entered into an employment agreement with Kahn
Consulting, Inc. ("KCI") when we acquired it in September 1998. This agreement
has a four-year term and expires on September 16, 2002. However, Mr. Kahn may
resign upon 60 days' notice. Mr. Kahn is entitled to an annual salary, subject
to increase at our discretion. Mr. Kahn is entitled to a bonus based on our
Incentive Compensation Plan. If we terminate the agreement without cause or Mr.
Kahn resigns for a specified good reason, he remains entitled to his salary
through the end of the agreement's term and one-half of the bonus he received
in the prior year. The agreement contains a non-competition clause that lasts
until the later of September 17, 2003 or one year from the end of employment.
The non-competition clause prohibits him from soliciting any entity or person
that was our client, customer, employee or consultant at any time from
September 17, 1998 to the date Mr. Kahn leaves KCI.
Mr. Baker. Mr. Baker entered into an employment agreement with S.E.A., Inc.
when we acquired it in September 1998. This agreement has a five year term and
expires on September 25, 2003. However, Mr. Baker may resign upon 60 days
notice. Mr. Baker is entitled to an annual salary, subject to annual increases.
He is also entitled to an annual bonus based on our Incentive Compensation
Plan. If we terminate Mr. Baker's employment without cause, he remains entitled
to his salary through the end of the agreement's term. Mr. Baker's agreement
contains a non-competition clause that lasts until the later of September 25,
2002 or one year from the end of his employment. This non-competition clause
prohibits Mr. Baker from competing with SEA or us in any standard metropolitan
statistical area or county where we or SEA have an office or provide services.
The clause also prohibits Mr. Baker from soliciting any entity or person that
was our client, customer, employee or consultant at any time from September 25,
1998 to the date Mr. Baker leaves SEA.
16
Compensation Committee Report on Executive Compensation
Compensation Philosophy. Our goal is to design and administer an executive
compensation program to (i) attract and retain qualified executive officers,
(ii) reward executive officers for performance in achieving FTI Consulting's
business objectives and enhancing stockholder value, (iii) align the executive
officers' interests with those of the stockholders, and (iv) provide incentives
for the creation of long-term stockholder value. The key elements of executive
compensation are base salary, annual incentive and performance bonuses, and
equity options. We review and approve FTI Consulting's policies and practices
regarding executive compensation, including (a) base salary levels, (b)
incentive compensation plans and related performance awards, and (c) long-term
incentives, principally equity option awards.
We believe that compensation must be competitive, as well as directly and
materially linked to FTI Consulting's performance. In administering the
compensation program, our objectives include the following: attracting and
retaining executive talent, motivating executives to maximize operating
performance, measuring performance on both an individual and a company-wide
basis, reflecting FTI Consulting's progress in meeting growth and profitability
targets, and linking executive and stockholder interests through the grant of
stock options and other equity-based compensation.
The key components of FTI Consulting's executive compensation program have
historically consisted of salary, annual incentive and performance bonuses and
stock options. The long-term compensation of FTI Consulting's executive
officers has consisted primarily of stock options. The short-term compensation
has consisted principally of base salary and a cash bonus. Our policy with
respect to each of these elements is discussed below.
Base Salary Levels. We believe that base salary levels at FTI Consulting
are reasonably related to the salary levels of executive officers of comparable
companies at similar stages of development. The Board and we set base salaries
and determined other compensation for 2001 based on those factors. Some of the
senior executives have employment agreements that set floors on base salary and
other elements of compensation for their contract terms, but we can increase
the base salary at any point. We expect that any such increases will take into
account such factors as individual past performance, changes in
responsibilities, changes in pay levels of companies we consider comparable,
and inflation.
Bonus Awards. FTI Consulting awards performance bonuses under its Incentive
Compensation Plan to reflect the level of involvement and success of its
executive officers in advancing corporate goals. The awards earned depend on
the extent to which FTI Consulting and individual performance objectives are
achieved. FTI Consulting's objectives consist of operating, strategic and
financial goals that are considered to be critical to our fundamental long-term
goal of building stockholder value. For fiscal year 2001, these objectives
were: (i) evaluating, negotiating, and reaching agreement as to expansion of
the business and its prospects, (ii) achievement of performance goals that
included standard measures of financial performance such as EBITDA, stock
price, earnings per share, return on equity and growth in assets, (iii)
continued advances toward project goals in consolidation and management, and
(iv) progress in certain financial and administrative activities. EBITDA means
our earnings before interest, taxes, depreciation and amortization. In 2002,
the Committee awarded approximately $1.4 million in bonuses to named officers
for 2001.
Long-Term Incentive Compensation. The Board and stockholders approved the
1997 Stock Option Plan as the principal means of providing long-term
incentives. We believe that the use of equity incentives better aligns the
interest of executive officers with those of stockholders and promotes
long-term stockholder value than does cash alone. We administer the 1997 Stock
Option Plan, determine the terms of the options and the number of shares of
Common Stock subject to option grants, and set significant terms. In setting
the grants, we relied on our own experience and that of our financial and other
advisers.
17
Compensation of the Chief Executive Officer. We use the same procedures
described above in setting the annual salary, bonus, and long-term incentive
compensation of the chief executive officer (the "CEO"). The Board had
established the CEO's salary for this report's period by contract, and we had
granted him incentive stock options and nonqualified stock options. He
continued to receive formula grants of options under a program we had
previously established. In considering the CEO's compensation, we considered
FTI Consulting's achievements of some of its performance goals and further
considered key subjective factors such as the CEO's work in negotiating and
supervising acquisitions, building a management team and recruiting and
retaining highly qualified individuals. In awarding any future long-term
incentive compensation, we will consider the CEO's performance, overall
contribution to FTI Consulting, retention of employees, the number of options
not yet exercisable and the total number of options to be granted.
Compensation Deduction Limit. The SEC requires that this report comment on
our policy with respect to a special rule under the tax laws, Section 162(m) of
the Internal Revenue Code. That section can limit the deductibility on a
Subchapter C corporation's federal income tax return of compensation of $1.0
million to any of the named officers.
A company can deduct compensation (including from exercising options)
outside that limit if it pays the compensation under a plan that its
stockholders approve and that is performance-related and non-discretionary.
Option exercises are typically deductible under such a plan if granted with
exercise prices at or above the market price when granted. Our policy with
respect to this section is to make every reasonable effort to ensure that
compensation complies with Section 162(m), while simultaneously providing our
executives with the proper incentives to remain with and increase the prospects
of FTI Consulting. We did not pay any compensation with respect to 2001 that
would be outside the limits of Section 162(m).
Compensation Committee
Dennis J. Shaughnessy, Chair
Denis J. Callaghan
James A. Flick, Jr.
Peter F. O'Malley
George P. Stamas
18
Audit Committee Report
Our Audit Committee is composed of five independent directors, consistent
with the New York Stock Exchange listing standards. Our Audit Committee
operates under a written charter adopted by the Board of Directors, which we
attached to a prior year's Proxy Statement, and is responsible for overseeing
our financial reporting process on behalf of the Board of Directors.
Management is responsible for our financial statements and the financial
reporting process, including internal controls. The independent auditors are
responsible for performing an independent audit of our consolidated financial
statements in accordance with generally accepted auditing standards and for
issuing a report thereon. Our Audit Committee's responsibility is to monitor
and oversee these processes.
In this context, our Audit Committee has met and held discussions with
management and Ernst & Young LLP, our independent accountants. Management
represented to the Committee that FTI Consulting's consolidated financial
statements were prepared in accordance with generally accepted accounting
principles, and the Committee has reviewed and discussed the consolidated
financial statements with management and the independent accountants. The Audit
Committee discussed with Ernst & Young the matters required to be discussed by
Statement on Auditing Standards No. 61 (Communication with Audit Committees).
These matters included a discussion of Ernst & Young's judgments about the
quality (not just the acceptability) of our accounting principles as applied to
financial reporting.
Ernst & Young also provided the Audit Committee with the written disclosures
and letter required by Independence Standards Board Standard No. 1
(Independence Discussions with Audit Committees), and the Audit Committee
discussed with Ernst & Young that firm's independence. The Audit Committee
further considered whether the provision by Ernst & Young of the non-audit
services described elsewhere in this Proxy Statement is compatible with
maintaining the accountants' independence.
Based upon the Audit Committee's discussion with management and the
independent accountants and the Audit Committee's review of the representation
of management and the disclosures by the independent accountants to the Audit
Committee, the Audit Committee recommended to the Board of Directors that FTI
Consulting's audited consolidated financial statements be included in its
Annual Report on Form 10-K for the year ended December 31, 2001, for filing
with the SEC. The Audit Committee and the Board of Directors have also
recommended the selection of Ernst & Young as our independent accountants for
2002, subject to stockholder ratification.
Audit Committee
James A. Flick, Jr., Chair
Denis J. Callaghan
Peter F. O'Malley
Dennis J. Shaughnessy
George P. Stamas
19
OTHER INFORMATION
Company Performance
The following graph compares the cumulative total stockholder return on our
Common Stock from January 1, 1997 through December 31, 2001 with the cumulative
total return of the S&P 500 Index and a peer group index comprised of Charles
River Associates, Inc., Esquire Communications Ltd., Exponent Inc., FYI Inc.,
Kroll Inc., Navigant Consulting, Inc. and The Profit Recovery Group
International Inc. (collectively, the "Peer Group") Index. Although we will no
longer compare such stockholder return on our Common Stock with The Nasdaq
Stock Market Index, SEC rules require that for this Proxy Statement, we include
such index in our comparison. Our Common Stock price is published daily. The
Peer Group Index was compiled by FTI Consulting as of December 31, 2001.
The graph assumes an investment of $100 in each of FTI Consulting, the S&P
500 Index, The Nasdaq Stock Market Index and the Peer Group on December 31,
1996. The comparison assumes that all dividends, if any, are reinvested into
additional shares of Common Stock during the holding period.
[CHART]
COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*
AMONG FTI CONSULTING, INC., THE S&P 500 INDEX,
THE NASDAQ STOCK MARKET (U.S.) INDEX AND A PEER GROUP INDEX
Cumulative Total Return
--------------------------------------------------------------
12/96 12/97 12/98 12/99 12/00 12/01
FTI CONSULTING, INC. $100.00 $128.21 $34.62 $51.28 $105.13 $336.41
S&P 500 100.00 133.36 171.47 207.56 188.66 166.24
NASDAQ STOCK MARKET (U.S.) 100.00 122.48 172.68 320.89 193.01 153.15
PEER GROUP 100.00 124.43 222.01 133.38 58.57 76.57
* $100 invested on 12/31/96 in stock or index, including reinvestment of
dividends. Fiscal year ending December 31.
20
Section 16(a) Beneficial Ownership Reporting Compliance
Based on our records and other information, we believe that our directors
and officers who are required to file reports under Section 16 reported all
transactions in shares of our Common Stock and derivative securities, including
options for shares and warrants for shares, on a timely basis during the fiscal
year ended December 31, 2001.
Proposals for the 2003 Annual Meeting
If you want to include a proposal in the proxy statement for FTI
Consulting's 2003 Annual Meeting, send the proposal to FTI Consulting, Inc.,
Attn: Theodore I. Pincus, Executive Vice President, Chief Financial Officer and
Secretary, at 900 Bestgate Road, Suite 100, Annapolis, Maryland 21401.
Proposals must be received on or before December 11, 2002 to be included in our
2003 proxy statement.
Stockholders intending to present a proposal at our 2003 Annual Meeting, but
not to include the proposal in our proxy statement, must comply with the
requirements set forth in our Bylaws. The Bylaws require, among other things,
that a stockholder submit a written notice of intent to present such a proposal
that is received by our Secretary no more than 120 days and no less than 90
days prior to the anniversary of the mailing date of the preceding year's
annual meeting. Therefore, we must receive notice of such a proposal for the
2003 Annual Meeting no earlier than December 11, 2002 and no later than January
10, 2003. If the notice is received before December 11, 2002 or after January
10, 2003, it will be considered untimely, and we will not be required to
present it at the 2003 Annual Meeting.
21
EXHIBIT A
FTI CONSULTING, INC.
1997 STOCK OPTION PLAN, AS AMENDED
PURPOSE FTI Consulting, Inc., a Maryland corporation ("FTI" or the "Company"), wishes to
recruit, reward, and retain employees and outside directors. To further these
objectives, the Company hereby sets forth the FTI Consulting, Inc. 1997 Stock Option
Plan (the "Plan"), effective, as of March 25, 1997 (the "Effective Date"), and
amended as of May 20, 1998, May 19, 1999, February 15, 2000, May 23, 2001, and
March 27, 2002, to provide options ("Options") to purchase shares of the Company's
common stock (the "Common Stock") to employees and outside directors and direct
grants of shares of Common Stock to employees.
OPTIONEES All Employees of FTI and the Eligible Subsidiaries are eligible for option grants under
this Plan, as are the directors of FTI and the Eligible Subsidiaries who are not
employees ("Eligible Directors"). Eligible employees and directors become optionees
when the Administrator grants them an option under this Plan. The Administrator may
also grant options to certain other service providers. The term optionee also includes,
where appropriate, a person authorized to exercise an Option in place of the original
recipient.
Employee means any person employed as a common law employee of the Company or
an Eligible Subsidiary.
ADMINISTRATOR The Administrator will be the Compensation Committee of the Board of Directors of
FTI (the "Compensation Committee"). The Board may also act under the Plan as
though it were the Compensation Committee.
The Administrator is responsible for the general operation and administration of the
Plan and for carrying out its provisions and has full discretion in interpreting and
administering the provisions of the Plan. Subject to the express provisions of the Plan,
the Administrator may exercise such powers and authority of the FTI Board as the
Administrator may find necessary or appropriate to carry out its functions. The
Administrator may delegate its functions (other than those described in the
GRANTING OF OPTIONS section) to officers or employees of FTI. The
Administrator's powers will include, but not be limited to, the power to amend, waive,
or extend any provision or limitation of any Option. The Administrator may act
through meetings of a majority of its members or by unanimous consent.
GRANTING OF Subject to the terms of the Plan, the Administrator will, in its sole discretion,
OPTIONS determine the recipients of option grants, the terms of such grants, the schedule for
exercisability (including any requirements that the optionee or the Company satisfy
performance criteria), the time and conditions for expiration of the Option, and the
form of payment due upon exercise.
The Administrator's determinations under the Plan need not be uniform and need not
consider whether possible optionees are similarly situated.
Options granted to employees may be nonqualified stock options ("NQSOs") or
incentive stock options ("ISOs") within the meaning of Section 422 of the Internal
Revenue Code of 1986, as amended from time to time (the "Code"), or the
corresponding provision of any subsequently enacted tax statute. Options granted to
Eligible Directors must be NQSOs.
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The Administrator may also grant Options in substitution for options held by
individuals who become employees of the Company or of an Eligible Subsidiary as a
result of the Company's acquiring the individual's employer. If necessary to conform
the Options to the options for which they are substitutes, the Administrator may grant
substitute Options under terms and conditions that vary from those the Plan otherwise
requires.
DATE OF GRANT The DATE OF GRANT will be the date as of which the Administrator awards an
Option to an optionee, as specified in the Administrator's minutes, or as specified in
this Plan.
EXERCISE PRICE The EXERCISE PRICE is the value of the consideration that an optionee must provide
under an Option Agreement in exchange for one share of Common Stock. The
Administrator will determine the Exercise Price under each Option. The Administrator
may set the Exercise Price of an Option without regard to the Exercise Price of any
other Options granted at the same or any other time.
The Exercise Price per share for NQSOs may not be less than 50% of the Fair Market
Value of a share on the Date of Grant. If an Option is intended to be an ISO, the
Exercise Price per share may not be less than 100% of the Fair Market Value (on the
Date of Grant) of a share of Stock covered by the Option; provided, however, that if
the employee would otherwise be barred from receiving an ISO by reason of the
provisions of Code Sections 422(b)(6) and 424(d) (relating to more than 10%
stockholders), the Exercise Price of an Option that is intended to be an ISO may not be
less than 110% of the Fair Market Value (on the Date of Grant) of a share of Stock
covered by the Option.
FAIR MARKET FAIR MARKET VALUE of a share of Common Stock for purposes of the Plan will be
VALUE determined as follows:
if the Common Stock is traded on a national securities exchange, the closing sale
price on that date;
if the Common Stock is not traded on any such exchange, the closing sale price as
reported by the National Association of Securities Dealers, Inc. Automated
Quotation System ("Nasdaq") for such date;
if no such closing sale price information is available, the average of the closing bid
and asked prices as reported by Nasdaq for such date; or
if there are no such closing bid and asked prices, the average of the closing bid and
asked prices as reported by any other commercial service for such date.
For any date that is not a trading day, the Fair Market Value of a share of Common
Stock for such date shall be determined by using the closing sale price or the
average of the closing bid and asked prices, as appropriate, for the immediately
preceding trading day.
The Company may use the consideration it receives from the optionee for general
corporate purposes.
EXERCISABILITY The Administrator will determine the times and conditions for exercise of each Option
but may not extend the period for exercise beyond the tenth anniversary of its Date of
Grant.
Options will become exercisable at such times and in such manner as the
Administrator determines and the Option Agreement indicates; provided, however,
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that the Administrator may, on such terms and conditions as it determines
appropriate, accelerate the time at which the optionee may exercise any portion of
an Option.
No portion of an Option that is unexercisable at an optionee's termination of
employment will thereafter become exercisable, unless the Option Agreement
provides otherwise, either initially or by amendment.
LIMITATION ON An Option granted to an employee will be an ISO only to the extent that the
ISOS aggregate Fair Market Value (determined at the Date of Grant) of the stock with
respect to which ISOs are exercisable for the first time by the optionee during any
calendar year (under the Plan and all other plans of the Company and its subsidiary
corporations, within the meaning of Code Section 422(d)), does not exceed
$100,000. This limitation will be applied by taking Options into account in the
order in which such Options were granted.
DIRECTOR GRANTS Each Eligible Director, when first elected or appointed to the Board and every three
years thereafter that he remains on the Board, will receive an option to purchase
90,000 shares of Common Stock. One-third of the option will vest on each
anniversary of the date of the grant of the Option to the Eligible Director. The
Option will become exercisable in its entirety upon the Eligible Director's death,
disability or attainment of age 70. Options will be forfeited to the extent they are
not then exercisable if a director resigns or fails to be reelected as a director.
EXERCISE PRICE The Exercise Price of each Option granted to an Eligible Director will be the Fair
Market Value on the Date of Grant.
METHOD OF To exercise any exercisable portion of an Option, the optionee must:
EXERCISE
Deliver a written notice of exercise to the Secretary of the Company (or to
whomever the Administrator designates) in a form complying with any rules the
Administrator may issue, signed by the optionee and specifying the number of
shares of Common Stock underlying the portion of the Option the optionee is
exercising;
Pay the full Exercise Price by cashier's or certified check for the shares of
Common Stock with respect to which the Option is being exercised, unless the
Administrator consents to another form of payment (which could include the use
of Common Stock); and
Deliver to the Administrator such representations and documents as the
Administrator, in its sole discretion, may consider necessary or advisable.
Payment in full of the Exercise Price need not accompany the written notice of
exercise provided the notice directs that the stock certificates for the shares issued
upon the exercise be delivered to a licensed broker acceptable to the Company as
the agent for the individual exercising the option and at the time the stock
certificates are delivered to the broker, the broker will tender to the Company cash
or cash equivalents acceptable to the Company and equal to the Exercise Price.
If the Administrator agrees to payment through the tender to the Company of shares
of Common Stock, the individual must have held the stock being tendered for at
least six months at the time of surrender. Shares of stock offered as payment will be
valued, for purposes of determining the extent to which the optionee has paid the
Exercise Price, at their Fair Market Value on the date of exercise. The
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Administrator may also, in its discretion, accept attestation of ownership of Common
Stock and issue a net number of shares upon Option exercise.
OPTION No one may exercise an Option more than ten years after its Date of Grant (or five
EXPIRATION years, for an ISO granted to a more-than-10% stockholder). Unless the Option
Agreement provides otherwise, either initially or by amendment, no one may exercise
an Option after the first to occur of:
EMPLOYMENT The date of termination of employment (other than for death or disability), where
TERMINATION termination of employment means the time when the employer-employee or other
service-providing relationship between the employee and the Company ends for any
reason, including retirement. Unless the Option Agreement provides otherwise,
termination of employment does not include instances in which the Company
immediately rehires a common law employee as an independent contractor. The
Administrator, in its sole discretion, will determine all questions of whether
particular terminations or leaves of absence are terminations of employment;
DISABILITY For disability, the earlier of (i) the first anniversary of the optionee's termination of
employment for disability and (ii) thirty (30) days after the optionee no longer has a
disability, where disability means the inability to engage in any substantial gainful
activity by reason of any medically determinable physical or mental impairment that
can be expected to result in death or that has lasted or can be expected to last for a
continuous period of not less than twelve months; or
DEATH The date twelve months after the optionee's death.
If exercise is permitted after termination of employment, the Option will nevertheless
expire as of the date that the former employee violates any covenant not to compete
in effect between the Company and the former employee.
Nothing in this Plan extends the term of an Option beyond the tenth anniversary of its
Date of Grant, nor does anything in this OPTION EXPIRATION section make an
Option exercisable that has not otherwise become exercisable.
OPTION Option Agreements will set forth the terms of each Option and will include such terms
AGREEMENT and conditions, consistent with the Plan, as the Administrator may determine are
necessary or advisable. To the extent the agreement is inconsistent with the Plan, the
Plan will govern. The Option Agreements may contain special rules.
STOCK SUBJECT Except as adjusted below under SUBSTANTIAL CORPORATE CHANGES, the
TO PLAN aggregate number of shares of Common Stock that may be issued under the Options
may not exceed 7,725,000 shares, of which the aggregate number of shares of Common
Stock that may be issued pursuant to direct grants of Common Stock may not exceed
375,000 shares, and the aggregate number of shares of Common Stock that may be
issued under the Options that qualify as ISOs may not exceed 7,500,000 shares. No
individual may receive Options or direct grants under the Plan for more than 750,000
shares in a calendar year. The Common Stock will come from either authorized but
unissued shares or from previously issued shares that the Company reacquires,
including shares it purchases on the open market. If any Option expires, is canceled or
terminates for any other reason, the shares of Common Stock available under that
Option will again be available for the granting of new Options (but will be counted
against that calendar year's limit for a given individual).
No adjustment will be made for a dividend or other right for which the record date
precedes the date of exercise.
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The optionee will have no rights of a stockholder with respect to the shares of stock
subject to an Option except to the extent that the Company has issued certificates for
such shares upon the exercise of the Option.
The Company will not issue fractional shares pursuant to the exercise of an Option, but
the Administrator may, in its discretion, direct the Company to make a cash payment in
lieu of fractional shares.
PERSON WHO During the optionee's lifetime, only the optionee or his duly appointed guardian or
MAY EXERCISE personal representative may exercise the Options. After his death, his personal
representative or any other person authorized under a will or under the laws of descent
and distribution may exercise any then exercisable portion of an Option. If someone
other than the original recipient seeks to exercise any portion of an Option, the
Administrator may request such proof as it may consider necessary or appropriate of the
person's right to exercise the Option.
ADJUSTMENTS Subject to any required action by the Company (which it shall promptly take) or its
UPON CHANGES stockholders, and subject to the provisions of applicable corporate law, if, after the Date
IN CAPITAL of Grant of an Option, the outstanding shares of Common Stock increase or decrease or
STOCK change into or are exchanged for a different number or kind of security by reason of any
recapitalization, reclassification, stock split, reverse stock split, combination of shares,
exchange of shares, stock dividend, or other distribution payable in capital stock, or
some other increase or decrease in such Common Stock occurs without the Company's
receiving consideration, the Administrator will make a proportionate and appropriate
adjustment in the number of shares of Common Stock underlying each Option, so that
the proportionate interest of the optionee immediately following such event will, to the
extent practicable, be the same as immediately before such event. Any such adjustment
to an Option will not change the total price with respect to shares of Common Stock
underlying the unexercised portion of the Option but will include a corresponding
proportionate adjustment in the Option's Exercise Price.
The Administrator will make a commensurate change to the maximum number and kind
of shares provided in the STOCK SUBJECT TO PLAN section.
Any issue by the Company of any class of preferred stock, or securities convertible into
shares of common or preferred stock of any class, will not affect, and no adjustment by
reason thereof will be made with respect to, the number of shares of Common Stock
subject to any Option or the Exercise Price except as this Adjustments section
specifically provides. The grant of an Option under the Plan will not affect in any way
the right or power of the Company to make adjustments, reclassifications,
reorganizations or changes of its capital or business structure, or to merge or to
consolidate or to dissolve, liquidate, sell, or transfer all or any part of its business or
assets.
SUBSTANTIAL Upon a SUBSTANTIAL CORPORATE CHANGE, the Plan and the Options will
CORPORATE terminate unless provision is made in writing in connection with such transaction for the
CHANGE assumption or continuation of outstanding Options, or the substitution for such options
or grants of any options or grants covering the stock or securities of a successor
employer corporation, or a parent or subsidiary of such successor, with appropriate
adjustments as to the number and kind of shares of stock and prices, in which event the
Options will continue in the manner and under the terms so provided.
Unless the Board determines otherwise, if an Option would otherwise terminate
pursuant to the preceding sentence, the optionee will have the right, at such time before
the consummation of the transaction causing such termination as the Board reasonably
A-5
designates, to exercise any unexercised portions of the Option, whether or not they had
previously become exercisable.
A Substantial Corporate Change means the
dissolution or liquidation of the Company,
merger, consolidation, or reorganization of the Company with one or more
corporations in which the Company is not the surviving corporation,
the sale of substantially all of the assets of the Company to another corporation, or
any transaction (including a merger or reorganization in which the Company
survives) approved by the Board that results in any person or entity (other than any
affiliate of the Company as defined in Rule 144(a)(1) under the Securities Act)
owning 100% of the combined voting power of all classes of stock of the Company.
DIRECT GRANTS The Company may grant shares of Common Stock to its employees and to the
employees of its Subsidiaries. Subject to the terms of the Plan, the Administrator will,
in its sole discretion, determine the recipients of such grants, the terms of such grants,
and the form of payment for such grants, including no consideration or such minimum
consideration as may be required by law, as it shall determine. The Administrator's
determinations under the Plan need not be uniform and need not consider whether
possible recipients are similarly situated.
SUBSIDIARY Employees of Company Subsidiaries will be entitled to participate in the Plan, except
EMPLOYEES as otherwise designated by the Board of Directors or the Committee.
Eligible Subsidiary means each of the Company's Subsidiaries, except as the Board
otherwise specifies. For ISO grants, Subsidiary means any corporation (other than the
Company) in an unbroken chain of corporations beginning with the Company if, at the
time an ISO is granted to a Participant under the Plan, each of the corporations (other
than the last corporation in the unbroken chain) owns stock possessing 50% or more of
the total combined voting power of all classes of stock in one of the other corporations
in such chain. For NQSOs, the Board or the Committee can use a different definition of
Subsidiary in its discretion.
LEGAL The Company will not issue any shares of Common Stock under an Option until all
COMPLIANCE applicable requirements imposed by Federal and state securities and other laws, rules
and regulations, and by any applicable regulatory agencies or stock exchanges, have
been fully met. To that end, the Company may require the optionee to take any
reasonable action to comply with such requirements before issuing such shares. No
provision in the Plan or action taken under it authorizes any action that is otherwise
prohibited by Federal or state laws.
The Plan is intended to conform to the extent necessary with all provisions of the
Securities Act of 1933 ("Securities Act") and the Securities Exchange Act of 1934 and
all regulations and rules the Securities and Exchange Commission issues under those
laws. Notwithstanding anything in the Plan to the contrary, the Administrator must
administer the Plan and Options may be granted and exercised only in a way that
conforms to such laws, rules, and regulations. To the extent permitted by applicable
law, the Plan and any Options will be deemed amended to the extent necessary to
conform to such laws, rules and regulations.
PURCHASE FOR Unless a registration statement under the Securities Act covers the shares of Common
INVESTMENT Stock an optionee receives upon exercise of his Option, the Administrator may require,
AND OTHER at the time of such exercise, that the optionee agree in writing to acquire such shares for
RESTRICTIONS investment and not for public resale or distribution, unless and until the shares subject
A-6
to the Option are registered under the Securities Act. Unless the shares are registered
under the Securities Act, the optionee must acknowledge:
that the shares purchased on exercise of the Option are not so registered,
that the optionee may not sell or otherwise transfer the shares unless
the shares have been registered under the Securities Act in connection with the
sale or transfer thereof, or counsel satisfactory to the Company has issued an
opinion satisfactory to the Company that the sale or other transfer of such shares
is exempt from registration under the Securities Act, and
such sale or transfer complies with all other applicable laws, rules and regulations,
including all applicable Federal and state securities laws, rules and regulations.
Additionally, the Common Stock, when issued upon the exercise of an Option, will be
subject to any other transfer restrictions, rights of first refusal and rights of repurchase
set forth in or incorporated by reference into other applicable documents, including the
Company's articles or certificate of incorporation, by-laws or generally applicable
stockholders' agreements.
The Administrator may, in its sole discretion, take whatever additional actions it deems
appropriate to comply with such restrictions and applicable laws, including placing
legends on certificates and issuing stop-transfer orders to transfer agents and registrars.
TAX The optionee must satisfy all applicable Federal, state and local income and
WITHHOLDING employment tax withholding requirements before the Company will deliver stock
certificates upon the exercise of an Option. The Company may decide to satisfy the
withholding obligations through additional withholding on salary or wages. If the
Company does not or cannot withhold from other compensation, the optionee must pay
the Company, with a cashier's check or certified check, the full amounts required by
withholding. Payment of withholding obligations is due at the same time as is payment
of the Exercise Price. If the Committee so determines, the optionee may instead satisfy
the statutory minimum withholding obligations by directing the Company to retain
shares from the Option exercise, by tendering previously owned shares, or by attesting
to his ownership of shares (with the distribution of net shares).
TRANSFERS, Unless the Administrator otherwise approves in advance in writing, an Option may not
ASSIGNMENTS, be assigned, pledged or otherwise transferred in any way, whether by operation of law
AND PLEDGES or otherwise, or through any legal or equitable proceedings (including bankruptcy), by
the optionee to any person, except by will or by operation of applicable laws of descent
and distribution. If Rule 16b-3 then applies to an Option, the optionee may not transfer
or pledge shares of Common Stock acquired upon exercise of an Option until at least
six (6) months have elapsed from (but excluding) the Date of Grant, unless the
Administrator approves otherwise in advance in writing.
AMENDMENT OR The Board may amend, suspend or terminate the Plan at any time, without the consent
TERMINATION of the optionees or their beneficiaries; provided, however, that no amendment will
OF PLAN AND deprive any optionee or beneficiary of any previously declared Option. Except as
OPTIONS required by law or by the CORPORATE CHANGES section, the Administrator may
not, without the optionee's or beneficiary's consent, modify the terms and conditions
of an Option so as to adversely affect the optionee. No amendment, suspension or
termination of the Plan will, without the optionee's or beneficiary's consent, terminate
or adversely affect any right or obligations under any outstanding Options.
A-7
PRIVILEGES OF No optionee and no beneficiary or other person claiming under or through such
STOCK optionee will have any right, title or interest in or to any shares of Common Stock
OWNERSHIP allocated or reserved under the Plan or subject to any Option except as to such shares
of Common Stock, if any, that have been issued to such optionee.
EFFECT ON 1992 No additional options will be granted under the Forensic Technologies International
OPTION PLAN Corporation 1992 Stock Option Plan.
EFFECT ON Whether exercising an Option causes the optionee to accrue or receive additional
OTHER PLANS benefits under any pension or other plan is governed solely by the terms of such other
plan.
LIMITATIONS ON Notwithstanding any other provisions of the Plan, no individual acting as a director,
LIABILITY employee or agent of the Company shall be liable to any optionee, former optionee,
spouse, beneficiary or any other person for any claim, loss, liability or expense
incurred in connection with the Plan, nor shall such individual be personally liable
because of any contract or other instrument he executes in such other capacity. The
Company will indemnify and hold harmless each director, employee or agent of the
Company to whom any duty or power relating to the administration or interpretation
of the Plan has been or will be delegated, against any cost or expense (including
attorneys' fees) or liability (including any sum paid in settlement of a claim with the
FTI Board's approval) arising out of any act or omission to act concerning this Plan
unless arising out of such person's own fraud or bad faith.
NO EMPLOYMENT Nothing contained in this Plan constitutes an employment contract between the
CONTRACT Company and the optionee. The Plan does not give the optionee any right to be
retained in the Company's employ nor does it enlarge or diminish the Company's
right to terminate the optionee's employment.
APPLICABLE LAW The laws of the State of Maryland (other than its choice of law provisions) govern
this Plan and its interpretation.
DURATION OF Unless the FTI Board extends the Plan's term, the Administrator may not grant
PLAN Options after March 25, 2007. The Plan will then terminate but will continue to
govern unexercised and unexpired Options.
APPROVAL OF The Plan, as amended March 27, 2002, must be submitted to the stockholders of the
STOCKHOLDERS Company for their approval within 12 months after the Board of Directors of the
Company adopts the amended Plan. The adoption of the amended Plan is conditioned
upon the approval of the stockholders of the Company and failure to receive their
approval will render the March 27, 2002 amendment to the Plan void and of no
effect.
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EXHIBIT B
FTI CONSULTING, INC.
EMPLOYEE STOCK PURCHASE PLAN, AS AMENDED
PURPOSE The FTI Consulting, Inc. Employee Stock Purchase Plan (the "ESPP" or the "Plan")
provides employees of FTI Consulting, Inc. (the "Company") and selected Company
Subsidiaries with an opportunity to become owners of the Company through the
purchase of shares of the Company's common stock (the "Common Stock"). The
Company intends this Plan to qualify as an employee stock purchase plan under
Section 423 of the Internal Revenue Code of 1986, as amended (the "Code"), and its
terms should be construed accordingly.
ELIGIBILITY Unless determined otherwise by the Committee, any Employee who is employed with
the Company or an Eligible Subsidiary on the first day of an Offering Period and
regularly scheduled to work at least 20 hours per week is eligible to participate in the
ESPP for that Offering Period; provided, however, that an Employee may not make a
purchase under the ESPP if such purchase would result in the Employee's owning
Common Stock possessing 5% or more of the total combined voting power or value of
the Company's outstanding stock. For purposes of determining an individual's amount
of stock ownership, any options to acquire shares of Company Common Stock are
counted as shares of stock, and the attribution rules of Section 424(d) of the Code
apply.
Employee means any person employed as a common law employee of the Company or
an Eligible Subsidiary. Employee excludes anyone not treated initially on the payroll
records as a common law employee.
ADMINISTRATOR The Compensation Committee of the Board of Directors of the Company, or such
other committee as the Board designates (the "Committee"), will administer the ESPP.
The Committee is vested with full authority and discretion to make, administer, and
interpret such rules and regulations as it deems necessary to administer the ESPP
(including rules and regulations deemed necessary in order to comply with the
requirements of Section 423 of the Code). The Committee is vested with full authority
and discretion to make modifications to the eligibility requirements for participation in
the ESPP from time to time that do not require shareholder approval to comply with
the requirements of Section 423 of the Code, provided that all such modifications
enable the ESPP to continue to satisfy the eligibility requirements of Section 423 of
the Code and do not materially increase the cost of the ESPP to the Company. Any
determination or action of the Committee in connection with the administration or
interpretation of the ESPP shall be final and binding upon each Employee, Participant
and all persons claiming under or through any Employee or Participant.
OFFERING Offering Periods are successive six month periods beginning on January 1 and July 1,
PERIOD and the first such period will begin on July 1, 1997.
PARTICIPATION An eligible Employee may become a "Participant" for an Offering Period by
completing an authorization notice and delivering it to the Committee through the
Company's Human Resources Department within a reasonable period of time before
the first day of such Offering Period. The Committee will send to each new Employee
who satisfies the rules in Eligibility above a notice advising the Employee of his right
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to participate in the ESPP for the following Offering Period. All Participants receiving
options under the ESPP will have the same rights and privileges.
METHOD OF A Participant may contribute to the ESPP through payroll deductions, as follows:
PAYMENT
The Participant must elect on an authorization notice to have deductions made from his
Compensation for each payroll period during the Offering Period at a rate of at least 1%
but not more than 15% of his Compensation. Compensation under the Plan means an
Employee's regular compensation, including overtime, bonuses, and commissions, from
the Company or an Eligible Subsidiary paid during an Offering Period.
All payroll deductions will be credited to the Participant's account under the ESPP. No
interest or earnings will accrue on any payroll deductions credited to such accounts.
Payroll deductions will begin on the first payday coinciding with or following the first day
of each Offering Period and will end with the last payday preceding or coinciding with the
end of that Offering Period, unless the Participant sooner withdraws as authorized under
Withdrawals below.
A Participant may not alter the rate of payroll deductions during the Offering Period.
The Company may use the consideration it receives for general corporate purposes.
The Committee, in its discretion, may permit Participants to pay the option price through
the tendering of shares of Common Stock subject to such rules and regulations as the
Committee may determine.
GRANTING OF On the first day of each Offering Period, a Participant will receive options to purchase a
OPTIONS number of shares of Common Stock with funds withheld from his Compensation. Such
number of shares will be determined at the end of the Offering Period according to the
following procedure:
Step 1--Determine the amount the Company withheld from Compensation since the
beginning of the Offering Period;
Step 2--Determine the amount that represents 85% of the lower of Fair Market Value
of a share of Common Stock on the (I) first day of the Offering Period, or (II) the last
day of the Offering Period; and
Step 3--Divide the amount determined in Step 1 by the amount determined in Step 2
and round down the quotient to the nearest whole number.
FAIR MARKET The Fair Market Value of a share of Common Stock for purposes of the Plan as of each
VALUE date described in Step 2 will be determined as follows:
if the Common Stock is traded on a national securities exchange, the closing sale price
on that date;
if the Common Stock is not traded on any such exchange, the closing sale price as
reported by the National Association of Securities Dealers, Inc. Automated Quotation
System ("Nasdaq") for such date;
if no such closing sale price information is available, the average of the closing bid and
asked prices as reported by Nasdaq for such date; or
if there are no such closing bid and asked prices, the average of the closing bid and
asked prices as reported by any other commercial service for such date.
For January 1 and any other date described in Step 2 that is not a trading day, the Fair
Market Value of a share of Common Stock for such date shall be determined by using
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the closing sale price or the average of the closing bid and asked prices, as appropriate,
for the immediately preceding trading day.
No Participant shall receive options:
if, immediately after the grant, that Participant would own shares, or hold
outstanding options to purchase shares, or both, possessing 5% or more of the total
combined voting power or value of all classes of shares of the Company or any
Subsidiaries; or
that permit the Participant to purchase shares under all employee stock purchase
plans of the Company and any Subsidiary with a Fair Market Value (determined at
the time the options are granted) that exceeds $25,000 in any calendar year.
EXERCISE PRICE The exercise price of all options granted for an Offering Period is 85% of the lower of
Fair Market Value of a share of Common Stock on (I) the first day of the Offering
Period or (II) the last day of the Offering Period.
EXERCISE Unless a Participant effects a timely withdrawal pursuant to the Withdrawal paragraph
OF OPTION below, his option for the purchase of shares of Common Stock during an Offering
Period will be automatically exercised as of the last day of the Offering Period for the
purchase of the maximum number of full shares that the sum of the payroll deductions
credited to the Participant's account during such Offering Period can purchase pursuant
to the formula specified in Granting of Options.
Any payroll deductions credited to a Participant's account during the Offering Period
that are not used for the purchase of shares will be treated as follows:
If the Participant has elected to withdraw from the ESPP as of the end of the
Offering Period, the Company will deliver the amount of the payroll deductions to
the Participant.
The amount of any other excess payroll deductions will be applied to the purchase of
shares in the immediately succeeding Offering Period.
DELIVERY OF As soon as administratively feasible after the options are used to purchase Common
COMMON Stock, the Company will deliver to each Participant or, in the alternative, to a custodian
STOCK that the Committee designates, the shares of Common Stock the Participant purchased
upon the exercise of the option. If shares are delivered to a custodian, the Participant
may elect at any time thereafter to take possession of the shares or to have the
Committee deliver the shares to any brokerage firm. The Committee may, in its
discretion, establish a program for cashless sales of Common Stock received under the
ESPP.
SUBSEQUENT A Participant will be deemed to have elected to participate in each subsequent Offering
OFFERINGS Period following his initial election to participate in the ESPP, unless the Participant
files a written withdrawal notice with the Human Resources Department at least ten
days before the beginning of the Offering Period as of which the Participant desires to
withdraw from the ESPP.
WITHDRAWAL A Participant may withdraw all, but not less than all, payroll deductions credited to his
FROM THE account for an Offering Period before the end of such Offering Period by delivering a
PLAN written notice to the Human Resources Department on behalf of the Committee at least
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thirty days before the end of such Offering Period. A Participant who for any reason,
including retirement, termination of employment, or death, ceases to be an Employee
before the last day of any Offering Period will be deemed to have withdrawn from the
ESPP as of the date of such cessation.
Upon the withdrawal of a Participant from the ESPP under the terms of the preceding
paragraph, his outstanding options under the ESPP will immediately terminate.
If a Participant withdraws from the ESPP for any reason, the Company will pay to the
Participant all payroll deductions credited to his account or, in the event of death, to the
persons designated as provided in Designation of Beneficiary, as soon as
administratively feasible after the date of such withdrawal and no further deductions
will be made from the Participant's Compensation.
A Participant who has elected to withdraw from the ESPP may resume participation in
the same manner and pursuant to the same rules as any Employee making an initial
election to participate in the ESPP, i.e., he may elect to participate in the next following
Offering Period so long as he files the authorization form by the deadline for that
Offering Period. Any Participant who is subject to Section 16 of the Securities
Exchange Act of 1934, as amended (the "Exchange Act" ), and who withdraws from
the ESPP for any reason will only be permitted to resume participation in a manner that
will permit transactions under the ESPP to continue to be exempt within the meaning of
Rule 16b-3, as issued under the Exchange Act.
STOCK SUBJECT The shares of Common Stock that the Company will sell to Participants under the ESPP
TO PLAN will be shares of authorized but unissued Common Stock. The maximum number of
shares made available for sale under the ESPP will be 950,000 (subject to the
provisions in Adjustments upon Changes in Capital Stock). If the total number of
shares for which options are to be exercised in an Offering Period exceeds the number
of shares then available under the ESPP, the Company will make, so far as is
practicable, a pro rata allocation of the shares available.
A Participant will have no interest in shares covered by his option until the Participant
exercises the option.
Shares that a Participant purchases under the ESPP will be registered in the name of the
Participant.
The Company will not issue fractional shares pursuant to the ESPP, but the
Administrator may, in its discretion, direct the Company to make a cash payment in lieu
of fractional shares.
ADJUSTMENTS Subject to any required action by the Company (which it shall promptly take) or its
UPON CHANGES stockholders, and subject to the provisions of applicable corporate law, if, during an
IN CAPITAL Offering Period,
STOCK
the outstanding shares of Common Stock increase or decrease or change into or are
exchanged for a different number or kind of security by reason of any
recapitalization, reclassification, stock split, reverse stock split, combination of
shares, exchange of shares, stock dividend, or other distribution payable in capital
stock, or
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some other increase or decrease in such Common Stock occurs without the Company's
receiving consideration,
the Administrator will make a proportionate and appropriate adjustment in the number of
shares of Common Stock underlying the options, so that the proportionate interest of the
Participant immediately following such event will, to the extent practicable, be the same as
immediately before such event. Any such adjustment to the options will not change the total
price with respect to shares of Common Stock underlying the Participant's election but will
include a corresponding proportionate adjustment in the price of the Common Stock, to the
extent consistent with Section 424 of the Code.
The Administrator will make a commensurate change to the maximum number and kind of
shares provided in the Stock Subject to Plan section.
Any issue by the Company of any class of preferred stock, or securities convertible into
shares of common or preferred stock of any class, will not affect, and no adjustment by
reason thereof will be made with respect to, the number of shares of Common Stock subject
to any options or the price to be paid for stock except as this Adjustments section
specifically provides. The grant of an option under the Plan will not affect in any way the
right or power of the Company to make adjustments, reclassifications, reorganizations or
changes of its capital or business structure, or to merge or to consolidate, or to dissolve,
liquidate, sell, or transfer all or any part of its business or assets.
SUBSTANTIAL Upon a Substantial Corporate Change, the Plan and the offering will terminate unless
CORPORATE provision is made in writing in connection with such transaction for
CHANGE
the assumption or continuation of outstanding elections, or
the substitution for such options or grants of any options or grants covering the stock or
securities of a successor employer corporation, or a parent or subsidiary of such successor,
with appropriate adjustments as to the number and kind of shares of stock and prices, in
which event the options will continue in the manner and under the terms so provided.
If an option would otherwise terminate pursuant to the preceding sentence, the optionee will
have the right, at such time before the consummation of the transaction causing such
termination as the Board reasonably designates, to exercise any unexercised portions of the
option.
A Substantial Corporate Change means the
dissolution or liquidation of the Company,
merger, consolidation, or reorganization of the Company with one or more corporations in
which the Company is not the surviving corporation,
the sale of substantially all of the assets of the Company to another corporation, or
any transaction (including a merger or reorganization in which the Company survives)
approved by the Board that results in any person or entity (other than any affiliate of the
Company as defined in Rule 144(a)(1) under the Securities Act) owning 100% of the
combined voting power of all classes of stock of the Company.
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DESIGNATION A Participant may file with the Committee a written designation of a beneficiary who
OF BENEFICIARY is to receive any payroll deductions credited to the Participant's account under the
ESPP or any shares of Common Stock owed to the Participant under the ESPP if the
Participant dies. A Participant may change a beneficiary at any time by filing a notice
in writing with the Human Resources Department on behalf of the Committee.
Upon the death of a Participant and upon receipt by the Committee of proof of the
identity and existence of the Participant's designated beneficiary, the Company shall
deliver such cash or shares, or both, to the beneficiary. If a Participant dies and is not
survived by a beneficiary that the Participant designated in accordance with the
immediate preceding paragraph, the Company will deliver such cash or shares, or both,
to the personal representative of the estate of the deceased Participant. If, to the
knowledge of the Committee, no personal representative has been appointed within 90
days following the date of the Participant's death, the Committee, in its discretion, may
direct the Company to deliver such cash or shares, or both, to the surviving spouse of
the deceased Participant, or to any one or more dependents or relatives of the deceased
Participant, or if no spouse, dependent or relative is known to the Committee, then to
such other person as the Committee may designate.
No designated beneficiary may acquire any interest in such cash or shares before the
death of the Participant.
SUBSIDIARY Employees of Company Subsidiaries will be entitled to participate in the ESPP, except
EMPLOYEES as otherwise designated by the Board of Directors or the Committee.
Eligible Subsidiary means each of the Company's Subsidiaries, except as the Board
otherwise specifies. Subsidiary means any corporation (other than the Company) in an
unbroken chain of corporations beginning with the Company if, at the time an option is
granted to a Participant under the ESPP, each of the corporations (other than the last
corporation in the unbroken chain) owns stock possessing 50% or more of the total
combined voting power of all classes of stock in one of the other corporations in such
chain.
TRANSFERS, A Participant may not assign, pledge, or otherwise dispose of payroll deductions
ASSIGNMENTS, credited to the Participant's account or any rights to exercise an option or to receive
AND PLEDGES shares of Common Stock under the ESPP other than by will or the laws of descent and
distribution or pursuant to a qualified domestic relations order, as defined in the
Employee Retirement Income Security Act. Any other attempted assignment, pledge or
other disposition will be without effect, except that the Company may treat such act as
an election to withdraw under the Withdrawal section.
AMENDMENT OR The Board of Directors of the Company may at any time terminate or amend the ESPP.
TERMINATION Any amendment of the ESPP that (i) materially increases the benefits to Participants,
OF PLAN (ii) materially increases the number of securities that may be issued under the ESPP, or
(iii) materially modifies the eligibility requirements for participation in the ESPP must
be approved by the shareholders of the Company to take effect. The Company shall
refund to each Participant the amount of payroll deductions credited to his account as
of the date of termination as soon as administratively feasible following the effective
date of the termination.
NOTICES All notices or other communications by a Participant to the Committee or the
Company shall be deemed to have been duly given when the Human Resources
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Department or the Secretary of the Company receives them or when any other person
the Company designates receives the notice or other communication in the form the
Company specifies.
GENERAL Any amounts the Company invests or otherwise sets aside or segregates to satisfy its
ASSETS obligations under this ESPP will be solely the Company's property (except as
otherwise required by Federal or state wage laws), and the optionee's claim against the
Company under the ESPP, if any, will be only as a general creditor. The optionee will
have no right, title, or interest whatever in or to any investments that the Company may
make to aid it in meeting its obligations under the ESPP. Nothing contained in the
ESPP, and no action taken pursuant to its provisions, will create or be construed to
create an implied or constructive trust of any kind or a fiduciary relationship between
the Company and any Employee, Participant, former Employee, former Participant, or
any beneficiary.
PRIVILEGES OF No Participant and no beneficiary or other person claiming under or through such
STOCK Participant will have any right, title, or interest in or to any shares of Common Stock
OWNERSHIP allocated or reserved under the Plan except as to such shares of Common Stock, if any,
that have been issued to such Participant.
LIMITATIONS Notwithstanding any other provisions of the ESPP, no individual acting as a director,
ON employee, or agent of the Company shall be liable to any Employee, Participant,
LIABILITY former Employee, former Participant, or any spouse or beneficiary for any claim, loss,
liability or expense incurred in connection with the ESPP, nor shall such individual be
personally liable because of any contract or other instrument he executes in such other
capacity. The Company will indemnify and hold harmless each director, employee, or
agent of the Company to whom any duty or power relating to the administration or
interpretation of the ESPP has been or will be delegated, against any cost or expense
(including attorneys' fees) or liability (including any sum paid in settlement of a claim
with the FTI Board's approval) arising out of any act or omission or act concerning this
ESPP unless arising out of such person's own fraud or bad faith.
NO Nothing contained in this Plan constitutes an employment contract between the
EMPLOYMENT Company or an Eligible Subsidiary and any Employee. The ESPP does not give an
CONTRACT Employee any right to be retained in the Company's employ, nor does it enlarge or
diminish the Company's right to terminate the Employee's employment.
DURATION OF Unless the FTI Board extends the Plan's term, no Offering Period will begin after
ESPP December 31, 2006.
APPLICABLE The laws of the State of Maryland (other than its choice of law provisions) govern the
LAW ESPP and its interpretation.
APPROVAL OF The ESPP, as amended in 2002, must be submitted to the stockholders of the Company
STOCKHOLDERS for their approval within 12 months after the Board of Directors of the Company adopts
the amended ESPP. The adoption of the amended ESPP is conditioned upon the
approval of the stockholders of the Company, and failure to receive their approval will
render the 2002 amendment to the ESPP void and of no effect.
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Please date, sign and mail your proxy card back as soon as possible!
Annual Meeting of Stockholders
FTI CONSULTING, INC.
May 22, 2002
Please Detach and Mail in the Envelope Provided
A [x] Please mark your votes as in this example.
1. Election of Class III Directors.
FOR all nominees (except as marked to the contrary) [ ]
WITHHOLD AUTHORITY to vote for the nominees listed at right [ ]
Nominees: Jack B. Dunn, IV
Stewart J. Kahn
(INSTRUCTIONS: To withhold authority to vote for any nominee, write the
nominee's name on the space provided below.)
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2. Amendment of the Company's 1997 Stock Option Plan, as amended, to increase
the number of shares authorized by 1,500,000.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
3. Amendment of the Company's Employee Stock Purchase Plan, as amended, to
increase the number of shares authorized by 200,000 shares.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
4. Ratification of selection of Ernst & Young, LLP to serve as independent
accountants for the Company for the fiscal year ending December 31, 2002.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
5. The proxies are authorized to vote in their discretion upon such other
business as may properly come before the meeting to the extent permitted by
law.
I PLAN TO ATTEND THE MEETING [ ]
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SIGNATURE
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SIGNATURE IF HELD JOINTLY
DATE ,2002
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Note: Please date this Proxy and sign exactly as your name(s) appears hereon.
When signing as attorney, administrator, trustee or guardian, please give
your full title as such. If there is more than one trustee, all should
sign. All joint owners should sign.
PROXY FOR THE ANNUAL MEETING OF STOCKHOLDERS
FTI CONSULTING, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE
BOARD OF DIRECTORS AND MAY BE REVOKED PRIOR TO ITS EXERCISE
The undersigned stockholder(s) of FTI Consulting, Inc. (the "Company")
hereby appoints Messrs. Jack B. Dunn, IV and Theodore I. Pincus, and each of
them singly, as proxies, each with full power of substitution, for and in the
name of the undersigned at the Annual Meeting of Stockholders of FTI Consulting,
Inc. to be held on May 22, 2002, and at any and all adjournments thereof, to
vote all shares of common stock of said Company held of record by the
undersigned on March 22, 2002, as if the undersigned were present and voting
the shares.
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED IN THE MANNER
DIRECTED. IN THE ABSENCE OF ANY DIRECTION, THE SHARES WILL BE VOTED FOR EACH
NOMINEE NAMED IN PROPOSAL 1 AND FOR PROPOSALS 2 THROUGH 4, AND IN ACCORDANCE
WITH THE PROXIES' DISCRETION ON SUCH OTHER BUSINESS THAT MAY PROPERLY COME
BEFORE THE MEETING TO THE EXTENT PERMITTED BY LAW.
(TO BE SIGNED ON REVERSE SIDE)