UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.
20549
SCHEDULE 14A
Proxy Statement Pursuant to Section
14(a) of the Securities
Exchange Act of 1934 (Amendment
No. )
Filed by the Registrant
[X]
Filed by a Party other than the Registrant
o
Check the appropriate box:
o | Preliminary Proxy Statement | |
o | Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) | |
[X] | Definitive Proxy Statement | |
o | Definitive Additional Materials | |
o | Soliciting Material Pursuant to Rule §240.14a-12 |
FTI CONSULTING, INC. | ||
(Name of Registrant as Specified In Its Charter) | ||
(Name of Person(s) Filing Proxy Statement, if other than the Registrant) | ||
Payment of Filing Fee (Check the appropriate box):
[X] | No fee required. | |||
o | Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11. | |||
1. | Title of each class of securities to which transaction applies: | |||
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): | |||
4. | Proposed maximum aggregate value of transaction: | |||
5. | Total fee paid: | |||
o | Fee paid previously with preliminary materials. | |||
o | 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.: | |||
3. | Filing Party: | |||
4. | Date Filed: |
SEC 1913 (04-05)
Persons who are to respond to the collection of information
contained in this form are not required to respond unless the form displays a
currently valid OMB control number.
777 South Flagler
Drive |
April 23, 2009
Dear Stockholder:
You are cordially invited to attend the 2009 Annual Meeting of Stockholders of FTI Consulting, Inc. on June 3, 2009, at 9:30 a.m., EDT, at its executive office located at 777 South Flagler Drive, Phillips Point, Suite 1500 West Tower, West Palm Beach, Florida 33401.
This year, we are pleased to be using the U.S. Securities and Exchange Commission rule that allows companies to furnish their proxy materials over the Internet. As a result, on or about April 23, 2009 we began mailing to our stockholders of record on March 30, 2009 a Notice of Internet Availability of Proxy Materials instead of paper copies of this proxy statement and our 2008 Annual Report to Stockholders. The Notice contains instructions on how to access those documents over the Internet. The Notice also contains instructions on how each stockholder can receive a paper copy of our proxy materials, including this proxy statement, our 2008 Annual Report to Stockholders and a form of proxy card. We believe that the notice and access method expedites stockholders receipt of proxy materials and the annual report, while helping the environment and lowing costs. On or about April 23, 2009, we also began mailing a full set of the proxy materials and the 2008 Annual Report of Stockholders to FTI stockholders who previously requested delivery of the materials in paper copy.
Your vote is important. Whether or not you plan to attend this meeting, we urge you to vote as soon as possible. We invite you to use the convenience of Internet or telephone voting by following the instructions on pages 4 and 5 of the proxy statement. Alternatively, you may also vote by returning a proxy card, if you received a paper copy of the proxy statement. Your proxy will be voted at the Annual Meeting in accordance with your instructions. If you do not specify a choice on one of the proposals described in this proxy statement, your proxy will be voted as recommended by the Board of Directors. If you hold your shares through an account with a brokerage firm or other nominee or fiduciary such as a bank, please follow the instructions you receive from such brokerage firm or other nominee or fiduciary to vote your shares.
If you plan to attend the meeting in person, please respond affirmatively to the request for that information on the Internet, or mark that box on the proxy card if you received a paper copy of the proxy statement. You will be asked to present valid picture identification, such as a drivers license or passport. Cameras, recording devices and other electronic devices will not be permitted at the meeting.
Sincerely,
JACK B. DUNN, IV
President and Chief Executive Officer
FTI CONSULTING, INC.
NOTICE OF 2009 ANNUAL MEETING OF STOCKHOLDERS
Date: June 3, 2009
Time: 9:30 a.m.,
EDT
Place: FTI Consulting, Inc., Executive
Office, 777 Flagler Drive, Phillips Point, Suite 1500 West Tower, West Palm
Beach, Florida 33401
Dear Stockholder:
At the Annual Meeting, we will ask you to:
The Board of Directors recommends a vote FOR the election of each of the two nominees for Class I director named in the proxy statement, FOR the approval of amendments to the FTI Consulting, Inc. Deferred Compensation Plan for Key Employees and Non-Employee Directors, and FOR the ratification of the retention of KPMG LLP as FTI Consulting, Inc.s independent registered public accounting firm for the fiscal year ending December 31, 2009.
Stockholders of record at the close of business on March 30, 2009, will be entitled to notice of and to vote at the 2009 Annual Meeting and any adjournment or postponement of the meeting.
By Order of the Board of Directors,
JOANNE F. CATANESE
Associate General Counsel
and Secretary
April 23, 2009
YOUR VOTE AT THE ANNUAL MEETING IS IMPORTANT
Please vote as promptly as possible even if you plan to attend the meeting. We invite you to utilize the convenience of Internet or telephone voting. For information on how to vote your shares, see the instructions included on the Notice of Internet Availability of Proxy Materials or the instruction form from your broker or other fiduciary, as applicable, and under Information About the 2009 Meeting and Voting beginning on page 1 of the proxy statement. Alternatively, we encourage you to vote by completing, signing and dating the proxy card if your received paper copies of this proxy statement and returning it in the enclosed envelope. If you have questions about voting your shares, please contact our Corporate Secretary at FTI Consulting, Inc., 500 East Pratt Street, Suite 1400, Baltimore, Maryland 21202, telephone no. (410) 951-4800. If you decide to change your vote, you may revoke your proxy in the manner described in the proxy statement, at any time before it is voted.
TABLE OF CONTENTS
Page | |
Proxy Statement for Annual Meeting | 1 |
Information About the 2008 Annual Meeting and Voting | 2 |
Additional Information | 7 |
Proposals to be Presented at the Annual Meeting | 8 |
Proposal No. 1 Elect as Class I Directors the Two Nominees Named in the Proxy Statement | 8 |
Proposal No. 2 Approve the Amendment and Restatement of the FTI Consulting, Inc. | |
Deferred Compensation Plan for Key Employees and Non-Employee Directors | |
(to be Renamed the FTI Consulting, Inc. 2009 Omnibus Incentive Compensation Plan) | 9 |
Proposal No. 3 Ratify the Retention of KPMG LLP as FTI Consulting, Inc.s Independent | |
Registered Public Accounting Firm for the Fiscal Year Ending December 31, 2009 | 22 |
Information About the Board of Directors and Committees | 22 |
Independence of Directors | 22 |
Information About the Nominees for Class I Director and the Other Directors | 24 |
Director Attendance at Meetings | 28 |
Committees of the Board of Directors | 29 |
Nominating and Corporate Governance Committee Director Nomination Process | 33 |
Compensation of Non-Employee Directors and Stock Ownership Guidelines | 34 |
Corporate Governance | 38 |
Governance Principles | 38 |
Presiding Director | 39 |
Code of Conduct | 39 |
Stockholder Nominees for Director | 39 |
Communications with Non-Management Directors | 40 |
Security Ownership of Certain Beneficial Owners and Management | 40 |
Executive Officers and Compensation | 44 |
Executive and Key Officers | 44 |
Compensation Discussion and Analysis | 46 |
Compensation Committee Report | 60 |
Summary Compensation Table | 61 |
Equity Compensation Plans | 64 |
Employment Agreements and Potential Termination and Change in Control Payments | 73 |
Certain Relationships and Related Party Transactions | 94 |
Report of the Audit Committee of the Board of Directors | 95 |
Principal Accountant Fees and Services | 97 |
Section 16(a) Beneficial Ownership Reporting Compliance | 97 |
Proposals for the 2010 Annual Meeting | 98 |
Appendix A 2009 Omnibus Incentive Compensation Plan | A-1 |
Appendix B Charter of the Audit Committee of the Board of Directors | |
[as Amended and Restated Effective March 31, 2009] | B-1 |
777 South Flagler
Drive |
April 23, 2009
_____________________
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 2009 Annual Meeting of Stockholders of FTI Consulting, Inc. The 2009 Annual Meeting of Stockholders will be held on June 3, 2009, at 9:30 a.m., EDT, at FTI Consulting, Inc.s executive office, located at 777 South Flagler Drive, Phillips Point, Suite 1500 West Tower, West Palm Beach, Florida 33401.
On or about April 23, 2009, we began mailing a Notice of Internet Availability of Proxy Materials containing instructions on how to access this proxy statement and our 2008 Annual Report to Stockholders online and we began mailing a full set of the proxy materials and 2008 Annual Report to Stockholders to stockholders who previously requested delivery in paper copy. For information on how to vote your shares of our common stock, see the Notice of Internet Availability of Proxy Materials, the instructions included on the proxy card or the instruction form you receive from your broker or other fiduciary, and the information under Information About the 2009 Annual Meeting and Voting. Stockholders who, according to our records, owned shares of FTI common stock at the close of business on March 30, 2009 will be entitled to vote at the 2009 Annual Meeting.
INFORMATION ABOUT THE 2009 ANNUAL MEETING AND VOTING
Why am I receiving these proxy materials?
The Board of Directors (the Board) of FTI Consulting, Inc., a Maryland corporation, has made these materials available to you over the Internet or delivered paper copies of these materials to you by mail in connection with our Annual Meeting of Stockholders, which will take place on Wednesday, June 3, 2009. As a stockholder, you are invited to attend the annual meeting and are entitled to and requested to vote on the items of business described in this proxy statement. This proxy statement includes information that we are required to provide to you under the rules of the U.S. Securities and Exchange Commission (SEC) to assist you in voting your shares.
What information is contained in the proxy materials?
The proxy materials include the proxy statement for the 2009 Annual Meeting of Stockholders and 2008 Annual Report to Stockholders. If you received a paper copy of these materials by mail, the proxy materials also include a proxy card or voting instruction card for the annual meeting.
The information in this proxy statement relates to the proposals to be voted on at the 2009 Annual Meeting of Stockholders, the voting process, the two nominees for Class I director named in this proxy statement, information about our Board and its Committees, the compensation of non-employee directors and our chief executive officer, chief financial officer and other three most highly paid executive officers for year ended December 31, 2008, and certain other information we are required to provide to you. We have summarized information in this proxy statement that you should consider in deciding how to vote on the proposals being submitted to a vote of our stockholders at this meeting.
Why did I receive a Notice of Internet Availability of Proxy Materials?
We are pleased to be using the SECs rule that allows companies to furnish proxy materials over the Internet, As permitted under the SEC rule we are sending a Notice of Internet Availability of Proxy Materials (the Notice) to stockholders instead of a paper copy of the proxy materials. All stockholders receiving the Notice will have the ability to access this proxy statement and our 2008 Annual Report to Stockholders for the fiscal year ended December 31, 2008 on a website referred to in the Notice or to request a printed set of these materials at no charge. Instructions on how to access these materials over the Internet or to request a printed copy may be found in the Notice.
In addition, any stockholder may request to receive proxy materials in printed form by mail or electronically by email on an ongoing basis. Choosing to receive future proxy materials by email will save the Company the cost of printing and mailing documents to stockholders and will reduce the impact of annual meetings on the environment. A stockholders election to receive proxy materials by email will remain in effect until the stockholder terminates it.
Why did I receive a full set of proxy materials and the 2008 Annual Report to Stockholders by mail?
We are providing some of our stockholders, including stockholders who have previously requested paper copies of the proxy materials and some of our stockholders who live outside of the United States, with paper copies of proxy materials instead of the Notice of the Internet Availability of Proxy Materials and FTIs 2008 Annual Report to Stockholders.
In addition, we are providing notice of the availability of the proxy materials by email to those stockholders who have previously elected delivery of the proxy materials electronically. Those stockholders should have received an email containing a link to the website where the proxy materials are available and a link to the proxy voting website.
How can I access the proxy materials over the Internet?
Your Notice of the Internet Availability of Proxy Materials will contain instructions on how to:
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How may I obtain a paper copy of the proxy materials?
Stockholders receiving a Notice about the Internet availability of the proxy materials and 2008 Annual Report to Stockholders by mail will find instructions about how to obtain a paper copy of the proxy materials and annual report on their Notice. Stockholders receiving a Notice by email will find instructions about how to obtain paper copies as part of the email. All stockholders of record on March 30, 2009 who do not receive a Notice by mail or email will receive a paper copy of the proxy materials by mail.
How may I obtain a copy of FTI Consulting, Inc.s 2008 Annual Report to Stockholders and other financial information?
Stockholders may request a free copy of our 2008 Annual Report to Stockholders, which includes our 2008 Annual Report on Form 10-K filed with the SEC on March 2, 2009, from:
FTI Consulting, Inc.
Attn: Corporate Secretary
500 East Pratt Street
Suite
1400
Baltimore, MD 21202
(410) 951-4800
Alternatively, stockholders can access the 2008 Annual Report to Stockholders, which includes our 2008 Annual Report on Form 10-K, and other financial information, on our website at http:/ir.fticonsulting.com/phoenix.zhtml?c=82634&p=irol-sec.
We will furnish any exhibit to the 2008 Annual Report on Form 10-K if specifically requested at no charge.
Who is soliciting my proxy?
We are sending you this proxy statement because our Board is seeking a proxy to vote your shares of common stock at our 2009 Annual Meeting of Stockholders, because you were a stockholder at the close of business on March 30, 2009, the record date, and are entitled to vote at the meeting. This proxy statement is intended to assist you in deciding how to vote your shares.
When and where will FTI hold the 2009 Annual Meeting of Stockholders?
FTIs 2009 Annual Meeting of Stockholders will be held on Wednesday, June 3, 2009, at 9:30 a.m., EDT, at FTI Consulting, Inc.s executive office, located at 777 South Flagler Drive, Phillips Point, Suite 1500 West Tower, West Palm Beach, Florida 33401, telephone no. (561) 515-1900.
Who pays the costs of the proxy solicitation?
FTI will pay the cost of soliciting proxies. In addition to the mailing of the Notice and these proxy materials, the solicitation of proxies or votes may be made in person, by telephone or by electronic communication by our directors, officers and employees, who will not receive any additional compensation for such solicitation activities.
We also have hired Morrow & Co., LLC (Morrow), 470 West Avenue, Stamford, CT 06902, to assist us in the solicitation of votes. We will pay Morrow a base fee of $20,000 plus customary costs and expenses for these services.
In accordance with the regulations of the SEC and the New York Stock Exchange (NYSE), we also pay the fees and expenses of any other proxy solicitation firm engaged by us and will reimburse brokerage firms and other nominees and fiduciaries for their expenses incurred in sending Notices or proxy materials to beneficial owners of our common stock as of the record date.
3
How many votes must be present to hold the 2009 Annual Meeting of Stockholders?
On March 30, 2009, the record date for the 2009 Annual Meeting of Stockholders, 51,325,310 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, in which case the Annual Meeting may be adjourned until such time as a quorum is present. In deciding whether a quorum is present, abstentions and broker non-votes will be counted as shares of common stock that are present at the Annual Meeting.
What items of business will be voted on at the Annual Meeting?
At the Annual Meeting, we will ask you to:
How do I vote my shares?
You have one vote for each share of our common stock that you owned of record at the close of business on March 30, 2009. Even if you plan to attend the annual meeting in person, we recommend that you also vote by proxy as described below so that your vote will be counted if you later decide not to attend the meeting. By voting by proxy you will be directing the person or persons designated on the proxy card as your proxies to vote your shares of common stock at the Annual Meeting in accordance with the instructions you give on the proxy card.
How can I vote in person? Shares held in your name as the stockholder of record may be voted in person at the annual meeting. 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. Shares for which you are the beneficial owner but not the stockholder of record may be voted in person at the annual meeting only if you obtain a legal proxy from the broker or other nominee or fiduciary that holds your shares giving you the right to vote the shares.
How can I vote by Internet? Stockholders who received a Notice of Internet Availability of Proxy Materials by mail may submit proxies over the Internet by following the instructions on the Notice. Stockholders who have received Notice by email may submit proxies over the Internet by following the instructions included in the email. Stockholders who have received paper copies of the proxy materials, including a proxy card or voting instruction card by mail may submit proxies over the Internet by following the instructions on the proxy card or voting instruction card. Internet voting is available 24 hours a day until 11:59 p.m., EDT, on June 2, 2009. You will be given the opportunity to confirm that your instructions have been properly recorded. If you vote via the Internet, please do NOT return a paper proxy card.
How can I vote by telephone? If you are a registered record stockholder, meaning that you hold your shares in certificate form or through an account with our transfer agent, American Stock Transfer & Trust Company, you may also vote by telephone by calling 1-800-690-6903, toll-free, and following the instructions. Telephone voting is available 24 hours a day until 11:59 P.M., EDT, on June 2, 2009. If you vote by telephone, please do NOT return a paper proxy card. Stockholders who are beneficial owners and who receive a voting instruction card by mail may vote by telephone by calling the number specified on the voting instruction card provided by their broker or other nominee or fiduciary. Those stockholders should check the voting instruction card for telephone voting availability.
4
What does it mean if I received more than one proxy card or instruction form?
If you receive more than one proxy card or instruction form, it means that you have multiple accounts with our transfer agent and/or a broker or other nominee or fiduciary or you may hold shares in different ways or in multiple names (e.g., joint tenancy, trusts and custodial accounts). Please vote all of your shares.
Will my shares be voted if I do not complete, sign and return my proxy card or instruction form?
If you are a registered record stockholder and do not vote your shares by Internet, or if you receive paper copies of the proxy materials, by telephone or mail, you must attend the Annual Meeting in order to vote.
If your shares are held in a brokerage account or by another nominee or fiduciary, you are considered the beneficial owner of shares held in street name, you must following the voting instructions forwarded to you by or on behalf of your broker or other nominee or fiduciary. Brokerage firms and other fiduciaries or nominees are required to request voting instructions for shares they hold on behalf of customers and others. As the beneficial owner, you have the right to direct your broker or other nominee of fiduciary how to vote and you are also invited to attend the Annual Meeting. We encourage you to provide instructions to your broker or other nominee or fiduciary to vote your shares. Since a beneficial owner is not the record stockholder, you may not vote the shares in person at the Annual Meeting unless you obtain a legal proxy from the broker or other nominee or fiduciary that holds your shares giving you the right to vote the shares at the meeting.
Even if you do not provide voting instructions on your instruction form, if you hold shares through an account with a broker or other nominee or fiduciary, your shares may be voted. Brokerage firms have the authority under NYSE rules to vote shares for which their customers do not provide voting instructions on certain routine matters. Proposal 1, the election of the two nominees named in the proxy statement as Class I directors, and Proposal 3, the ratification of the retention of KPMG LLP as our independent registered public accounting firm for our fiscal year ending December 31, 2009, are considered routine matters for which brokers or other nominees or fiduciaries may vote in the absence of specific instructions.
When a proposal is not considered routine and the broker or other nominees or fiduciaries has not received voting instructions from the beneficial owner of the shares with respect to such proposal; such firm cannot vote the shares on that proposal. Proposal 2, to amend and restate the FTI Consulting, Inc. Deferred Compensation Plan for Key Employees and Non-Employee Directors, is not considered routine and brokerage firms and other nominees or fiduciaries may not vote on this proposal in the absence of specific instructions. Shares of common stock that a broker or other nominee or fiduciary is not authorized to vote are counted as broker non-votes.
How will my shares of FTI common stock be voted if I do not specify my voting instructions on the proxy card?
If you sign, date and return a proxy card but do not complete voting instructions for a proposal, then your shares will be voted with respect to such proposal by the named proxies as follows:
5
How can I revoke my proxy and change my vote prior to the meeting?
You may change your vote at any time prior to the vote at the Annual Meeting. You may change your vote in any one of four ways:
How many votes will be needed to approve each of this years proposals?
Proposal 1: Elect as Class I Directors the two nominees named in the proxy statement |
The nominees for election as Class I directors who receive the highest number of FOR votes will be elected as directors. This number is called a plurality. | |
Proposal 2: Approve the amendment and restatement of the FTI Consulting, Inc. Deferred Compensation Plan for Key Employees and Non-Employee Directors (to be renamed the FTI Consulting, Inc. 2009 Omnibus Incentive Compensation Plan) |
Under Maryland law, approval of the amendment and restatement of the FTI Consulting, Inc. Deferred Compensation Plan for Key Employees and Non-Employee Directors (to be renamed the FTI Consulting, Inc. 2009 Omnibus Incentive Compensation Plan) requires a majority of the votes cast at the Annual Meeting to be voted FOR this proposal (provided that the total votes cast on Proposal 2 represents over 50% in interest of all securities entitled to vote on the proposal). | |
Proposal 3: Ratify the retention of KPMG LLP as FTIs independent registered public accounting firm for the fiscal year ending December 31, 2009 |
Ratification of the retention of KPMG LLP as our independent registered public accounting firm for the year ending December 31, 2009 requires a majority of the votes cast at the Annual Meeting be voted FOR this proposal. |
What impact will abstentions and broker non-votes have on the proposals?
Abstentions and broker non-votes will not be counted as votes cast either for or against Proposal 1 or 3 and will have no impact on the result of the vote for these Proposals. If you indicate withhold authority to vote for a particular nominee on your proxy card, your withholding of authority will not count as votes cast either for or against the nominee and will have no impact on the election of a director.
Under the NYSE stockholder approval requirements, abstentions are treated as votes cast. Accordingly, they will have the effect of a vote against Proposal 2. Because broker non-votes are not counted as votes cast under the NYSE stockholder approval requirements, they could have an impact on satisfying the NYSE requirement that the total vote cast on Proposal 2 represents over 50% in interest of all securities entitled to vote on that Proposal.
How does the Board recommend that I vote?
Our Board recommends that you vote your shares:
6
How can I obtain FTIs corporate governance information?
The FTI website home page is www.fticonsulting.com. You may also go directly to http://www.fticonsulting.com/en_us/about/governance/Pages/default.aspx for the following information which is also available in print, free of charge, to any stockholder who requests it by contacting our Corporate Secretary at FTI Consulting, Inc., 500 East Pratt Street, Suite 1400, Baltimore, Maryland 21202, telephone no. (410) 951-4800:
ADDITIONAL INFORMATION
On or about April 23, 2009, we began sending a Notice of Internet Availability of Proxy Materials, including Internet availability of the 2008 Annual Report to Stockholders, to FTI stockholders of record on March 30, 2009. The Annual Report to Stockholders does not constitute a part of the proxy solicitation material. The Annual Report provides you with additional information about FTI.
You may access FTIs Annual Report on Form 10-K for the year ended December 31, 2008 and other information on our website at: http://ir.fticonsulting.com/phoenix.zhtml?c=82634&p=irol-sec. Alternatively, you may request a free copy of the Annual Report on Form 10-K and other periodic reports and materials filed with the SEC by contacting our Corporate Secretary, c/o FTI Consulting, Inc., 500 East Pratt Street, Suite 1400, Baltimore, Maryland 21202, telephone no. (410) 951-4800. We will also furnish without charge copies of the exhibits and schedules to the Annual Report on Form 10-K for the fiscal year ended December 31, 2008 if specifically requested.
7
PROPOSALS TO BE PRESENTED AT THE ANNUAL MEETING
We will present the following three proposals at the 2009 Annual Meeting of Stockholders. 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 NO. 1 ELECT AS CLASS I DIRECTORS THE TWO NOMINEES NAMED IN THE PROXY STATEMENT
Our Board is divided into three classes. We currently have ten directors, with Class I and III each having three directors and Class II having four directors. The members of each class are elected for three-year terms. The terms of each class expire at successive meetings so that stockholders elect one class of directors at each annual meeting. Class I directors will stand for election by stockholders at the 2009 Annual Meeting. The terms of the Class II directors and Class III directors will expire at the annual meetings of stockholders to be held in 2010 and 2011, respectively. Gary C. Wendts term as a director will expire at the 2009 Annual Meeting of Stockholders and he will not continue as a director. On April 8, 2009, the Board authorized the reduction of the size of Class I from three to two directors to be effective upon election of the nominees for director at the 2009 Annual Meeting of Stockholders. See Information About the Board of Directors and Committees Nominating and Corporate Governance Committee Director Nomination Process Identification and Nomination of Candidates as Class I Directors for Election at 2009 Annual Meeting of Stockholders for a discussion of the director identification, appointment and nomination process.
Upon the recommendation of the Nominating and Corporate Governance Committee, the Board has nominated the following two persons for election as Class I directors at the 2009 Annual Meeting of Stockholders:
Denis J. Callaghan
Matthew F. McHugh
Denis J. Callaghan and Matthew F. McHugh currently are members of Class I of the Board. Mr. Callaghan has been a director since 2000 and Mr. McHugh has been a director since 2005. The Board has affirmatively concluded that Messrs. Callaghan and McHugh qualify as independent directors under our Categorical Standards of Director Independence and the independence standards established under Section 303A of the NYSE corporate governance rules. More detailed information about the Boards determination of director independence is provided in the section of this proxy statement titled Information About the Board of Directors and Committees Independence of Directors.
Each of the two nominees for Class I director, if elected, will serve for a three-year term until the annual meeting of stockholders in 2012. We do not know any reason why any nominee would be unable to serve as a director. If any of the nominees cannot serve for any reason (which is not anticipated), the Nominating and Corporate Governance Committee may identify and recommend a candidate or candidates to the Board as a potential substitute nominee or nominees. If that happens, we will vote all valid proxies for the election of the substitute nominee or nominees designated by the Board. Alternatively, the Board may determine to keep a vacancy open or reduce the size of the class of directors. Proxies cannot be voted for a greater number of persons than the number of nominees named.
More detailed information about each of the nominees is provided in the section of this proxy statement titled Information About the Board of Directors and Committees Information About the Nominees for Class I Director and Other Directors.
The Board of Directors Unanimously
Recommends That You Vote FOR the Election of
All the Nominees as Class I
Directors.
8
PROPOSAL NO. 2 APPROVE THE AMENDMENT AND RESTATEMENT OF THE FTI CONSULTING, INC. DEFERRED COMPENSATION PLAN FOR KEY EMPLOYEES AND NON-EMPLOYEE DIRECTORS (TO BE RENAMED THE FTI CONSULTING, INC. 2009 OMNIBUS INCENTIVE COMPENSATION PLAN)
INTRODUCTION
On March 31, 2009, our Board approved the amendment and restatement of the FTI Consulting, Inc. Deferred Compensation Plan for Key Employees and Non-Employee Directors, as amended (the Deferred Compensation Plan), which was originally approved by stockholders on June 6, 2006 (to be renamed the FTI Consulting, Inc. 2009 Omnibus Incentive Compensation Plan (and to be referred to as the 2009 Plan)), subject to approval by our stockholders at this 2009 Annual Meeting of Stockholders. The 2009 Plan is intended to advance the interests of FTI by providing incentives to our officers, employees, non-employee directors and other individual service providers, attracting and retaining key professionals, and increasing their proprietary interest in the success of FTI. Notably, FTI is not asking stockholders to approve an increase in the aggregate number of shares of common stock available for issuance under the 2009 Plan.
The 2009 Plan will retain all the provisions of the Deferred Compensation Plan as in effect prior to its amendment and restatement, which allows (i) employees at the senior managing director and practice group leader levels or higher or other highly compensated positions with FTI and our subsidiaries in and outside of the U.S. (collectively, referred to as Key Employees), to voluntarily defer a portion of their annual cash bonus payments and substitute deferred stock units and (ii) FTIs non-employee directors to elect to defer all or a portion of their annual cash and equity compensation and substitute stock units or restricted stock units, as applicable, in each case representing the right to receive one share of our common stock for each stock unit and restricted stock unit upon a pay-out event. Executive officers and other officers of FTI designated as officers subject to Section 16 of the Securities Exchange Act of 1934, as amended (the Exchange Act), are not eligible and will continue not to be eligible to participate in the deferral features of the 2009 Plan.
The amendment and restatement of the 2009 Plan incorporates the provisions of the 2009 Plan as currently in effect and includes the following key modifications:
i. |
adding the authority to grant incentive and non-qualified stock options and stock appreciation rights and stock-based awards, including restricted stock, unrestricted stock, performance stock, phantom stock, stock unit and restricted stock unit awards (2009 Plan Awards), of which an aggregate of 900,000 shares of common stock would be available for restricted and unrestricted stock awards as well as other stock-based awards, including phantom stock, performance awards, stock units, restricted stock units and performance units; | ||
ii. |
adding all employees, executive officers, non-employee directors and individual service providers of FTI and our subsidiaries and affiliates as individuals eligible to receive grants of 2009 Plan Awards in the discretion of the administrator (2009 Plan Participants); | ||
iii. |
adding performance goals and annual per participant grant limitations so that certain awards granted under the 2009 Plan may qualify as performance-based compensation within the meaning of Section 162(m) of the Internal Revenue Code (Code Section 162(m)); and | ||
iv. |
renaming the plan as our 2009 Omnibus Incentive Compensation Plan. |
If the requisite stockholder approval is not obtained, elements of the 2009 Plan requiring the approval of stockholders will not take effect but FTI will continue to administer the plan in accordance with its current terms and conditions.
As of March 30, 2009, the record date, (i) 1,226,492 shares of common stock remain available under the 2009 Plan, (ii) our FTI Consulting, Inc. 2006 Global Long-Term Incentive Plan, as Amended and Restated Effective May 14, 2008 (the 2006 Plan), had 93,125 shares of common stock available that could be used to make awards, all of which may be granted as incentive and non-qualified stock options and stock appreciation rights, but only 47,086 of which may be used for stock-based awards, including restricted and unrestricted stock awards, and (iii) no authorized shares remain available for award under the FTI Consulting, Inc. 2004 Long-Term Incentive Plan, as Amended and Restated Effective May 14, 2008 (the 2004 Plan).
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In order to facilitate approval of this proposal and to address potential stockholder concerns regarding the number of options, stock appreciation rights or stock awards we intend to grant in a given year, we commit to our stockholders that for the next three years (commencing on January 1, 2009) we will limit the number of shares of common stock subject to options, stock appreciation rights and stock awards under our equity compensation plans, including the 2009 Plan, to an average of 4.01% of our weighted average basic shares outstanding, which is the Burn Rate limit established by Institutional Shareholder Services for FTIs industry group. This represents a reduction from FTIs average of 4.17% over the three previous fiscal years. For purposes of the calculation used to determine compliance with the limitation described in the foregoing sentence, stock-based awards will count as equivalent to (1) 1.5 option shares, if our annual stock price volatility is 54.6% or higher, (2) two option shares, if our annual stock price volatility is between 36.1% and 54.6%, (3) 2.5 option shares, if our annual stock price volatility is between 24.9% and 36.1%, (4) three (3) option shares, if our annual stock price volatility is between 16.5% and 24.9%, (5) three and one-half (3.5) option shares, if our annual stock price volatility is between 7.9% and 16.5%, and (6) four (4) option shares if our annual stock price volatility is less than 7.9%.
Usage of Equity Awards by FTI
The table below sets forth the stock option and stock-based awards awarded by the administrator of FTIs equity plans for the years ended December 31, 2008, December 31, 2007 and December 31, 2006 and the weighted average number of shares outstanding at the end of each year:
Net Full | ||||||||||||||||||||
Net Options | Value Shares | |||||||||||||||||||
Granted | Granted | |||||||||||||||||||
Minus | Minus | Weighted | ||||||||||||||||||
Unearned | Performance- | Unearned | Average | |||||||||||||||||
Performance- | Performance- | Based Full | Performance- | Fully | ||||||||||||||||
Based Options | Based Option | Full-Value | Value Shares | Based Full | Diluted | Weighted | ||||||||||||||
Options | Granted and | Awards in | Shares | Granted and | Value Shares | Shares | Average | |||||||||||||
Year Ended | Granted | Not Earned | Column (b) | Granted | Not Earned | in Column(e) | Outstanding | Basic Shares | ||||||||||||
December 31, | (a) | (b) | (c) | (d) | (e) | (f) | (g) | Outstanding | ||||||||||||
2006 | 2,057,104 | 135,000 | 1,922,104 | 373,969 | 85,000 | 288,969 | 40,526,000 | 39,741,000 | ||||||||||||
2007 | 1,045,565 | -0- | 1,045,565 | 386,825 | 26,500 | 360,325 | 45,974,000 | 43,028,000 | ||||||||||||
2008 | 428,986 | -0- | 428,986 | 374,868 | 77,521 | 297,347 | 53,603,000 | 49,193,000 |
The table below shows information relating to shares of FTI common stock issuable upon the exercise of stock options and the vesting of unvested shares of our common stock (including restricted stock), in each case including performance-based awards, awarded under our equity plans that are outstanding as of March 30, 2009:
Weighted Average | ||||||||||||
Stock Based Awards | Weighted Average Exercise | Remaining Option | ||||||||||
Outstanding | Stock Options Outstanding | Price Per Option Share ($) | Term (in Years) | |||||||||
(a) | (b) | (c) | (d) | |||||||||
1,394,421(1) | n/a | n/a | n/a | |||||||||
5,291,236 | 30.74 | 6.71 |
n/a means not applicable |
(1) | Includes (i) 274,918 unvested shares of restricted stock and 0 unearned performance-based stock awards awarded under the 2004 Plan, (ii) 664,287 unvested shares of restricted stock and 189,021 unearned performance-based stock awards awarded under the 2006 Plan and (iii) 266,000 unreleased or restricted stock units under the Deferred Compensation Plan. | |
(2) | Includes unexercised stock options exercisable for (i) 1,224,366 shares of common stock awarded under the 1997 Stock Option Plan, as amended (which plan terminated by its terms in 2007), (ii) 1,882,669 shares of common stock awarded under the 2004 Plan, and (iii) 2,184,201 shares of common stock awarded under the 2006 Plan, of which 135,000 are unearned performance-based awards. |
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Why You Should Vote in Favor of the 2009 Plan
As of March 30, 2009 there were 93,125 authorized shares of FTI common stock available under our 2006 Plan for new equity awards, of which 47,086 shares could be used for stock-based awards, including restricted stock awards. That number of shares is not sufficient to meet our anticipated needs under FTIs Senior Managing Director Incentive Compensation Program (the IC Program) and for other purposes. We are not asking stockholders for approval of additional new shares. We are asking stockholders to make available the currently authorized 1,226,492 shares of FTI common stock under our Deferred Compensation Plan for the additional purposes described above. The Company would be limited in its ability to grant new awards by the number of authorized shares of common stock then available under the 2009 Plan.
We believe our future success and profitability depend heavily on our ability to retain Key Employees by providing them with a compensation package that meets or exceeds that offered by our competitors. As a professional services firm, equity is a key component of our overall compensation package. We believe it encourages our Key Employees, executive officers and other employees to remain with FTI and closely aligns their interests with those of our stockholders. We also believe it is a useful recruiting tool and we use equity compensation to compete for top talent. We also use equity to facilitate our acquisition of other businesses and companies and to induce the top talent with a company or business that we acquire to join us following completion of such acquisition.
The adoption of the 2006 Plan coincided with the introduction of our IC Program, which is designed to retain and reward Key Employees invited to join the program through significant up-front and annual stock option and restricted stock awards in consideration of them entering into long-term written employment agreements and deferring one-third of their annual cash bonus award into the form of restricted shares that vest over three years. We believe that the following charts support statistically the favorable impact of our historical use of equity-based compensation to our growth and stockholder value from 2005 through 2008.
As these charts illustrate (i) our revenue generating headcount grew from 1,005 as of year end 2005, to 1,596 as of year end 2006, 1,954 as of year end 2007 and 2,536 as of year end 2008, for a compound growth rate (CGR) of 35.8%, (ii) our annual revenue increased from $539.5 million for fiscal 2005, to $707.9 million for fiscal 2006, $1.0 billion for fiscal 2007 and $1.3 billion for fiscal 2008, reflecting a compound annual growth rate of 33.8%, and (iii) stockholders equity has grown from $454.3 million for fiscal 2005, to $565.1 million for fiscal 2006, $972.3 for fiscal 2007 and $1.124 billion for fiscal 2008, representing a compound total stockholder return on our common stock such that $100,000 invested in our common stock on March 30, 2005 would have grown to approximately $235,683 on March 30, 2009, based on the closing price of FTI common stock as reported on the NYSE for March 30, 2009 of $48.81 per share. We believe that if we presented this data for years prior to 2005, the growth would be even more dramatic.
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In deciding whether to approve the proposal to approve the modifications to the 2009 Plan, stockholders should also consider the following key factors:
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professionals with the level of expertise, specializations and education that we employ is intense. Between December 31, 2005 and December 31, 2008, the number of professionals we employ grew from 1,005 to 2,523, which supported revenue growth from approximately $539.5 million to $1.3 billion during the same period. Our future growth depends on our ability to retain and continue to attract the level of professional who are critical to our success.
Stock | Restricted | Bonus | Bonus | |||||||||||||||||||||||||
Initial Stock | Initial | Option | Stock | Equity | Matching | Matching | ||||||||||||||||||||||
Option | Restricted | Grants to | Awards to | Awards in | Equity | Equity | ||||||||||||||||||||||
Grants to | Stock Awards | Existing | Existing | Substitution | Awards: | Awards: | ||||||||||||||||||||||
Year Ended | New Plan | to New Plan | Plan | Plan | of Deferred | Stock | Restricted | Segments | ||||||||||||||||||||
December 31, | Participants | Participants | Participants | Participants | Cash Bonus | Options | Stock | Participating | ||||||||||||||||||||
2006 | 685,000 | 99,500 | | | | | | Corporate Finance | ||||||||||||||||||||
2007 | 730,000 | 140,000 | 25,000 | 3,500 | 61,486 | 61,486 | 33,350 | Corporate Finance, Forensic and Litigation Consulting, Technology | ||||||||||||||||||||
2008 | 129,000 | 20,420 | 18,000 | 6,000 | 117,750 | 117,750 | 61,821 | Corporate Finance, Forensic and Litigation Consulting, Technology, Economic Consulting |
We expect the number of participants in the IC Program to increase each year as current written employment agreements approach their expiration date, as special arrangements entered into with professionals who joined us in connection with acquisitions come to an end and as part of our annual performance evaluation process. We also expect to add Key Employees in our Strategic Communications segment as participants in the IC Program. Each year we evaluate whether current participants should be eligible for additional awards under this program. Our executive officers are not eligible to participate in the IC Program. As of March 30, 2009, there were 58 Key Employees who participate in the IC Program representing 23% of employees in the position of practice leader, senior manager director or senior vice president in our business segments.
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long-term written employment agreements with a typical term of five years, which include annual renewal provisions that provide that the agreements will renew for one year, from year to year, beginning at the end of their initial terms unless a party provides written notice of non-renewal to the other party.
DESCRIPTION OF THE 2009 PLAN
Summary
The following is a summary of the 2009 Plan (as amended and restated). The following general summary is qualified in its entirety by the complete text of the 2009 Plan attached to this proxy statement as Appendix A. You may request a copy of the 2009 Plan, free of charge, from the Corporate Secretary of FTI Consulting, Inc. at 500 East Pratt Street, Suite 1400, Baltimore, Maryland 21202, telephone no. (410) 951-4800.
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Shares Available; Limitation on Issuance of Stock-Based Awards
A total of 1,500,000 shares of FTI common stock was initially authorized for issuance under the 2009 Plan by our stockholders at the annual meeting of stockholders held on June 6, 2006. As of March 30, 2009, the record date, 1,226,492 shares of our common stock remained available for issuance under the 2009 Plan, of which an aggregate of 900,000 shares would be available for direct restricted stock, unrestricted stock, restricted stock units, stock units, performance stock, phantom stock and other stock-based awards.
The maximum number of shares of our common stock granted during any calendar year to any one individual under the 2009 Plan will be limited to 200,000 shares of our common stock per type of award. Such per-individual limit will not be adjusted for any 2009 Plan Award (and related shares of common stock) of an individual that has been terminated, surrendered or canceled.
The maximum dollar award that may be paid to any one individual as cash-based awards under the 2009 Plan in any year shall not exceed the aggregate amount of $15.0 million.
Not more than five percent (5%) of stock-based awards granted under the 2009 Plan that are stock awards, phantom stock awards, performance awards or other stock-based awards shall be granted with pro rata vesting periods ending less than (a) in the case of performance stock awards granted under the 2009 Plan, one-year measured from the date of grant, and (b) in the case of awards granted under the 2009 Plan that are stock awards, phantom stock awards or other stock-based awards, three years measured from the date of grant.
The maximum number of shares of our common stock as to which 2009 Plan Awards may be granted, in the aggregate and with respect to any type of 2009 Plan Award, the maximum number of shares with respect to which 2009 Plan Awards may be granted during any one calendar year to any individual, and the number of shares covered by and the exercise price and other terms of outstanding 2009 Plan Awards, may be subject to adjustment in the event of a non-change in control transaction affecting our common stock, or our capitalization, by reason of a spin-off, split-up, dividend, recapitalization, merger, consolidation, share exchange or other similar transaction, or a stock dividend, stock split, reverse stock split, issuance of rights or warrants or other similar events. Shares of common stock that relate to 2009 Plan Awards that have been settled in cash, terminate or expire unexercised, or are repurchased, or otherwise forfeited will be restored to the 2009 Plan and thereafter will be available for future 2009 Plan Awards; provided, however, that any shares that are repurchased by us in connection with any 2009 Plan Award or that are otherwise forfeited after issuance will not be available for purchase pursuant to incentive stock options intended to qualify under Section 422 of the Internal Revenue Code (the Code) and shares withheld to pay tax withholding obligations with respect to an award will not be restored to the plan. The shares of common stock to be issued under the 2009 Plan will come from authorized but unissued shares of our common stock, treasury shares or our open market purchases of our common stock.
Plan Administration; Terms of 2009 Plan Awards
The 2009 Plan will be administered by a committee of the Board comprised (to the extent determined to be necessary or advisable by the Board) of directors who are independent directors for purposes of the applicable exchange requirements, who are outside directors within the meaning of Code Section 162(m), and who are non-employee directors within the meaning of Rule 16b-3 promulgated by the SEC under the Exchange Act. The administrator, has the sole authority to interpret the 2009 Plan and set the terms of all 2009 Plan Awards, including the authority to: (1) determine the eligible persons to whom, and the time or times at which 2009 Plan Awards shall be granted; (2) determine the types of 2009 Plan Awards to be granted; (3) determine the number of shares to be covered by or used for reference purposes for each 2009 Plan Award; (4) impose such other terms, limitations, restrictions and conditions upon any 2009 Plan Award as the administrator shall deem appropriate; (5) establish the performance goals and payment terms of performance-based awards, (6) determine conclusively whether (and, if applicable, when) a participant is a specified employee or disabled (as each term or terms of similar import are defined in the 2009 Plan), or has experienced a separation from service or unforeseeable emergency (as each term is defined in the 2009 Plan), and shall make such determination consistent with Section 409A of the Internal Revenue Code (Code Section 409A); (7) accelerate or otherwise change the time in which a 2009 Plan Award may be exercised or becomes payable and to waive or accelerate the lapse, in whole or in part, of any restriction or condition with respect to such 2009 Plan Award, including, but not limited to, any restriction or condition with respect to the vesting or exercisability of a 2009 Plan Award following termination of a participants employment or other relationship with the FTI or its
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affiliates; provided, however, that (a) the Board may accelerate vesting terms and conditions and lapse of restrictions of outstanding 2009 Plan Awards for reasons of (i) death, (ii) disability, (iii) change in control, (iv) retirement, or (v) an event of termination (including termination by FTI or its affiliates without cause, termination by grantee for good reason, or settlement or waiver of claims or proceedings arising out of a termination by FTI or its affiliates without cause), and (b) no such acceleration or waiver shall be allowed with regard to a deferral of compensation within the meaning of Code Section 409A, except as otherwise permitted thereunder; and (8) establish objectives and conditions, if any, for earning 2009 Plan Awards and determining whether 2009 Plan Awards will be paid after the end of a performance period.
No Stock Option and Stock Appreciation Right Reloads, Repricings or Cancellations
The 2009 Plan does not provide for the automatic reload of stock options once they are exercised. In addition, the 2009 Plan prohibits the repricing, replacement or regrant of any stock options or stock appreciation rights granted under the 2009 Plan, (i) through cancellation and replacement or regrant with lower priced options or stock appreciation rights, (ii) through exchange, replacement or buyouts of awarded options or stock appreciation rights with cash, or (iii) by lowering the option exercise price or stock appreciation right base price of a previously granted 2009 Plan Award, without the prior approval of our stockholders.
No Annual Evergreen Provision
The 2009 Plan provides for a fixed allocation of shares of common stock.
No Loans
The 2009 Plan does not authorize FTI to make loans to plan participants to finance the acquisition of shares.
No Discount Stock Options
The 2009 Plan prohibits the grant of a stock option with an exercise price of less than the fair market value of a share of our common stock on the date of grant.
Types of 2009 Plan Awards and Grants
Pursuant to written award agreements, and subject to the provisions of the 2009 Plan, the administrator may award stock options (including nonstatutory and incentive stock options), stock appreciation rights, restricted and unrestricted stock, stock and cash-based phantom stock, performance awards, other incentive and stock-based awards, and cash-based awards, or any combination thereof as described below:
a. | Stock Options. A stock option represents the right to purchase a share of common stock at a predetermined exercise price. The administrator, in its discretion, may grant nonstatutory stock options or incentive stock options to qualified participants. The administrator will set the terms of each stock option, including the number of shares, exercise price, vesting period, and option duration, but in no event will any option term exceed ten years. All options must have an exercise price at least equal to the closing price of one share of FTI common stock as reported on the NYSE (or other principal securities exchange on which shares of our common stock are then listed) on the date of grant. The administrator, in its sole discretion, in the applicable award agreement may authorize stock options to be exercised, in whole or in part, by payment in full of the exercise price in cash, or by delivery of previously owned shares of common stock, or through a broker cashless exercise program. | ||
b. | Stock Appreciation Rights. The administrator may from time to time grant to eligible participants awards of stock appreciation rights (SARs). A SAR entitles the recipient to receive a payment having an aggregate value equal to the product of (1) the excess of (A) the fair market value on the exercise date of one share of common stock over (B) the base price per share specified in the applicable award agreement, times (2) the number of shares specified by the SAR, or portion thereof, which is exercised. Payment of the amount payable upon any exercise of a SAR may be made by the delivery of shares of common stock or cash, or any combination of shares of common stock and cash, as determined in the sole discretion of the administrator. If upon settlement of the exercise of a SAR the holder is to receive a portion of such payment in shares of common stock, the number of shares will be determined by dividing such portion |
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by the fair market value of a share of common stock on the exercise date. No fractional shares will be used for such payment and the administrator will determine whether cash will be given in lieu of such fractional shares or whether such fractional shares will be eliminated. For purposes of counting against the aggregate share limitation of the 2009 Plan, SARs to be settled in shares of common stock will be counted in full, regardless of the number of actual shares issued upon settlement of the SARs. | |||
c. | Stock Awards. Restricted stock is shares of common stock that are awarded to a participant and that are subject to forfeiture or vesting during a pre-established period if certain conditions are met. Unrestricted stock consists of shares of common stock that are not subject to forfeiture or vesting conditions. Restricted stock may not be sold, assigned, transferred, pledged or otherwise encumbered so long as it is subject to forfeiture or has not vested. A holder of restricted stock will generally have all the rights of a holder of shares of common stock, including the right to receive any dividends and to vote, even during the restricted period. Any dividends with respect to shares of restricted stock that are payable in shares of common stock will be paid in the form of shares of restricted stock, and any cash dividends with respect to shares of restricted stock will be reserved and held by us for the holder and paid upon the satisfaction of applicable vesting conditions in a manner consistent with the requirements of Code Section 409A. | ||
d. | Phantom Stock. Phantom stock awards, including phantom stock units, restricted stock units and stock units are full value awards denominated in stock-equivalent units. The amount and terms of a stock unit award will be set by the administrator pursuant to a written award agreement. Stock units granted to a participant will be credited to a bookkeeping reserve account solely for accounting purposes, and will not require a segregation of any of our assets. An award of stock units may be settled in shares of our common stock, in cash, or in a combination of shares of common stock and cash, as determined in the sole discretion of the administrator. Except as otherwise provided in the applicable award agreement, in the sole discretion of the administrator, the holder of stock units will not have any rights of a stockholder with respect to any shares of common stock represented by a stock unit solely as a result of the grant of a stock unit. | ||
e. | Performance Awards. Performance awards are awards of cash, shares of common stock, or a combination of cash and shares of common stock, which become vested or payable upon the satisfaction of pre-determined performance goals over the pre-determined performance period established by the administrator. The performance goals will be based on one or more of the following criteria: earnings before interest, taxes, depreciation and amortization, or EBITDA, stock price, earnings per share, net earnings, operating or other earnings, profits, revenues, net cash flow, financial return ratios, return on assets, stockholder return, return on equity, growth in assets, market share or strategic business criteria consisting of one or more objectives based on meeting specified goals such as business or operating goals, revenue or other financial goals, market penetration goals, geographic business expansion goals or goals relating to acquisitions or strategic partnerships. The performance period may be one year or longer. Upon completion of a performance period, the administrator will determine whether the performance goals have been met within the established performance period, and certify in writing to the extent such goals have been satisfied. | ||
f. | Other Stock-Based Awards. Other stock-based awards are awards, which are denominated or valued in whole or in part by reference to, or otherwise based on or related to, the value of our common stock. Other stock-based awards may be denominated in cash, in shares of common stock or other securities, in stock-equivalent units, in stock appreciation units, in securities or debentures convertible into shares of common stock, or in any combination of the foregoing and may be paid in shares of common stock or other securities, in cash, or in a combination of shares of common stock or other securities and cash, all as determined in the sole discretion of the administrator. The administrator will set the terms and amounts of other stock-based awards, if any, pursuant to a written award agreement. | ||
g. | Other Cash-Based Awards. The administrator may from time to time grant cash-based awards to eligible participants in such amounts, on such terms and conditions, and for such consideration, including no consideration or such minimum consideration as may be required by law, as it shall determine. Cash-based awards shall be credited to a bookkeeping reserve account solely for accounting purposes and shall not require a segregation of any of our assets, and will be payable in only cash. |
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Incentive Stock Option Limits
For purposes of the grant of incentive stock options under the 2009 Plan, (i) only the first $100,000 of shares of common stock (valued as of the date of grant) that become exercisable under an individuals incentive stock options in a given year will be eligible to receive incentive stock option tax treatment, (ii) the exercise price must at least equal 100% of the fair market value of the shares on the date of grant of the option (or, in the case of incentive stock options granted to a 10% stockholder of FTI, at least 110% of the fair market value of our common stock), and (iii) the maximum term of an incentive stock option is ten years from the date of grant (or, in the case of incentive stock options granted to a 10% stockholder of FTI, five years from the date of grant).
No Separate Consideration
We will not receive separate consideration for the granting of 2009 Plan Awards under the 2009 Plan, other than related to the services the participants provide or as otherwise required by applicable law.
Change in Control
In the event of any transaction resulting in a change in control (as defined in the 2009 Plan) of FTI, outstanding stock options and other awards that are payable in or convertible into common stock under the 2009 Plan will terminate upon the effective time of such change in control unless provision is made in connection with the transaction for the continuation or assumption of such awards by, or for the substitution of equivalent awards of, the surviving or successor entity or parent thereof. In the event of such termination, (i) the outstanding stock options and other awards that will terminate upon the effective time of the change in control will become fully vested immediately before the effective time of the change in control and (ii) the holders of stock options and other awards under the 2009 Plan will be permitted, immediately before the change in control, to exercise or convert all portions of such stock options or other awards under the 2009 Plan that are then exercisable or convertible or which become exercisable or convertible upon or immediately prior to the effective time of the change in control. The administrator may, in its discretion, provide for a different treatment of outstanding awards in the applicable award agreement.
Amendments and Termination
The Board may terminate, amend or modify the 2009 Plan or any portion thereof at any time; provided, however, that without approval of our stockholders, no such amendment or modification will be made that (a) increases the total number of shares of common stock that may be granted under the 2009 Plan, in the aggregate, with respect to any type of award, or with respect to any individual during any one calendar year (except in each case for adjustments to common stock for corporate transactions or other events such as stock splits, reverse stock splits and stock dividends, as provided in the 2009 Plan) or (b) is required to be submitted to stockholders for approval under applicable law or the rules of the SEC and/or NYSE (or other principal securities exchange on which shares of our common stock are then listed). Except as otherwise determined by the Board, termination of the 2009 Plan will not affect the administrators ability to exercise the powers granted to it hereunder with respect to 2009 Plan Awards granted under the Plan prior to the date of such termination. The administrator may take such actions as it deems appropriate to ensure that the 2009 Plan and 2009 Plan Awards comply with any tax, securities or other applicable laws. In general, no amendment or termination of the 2009 Plan will adversely affect the rights of a participant that has been established prior to such amendment or termination absent the written consent of the affected participant.
Vesting and Transferability of 2009 Plan Awards
Subject to the limitations of the 2009 Plan, the administrator, in its discretion, has the general authority to enact terms and conditions with respect to the vesting or exercisability of a 2009 Plan Award during and following the end of a participants employment or other relationship with FTI or its subsidiaries or affiliates. In general, no award under the 2009 Plan may be subject in any manner to sale, transfer, assignment, pledge, attachment, garnishment or other alienation or encumbrance of any kind, other than by will or by the laws of descent and distribution.
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Eligibility and Awards
As of March 30, 2009, approximately 3,428 employees, including 257 senior managing directors, five practice leaders, 16 officers and eight non-employee directors, as well as individual service providers of FTI and our subsidiaries will be eligible to participate in the 2009 Plan. The administrator has the authority to select participants and to determine the amount, type and terms of each award granted under the 2009 Plan. The administrator may also grant new 2009 Plan Awards to replace outstanding options or other equity-based compensation when we acquire another company and, where appropriate, to mirror the terms of those replaced options or other equity-based compensation awards. We cannot fully determine at this time the type of awards, number of shares subject to awards, exercise prices or dollar values of benefits that will be granted pursuant to the 2009 Plan, however, the Company is in the process of negotiating new employment terms with the head and chief financial officer of our Strategic Communications segment, including the possible award of stock options exercisable for a number of shares of FTI common stock with an aggregate value of $1,650,000 (as determined in accordance with Black-Scholes or such other valuation method as is used for our GAAP financials) and restricted stock with an aggregate value of $850,000, and may seek approval of the administrator for such awards prior to the Annual Meeting of Stockholders, subject to stockholder approval of the 2009 Plan.
The following table sets forth the aggregate number of stock option, restricted stock and performance-based stock awards granted under the 2006 Plan, 2004 Plan and Deferred Compensation Plan during the year ended December 31, 2008, to each of our named executive officers (NEOs), all executive officers as a group, all directors who are not executive officers as a group and our non-executive officer employee group. The fair market value of one share of FTI common stock on March 30, 2009, as reported on the NYSE for that day, was $48.81.
Stock Awards | Option Awards | |||||||||||||
Aggregate | ||||||||||||||
Number of | ||||||||||||||
Shares of | ||||||||||||||
Restricted | Aggregated | Aggregate | Weighted | Aggregate | ||||||||||
Stock, | Dollar | Number | Average | Dollar | ||||||||||
Restricted | Value of | of Shares | Exercise | Value of | ||||||||||
Stock Units | Stock | Underlying | Price Per | Option | ||||||||||
or Stock | Awards | Option | Share | Award | ||||||||||
Units | ($)(1) | Awards | ($) | ($)(1) | ||||||||||
Name and Position | (a) | (b) | (c) | (d) | (e) | |||||||||
Jack B. Dunn, IV | 76,920 | (2) | 5,499,909 | 45,000 | 68.88 | 1,373,175 | ||||||||
President and Chief Executive Officer, | ||||||||||||||
Director(2) | ||||||||||||||
Dennis J. Shaughnessy | | | | | ||||||||||
Executive Chairman of the Board | ||||||||||||||
Jorge A. Celaya | | | | | | |||||||||
Executive Vice President and | ||||||||||||||
Chief Financial Officer | ||||||||||||||
Dominic DiNapoli | 6,000 | 381,000 | | | | |||||||||
Executive Vice President and | ||||||||||||||
Chief Operating Officer | ||||||||||||||
Declan M. Kelly | 15,000 | (3)(4) | 1,110,750 | 75,000 | (3)(4) | 74.05 | 2,242,838 | |||||||
Executive Vice President and | ||||||||||||||
Chief Integration Officer(3)(4) | ||||||||||||||
Executive Group (9 persons) | 117,280 | 8,276,902 | 121,274 | 72.04 | 3,649,231 | |||||||||
Non-Executive Director Group (8 persons) | 8,163 | 452,802 | | | | |||||||||
Non-Executive Officer Employee Group | 3,200 | 203,200 | | | | |||||||||
(7 persons) |
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(1) | Represents the aggregate grant date fair value pursuant to FAS Statement 123(R) of each stock and option award, as applicable, made during the year ended December 31, 2008 to the person or groups indicated. Assumptions used in the calculations of these amounts are included in Managements Discussion and Analysis of Financial Condition and Results of Operations Critical Accounting Policies Share-Based Compensation and Note 1 Description of Business and Significant Accounting Policies Share-Based Compensation Expense and Note 2 Share-Based Compensation to the Consolidated Financial Statements of FTI in our Annual Report on Form 10-K for the year ended December 31, 2008 filed with the SEC on March 2, 2009. | |
(2) | Includes: | |
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(3) | Includes 10,000 shares of performance-based restricted stock awarded to the executive by the Compensation Committee pursuant to the 2006 Plan with a grant date of August 11, 2008 (see Executive Officers and Compensation Compensation Discussion and Analysis NEO Compensation LTIP Awards). | |
(4) | Includes 5,000 shares of restricted stock and a stock option exercisable for 75,000 shares of common stock awarded to the executive by the Compensation Committee pursuant to the 2006 Plan with a grant date of August 11, 2008. The shares of restricted stock will vest in five equal installments of 1,000 shares on the first through fifth anniversary of the date of grant, such that the restricted shares will be fully vested on August 11, 2013. The stock option will vest in five equal installments of 15,000 shares on the first through fifth anniversary date of the date of grant, such that the stock option will be fully vested on August 11, 2013. |
2009 PLAN AWARDS TO EMPLOYEES IN FOREIGN COUNTRIES
The administrator has the authority to grant 2009 Plan Awards to employees of FTI and our subsidiaries who are foreign nationals or employed outside the U.S. on any different terms and conditions than those specified in the 2009 Plan that the administrator, in its discretion, believes to be necessary or desirable to accommodate differences in applicable law, tax policy or custom, or to qualify for preferred tax treatment under foreign tax laws or otherwise complying with the regulatory requirements of local or foreign jurisdictions, while furthering the purposes of the 2009 Plan. The administrator has delegated to a management committee the authority to establish or approve sub-plans to the 2009 Plan to comply with foreign laws (but not the authority to grant awards or set the terms of awards). The administrator may allocate all or a portion of authorized shares under the 2009 Plan for award pursuant to such sub-plan(s), as it believes to be necessary or appropriate for these purposes without altering the terms of the 2009 Plan in effect for other participants; provided, however, that the administrator, without stockholder approval, may not (a) increase individual share ownership limitations in the 2009 Plan, (b) increase the number of shares available under the 2009 Plan (c) increase the number of shares available for stock-based awards under the 2009 Plan; (d) increase the limitations on cash-based awards under the 2009 Plan or (e) cause the 2009 Plan to cease to satisfy any conditions under Rule 16b-3 under the Exchange Act. Subject to the foregoing, the management committee may amend, modify, administer and terminate, as well as prescribe, amend and rescind rules relating to, such sub-plans.
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U.S. FEDERAL INCOME TAX CONSEQUENCES
The following summary is intended only as a general guide to the U.S. federal income tax consequences of incentive stock options and nonstatutory stock options, which are authorized for grant under the 2009 Plan, under current law. It does not attempt to describe all possible federal or other tax consequences of participation in the 2009 Plan or tax consequences based on particular circumstances. The tax consequences may vary for non-U.S. awards.
Incentive Stock Options
An optionholder recognizes no taxable income for regular income tax purposes as a result of the grant or exercise of an incentive stock option qualifying under Code Section 422. However, an optionholder may be subject to the alternative minimum tax if the fair market value of our common stock on the date of exercise exceeds the optionholders purchase price for the shares. Optionholders who neither dispose of their shares within two years following the date the option was granted nor within one year following the exercise of the option will normally recognize a capital gain or loss upon a sale of the shares equal to the difference, if any, between the sale price and the purchase price of the shares. If an optionholder satisfies such holding periods upon a sale of the shares, we will not be entitled to any deduction for federal income tax purposes. If an optionholder disposes of shares within two years after the date of grant or within one year after the date of exercise (a disqualifying disposition), the optionholder will normally recognize ordinary income in the tax year during which he disqualifying disposition occurs equal to the lesser of the difference between (i) the fair market value of the shares on the date of exercise and the purchase price of such shares, or (ii) the sales price and the purchase of such shares. The optionholder will normally also recognize capital gain equal to the difference, if any, between the sales price and the fair market value of such shares on the exercise date. However, if a loss is recognized on the sale (i.e., the sales price is less than the purchase price of the disposed shares), the optionholder will not recognize any ordinary income and such loss will be a capital loss. Any ordinary income recognized by the optionholder upon the disqualifying disposition of the shares generally will result in a deduction by us for federal income tax purposes.
Nonstatutory Stock Options
Options not designated or qualifying as incentive stock options will be nonstatutory stock options having no special tax status. An optionholder generally recognizes no taxable income as the result of the grant of such an option. Upon exercise of a nonstatutory stock option, the optionee normally recognizes ordinary income in the amount of the difference between the option exercise price and the fair market value of the shares on the exercise date. If the optionholder is an employee, such ordinary income generally is subject to withholding of income and employment taxes. Upon the sale of stock acquired by the exercise of a nonstatutory stock option, any gain or loss, based on the difference between the sale price and the fair market value on the exercise date, will be taxed as a capital gain or loss. No tax deduction is available to us with respect to the grant of a nonstatutory stock option or the sale of the stock acquired pursuant to such grant. We generally should be entitled to a deduction equal to the amount of ordinary income recognized by the optionholder as a result of the exercise of a nonstatutory stock option.
Other Considerations
The Code allows publicly held corporations to deduct compensation in excess of $1,000,000 paid to a corporations chief executive officer and its four other most highly compensated executive officers if the compensation is payable solely based on the attainment of one or more performance goals and certain statutory requirements are satisfied. We intend for compensation arising from grants of 2009 Plan Awards under the 2009 Plan that are based on performance goals, and compensation arising from grants of stock options and stock appreciation rights granted at fair market value, to be deductible by us as qualified performance-based compensation not subject to the $1,000,000 limitation on deductibility. However, other considerations, such as providing our executive officers with competitive and adequate incentives to remain with and increase our business operations, financial performance and prospects, as well as rewarding extraordinary contributions, also significantly factor into the administrators decisions. The administrator has and expects to continue to authorize payment of compensation to executive officers outside the limits of Code Section 162(m).
The Board of Directors Unanimously Recommends That You Vote FOR Proposal No. 2.
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PROPOSAL NO. 3 RATIFY THE RETENTION OF KPMG LLP AS FTI CONSULTING, INC.S INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR THE YEAR ENDING DECEMBER 31, 2009
The Audit Committee has retained the firm of KPMG LLP (KPMG) as the independent registered public accounting firm to audit the Companys books and accounts for the fiscal year ending December 31, 2009. KPMG has served as the Companys independent registered public accounting firm since 2006. KPMG has confirmed to the Audit Committee and us that it complies with all rules, standards and policies of the Public Company Accounting Oversight Board (PCAOB) and the SEC governing auditor independence.
KPMGs representative will be present at the annual meeting and will have the opportunity to make a statement if he desires to do so and to respond to appropriate questions asked by stockholders. See Principal Accountant Fees and Services for a description of the fees paid to KPMG for the fiscal years ended December 31, 2008 and December 31, 2007, and other matters relating to the procurement of services.
We are seeking stockholder ratification of that action. Although stockholder ratification of the appointment of our independent registered public accounting firm is not required by our By-Laws or otherwise, we are submitting the selection of KPMG for ratification as a matter of good corporate governance practice. Even if the selection is ratified, the Audit Committee in its discretion may appoint an alternative independent registered public accounting firm if it deems such action appropriate. If the Audit Committees selection is not ratified, the Audit Committee will take that fact into consideration, together with such other factors it deems relevant, in determining its selection of an independent registered public accounting firm.
The Board of Directors Unanimously Recommends That You Vote FOR Proposal No. 3.
INFORMATION ABOUT THE BOARD OF DIRECTORS AND COMMITTEES
INDEPENDENCE OF DIRECTORS
For a director to be considered independent, the Board must affirmatively determine that the director does not have any direct or indirect material relationship with FTI or our subsidiaries, and is not otherwise automatically disqualified by the NYSE independence standards. The Board has established Categorical Standards of Director Independence, which recognize that a director is independent if he or she does not have a material relationship with us (directly or as a partner, stockholder or officer of an organization that has a relationship with us). In connection with, and to assist in making, that determination, the Categorical Standards of Director Independence require the Board to consider whether a director meets the following categorical standards: (A) during the past three years, the Company has not employed the director and has not employed (except in a non-officer capacity) any of his or her immediate family members; (B) (i) the director is not a current partner or employee of a firm that is the Companys internal or external auditor, (ii) none of his or her immediate family members is a current partner of such firm, (iii) none of his or her immediate family members is currently an employee of such firm who personally works on the Companys audit, or (iv) the director or an immediate family member was within the last three years a partner or employee of such a firm and personally worked on the Companys audit within that time; (C) during the past three years, neither the director nor any of his or her immediate family members has been employed as an executive officer of another company where any of the Companys present executives serve or served on such other companys compensation committee; (D) during the past three years, neither the director nor any of his or her immediate family members has received more than $120,000 per year in direct compensation from the Company, other than director and committee fees and pension or other forms of deferred compensation for prior service (provided such compensation is not contingent in any way on continued service); (E) the director has not served as an executive officer or employee, and none of his or her immediate family members has served as an executive officer, of a company that makes payments to, or receives payments from, the Company for property or services in an amount which, in any single fiscal year, exceeds the greater of $1.0 million or 2% of such other companys consolidated gross revenues; provided, that, such restriction shall not apply if three years have passed since such payments fell below the threshold; (F) the director is not an employee, officer, director or trustee of a foundation, university or other non-profit organization to which we give, directly or indirectly, through the provision of services, more than the greater of $1.0 million or 2% of the organizations consolidated gross revenues in any fiscal year; provided, that, such restriction shall not apply if three years have passed since such charitable contributions by us fell below the threshold; and (G) considering all facts and circumstances that the Board determines are relevant, the director does not, directly or indirectly, have a material relationship with us.
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The Board, upon the recommendations of the Nominating and Corporate Governance Committee, determined that for the year ended December 31, 2008, each of the following non-employee directors, including the two nominees for Class I director for election by stockholders at the 2009 Annual Meeting, do not have a direct or indirect material relationship with the Company that would render him or her not independent and satisfies the independence requirements set forth in the Companys Categorical Standards of Director Independence and Section 303A of the NYSE corporate governance rules. Our Categorical Standards of Director Independence are available on out website at http://www.fticonsulting.com/en_us/about/governance/pages/default.aspx.
(1) Brenda J. Bacon | (5) Gerard E. Holthaus |
(2) Mark H. Berey | (6) Matthew F. McHugh |
(3) Denis J. Callaghan | (7) Gary C. Wendt |
(4) James W. Crownover |
In affirmatively finding that Brenda J. Bacon has no direct or indirect material relationship with the Company and is independent, the Board considered that Ms. Bacon is president and chief executive officer of Brandywine Senior Living, a company that is owned by a private equity firm affiliated with Warburg Pincus, which has been a client during the past three years. Sales to Warburg Pincus amounted to less than the greater of $1.0 million or 2% of that firms consolidated gross revenues during each of 2007 and 2006. The Company did not provide services to Warburg Pincus during 2008.
For the year ended December 31, 2008, the Board affirmatively found that Gerard E. Holthaus had no direct or indirect material relationship with the Company and was independent. The Board considered that Mr. Holthaus is chairman of the board and chief executive officer of Algeco Scotsman, a company that has engaged us to provide services during the past three years. Sales to Algeco Scotsman in 2007 were less than the greater of $1.0 million or 2% of that companys consolidated gross revenues during 2007. The Company did not provide services to Algeco Scotsman or its subsidiary, Williams Scotsman International, Inc. during 2008 or 2006.
In April 2009, FTI was advised that it will be engaged to provide financial advisory services to certain lenders to Algeco Scotsman. FTI may enter into a formal letter of engagement at any time. Algeco Scotsman will reimburse the lenders for fees they pay to FTI, as is customary in these types of relationships. Under NYSE listing standards and FTIs Categorical Standards of Director Independence, this engagement is not of a type that automatically disqualifies Mr. Holthaus from being considered an independent director. The Board and the Nominating and Corporate Governance Committee convened a joint meeting on April 15, 2009, to consider director independence, Committee membership and related issues. Upon consideration of the facts and circumstances of the engagement, including the anticipated amount of fees and uncertainty about the scope of work that FTI might be asked to undertake over time, upon the recommendation of the Nominating and Corporate Governance Committee, the Board concluded that it could not affirmatively find that Mr. Holthaus is independent for at least the duration of the engagement. The Board concluded that it would re-evaluate the situation and decide whether it could make an affirmative determination that Mr. Holthaus is independent, if the engagement does not go forward or at such time as the engagement is completed. As a result, under the NYSE standards for committee membership, Mr. Holthaus could no longer be chairman and a member of the Audit Committee and a member of the Compensation Committee. Mr. Holthaus also stepped down as presiding director. At the same meeting, the Board appointed Mark Berey as Chair of the Audit Committee. Mr. Berey qualifies as a Financial Expert under the rules of the SEC. Also, on April 15, 2009, the non-management and independent directors appointed Matthew McHugh, Chair of the Nominating and Corporate Governance Committee, as presiding director.
The Board has affirmatively determined that George P. Stamas, a partner with Kirkland & Ellis LLP, is not independent. Although sales to and purchases from Kirkland & Ellis amounted to less than the greater of $1.0 million or 2% of that firms revenues during 2008, 2007 and 2006, the Board reached its conclusion based on the nature of the legal services provided by Kirkland & Ellis to the Company and anticipated future services. Jack B. Dunn, IV and Dennis J. Shaughnessy do not qualify as independent directors because they are executive officers of the Company.
In 2008 and during the preceding three years, we have not made charitable contributions to any organization in which a director serves as an employee, officer, director or trustee, which in any single year exceeded the greater of $1.0 million or 2% of such organizations gross revenues.
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INFORMATION ABOUT THE NOMINEES FOR CLASS I DIRECTOR AND THE OTHER DIRECTORS
Each of Messrs. Callaghan and McHugh is currently a Class I director of FTI. The Class I nominees were recommended for nomination by the Nominating and Corporate Governance Committee, and nominated by the full Board on April 8, 2009. See Proposals to be Presented at the Annual Meeting Proposal 1 Elect as Class I Directors the Two Nominees Named in the Proxy Statement and Nominating and Corporate Governance Committee Director Nomination Process in this proxy statement for additional information.
Information about the two nominees for Class I director and the other directors is set forth below:
Other Public | ||||||||||
Director | Principal Occupation and | Committees | Company | |||||||
Name | Age | Since | Business Experience | of FTI Board | Directorships | |||||
Nominees for Class I Director |
||||||||||
Denis J. Callaghan | 66 | 2000 |
Mr. Callaghan retired from Deutsche Bank Securities Inc. 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 the Insurance and Financial Services Research Groups of Alex. Brown & Sons Incorporated. |
Audit Nominating |
None | |||||
Matthew F. McHugh | 70 | 2005 |
Congressman McHugh, after retiring from Congress, was a senior advisor at The World Bank, acting as senior counselor to the President from May 1993 to June 2005, as an employee until December 2000, and beginning in December 2000 as a consultant. From 1975 through 1992, Congressman McHugh was a U.S. Representative in Congress for the 27th and 28th congressional Districts of New York. He was also a member of the House Appropriations Committee, from 1978 through 1992, and the House Permanent Select Committee on Intelligence, from 1985 through 1990. In 1991, he was appointed Acting Chairman of the Committee on Standards of Official Conduct. |
Compensation Nominating |
None |
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Other Public | ||||||||||
Director | Principal Occupation and | Committees | Company | |||||||
Name | Age | Since | Business Experience | of FTI Board | Directorships | |||||
Class II Directors | ||||||||||
Brenda J. Bacon | 58 | 2006 |
Ms. Bacon is President and Chief Executive Officer of Brandywine Senior Living, a company she co-founded in 1996 and which now owns and operates 19 senior living communities in five states. Ms. Bacon became President and Chief Executive Officer in July 2004. From May 2003 to July 2004, Ms. Bacon was its President and Chief Operating Officer. From 1989 to 1993, Ms. Bacon served as Chief of Management and Planning, a cabinet-level position under New Jersey Governor James J. Florio. In this capacity, she oversaw all health care and human services reform efforts and departments, and served as a senior advisor to the Governor. Ms. Bacon currently serves on the Board of the Assisted Living Federation of America and the Executive Board of the American Senior Housing Association. |
Compensation
Nominating |
None | |||||
James W. Crownover | 65 | 2006 |
Mr. Crownover had a 30-year career with McKinsey & Company, Inc. when he retired in 1998. He headed McKinseys Southwest practice for many years, and also served as co-head of the firms worldwide energy practice. In addition, he served as a member of McKinseys Board of Directors. Mr. Crownover also is Chairman of Rice Universitys Board of Trustees. |
Compensation
Nominating |
Chemtura Corporation Director and a member of the Organization, Compensation and Governance and Safety, Health and Environment Committees Weingarten Realty Republic Services, |
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Other Public | ||||||||||
Director | Principal Occupation and | Committees | Company | |||||||
Name | Age | Since | Business Experience | of FTI Board | Directorships | |||||
Class II Directors | ||||||||||
Dennis J. Shaughnessy | 61 | 1992 |
Since October 2004, Mr. Shaughnessy has been our executive Chairman of the Board. From 1989 to October 2004, Mr. Shaughnessy was a General Partner of Grotech Capital Group, Inc., a private equity firm. He continues to be a non-voting special general partner of certain partnerships affiliated with Grotech Capital Group. Prior to becoming a General Partner of Grotech Capital Group in 1989, Mr. Shaughnessy was the Chief Executive Officer of CRI International, Inc. |
None |
TESSCO Technologies, Inc. Director and a member of the Compensation and Nominating Committees | |||||
George P. Stamas | 57 | 1992 |
Since 2002, Mr. Stamas has been a Partner of the law firm of Kirkland & Ellis LLP. He is also a Venture Partner of New Enterprise Associates, a venture capital firm. Mr. Stamas was Vice Chairman of the Board of Directors of Deutsche Bank Securities Inc. from 1999 to January 2002. He is a limited partner of the Baltimore Orioles L.P., the Washington Capitals and the Washington Wizards. |
None |
NexCen Brands, Inc. Director | |||||
Class III Directors | ||||||||||
Mark H. Berey | 57 | 2004 |
Mr. Berey is President of MHB Ventures LLC, a real estate and hospitality consulting company founded by him in September 2007. Since February 2008, Mr. Berey has also served as an Executive Vice President of Miller Global Properties. From its formation in 2001 to December 2007, Mr. Berey was Executive Vice President and Chief Financial Officer and a director of Avendra, LLC a procurement company serving the hospitality industry in North America and the Caribbean. |
Audit Committee Nominating |
None |
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Other Public | ||||||||||
Director | Principal Occupation and | Committees | Company | |||||||
Name | Age | Since | Business Experience | of FTI Board | Directorships | |||||
Class III Directors | ||||||||||
Jack B. Dunn, IV | 57 | 1992 |
Jack B. Dunn, IV has served as our Chief Executive Officer since October 1995 and as a director since 1992. In May 2004, he assumed the position of President, a position he also held from October 1995 to December 1998. He also served as our Chairman of the Board from December 1998 to October 2004. From May 1994 to October 1995, he served as our Chief Operating Officer. Prior to joining us, he was a member of the Board of Directors and a Managing Director of Legg Mason Wood Walker, Incorporated and directed its Baltimore corporate finance and investment banking activities. Mr. Dunn is a limited partner of the Baltimore Orioles L.P. |
None |
Pepco Holdings, Inc. Director and a member of its Compensation and Corporate Governance/ Nominating Committees (Chair) | |||||
Gerard E. Holthaus | 59 | 2004 |
Since November 2007, Mr. Holthaus has been Chairman and Chief Executive Officer of Algeco Scotsman, the largest provider of mobile office space and modular buildings throughout the world. From April 1997 to October 2007, Mr. Holthaus was President and Chief Executive Officer of Williams Scotsman International, Inc., which is now a subsidiary of Algeco Scotsman. He is a certified public accountant. |
Audit Compensation
|
None |
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Other Public | ||||||||||
Director | Principal Occupation and | Committees | Company | |||||||
Name | Age | Since | Business Experience | of FTI Board | Directorships | |||||
Non-Continuing Current Class I Director |
||||||||||
Gary C. Wendt | 67 | 2006 |
From March 2001 to present, Mr. Wendt has been non-executive Chairman of India Value Fund Advisors Private Limited, an advisor to private equity funds. From June 2000 to September 2002, M. Wendt served as President and Chief Executive Officer of Conseco, Inc. Mr. Wendt was the Chairman and Chief Executive Officer of GE Capital Services from June 1985 to January 1999. In 1999, Mr. Wendt founded two businesses in India, EXL, a back-office service company that was subsequently sold to a private equity advisor, and GW Capital Advisors, which subsequently became India Value Fund Advisors Limited. In 2007, Mr. Wendt founded and is the Chairman and a director of Deerpath Advisors, an advisor to a small business association based limited partnership that makes loans to small businesses in the U.S. |
Audit Compensation |
None |
DIRECTOR ATTENDANCE AT MEETINGS
Director Attendance at Board and Committee Meetings
Our policy is that each director should attend all meetings of the Board and each Committee on which he or she serves, unless excused by the Board for reasons of serious illness or extreme hardship. During 2008, the Board held seven regular and four special meetings for a total of 11 meetings, the Audit Committee held six regular and four special meetings for a total of 10 meetings, the Nominating and Corporate Governance Committee held seven regular meetings, and the Compensation Committee held six regular and four special meetings for a total of 10 meetings. Each joint meeting of the Board and any Committee has been counted as a separate meeting of the Board and the applicable Committee(s) for purposes of presenting this information.
During 2008, each director attended at least 75% of the regular and special meetings of the Board and each Committee on which he or she served held during the time period he or she served as a director.
Director Attendance at Other Meetings
Non-management directors met in closed sessions without management five times during 2008. Each of the non-management directors attended at least 75% of those meetings. Independent directors met five times during 2008. Every independent director attended all of those meetings. The Companys policy is that all directors should attend the annual meeting of stockholders absent a good reason. All continuing directors attended our 2008 annual meeting of stockholders.
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COMMITTEES OF THE BOARD OF DIRECTORS
Committees
During 2008, our Board of Directors had three standing committees: Audit, Compensation and Nominating and Corporate Governance. The responsibilities and functions of the Audit, Compensation and Nominating and Corporate Governance Committees are described in their respective Charters, which are available on our website at http://www.fticonsulting.com/en_us/about/governance/Pages/default.aspx. In addition to the standing Committees, during 2008, the Board convened a special committee, composed of Mark Berey and Gerard Holthaus, to review and report to the Board on various tax planning considerations. The special committee met once in 2008.
The members of each Committee during 2008 who are currently directors of FTI, a description of the primary functions of each Committee, and the total number of regular and special meetings held by each Committee in 2008, are described below:
Audit Committee
The Audit Committee is comprised solely of non-employee directors, all of whom the Board has determined are independent pursuant to our Categorical Standards of Director Independence and the rules of the NYSE. The Board has determined that all the members of the Audit Committee are financially literate pursuant to the rules of the NYSE. During the year ended December 31, 2008, the Board has determined that Gerard E. Holthaus, then Chair of the Audit Committee, was the Audit Committee Financial Expert within the meaning stipulated by the SEC. On April 15, 2009, the Board concluded that it could not affirmatively find that Mr. Holthaus would be independent for at least the duration of an engagement involving Algeco Scotsman. As a result of this determination, Mr. Holthaus went off of the Audit Committee and Mark Berey was appointed as Chair of the Audit Committee effective April 15, 2009. Mr. Berey qualifies as a Financial Expert within the meaning stipulated by the SEC.
The Board has approved the Charter of the Audit Committee, last amended and restated as of March 31, 2009, which has been recommended by Nominating and Corporate Governance Committee and adopted by the Audit Committee. A copy of the Charter of the Audit Committee is available on our website at http://www.fticonsulting.com/en_us/about/governance/Pages/default.aspx. The Charter of the Audit Committee is reviewed annually, and more frequently as necessary, to address any new, or changes to, rules relating to audit committees. The Audit Committee recommends changes to its Charter to the Nominating and Corporate Governance Committee and the Board for approval. The Charter of the Audit Committee (as Amended and Restated Effective March 31, 2009) has been amended to conform the provisions relating to the independence of FTIs independent registered public accounting firm to PCAOB Rule 3526 that went into effect in the third quarter of 2008. A copy of the Audit Committee Charter (as Amended and Restated Effective March 31, 2009) is attached to this proxy statement as Appendix B.
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Total Number of | ||||
Regular and Special | ||||
Name of Committee and | Meetings | |||
Members(1) | Functions of the Committee | Held in 2008 | ||
Audit Committee: Gerard E. Holthaus (Chair)(2) |
|
10 |
(1) | Effective February 25, 2009 (a) James Crownover rotated off of the Audit Committee and was appointed to the Compensation Committee and (b) Denis Callaghan was appointed to the Audit Committee and rotated off of the Compensation Committee. | |
(2) | On April 15, 2009, the Board concluded it could not affirmatively find that Mr. Holthaus would be independent for at least the duration of an engagement involving Algeco Scotsman. As a result of the Boards conclusion, Mr. Holthaus went off of the Audit Committee and Mr. Berey assumed the position of Chair of the Audit Committee effective April 15, 2009. |
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Compensation Committee
The Compensation Committee is comprised solely of non-employee directors, all of whom the Board has determined are independent pursuant to our Categorical Standards of Director Independence and rules of the NYSE. All of the members of the Compensation Committee qualify as outside directors under Section 162(m) of the Code. All of the members of the Compensation Committee qualify as non-employee directors under Rule 16b-3 under the Exchange Act. The Compensation Committee operates under a written Charter, last amended and restated as of August 1, 2008, which was recommended by the Nominating and Corporate Governance Committee, approved by the Board of Directors and adopted by the Compensation Committee. A copy of the Charter of the Compensation Committee is available on our website at http://www.fticonsulting.com/en_us/about/governance/Pages/default.aspx. The Charter of the Compensation Committee is reviewed annually, and more frequently as necessary, to address any new, or changes to, rules relating to compensation committees. The Compensation Committee recommends changes to its Charter to the Nominating and Corporate Governance Committee and the Board for approval. A copy of the amended and restated Charter of the Compensation Committee has been filed as an exhibit to our Annual Report on Form 10-K for the fiscal year ended December 31, 2008 filed with the SEC on March 2, 2009.
Mr. Dunn, our Chief Executive Officer (CEO) and Mr. Shaughnessy, our Executive Chairman of the Board (Chairman), attend substantially all regularly scheduled Compensation Committee meetings but do not attend executive sessions and specially scheduled meetings of the Compensation Committee to which they have not been invited. Other officers and employees of the Company may be invited to attend all or a portion of a Compensation Committee meeting depending on the nature of the agenda items. None of our named executive officers (NEOs) and other non-members of the Compensation Committee vote on matters before the Compensation Committee; however, the Compensation Committee and Board of Directors solicit recommendations from Mr. Dunn and Mr. Shaughnessy on compensation matters, including as they relate to their own compensation and the compensation of our NEOs and other officers. In 2008, the Compensation Committee also worked with management, including our Executive Vice President General Counsel and our Corporate Secretary, to set the agenda for each meeting and prepare the meeting materials. Our Corporate Secretary acts as secretary of the Compensation Committee meetings, other than the closed executive sessions and special meetings to which she is not invited. Actions taken in closed or special session are reported by the Chair of the Compensation Committee to our Corporate Secretary who records them in the minutes of the applicable meeting.
Mr. Dunn and Mr. Shaughnessy perform individual self-assessments during the fourth quarter and/or first quarter of the year. The Compensation Committee has delegated to the presiding director of the Board the responsibility of administering that self-assessment process, reviewing the self-assessments and holding discussions with those executives. The presiding director reports the results of the self-assessments to the Chairs of the Compensation Committee and Nominating and Corporate Governance Committee. The Compensation and/or Nominating and Corporate Governance Committee may hold discussions with Messrs. Dunn and Shaughnessy. Messrs. Dunn and Shaughnessy make recommendations to the Compensation Committee regarding their own compensation, but will not be present when final compensation decisions are made. The above performance evaluation procedures were followed for the years ended December 31, 2007 and 2008.
Messrs. Dunn and Shaughnessy annually (or more often) evaluate the performance of our CFO and other officers at the executive vice president level or higher (our executive officers) against long- and short-term performance goals and their expectations for those executives. Mr. Dunn and Mr. Shaughnessy report the results of their performance reviews to the Compensation Committee. Mr. Dunn and Shaughnessy participate in the Compensation Committees compensation setting process for Mr. Celaya, our Executive Vice President and Chief Financial Officer (our CFO) and other NEOs and officers, including, recommending the amounts and forms of cash and equity, long- and short-term and at-risk compensation that will be paid to them as well as related payment terms. The Compensation Committee did not individually meet with those officers regarding 2008 compensation decisions.
FTIs chief financial officer, from time to time, may participate in the Compensation Committees compensation-setting process in connection with the establishment of financially-driven performance goals. Management assists the Compensation Committee by providing information such as financial results, short-term and long-term business and financial plans and strategic objectives and their views on current compensation
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programs and levels; and by recommending individual performance measures and/or target award levels. For the 2008 plan year, the performance-based goals under the FTI Consulting, Inc. Incentive Compensation Plan in which certain NEOs participated were a range of year-end fully diluted earnings per share.
In the past, the Compensation Committee has selectively engaged outside compensation consultants for advice regarding compensation issues. In 2008, the Compensation Committee engaged a compensation consultant in connection with discussions with Mr. Dunn regarding the extension of his contract and related payments.
Total Number of | ||||
Regular and Special | ||||
Name of Committee | Committee Meetings | |||
and Members(1) | Functions of the Committee | Held in 2008 | ||
Compensation Committee: Gary C. Wendt, Chair |
|
10 |
(1) | Effective February 25, 2009, (a) James Crownover joined the Compensation Committee and rotated off of the Audit Committee, (b) Denis Callaghan rotated off of the Compensation Committee and joined the Audit Committee, and (c) Brenda Bacon was appointed as a new member of the Compensation Committee. | |
(2) | On April 15, 2009, the Board concluded it could not affirmatively find that Mr. Holthaus would be independent for at least the duration of an engagement involving Algeco Scotsman. As a result of the Boards conclusion, Mr. Holthaus went off of the Compensation Committee effective April 15, 2009. |
Compensation Committee Interlocks and Insider Participation
No member of the Compensation Committee has served as one of our officers or employees at any time. None of our executive officers serves as a member of the board and compensation committee of any other company that has an executive officer serving as a member of our Board or Compensation Committee.
Nominating and Corporate Governance Committee
The Nominating and Corporate Governance Committee consists of only non-employee directors, who qualify as independent directors under our Categorical Standards of Director Independence and the independence standards established under Section 303A of the NYSE corporate governance rules. The Nominating and Corporate Governance Committee operates under a written Charter, last amended and restated as of August 1, 2008, which has been approved by the Board and adopted by that Committee. A copy of the Charter of the Nominating and Corporate Governance Committee is available on our website at http://www.fticonsulting.com/en_us/about/governance/Pages/default.aspx. The Charter of the Nominating and Corporate Governance Committee is reviewed annually,
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and more frequently as necessary, to address any new, or changes to, rules relating to nominating and governance committees. The Nominating and Corporate Governance Committee recommends changes to its Charter to the Board for approval. A copy of the Charter of the Nominating and Corporate Governance Committee has been filed as an exhibit to our Annual Report on Form 10-K for the fiscal year ended December 31, 2008 filed with the SEC on March 2, 2009.
Total Number of | ||||
Regular and Special | ||||
Name of Committee | Committee Meetings | |||
and Members | Functions of the Committee | Held in 2008 | ||
Nominating and
Corporate Matthew F. McHugh, Chair
|
|
7 |
NOMINATING AND CORPORATE GOVERNANCE COMMITTEE DIRECTOR NOMINATION PROCESS
Identification and Nomination of Candidates as Class I Directors for Election at 2009 Annual Meeting of Stockholders
Each year the Nominating and Corporate Governance Committee reviews our Categorical Standards of Director Independence and applicable NYSE and SEC governance rules, and works with the Board to develop the education, credentials and characteristics required of Board and Committee nominees in light of current Board and Committee composition, our business, operations, long-term and short-term plans, applicable legal and listing requirements and other factors they consider relevant. The Nominating and Corporate Governance Committee evaluates existing directors for reelection each year as if they were new candidates. The Nominating and Corporate Governance Committee may identify other candidates, if necessary, through recommendations from our directors, management, employees, the stockholder nomination process, or outside consultants. For a description of how the stockholder nomination process works, see Corporate Governance Stockholder
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Nominees for Director below. The Nominating and Corporate Governance Committee will review candidates in the same manner regardless of the source of the recommendation. The Nominating and Corporate Governance Committee is authorized, in its sole discretion, to engage outside search firms and consultants to assist with the process of identifying and qualifying candidates, and has sole authority to negotiate the fees and terms of such retention.
In addition to the Categorical Standards of Director Independence and applicable NYSE and SEC independence standards, the Nominating and Corporate Governance Committee considers other factors, as it determines to be appropriate, in evaluating candidates for nominees as directors. Some of the other factors considered by the Nominating and Corporate Governance Committee include:
(1) | demonstrated strength of character and integrity, credibility and sound judgment; | ||
(2) | managerial experience in a relatively complex organization or experience dealing with complex problems; | ||
(3) | sufficient time to devote to the affairs of FTI; | ||
(4) | public company board or equivalent experience, as well as the number of boards of other public companies on which such candidate sits, which may not exceed three; | ||
(5) | the extent to which the candidate would fill a present need on the Board; and | ||
(6) | any other factors related to the ability and willingness of a candidate to serve, or an existing member of the Board to continue his or her service. |
On April 2, 2009, the Nominating and Corporate Governance Committee took action to recommend that the Board nominate Messrs. Callaghan and McHugh as Class I directors to stand for election at the 2009 Annual Meeting of Stockholders. On April 8, 2009, the Board accepted the recommendation of the Nominating and Corporate Governance Committee and nominated Messrs. Callaghan and McHugh to stand for election as Class I directors at the 2009 Annual Meeting of Stockholders. The Board also approved a reduction of the size of Class I to two directors from three directors effective upon the election of directors at the meeting. Under FTIs By-Laws and the Maryland General Corporation Law, the Board has the authority to increase or decrease the size of the Board and any class and to fill any vacancy resulting from an increase in the size of the Board. Any person appointed by the Board to fill a vacancy as a director would serve until the next annual meeting of stockholders unless he or she resigns, dies or is not nominated for reelection. The Nominating and Corporate Governance may identify, communicate with and consider new candidates for the position of director prior to the 2009 Annual Meeting of Stockholders and may make recommendations to the Board with regard to the appointment of a new director, however, as of the date of this proxy statement, no decision has been made by the Committee or the Board whether to increase the size of the Board or appoint a candidate as a director.
COMPENSATION OF NON-EMPLOYEE DIRECTORS AND STOCK OWNERSHIP GUIDELINES
General
Employee directors do not receive any separate compensation for their Board activities. We reimburse our non-employee directors for their out-of-pocket expenses incurred in the performance of their duties as our directors (including expenses related to spouses when spouses are invited to attend Board events), and non-employee directors may travel on the corporate aircraft to Board events. We do not pay fees for attendance at Board and Committee meetings.
In 2005, the Board, upon the recommendation of the Compensation Committee, adopted the FTI Consulting, Inc. Non-Employee Director Compensation Plan (the Director Compensation Plan). Under that plan, starting in 2005 through 2007, non-employee directors were eligible to receive a combination of an (i) annual retainer, which the director could elect to receive in cash, in stock options or in deferred stock units and (ii) an equity award granted on a three year cycle that the director could elect to receive in the form of stock options, shares of restricted stock or deferred restricted stock units. Non-employee directors received a three-year cyclical equity award under that compensation plan as follows: Brenda J. Bacon December 11, 2006; Mark H. Berey June 7, 2007; Denis J. Callaghan July 24, 2006; James W. Crownover October 25, 2006; Gerard E. Holthaus June 7, 2007; Matthew F. McHugh
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October 26, 2005; George P. Stamas June 5, 2005; and Gary C. Wendt June 6, 2006. The plan did not provide for proration or require the director to repay the annual retainer and three-year cyclical equity award if a director only serves a portion of the period covered by the award or does not stand for reelection by stockholders during a year when his or her term is up. In setting the terms of non-employee director compensation, the Board and the Compensation Committee considered the significant amount of time that directors expend in fulfilling their duties to the Company as well as the skill-level required by the Company of members of the Board and its Committees.
At its February 20, 2008 meeting, the Board approved changes to the Director Compensation Plan that went into effect for 2008. At its February 25, 2009 meeting, the Board approved changes to the amount of the annual retainer payments and authorized a separate annual payment to the presiding director, which will go into effect for 2009. At its March 31, 2009 meeting, the Board approved changes to provide for the acceleration of vesting of equity awards in the event of a non-employee directors cessation of service at the expiration of the then-current term as a director of the Company due to (i) the Companys failure to re-nominate such non-employee director for service on the Board, (ii) the request of such non-employee director, or as a result of a voluntary resignation, or (iii) the Companys stockholders failing to re-elect such non-employee director for service on the Board, in each applicable case other than for cause, as determined by the Board in its good-faith discretion.
The terms of the current Director Compensation Plan are discussed below:
Amended Non-Employee Director Compensation Plan
General
The amendments to the Director Compensation Plan were designed to equate the annual aggregate value of non-employee compensation payments for 2008 and future years with the intended annual aggregate value of the non-employee compensation package in 2005, which totaled approximately $300,000 per annum based on the price per share of FTI common stock at that time.
Annual Retainer
The annual retainer amount payable to non-employee directors for 2008 did not change, remaining at $50,000. Non-employee directors who served as Chairs of the Compensation Committee and Nominating and Corporate Governance Committee receive an additional $5,000 for a total payment of $55,000 and the Chair of the Audit Committee receives an additional $10,000 for a total payment of $60,000. Starting in 2009, the Chair of the Compensation Committee will receive an additional $7,250 for a total annual retainer payment of $57,250. Also beginning in 2009, the Board authorized an additional annual payment of $15,000 to the presiding director. Currently, Matthew F. McHugh is the presiding director of the non-management directors. Non-employee directors, will be entitled to elect payment of the annual retainer in the form of cash or fully vested stock units. Payment in the form of stock options will no longer be included as an alternative form of payment.
Annual Equity Award
Currently, non-employee directors will receive an annual payment denominated at a fixed value of $250,000 (US dollars) per year in the form of restricted stock or deferred restricted stock units valued at the closing price per share of FTI common stock as reported on the NYSE for the date of grant. The restricted stock and restricted stock units will be nontransferable and will vest in full on the first anniversary of the date of grant. The restricted stock units will be settled in shares of common stock. Vesting of restricted stock and restricted stock units will accelerate upon the non-employee directors death or permanent disability, immediately prior to a change in control and in the event of a non-employee directors cessation of service at the expiration of the then-current term as a director of the Company due to the Companys failure to re-nominate such non-employee director for service on the Board (other than for cause as described under General above. Restricted stock and restricted stock units that have not vested upon a director leaving the Board for any other reason will be forfeited. If no shares are then available under a stockholder approved equity compensation plan, the non-employee director will receive the payment in cash, subject to the vesting terms described above.
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Participation and Payment Dates under the Amended Non-Employee Director Compensation Plan
New non-employee directors joining the Board after December 31, 2007, will receive their first annual retainer payment on the date they join the Board and their first annual equity award on the date of the annual meeting of stockholders for the year they join the Board. Beginning in 2008, incumbent non-employee directors began receiving the annual retainer payment on the date of the annual meeting of stockholders each year. Each incumbent director has or will become eligible to receive the annual equity award on the annual stockholder meeting date for the year following his or her name: Matthew F. McHugh and George P. Stamas 2008, Brenda J. Bacon, Denis J. Callaghan and James W. Crownover 2009 and Mark H. Berey and Gerard E. Holthaus 2010, assuming each is a member of the Board following the annual stockholders meeting for that year. Thereafter, the annual equity award will be made on the annual stockholders meeting date each year. The annual equity award for the first year that a non-employee director participates in the amended plan will be prorated based on the date that such director would have otherwise received payment under the plan as in effect prior to 2008, and the annual retainer and annual equity award to a new director who joins the Board in 2009 or later will be prorated, depending on when such director first joins the Board.
Non-Employee Director Deferred Compensation Election
Non-employee directors may elect to defer all or a portion of their annual retainer and equity award. Deferred annual retainers will be designated as a number of stock units determined by dividing (i) the applicable annual retainer payment (and presiding director payment, if applicable), by (ii) the closing price per share of FTI common stock as reported on the NYSE for the applicable date. All stock units will be (i) immediately vested and (ii) non-transferable.
Each director who elects to defer his or her annual equity payment will receive a number of restricted stock units determined by dividing (i) $250,000 by (ii) the closing price per share of FTI common stock as reported on the NYSE for the date of grant. Restricted stock units will be (i) subject to vesting on the first anniversary of the date of grant, (ii) nontransferable and (iii) settled in shares of common stock, to the extent vested. Non-employee directors may elect a payment date for a years deferred award in accordance with Code Section 409A. The deferred award will be paid out to the applicable non-employee director or his or her estate on the earlier to occur of (i) the elective payment date (if one has been elected), (ii) the non-employee directors death, permanent disability or other date that he or she is no longer a director of the Company, and (iii) change in control. Vesting of stock options, restricted stock units and restricted stock will accelerate in the event of a non-employee directors cessation of service at the expiration of the then-current term as a director of FTI as described under General above. Restricted stock units that have not vested upon a director leaving the Board for any other reason will be forfeited. Non-employee directors with restricted stock units will have no voting or other rights as a stockholder until shares of our common stock are issued to the holder upon settlement.
If a director elects to defer his or her annual retainer in the form of stock units and/or annual equity payment in the form of restricted stock units, dividend equivalents will be credited in the form of additional stock units or restricted stock units, should the Board declare and pay dividends on our common stock. Stock units or restricted stock units are awarded pursuant to the Deferred Compensation Plan.
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Director Summary Compensation Table
The table below summarizes the compensation paid by the Company to non-employee directors for the year ended December 31, 2008:
Pro Rated | |||||||||||||||||||
Fees Earned or | Stock | Option | All Other | ||||||||||||||||
Paid in Cash | Awards | Awards | Compensation | Total | |||||||||||||||
($)(1) | ($)(2) | ($)(3) | ($)(4) | ($) | |||||||||||||||
Name of Non-Employee Director | (a) | (b) | (c) | (d) | (e) | ||||||||||||||
Current Directors: | |||||||||||||||||||
Brenda J. Bacon | 25,205 | 340,082 | | | 365,287 | ||||||||||||||
Mark H. Berey | 50,274 | 459,712 | | | 509,986 | ||||||||||||||
Denis J. Callaghan | | 43,932 | 292,364 | | 336,296 | ||||||||||||||
James W. Crownover | 31,233 | 332,747 | | | 363,980 | ||||||||||||||
Gerard E. Holthaus | 60,329 | 459,712 | | | 520,041 | ||||||||||||||
Matthew F. McHugh | 34,356 | 358,292 | | | 392,648 | ||||||||||||||
George P. Stamas | 50,548 | 141,247 | 95,139 | | 286,934 | ||||||||||||||
Gary C. Wendt | 55,452 | 323,541 | | | 378,993 |
(1) | Includes additional retainer fees in excess of $50,000 per annum that were paid to the Chairs of the Audit Committee, Nominating and Corporate Governance Committee and Compensation Committee in the amounts of $10,000, $5,000 and $5,000, respectively. All non-employee directors elected to receive their annual retainers in cash, other than Mr. Callaghan who elected to receive the 2008 annual retainer in the form of 792 deferred stock units. | |
(2) | Reflects the aggregate compensation costs recognized for financial statement reporting purposes for the year ended December 31, 2008 in accordance with FAS Statement 123(R) and may include amounts from awards granted in and prior to 2008. Assumptions used in the calculations of these amounts are discussed in Managements Discussion and Analysis of Financial Condition and Results of Operations Recent Events Affecting our Operations and Note 1 Description of Business and Significant Accounting Policies Share- Based Compensation Expense and Note 2 Share-Based Compensation to the Consolidated Financial Statements of the Company in our Annual Report on Form 10-K for the year ended December 31, 2008 filed with the SEC on March 2, 2009. | |
The grant date fair value of stock awards granted to each non-employee director in 2008 was: Brenda J. Bacon $0.00; Mark H. Berey $0.00; Denis J. Callaghan $43,932; James W. Crownover $0.00; Gerard E. Holthaus $0.00; Matthew F. McHugh $156,148; George P. Stamas $252,721 and Gary C. Wendt $0.00, in each case based on the closing price per share of FTI common stock as reported on the NYSE for the applicable grant date. | ||
As of December 31, 2008, each director has the following aggregate number of unvested restricted stock awards or unreleased stock unit and restricted stock unit awards: Brenda J. Bacon 12,500; Mark H. Berey 18,750; Denis J. Callaghan 792; James W. Crownover 37,500; Gerard E. Holthaus 37,500; Matthew F. McHugh 2,815; George P. Stamas 4,556 and Gary C. Wendt 37,500, pursuant to the 2006 Plan, 2004 Plan or Deferred Compensation Plan, as applicable. These stock awards have been included in the Stock Ownership Table for each director. | ||
(3) | Reflects the aggregate compensation costs recognized for financial statement reporting purposes for the year ended December 31, 2008 in accordance with FAS Statement 123(R) and may include amounts from awards granted in and prior to 2008. Assumptions used in the calculations of these amounts are included in Managements Discussion and Analysis of Financial Condition and Results of Operations Recent Events Affecting our Operations and Note 1 Description of Business and Significant Accounting Policies Share- Based Compensation Expense and Note 2 Share-Based Compensation to the Consolidated Financial Statements of the Company in our Annual Report on Form 10-K for the year ended December 31, 2008 filed with the SEC on March 2, 2009. |
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There were no stock options granted to non-employee directors in 2008. As of December 31, 2008, each director has unexercised stock options outstanding exercisable for the following number of shares of common stock: Brenda J. Bacon 7,206; Mark H. Berey 73,000; Denis J. Callaghan 198,898; James W. Crownover 0; Gerard E. Holthaus 110,000; Matthew F. McHugh 0; George P. Stamas 102,945 and Gary C. Wendt 0, pursuant to the 1997 Stock Option Plan, as amended (the 1997 Plan), the 2004 Plan or the 2006 Plan, as applicable. These stock option awards have been included in the Stock Ownership Table for each director to the extent they have vested or will vest within 60 days of March 30, 2009. | ||
(4) | No non-employee director received perquisites or other benefits aggregating more than $10,000. |
Non-Employee Director Equity Ownership Guidelines
We have adopted equity ownership guidelines for non-employee directors. Under these guidelines, non-employee directors are encouraged to attain an investment level in our equity securities having a cumulative value as of the Equity Ownership Compliance Date (as defined below) equal to at least $100,000, which is two times the amount of the base annual retainer. Each non-employee director is encouraged to attain this investment level by the third anniversary of the date the first non-employee director equity compensation award is received by him or her (the Equity Ownership Compliance Date). Shares of common stock owned by the non-employee director and shares of common stock held in trust over which the non-employee director has or shares investment and/ or voting power are counted towards attaining the investment level. Option holdings, whether or not vested, do not count. However, restricted stock and deferred stock units, to the extent vested, will be counted towards such directors equity ownership. All non-employee directors currently have FTI stock holdings that meet or exceed the non-employee director equity ownership guidelines.
CORPORATE GOVERNANCE
GOVERNANCE PRINCIPLES
We have long believed that sound principles of corporate governance are required to build stockholder value. Our governance policies, including Categorical Standards of Director Independence, Corporate Governance Guidelines, Policy on Ethics and Business Conduct, Policy on Conflicts of Interest, Anti-Corruption Policy, Whistleblower Policy, Policy on Disclosure Controls, Committee Charters and Policy Statement on Inside Information and Insider Trading, can be found on our website at http://www.fticonsulting.com/en_us/about/governance/Pages/default.aspx. A copy of the Charter of the Audit Committee as amended and restated effective March 31, 2009 is furnished with this proxy statement as Appendix B. Copies of the Charters of the Nominating and Corporate Governance and Compensation Committees, each as amended and restated effective August 1, 2008, have been filed as exhibits to our Annual Report on Form 10-K for the fiscal year ended December 31, 2008 filed with the SEC on March 2, 2009. We filed our Policy on Ethics and Business Conduct [as Amended and Restated Effective December 18, 2008] as an exhibit to our Current Report on Form 8-K dated December 18, 2008 filed with the SEC on December 22, 2008.
The Nominating and Corporate Governance Committee regularly reviews corporate governance developments and recommends modifications or new policies for adoption by the Board and the Committees, as appropriate, to enhance our corporate governance policies and practices and to comply with laws and rules of the SEC, the NYSE or other governmental or applicable regulatory authorities. We will provide printed copies of the corporate governance documents, including, without limitation, the Charters of the Committees, the Corporate Governance Guidelines and the Policy on Ethics and Business Conduct, Policy on Conflicts of Interest and Anti-Corruption Policy to any person, without charge, upon request to our Corporate Secretary at FTI Consulting, Inc., 500 East Pratt Street, Suite 1400, Baltimore, Maryland 21202, telephone no. (410) 951-4800.
In January and February 2009, the Board and each Committee conducted their 2008 self-evaluations. The presiding director compiled the data. The Board and each of the Committees discussed its own assessment, and the Board reviewed the assessments of the Board and the Committees to determine whether any revisions to existing practices or policies or new practices or policies were advisable.
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PRESIDING DIRECTOR
Our non-management directors meet in closed (executive) sessions without the presence of management periodically throughout the year. During 2008, our non-management directors (which consist of our independent non-employee directors and Mr. Stamas) met in closed (executive) session five times without management. During 2008, our independent directors met in closed (executive) session five times without management. Gerard Holthaus was the presiding director for the year ended December 31, 2008 and was reappointed as presiding director by the non-management directors at the Board meeting held on March 31, 2009. On April 15, 2009, the Board concluded it could not affirmatively find that Mr. Holthaus would be independent for at least the duration of an engagement involving Algeco Scotsman. As a result of that decision, Mr. Holthaus stepped down as presiding director and the non-management and independent directors appointed Matthew McHugh to that position effective April 15, 2009.
CODE OF CONDUCT
Our written Policy on Ethics and Business Conduct (the Code of Ethics and together with the Policy on Conflicts of Interest and the Anti-Corruption Policy, the Ethics Policy) reflects our longstanding policies. The Ethics Policy applies to financial professionals, including our CFO, Corporate Controller and Corporate Treasurer, as well as our Chairman, President and CEO, Chief Operating Officer and other officers, directors, employees and independent contractors. We require that they avoid conflicts of interest, comply with applicable laws, including the Foreign Corrupt Practices Act, and other legal requirements, protect company assets, and conduct business in an honest and ethical manner, and otherwise act with integrity, in our best interest, and in accordance with the Ethics Policy. The Ethics Policy prohibits insiders from knowingly taking advantage of corporate opportunities for personal benefit, and taking unfair advantage of our business associates, competitors and employees through manipulation, concealment, abuse of privileged information, misrepresentation of material facts, or any other practice of unfair dealing. Our Code of Ethics is publicly available and can be found on our website at http://www.fticonsulting.com/en_us/about/governance/Pages/default.aspx. If we make substantive amendments to the Code of Ethics or grant any waiver, including any implicit waiver, from a provision of the Ethics Policy to our Chairman, President and CEO, CFO, Chief Operating Officer or Corporate Controller, Corporate Treasurer and any of our other officers, financial professionals and persons performing similar functions, we will disclose the nature of such amendment or waiver on our website or in a report filed with the SEC on Form 8-K.
STOCKHOLDER NOMINEES FOR DIRECTOR
We did not receive any notices of stockholder nominees for director prior to the deadline for 2009 nominations described in our 2008 proxy statement. Under our By-Laws, nominations for director may be made by a stockholder who is a stockholder of record on the date of the giving of the notice of a meeting and on the record date for the determination of stockholders entitled to vote at such meeting and who delivers notice along with the additional information and materials required by our By-Laws, including: (a) as to each person whom the stockholder proposes to nominate for election as a director, all information relating to such person that is required to be disclosed in connection with solicitations of proxies for election of directors by the SECs proxy rules and (b) as to the stockholder giving the notice (i) the name and address of such stockholder as they appear on our books and of the beneficial owner, if any, on whose behalf the nomination is made, (ii) the class or series and number of shares of our capital stock owned beneficially or of record by such stockholder and such beneficial owner, as applicable, (iii) a description of all arrangements or understandings between such stockholder and each proposed nominee and any other person or persons (including their names) pursuant to which the nomination(s) are to be made by such stockholder, (iv) a representation that such stockholder intends to appear in person or by proxy at the meeting to nominate the persons named in its notice, and (v) any other information relating to such stockholder that would be required to be disclosed in a proxy statement or other filings required to be made in connection with solicitations of proxies for election of directors by the SECs proxy rules. Such notice must be accompanied by a written consent of each proposed nominee to be named as a nominee and to serve as a director if elected. Under our By-Laws a stockholder must deliver notice of nominees for director to our Corporate Secretary not less than 90 days and no more than 120 days before the first anniversary date of the mailing date of the proxy for the preceding years annual meeting, provided, however, that in the event that the date of the annual meeting is advanced by more than 30 days or delayed by more than 60 days from the anniversary date of the preceding years annual meeting, notice by the stockholder must be so delivered not earlier than the 90th day prior to such annual meeting and not later than the close of business on the later of the
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60th day prior to such annual meeting or the tenth day following the day on which public announcement of the date of such annual meeting is first made. For the annual meeting of stockholders in 2010, we must receive this notice no earlier than December 24, 2009 and no later than January 23, 2010. You may obtain a copy of our By-Laws, without charge, or submit a nominee for director, by writing to our Corporate Secretary, c/o FTI Consulting, Inc., 500 East Pratt Street, Suite 1400, Baltimore, Maryland 21202, telephone no. (410) 951-4800. We filed a copy of our By-Laws, as amended and restated through September 17, 2004, with the SEC on November 9, 2004 as an exhibit to our Quarterly Report on Form 10-Q for the quarter ended September 30, 2004. We filed Amendment No. 6 to our By-Laws Amendment dated as of December 18, 2008 with the SEC on December 22, 2008 as an exhibit to our Current Report on Form 8-K dated December 18, 2008. We filed Amendment No. 7 to our By-Laws Amendment dated as of February 25, 2009 with the SEC on March 3, 2009 as an exhibit to our Current Report on Form 8-K dated February 25, 2009.
COMMUNICATIONS WITH NON-MANAGEMENT DIRECTORS
Our Whistleblower Policy covers communications with the non-management directors. It is available on our website at http://www.fticonsulting.com/en_us/about/governance/Pages/default.aspx. Stockholders, employees and other interested persons can communicate with an individual director, the Chair of the Audit Committee, the presiding director or the non-management directors as a group, using the EthicsPoint system, which allows interested persons to place confidential and anonymous reports by either telephone or the Internet, without divulging their names or other personal information. The reporting website can be accessed from any Internet-enabled computer at www.ethicspoint.com. Telephone reports can be placed by calling toll free (866) 294-3576. EthicsPoint will send reports to designated recipients within FTI, which includes our Executive Vice President and General Counsel, Associate General Counsel and Corporate Secretary, and Executive Vice President and Chief Risk and Compliance Officer. If interested persons do not feel comfortable using the EthicsPoint system, they may communicate with non-management directors by telephone to our General Counsel at (410) 951-4800, by mail to FTI Consulting, Inc., 500 East Pratt Street, Suite 1400, Baltimore, Maryland 21202, or by e-mail to eric.miller@fticonsulting.com. The designated recipients will forward interested party communications, depending upon the subject matter, to the Chair of the Nominating and Corporate Governance Committee or Audit Committee, the presiding director, or other appropriate person who is responsible for ensuring that the interested persons concerns are investigated and appropriately addressed. The designated recipients of the reports will not filter the communications. Communications to non-management directors relating to our business will be retained for seven-years.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
There were 51,325,310 shares of our common stock issued and outstanding on March 30, 2009, the record date of this 2009 Annual Meeting of Stockholders. The following table shows the beneficial ownership of our common stock as of March 30, 2009, by:
The amounts and percentages of shares of common stock beneficially owned are reported on the basis of SEC regulations governing the determination of beneficial ownership of securities. Under SEC rules, a person is deemed to be a beneficial owner of a security if that person has or shares voting power or investment power, which includes the power to dispose of or to direct the disposition of such security. A person is also deemed to be a beneficial owner of any securities with respect to which that person has a right to acquire beneficial ownership within 60 days. Securities that can be so acquired are deemed to be outstanding for purposes of computing such persons ownership percentage but not for purposes of computing any other persons percentage. Under these rules, more than one person may be deemed to be a beneficial owner of the same securities, and a person may be deemed to be a beneficial owner of securities as to which such person has no economic interest.
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Except as otherwise indicated in these footnotes, each of the beneficial owners listed has, to our knowledge, sole voting and investment power with respect to the indicated shares of common stock.
Number of Shares | Percentage of Shares | |||||||
Name of Beneficial Owner(1) | Beneficially Owned | Beneficially Owned (%) | ||||||
Jack B. Dunn, IV(2) | 676,901 | 1.31 | ||||||
Dennis J. Shaughnessy(3) | 394,897 | * | ||||||
David G. Bannister(4) | 164,396 | * | ||||||
Roger D. Carlile(5) | 77,209 | * | ||||||
Jorge A. Celaya(6) | 24,260 | * | ||||||
Dominic DiNapoli(7) | 322,219 | * | ||||||
Declan M. Kelly(8) | 27,000 | |||||||
John A. MacColl(9) | 69,554 | * | ||||||
Eric B. Miller(10) | 54,870 | * | ||||||
Catherine M. Freeman(11) | 7,000 | * | ||||||
Curt A. H. Jeschke, Jr.(12) | 17,641 | * | ||||||
Brenda J. Bacon(13) | 35,331 | * | ||||||
Mark H. Berey(14) | 111,000 | * | ||||||
Denis J. Callaghan(15) | 218,465 | * | ||||||
James W. Crownover(16) | 34,850 | * | ||||||
Gerard E. Holthaus(17) | 131,875 | * | ||||||
Matthew F. McHugh(18) | 18,340 | * | ||||||
George P. Stamas(19) | 110,364 | * | ||||||
Gary C. Wendt(20) | 75,575 | * | ||||||
FMR Corp. | 7,610,001 | 14.82 | ||||||
82 Devonshire Street | ||||||||
Boston, MA 02109(21) | ||||||||
All directors and executive officers as a group (17 persons) | 2,547,106 | 4.81 |
* | Less than 1%. | |
(1) | Unless otherwise specified, the address of these persons is c/o FTI Consulting, Inc.s executive office at 777 South Flagler Drive, Phillips Point, Suite 1500 West Tower, West Palm Beach, Florida 33401. | |
(2) | Includes: | |
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(3) | Includes: | |
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(4) | Includes: | |
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(5) | Includes: | |
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(6) | Includes: | |
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(7) | Includes: | |
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(8) | Includes 10,000 shares of restricted stock with a grant date of August 11, 2008 that are subject to forfeiture, which will vest in five equal annual installments of 20% on the day following the first through fifth anniversary dates of the grant date; provided that the applicable performance goals based on the achievement of annual revenue and earnings per share targets for the year ended December 31, 2008 and the years ending December 31, 2009, December 31, 2010, December 31, 2011 and December 31, 2012, have been achieved (see Executive Officers and Compensation Compensation Discussion and Analysis NEO Compensation LTIP Awards 2008 Performance-Based Equity Awards to our CEO, Chairman and CIO). On November 26, 2007, Mr. Kelly entered into a European style collar arrangement consisting of a call option expiring November 30, 2009 and a put option expiring on November 30, 2009 for 103,643 shares of common stock with a securities broker. The common stock subject to the collar was acquired by Mr. Kelly as partial purchase price consideration for the share capital of FD International (Holdings) Limited owned by him, which was acquired by FTI in October 2006. | |
(9) | Includes 56,893 shares of our common stock issuable upon exercise of stock options. | |
(10) | Includes: | |
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(11) | Includes (i) 5,000 shares of restricted stock awarded on November 12, 2007 that are subject to forfeiture, which will vest as to one-half on the second anniversary and one-half on the third anniversary of the date of grant, such that 100% will be vested on November 12, 2010 and (ii) 2,000 shares of our common stock issuable upon exercise of stock options. | |
(12) | Includes 16,666 shares of our common stock issuable upon exercise of stock options. | |
(13) | Includes (i) 9,375 shares of restricted stock awarded on December 11, 2006 that are subject to forfeiture, which will vest as to one-twelfth on each three-month period beginning on the first three-month period after such date of grant, such that 100% of such restricted shares will be vested on December 11, 2009 and (ii) 7,206 shares of our common stock issuable upon exercise of options. | |
(14) | Includes (i) 15,625 shares of restricted stock awarded on June 7, 2007 that are subject to forfeiture, which will vest as to one-twelfth on each three-month period beginning on the first three-month period after such date of grant, such that 100% of such restricted shares will be vested on June 7, 2010 and (ii) 73,000 shares of our common stock issuable upon exercise of stock options. | |
(15) | Includes (i) 211,398 shares of our common stock issuable upon exercise of stock options and (ii) 792 shares of our common stock issuable upon settlement of stock units issued under our Deferred Compensation Plan. Upon a termination event under the plan, Mr. Callaghan will receive one share of our common stock for each stock unit in his account. | |
(16) | Includes 31,250 shares of our common stock issuable upon settlement of restricted stock units issued under our Deferred Compensation Plan. Upon a termination event under the plan, Mr. Crownover will receive one share of our common stock for each vested restricted stock unit in his account. | |
(17) | Includes (i) 110,000 shares of our common stock issuable upon exercise of stock options and (ii) 21,875 shares of our common stock issuable upon settlement of restricted stock units issued under our Deferred Compensation Plan. Upon a termination event under the plan, Mr. Holthaus will receive one share of our common stock for each vested restricted stock unit in his account. | |
(18) | Includes 2,815 shares of restricted stock awarded on June 10, 2008 that are subject to forfeiture, which will vest in full on June 10, 2009. |
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(19) | Includes: | |
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(20) | Includes 34,375 shares of our common stock issuable upon settlement of restricted stock units issued under our Deferred Compensation Plan. Upon a termination event under the plan, Mr. Wendt will receive one share of our common stock for each vested restricted stock unit in his account. | |
(21) | Based on Schedule 13G/A filed on February 17, 2009. The reporting person reported sole voting power with respect to 496,203 shares of common stock and sole dispositive power with respect to 7,610,001 shares of common stock. These securities are owned by various investment funds affiliated with FMR Corp., which have the right to direct the voting and disposition of shares of our common stock and the right to receive or the power to direct the receipt of dividends or the proceeds from the sale of our common stock. For purposes of the reporting requirements of the Exchange Act, FMR Corp. is deemed to be a beneficial owner of such securities. The number of shares of common stock of FTI Consulting Inc owned by the investment companies or other affiliates of FMR LLC at December 31, 2008 included an aggregate of 41,342 shares of common stock resulting from the assumed conversion of $1,292,000 aggregate principal amount of FTI CONSULTING CV 3.75 7/15/12 (31.998 shares of Common Stock for each $1,000 principal amount of debenture). |
EXECUTIVE OFFICERS AND COMPENSATION
EXECUTIVE AND KEY OFFICERS
We have set forth below information about each of our executive officers and other key officers who is not also a director:
Officer | ||||||||
Name | Age | Since | Position | Principal Business Experience For Past Five Years | ||||
David G. Bannister | 53 | 2005 | Executive
Vice President Corporate Development and Chief Administrative Officer |
Mr. Bannister joined us as Senior Vice PresidentBusiness Development in May 2005 and he assumed the position of Executive Vice PresidentCorporate Development in June 2006. In December 2008, Mr. Bannister was appointed to the additional position of Chief Administrative Officer. From 1998 to 2004, Mr. Bannister was a General Partner of Grotech Capital Group. From 1983 to 1998, Mr. Bannister was employed in the investment banking division of Alex Brown & Sons Incorporated holding the position of Managing Director when he left in 1998. Mr. Bannister is a director of Landstar System, Inc., the Chairman of its Audit Committee and a member of other committees. | ||||
Roger D. Carlile | 46 | 2009 | Executive Vice President and Chief Human Resources Officer |
Mr. Carlile has been an Executive Vice President and our Chief Human Resources Officer since January 2009. From November 2003 to January 2009, Mr. Carlile was a Senior Managing Director heading our Forensic and Litigation Consulting business segment. |
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Officer | ||||||||
Name | Age | Since | Position | Principal Business Experience For Past Five Years | ||||
Jorge A. Celaya | 43 | 2007 | Executive Vice President and Chief Financial Officer |
Mr. Celaya has been Executive Vice President and Chief Financial Officer since July 2007. From March 2007 to July 2007, Mr. Celaya performed M&A consulting. Mr. Celaya served as Executive Vice President, Chief Financial Officer and a member of the Executive Committee of Sitel Corporation, a global provider of BPO services, from October 2003 to February 2007 when it was merged in a take-private transaction. From 1990 to October 2003, Mr. Celaya was employed by Schlumberger Limited in various operating and senior corporate financial management positions, including service in Europe and Latin America. Beginning in May 2002 to August 2003, Mr. Celaya was Chief Financial Officer of NPTest, Inc., a semiconductor company and Schlumberger spin-off. | ||||
Dominic DiNapoli | 54 | 2004 | Executive Vice President and Chief Operating Officer |
Mr. DiNapoli has been an Executive Vice President and our Chief Operating Officer since February 2004. From August 2002 to February 2004, Mr. DiNapoli was a Senior Managing Director in our Corporate Finance/Restructuring segment. From 1998 to 2002, Mr. DiNapoli was a Managing Partner of PricewaterhouseCoopers LLPs U.S. business recovery services (BRS) practice. | ||||
Declan M. Kelly | 40 | 2008 | Executive Vice President and Chief Integration Officer |
Mr. Kelly has been an Executive Vice President and our Chief Integration Officer since June 2008. From 2002 to June 2008, Mr. Kelly was President and Chief Executive Officer of FD US Communications, Inc., a U.S. subsidiary of FD International (Holdings) Limited, a strategic communications company that we acquired in October 2006. | ||||
John A. MacColl | 60 | 2006 | Executive Vice President and Chief Risk and Compliance Officer |
Mr. MacColl has been an Executive Vice President and our Chief Risk Officer since January 2006. In August 2007, Mr. MacColl assumed the position of Chief Compliance Officer. From January 2006 to February 2008, he also held the position of Chief Legal Officer. From April 2004 to April 2005, Mr. MacColl was Vice Chairman of St. Paul Travelers, a position he held with its predecessor, The St. Paul Companies, Inc. from May 2002 to April 2004. From May 1999 to August 2004, he also held the position of General Counsel of The St. Paul Companies, Inc. Mr. MacColl joined the St. Paul Companies in 1998, following the companys merger with USF&G Corporation, where he served as Executive Vice President of Human Resources and General Counsel. From April 2005 to January 2006, Mr. MacColl pursued personal business interests. |
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Officer | ||||||||
Name | Age | Since | Position | Principal Business Experience For Past Five Years | ||||
Eric B. Miller | 49 | 2006 | Executive Vice President and General Counsel |
Mr. Miller joined us in May 2006 and was elected Senior Vice President and General Counsel in June 2006 and assumed the chief legal officer role in February 2008. In May 2008, Mr. Miller was elected an Executive Vice President of FTI. From 1995 to May 2006, Mr. Miller was a Partner with DLA Piper. | ||||
Catherine M. Freeman | 52 | 2007 | Senior Vice President, Controller and Chief Accounting Officer |
Ms. Freeman has been Senior Vice President and our Controller and Chief Accounting Officer since November 2007. From April 2004 to July 2007, Ms. Freeman held the position of Vice President, Corporate Controller, and from July 2007 to November 2007 held the position of Vice President and Deputy Chief Financial Officer, of AES Corporation. From August 2001 to March 2004, Ms. Freeman was Vice President and Corporate Controller of World Kitchen, Inc., and from 1983 to March 2001, held various finance and accounting positions with Fort James Corporation. During Ms. Freemans term as an officer of World Kitchen, Inc., World Kitchen, Inc. filed for Chapter 11 bankruptcy protection. | ||||
Curt A. H. Jeschke, Jr. | 58 | 2004 | Vice President Internal Audit |
Mr. Jeschke joined us as Vice PresidentInternal Audit in May 2004. From November 1998 through June 2003, he was Senior Vice President and Chief Financial Officer of Renaissance Aircraft LLC, a manufacturer of general aviation aircraft. He managed his familys real estate business from July 2003 to May 2004. |
Our executive officers are appointed by the Board of Directors, and they serve at the pleasure of our Board, subject to the terms of written employment arrangements that we have with some of them.
COMPENSATION DISCUSSION AND ANALYSIS
The following discussion of NEO compensation contains descriptions of various employment related agreements and employee compensation plans. These descriptions are qualified in their entirety by reference to the full text or detailed descriptions of the agreements and plans that we have filed as exhibits to our Annual Report on Form 10-K for the year ended December 31, 2008 filed with the SEC on March 2, 2009. You may request copies of the agreements and plans filed with the SEC, free of charge, by contacting our Corporate Secretary, at 500 East Pratt Street, Suite 1400, Baltimore, Maryland 21202, telephone no. (410) 951-4800. Exhibits and schedules to the agreements and plans will not be provided unless specifically requested. See Information About the Board of Directors and Committees Committees of the Board of Directors Compensation Committee for a discussion of the role that the Compensation Committee plays in setting NEO compensation.
The Compensation Committee
All our NEOs are elected to their positions by the Board. As of December 31, 2008, our NEOs were: our President and CEO Jack B. Dunn, IV; our Chairman Dennis J. Shaughnessy; our CFO Jorge A. Celaya; our Executive Vice President and Chief Operating Officer (COO) Dominic DiNapoli, and our Executive Vice President and Chief Integration Officer (CIO) Declan M. Kelly. The Compensation Committee is responsible for setting the compensation of our NEOs. It reviews and approves corporate and individual goals for Mr. Dunn and Mr. Shaughnessy and reviews the goals of the other NEOs. It sets the compensation of Mr. Dunn and Mr. Shaughnessy and reviews the
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recommendations of Mr. Dunn and Mr. Shaughnessy relating to the compensation of other NEOs and approves the compensation of those officers. See Information About the Board of Directors and Committees Committees of the Board of Directors Compensation Committee for a discussion of the powers of the Compensation Committee and the role Mr. Dunn and Mr. Shaughnessy play in compensation decisions.
Primary Objectives of Our Compensation Program
The primary objectives of the compensation program for our NEOs are to:
Design of Our Compensation Program
The compensation program for our NEOs is intended to reward performance by:
In designing the compensation program and in determining NEO compensation, we also considered the following factors:
2008 Peer Group Data
In May 2008, the Compensation Committee engaged Frederic W. Cook & Co., Inc. (FWC) to review chief executive officer compensation levels among a defined set of peer companies in preparation for negotiation of an extension of Mr. Dunns employment term and compensation. The peer group selected by FWC consisted of eight publiclytraded companies selected by FWC to be similar in size and business mix to FTI, which consisted of ChoicePoint, Inc., The Dun & Bradstreet Corporation, Gartner, Inc., Huron Consulting Group, Inc., HIS Inc., LECG Corporation, Navigant Consulting, Inc. and Watson Wyatt Worldwide, Inc. FWC concluded that in terms of size, FTI is generally between the median and the 75th percentile on all measures, except for the number of employees,
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which is below the median. To analyze chief executive officer compensation levels among the peer companies, FWC reviewed the following pay elements as reported in the most recently filed proxy statements of those companies: base salary, actual bonus (and target, if disclosed), long-term incentive compensation, valued as follows stock options based on grant date fair value, restricted shares valued at fair market value on grant date; long-term performance awards valued at target, cash-based long-term incentives discounted at 5% per year for the number of years in the performance period, and long-term incentive grants were annualized to reflect irregular patterns and special non-recurring awards. Based on its analysis, FWC concluded that the cash compensation levels of Mr. Dunn were above the 75th percentile of the peer group but the long-term incentives are below the median of the peer group resulting in overall total compensation being between the median and 75th percentile of the peer group. At the median and 75th percentile, the peer group (a) base salary was $873,000 and $947,000, respectively, as compared to Mr. Dunns base salary of $1,375,000 (increased to $1,500,000 in July 2008), (b) total target cash compensation, was $1,765,000 and $2,177,000, respectively (compared to $2,850,000 for Mr. Dunn (based on salary of $1,375,000 and bonus target set by FWC of $1,500,000), and (c) target total direct compensation (including fair value equity compensation determined by FWC of $3,044,00 and $4,076,000, respectively), was $5,319,000 and $6,840,000, respectively (compared to $5,549,000 for Mr. Dunn). The Compensation Committee considered the data and analysis supplied by FWC as useful information but did not give it dispositive weight when negotiating the amendments to Mr. Dunns employment agreement and compensation discussed below under NEO Compensation.
The Compensation Committee has not targeted salary, bonus, equity compensation and total compensation to any peer group. The Committee did not engage any compensation consultant to look at the compensation of any other NEO in 2008.
Employment Agreements, Termination of Employment and Change in Control Arrangements
As we discuss more fully in Executive Officers and Compensation Employment Agreements and Potential Termination and Change in Control Payments, we have employment agreements with Messrs. Dunn, Shaughnessy, DiNapoli and Kelly. The employment agreements include annual base salary terms that provide that specified annual salary levels cannot be reduced. Our employment agreements with Mr. Dunn, Mr. Shaughnessy and Mr. DiNapoli contain provisions relating to part-time employment opportunities and payments during that period. We do not have a long-term employment agreement with Mr. Celaya, but his written offer letter contains certain terms relating to his continuing employment and payments on termination of his employment by FTI without cause and termination by Mr. Celaya with good reason within three years of the commencement of his employment with FTI or after three years from the effective date of his employment during the one year period following a change in control.
As discussed more fully in Executive Officers and Compensation Employment Agreements and Potential Termination and Change in Control Payments, we provide certain NEOs with payments and benefits related to certain termination of employment events, including in connection with a change in control, termination by us without cause and termination by the NEO with good reason (as those terms are defined in the relevant agreement). These protections limit our ability to downwardly adjust compensation, including base salaries, to relocate an executive and to change responsibilities of executives, without triggering the right of the affected NEO to receive termination payments and benefits. These termination protection payments and benefits are viewed as an important component of the total compensation to each of our NEOs. In our view, having these protections helps to maintain our NEOs objectivity in decision-making and provides another vehicle to align the interests of our NEOs with the interests of our stockholders. The Compensation Committee did not take the termination protection payments and benefits into account in making decisions with respect to other elements of NEO compensation as all or some of these payments and benefits may never be triggered.
Decisions to enter into employment agreements, the terms of those agreements and amendments to those agreements have been based on the facts and circumstances at the time and arms length negotiations with the applicable NEO.
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Deductibility of NEO Compensation
Code Section 162(m)
Code Section 162(m) limits the deductibility of compensation in excess of $1,000,000 million paid to our chief executive officer and our four other highest-paid executive officers unless certain specific and detailed criteria are satisfied. A company can deduct compensation (including the exercise of options) above that limit if it pays the compensation under a plan that its stockholders have approved and that is performance-related and non-discretionary. The Compensation Committee considers Section 162(m) when making compensation decisions but other considerations, such as providing our NEOs with competitive and adequate incentives to remain with and increase our business operations, financial performance and prospects, as well as rewarding extraordinary contributions, also significantly factor into the Compensation Committees decisions. The Compensation Committee has and expects to continue to authorize payment of compensation to NEOs outside the limits of Code Section 162(m). The Compensation Committee has not consulted with any compensation consultant with respect to the payment of compensation that is not deductible under Code Section 162(m) and may or may not to do so in the future.
2008 NEO Payments Not Deductible Under Code Section 162(m)
In 2008, we paid total base salary compensation to each of Mr. Dunn and Mr. DiNapoli in excess of the deductibility limits of Code Section 162(m). We also paid a supplemental 2008 cash bonus to Mr. DiNapoli in the amount of $200,000 that would not be deductible under Code Section 162(m) in recognition of his extensive activities on behalf of our Corporate Finance/Restructuring segment that were in addition to his duties as COO. In addition, on February 19, 2008, the Compensation Committee awarded 6,000 shares of restricted stock to Mr. DiNapoli with a grant date of February 29, 2008 and a market value of $381,000 as of that date (based on a closing price of $63.50 per share as reported on the NYSE for February 29, 2008), which was in excess of the deductibility limits. This restricted stock award was intended as 2007 bonus compensation. Mr. Kelly, our CIO, was not an officer of FTI on March 26, 2008, which was the date the Compensation Committee designated the participants and set the performance goals and individual targets for 2008 under the FTI Consulting, Inc. Incentive Compensation Plan, as amended (the Incentive Plan). The Compensation Committee awarded Mr. Kelly a cash bonus of $600,000 for 2008 in light of his duties prior to June 2008 as the chief executive officer of the U.S. subsidiary of our Strategic Communications segment and his performance after June 2008 as FTIs CIO, which together with his base annual salary of $705,000, caused his total cash compensation to exceed the deduction limit of Code Section 162(m). See Executive Officers and Compensation Summary Compensation Table for the base salaries and other compensation paid to the NEOs for 2008.
2008 Amendments to NEO Employment Arrangements to Comply with Code Section 162(m)
In 2008, we determined it necessary to amend the severance provisions of the employment arrangements with our NEOs to conform to a recent Internal Revenue Service interpretation of Code Section 162(m) providing that certain incentive awards will fail to qualify for the performance-based compensation exemption if such awards are payable at target levels upon a termination without cause or for good reason. The amendments to the applicable employment arrangements should allow FTI to preserve the deductibility of the annual bonus payments made by FTI to certain NEOs. These amendments were approved by the Compensation Committee on December 17, 2008 and were entered into by the applicable NEOs effective as of December 31, 2008. These amendments are further described in the section captioned Executive Officers and Compensation Employment Agreements and Potential Termination and Change in Control Payments.
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NEO Compensation
General
We pay our NEOs an annual base salary and we also put a significant portion of the executives compensation at risk through the use of annual cash bonus and equity awards, by tying those elements to Company and/or individual performance for the year and longer periods of time. The elements of compensation paid to our NEOs are intended to reward performance as follows:
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Historically, the Compensation Committee and the Company have not used a formula to allocate among cash and non-cash, short and long-term, and fixed and at-risk compensation and has subjectively made decisions as to the form of compensation, amount of compensation and timing of compensation after considering the periodic financial results of the Company and their subjective assessment of the applicable NEOs performance. The Compensation Committee has not assigned weights or to specific aspects of performance, compensation objections and components of NEO compensation.
2008 NEO Base Salary Adjustments
The Compensation Committee considers adjustments to annual base compensation each year but not necessarily at the same time each year. The Compensation Committee discusses annual base salary levels directly with Mr. Dunn and Mr. Shaughnessy and considers the recommendations of Mr. Dunn and Mr. Shaughnessy with respect to the annual base salary levels of the other NEOs. See Executive Officers and Compensation Summary Compensation Table for the base salaries paid to the NEOs.
2008 CEO Base Salary Adjustment
On July 31, 2008, the Compensation Committee took action to offer to Mr. Dunn an extension of his employment term and changes to compensation. The Compensation Committee presented the offer to Mr. Dunn on August 4, 2008 and after discussions revised the terms of the offer on August 5, 2008, which terms were agreed to by Mr. Dunn that day. See Executive Officers and Compensation Employment Agreements and Potential Termination and Change in Control Payments for a description of the amendments to Mr. Dunns employment arrangements.
As partial consideration for the extension of his employment agreement through August 2013, Mr. Dunns base annual salary was increased from $1,375,000 to $1,500,000 retroactive to July 1, 2008. The Compensation Committee considered FWCs peer group analysis prior to approving the increase of Mr. Dunns 2008 base annual salary but did not assign it any significant weight. See 2008 Peer Group Data. The Compensation Committee determined that the higher base salary was deserved and warranted in light of Mr. Dunns direction during 2008 that resulted in the Company completing 16 acquisitions that added new service offerings, such as real estate advisory services, and expanded FTIs global reach across Europe, Asia and Latin America, as well as his mandate to direct the larger and more complex organization in 2008 and beyond. The Compensation Committee also considered the increased complexity of our business and organizational structure, the positive 2008 business and financial results of the Company in a challenging economic environment, and increases in our stock price. See LTIP Awards for a description of the performance-based restricted stock award granted to Mr. Dunn as partial consideration for the extension of his employment agreement.
2008 Other NEO Salary Considerations
Mr. Shaughnessys annual base salary for 2008 was not adjusted. In lieu of an adjustment to annual base salary, Mr. Shaughnessy asked for, and received in January 2009, an increase in the annual transition payment that he would receive upon termination of his employment term as described under 2008 Chairman Transition Payment Adjustment.
Mr. DiNapoli, our COO, has the highest annual base salary of all executive officers. His annual base salary of $2,000,000 was established by contract in November 2005 through arms-length negotiations. The Compensation Committee concluded that his salary was competitive and did not warrant an increase in 2008.
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Mr. Kellys annual base salary for 2008 was $705,000. The Compensation Committee did not take action to increase his salary in 2008.
Mr. Celaya joined the Company in July 2007. His $550,000 annual base salary in 2008 was established through arms length negotiations. Effective March 1, 2009, the Compensation Committee increased his annual base salary to $600,000. This annual base salary change was a merit increase in light of the growing size and complexity of our business and the financial function as a result of adding 16 acquisitions in 2008 and the Companys continuing expansion in locations outside of the U.S.
2009 Chairman Transition Payment Adjustment
On December 17, 2008, the Committee approved amendments to the term of the employment agreement with an effective date of October 18, 2004, as amended (the Chairman Employment Agreement), between FTI and Mr. Shaughnessy that had a termination date of October 18, 2009 to extend the term to January 2, 2012. In lieu of a current base salary increase for Mr. Shaughnessy, at his request the Compensation Committee increased his post-full-time employment annual transition payment from $400,000 to $700,000. The foregoing annual transition payment will be payable by FTI following Mr. Shaughnessys termination of employment at the expiration of his employment term or for reasons other than death, disability or termination by FTI for cause, in consideration for services that we may request from Mr. Shaughnessy up to 500 hours per annum during the five-year period following such termination. The Compensation Committee determined that the higher annual transition payment would be deserved based on the perceived benefit of retaining Mr. Shaughnessys services on a part-time basis in light of his knowledge of our company and business and the services he provides to the Board. See LTIP Awards for a description of the performance-based restricted stock award granted to Mr. Shaughnessy as consideration for the extension of his employment agreement.
2008 Incentive Compensation Payments
The FTI Consulting, Inc. Incentive Compensation Plan
On June 6, 2006, our stockholders approved our Incentive Plan. Annual cash incentive compensation is intended to focus and reward individuals based on measures identified as having a positive impact on our annual business results and that are aligned with the interests of our stockholders. The Incentive Plan requires that the Compensation Committee designate those executive officers who will participate in the plan for any year and establish performance goals and maximum dollar amounts to be paid to each plan participant if the performance goals have been achieved. In conjunction with a NEOs equity incentives, annual cash incentive compensation is intended to tie a potentially large portion of such officers total compensation to that years financial performance and place it at-risk. The Compensation Committee has not assigned any weights to cash incentive compensation as a specific multiple of base salary or as a percentage of total compensation.
Under the Incentive Plan, the Compensation Committee may choose from a range of defined objective performance measures: earnings before interest, taxes, depreciation and amortization, or EBITDA, stock price, earnings per share, earnings per share before stock option expense, net earnings, operating or other earnings, revenues, net cash flow, financial return ratios, return on assets, stockholder return, return on equity, growth in assets, and market share or strategic business criteria consisting of one or more objectives meeting specified revenue goals, market penetration goals, geographic business expansion goals, or goals relating to acquisitions or strategic partnerships.
The incentive compensation measures are objective measures that reflect our operating results for the year for which the performance goals are established. The Compensation Committee seeks to establish performance goals that are challenging but attainable based on our business and financial plan for the year. When establishing performance goals for a plan year, the Compensation Committee reviews and discusses our business and financial plans for that year and their key underlying assumptions, expectations under then-existing and anticipated market conditions and the opportunity to generate stockholder value. The Compensation Committee establishes a range of performance goals for the plan year as well as individual payment maximums for each goal within the range for the participants in the plan.
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In the case of the NEOs whose overall annual cash compensation may, in some instances, exceed $1,000,000, performance goals and payment maximums have been established by the Compensation Committee no later than 90 days following our fiscal year end, or by March 30 of each year, to ensure that their award payouts that are solely attributable to and dependent upon satisfaction of a performance goal will be fully deductible under the federal tax laws. Under our Incentive Plan, payments based on the prior years performance must be made (if earned) by no later than March 15th of each year. All cash incentive compensation payments for 2008 made pursuant to our Incentive Plan will be deductible under Code Section 162(m), however, Dominic DiNapoli received a special merit based discretionary cash bonus in the amount of $200,000 on account of his performance in 2008 that will not be deductible under Section 162(m).
On March 26, 2008, the Compensation Committee approved the participants, performance goals and individual maximum cash target bonus levels for the year ended December 31, 2008 under our Incentive Plan. When establishing performance goals for 2008, the Compensation Committee reviewed and discussed FTIs business and financial plans for 2008, company expectations, anticipated market conditions, FTIs published financial guidance and the recommendations of Mr. Dunn and Mr. Shaughnessy. For 2008, the Compensation Committee designated a range of target performance goals based on earnings per share (determined in accordance with Generally Accepted Accounting Principles) (EPS), with a low EPS performance goal and high EPS performance goal. For the purpose of presenting that information in our proxy statement, we report the threshold as the lowest performance goal, the target as the middle performance goal and the maximum as the highest performance goal established within the applicable range of performance goals set by the Compensation Committee. The Compensation Committee also approved a formula for adjusting EPS to reflect extraordinary events that may occur during the year such as a disposition of a business segment, however, no adjustments to EPS were made in connection with the award of the 2008 incentive compensation payments.
The Compensation Committee designated Mr. Dunn, our CEO, Mr. Shaughnessy, our Chairman, Mr. DiNapoli, our COO, Mr. Celaya, our CFO, Mr. Bannister, our Executive Vice President and Corporate Development and Chief Administrative Officer, and Mr. Miller, our Executive Vice President and General Counsel, as the only participants for 2008. The executive officers designated as 2008 participants in the Incentive Plan do not necessarily correlate to those executive officers who are NEOs. Our Executive Vice President and Corporate Development and Chief Administrative Officer and our Executive Vice President and General Counsel are not NEOs for 2008.
The Chair of the Compensation Committee proposed maximum cash bonus targets for the participants to Mr. Dunn and Mr. Shaughnessy, who then commented and proposed revised targets, which were ultimately accepted and approved by the Compensation Committee substantially in line with their recommendations. The maximum target awards were not set by formula. The 2008 maximum cash awards under the Incentive Plan for executives vary at each 2008 EPS level established as an objective performance goal, as follows:
2008 EPS Targets and Corresponding Maximum Incentive Compensation Plan Payments1 2 3
Participant | $2.00 | $2.30 | $2.40 | $2.45 | $2.50 | $2.55 | $2.60 | $2.65 | |||||||||||||||||
Jack B. Dunn, IV | $ | 500,000 | $ | 1,200,000 | $ | 1,325,000 | $ | 1,475,000 | $ | 1,575,000 | $ | 1,675,000 | $ | 1,750,000 | $ | 1,850,000 | |||||||||
Dennis J. Shaughnessy | $ | 500,000 | $ | 1,200,000 | $ | 1,325,000 | $ | 1,475,000 | $ | 1,575,000 | $ | 1,675,000 | $ | 1,750,000 | $ | 1,850,000 | |||||||||
Dominic DiNapoli | $ | 500,000 | 1 | $ | 600,000 | $ | 700,000 | $ | 800,000 | $ | 900,000 | $ | 1,000,000 | $ | 1,000,000 | $ | 1,000,000 | ||||||||
Jorge A. Celaya | $ | 250,000 | $ | 500,000 | $ | 550,000 | $ | 600,000 | $ | 650,000 | $ | 700,000 | $ | 750,000 | $ | 800,000 | |||||||||
David G. Bannister | $ | 250,000 | $ | 500,000 | $ | 650,000 | $ | 800,000 | $ | 900,000 | $ | 1,000,000 | $ | 1,050,000 | $ | 1,150,000 | |||||||||
Eric B. Miller | $ | 300,000 | $ | 400,000 | $ | 450,000 | $ | 500,000 | $ | 550,000 | $ | 600,000 | $ | 650,000 | $ | 700,000 |
(1) |
The amounts reflected on the table are maximum amounts payable for calendar 2008 pursuant to the Incentive Plan based on achievement of the corresponding EPS performance goals. Although the maximum payments shown on the table are based on the extent to which the EPS performance goals are achieved for 2008, the actual amounts payable under the Incentive Plan to any participant may be less than the maximum based on the extent to which such participant satisfies additional and subjective performance goals established for 2008 by the Compensation Committee in its sole and absolute discretion, including but not limited to individual, business segment or company-wide performance goals. | |
(2) |
The award levels are not cumulative. Mr. DiNapoli will be eligible to receive a payment for 2008 under this Plan of $500,000 based upon an EPS level of $1.00 per share. |
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(3) |
EPS is determined based on FTI as it is constituted on the date of action by the Compensation Committee, but including the anticipated affect of any acquisitions of businesses or business segments completed in 2008. In the event of any sale or other disposition of any business or business segment of the Company in its entirety completed in 2008, (a) the EPS targets in the table shall be reduced by an amount equal to the budgeted operating income for such business or business segment for the portion of 2008 subsequent to the closing of such transaction and (b) the Companys actual EPS shall be adjusted to disregard any gain or loss resulting from such transaction and reflected on the Companys profit and loss statement. In the event of any sale or other disposition of a part of any business or business segment of the Company completed in 2008, (a) actual EPS shall be adjusted to include the minority interest of such business or business segment subsequent to the closing of the transaction and (b) the Companys actual EPS shall be adjusted to disregard any gain or loss resulting from such transaction and reflected on the Companys profit and loss statement. |
As permitted under the Incentive Plan and Code Section 162(m), the Compensation Committee approved subjective individual performance criteria relating to the performance of the participants that could be considered by the Compensation Committee in it sole discretion, to reduce but not increase maximum target awards once an EPS goal has been achieved. The criteria set for Mr. Dunn and Mr. Shaughnessy were general in nature and related to the launching of our 2012 Five Year Strategic Plan, identifying changes to our world-wide organizational structure, branding and risk management initiatives, succession planning, expanding the internal audit function and creating opportunities for directors to interact with our business segment leaders and key revenue generating professionals. The Compensation Committee agreed with individual subjective performance goals set by the NEOs that were approved by Mr. Dunn and Mr. Shaughnessy for the other participants, which the Compensation Committee considered when setting actual bonus amounts awarded in 2009 for the 2008 plan year. The individual goals of the other participants were general, broad and reinforced Mr. Dunns and Mr. Shaughnessys goals. The subjective performance goals of Mr. DiNapoli included improving practice group profitability, cash collections and employee utilization, reducing employee turnover, marketing and developing client relations, developing and expanding our industry domain expertise and generating business opportunities for the company. The subjective performance goals of Mr. Celaya included continuing to build the internal finance function through key hires in the U.S. and United Kingdom, reviewing information systems, improving accounting processes, documenting accounting policies and procedures, developing operating and reporting statistics and metrics, improving cash collections, making progress on a world-wide treasury function, and expanding relationships with the business segments. The Compensation Committee did not assign weights to each subjective criteria but each participant was informed that the failure to meet such participants individual performance goals could result in a reduction of such participants maximum target bonus. The Compensation Committee also established quarterly financial benchmarks for 2008 based on information provided by management. These quarterly financial goals did not constitute guidance or projections but were established as benchmarks against which to measure progress and were intended as subjective criteria that could be considered by the Compensation Committee to reduce but not increase a participants maximum target award. The Compensation Committee set 2008 first, second, third and fourth quarter and total 2008 year end benchmarks of (a) EPS of $0.50, $0.60, $0.64, $0.71 and $2.45, respectively, (b) Revenue of $274.1 million, $327.1 million, $333.6 million, $339.6 million and $1,274.4 million, respectively, and (c) consolidated cash flow from operating activities of (negative $49.0 million), $22.7 million, $29.9 million, $118.6 million and $122.2, respectively.
The Company reported fully diluted EPS of $2.34 for the year ended December 31, 2008 in its Annual Report on Form 10-K filed with the SEC on March 2, 2009. On February 24, 2009, the Compensation Committee certified that the EPS performance goal of $2.30 was met, subject to confirmation by the final 2008 audit, and approved cash bonuses payments to the NEOs for 2008 under the Incentive Plan. The Compensation Committee found that the quarterly financial goals were exceeded by actual results for the first and second quarters of 2008 but fell short for the third and fourth quarters as the general economy and credit crisis worsened, although operating cash flow for the year ended December 31, 2008 exceeded the total goal.
The Compensation Committee found that Messrs. Dunn, Shaughnessy, Celaya and DiNapoli met the general subjective goals set for each of them in substantially all respects. The Compensation Committee considered the quarterly goals in light of the economic recession and the positive 2008 financial results relative to companies in general and its competitors. Although the company faired well in light of the economy, the Compensation Committee used its discretion and reduced the 2008 maximum target bonus at EPS $2.30 payable to Messrs. Dunn, Shaughnessy and Celaya by approximately 10% primarily due to the global economic downturn that negatively impacted our
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quarterly revenues and EPS for the third and fourth quarters of 2008 and EPS for the full year. The 2008 bonus payment awarded to Mr. DiNapoli equaled the target set for him under the Incentive Plan because of his success in generating new client engagements that contributed to our positive financial results in the worsening economic environment.
The 2008 annual cash bonuses paid to the NEOs pursuant to the Incentive Plan are as follows:
Performance | |||||||
Goal EPS | Individual Cash Incentive | ||||||
($) | Compensation Payments | ||||||
Participant | (a) | (b) | |||||
Jack B. Dunn, IV | $2.30 | $ | 1,100,000 | ||||
Dennis J. Shaughnessy | $2.30 | $ | 1,100,000 | ||||
Dominic DiNapoli | $2.30 | $ | 600,000 | (1) | |||
Jorge A. Celaya | $2.30 | $ | 450,000 |
(1) |
In addition, on March 18, 2009 the Compensation Committee awarded outside of the Incentive Plan, an additional discretionary cash bonus of $200,000 to Mr. DiNapoli in consideration of his activities in 2008 on behalf of the Corporate Finance/Restructuring segment that were in addition to his duties as COO. The amount awarded to Mr. DiNapoli was not based on any formula. |
On March 18, 2009, the Compensation Committee approved the participants, range of performance goals and individual maximum cash target bonus levels for 2009 under the Incentive Plan within the deadline for establishing such terms under Code Section 162(m). The Compensation Committee designated Mr. Dunn, our CEO, Mr. Shaughnessy, our Chairman, Mr. Celaya, our CFO, Mr. DiNapoli, our COO, Mr. Kelly, our CIO and our Executive Vice President Corporate Development and Chief Administrative Officer, Executive Vice President and Chief Human Resources Officer, Executive Vice President and Chief Risk and Compliance Officer and Executive Vice President and General Counsel as the only participants for the year ending December 31, 2009. The 2009 participants in the Incentive Plan will not necessarily correlate with those executive officers who are NEOs for 2009. The performance goals for 2009 are based on a range of company-wide earnings per share, subject to adjustment in certain circumstances, for the year ending December 31, 2009. The 2009 performance goals require the Company to meet or improve its 2009 year end earnings per share in comparison to the actual earnings per share reported by the Company for the year ended December 31, 2008. The Compensation Committee believes that it is probable that a 2009 performance goal at the low end of the range will be achieved. The 2009 performance goals at the high end of the range are appropriately aggressive and would require significant improvement of FTIs financial results for 2009 over 2008. If the Compensation Committee determines that an objective performance goal has been achieved, each of the participants for 2009 would be entitled to receive the corresponding target incentive compensation amount, subject to reduction in the Compensation Committees discretion based on certain subjective individual and company performance criteria.
2008 Bonus Payment to CIO
Mr. Kelly was not a participant in the Incentive Plan for the year ended December 31, 2008 because he was not an executive officer of FTI on March 26, 2009, the date that the Compensation Committee designated the 2008 participants under that plan. Mr. Kelly received a cash bonus of $600,000 for 2008. This amount was recommended by management, based on his performance as president and chief executive officer of the U.S. subsidiary of our Strategic Communications segment prior to his election as an executive officer in June 2008 and his performance as CIO during the balance of the year. The Compensation Committee reviewed the performance self-assessment prepared by Mr. Kelly and delivered to management and considered the branding and marketing initiatives commenced during the later half of the year. The Compensation Committee determined that Mr. Kelly substantially met his goals for 2008 and approved the 2008 bonus payment to him on February 3, 2009. The 2008 bonus payment was intended to reward Mr. Kelly for his performance as president of the U.S. branch of our Strategic Communications segment during the first half of 2008 and his performance as CIO during the second half of the year and, therefore, the Committee did consider the non-deductibility of such compensation as an impediment to paying that bonus.
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2008 Equity Compensation
Equity incentives are used as a mechanism to link compensation with increases in stockholder value. The Compensation Committee believes that the use of equity incentives aligns the interests of NEOs with long-term stockholder value better than cash alone. The Compensation Committee on the recommendation of Mr. Dunn also uses equity awards upon hiring of an officer or employee to immediately link the interests of that person with our interests and those of our stockholders. The level of equity awards are not tied to any peer group analysis and are determined on a case by case basis based on managements recommendation and the perceived value of the services performed by the individual to FTI.
Standing Equity Awards to our CEO
From 1996 to the first quarter of 2008, Mr. Dunn received a quarterly grant of a market-based stock option exercisable for 22,500 shares of common stock (the Standing Option Award). The grant was automatic and made and priced the day following the publication of our quarterly and annual earnings press release. On July 31, 2008, the Compensation Committee authorized a standing automatic restricted stock award to Mr. Dunn with a value equivalent to $250,000 on the day following FTIs quarterly and annual public earnings release each year (the Standing Stock Award) in lieu of the Standing Option Award, beginning with the second quarter ended June 30, 2008 and thereafter without the necessity of further action of the Committee. The number of shares of restricted stock awarded to Mr. Dunn will be determined by dividing (i) $250,000, by (ii) the closing price per share of FTI common stock as reported on the NYSE for the day following the date of each relevant quarterly and annual FTI earnings release (the Stock Grant Date). The Standing Stock Awards will be awarded out of the shares available under the 2006 Plan, or any other stockholder approved equity plan in effect from time to time. The Standing Stock Awards replace and supersede the Standing Option Awards first authorized by the Compensation Committee in December 1996, and affirmed in March 2005. The Compensation Committee believes that the Standing Stock Awards directly align with and keep our CEO focused on long-term increases in stockholder value. The Compensation Committee authorized the Standing Stock Awards in substitution for the Standing Option Awards based on its determination that (1) the accounting for the Standing Option Awards in future years was too variable because the Company is required to value those options under Regulation 123(R) using the a model other than Black-Scholes due to the market conditions associated with such awards and (2) a fixed value award of $250,000 per quarter would eliminate that variability. See LTIP Awards for a discussion of the performance-based restricted stock awarded to Mr. Dunn.
Other 2008 Equity Awards to NEOs
Upon the recommendation of management, on February 19, 2008, the Compensation Committee awarded 6,000 shares of restricted stock under the 2006 Plan to Mr. DiNapoli with a grant date of February 29, 2008 and a market value of $381,000 (based on a closing price of $63.50 per share of FTI common stock as reported on the NYSE for February 29, 2008). This restricted stock award was intended to reward Mr. DiNapolis performance for the year ended December 31, 2007.
In connection with Mr. Kelly being elected to the position of Executive Vice President and Chief Integration Officer on June 10, 2008, the company negotiated an amendment to the employment agreement entered into effective October 4, 2006 with Mr. Kelly (the CIO Employment Agreement), which amended certain compensation terms and provided for additional compensation, including compensation in the form of restricted stock and stock options, to compensate him for his promotion to an executive officer position and his additional duties and responsibilities. On July 31, 2008, our Compensation Committee granted to Mr. Kelly with a grant date of August 11, 2008 (i) a stock option under the 2006 Plan, exercisable for 75,000 shares of common stock at an exercise price of $74.05 per share (the closing price per share of FTI common stock reported on the NYSE for August 11, 2008) and (ii) 5,000 shares of restricted stock under the 2006 Plan with a market value of $370,250 (based on a closing price of $74.05 per share of FTI common stock for August 11, 2008). See LTIP Awards for a discussion of the performance-based restricted stock awarded to Mr. Kelly. Except as described under 2008 Equity Compensation, the Compensation Committee did not approve any other equity awards to NEOs in 2008. See also Executive Officers and Compensation Equity Compensation Plans Grants of Plan Based Awards for Fiscal Year Ended December 31, 2008 for additional information, including grant date fair values, of all equity awards made to our NEOs in 2008.
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LTIP Awards
As partial consideration for Mr. Dunn agreeing to extend his employment term, on July 31, 2008, the Compensation Committee authorized the award of 67,522 performance-based shares of restricted stock under our 2006 Plan with a value equivalent to $5.0 million on the grant date of August 11, 2008, based on $74.05 per share (the closing price per share of FTI common stock reported on the NYSE for that day). The revenue goal established for the year ended December 31, 2008 has been achieved and 50% of the award scheduled for vesting in 2009 will vest on August 11, 2009 (the first anniversary of the date of grant).
As partial consideration for Mr. Kellys promotion to an executive officer position and his additional duties and responsibilities, on July 31, 2008, the Compensation Committee authorized the award of 10,000 performance-based shares of restricted stock under our 2006 Plan on the grant date of August 11, 2008, with a value equivalent to $740,050 (based on the closing price of $74.05 per share of FTI common stock as reported on the NYSE for that day).
As partial consideration for Mr. Shaughnessys agreeing to extend his employment term, on December 18, 2008, the Compensation Committee authorized the award of 33,693 performance-based shares of restricted stock under our 2006 Plan with a value equivalent to $1.5 million on the grant date of January 2, 2009 (based on the closing price per share of FTI common stock of $44.52 reported on the NYSE for that day). The first vesting date associated with this award will be January 2, 2010.
The purpose of these awards was to incentivize long-term performance by setting aggressive annual revenue and earnings per share goals during the remaining term of each of Mr. Dunns, Mr. Shaughnessys and Mr. Kellys employment under his current employment agreement. See Grants of Plan Based Awards for Fiscal Year Ended December 31, 2008 for descriptions of the terms of these performance-based equity awards.
Employee Stock Purchase Plan
During 2008, the NEOs were entitled to participant in our employee stock purchase plan for U.S. employees (our ESPP) on the same basis and terms as our employees in general. All employees working more than 20 hours a week were eligible to participate in our ESPP. No participant was permitted to acquire more than $25,000 worth of shares of our common stock during a calendar year. Mr. Celaya and Mr. Kelly were the only NEOs who participated in the ESPP for 2008. The Board terminated our ESPP effective January 1, 2009.
Sign-On Payments
No NEO received a cash sign-on payment or retention payment in 2008.
Benefits and Perquisites
NEOs receive a variety of benefits, including the following benefits that are available to all full-time employees:
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Additional benefits and perquisites that are provided to one or more NEOs include:
During 2008, we were parties to a Charter and Management Services Agreement with Sentient LLC (f/k/a Summit Jet, LLC) (Sentient), a FAA Part 135 air carrier, whereby Sentient provided the crew and maintained, managed and operated our corporate leased aircraft to carry our NEOs, non-employee directors, other personnel and guests of the Company on business travel. When not in use by the Company for business travel, Sentient chartered the aircraft. In February 2006, upon the recommendation of the Compensation Committee, the Board approved an internal Corporate Aircraft Policy to govern the use and administration of the aircraft, including the personal use of the aircraft by authorized NEOs and their family members and other invitees. During 2008, authorized NEOs directly chartered the aircraft from Sentient for personal use. The hourly charter fee per in flight travel hour for personal charters by authorized NEOs for 2008 was $1,800, which is less than the amount third parities would pay to charter the aircraft. During 2008, Sentient charged an hourly fuel surcharge payable by lessees, including NEOs. During 2008, the cost per hour (with the fuel surcharge) for an executive to personally charter the aircraft has equaled or exceeded the aggregate marginal operating cost of the aircraft. In the event that a family member or other invitee travels on the aircraft when a NEO is using it for a business purpose, if the person is a family member, the related officer or non-employee director is imputed taxable income relating to that persons travel. If the invitee is a third party, we issue a Form 1099 to such invitee for the taxable income imputed to such third party. The taxable income is imputed at a rate equivalent to the Standard Industry Fare Level formula calculation (SIFL), or such other calculation as may be required under applicable rules and regulations of the Internal Revenue Service, for the NEO and each family member or other invitee over the age of two. On April 1, 2009, FTI engaged Northeastern Aviation (Northeastern), an FAA Part 135 air carrier, to provide the crew and maintain, manage and operate the corporate aircraft. NEOs and other officers and directors, with the consent of the CEO or Chairman, will continue to be allowed directly to charter the aircraft from Northeastern at the same hourly rate of $1,800 as applied in 2008, as well as on the other terms, including terms applicable to invitees, as described above.
Retirement Benefits
We do not maintain defined benefit pension plans. Retirement benefits to U.S. employees are currently provided through our 401(k) Plan. NEOs are eligible to receive matching benefits under our 401(k) Plan up to the maximum allowed under the Code.
We provide a medical program that provides health, dental, vision and prescription benefits to our NEOs and their spouses and dependents after termination of employment at a level substantially the same as that provided prior to termination. See Executive Officers and Compensation Employment Agreements and Potential Termination and Change in Control Payments.
For a description of the perquisites received by the NEOs in 2008, see Executive Officers and Compensation Summary Compensation Table.
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Total Compensation Comparisons
The following table compares each component of a NEOs compensation described in Executive Officers and Compensation Summary Compensation Table as a percentage of his total compensation for the year ended December 31, 2008:
Non-Equity | ||||||||||||||||||||
Incentive Plan | Option | All Other | ||||||||||||||||||
Base Salary | Bonus | Compensation | Stock Awards | Awards | Compensation | |||||||||||||||
(% of Total) | (% of Total) | (% of Total) | (% of Total) | (% of Total) | (% or Total) | |||||||||||||||
Name and Principal Position | (a) | (b)(1) | (c) | (d)(2) | (e)(2) | (f) | ||||||||||||||
Jack B. Dunn, IV | 23.17 | | 17.76 | 16.92 | 41.07 | 1.08 | ||||||||||||||
Jorge A. Celaya | 38.60 | | 31.58 | 9.20 | 18.69 | 1.93 | ||||||||||||||
Dennis J. Shaughnessy | 27.14 | | 29.85 | 18.96 | 22.07 | 1.98 | ||||||||||||||
Dominic DiNapoli | 60.22 | 6.02 | 18.07 | 14.17 | | 1.52 | ||||||||||||||
Declan M. Kelly | 38.18 | 32.62 | | 10.19 | 17.29 | 1.72 |
(1) |
The percentage in column (b) for Messrs. DiNapoli and Kelly includes the discretionary cash bonus paid to each of them for 2008 outside of the Incentive Plan. See Cash Incentive Compensation. | |
(2) |
The percentages in columns (d) and (e) were derived based on the dollar amounts recognized for financial statement reporting purposes for the year ended December 31, 2008, in accordance with FAS Statement 123(R), which may include amounts from awards granted in years prior to 2008. See Executive Officers and Compensation Summary Compensation Table. These amounts are different than the grant date fair values that were considered by the Compensation Committee when making equity awards in 2008. See Executive Officers and Compensation Equity Compensation Plans Grants of Plan Based Awards for Fiscal Year Ended December 31, 2008. |
Timing of Equity Grants
Equity awards to our NEOs, other officers and employees have been awarded under our 1997 Plan, 2004 Plan, 2006 Plan and Deferred Compensation Plan. Our plans are administered by the Compensation Committee. As administrator, the Compensation Committee has the authority, in its sole and absolute discretion, to grant awards under the plans, establish the terms of such awards, including vesting terms, prescribe grant agreements evidencing such awards, and establish programs for granting awards. The Compensation Committee has not delegated its authority to make awards or prescribe the terms (including vesting terms) to our management. Mr. Dunn, Mr. Shaughnessy and Mr. DiNapoli recommends to the Compensation Committee the identities of the officers and employees to receive awards, the type of award, the number of shares subject to an award and other terms of an award, including vesting terms and the life of such award. In general, our stock option awards have a ten year exercise term.
The 2004 Plan and 2006 Plan by their terms prohibit below-market equity grants. The plans also limit aggregate annual individual equity awards to 750,000 shares of our common stock. We do not adjust that limit for terminated, surrendered and cancelled awards.
Stock option and stock-based awards, including restricted stock awards, are only effective as of the later of the date (i) the Compensation Committee takes action to approve the grant and (ii) all conditions to the award have been met in accordance with FAS Statement 123(R). In some cases, the Compensation Committee will grant awards that are contingent, which contingencies may include commencement of employment or the execution of new written employment documents with us, or with grant dates as of a future date. All option awards are made at an exercise price equal to or exceeding the fair market value of our common stock on the date of grant.
The Compensation Committee does not generally time equity awards to NEOs (or other employees) to correspond to the release of material public information, including earnings announcements. However, by their terms, Mr. Dunns Standing Stock Awards, which are made the day after each quarterly and annual earnings release date, are timed to allow dissemination of our quarterly and year-end earnings announcements prior to the award dates. In addition, the Compensation Committee established the grant date of awards to Mr. Dunn and Mr. Kelly approved on July 31, 2008 as August 11, 2008 to coincide with the third business day following the publication of our second quarter earnings release, in light of the eminent release of material information to the public.
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The Compensation Committee does not follow a set schedule for making equity grants under the plans. Throughout the year, as Mr. Dunn, Mr. Shaughnessy and Mr. DiNapoli believe grants are merited, they will make recommendations for equity awards to the Compensation Committee for approval. The Compensation Committee may also make equity awards on its own initiative. The timing of awards is influenced by new hires and promotions throughout the year and timing of annual bonus payments that may be in the form of equity. Typically, equity awards are approved at regularly scheduled or special meetings of the Compensation Committee but the Compensation Committee may also approve equity awards by unanimous written consent of the members.
The equity awards to our NEOs are also subject to contractual transition, termination and change in control provisions. See Executive Officers and Compensation Employment Agreements and Potential Termination and Change in Control Payments.
Stock Ownership Guidelines and Return of Incentive Compensation by NEOs
Our NEOs are stockholders of the Company. See Security Ownership of Certain Beneficial Owners and Management. We do not currently have stock ownership guidelines for our NEOs. We have stock ownership guidelines for our non-employee directors. See Information About the Board of Directors and Committees Compensation of Non-Employee Directors and Stock Ownership Guidelines.
The Board has not adopted a policy that gives the Board the discretion to require an officer to reimburse FTI for any bonus or incentive compensation that was paid, or any equity awards that were granted, based on financial results that may become the subject of a significant restatement of our financial statements or are subsequently restated as a result of such officers misconduct.
Tax and Accounting Considerations
We account for stock-based compensation in accordance with SFAS No. 123(R). SFAS No. 123(R) requires us to recognize compensation expense relating to share-based payments (such as stock options and restricted stock) in our financial statements. The adoption of SFAS No. 123(R) and the recognition of this expense have not caused us to limit or significantly alter equity-based compensation elements. This is because we believe equity-based compensation is needed to provide a competitive executive compensation program and fulfills important objectives.
COMPENSATION COMMITTEE REPORT
The Compensation Committee of our Board has reviewed and discussed the Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K with management, and based on such review and discussion, the Compensation Committee recommended to the Board that the Compensation Discussion and Analysis be included in this proxy statement.
Compensation Committee
Gary C. Wendt (Chair)
Brenda J.
Bacon(1)
Denis J. Callaghan(1)
James W.
Crownover(1)
Gerard E. Holthaus(2)
Matthew F.
McHugh
____________________
(1) |
Effective February 25, 2009, (a) James Crownover joined the Compensation Committee and rotated off of the Audit Committee, (b) Denis Callaghan rotated off of the Compensation Committee and joined the Audit Committee, and (c) Brenda Bacon was appointed as a new member of the Compensation Committee. | |
(2) |
On April 15, 2009, the Board concluded that it could not affirmatively find that Mr. Holthaus would be independent for at least the duration of an engagement involving Algeco Scotsman. As a result of that decision, Mr. Holthaus went off of the Compensation Committee effective April 15, 2009. |
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SUMMARY COMPENSATION TABLE
We have set forth below the total compensation paid or earned by our President and Chief Executive Officer, each person who served as our Chief Financial Officer and the three other most highly compensated persons who were serving as our executive officers on December 31, 2008.
Change in | ||||||||||||||||||||||||||||||
Pension | ||||||||||||||||||||||||||||||
Value and | ||||||||||||||||||||||||||||||
Nonqualified | ||||||||||||||||||||||||||||||
Non-Equity | Deferred | All | ||||||||||||||||||||||||||||
Stock | Option | Incentive Plan | Compensation | Other | ||||||||||||||||||||||||||
Salary | Bonus | Awards | Awards | Compensation | Earnings | Compensation | Total | |||||||||||||||||||||||
Name and Principal | Year | ($)(1) | ($)(1) | ($)(2) | ($)(3) | ($)(1) | ($) | ($)(4) | ($) | |||||||||||||||||||||
Position | (a) | (b) | (c) | (d) | (e) | (f) | (g) | (h) | (i) | |||||||||||||||||||||
Jack B. Dunn, IV, | 2008 | 1,434,616 | | 1,047,877 | 2,542,933 | 1,100,000 | | 66,621 | 6,192,047 | |||||||||||||||||||||
President and Chief | 2007 | 1,375,000 | | 508,689 | 2,293,872 | 1,750,000 | | 44,589 | 5,972,150 | |||||||||||||||||||||
Executive Officer | 2006 | 1,250,000 | 750,000 | 216,534 | 1,030,662 | | | 43,739 | 3,290,935 | |||||||||||||||||||||
Jorge A. Celaya(5) | 2008 | 550,000 | | 131,025 | 266,361 | 450,000 | | 27,427 | 1,424,813 | |||||||||||||||||||||
Executive Vice | 2007 | 253,846 | 375,000 | 62,567 | 127,192 | | | 15,944 | 834,549 | |||||||||||||||||||||
President and Chief | ||||||||||||||||||||||||||||||
Financial Officer | ||||||||||||||||||||||||||||||
Dennis J. Shaughnessy, | 2008 | 1,000,000 | | 698,750 | 813,466 | 1,100,000 | | 73,105 | 3,685,321 | |||||||||||||||||||||
Executive Chairman | 2007 | 1,000,000 | | 697,325 | 812,317 | 1,750,000 | | 49,862 | 4,309,504 | |||||||||||||||||||||
of the Board | 2006 | 1,000,000 | 750,000 | 382,692 | 570,326 | | | 44,371 | 2,747,389 | |||||||||||||||||||||
Dominic DiNapoli, | 2008 | 2,000,000 | 200,000 | (6) | 470,628 | | 600,000 | | 50,285 | 3,320,913 | ||||||||||||||||||||
Executive Vice | 2007 | 2,000,000 | | 364,447 | (7) | 276,792 | 800,000 | | 22,666 | 3,463,905 | ||||||||||||||||||||
President and Chief | 2006 | 2,000,000 | | 312,973 | 412,614 | 500,000 | | 38,278 | 3,263,865 | |||||||||||||||||||||
Operating Officer | ||||||||||||||||||||||||||||||
Declan M. Kelly, | 2008 | 702,354 | 600,000 | (8) | 187,492 | 318,022 | | | 31,516 | 1,839,384 | ||||||||||||||||||||
Executive Vice | ||||||||||||||||||||||||||||||
President and | ||||||||||||||||||||||||||||||
Chief Integration | ||||||||||||||||||||||||||||||
Officer |
(1) |
All cash compensation is presented in columns (c), (d) and (f) above. Column (c) includes any cash bonus payments that were paid in, 2007, 2009 and 2008 on account of a NEOs performance in 2006, 2007 and 2008, respectively, which were not paid pursuant to our Incentive Plan. Cash bonus payments pursuant to our Incentive Plan that were paid in 2007, 2008 and 2009 on account of the 2006, 2007 and 2008 plan year, respectively, which are intended to qualify as deductible under Code Section 162(m), are included in column (f). The numbers in column (f) reflect the actual cash bonus awards paid to a NEO in 2007, 2008 and 2009 upon attainment of a performance goal for 2006, 2007 and 2008, respectively, established by the Compensation Committee pursuant to the Incentive Plan. | |
(2) |
The amounts in column (d) reflect the dollar amounts recognized for financial statement reporting purposes for the fiscal years ended December 31, 2006, 2007 and 2008, in accordance with FAS Statement 123(R), of stock awards pursuant to our stockholder approved equity plans, including our 1997 Plan, 2004 Plan and 2006 Plan, and may include amounts from awards granted in years prior to 2006, 2007 and 2008, respectively. Assumptions used in the calculations of these amounts are included in Managements Discussion and Analysis of Financial Condition and Results of Operations Critical Accounting Policies Share-Based Compensation and Note 1 Description of Business and Significant Accounting Policies Share-Based Compensation Expense and Note 2 Share-Based Compensation to the Consolidated Financial Statements of the Company in our Annual Report on Form 10-K for the year ended December 31, 2006 filed with the SEC on March 13, 2007, our Annual Report on Form 10-K for the year ended December 31, 2007 filed with the SEC on February 29, 2008 and our Annual Report on Form 10-K for the year ended December 31, 2008 filed with the SEC on March 2, 2009. |
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(3) |
The amounts in column (e) reflect the dollar amounts recognized for financial statement reporting purposes for the fiscal years ended December 31, 2006, 2007 and 2008, in accordance with FAS Statement 123(R), of option awards pursuant to our stockholder approved equity compensation plans, including our 1997 Plan, 2004 Plan and 2006 Plan and may include amounts from awards granted in years prior to 2006, 2007 and 2008. Assumptions used in the calculation of these amounts are included in Managements Discussion and Analysis of Financial Condition and Results of Operations Critical Accounting Policies Share-Based Compensation and Note 1 Description of Business and Significant Accounting Policies Share-Based Compensation Expense and Note 2 Share-Based Compensation to the Consolidated Financial Statements of the Company in our Annual Reports on Form 10-K for the year ended December 31, 2006 filed with the SEC on March 13, 2007, for the year ended December 31, 2007 filed with the SEC on February 29, 2008 and for the year ended December 31, 2008 filed with the SEC on March 2, 2009. Options allow the grantee to purchase shares of our common stock at the closing price per share of FTI common stock as reported on the NYSE for the grant date established by our Compensation Committee. | |
(4) |
The following table presents an itemization of the amounts included in column (h): |
Company | ||||||||||||||||||||||||||
Company | Paid | Premiums | Personal | Club Dues, | ||||||||||||||||||||||
401(k) | Premiums | on Other | Company | Use of | Memberships | |||||||||||||||||||||
Matching | on Life | Insurance | Car/Auto | Corporate | and Season | |||||||||||||||||||||
Contribution | Insurance | Policies | Allowance | Aircraft | Tickets | Total | ||||||||||||||||||||
($) | ($)(i) | ($)(ii) | ($) | ($)(iii) | ($)(iv) | ($) | ||||||||||||||||||||
Name | Year | (a) | (b) | (c) | (d) | (e) | (f) | (g) | ||||||||||||||||||
Jack B. Dunn, IV | 2008 | 6,900 | 1,290 | | 29,783 | 5,868 | 22,780 | 66,621 | ||||||||||||||||||
2007 | 6,750 | 1,000 | | 24,589 | | 12,250 | 44,589 | |||||||||||||||||||
2006 | 6,600 | 827 | | 23,317 | 995 | 12,000 | 43,739 | |||||||||||||||||||
Jorge A. Celaya(v) | 2008 | 6,900 | 300 | | 20,227 | | | 27,427 | ||||||||||||||||||
2007 | 6,750 | | | 9,194 | | | 15,944 | |||||||||||||||||||
Dennis J. Shaughnessy | 2008 | 6,900 | 1,980 | 11,148 | 37,824 | 10,107 | 5,146 | 73,105 | ||||||||||||||||||
2007 | 6,750 | 686 | 11,001 | 21,240 | 9,260 | 925 | 49,862 | |||||||||||||||||||
2006 | 6,600 | 568 | 10,824 | 21,240 | 2,357 | 2,782 | 44,371 | |||||||||||||||||||
Dominic DiNapoli | 2008 | 6,900 | 690 | | 33,483 | | 9,212 | 50,285 | ||||||||||||||||||
2007 | 6,750 | 331 | | 15,300 | | 285 | 22,666 | |||||||||||||||||||
2006 | 6,600 | 279 | | 16,899 | | 14,500 | 38,278 | |||||||||||||||||||
Declan M. Kelly | 2008 | 6,900 | 300 | | 24,316 | | | 31,516 |
(i) |
The amount in column (b) reflects premiums paid by us for a life insurance benefit. | |||
(ii) |
The amount in column (c) reflects premium payments for additional liability coverage and long-term disability coverage that are not generally provided to other employees and executive officers. | |||
(iii) |
During 2008, we were parties to a Charter and Management Services Agreement with Sentient, a FAA Part 135 air carrier, whereby Sentient provided the crew and maintained, managed and operated our corporate leased aircraft to carry our NEOs, non-employee directors, other personnel and guests of the Company on business travel. When the aircraft is not in use for business purposes, Sentient chartered the aircraft. The NEOs were permitted to directly charter the corporate aircraft from Sentient for personal use. In 2006, 2007 and 2008, the hourly leasing fee per in flight travel hour for personal charters by corporate executives and non-employee directors was $1,800, which is lower than the hourly charter fee charged to third parties. In 2008, Sentient charged an hourly fuel surcharge payable by the lessee (including an NEO). During 2006, 2007 and 2008, the cost per hour for a NEO to personally charter the aircraft has equaled or exceeded the aggregate marginal operating cost of the aircraft. In the event that a family member or other invitee traveled on the aircraft when a NEO or non-employee director was using it for a business purpose, if the person was a family member, the related NEO or non-employee director was imputed taxable income relating to that persons travel. If the invitee was a third party, we issued a Form 1099 to such invitee for the taxable income imputed to such third party. The taxable income was imputed at a rate equivalent to the SIFL formula calculation, or such other calculation as required under applicable |
62
rules and regulations of the Internal Revenue Service, for the executive or non-employee director and each family member or other invitee over the age of two. The amounts in column (e) include the SIFL imputed to the applicable NEO for use by invitees. | ||||
(iv) |
The amount in column (f) reflects the annual fees for memberships to golf clubs and other clubs that are primarily used for client entertainment purposes by certain of the NEOs as well as other employees. The golf club memberships require us to designate individuals as members. Messrs. Dunn Shaughnessy and DiNapoli are each designated as a member of one golf club. Mr. Shaughnessy is also designated as a member of one other club. Due to the billing cycle of the relevant golf club, 2007 dues for Mr. Shaughnessy and Mr. DiNapoli in the amounts of $2,782 and $6,955, respectively, were paid by the Company in 2006 instead of 2007. The amounts in column (f) do not reflect deposits paid by us on account of golf club memberships in the aggregate net amount of $1,095,000 as of December 31, 2008. As a limited partner and director, Mr. Dunn receives two season tickets to the Orioles. In addition, FTI purchases season tickets to the Baltimore Orioles and Ravens for client entertainment purposes. Mr. Dunn allows FTI to use his Orioles tickets for client entertainment purposes and at other times Mr. Dunn may use FTIs tickets for personal use. FTI believes that there is no net economic benefit to either party from this arrangement. | |||
(v) |
Jorge Celaya joined FTI on July 9, 2007. This table includes payments to Mr. Celaya for the portion of 2007 that he was employed by FTI and the payments to him have not been annualized to reflect a full 12 months. | |||
(5) |
Jorge Celaya joined FTI on July 9, 2007. This table includes payments to Mr. Celaya for the portion of 2007 that he was employed by FTI and the payments to him have not been annualized to reflect a full 12 months. | |||
(6) |
On March 18, 2009, the Compensation Committee awarded an additional $200,000 cash bonus to Mr. DiNapoli on account of 2008 outside of the Incentive Plan. | |||
(7) |
On February 19, 2008, the Compensation Committee awarded, 6,000 shares of restricted stock to each of Mr. DiNapoli with a grant date of February 29, 2008 and a market value of $381,000 as of that date (based on a closing price of $63.50 per share as reported on the NYSE for February 29, 2008). The restricted shares vest as follows: 33.33% on March 1, 2009, 33.33% on March 1, 2010 and 33.34% on March 1, 2011. This restricted stock award to Mr. DiNapoli were intended as 2007 equity bonus compensation to reward his performance for the year ended December 31, 2007. | |||
(8) |
Mr. Kelly did not participate in the Incentive Plan for the year ended December 31, 2008 because he was elected an executive officer of FTI on June 10, 2008. |
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EQUITY COMPENSATION PLANS
Grants of Plan Based Awards for Fiscal Year Ended December 31, 2008
The following table provides information on performance-based cash incentive awards pursuant to our Incentive Plan and performance-based and non-performance-based stock option and restricted stock awards granted in 2008 to each NEO. There can be no assurance that the grant date fair value of the stock and stock option awards will ever be realized. The dollar amount recognized for financial statement reporting purposes for the year ended December 31, 2008 in accordance with FAS Statement 123(R) is shown in Executive Officers and Compensation Summary Compensation Table.
All Other | |||||||||||||||||||||||||||||||||||||||
Stock | All Other | Grant | |||||||||||||||||||||||||||||||||||||
Awards: | Option | Date Fair | |||||||||||||||||||||||||||||||||||||
Number | Awards: | Exercise | Value | ||||||||||||||||||||||||||||||||||||
Estimated Future Payouts | Estimated Future Payouts | of Shares | Number of | or Base | of Stock | ||||||||||||||||||||||||||||||||||
Under Non-Equity Incentive | Under Equity Incentive Plan | of Stock | Securities | Price of | and | ||||||||||||||||||||||||||||||||||
Compensation | Plan Awards(1) | Awards(2) | or Stock | Underlying | Option | Option | |||||||||||||||||||||||||||||||||
Grant | Committee | Threshold | Target | Maximum | Threshold | Target | Maximum | Units(2) | Options(2) | Awards | Awards(3) | ||||||||||||||||||||||||||||
Date | Approval Date | ($) | ($) | ($) | (#) | (#) | (#) | (#) | (#) | ($/Sh) | ($) | ||||||||||||||||||||||||||||
Name | (a) | (b) | (c) | (d) | (e) | (f) | (g) | (h) | (i) | (j) | (k) | (l) | |||||||||||||||||||||||||||
Jack B. Dunn, IV | 03/26/08 | 500,000 | 1,475,000 | 1,850,000 | | | | | | | | ||||||||||||||||||||||||||||
(4) | 02/29/08 | | | | | | | | 22,500 | 63.50 | 694,575 | ||||||||||||||||||||||||||||
(4) | 05/08/08 | | | | | | | | 22,500 | 61.74 | 678,600 | ||||||||||||||||||||||||||||
(5) | 08/07/08 | | | | | | | 3,600 | | | 249,984 | ||||||||||||||||||||||||||||
(6) | 08/11/08 | | | | | | | 67,521 | | | 4,999,930 | ||||||||||||||||||||||||||||
(5) | 11/06/08 | | | | | | | 5,799 | | | 249,995 | ||||||||||||||||||||||||||||
Jorge A. Celaya | 03/26/08 | 500,000 | 800,000 | 1,000,000 | | | | | | | | ||||||||||||||||||||||||||||
| | | | | | | | | | | | ||||||||||||||||||||||||||||
Dennis J. Shaughnessy | | 03/26/08 | 500,000 | 1,475,000 | 1,850,000 | | | | | | | | |||||||||||||||||||||||||||
| | | | | | | | | | | | ||||||||||||||||||||||||||||
Dominic DiNapoli | | 03/26/08 | 500,000 | 800,000 | 1,000,000 | | | | | | | | |||||||||||||||||||||||||||
(7) | 02/29/08 | | | | | | | 6,000 | | | 381,000 | ||||||||||||||||||||||||||||
Declan M. Kelly | (8) | 08/11/08 | | | | | | | 10,000 | | | 740,500 | |||||||||||||||||||||||||||
(9) | 08/11/08 | | | | | | | 5,000 | | | 2,242,838 | ||||||||||||||||||||||||||||
(10) | 08/11/08 | | | | | | | | 75,000 | 74.05 | 370,250 |
(1) |
On March 26, 2008, the Compensation Committee set the performance goals under our Incentive Plan for the plan year ended December 31, 2008 as disclosed in the table under the heading Executive Officers and Compensation Compensation Discussion and Analysis Cash Incentive Compensation. For 2008, the Compensation Committee designated a range of target performance goals based on EPS, with a low EPS performance goal and high EPS performance goal. For the purpose of presenting information in this proxy statement, we report the threshold as the lowest performance goal, the target as the middle performance goal and the maximum as the highest performance goal established within the applicable range of performance goals set by the Compensation Committee. |
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On February 24, 2009, the Compensation Committee certified that the EPS performance goal of $2.30 per share under the Incentive Plan was met and approved the following cash bonus payments under the Incentive Plan for 2008:
Performance | Individual Incentive | ||||||
Participant | Criteria EPS ($) | Compensation Payments ($) | |||||
Jack B. Dunn, IV | 2.30 | 1,100,000 | |||||
Dennis J. Shaughnessy | 2.30 | 1,100,000 | |||||
Dominic DiNapoli | 2.30 | 600,000 | |||||
Jorge A. Celaya | 2.30 | 450,000 |
Mr. Kelly was elected an executive officer of the Company on June 10, 2008 and was not designated by the Compensation Committee as a participant in the Incentive Plan for the year ended December 31, 2008. | ||
(2) |
Equity awards to the NEOs in 2008 were awarded pursuant to our 2006 Plan, except that the stock option awards to Mr. Dunn made on February 29, 2008 and May 8, 2008 were awarded pursuant to our 2004 Plan. | |
(3) |
Column (l) represents the aggregate grant date fair value of restricted stock and stock option awards to a NEO during the year ended December 31, 2008. See Note 1 Description of Business and Significant Accounting Policies Share-Based Compensation Expense and Note 2 Share-Based Compensation to the Consolidated Financial Statements of the Company in our Annual Report on Form 10-K for the year ended December 31, 2008 filed with the SEC on March 2, 2009 for a discussion of the assumptions made in determining FAS Statement 123(R) values. The Company used the Black-Scholes method of valuation to value all stock options grants in 2008, except that the Company used the Monte Carlo Pricing model in 2008 to value the quarterly Standing Option Awards to Mr. Dunn. The Monte Carlo Pricing model value of the Standing Option Awards made to Mr. Dunn on February 29, 2008 was $694,575 and on May 8, 2008 was $678,600. The Black-Scholes value of the stock option award made to Mr. Kelly on August 11, 2008 was $2,242,838. Options allow the grantee to purchase shares of our common stock at the closing price per share of FTI common stock as reported on the NYSE for the date of grant, except in the case of Mr. Dunns Standing Option Awards, which will be exercisable at 110% of the closing price per share of FTI common stock as reported on the NYSE for each date of grant. The grant date fair value of restricted stock to the executive was determined by multiplying the number of shares subject to the applicable award by the closing price per share of FTI common stock as reported on the NYSE for the date of grant, which was $69.44 per share for the grant made to Mr. Dunn on August 7, 2008, $43.11 per share for the grant made to Mr. Dunn on November 6, 2008, $74.05 per share for the grant made to Messrs. Dunn and Kelly on August 11, 2008 and $63.50 per share for the grant made to Mr. DiNapoli on February 29, 2008. There can be no assurance that an executive will ever exercise the stock options awarded to him in 2008 (in which case no value will be realized by the executive) nor is there any assurance that the values of such stock options and the shares of restricted stock will equal their FAS Statement 123(R) values. | |
(4) |
Represents Standing Option Awards to Mr. Dunn pursuant to quarterly and year-end grant of stock options as first authorized by the Compensation Committee on December 9, 1996, as affirmed and reauthorized on March 2, 2005, pursuant to our equity-based plans in effect from time to time. Each quarterly grant is for 22,500 shares of our common stock (which number may be adjusted for stock splits, stock dividends and similar events pursuant to the applicable equity-based plan). The award was made automatically as of the day following the publication of each of our quarterly and year end earnings press releases at an exercise price equal to 110% of the closing price per share of FTI common stock as reported on the NYSE (or other principal exchange on which our common stock is then traded) for the date of the award. Each Standing Option Award will become fully exercisable upon an increase of 25% in the market value of a share of our common stock but not earlier than the first anniversary of the date of the award, or eight years from the date of the award if the market value does not reach the target value. The Standing Option Awards were replaced by the Standing Stock Awards to Mr. Dunn beginning with the second quarter ended June 30, 2008. | |
(5) |
Represents the Standing Stock Award authorized by our Compensation Committee on July 31, 2008, with a value equivalent to $250,000 on the date following FTIs quarterly and annual public earnings release each year. The Standing Stock Award is in lieu of the Standing Option Award and went into effect for the second quarter ended June 30, 2008. The number of shares of restricted stock awarded to Mr. Dunn will be determined by dividing (i) $250,000, by (ii) the closing price per share of FTI common stock as reported on the NYSE for the day following the date of each relevant quarterly and annual FTI earnings release (the Stock Grant Date). |
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The restricted shares granted pursuant to each Standing Stock Award will vest as follows: 33.33% of the award shares on the first anniversary of the Stock Grant Date, 33.33% of the award shares on the second anniversary of the Stock Grant Date, and 33.34% of the award shares on the third anniversary of the Stock Grant Date, subject to the terms of the CEO Employment Agreement relating to the continued vesting of equity awards during his transition period (as defined in such employment agreement) and accelerated vesting on death, disability, termination by Mr. Dunn for good reason, termination by the Company without cause and a change in control. | ||
(6) |
Represents a performance-based restricted stock award to Mr. Dunn by the Compensation Committee pursuant to the 2006 Plan with a grant date of August 11, 2008 with a value equivalent to $5.0 million based on the closing price per share of FTI common stock reported on the NYSE for that day (the CEO Performance Stock Award). The CEO Performance Stock Award will vest in five equal annual installments of 20% on the day following the first through fifth anniversary dates of the grant date; provided that (i) applicable performance goals based on the achievement of annual revenue and earnings per share targets for the year ended December 31, 2008 and each of the years ending December 31, 2009, December 31, 2010, December 31, 2011, December 31, 2012 and December 31, 2012, have been achieved and (ii) all other conditions have been satisfied, including the condition that the achievement of the relevant goal(s) be confirmed by the final audit for the relevant year end. The applicable revenue and earnings per share targets will be adjusted for acquisitions and dispositions of businesses or portions of businesses. The vesting terms will also be subject to the applicable provisions of the CEO Employment Agreement relating to the accelerated vesting of equity awards on certain termination events. Mr. Dunn may earn 50% of the number of restricted shares that would have otherwise vested on an applicable vesting date, if one but not both of the revenue and earnings per share targets for the applicable period has been achieved and the balance of the restricted shares that do not vest for the applicable period will be forfeited. The revenue goal established for the year ended December 31, 2008 has been achieved and 50% of the award scheduled for vesting in 2009 will vest on August 11, 2009 (the first anniversary of the date of grant). | |
(7) |
On February 19, 2008, the Compensation Committee awarded 6,000 shares of restricted stock to Mr. DiNapoli with a grant date of February 29, 2008 and a market value of $381,000 (based on a closing price of $63.50 per share of FTI common stock as reported on the NYSE for February 29, 2008). The restricted shares vest as follows: 33.33% on March 1, 2009, 33.33% on March 1, 2010 and 33.34% on March 1, 2011. | |
(8) |
Represents 10,000 shares of performance-based restricted stock awarded to Mr. Kelly by the Compensation Committee pursuant to the 2006 Plan with a grant date of August 11, 2008 (the CIO Performance Stock Award). The CIO Performance Stock Award will vest in five equal annual installments of 20% on the day following the first through fifth anniversary dates of the grant date; provided that (i) the applicable performance goals based on the achievement of annual revenue and earnings per share targets for the year ended December 31, 2008 and the years ending December 31, 2009, December 31, 2010, December 31, 2011, December 31, 2012 and December 31, 2013, have been achieved and (ii) all other conditions have been satisfied, including the condition that the achievement of the relevant goal(s) be confirmed by the final audit for the relevant year end. The applicable revenue and earnings per share targets will be adjusted for acquisitions and dispositions of businesses or portions of businesses. The vesting terms will also be subject to the applicable provisions of the CIO Employment Agreement relating to the accelerated vesting of equity awards on certain termination events. Mr. Kelly may earn 50% of the number of restricted shares that would have otherwise vested on an applicable vesting date, if one but not both of the revenue and earnings per share targets for the applicable period has been achieved and the balance of the restricted shares that do not vest for the applicable period will be forfeited. The revenue goal established for the year ended December 31, 2008 has been achieved and 50% of the award scheduled for vesting in 2009 will vest on August 11, 2009 (the first anniversary of the date of grant). | |
(9) |
On July 31, 2008, the Compensation Committee awarded 5,000 shares of restricted stock to Mr. Kelly with a grant date of August 11, 2008, with a market value of $370,250 (based on the closing price of $74.05 per share of FTI common stock as reported on the NYSE for August 11, 2008). The restricted shares vest in equal installments of 20% on each of the first through fifth anniversary dates of the date of grant. | |
(10) |
On July 31, 2008, the Compensation Committee awarded a stock option exercisable for 75,000 shares of common stock to Mr. Kelly with a grant date of August 11, 2008, at an exercise price of $74.05 per share (based on the closing price per share of FTI common stock as reported on the NYSE for August 11, 2008). The stock option vests in equal installments of 20% on each of the first through fifth anniversary of the date of grant. |
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Outstanding Equity Awards at Fiscal Year-End
The following table shows the number of shares covered by exercisable and unexercisable options and unvested shares of restricted stock held by our NEOs on December 31, 2008:
Option Awards | Stock Awards | ||||||||||||||||||||||||||||||||
Equity | Equity | ||||||||||||||||||||||||||||||||
Incentive | Incentive | ||||||||||||||||||||||||||||||||
Plan | Plan | ||||||||||||||||||||||||||||||||
Awards: | Awards: | ||||||||||||||||||||||||||||||||
Equity | Number | Market | |||||||||||||||||||||||||||||||
Incentive | of | or Payout | |||||||||||||||||||||||||||||||
Plan | Unearned | Value of | |||||||||||||||||||||||||||||||
Awards: | Market | Shares, | Unearned | ||||||||||||||||||||||||||||||
Number of | Number of | Number of | Number | Value | Units or | Shares, | |||||||||||||||||||||||||||
Securities | Securities | Securities | of Shares | Shares or | Other | Units or | |||||||||||||||||||||||||||
Underlying | Underlying | Underlying | or Units of | Units of | Rights | Other | |||||||||||||||||||||||||||
Unexercised | Unexercised | Unexercised | Option | Stock that | Stock that | that | Rights that | ||||||||||||||||||||||||||
Options | Options | Unearned | Exercise | Option | Have Not | Have Not | Have Not | Have Not | |||||||||||||||||||||||||
(#) | (#) | Options | Price | Expiration | Vested | Vested | Vested | Vested | |||||||||||||||||||||||||
Exercisable | Unexercisable | (#) | ($/Sh) | Date | (#) | ($) | (#) | ($) | |||||||||||||||||||||||||
Name | (a) | (b) | (c) | (d) | (e) | (f) | (g) | (h) | (i) | ||||||||||||||||||||||||
Jack B. Dunn, IV | 20,021 | (1) | 894,538 | (2) | |||||||||||||||||||||||||||||
104,021 | (3) | 4,647,658 | (2) | ||||||||||||||||||||||||||||||
22,500 | (4) | | | 31.91 | 02/15/16 | | | | | ||||||||||||||||||||||||
22,500 | (4) | | | 30.83 | 05/02/16 | | | | | ||||||||||||||||||||||||
| | 20,000 | (5) | 26.45 | 10/24/16 | | | | | ||||||||||||||||||||||||
23,750 | (6) | | | 26.45 | 10/24/16 | | | | | ||||||||||||||||||||||||
| 20,000 | (6) | | 26.45 | 10/24/16 | | | | | ||||||||||||||||||||||||
22,500 | (4) | | | 30.77 | 11/01/16 | | | | | ||||||||||||||||||||||||
22,500 | (4) | | | 28.86 | 11/01/15 | | | | | ||||||||||||||||||||||||
22,500 | (4) | | | 29.48 | 03/03/13 | | | | | ||||||||||||||||||||||||
22,500 | (4) | | | 33.25 | 04/25/13 | | | | | ||||||||||||||||||||||||
18,651 | (4) | | | 28.58 | 07/25/12 | | | | | ||||||||||||||||||||||||
22,500 | (4) | | | 30.50 | 11/01/12 | | | | | ||||||||||||||||||||||||
126,029 | (7) | | | 27.60 | 11/05/12 | | | | | ||||||||||||||||||||||||
22,500 | (4) | | | 36.40 | 02/16/17 | | | | | ||||||||||||||||||||||||
22,500 | (4) | | | 41.15 | 05/02/17 | | | | | ||||||||||||||||||||||||
22,500 | (4) | | | 53.52 | 08/06/17 | | | | | ||||||||||||||||||||||||
22,500 | (4) | | | 59.25 | 11/01/17 | | | | | ||||||||||||||||||||||||
| | 22,500 | (8) | 69.85 | 03/01/18 | | | | | ||||||||||||||||||||||||
| | 22,500 | (8) | 67.91 | 05/08/18 | | | | | ||||||||||||||||||||||||
Jorge A. Celaya | 6,667 | (9) | 297,882 | (2) | |||||||||||||||||||||||||||||
15,000 | (10) | | | 39.26 | 07/09/17 | | | | | ||||||||||||||||||||||||
| 60,000 | (10) | | 39.26 | 07/09/17 | | | | | ||||||||||||||||||||||||
Dennis J. Shaughnessy | | | | | | 91,512 | (11) | 4,088,756 | (2) | | | ||||||||||||||||||||||
| | | | | | | 50,000 | (3) | 2,234,000 | (2) | |||||||||||||||||||||||
100,000 | (6) | | | 26.45 | 10/24/16 | | | | | ||||||||||||||||||||||||
| 50,000 | (6) | | 26.45 | 10/24/16 | | | | | ||||||||||||||||||||||||
| | 50,000 | (5) | 26.45 | 10/24/16 | | | | | ||||||||||||||||||||||||
60,000 | (12) | | | 21.33 | 06/05/12 | | | | | ||||||||||||||||||||||||
| | | | ||||||||||||||||||||||||||||||
Dominic DiNapoli | | | | | | 89,334 | (13) | 3,991,443 | (2) | | | ||||||||||||||||||||||
67,500 | (14) | | | 24.28 | 08/30/12 | | | | | ||||||||||||||||||||||||
50,000 | (14) | | | 16.59 | 03/12/14 | | | | | ||||||||||||||||||||||||
100,000 | (15) | | | 26.24 | 11/01/15 | | | | | ||||||||||||||||||||||||
Declan M. Kelly | | | | | | 17,000 | (16) | 759,560 | (14) | ||||||||||||||||||||||||
| | | | | | | 10,000 | (3) | 446,800 | (2) | |||||||||||||||||||||||
12,000 | (17) | | | 25.25 | 10/04/16 | | | | | ||||||||||||||||||||||||
| 36,000 | (17) | | 25.25 | 10/04/06 | | | | | ||||||||||||||||||||||||
| 75,000 | (18) | | 74.05 | 08/11/18 | | | | |
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(1) | Includes: | ||
| |||
(2) | The closing price of FTI common stock reported by the NYSE for December 29, 2008 was $44.68 per share. Determined by multiplying $44.68 by the number of shares of restricted stock that have not yet vested. | ||
(3) | Includes: | ||
|
Consolidated Revenues: | $1.0 billion or more | |
EBITDA: | $250.0 million or more (before stock option expense under FAS Statement 123(R)) | |
Revenues outside of the U.S.: | $150.0 million | |
Leverage Ratio: Net Debt/EBITDA: | Less than 3.0 : 1 | |
All performance goals associated with these awards have been met as of the year ended December 31, 2008. As a result of the performance goals having been met, the awards are scheduled to vest on December 31, 2009; and |
|
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(4) |
Represents vested Standing Option Awards to the executive as first authorized by the Compensation Committee on December 9, 1996, as affirmed and reauthorized on March 2, 2005, pursuant to our equity-based plans in effect from time to time. Each quarterly grant was exercisable for 22,500 shares of FTI common stock (which number may be adjusted for stock splits, stock dividends and similar events pursuant to the applicable equity-based plan). The award was made automatically as of the day following the publication of each of our quarterly and year end earnings press releases at an exercise price equal to 110% of the closing price per share of FTI common stock as reported on the NYSE (or other principal exchange on which our common stock is then traded) for the date of the award. Each option becomes fully exercisable upon an increase of 25% in the market value of a share of our common stock but not earlier than the first anniversary of the award date, or eight years from the award date if the market value does not reach the target value. The Standing Option Award was replaced by the Standing Stock Award to Mr. Dunn effective with the second quarter ended June 30, 2008. The awards in column (a) represent stock options granted pursuant to our 2004 Plan or 2006 Plan for which the applicable market conditions have been achieved as of December 31, 2008, which have been outstanding more than one-year, and have vested as described below: |
Grant Date | Fully Vested Date | Expiration Date | ||
02/16/07 | 02/16/08 | 02/16/17 | ||
05/02/07 | 05/02/08 | 05/02/17 | ||
08/06/07 | 08/06/08 | 08/06/17 | ||
11/01/07 | 11/01/08 | 11/01/17 | ||
02/15/06 | 02/15/07 | 02/15/16 | ||
05/02/06 | 05/02/07 | 05/02/16 | ||
11/01/06 | 11/01/07 | 11/01/16 | ||
11/01/05 | 02/15/07 | 11/01/15 | ||
03/03/03 | 04/11/07 | 03/03/13 | ||
04/25/03 | 04/25/07 | 04/25/13 | ||
07/25/02 | 02/15/07 | 07/25/12 | ||
01/01/02 | 04/11/07 | 11/01/12 |
(5) |
Represents an unvested performance-based stock option granted to the executive by the Compensation Committee pursuant to our 2006 Plan with a grant date of October 24, 2006, which is subject to cliff vesting as of December 31, 2009 after final determination that the company-wide performance goals described in footnote (3) above have been achieved. | |
(6) |
Represents the vested and unexercised portion and the unvested portion of a stock option exercisable for 60,000 shares of FTI common stock granted to the executive by the Compensation Committee pursuant to our 2006 Plan with a grant date of October 24, 2006, which vests in three installments as follows: 20,000 on October 24, 2007, 20,000 on October 24, 2008 and 20,000 on October 24, 2009, such that the stock option will be fully vested on October 24, 2009. | |
(7) |
Represents a vested and unexercised stock option exercisable for 126,029 shares of FTI common stock granted to the executive by the Compensation Committee pursuant to our 1997 Plan with a grant date of November 5, 2002, which has vested in three installments as follows: 36,029 on November 5, 2002, 45,000 on November 5, 2003 and 45,000 on November 5, 2004, such that the stock option was fully vested on November 5, 2004. | |
(8) |
Represents unvested stock option awards, each exercisable for 22,500 shares of FTI common stock, granted by the Compensation Committee to the executive under our 2004 Plan or 2006 Plan, pursuant to the Standing Option Awards described in footnote (4). Each stock option award will become fully exercisable upon an increase of 25% in the market value of a share of FTI common stock but not earlier than the first anniversary of the date of the award, or eight years from the date of the award if the market value does not reach the target value. The applicable market conditions have not yet been achieved for these stock option awards and they have not vested. |
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(9) | Represents unvested portion of shares of restricted stock awarded to the executive by the Compensation Committee pursuant to our 2006 Plan for 10,000 shares of FTI common stock with a grant date of July 9, 2007, which vest in three installments as follows: 3,333 shares on July 9, 2008, 3,333 shares on July 9, 2009 and 3,334 shares on July 9, 2010, such that all shares will be fully vested on July 9, 2010. | |
(10) | Represents vested and unvested unexercised portions of a stock option exercisable for 75,000 shares of FTI common stock granted to the executive by the Compensation Committee pursuant to our 2006 Plan on July 9, 2007, which vests in five installments as follows: 15,000 on July 9, 2008, 15,000 shares on July 9, 2009, 15,000 shares on July 9, 2010, 15,000 shares on July 9, 2011 and 15,000 shares on July 9, 2012, such that the stock option will be fully vested on July 9, 2012. | |
(11) | Represents the unvested portion of shares of restricted stock awarded to the executive by our Compensation Committee pursuant to our 2004 Plan for 152,517 shares of FTI common stock with a grant date of October 18, 2004, which vests in ten installments as follows: 15,252 shares on October 18, 2005, 15,251 shares on October 18, 2006, 15,251 shares on October 18, 2007, 15,251 shares on October 18, 2008, 15,252 shares on October 18, 2009, 15,252 shares on October 18, 2010, 15,252 shares on October 18, 2011, 15,252 shares on October 18, 2011, 15,252 shares on October 18, 2012, 15,252 shares on October 18, 2013 and 15,552 shares on October 18, 2014, such that all shares will be fully vested on October 18, 2014. | |
(12) | Prior to October 18, 2004, the executive was a non-employee director of the Company. In that capacity, he received non-employee directors compensation in the form of an automatic formula stock option exercisable for 135,000 shares of common stock under our 1997 Plan with a grant date of June 5, 2002. Represents the vested and unexercised portion of that award, which vested in three installments as follows: 45,000 shares on June 5, 2003, 45,000 shares on June 5, 2004 and 45,000 shares on June 5, 2005, such that the stock option was fully vested on June 5, 2005. | |
(13) | Includes: | |
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(14) | Includes: | |
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(15) | Represents the vested and unexercised stock option exercisable for 100,000 shares of FTI common stock granted to the executive by the Compensation Committee pursuant to our 2004 Plan with a grant date of November 1, 2005, which vested in three installments as follows: 33,333 shares on November 1, 2005, 33,333 shares on November 1, 2006 and 33,334 shares on November 1, 2007, such that the stock option was fully vested on November 1, 2007. | |
(16) | Includes: | |
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(17) | Represents the vested and unexercised and unvested portions of a stock option exercisable for 60,000 shares of FTI common stock granted to the executive by the Compensation Committee pursuant to our 2006 Plan with a grant date of October 4, 2006, which vests in five equal installments as follows: 12,000 shares on October 4, 2007, 12,000 shares on October 4, 2008, 12,000 shares on October 4, 2009, 12,000 shares on October 4, 2010 and 12,000 shares on October 4, 2011, such that the stock option will be fully vested on October 4, 2011. | |
(18) | Represents an unvested stock option exercisable for 75,000 shares of FTI common stock granted to the executive by the Compensation Committee pursuant to our 2006 Plan with a grant date of August 11, 2008, which vests in five equal installments as follows: 15,000 shares on August 11, 2009, 15,000 shares on August 11, 2010, 15,000 shares on August 11, 2011, 15,000 shares on August 11, 2012 and 15,000 shares on August 11, 2013, such that the stock option will be fully vested on August 11, 2013. |
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Option Exercises and Stock Vested
The following table shows the number of shares of our common stock acquired during the fiscal year ended December 31, 2008 upon the exercise of stock options and the vesting of restricted stock awards:
Option Awards | Stock Awards | |||||||||
Number | Value | Number | Value | |||||||
of Shares | Realized | of Shares | Realized | |||||||
Acquired on | Upon | Acquired | on | |||||||
Exercise | Exercise | on Vesting | Vesting | |||||||
(#) | ($) | (#) | ($) | |||||||
Name of Executive Officer | (a) | (b)(1) | (c) | (d)(2) | ||||||
Jack B. Dunn, IV: | ||||||||||
Options | | | | | ||||||
Stock | | | 10,621 | (3) | 763,969 | |||||
Jorge A. Celaya | ||||||||||
Options | | | | | ||||||
Stock | | | 3,333 | (4) | 227,277 | |||||
Dennis J. Shaughnessy: | ||||||||||
Options | | | | | ||||||
Stock | | | 15,251 | (5) | 975,759 | |||||
Dominic DiNapoli: | ||||||||||
Options | | | | | ||||||
Stock | | | 13,889 | (6) | 620,561 | |||||
Declan M. Kelly: | ||||||||||
Options | | | | |||||||
Stock | | | 4,000 | (7) | 271,360 |
(1) | The value realized upon the exercise of stock options is computed by multiplying (A) the difference between (i) the market price of the underlying shares at the exercise date and (ii) the exercise price of the option by (B) the number of shares for which the option was exercised. | |
(2) | The value realized on vesting of restricted stock is computed by multiplying (A) the market value of the shares of common stock at the exercise date by (B) the number of restricted share that vested on that date. | |
(3) | On September 23, 2004, the Compensation Committee awarded to Mr. Dunn 53,106 shares of restricted stock pursuant to our 2004 Plan that vest in five installments as follows: 10,621 shares on September 23, 2005, 10,621 shares on September 23, 2006, 10,621 shares on September 23, 2007, 10,621 shares on September 23, 2008 and 10,622 shares on September 23, 2009, such that the shares will be fully vested on September 23, 2009. Upon vesting of 10,621 shares of restricted stock on September 24, 2008, the Company withheld 3,871 shares to pay federal withholding on account of that vesting event, such that the net number of shares delivered to Mr. Dunn was 6,750. | |
(4) | On July 9, 2007, the Compensation Committee awarded to Mr. Celaya 10,000 shares of restricted stock pursuant to our 2006 Plan that vest in three installments as follows: 3,333 shares on July 9, 2008, 3,333 shares on July 9, 2009 and 3,334 shares on July 9, 2010, such that the shares will be fully vested on July 9, 2010. Upon vesting of 3,333 shares of restricted stock on July 9, 2008, the Company withheld 1,145 shares to pay federal withholding taxes on account of that vesting event, such that the net number of shares delivered to Mr. Celaya was 2,188. | |
(5) | On October 18, 2004, the Compensation Committee awarded to Mr. Shaughnessy 152,517 shares of restricted stock pursuant to our 2004 Plan that vest in ten installments as follows: 15,252 shares on October 18, 2005, 15,251 shares on October 18, 2006, 15,251 shares on October 18, 2007, 15,251 shares on October 18, 2008, 15,252 shares on October 18, 2009, 15,252 shares on October 18, 2010, 15,252 shares on October 18, 2011, 15,252 shares on October 18, 2011, 15,252 shares on October 18, 2012, 15,252 shares on October 18, 2013 and 15,552 shares on October 18, 2014, such that the shares will be fully vested on October 18, 2014. Upon the |
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vesting of 15,251 shares of restricted stock on October 18, 2008, upon instructions from Mr. Shaughnessy, the Company withheld 5,558 shares to pay federal withholding taxes on account of that vesting event, such that the net number of shares delivered to Mr. Shaughnessy was 9,693. | ||
(6) | On November 1, 2005, the Compensation Committee awarded to Mr. DiNapoli 125,000 shares of restricted stock pursuant to our 2004 Plan that vest in nine installments as follows: 13,889 shares on December 31, 2006, 13,889 shares on December 31, 2007, 13,889 shares on December 31, 2008, 13,889 shares on December 31, 2009, 13,889 shares on December 31, 2010, 13,889 shares on December 31, 2011, 13,889 shares on December 31, 2012, 13,889 shares on December 31, 2013, 13,889 shares on December 31, 2014, such that the shares will be fully vested on December 31, 2014. Upon the vesting of 13,889 shares of restricted stock on December 31, 2008, upon instructions from Mr. DiNapoli, the Company withheld 5,681 shares to pay federal withholding taxes on account of that vesting event, such that the net number of shares delivered to Mr. DiNapoli was 8,208. | |
(7) | On October 4, 2006, the Compensation Committee awarded to Mr. Kelly 20,000 shares of restricted stock pursuant to our 2006 Plan that vest in five equal installments as follows: 4,000 shares on October 4, 2007, 4,000 shares on October 4, 2008, 4,000 shares on October 4, 2009, 4,000 shares on October 4, 2010 and 4,000 shares on October 4, 2011, such that the shares will be fully vested on October 4, 2011. |
EMPLOYMENT AGREEMENTS AND POTENTIAL TERMINATION AND CHANGE IN CONTROL PAYMENTS
Employment Agreements
Jack B. Dunn, IV
We entered into an employment agreement with Jack B. Dunn, IV as of November 5, 2002, to replace the employment agreement that we previously had with him. The CEO Employment Agreement was amended as of September 23, 2004. The CEO Employment Agreement was further amended as of August 11, 2008 to extend the employment term to terminate on August 12, 2011 rather than November 5, 2010 (the First Additional Term). Effective at the close of business on August 11, 2009, the term of Mr. Dunns employment under the CEO Employment Agreement, if not otherwise terminated, will be extended for an additional one-year period unless either party has, before such time, given notice to the other of his or its intention not to further extend the term to and including August 12, 2012 (the Second Additional Term). Effective at the close of business on August 11, 2010, the term of Mr. Dunns employment under the CEO Employment Agreement, if not otherwise terminated, will be extended for an additional one-year period unless either party has, before such time, given notice of his or its intention not to further extend the term to and including August 12, 2013. The CEO Employment Agreement includes provisions relating to termination by the Company with and without cause, termination by the employee with and without good reason and events of termination such as death, disability and a change in control (all such terms as defined in such agreement). In addition, the CEO Employment Agreement was amended to provide that the executives place of employment may be Baltimore, Maryland, Annapolis, Maryland or Palm Beach (West Palm Beach), Florida.
If Mr. Dunns employment term expires or earlier terminates other than upon death, disability or termination by the Company for cause, Mr. Dunn will continue to provide services to us as a part-time employee for five years (his transition term), providing not more than 500 hours of service per 12-month period. During his transition term, in lieu of his salary, we will pay Mr. Dunn five annual transition payments of $500,000. Mr. Dunn is also entitled to the use of a car during his transition term. Mr. Dunns equity awards will continue to vest during the transition term. Mr. Dunns agreement contains non-competition terms that will continue for three years from the last day of his transition term. During this period, Mr. Dunn also will be prohibited from soliciting any entity or person that has been our client, customer, employee, contractor or vendor to terminate their relationship with us. Mr. Dunn also agrees not to use or disclose proprietary information of the Company in violation of his employment agreement. The transition term will terminate if he breaches his obligations not to compete or solicit pursuant to the employment agreement. See Potential Payments upon Termination or Change in Control.
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Dennis J. Shaughnessy
We entered into an employment agreement with Dennis J. Shaughnessy as of September 20, 2004, with an effective date of October 18, 2004. Mr. Shaughnessys employment agreement provides that he will serve as our full-time Chairman of the Board of Directors, which is an executive officers position, reporting to the Board and our Chief Executive Officer. On December 17, 2008, the Committee approved amendments to the term of the Chairman Employment Agreement to extend the termination date to January 2, 2012 from October 18, 2009, unless otherwise terminated pursuant to Section 9 of such agreement). The amendment became effective as of January 2, 2009. Mr. Shaughnessys employment agreement includes provisions relating to termination by the Company with and without cause, termination by the employee with and without good reason and events of termination such as death, disability and a change in control (all such terms as defined in such agreement).
If Mr. Shaughnessys employment term expires or earlier terminates other than upon death, disability or termination by the Company for cause), Mr. Shaughnessy will continue to provide services to us as a part-time employee for five years (his transition term), at the request of our chief executive officer or Board, of not more than 500 hours of service per 12-month period. On December 17, 2008, the Compensation Committee increased his post-full-time employment annual transition payment, in lieu of salary, from $400,000 to $700,000 effective as of January 2, 2009. Mr. Shaughnessy is also entitled to the use of a car during his transition term. Mr. Shaughnessys equity awards will continue to vest during the transition term. Mr. Shaughnessys agreement contains non-competition terms that will continue for three years from the last day of his transition term. During this period, Mr. Shaughnessy also will be prohibited from soliciting any entity or person that has been a client, customer, employee, contractor or vendor of ours to terminate its relationship with us. Mr. Shaughnessy also agrees not to use or disclose proprietary information of the Company in violation of his employment agreement. The transition term will terminate if he breaches his obligations not to compete or solicit pursuant to the employment agreement. See Potential Payments upon Termination or Change in Control.
Dominic DiNapoli
On November 1, 2005, we entered into an employment agreement with Dominic DiNapoli effective as of that date that superseded and replaced his employment agreement dated July 17, 2002 and the letter agreement dated March 24, 2004. The effective date of the employment agreement is November 1, 2005 and it terminates on December 31, 2011, unless otherwise terminated pursuant to Section 9 of such agreement. During the term of his employment agreement, Mr. DiNapoli will serve as our full-time Executive Vice President and Chief Operating Officer. The Compensation Committee has approved a minimum bonus amount of $500,000 per year at a minimum target of $1.00 consolidated earnings per share for the term of the employment agreement pursuant to the Incentive Plan, or its successor plan. Mr. DiNapoli will be eligible to earn additional bonus amounts pursuant to that plan, subject to the discretion of the Compensation Committee, and the recommendation of Mr. Dunn or Mr. Shaughnessy. Mr. DiNapolis employment agreement includes provisions relating to termination by the Company with and without cause, termination by the employee with and without good reason and events of termination such as death, disability and a change in control (all such terms as defined in such agreement).
If Mr. DiNapolis employment term expires or earlier terminates other than upon death, disability, termination by the Company for cause or the resignation of Mr. DiNapoli without good reason, Mr. DiNapoli will continue to provide services to us as a part-time employee for three years (his transition term), at such dates and time as may be mutually agreed to by him and us, and upon the request and direction of the chief executive officer, of not more than 500 hours of service per 12-month period. During the transition term, in lieu of his salary, we will pay Mr. DiNapoli annual transition payments of $500,000. Mr. DiNapoli is also entitled to the use of a car during his transition term. Mr. DiNapolis equity awards will continue to vest during the transition term. Mr. DiNapolis agreement contains non-competition terms that will continue for three years from the last day of his transition term. During this period, Mr. DiNapoli also will be prohibited from soliciting any entity or person that has been a client, customer, employee, contractor or vendor of ours to terminate its relationship with us. Mr. DiNapoli also agrees not to use or disclose proprietary information of the Company in violation of his employment agreement. The transition term will terminate if he breaches his obligations not to compete or solicit pursuant to the employment agreement. See Potential Payments upon Termination or Change in Control.
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Jorge A. Celaya
Jorge A. Celaya joined us as our Executive Vice President and Co-Chief Financial Officer in July 2007. Mr. Celaya assumed the role of sole Chief Financial Officer in November 2007. His offer letter provides that in the event of termination by the Company without cause or termination by Mr. Celaya for good reason (all such terms as defined in the Offer Letter) (i) within three years from the effective date of his employment or (ii) after three years from the effective date of his employment during the one year period following a change in control (as defined in the Offer Letter) he will be entitled to certain payments described under the section captioned Termination Payments to our NEOs who are not Parties to Written Employment Agreements. Pursuant to the offer letter extended by the Company and accepted by Mr. Celaya, Mr. Celayas employment with us is at-will. As an at-will employee he is not subject to non-competition and non-solicitation agreements.
Declan M. Kelly
Effective October 4, 2006, we entered into an employment agreement with Declan Kelly in connection with the acquisition of FD International (Holdings) Limited (FD). Mr. Kelly joined us in the capacity of president and chief executive officer of the U.S. subsidiary of FD. The effective date of the employment agreement coincided with the closing date of the acquisition of FD. Mr. Kellys employment term will terminate on the fifth anniversary of the effective date (the CIO Initial Term), except that the term will extend for an additional year from year to year (each a CIO Extended Term) unless either party provides written notice of non-renewal to the other party at least 90 days prior to the date of the expiration of the CIO Initial Term or any CIO Extended Term, unless otherwise terminated pursuant to Section 9 of such agreement. Mr. Kellys employment agreement includes provisions relating to termination by the Company with and without cause, termination by the employee with and without good reason and events of termination such as death and disability (as such terms are defined in such agreement). On August 1, 2008, we entered into an amendment to the CIO Employment Agreement to provide that Mr. Kelly will service as our Executive Vice President and Chief Integration Officer and the Chairman of FD-Americas (the business operations of our strategic communications segment located in the U.S.) and FD-Ireland (the business operations of our Strategic Communications segment located in Ireland) reporting to Mr. Dunn.
Mr. Kellys employment agreement contains non-competition terms that will continue for 12 months from the termination date of his employment (the CIO Restricted Period), unless the termination was by the Company without cause. During this period, Mr. Kelly also will be prohibited from soliciting any entity or person that has been our client, customer, employee, contractor or vendor to terminate their relationship with us. Mr. Kelly also agrees not to use or disclose proprietary information of the Company in violation of his employment agreement. Mr. Kelly will be entitled to the continuation of his full salary during the CIO Restricted Period. See Potential Payments upon Termination or Change in Control.
2008 Amendments to NEO Employment Arrangements to Comply with Section 409A and Section 162(m) of the Internal Revenue Code
In 2008 we determined it necessary to amend the employment agreements with Messrs. Dunn, Shaughnessy, Celaya, DiNapoli and Kelly to comply with the final rules and regulations promulgated under Code Section 409A that went into effect on January 1, 2009. In general, the amendments to conform their employment arrangements to the requirements of Code Section 409A are administrative and procedural in nature, and did not materially alter the underlying economic benefits to the Company or the affected NEOs. The changes to the NEO employment arrangements were approved by the Compensation Committee on December 17, 2008 and the NEOs entered into amendments of their employment arrangements effective December 31, 2008.
In 2008, we determined it necessary to amend the severance provisions of the employment arrangements with Messrs. Dunn, Shaughnessy, Celaya and DiNapoli to conform to a recent Internal Revenue Service interpretation of Code Section 162(m) providing that certain incentive awards will fail to qualify for the performance-based compensation exemption if such awards are payable at target levels upon a termination without cause or for good reason. The amendments to the applicable employment arrangements should allow FTI to preserve the deductibility of the annual bonus payments made by FTI to certain NEOs during their employment. These amendments were approved by the Committee on December 17, 2008 and were entered into by the applicable NEOs effective as of December 31, 2008.
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Prior to their amendment, the employment arrangements with Messrs. Dunn, Shaughnessy, Celaya and DiNapoli generally provided for, among other termination benefits, the payment of a pro rata target bonus upon termination by FTI without cause or by the executive officer for good reason, and, in the case of Messrs. Dunn, Shaughnessy and DiNapoli, upon expiration of such executive officers employment term (as such term is defined in the applicable employment arrangement). In addition, the employment arrangements with Messrs. Dunn, Shaughnessy and DiNapoli provided for the payment of an amount equal to 50% of the annual bonus paid to such executive in the year prior to termination in the event of a termination by FTI without cause or by the executive for good reason.
In lieu of the termination payments described above, the amendments to the employment arrangements with Messrs. Dunn, Shaughnessy, Celaya and DiNapoli provide for the following new payments:
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Mr. Celaya is an at-will employee and his employment arrangement with FTI has no fixed term, therefore, his employment arrangement did not require amendment to address severance upon expiration of an employment term. The provisions of the CIO Employment Agreement do not provide for post-termination payment of bonuses tied to a target and therefore did not require modification.
Potential Payments upon Termination or Change in Control
The NEOs will receive various payments described below upon termination of employment or a change in control of the Company. We believe that these payment rights and payments are in the best interests of the Company as they tie the interests of the NEOs to those of the Company, secure the services of the NEO and serve as a deterrent to the NEO voluntarily leaving the Companys employ, and serves as consideration for the agreements of certain NEOs not to compete with the Company, not to solicit employees and clients of the Company, and not to use or disclose proprietary information of the Company, as described under Employment Agreements above.
The NEOs will be entitled to various payments upon termination of their employment, including termination by the Company without cause, termination by the employee for good reason and termination upon or in anticipation of a change in control or words of similar import. Generally, a NEOs employment agreement provides that the Company may terminate such executives employment for cause if, and only if, the executive: (i) commits a material breach of his obligations or agreements under his employment agreement; (ii) commits an act of gross negligence or otherwise acts with willful disregard for the best interests of the Company and its affiliates; (iii) fails or refuses to perform any duties delegated to him that are consistent with the duties of similarly-situated executives or are otherwise required under his employment agreement; (iv) is convicted or pleads guilty or no contest to a felony, or violates any federal or state securities or tax laws, or with respect to his employment, commits either a material dishonest act or common law fraud; (v) seizes a corporate opportunity for himself instead of offering such opportunity to the Company or its affiliates; (vi) is absent (and not traveling on business) for a reason other than illness, vacation, or approved leave for more than 30 consecutive days; or (vii) commits a material violation of a material Company policy. Generally, a NEOs employment agreement provides that an executive may resign for good reason if, without such executives prior written consent, the Company: (i) assigns such executive duties materially and adversely
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inconsistent with such executives positions as described in his employment agreement; (ii) materially reduces such executives compensation or compensation (including in some cases target annual bonus levels for any year below the target for the preceding year), other than as a result of a decline in the Companys results of operations or other adverse event; (iii) materially breaches a material provision of his employment agreement; or (iv) changes executives principal place of employment to another location or to a specified number of miles beyond the specified location.
Generally, change in control or words of similar import mean: (i) the acquisition, in one or more transactions, by any person of the beneficial ownership of 50% or more of (A) all shares of capital stock of the Company to be outstanding immediately following such acquisition or (B) the combined voting power of all shares of capital stock of the Company to be outstanding immediately following such acquisition that are entitled to vote generally in the election of directors (the shares in clauses (A) and (B), collectively Company Voting Stock); (ii) the closing of a sale or conveyance of all or substantially all of the assets of the Company; or (iv) the effective time of any merger, share exchange, consolidation or other business combination involving the Company if immediately after such transaction, persons who hold a majority of the outstanding voting securities entitled to vote generally in the election of directors of the surviving entity (or the entity owning 100% of such surviving entity) are not persons who, immediately prior to such transaction, held Company Voting Stock.
Payments by the Company upon Termination (Including Termination by the Company for Cause or by Executive Without Good Reason)
Regardless of the manner in which Mr. Dunns, Mr. Shaughnessys or Mr. DiNapolis employment terminates, he will be entitled to receive the following payments (collectively, Accrued Compensation) earned during his term of employment:
Regardless of the manner in which Mr. Kellys employment terminates, he will be entitled to receive the following payments (collectively, CIO Accrued Compensation) earned during his term of employment:
Payments upon Termination by the Company Without Cause or by the Executive for Good Reason
Messrs. Dunn, Shaughnessy and DiNapoli will be entitled to receive the following payments upon (a) termination of his employment by us without cause, (b) termination of employment by such executive with good reason, or (c) termination by an acquirer following a change in control other than as described in Payments on or after Certain Change in Control Events:
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Mr. Kelly will be entitled to receive the following payments upon (a) termination of his employment by us without cause or (b) termination of employment by Mr. Kelly with good reason. See Payments on or after Certain Change in Control Events.
If termination is during the remaining three years of the CIO Initial Term:
If termination is during a CIO Extended Term:
If Mr. Dunn, Mr. Shaughnessy, Mr. DiNapoli or Mr. Kelly breaches his obligations not to compete or solicit pursuant to his employment agreement, the Company may cease paying the executive the payments described above.
Payments on or After Certain Change in Control Events
Messrs. Dunn, Shaughnessy and DiNapoli will be entitled to receive all or substantially all of the following payments, if such executives employment is terminated following a change in control, other than in the event executives employment is terminated (a) by such executive for any or no reason coincident with or during the 12-month period after a change in control occurs or (b) by such NEO for good reason coincident with or during the 24-month period after a change in control occurs or (c) by the Company without cause coincident with or during the 24-month period after a change in control occurs:
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Mr. Dunn, Mr. Shaughnessy and Mr. DiNapoli will be entitled to receive all or substantially all of the following payments if such executives employment is terminated (a) by such executive for any or no reason coincident with or during the 12-month period after a change in control occurs or (b) by such NEO for good reason coincident with or during the 24-month period after a change in control occurs or (c) by the Company without cause coincident with or during the 24-month period after a change in control occurs:
If Mr. Dunn, Mr. Shaughnessy or Mr. DiNapoli breaches his obligations not to compete or solicit pursuant to his employment agreement, the Company may cease paying the executive the payments described above.
Termination of Mr. Kelly in anticipation of or after a change in control, such termination will be treated like a termination by the Company without cause and Mr. Kelly will be entitled to payments under his contract pursuant to the sections relating to payments upon a termination by the Company without cause.
Payments upon Death or Disability
Each of Mr. Dunn, Mr. Shaughnessy or Mr. DiNapoli, or his estate in the event of death, will be entitled to receive all or substantially all of the following payments if his employment is terminated due to death or disability as defined in his employment agreement):
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Mr. Kelly, in the event of disability, or his estate in the event of death, will be entitled to receive Accrued Compensation.
Payments Due upon Expiration of the Primary Employment Term
Messrs. Dunn, Shaughnessy and DiNapoli will be entitled to receive all or substantially all of the following payments upon expiration of the primary employment term of such executives contract (whether or not as a result of a notice of non-renewal by such executive or the Company):
Mr. Kelly, in the event of non-renewal of his employment agreement will be entitled to receive Accrued Compensation.
If any such executive breaches his obligations not to compete or solicit pursuant to his employment agreement, the Company may cease paying such executive the payments described above.
Payments Due upon Expiration of the Transition Term
Our NEOs who are parties to written employment agreements will be entitled to receive all or substantially all of the following payments upon expiration of such executives transition term:
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In the case of Mr. DiNapoli, we also have agreed to transfer his golf club membership in effect as of November 1, 2005 (if still in effect on the date of termination) to him, including all rights to the initiation deposit of $75,000, at no cost to him.
In addition to the above payments, in the event it is determined that any payment or distribution by FTI would be subject to an excise tax imposed by Section 4999 of the Internal Revenue Code, the Company will reimburse the executive for such excise taxes and related interest and penalties.
Termination Payments to our NEOs Who are not Parties to Written Employment Agreements
Jorge Celaya, our CFO, pursuant to his offer letter will be entitled to the following payments if his employment is terminated by the Company without cause or terminated by the executive with good reason (i) within three years from the effective date of his employment or (ii) after three years from the effective date of his employment during the one year period following a change in control:
Potential Termination and Change in Control Payment Amounts
The following tables show the potential payments upon a termination or change in control of the Company that a NEO could receive pursuant to the terms of his employment agreement or offer letter if the termination or change in control occurred as of December 31, 2008. The amounts are estimates based on the assumptions set forth in the footnotes to each table and may differ substantially from the actual amounts paid to the NEO.
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Termination by (1) | ||||||||||||||||||||||||||||||
the Executive for Any or | ||||||||||||||||||||||||||||||
No Reason Coincident | ||||||||||||||||||||||||||||||
With or During the | ||||||||||||||||||||||||||||||
12-Month Period After | ||||||||||||||||||||||||||||||
a Change in Control, | ||||||||||||||||||||||||||||||
or (2) by the Executive for | ||||||||||||||||||||||||||||||
Good Reason | ||||||||||||||||||||||||||||||
Coincident With or | ||||||||||||||||||||||||||||||
During the 24-Month | ||||||||||||||||||||||||||||||
Period After a Change | ||||||||||||||||||||||||||||||
Termination | in Control Occurs, or | |||||||||||||||||||||||||||||
by the Company | Termination | (3) by the Company | ||||||||||||||||||||||||||||
Termination | Termination | Without Cause | After a Change | Without Cause | Death and | |||||||||||||||||||||||||
by the | by the | or by the | in Control | Coincident With or | Termination | Termination | Disability | |||||||||||||||||||||||
Company | Executive | Executive | Other Than | During the 24-Month | at End of | at End of | During the | |||||||||||||||||||||||
for | Without | With Good | as Provided in | Period After a Change | Employment | Transition | Employment | |||||||||||||||||||||||
Cause | Good Reason | Reason | Column (e) | In Control | Term | Period | Term | |||||||||||||||||||||||
($) | ($) | ($) | ($) | ($) | ($) | ($) | ($) | |||||||||||||||||||||||
Name | (a) | (b) | (c) | (d) | (e) | (f) | (g) | (h) | ||||||||||||||||||||||
Jack B. Dunn, IV: | ||||||||||||||||||||||||||||||
Accrued Compensation(1) | | | | | | | | | ||||||||||||||||||||||
Cash Compensation: | n/a | 2,416,438 | 2,416,438 | |||||||||||||||||||||||||||
Base Salary(2) | n/a | n/a | n/a | n/a | n/a | n/a | ||||||||||||||||||||||||
Transition Payments(3) | n/a | 2,500,000 | 2,500,000 | 2,500,000 | 2,500,000 | 2,500,000 | n/a | n/a | ||||||||||||||||||||||
Fixed Cash Payment(4) | n/a | n/a | 2,000,000 | n/a | n/a | 1,000,000 | n/a | n/a | ||||||||||||||||||||||
Short-Term Incentives: | ||||||||||||||||||||||||||||||
Cash Incentive Bonus(5) | n/a | n/a | n/a | 2,350,000 | (13) | 1,475,000 | (14) | n/a | n/a | 1,475,000 | (14) | |||||||||||||||||||
Equity and Long-Term | ||||||||||||||||||||||||||||||
Incentives: | ||||||||||||||||||||||||||||||
Restricted Stock | n/a | n/a | 5,542,197 | 5,542,197 | (15) | 5,542,197 | (15) | | 5,542,197 | (16) | 5,542,197 | (15) | ||||||||||||||||||
Stock Options | n/a | n/a | 729,200 | 729,200 | (17) | 729,200 | (17) | | 729,200 | (18) | 729,200 | (17) | ||||||||||||||||||
Benefits & Perquisites: | ||||||||||||||||||||||||||||||
Dental and Medical | ||||||||||||||||||||||||||||||
Benefits(6) | n/a | 56,040 | 56,040 | 56,040 | 56,040 | 56,040 | n/a | n/a | ||||||||||||||||||||||
Life and ADD Insurance(7) | n/a | 15,641 | 15,641 | 15,641 | 15,641 | 15,641 | n/a | n/a | ||||||||||||||||||||||
Long- and Short-Term | ||||||||||||||||||||||||||||||
Disability Insurance(8) | n/a | 6,690 | 6,690 | 6,690 | 6,690 | 6,690 | n/a | n/a | ||||||||||||||||||||||
Accrued Unpaid Vacation | n/a | n/a | n/a | n/a | n/a | n/a | n/a | n/a | ||||||||||||||||||||||
Tax Gross-up | n/a | n/a | n/a | n/a | n/a | n/a | n/a | n/a | ||||||||||||||||||||||
Automobile/Car | ||||||||||||||||||||||||||||||
Allowance(9) | n/a | 148,822 | 148,822 | 148,822 | 148,822 | 148,822 | n/a | n/a | ||||||||||||||||||||||
401(k)(10) | n/a | 34,500 | 34,500 | 34,500 | 34,500 | 34,500 | n/a | n/a | ||||||||||||||||||||||
Club Dues(11) | n/a | 61,250 | 61,250 | 61,250 | 61,250 | 61,250 | n/a | n/a | ||||||||||||||||||||||
Severance: | ||||||||||||||||||||||||||||||
Cash Severance(12) | n/a | n/a | n/a | n/a | 9,750,000 | n/a | n/a | n/a | ||||||||||||||||||||||
Total | n/a | 2,822,943 | 13,510,778 | 13,860,778 | 20,319,340 | 3,822,943 | 6,271,397 | 7,746,397 |
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n/a means not applicable |
(1) | Assumes there would have been no Accrued Compensation due and payable as of December 31, 2008. | ||
(2) | Assumes a pro rated base salary continuation payment for the period January 1, 2009 to and including August 11, 2009 of $916,438 based on a 365 day year. Assumes base salary continuation payments for the period August 11, 2009 to and including August 11, 2010 of $1,500,000 per annum. | ||
(3) | Executive will continue to provide not more than 500 hours of service per year for a period of five years at annual base compensation of $500,000 per annum. | ||
(4) | Executive will be entitled to a fixed cash payment of $2,000,000 in the event of termination by FTI without cause or by the executive with good reason and $1,000,000 in the event of termination at the end of the employment term. See 2008 Amendments to NEO Employment Arrangements to Comply with Section 409A and Section 162(m) of the Internal Revenue Code. | ||
(5) | Upon an event of a change in control other than as provided in Column (e), executive will be entitled to a pro rated target incentive bonus for the year of termination or, if no target annual incentive bonus was established for the year or the target annual incentive bonus for the year was materially reduced so as to constitute good reason, the highest incentive bonus earned within the preceding three years, plus an additional incentive bonus equal to one-half of the annual incentive bonus paid to the executive on account of the immediately preceding year. Upon an event of a change in control as provided in Column (e), executive shall be entitled to a pro rated target incentive bonus for the year of termination, or, if no target payment incentive bonus was established for the year, or if the target annual incentive bonus for the year was materially reduced so as to constitute good reason, the highest incentive bonus earned within the preceding three years. Upon death or disability during the employment term, executive or his estate will be entitled to receive the target annual incentive bonus for the year, or, if no target annual incentive bonus was established for the year, or, if the target annual incentive bonus for the year was materially reduced so as to constitute good reason, the highest incentive bonus earned within the preceding three years. If executive dies or becomes disabled during the transition period, no pro rated bonus will be payable. | ||
(6) | Assumes no increase of the Companys aggregate annual cost of $11,208 as of December 31, 2008 to provide dental and medical benefits to the executive and his dependents during the five-year transition period. | ||
(7) | Assumes no increase of the aggregate annual premiums of $3,128 as of December 31, 2008 for life insurance and accidental death and dismemberment insurance during the five-year transition period. | ||
(8) | Assumes no increase of the aggregate annual premiums of $1,338 as of December 31, 2008 for long- and short-term disability insurance during the five-year transition period. | ||
(9) | Assumes no increase of the Companys annual cost as of December 31, 2008 of $29,764 for a company car or automobile allowance during the five-year transition period. | ||
(10) | Assumes annual Company match under our 401(k) Plan of $6,900 (the maximum match permitted for 2008) during the five-year transition period. | ||
(11) | Assumes no increase of the annual dues of $12,250 as of December 31, 2008 for one club membership during the five-year transition period. | ||
(12) | $9,750,000 or three times $3,250,000, which is the sum of (a) $1,500,000 (executives annual base salary), plus (b) the greater of (i) $1,475,000 (the 2008 EPS target bonus at $2.45 for the year in which termination occurs) or (ii) $1,750,000 (the highest annual bonus earned within the immediately prior three years), plus (c) $0.00, which was the aggregate amount of any other bonuses (including special bonuses) earned by the executive for 2007 (the immediately prior year). | ||
(13) | Assumes payment of incentive bonus of $1,475,000 for the year of termination based on the 2008 EPS target performance goal of $2.45, plus $875,000 (50% of the 2007 bonus in the amount of $1,750,000 paid in 2008). On February 24, 2009, the Compensation Committee authorized a 2008 bonus payment of $1,100,000 based on achieving the 2008 EPS performance goal of $2.30. |
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(14) | Assumes payment of incentive bonus of $1,475,000 for the year of termination based on the 2008 EPS target performance goal of $2.45. On February 24, 2009, the Compensation Committee authorized a 2008 bonus payment of $1,100,000 based on achieving the 2008 EPS performance goal of $2.30. | |
(15) | The vesting of all unvested shares of restricted stock will accelerate as of December 31, 2008. Represents the aggregate market value of such shares of restricted stock for which vesting has accelerated, determined by multiplying (a) the number of shares of restricted stock by (b) $44.68 (the closing price per share of FTI common stock as reported on the NYSE for December 31, 2008). | |
(16) | The unvested shares of restricted stock will continue to vest during the five-year transition term, which will result in the vesting of all currently unvested shares of restricted stock by the end of the transition period. Represents the aggregate market value of such shares of restricted stock for which vesting will occur or has occurred, determined by multiplying (a) the number of shares of restricted stock by (b) $44.68 (the closing price per share of FTI common stock as reported on the NYSE for December 31, 2008). Assumes that any performance conditions to be satisfied during the transition period have been satisfied. Assumes any market price conditions to vesting have been satisfied during the transition period. | |
(17) | The vesting of all unvested stock option awards will accelerate as of December 31, 2008. Represents the aggregate market value of such stock options for which vesting has accelerated, determined by multiplying (a) the number of option shares by (b) the difference between (i) $44.68 (the closing price per share of FTI common stock as reported on the NYSE for December 31, 2008) and (ii) the applicable option exercise price. Does not include stock options exercisable for 45,000 shares of common stock with an aggregate Black-Scholes value of $1,373,175 with exercise prices in excess of $44.68 per share. | |
(18) | The unvested stock option awards will continue to vest during the five-year transition term, assuming any market price conditions to vesting have been satisfied during the transition period, which will result in the vesting of all currently unvested stock options by the end of the transition period. Represents the aggregate market value of such stock options for which vesting will occur or has occurred, determined by multiplying (a) the number of shares issuable upon exercise of the options by (b) the difference between (i) $44.68 (the closing price per share of FTI common stock as reported on the NYSE for December 31, 2008) and (ii) the applicable option exercise price. Assumes that any performance conditions are satisfied during the transition period. |
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Termination by the | ||||||||||||||||||
Company Without | ||||||||||||||||||
Termination | Cause or by the | |||||||||||||||||
by the Company | Executive With Good | |||||||||||||||||
Without Cause | Reason After Three | |||||||||||||||||
or by the Executive | Years from Effective Date | |||||||||||||||||
Termination | With Good | of Employment and | ||||||||||||||||
Termination by | By the Executive | Reason on | Within One Year | |||||||||||||||
the Company | Without Good | or Prior to | of a Change in | < |