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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[X] Preliminary Proxy Statement
[_] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[_] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S)240.14a-12
FTI CONSULTING, INC.
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(Name of the Registrant as Specified in its Charter)
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(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rule 14a-6(i)(1) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
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Preliminary Proxy Statement
[LOGO]
900 Bestgate Road, Suite 100
Annapolis, Maryland 21401
(410) 224-8770
April 14, 2003
Dear Stockholder:
On behalf of the Board of Directors, I cordially invite you to attend the
2003 Annual Meeting of Stockholders of FTI Consulting, Inc. on May 21, 2003, at
9:30 a.m., EDT, at FTI's business office, located at 909 Commerce Road,
Annapolis, Maryland 21401.
Enclosed with this letter is a Notice of the Annual Meeting, a Proxy
Statement, a proxy card, and a return envelope. Both the Notice of the Annual
Meeting and the Proxy Statement provide details of the business that we will
conduct at the Annual Meeting and other information about FTI. Also enclosed
with this letter is FTI's Annual Report to Stockholders for 2002.
At the Annual Meeting, we will ask you to:
. Elect two Class I directors;
. Approve an amendment of our charter to increase our authorized capital
stock;
. Approve an amendment of our Employee Stock Purchase Plan, as amended;
. Ratify the selection of Ernst & Young LLP as our independent accountants
for 2003; and
. Transact any other business that is properly presented at the Annual
Meeting.
Whether or not you plan to attend the Annual Meeting, please sign, date and
promptly return the proxy card in the enclosed prepaid return envelope. Your
shares of Common Stock will be voted at the Annual Meeting in accordance with
your proxy instructions. Of course, if you attend the Annual Meeting you may
vote in person. If you plan to attend the meeting, please mark the appropriate
box on the enclosed proxy card.
Sincerely,
Jack B. Dunn, IV
Chairman of the Board of Directors and
Chief Executive Officer
Your Vote Is Important
Please Sign, Date and Return Your Proxy Card Before the Annual Meeting.
If you have any questions about voting your shares, please contact
Theodore I. Pincus, Executive Vice President, Chief Financial Officer and
Assistant Secretary, FTI Consulting, Inc., 900 Bestgate Road, Suite 100,
Annapolis, Maryland 21401, Telephone No. (410) 224-8770.
FTI CONSULTING, INC.
NOTICE OF 2003 ANNUAL MEETING OF STOCKHOLDERS
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Date: May 21, 2003
Time: 9:30 a.m., EDT
Place: 909 Commerce Road, Annapolis, Maryland 21401
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Dear Stockholder:
At the Annual Meeting, we will ask you to:
. Elect two Class I directors;
. Approve an amendment of our charter to increase our authorized capital
stock;
. Approve an amendment of our Employee Stock Purchase Plan, as amended;
. Ratify the selection of Ernst & Young LLP as our independent accountants
for 2003; and
. Transact any other business that is properly presented at the Annual
Meeting.
You will be able to vote your shares of Common Stock at the Annual Meeting
if you were a stockholder of record at the close of business on March 14, 2003.
By Order of the Board of Directors
Theodore I. Pincus
Assistant Secretary
April 14, 2003
YOUR VOTE AT THE ANNUAL MEETING IS IMPORTANT.
Please indicate your vote on the enclosed proxy card and return it in the
enclosed envelope as soon as possible, even if you plan to attend the meeting.
If you have questions about voting your shares, please contact Theodore I.
Pincus, Executive Vice President, Chief Financial Officer and Assistant
Secretary, FTI Consulting, Inc., 900 Bestgate Road, Suite 100, Annapolis,
Maryland 21401, Telephone No. (410) 224-8770.
If you attend the meeting, you will be able to revoke
your proxy and vote in person.
[Logo]
900 Bestgate Road, Suite 100
Annapolis, Maryland 21401
April 14, 2003
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 2003 Annual Meeting
of Stockholders of FTI Consulting, Inc. The 2003 Annual Meeting will be held on
May 21, 2003, at 9:30 a.m., EDT, at FTI's business office, located at 909
Commerce Road, Annapolis, Maryland 21401.
This Proxy Statement provides information about the Annual Meeting, the
proposals on which you will be asked to vote at the Annual Meeting and other
relevant information.
On April 14, 2003, we began mailing information to people who, according to
our records, owned shares of our Common Stock at the close of business on March
14, 2003. We have mailed with that information a copy of FTI's Annual Report to
Stockholders for 2002.
INFORMATION ABOUT THE 2003 ANNUAL MEETING AND VOTING
The Annual Meeting
The Annual Meeting will be held on May 21, 2003 at 9:30 a.m., EDT, at FTI's
business office, located at 909 Commerce Road, Annapolis, Maryland 21401.
This Proxy Solicitation
We are sending you this Proxy Statement because FTI's Board of Directors is
seeking a proxy to vote your shares of our Common Stock at the Annual Meeting.
This Proxy Statement is intended to assist you in deciding how to vote your
shares. On April 14, 2003, we began mailing this Proxy Statement to all people
who, according to our stockholder records, owned shares of our Common Stock at
the close of business on March 14, 2003.
FTI is paying the cost of requesting these proxies. FTI's directors,
officers and employees may request proxies in person or by telephone, mail,
facsimile or letter. FTI will reimburse brokers and other nominees their
reasonable out-of-pocket expenses for forwarding proxy materials to beneficial
owners of our Common Stock.
Voting Your Shares
You have one vote for each share of our Common Stock that you owned of
record at the close of business on March 14, 2003. The number of shares you own
(and may vote at the Annual Meeting) is listed on the enclosed proxy card.
You may vote your shares of our Common Stock at the Annual Meeting either
in person or by proxy. To vote in person, you must attend the Annual Meeting and
submit a ballot. Ballots for voting in person will be available at the Annual
Meeting. To vote by proxy, you must complete and return the enclosed proxy card.
By completing and returning the proxy card, you will be directing the person or
persons designated on the proxy card to vote your shares of our Common Stock at
the Annual Meeting in accordance with the instructions you give on the proxy
card.
IF YOU DECIDE TO VOTE BY PROXY, YOUR PROXY CARD WILL BE VALID ONLY IF YOU
SIGN, DATE AND RETURN IT BEFORE THE ANNUAL MEETING.
If you complete the proxy card except for the voting instructions, then
your shares will be voted FOR the election of the Class I directors, FOR the
amendment to our charter, FOR the amendment to our Employee Stock Purchase Plan
and FOR the ratification of the selection of Ernst & Young LLP as our
independent accountants for the year 2003.
Revoking Your Proxy
If you decide to change your vote, you may revoke your proxy at any time
before it is voted. You may revoke your proxy in any one of three ways:
. You may notify the Secretary of FTI in writing that you wish to revoke
your proxy.
1
. You may submit a proxy dated later than your original proxy.
. You may attend the Annual Meeting and vote. Merely attending the Annual
Meeting will not by itself revoke a proxy. You must submit a ballot and
vote your shares of Common Stock.
Vote Required for Approval
Proposal 1: Election of Two The two nominees for election as Class I
Class I Directors directors who receive the most votes will be
elected. So, if you do not vote for a particular
nominee, or you indicate "withhold authority to
vote" for a particular nominee on your proxy
card, your vote will not count either for or
against the nominee.
Proposal 2: Amendment of Our Charter The affirmative vote of a majority of all
outstanding shares entitled to vote is required
to approve. If you abstain from voting, your
abstention will constitute a vote against the
proposal.
Proposals 3 and 4: Amendment to Our Employee The affirmative vote of a majority of the
Stock Purchase Plan and Ratification of votes cast at the Annual Meeting is required.
Selection of Our Independent Accountants So, an abstention will not count as a vote for
or against the proposal.
If you hold your shares with a broker and you do not tell your broker how
to vote, your broker has the authority to vote on Proposals 1, 2, 3 and 4.
Quorum. On March 14, 2003, the record date for the Annual Meeting,
27,463,531 shares of our Common Stock were issued and outstanding. A quorum must
be present at the Annual Meeting in order to transact business. A quorum will be
present if a majority of the shares of Common Stock entitled to vote are
represented at the Annual Meeting, either in person or by proxy. If a quorum is
not present, a vote cannot occur, except the Annual Meeting may be adjourned
until such time as a quorum is present. In deciding whether a quorum is present,
abstentions will be counted as shares of Common Stock that are represented at
the Annual Meeting.
Additional Information
FTI's Annual Report to Stockholders for the year ended December 31, 2002,
including our consolidated financial statements, is being mailed to all
stockholders entitled to vote at the Annual Meeting together with this Proxy
Statement. The Annual Report does not constitute a part of the proxy
solicitation material. The Annual Report provides you with additional
information about FTI.
2
PROPOSALS TO BE PRESENTED AT THE ANNUAL MEETING
We will present the following four proposals at the Annual Meeting. We have
described in this Proxy Statement all the proposals that we expect will be made
at the Annual Meeting. If we or a stockholder properly presents any other
proposal at the meeting, we will, to the extent permitted by applicable law, use
your proxy to vote your shares of Common Stock on the proposal in our best
judgment.
PROPOSAL 1. - ELECTION OF DIRECTORS
FTI's charter provides that its Board of Directors will consist of three
classes. The members of each class are elected for three-year terms. We
currently have seven directors, of which the two directors constituting the
Class I directors are to be elected at the 2003 Annual Meeting. The terms of the
Class II and Class III directors will expire at the Annual Meetings of
Stockholders to be held in 2004 and 2005, respectively.
On March 26, 2003, the Nominating and Corporate Governance Committee of our
Board of Directors unanimously recommended to the Board that the following
individuals be nominated for election to our Board of Directors as Class I
directors:
James A. Flick, Jr.
Peter F. O'Malley
Based upon the recommendation of the Nominating and Corporate Governance
Committee, our Board of Directors has nominated Messrs. Flick and O'Malley for
election to our Board of Directors as Class I directors. Each director will be
elected to serve for a three-year term, or thereafter until his replacement is
chosen and qualifies. Messrs. Flick and O'Malley are currently members of the
Board of Directors, and each has agreed to continue to serve as a director if
elected. More detailed information about each of the nominees is provided in the
section of this Proxy Statement titled "The Board of Directors."
If either of the nominees cannot serve for any reason (which is not
anticipated), the Board of Directors may designate a substitute nominee. If that
happens, we will vote all valid proxies for the election of the substitute
nominee or nominees. The Board of Directors may also decide to leave the Board
seat or seats open until a suitable candidate or candidates are located, or it
may decide to reduce the size of the Board.
The Board of Directors unanimously recommends that you vote FOR the nominees
for election as Class I directors.
PROPOSAL 2. - INCREASE AUTHORIZED CAPITAL STOCK
On February 11, 2003, our Board of Directors unanimously approved an
amendment to our charter to increase the number of shares of authorized stock to
80,000,000 shares, consisting of 75,000,000 shares of Common Stock and 5,000,000
shares of Preferred Stock. Currently, we are authorized to issue up to
50,000,000 shares of capital stock, consisting of 45,000,000 shares of Common
Stock and 5,000,000 shares of Preferred Stock. On March 17, 2003, we had
27,468,531 shares of Common Stock issued and outstanding and no shares of
Preferred Stock issued and outstanding. The form of the proposed amendment is
attached to this Proxy Statement as Exhibit A.
3
We would like to increase the number of shares of our capital stock to
accommodate our planned three-for-two stock split of our Common Stock that we
announced on March 17, 2003, any future stock splits, acquisitions and
financings and for other corporate purposes. Other than with respect to the
reservation of shares of our Common Stock in connection with our planned
three-for-two stock split and increase in the authorized shares under our
Employee Stock Purchase Plan, we have no existing or proposed plans, agreements
or understandings to issue, or reserve for future issuance, any of the
additional shares of capital stock that would be authorized by the proposed
amendment. The new shares of Common Stock would have the same rights as the
presently authorized shares of Common Stock.
We are subject to restrictions on our ability to issue additional shares of
capital stock in some situations. For example, the current New York Stock
Exchange rules generally require that we obtain stockholder approval before we
issue our capital stock when the number of shares to be issued equals or exceeds
20% of the outstanding voting power. There are numerous other situations,
however, where we may issue shares of capital stock without seeking the approval
of the stockholders. The issuance of additional shares of capital stock other
than in connection with a stock split, could have a dilutive effect on your
ownership of FTI. Stockholders do not have preemptive rights. Additionally, the
issuance of shares in some instances may have the effect of forestalling a
merger, tender offer, proxy contest, assumption of control by a holder of a
large block of our stock or the removal of our incumbent management. Our Board
of Directors does not intend or view the increase in authorized capital stock as
an anti-takeover measure, and we are not aware of any proposed or contemplated
transaction of this type.
The Board of Directors unanimously recommends that you vote FOR this proposal.
PROPOSAL 3. - AMEND THE EMPLOYEE STOCK PURCHASE PLAN
We are asking you to approve an amendment to our Employee Stock Purchase
Plan, as amended (the "Plan"), to increase from 950,000 to 1,200,000 the number
of shares of Common Stock that we can issue under the Plan. No other amendments
are proposed to be made to the Plan at this time. The following is a summary of
the Plan as it will be if the stockholders approve the amendment. A copy of the
Plan is attached to this Proxy Statement as Exhibit B.
General
Purpose. The Plan offers eligible employees the opportunity to purchase
shares of our Common Stock through after-tax payroll deductions. We believe that
enabling employees to acquire an equity interest in us creates a stronger
incentive for employees to expend maximum effort toward our growth and success.
Funds received by us under the Plan may be used for any general corporate
purpose.
Eligibility. All of our employees are eligible to participate in the Plan,
so long as they are regularly scheduled to work at least 20 hours per week and
do not hold more than 5% of our Common Stock. As of March 17, 2003, about 744
employees in our continuing operations were eligible to participate in the Plan.
Shares Available Under the Plan. The Plan authorizes the issuance of up to
1,200,000 shares of our authorized but unissued Common Stock. The number of
shares issuable under the Plan will be adjusted for stock dividends, stock
splits, reclassifications and other changes that affect our Common Stock.
Because the Plan permits employees to choose their own level of participation,
subject to overall tax and program limits, the specific amounts to be granted to
particular persons cannot be determined in advance.
4
As of March 17, 2003, 714,519 shares of our Common Stock have been issued under
the Plan since its inception in 1997.
Administration. The Plan is administered by our Compensation Committee. The
Compensation Committee has the authority and discretion to make, administer and
interpret rules and regulations to administer the Plan. In addition, the
Compensation Committee has the authority and discretion to modify the
eligibility requirements for participation in the Plan from time to time, so
long as those modifications do not require stockholder approval in order for the
Plan to continue to qualify under Section 423 of the Internal Revenue Code and
they do not materially increase our cost of maintaining the Plan.
Purchase of Shares under the Plan
Offering Periods. Offering periods under the Plan run from January 1 to
June 30 and July 1 to December 31 of each calendar year.
Election to Participate. Employees must elect before the beginning of a
given offering period to participate; however, once an employee has elected to
participate, that election carries forward to future offering periods until
revoked. The employee may elect to have between 1% and 15% of compensation set
aside for use in purchasing shares of our Common Stock at the end of the
offering period. The employee may not change the elected percentage during an
offering period but may withdraw entirely, so long as the withdrawal is made at
least 30 days before the end of the offering period.
Purchase Price. The purchase price of shares of our Common Stock under the
Plan is 85% of the fair market value of our Common Stock on the first day or the
last day of the offering period, whichever is lower. No employee may purchase
more than $25,000 worth of our Common Stock in all offering periods ending
during the same calendar year. The closing price of a share of our Common Stock,
as reported on the New York Stock Exchange on March 17, 2003, was $44.32.
Purchases. Shares of our Common Stock are purchased automatically on behalf
of all participating employees as of the last day of the offering period, unless
the employee has requested withdrawal of his payroll deductions at least 30 days
earlier. The number of shares to be purchased is determined by dividing the
dollars accumulated through payroll deduction by the purchase price, and
rounding down to the nearest whole number of shares. The purchase price is
ordinarily paid through payroll deduction, but the Compensation Committee is
authorized to accept payment through the tendering of shares of Common Stock
subject to such rules and regulations as the Compensation Committee may
determine. An employee does not have any of the rights of a stockholder until
payment in full for the shares is received and a stock certificate is issued.
Termination of Service. Employees who terminate their employment or die
during an offering period will be deemed to have elected withdrawal of all
payroll deductions and will not purchase shares under such offering period.
Substantial Corporate Changes. If we have a "substantial corporate change"
(examples of which include total liquidation, sale of all of our shares, a
merger in which we do not survive, or sale of substantially all of our assets),
we may terminate the offering period and cause the purchase of shares to occur
on behalf of participating employees immediately before the substantial
corporate change occurs.
Stockholder Approval. In general, stockholder approval is required for
changes to the extent necessary to preserve the Plan's status as a plan under
Section 423 of the Internal Revenue Code.
5
Amendment or Termination. Our Board of Directors may amend or terminate the
Plan at any time. Unless we extend the Plan, no offering periods will begin
after December 31, 2006.
Tax Consequences
The following summarizes the federal income tax consequences of
participation in the Plan. The summary does not cover employment taxes except as
specified and does not cover state, local, or foreign tax consequences, if any.
Purchases of shares under the Plan are intended to qualify for the
favorable federal income tax treatment provided by an employee stock purchase
plan that qualifies under Section 423 of the Internal Revenue Code. Deductions
from an employee's compensation will be made on a post-tax basis. In other
words, the employee will be taxed on amounts deducted for the purchase of shares
of our Common Stock as if he had instead received his full salary or wages.
Other than this, no income will be taxable to an employee until disposition of
the shares acquired, and the method of taxation will depend on how long he held
the shares before disposition.
If the purchased shares of Common Stock are disposed of more than two years
after the beginning of the applicable offering period (July 1 or January 1) and
more than one year after the exercise date or if the employee dies at any time
while holding the stock, then the lesser of (a) the excess of the fair market
value of the stock at the time of such disposition or death over the purchase
price or (b) 15% of the fair market value of the stock as of the beginning of
the applicable offering period will be treated as ordinary income. Any further
gain or any loss will be taxed as a long-term capital gain or loss. Net
long-term capital gains for individuals are currently subject to a maximum
marginal federal income tax rate that is less than the maximum marginal rate for
ordinary income.
If the employee sells or disposes of the stock before expiration of either
of the holding periods described above (a "disqualifying disposition"), the
excess of the fair market value of the stock on the exercise date over the
purchase price will be treated as ordinary income at the time of such
disposition. The balance of any gain on a sale will be treated as capital gain.
Even if the stock is sold for less than its fair market value on the purchase
date, the same amount of ordinary income is attributed to the employee, and a
capital loss is recognized equal to the difference between the sales price and
the fair market value of the stock on the purchase date. Any capital gain or
loss will be long- or short-term depending on whether the stock has been held
for more than one year.
There are no federal income tax consequences to us by reason of the
purchase of shares by employees under the Plan. We are generally entitled to a
deduction to the extent amounts are taxed as ordinary income to an employee by
reason of a disqualifying disposition of the purchased shares of stock, but we
are not entitled to a deduction in respect of any ordinary income realized by an
employee upon a later disposition or upon death. Our deduction may be limited
under Internal Revenue Code Section 162(m) and may be subject to disallowance
for failure to report the employee's income (which could arise if an employee
does not notify us of the sale of stock in a disqualifying disposition).
New Plan Benefits
Benefits to be awarded under the Plan will be based upon future
participation in the Plan by our employees. As a result, amounts of awards
cannot be determined at this time.
The Board of Directors unanimously recommends that you vote FOR this proposal.
6
PROPOSAL 4. - RATIFY ERNST & YOUNG LLP AS INDEPENDENT ACCOUNTANTS
The Audit Committee of the Board of Directors has appointed Ernst & Young
LLP to serve as our independent accountants for the year ending December 31,
2003. The Audit Committee is seeking ratification of the appointment of Ernst &
Young. A representative from Ernst & Young will be available at the Annual
Meeting to answer your questions and make a statement if he or she desires.
2001 2002
------- -------
(in thousands)
Audit Fees ....................... $165 $512
Audit-Related Fees ............... 11 80
Tax Fees ......................... 103 132
All Other Fees ................... -- --
In the above table, fees that FTI paid to Ernst & Young in 2001 and 2002
are set forth in accordance with the new rules and regulations of the Securities
and Exchange Commission ("SEC"). Audit fees are fees FTI paid Ernst & Young for
the audit and quarterly reviews of our consolidated financial statements,
assistance with and review of documents filed with the SEC, comfort letters,
consent procedures and accounting consultations related to transactions and the
adoption of new accounting pronouncements. In 2002, of the approximately
$512,000 in audit fees that we incurred, approximately $212,000 was for
assistance with our underwritten public offering and the filing of a
registration statement on Form S-8. Audit-related fees principally include audit
services for FTI subsidiaries and professional services related to financial due
diligence for our acquisitions of other businesses. Tax fees primarily include
tax compliance and planning services. Ernst & Young did not provide any other
services to us in 2002.
The Board of Directors unanimously recommends that you vote FOR this proposal.
7
STOCK OWNERSHIP
There were 27,468,531 shares of our Common Stock issued and outstanding on
March 17, 2003. The following table shows the beneficial ownership of our Common
Stock as of March 17, 2003 by: (1) each of our current executive officers and
directors and (2) all of our current directors and executive officers as a
group.
Number of Shares Percentage of Shares
Name of Beneficial Owner(1)(2) Beneficially Owned Beneficially Owned
------------------------------ -------------------- ----------------------
Executive Officers and Directors:
Jack B. Dunn, IV (3) ....................................... 340,353 1.23%
Stewart J. Kahn (4) ........................................ 145,792 *
Theodore I. Pincus (5) ..................................... 73,000 *
Barry S. Kaufman (6) ....................................... 2,000 *
Glenn R. Baker ............................................. -- --
Denis J. Callaghan (7) ..................................... 8,550 *
James A. Flick, Jr. (8) .................................... 61,847 *
Peter F. O'Malley (9) ...................................... 15,000 *
Dennis J. Shaughnessy (10) ................................. 3,750 *
George P. Stamas (11) ...................................... 6,909 *
All directors and executive officers as a group (10 persons) 657,201 2.36%
__________________________
* Less than 1%.
(1) Unless otherwise specified, the address of these persons is c/o FTI
Consulting, Inc., 900 Bestgate Drive, Suite 100, Annapolis, Maryland 21401.
(2) We use the SEC's definition of beneficial ownership. This means that the
persons named in this table have sole or shared voting and/or investment
power over the shares shown. Beneficial ownership also includes shares
underlying options currently exercisable or exercisable within 60 days.
(3) Represents 119,065 shares of our Common Stock and 221,288 shares of Common
Stock issuable upon the exercise of options. The shares of Common Stock
includes 12,000 shares of Common Stock over which Mr. Dunn and his wife
share voting and investment power and includes 300 shares over which Mr.
Dunn and his son share voting and investment power.
(4) Represents 52,741 shares of our Common Stock and 93,051 shares of our
Common Stock issuable upon exercise of stock options.
(5) Represents 10,500 shares of our Common Stock and 62,500 shares of our
Common Stock issuable upon exercise of stock options.
(6) Represents 2,000 shares of our Common Stock.
(7) Represents 8,550 shares of our Common Stock.
(8) Represents 13,097 shares of our Common Stock and 48,750 shares of our
Common Stock issuable upon exercise of stock options. The shares of Common
Stock includes 1,500 shares of Common Stock owned by Mr. Flick's wife.
(9) Represents 15,000 shares of our Common Stock held by entities affiliated
with Mr. O'Malley.
(10) Represents 3,750 shares of our Common Stock.
(11) Represents 1,909 shares of our Common Stock over which Mr. Stamas and his
wife share voting and investment power and 5,000 shares of our Common Stock
issuable upon exercise of stock options.
8
THE BOARD OF DIRECTORS
We have set forth below information about the members of our Board of
Directors. We have nominated James A. Flick, Jr. and Peter F. O'Malley for
re-election as the Class I directors.
Class I Director Nominees
Director Principal Occupation and
------------------------
Name Age Since Business Experience Other Directorships
---- --- ----- ------------------- -------------------
James A. Flick, Jr. 68 1992 Mr. Flick is President and Chief Mr. Flick is a director
Executive Officer of Winnow, Inc., a of Capital One
management consulting firm. From 1994 Financial Corporation.
to 2001, Mr. Flick was also Chairman,
President and Chief Executive Officer
of Dome Corporation, a real estate
development and management services
company. Mr. Flick is a certified
public accountant.
Peter F. O'Malley 64 1992 Mr. O'Malley is President of Aberdeen Mr. O'Malley is a
Creek Corporation, a privately-held director of Potomac
company engaged in investment, business Electric Power Company
consulting and development activities. and Legg Mason, Inc.
He is a founder of, and since 1989 has
been Of Counsel to, the law firm of
O'Malley, Miles, Nylen & Gilmore.
Class II Directors
Director Principal Occupation and
------------------------
Name Age Since Business Experience Other Directorships
---- --- ----- ------------------- -------------------
Denis J. Callaghan 60 2000 Mr. Callaghan retired from Deutsche None
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
Alex. Brown's Insurance and Financial
Services Research Groups.
Dennis J. Shaughnessy 55 1992 Since 1989, Mr. Shaughnessy has been a Mr. Shaughnessy is a
General Partner of Grotech Capital director of TESSCO
Group, Inc., a venture capital firm. Technologies, Inc.
Prior to becoming a General Partner of
Grotech Capital Group in 1989, Mr.
Shaughnessy was the Chief Executive
Officer of CRI International, Inc.
George P. Stamas 52 1992 Since 2002, Mr. Stamas has been a Mr. Stamas is a
senior partner of the national law firm director of Aether
of Kirkland & Ellis. Mr. Stamas is Systems, Inc.
also a venture partner of New
Enterprise Associates, a venture
capital firm. From 1999 to January
2002, Mr. Stamas was vice chairman of
the Board of Directors of Deutsche Bank
Securities, Inc. Mr. Stamas is a
limited partner of the Baltimore
Orioles, the Washington Capitals and
the Washington Wizards. From 1996 to
1999, Mr. Stamas was a partner in the
law firm of Wilmer, Cutler & Pickering
LLP.
9
Class III Directors
Director Principal Occupation and
------------------------
Name Age Since Business Experience Other Directorships
---- --- ----- ------------------- -------------------
Jack B. Dunn, IV 51 1992 Mr. Dunn became Chairman of our Board Mr. Dunn is a director
of Directors in December 1998. Since of Aether Systems, Inc.
October 1995, he has served as our
Chief Executive Officer. From October
1995 to December 1998, he also served
as our President. From May 1994 to
October 1995, he served as our Chief
Operating Officer. From October 1992
through September 1995, he served as
our Chief Financial Officer. Mr. Dunn
is a limited partner of the Baltimore
Orioles. Prior to joining us, he was a
member of the Board of Directors of,
and a Managing Director of Legg Mason
Wood Walker, Incorporated and directed
its Baltimore corporate finance and
investment banking activities.
Stewart J. Kahn 59 1999 Mr. Kahn has served as our President None
since December 1998 and as our Chief
Operating Officer since September
1999. Since 1989, Mr. Kahn has served
as President of Kahn Consulting, Inc.,
a turnaround, restructuring and
bankruptcy and forensic accounting
practice, which became one of our
subsidiaries in September 1998.
10
CORPORATE GOVERNANCE OF FTI
Our business is managed by and under the direction of our Board of
Directors. Our Board of Directors seeks to increase stockholder value and
promote our long-term growth. The Board establishes our policies and strategies
and regularly monitors the effectiveness of our management in carrying out those
policies and strategies. As part of the Board's commitment to these principles,
the Board has adopted Corporate Governance Guidelines.
In connection with the adoption of these Corporate Governance Guidelines,
we reviewed our then current corporate governance policies and practices. This
review included comparing our then current policies and practices to policies
and practices suggested by various groups and authorities active in corporate
governance and policies and practices of public companies in general. Based upon
this review, we adopted policies and practices that our Board of Directors
believes represent the appropriate corporate governance policies and practices
for us. We will continue to consider the adoption of changes, as appropriate, to
enhance our corporate governance policies and practices and to comply with any
rule changes made by the SEC or the New York Stock Exchange. We have made
available on our website our Corporate Governance Guidelines and other corporate
governance documents, including our Policy on Ethics and Business Conduct and
the charters for the Audit, Compensation and Nominating and Corporate Governance
Committees of our Board of Directors.
Board Organization and Operation
Members of our Board of Directors are kept informed of our business through
discussions with key members of our management team, by reviewing materials
provided to them and by participating in meetings of the Board of Directors and
its committees.
Our Board of Directors has adopted categorical standards for director
independence. Directors who meet these standards are considered independent.
Based on these standards, we have determined that Messrs. Callaghan, Flick,
O'Malley, Shaughnessy and Stamas are independent directors, and Messrs. Dunn and
Kahn are not independent directors. Therefore, a majority of the members of our
Board of Directors is independent, including all current members of our Audit,
Compensation and Nominating and Corporate Governance Committees.
Our independent directors regularly meet in executive sessions without the
presence of management. This gives our independent directors the opportunity to
discuss management's performance and any other matters that one or more
independent directors would like to discuss.
During 2002, our Board of Directors met eight times. Each of the nominees
and our other directors attended at least 75% of the total Board meetings and
meetings of committees of the Board of Directors on which he served.
Committees of the Board of Directors
Audit Committee. The Audit Committee responsibilities include the
appointment of our independent accountants, the preapproval of all auditing
services and permitted non-audit services provided to us by our independent
accountants, reviews of the independence of our accountants, and reviews of the
adequacy of internal accounting controls. The Audit Committee operates under a
written charter adopted by our Board of Directors, a copy of which we have
attached as Exhibit C to this Proxy Statement. In 2002, the Audit Committee met
five times. The current members of the Audit Committee are: Messrs. Flick,
Chair, Callaghan, O'Malley, Shaughnessy and Stamas. Each member of the Audit
Committee is an independent director as defined by the current rules of the New
York Stock Exchange.
Compensation Committee. The Compensation Committee makes recommendations to
the Board of Directors with respect to the compensation of our executive
officers and administers our stock option,
11
incentive and employee benefit plans. The Compensation Committee operates under
a written charter adopted by our Board of Directors, a copy of which we have
attached as Exhibit D to this Proxy Statement. The Compensation Committee met
five times in 2002. The current members of the Compensation Committee are:
Messrs. Shaughnessy, Chair, Callaghan, Flick, O'Malley and Stamas. Each member
of the Compensation Committee is an independent director as defined by the
current rules of the New York Stock Exchange.
Nominating and Corporate Governance Committee. The Nominating and Corporate
Governance Committee reviews and recommends the size and composition of the
Board, reviews and recommends Board committee charters, members and
chairpersons, recommends to the full Board nominees for election as directors at
annual meetings of our stockholders, assists our chairman of the board in
identifying, evaluating, recruiting, nominating and retaining new candidates for
election as directors, evaluates annually the performance of the Board and
reviews corporate governance policies and practices. The Nominating and
Corporate Governance Committee operates under a written charter adopted by our
Board of Directors, a copy of which we have attached as Exhibit E to this Proxy
Statement. The Nominating and Corporate Governance Committee met three times in
2002. The current members of the Nominating and Corporate Governance Committee
are: Messrs. O'Malley, Chair, Callaghan and Shaughnessy. Each member of the
Nominating and Corporate Governance Committee is an independent director as
defined by the current rules of the New York Stock Exchange.
Under our Bylaws, nominations for director may be made only by the Board of
Directors or a committee thereof or by a stockholder of record who delivers
notice along with the additional information and materials required by our
Bylaws to our corporate Secretary not less than 90 days and no more than 120
days before the first anniversary date of the mailing date for the preceding
year's annual meeting. For our annual meeting in 2004, we must receive this
notice on or after December 16, 2003 and on or before January 15, 2004. You may
obtain a copy of our Bylaws by writing to our corporate Secretary, FTI
Consulting, Inc., 900 Bestgate Drive, Suite 100, Annapolis, Maryland 21401. A
copy of our Bylaws has been filed with the SEC as an exhibit to our report on
Form 10-K/A filed April 18, 2001.
Compensation of Directors
We reimburse our directors for their out-of-pocket expenses incurred in the
performance of their duties as our directors. We do not pay fees to our
directors for attendance at meetings. Non-employee directors are eligible to
receive options to acquire shares of our Common Stock under our 1997 Stock
Option Plan ("1997 Plan"). Under the 1997 Plan, when a non-employee director
joins our Board of Directors and every three years thereafter that he remains on
the Board, he receives an option for 90,000 shares of Common Stock, exercisable
at the fair market value of our Common Stock on the date of grant. These options
become exercisable one-third per year for three years and have a term of ten
years. As of March 17, 2003, there were outstanding 468,750 non-qualified stock
options that had been granted to non-employee directors, 53,750 of which were
exercisable on such date.
Policy on Ethics and Business Conduct
For years we have had company policies regarding conflicts of interest and
securities law compliance. We have recently adopted a Policy on Ethics and
Business Conduct (the "Ethics Policy"), which reflects these longstanding
policies and contains additional policy initiatives. We require all our
directors and employees to adhere to the Ethics Policy in addressing the legal
and ethical issues encountered in conducting their work. The Ethics Policy
requires that our directors and employees avoid conflicts of interest, comply
with all laws and other legal requirements, conduct business in an honest and
ethical manner and otherwise act with integrity and in the company's best
interest. We convey to our directors and employees both their obligations and
responsibilities under and the importance of the Ethics Policy.
12
Employees are required to report any conduct that they believe in good
faith to be an actual or apparent violation of the Ethics Policy. The
Sarbanes-Oxley Act of 2002 requires companies to have procedures to receive,
retain and treat complaints received regarding accounting, internal accounting
controls or auditing matters and to allow for the confidential and anonymous
submission by employees of concerns regarding questionable accounting or
auditing matters. We have established procedures to meet this requirement, and
we will monitor any rules adopted by the SEC to determine whether we need to
modify our process.
EXECUTIVE OFFICERS AND COMPENSATION
We have set forth below information about each of our executive officers
who is not also a director.
Officer Principal Business
Name Age Since Experience for Past Five Years
---- --- ----- ------------------------------
Glenn R. Baker 61 1998 Mr. Baker has been the President of our applied
sciences practice group since September 1998. Prior
to joining us, he was Chief Executive Officer and
President of S.E.A., Inc., which we acquired in
September 1998.
Barry S. Kaufman 55 2002 Mr. Kaufman has been our Vice President of Operations
since July 2002. Prior to joining us, Mr. Kaufman was
a director and subsequently a partner with Arthur
Andersen's Strategy and Technology practice from
February 1998 to June 2002. From August 1997 to
February 1998, he was President of his own consulting
firm, KTFB. From March 1993 to July 1997, Mr. Kaufman
served as a director with Kahn Consulting, Inc.,
which we acquired in September 1998.
Theodore I. Pincus 60 1999 Mr. Pincus has been our Executive Vice President and
Chief Financial Officer since April 1999. Prior to
joining us, Mr. Pincus was Executive Vice President
and Chief Financial Officer of Nitinol Medical
Technologies from May 1995 to March 1999. Before
then, he was President of the Pincus Group, a
financial consulting firm, from December 1989 to May
1995.
Our executive officers are elected by the Board of Directors, and they
serve at the pleasure of our Board, subject to the terms of the employment
agreements that we have with some of them.
13
Summary Compensation Table
We have set forth below information concerning the cash and non-cash
compensation earned by our Chief Executive Officer and the four other most
highly compensated persons who were serving as our executive officers on
December 31, 2002.
Long Term
Compensation
Awards
------
Annual Compensation Securities
-----------------------------------------
Other Annual Underlying All Other
Name and Principal Position Year Salary (1) Bonus Compensation (2) Options (#) Compensation (3)
--------------------------- ---- ---------- ----- ---------------- ----------- ----------------
Jack B. Dunn, IV ............... 2002 $900,000 $1,625,000 $4,105 150,000 $6,664
Chairman and Chief 2001 750,000 550,000 2,849 210,000 5,539
Executive Officer 2000 600,000 400,000 2,837 210,000 5,628
Stewart J. Kahn ................ 2002 900,000 1,625,000 3,179 90,000 7,389
President and Chief 2001 750,000 550,000 3,843 150,000 5,539
Operating Officer 2000 600,000 400,000 4,856 112,500 4,841
Theodore I. Pincus ............. 2002 400,000 620,000 3,249 45,000 7,290
Executive Vice President 2001 350,000 200,000 2,833 112,500 5,539
and Chief Financial Officer 2000 300,000 125,000 2,335 52,500 1,514
Glenn R. Baker ................. 2002 500,000 50,000 589 -- 7,980
President, Applied 2001 500,000 145,000 665 -- 5,539
Sciences Practice Group 2000 409,000 50,000 665 22,500 4,841
Barry S. Kaufman (4) ........... 2002 250,000 50,000 -- 25,000 6,595
Vice President of Operations
-----------------------
(1) Includes amounts earned but deferred at the election of the executive
officer, such as salary deferrals under our 401(k) Plan.
(2) These amounts represent our payments of automobile expenses on behalf of
the named executive officers.
(3) These amounts represent our payment of matching and discretionary
contributions to our 401(k) Plan and payments of premiums on life insurance
coverage. Our 401(k) contributions for 2002 for Messrs. Dunn, Kahn, Pincus,
Baker and Kaufman were $6,000 each. The life insurance premiums paid by us
for 2002 for Messrs. Dunn, Kahn, Pincus, Baker and Kaufman were $664,
$1,389, $1,290, $1,980 and $595, respectively.
(4) Mr. Kaufman joined us in July 2002 as our Vice President of Operations. The
salary disclosed for Mr. Kaufman is the amount he earned in 2002, based on
an annual salary of $500,000.
14
Option Grants In Last Fiscal Year
The following table sets forth the options granted to our named officers
during 2002:
Individual Grants
---------------------------------------------------------
Number of Percent of
Securities Total Options Potential Realizable Value
Underlying Granted to At Assumed Annual Rates of
Options Employees in Exercise Expiration Stock Price
Name Granted(1) Fiscal Year Price(2) Date Appreciation for Option Term
---- ---------- ------------- --------- ---- ----------------------------
5%(3) 10% (3)
-------- ----------
Jack B. Dunn, IV (4) .. 90,000(5) 7.5% $41.40 11-2012 $2,421,900 $6,371,460
15,000 1.2 29.15 2-2012 284,213 747,698
15,000 1.2 38.50 4-2012 375,375 987,525
15,000 1.2 42.87 7-2012 417,983 1,099,616
15,000 1.2 45.76 11-2012 446,160 1,173,744
Stewart J. Kahn ....... 90,000(5) 7.5 41.40 11-2012 2,421,900 6,371,460
Theodore I. Pincus .... 45,000(5) 3.7 41.40 11-2012 1,210,950 3,185,730
Glenn R. Baker ........ -- -- -- -- -- --
Barry S. Kaufman ...... 15,000 1.2 33.98 7-2012 331,305 871,587
10,000 .8 39.70 12-2012 258,050 678,870
---------------------
(1) Except as noted in (5) below, options become exercisable one-third on the
first anniversary of the date of grant, two-thirds on the second
anniversary of the date of grant and in full on the third anniversary of
the date of grant.
(2) All options were granted at or above the fair market value of our Common
Stock on the date of grant.
(3) The dollar amounts are the result of calculations at assumed 5% and 10%
compounded rates of stock appreciation from the date of grant to the
expiration date of the options. The potential realizable value is reported
net of the option price but before income taxes associated with exercise.
These assumed rates of growth were selected by the SEC for illustration
purposes only. They are not intended to forecast possible future
appreciation, if any, of our stock price. No gain to the optionees is
possible without an increase in stock price.
(4) Mr. Dunn receives an option grant for 15,000 shares of our Common Stock on
the day following each quarterly earnings release. These options are
granted with an exercise price 10% higher than the fair market value of our
Common Stock on the date of grant and become fully exercisable upon an
increase of 25% in the market value of the Common Stock but not earlier
than one year after the date of grant.
(5) Options become exercisable one-third on the date of grant, two-thirds on
the first anniversary of the date of grant and in full on the second
anniversary of the date of grant.
15
Aggregated Option Exercises In Last Fiscal Year
And Year End Value Of Options
The following table sets forth information about outstanding options held
by the named officers as of December 31, 2002:
Number of Securities
Underlying Unexercised Value of Unexercised
Shares Acquired Options Held In-the-Money Options
Name on Exercise(#) Value Realized ($) at Fiscal Year-End(1) At Fiscal Year-End($)(2)
---- -------------- ----------------- ---------------------- ------------------------
Exercisable Unexercisable Exercisable Unexercisable
----------- ------------- ----------- -------------
Jack B. Dunn, IV .... 149,490 5,240,269 210,737 180,000 2,599,380 3,073,250
Stewart J. Kahn ..... 75,000 2,505,000 125,000 137,500 1,234,000 2,007,375
Theodore I. Pincus .. 37,500 1,302,170 27,500 92,500 461,382 1,158,775
Glenn R. Baker ...... 7,500 239,525 -- 7,500 -- 30,675
Barry S. Kaufman .... -- -- -- 25,000 -- 906,700
----------
(1) Represents "in-the-money" options.
(2) Based on the market price of our Common Stock on December 31, 2002, which
was $40.15 per share.
Equity Compensation Plans
The following table sets forth information regarding outstanding options
and shares reserved for future issuance under our equity compensation plans at
December 31, 2002. None of the plans have outstanding warrants or rights other
than options. All of our equity compensation plans have been approved by our
stockholders. The table does not take into account any potential impact of the
proposed amendment to our Plan that may be approved by our stockholders at the
2003 Annual Meeting.
Number of Securities to be Weighted - Average Number of Securities Remaining
Issued Upon Exercise of Exercise Price of Available for Future Issuance
Plan Category Outstanding Options Outstanding Options Under Equity Compensation Plans
-------------------------- -------------------------- ------------------------ ---------------------------------
Equity compensation
plans approved by our
security holders ........... 3,871,414/(1)/ $22.14/(1)/ 899,885/(2)/
----------------
(1) Corresponds to options for shares of our Common Stock issued under our
stock option plans.
(2) Consists of 664,404 shares of our Common Stock reserved for future
issuance under our stock option plans and 235,481 shares of our common
stock reserved for issuance under our Plan.
Employment Arrangements
Mr. Dunn. We entered into an employment agreement with Mr. Dunn as of
November 5, 2002, to replace the employment agreement that we previously had
with him. During the term of the agreement, Mr. Dunn will serve as our Chief
Executive Officer and Chairman of the Board. For consideration for Mr. Dunn's
services, Mr. Dunn receives an annual base salary, set at $900,000 for 2002, and
is entitled to participate in our incentive compensation and other bonus plans
adopted by our Board of Directors and in our health, pension and other benefit
plans. His annual salary is subject to annual increases at the
16
discretion of the Compensation Committee of our Board of Directors but may not
be decreased. Under the provisions of the employment agreement, Mr. Dunn shall
serve as a director on our Board of Directors. In connection with the execution
of the employment agreement, we granted Mr. Dunn an option for 90,000 shares of
our Common Stock. This option vests in three equal installments, on the date of
the agreement and on the first and second anniversaries of such date.
The employment agreement has an initial rolling three-year term that is
automatically extended by one year on each November 5 unless by that date either
we or Mr. Dunn give the other notice of an intention not to further extend the
term (the "Employment Term"). The agreement expires in 2008 but may terminate
earlier. If we terminate Mr. Dunn's employment for Cause, he resigns without
Good Reason or the Employment Term expires, Mr. Dunn will continue to provide
services to us as a part-time employee for three years (the "Transition Term").
During this time, in lieu of his salary, we will pay Mr. Dunn three annual
payments of $500,000 (the "Transition Payments"). Further, if we terminate Mr.
Dunn's employment for Cause or he resigns without Good Reason, Mr. Dunn is
entitled to receive any accrued compensation. If Mr. Dunn's employment with us
is terminated because of the expiration of the Employment Term, Mr. Dunn will
also be entitled to receive (1) accrued compensation, (2) a pro rated incentive
bonus and (3) continued health and life insurance benefits. Upon the expiration
of the Transition Term, Mr. Dunn will be entitled to receive any unreimbursed
business expenses, any vested benefits under our pension or other benefit plans
and continued health and life insurance benefits, the cost of which would be
borne by Mr. Dunn.
We may terminate for "Cause" upon the executive's (1) commission of a
material breach of his obligations or agreements under the agreement, (2)
commission of an act of gross negligence or he otherwise acts with willful
disregard for the best interests of FTI and its affiliates, (3) failure or
refusal to perform any duties delegated to him that are consistent with the
duties of similarly-situated executives or are otherwise required under the
agreement, (4) conviction of or plead of guilty or no contest to a felony, or
violation any federal or state securities or tax laws, or with respect to his
employment, commission of either a material dishonest act or common law fraud,
(5) seizure of a corporate opportunity for himself instead of offering such
opportunity to FTI or its affiliates, (6) absence (and not traveling on
business) for a reason other than illness, vacation, or approved leave for more
than 30 consecutive days, or (7) commission of a material violation of a
material company policy. An executive may leave for "Good Reason" if, without
his prior written consent, we (1) assign him duties materially and adversely
inconsistent with his positions as described in the agreement, (2) materially
reduce his target annual bonus level for any year below the target for the
preceding year, other than as a result of a decline in our results of operations
or other adverse event, (3) materially breach a material provision of the
agreement or (4) change his principal place of employment to a place more than
50 miles from his principal place of employment.
If we terminate Mr. Dunn's employment during the Employment Term without
Cause or Mr. Dunn resigns for Good Reason, he will be entitled to receive (1)
any accrued compensation, (2) continued salary through the end of the Employment
Term, (3) payment of the Transition Payments, (4) a pro rated incentive bonus,
(5) an additional incentive bonus equal to one-half of the incentive bonus he
received for the year prior to the termination of his employment, (6) immediate
vesting of all options held by him and (7) continued health and life insurance
benefits. If Mr. Dunn's employment is terminated during the Employment Term by
Mr. Dunn, for any or no reason, coincident with or during the 12-month period
after a Change of Control occurs, by Mr. Dunn for Good Reason coincident with or
during the 24-month period after the Change of Control occurs or by us without
Cause coincident with or during the 24-month period after a Change of Control
occurs, Mr. Dunn will be entitled to receive (1) any accrued compensation, (2) a
pro rated incentive bonus, (3) a severance payment equal to three times the sum
of his salary, the greater of his target annual incentive bonus for the year of
termination or the largest annual incentive bonus he received within the
immediately prior three years, and the aggregate amount of any
17
other bonuses earned by him in the prior year, (4) immediate vesting of all
options held by him, and (5) continued health and life insurance benefits. If
Mr. Dunn dies or becomes totally disabled, he is entitled to receive (1) his
accrued compensation, (2) if such death or disability occurs during the
Employment Term, a pro rated incentive bonus, (3) immediate vesting of all
options held by him and (4) continued health and life insurance benefits.
For purposes of the employment agreement, "Change of Control" means: (1)
the acquisition, in one or more transactions, by any person of the beneficial
ownership (within the meaning of Rule 13d-3 promulgated under the Securities
Exchange Act of 1934, as amended) of 50% or more of (A) all shares of our
capital stock to be outstanding immediately following such acquisition, or (B)
the combined voting power of all shares of our capital stock to be outstanding
immediately following such acquisition that are entitled to vote generally in
the election of directors (the shares described in clauses (A) and (B),
collectively "Company Voting Stock"); (2) the closing of a sale or other
conveyance of all or substantially all of our assets; or (3) the effective time
of any merger, share exchange, consolidation, or other business combination
involving us 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.
Mr. Dunn's agreement contains a non-competition clause that begins at the
time of his employment with us and lasts for three years from the end of his
employment. During this period, Mr. Dunn is also prohibited from soliciting any
entity or person that has been our client, customer, employee or contractor to
terminate their relationship with us.
If any payments made by us under the employment agreement with Mr. Dunn is
subject to an excise tax, we will pay Mr. Dunn an additional payment in an
amount that after the payment by him of all taxes, Mr. Dunn retains an amount
equal to such excise tax.
Messrs. Kahn and Pincus. We entered into an employment agreement with Mr.
Kahn as of November 5, 2002, to replace the employment agreement that we
previously had with him. During the term of the agreement, Mr. Kahn will serve
as our President and Chief Operating Officer. For consideration for Mr. Kahn's
services, Mr. Kahn receives an annual base salary, set at $900,000 for 2002, and
is entitled to participate in our incentive compensation and other bonus plans
adopted by our Board of Directors and in our health, pension and other benefit
plans. His annual salary is subject to annual increases at the discretion of the
Compensation Committee of our Board of Directors but may not be decreased. Under
the provisions of the employment agreement, Mr. Kahn shall serve as a director
on our Board of Directors. In connection with the execution of the employment
agreement, we granted Mr. Kahn an option for 90,000 shares of our Common Stock.
This option vests in three equal installments, on the date of the agreement and
on the first and second anniversaries of such date.
We entered into a new employment agreement with Mr. Pincus as of November
5, 2002. During the term of the agreement, Mr. Pincus will serve as our
Executive Vice President and Chief Financial Officer. For consideration for Mr.
Pincus' services, Mr. Pincus receives an annual base salary, set at $400,000 for
2002, and is entitled to participate in our incentive compensation and other
bonus plans adopted by our Board of Directors and in our health, pension and
other benefit plans. His annual salary is subject to annual increases at the
discretion of the Compensation Committee of our Board of Directors but may not
be decreased. In connection with the execution of the employment agreement, we
granted Mr. Pincus an option for 45,000 shares of our Common Stock. This option
vests in three equal installments, on the date of the agreement and on the first
and second anniversaries of such date.
18
The employment agreements of Messrs. Kahn and Pincus each have an initial
rolling three-year term that is automatically extended by one year on November
5, 2003 unless by that date either we or the executive officer give the other
notice of an intention not to further extend the term (respectively, his
"Employment Term"). These agreements expire in 2006 but may terminate earlier.
If we terminate either officer's employment for Cause, either resigns without
Good Reason or his Employment Term expires, such officer will continue to
provide services to us as a part-time employee for three years (his "Transition
Term"). During this time, in lieu of his salary, as applicable, we will pay Mr.
Kahn three annual payments of $500,000 and Mr. Pincus three annual payments of
$250,000 (respectively, his "Transition Payments"). Further, if we terminate
either officer's employment for Cause or such officer resigns without Good
Reason, such officer is entitled to receive any accrued compensation. If either
officer's employment with us is terminated because of the expiration of his
Employment Term, such officer will also be entitled to receive (1) accrued
compensation, (2) a pro rated incentive bonus and (3) continued health benefits.
Upon the expiration of his Transition Term, such officer will be entitled to
receive any unreimbursed business expenses, any vested benefits under our
pension or other benefit plans and continued health benefits, the cost of which
would be borne by such officer.
If we terminate either officer's employment during the Employment Term
without Cause or such officer resigns for Good Reason, such officer will be
entitled to receive (1) any accrued compensation, (2) continued salary through
the end of his Employment Term, (3) payment of his Transition Payments, (4) a
pro rated incentive bonus, (5) an additional incentive bonus equal to one-half
of the incentive bonus such officer received for the year prior to the
termination of his employment, (6) immediate vesting of all options held by such
officer and (7) continued health and life insurance benefits. If either
officer's employment is terminated during his Employment Term by such officer,
for any or no reason, coincident with or during the 12-month period after a
Change of Control occurs, by such officer for Good Reason coincident with or
during the 24-month period after the Change of Control occurs or by us without
Cause coincident with or during the 24-month period after a Change of Control
occurs, such officer will be entitled to receive (1) any accrued compensation,
(2) a pro rated incentive bonus, (3) a severance payment equal to three times
the sum of such officer's salary, the greater of his target annual incentive
bonus for the year of termination or the largest annual incentive bonus such
officer received within the immediately prior three years, and the aggregate
amount of any other bonuses earned by such officer in the prior year, (4)
immediate vesting of all options held by such officer, and (5) continued health
and life insurance benefits. If either officer dies or becomes totally disabled,
such officer is entitled to receive (1) his accrued compensation, (2) if such
death or disability occurs during his Employment Term, a pro rated incentive
bonus, (3) immediate vesting of all options held by such officer and (4)
continued health and life insurance benefits. The terms "Cause," "Good Reason"
and "Change of Control" have the same meanings as in Mr. Dunn's employment
agreement with us.
Each of the employment agreements contains a non-competition clause that
begins at the time of the officer's employment with us and lasts for three years
from the end of such officer's employment. During this period, each officer is
also prohibited from soliciting any entity or person that has been our client,
customer, employee or contractor to terminate their relationship with us.
If any payments made by us under the employment agreement with either
officer is subject to an excise tax, we will pay such officer an additional
payment in an amount that after the payment by the applicable officer of all
taxes, such officer retains an amount equal to such excise tax.
Mr. Baker. Mr. Baker entered into an employment agreement with S.E.A., Inc.
when we acquired it in September 1998. This agreement has a five year term and
expires on September 25, 2003. However, Mr. Baker may resign upon 60 days
notice. Mr. Baker is entitled to an annual salary, subject to annual increases.
He is also entitled to an annual bonus based on our incentive compensation plan.
If we terminate Mr. Baker's employment without cause, he remains entitled to his
salary through the end of the
19
agreement's term. Mr. Baker's agreement contains a non-competition clause that
lasts until the later of September 25, 2002 or one year from the end of his
employment. This non-competition clause prohibits Mr. Baker from competing with
SEA or us in any standard metropolitan statistical area or county where we or
SEA have an office or provide services. The clause also prohibits Mr. Baker from
soliciting any entity or person that was our client, customer, employee or
consultant at any time from September 25, 1998 to the date Mr. Baker leaves SEA.
Certain Relationships and Related Party Transactions
Glenn R. Baker, President of our applied sciences practice group, owns a
one-third partnership interest in SEA Properties and 50% of the capital stock of
GBDG, Ltd. S.E.A., Inc., one of our wholly-owned subsidiaries, leases two
properties from SEA Properties and GBDG, Ltd. for an aggregate annual rent of
$485,654. In 2002, pursuant to the provisions of these leases, we paid an
aggregate of $121,661 for real estate taxes and utilities related to the leased
facilities. Both leases expire on August 31, 2008. In connection with our
acquisition of S.E.A., Inc. in 1998, we agreed to assume these leases and to pay
rent and other related expenses at fair market value. Management believes that
these lease agreements are on terms at least as favorable to FTI as those that
could have been obtained from unaffiliated third parties. In July 2002, we
committed to a plan to sell our applied sciences practice group.
Compensation Committee Report on Executive Compensation
Compensation Philosophy. Our goal is to design and administer an executive
compensation program to (i) attract and retain qualified executive officers,
(ii) reward executive officers for performance in achieving FTI's business
objectives and enhancing stockholder value, (iii) align the executive officers'
interests with those of the stockholders, and (iv) provide incentives for the
creation of long-term stockholder value. The key elements of executive
compensation are base salary, annual incentive and performance bonuses, and
equity options. We review and approve FTI's policies and practices regarding
executive compensation, including (a) base salary levels, (b) incentive
compensation plans and related performance awards, and (c) long-term incentives,
principally equity option awards.
We believe that compensation must be competitive, as well as directly and
materially linked to FTI's performance. In administering the compensation
program, our objectives include the following: attracting and retaining
executive talent, motivating executives to maximize operating performance,
measuring performance on both an individual and a company-wide basis, reflecting
FTI's progress in meeting growth and profitability targets, and linking
executive and stockholder interests through the grant of stock options and other
equity-based compensation.
The key components of FTI's executive compensation program have
historically consisted of salary, annual incentive and performance bonuses and
stock options. The long-term compensation of FTI's executive officers has
consisted primarily of stock options. The short-term compensation has consisted
principally of base salary and a cash bonus. Our policy with respect to each of
these elements is discussed below.
Base Salary Levels. We believe that base salary levels at FTI are
reasonably related to the salary levels of executive officers of comparable
companies at similar stages of development. The Board and we set base salaries
and determined other compensation for 2002 based on those factors. Some of the
senior executives have employment agreements that set floors on base salary and
other elements of compensation for their contract terms, but we can increase the
base salary at any point. We expect that any such increases will take into
account such factors as individual past performance, changes in
responsibilities, changes in pay levels of companies we consider comparable, and
inflation.
Bonus Awards. FTI awards performance bonuses under its Incentive
Compensation Plan to reflect the level of involvement and success of its
executive officers in advancing corporate goals. The awards
20
earned depend on the extent to which FTI and individual performance objectives
are achieved. FTI's objectives consist of operating, strategic and financial
goals that are considered to be critical to our fundamental long-term goal of
building stockholder value. For fiscal year 2002, these objectives were: (i)
evaluating, negotiating, and reaching agreement as to expansion of the business
and its prospects, (ii) achievement of performance goals that included standard
measures of financial performance such as EBITDA, stock price, earnings per
share, return on equity and growth in assets, (iii) continued advances toward
project goals in consolidation and management, and (iv) progress in certain
financial and administrative activities. EBITDA means our earnings before
interest, taxes, depreciation and amortization. In 2003, the Committee awarded
approximately $3.97 million in bonuses to named officers for 2002.
Long-Term Incentive Compensation. The Board and stockholders approved the
1997 Plan as the principal means of providing long-term incentives. We believe
that the use of equity incentives better aligns the interest of executive
officers with those of stockholders and promotes long-term stockholder value
than does cash alone. We administer the 1997 Plan, determine the terms of the
options and the number of shares of Common Stock subject to option grants, and
set significant terms. In setting the grants, we relied on our own experience
and that of our financial and other advisers.
Compensation of the Chief Executive Officer. We use the same procedures
described above in setting the annual salary, bonus, and long-term incentive
compensation of the chief executive officer (the "CEO"). The Board had
established the CEO's salary for this report's period by contract, and we had
granted him incentive stock options and nonqualified stock options. He continued
to receive formula grants of options under a program we had previously
established. In considering the CEO's compensation, we considered FTI's
achievements of some of its performance goals and further considered key
subjective factors such as the CEO's work in negotiating and supervising
acquisitions, building a management team and recruiting and retaining highly
qualified individuals. In awarding any future long-term incentive compensation,
we will consider the CEO's performance, overall contribution to FTI, retention
of employees, the number of options not yet exercisable and the total number of
options to be granted.
Compensation Deduction Limit. The SEC requires that this report comment on
our policy with respect to a special rule under the tax laws, Section 162(m) of
the Internal Revenue Code. That section can limit the deductibility on a
Subchapter C corporation's federal income tax return of compensation of $1.0
million to any of the named officers.
A company can deduct compensation (including from exercising options)
outside that limit if it pays the compensation under a plan that its
stockholders approve and that is performance-related and non-discretionary.
Option exercises are typically deductible under such a plan if granted with
exercise prices at or above the market price when granted. Our policy with
respect to this section is to make every reasonable effort to ensure that
compensation complies with Section 162(m), while simultaneously providing our
executives with the proper incentives to remain with and increase the prospects
of FTI. We did not pay any compensation with respect to 2002 that would be
outside the limits of Section 162(m).
Compensation Committee
Dennis J. Shaughnessy, Chair
Denis J. Callaghan
James A. Flick, Jr.
Peter F. O'Malley
George P. Stamas
21
Audit Committee Report
Our Audit Committee is composed of five independent directors, consistent
with the New York Stock Exchange listing standards. Our Audit Committee operates
under a written charter adopted by the Board of Directors, a copy of which we
have attached as Exhibit C to this Proxy Statement, and is responsible for
overseeing our financial reporting process on behalf of the Board of Directors.
Management is responsible for our financial statements and the financial
reporting process, including internal controls. The independent auditors are
responsible for performing an independent audit of our consolidated financial
statements in accordance with generally accepted auditing standards and for
issuing a report thereon. Our Audit Committee's responsibility is to monitor and
oversee these processes.
In this context, our Audit Committee has met and held discussions with
management and Ernst & Young LLP, our independent accountants. Management
represented to the Committee that FTI's consolidated financial statements were
prepared in accordance with generally accepted accounting principles, and the
Committee has reviewed and discussed the consolidated financial statements with
management and the independent accountants. The Audit Committee discussed with
Ernst & Young the matters required to be discussed by Statement on Auditing
Standards No. 61 (Communication with Audit Committees). These matters included a
discussion of Ernst & Young's judgments about the quality (not just the
acceptability) of our accounting principles as applied to financial reporting.
The Audit Committee also discussed with management and Ernst & Young their
assessments of our internal controls.
Ernst & Young also provided the Audit Committee with the written
disclosures and letter required by Independence Standards Board Standard No. 1
(Independence Discussions with Audit Committees), and the Audit Committee
discussed with Ernst & Young that firm's independence. The Audit Committee
further considered whether the provision by Ernst & Young of the non-audit
services described elsewhere in this Proxy Statement is compatible with
maintaining the accountants' independence.
Based upon the Audit Committee's discussion with management and the
independent accountants and the Audit Committee's review of the representation
of management and the disclosures by the independent accountants to the Audit
Committee, the Audit Committee recommended to the Board of Directors that FTI's
audited consolidated financial statements be included in its Annual Report on
Form 10-K for the year ended December 31, 2002, for filing with the SEC. The
Audit Committee has appointed Ernst & Young as our independent accountants for
2003, subject to stockholder ratification.
Audit Committee
James A. Flick, Jr., Chair
Denis J. Callaghan
Peter F. O'Malley
Dennis J. Shaughnessy
George P. Stamas
22
OTHER INFORMATION
Company Performance
The following graph compares the cumulative total stockholder return on our
Common Stock from January 1, 1998 through December 31, 2002 with the cumulative
total return of the S&P 500 Index and a peer group index comprised of Charles
River Associates, Inc., Exponent Inc., Sourcecorp., Kroll Inc., Navigant
Consulting, Inc. and PRG-Shultz International Inc. (collectively, the "Peer
Group") Index. Our Common Stock price is published every weekday except
holidays. The Peer Group Index was compiled by FTI as of December 31, 2002.
The graph assumes an investment of $100 in each of FTI, the S&P 500 Index
and the Peer Group on December 31, 1997. The comparison assumes that all
dividends, if any, are reinvested into additional shares of Common Stock during
the holding period.
COMPARISON OF 5 YEAR CUMULATIVE RETURN*
AMONG FTI CONSULTING, INC., THE S&P 500 INDEX
AND A PEER GROUP
Cumulative Total Return
------------------------------------------------------------------------
12/97 12/98 12/99 12/00 12/01 12/02
FTI CONSULTING, INC. 100.00 27.00 40.00 82.00 262.40 481.78
S & P 500 100.00 128.58 155.64 141.46 124.65 97.10
PEER GROUP 100.00 178.41 107.19 47.07 61.54 56.13
* Based on $100 invested on December 31, 1997 in stock or index, including
reinvestment of dividends. Fiscal year ending December 31.
23
Section 16(a) Beneficial Ownership Reporting Compliance
Based on our records and other information, we believe that our directors
and officers who are required to file reports under Section 16 reported all
transactions in shares of our Common Stock and derivative securities, including
options for shares, on a timely basis during the fiscal year ended December 31,
2002, except Barry S. Kaufman, as the result of an administrative error of FTI,
filed a Form 5 on February 13, 2003 for a grant on December 11, 2002 of an
option for 10,000 shares of our Common Stock and Glenn R. Baker filed a Form 4
on February 25, 2003 for the exercise on February 10, 2003 of an option for
7,500 shares of our Common Stock and his sale of the shares on the same date.
Proposals for the 2004 Annual Meeting
If you want to include a proposal in the Proxy Statement for FTI's 2004
Annual Meeting, send the proposal to FTI Consulting, Inc., Attn: Dianne R.
Sagner, Vice President, Secretary and General Counsel, at 900 Bestgate Road,
Suite 100, Annapolis, Maryland 21401. Proposals must be received on or before
December 16, 2003 to be included in our 2004 Proxy Statement.
Stockholders intending to present a proposal at our 2004 Annual Meeting,
but not to include the proposal in our Proxy Statement, must comply with the
requirements set forth in our Bylaws. The Bylaws require, among other things,
that a stockholder submit a written notice of intent to present such a proposal
that is received by our Secretary no more than 120 days and no less than 90 days
prior to the anniversary of the mailing date of the preceding year's annual
meeting. Therefore, we must receive notice of such a proposal for the 2004
Annual Meeting no earlier than December 16, 2003 and no later than January 15,
2004. If the notice is received before December 16, 2003 or after January 15,
2004, it will be considered untimely, and we will not be required to present it
at the 2004 Annual Meeting.
24
Exhibit A
FTI CONSULTING, INC.
ARTICLES OF AMENDMENT
FTI Consulting, Inc., a Maryland corporation, having its registered and
principal office in Anne Arundel County, Maryland (hereinafter called the
"Corporation"), hereby certifies to the State Department of Assessments and
Taxation of Maryland that:
FIRST: The charter of the Corporation is hereby amended by deleting
ARTICLE THIRD in its entirety and replacing it with the following:
THIRD: The total number of shares of all classes of stock that
the Corporation has authority to issue is 80,000,000 shares, having an
aggregate par value of $800,000, consisting of 75,000,000 shares of
Common Stock (the "Common Stock"), with a par value of $.01 per share,
and 5,000,000 shares of Preferred Stock (the "Preferred Stock"), with a
par value of $.01 per share.
SECOND: (a) Immediately prior to the amendment, the Corporation had
authority to issue 50,000,000 shares of stock of all classes, consisting of
45,000,000 shares of Common Stock, with a par value of $.01 per share, and
5,000,000 shares of Preferred Stock, with a par value of $.01 per share. The
aggregate par value of all shares of stock of all classes was $500,000.
(b) Immediately following the amendment, the Corporation has authority
to issue 80,000,000 shares of stock of all classes, consisting of 75,000,000
shares of Common Stock, with a par value of $.01 per share, and 5,000,000 shares
of Preferred Stock, with a par value of $.01 per share. The aggregate par value
of all shares of stock of all classes is $800,000.
THIRD: The information provided in the charter of the Corporation
regarding the classes of stock required by Subsection (b)(2)(i) of Section 2-607
of the Maryland General Corporation Law was not changed by this amendment.
FOURTH: The foregoing amendment to the Charter of the Corporation has
been advised by the Board of Directors and approved by the stockholders of the
Corporation.
IN WITNESS WHEREOF, the Corporation has caused these presents to be
signed in its name and on its behalf by its Chairman of the Board and Chief
Executive Officer and witnessed by its Assistant Secretary on May ______, 2003.
WITNESS: FTI CONSULTING, INC.
_________________________________________ By___________________________________
Theodore I. Pincus, Assistant Secretary Jack B. Dunn, IV, Chairman of the
Board and Chief Executive Officer
A-1
THE UNDERSIGNED, Chairman of the Board and Chief Executive Officer of
FTI Consulting, Inc., who executed on behalf of the Corporation the foregoing
Articles of Amendment of which this certificate is made a part, hereby
acknowledges in the name and on behalf of said Corporation the foregoing
Articles of Amendment to be the corporate act of said Corporation and hereby
certifies that to the best of his knowledge, information, and belief the matters
and facts set forth therein with respect to the authorization and approval
thereof are true in all material respects under the penalties of perjury.
___________________________________________
Jack B. Dunn, IV, Chairman of the Board
and Chief Executive Officer
A-2
Exhibit B
FTI CONSULTING, INC.
Employee Stock Purchase Plan, As Amended
Purpose The FTI Consulting, Inc. Employee Stock Purchase Plan (the
"ESPP" or the "Plan") provides employees of FTI Consulting,
Inc. (the "Company") and selected Company Subsidiaries with
an opportunity to become owners of the Company through the
purchase of shares of the Company's common stock (the
"Common Stock"). The Company intends this Plan to qualify
as an employee stock purchase plan under Section 423 of the
Internal Revenue Code of 1986, as amended (the "Code"), and
its terms should be construed accordingly.
Eligibility Unless determined otherwise by the Committee, any Employee
who is employed with the Company or an Eligible Subsidiary
on the first day of an Offering Period and regularly
scheduled to work at least 20 hours per week is eligible to
participate in the ESPP for that Offering Period; provided,
however, that an Employee may not make a purchase under the
ESPP if such purchase would result in the Employee's owning
Common Stock possessing 5% or more of the total combined
voting power or value of the Company's outstanding stock.
For purposes of determining an individual's amount of stock
ownership, any options to acquire shares of Company Common
Stock are counted as shares of stock, and the attribution
rules of Section 424(d) of the Code apply.
Employee means any person employed as a common law employee
of the Company or an Eligible Subsidiary. Employee excludes
anyone not treated initially on the payroll records as a
common law employee.
Administrator The Compensation Committee of the Board of Directors of the
Company, or such other committee as the Board designates
(the "Committee"), will administer the ESPP. The Committee
is vested with full authority and discretion to make,
administer, and interpret such rules and regulations as it
deems necessary to administer the ESPP (including rules and
regulations deemed necessary in order to comply with the
requirements of Section 423 of the Code). The Committee is
vested with full authority and discretion to make
modifications to the eligibility requirements for
participation in the ESPP from time to time that do not
require shareholder approval to comply with the
requirements of Section 423 of the Code, provided that all
such modifications enable the ESPP to continue to satisfy
the eligibility requirements of Section 423 of the Code and
do not materially increase the cost of the ESPP to the
B-1
Company. Any determination or action of the Committee in
connection with the administration or interpretation of the
ESPP shall be final and binding upon each Employee,
Participant and all persons claiming under or through any
Employee or Participant.
Offering Offering Periods are successive six month periods beginning
Period on January 1 and July 1, and the first such period will
begin on July 1, 1997.
Participation An eligible Employee may become a "Participant" for an
Offering Period by completing an authorization notice and
delivering it to the Committee through the Company's Human
Resources Department within a reasonable period of time
before the first day of such Offering Period. The Committee
will send to each new Employee who satisfies the rules in
Eligibility above a notice advising the Employee of his
right to participate in the ESPP for the following Offering
Period. All Participants receiving options under the ESPP
will have the same rights and privileges.
Method A Participant may contribute to the ESPP through payroll
Of Payment deductions, as follows:
The Participant must elect on an authorization notice to
have deductions made from his Compensation for each payroll
period during the Offering Period at a rate of at least 1%
but not more than 15% of his Compensation. Compensation
under the Plan means an Employee's regular compensation,
including overtime, bonuses, and commissions, from the
Company or an Eligible Subsidiary paid during an Offering
Period.
All payroll deductions will be credited to the
Participant's account under the ESPP. No interest or
earnings will accrue on any payroll deductions credited to
such accounts.
Payroll deductions will begin on the first payday
coinciding with or following the first day of each Offering
Period and will end with the last payday preceding or
coinciding with the end of that Offering Period, unless the
Participant sooner withdraws as authorized under
Withdrawals below.
A Participant may not alter the rate of payroll deductions
during the Offering Period.
The Company may use the consideration it receives for
general corporate purposes.
The Committee, in its discretion, may permit Participants
to pay the
B-2
option price through the tendering of shares of Common
Stock subject to such rules and regulations as the
Committee may determine.
Granting of On the first day of each Offering Period, a Participant
Options will receive options to purchase a number of shares of
Common Stock with funds withheld from his Compensation.
Such number of shares will be determined at the end of the
Offering Period according to the following procedure:
Step 1 - Determine the amount the Company withheld
from Compensation since the beginning of the
Offering Period;
Step 2 - Determine the amount that represents 85% of
the lower of Fair Market Value of a share of Common
Stock on the (I) first day of the Offering Period,
or (II) the last day of the Offering Period; and
Step 3 - Divide the amount determined in Step 1 by
the amount determined in Step 2 and round down the
quotient to the nearest whole number.
Fair Market The Fair Market Value of a share of Common Stock for
Value purposes of the Plan as of each date described in Step 2
will be determined as follows:
if the Common Stock is traded on a national
securities exchange, the closing sale price on that
date;
if the Common Stock is not traded on any such
exchange, the closing sale price as reported by the
National Association of Securities Dealers, Inc.
Automated Quotation System ("Nasdaq") for such date;
if no such closing sale price information is
available, the average of the closing bid and asked
prices as reported by Nasdaq for such date; or
if there are no such closing bid and asked prices,
the average of the closing bid and asked prices as
reported by any other commercial service for such
date.
For January 1 and any other date described in Step 2 that
is not a trading day, the Fair Market Value of a share of
Common Stock for such date shall be determined by using the
closing sale price or the average of the closing bid and
asked prices, as appropriate, for the immediately
B-3
preceding trading day.
No Participant shall receive options:
if, immediately after the grant, that Participant
would own shares, or hold outstanding options to
purchase shares, or both, possessing 5% or more of
the total combined voting power or value of all
classes of shares of the Company or any
Subsidiaries; or
that permit the Participant to purchase shares under
all employee stock purchase plans of the Company and
any Subsidiary with a Fair Market Value (determined
at the time the options are granted) that exceeds
$25,000 in any calendar year.
EXERCISE PRICE The exercise price of all options granted for an Offering
Period is 85% of the lower of Fair Market Value of a share
of Common Stock on (I) the first day of the Offering Period
or (II) the last day of the Offering Period.
Exercise Unless a Participant effects a timely withdrawal pursuant
Of Option to the Withdrawal paragraph below, his option for the
purchase of shares of Common Stock during an Offering
Period will be automatically exercised as of the last day
of the Offering Period for the purchase of the maximum
number of full shares that the sum of the payroll
deductions credited to the Participant's account during
such Offering Period can purchase pursuant to the formula
specified in Granting of Options.
Any payroll deductions credited to a Participant's account
during the Offering Period that are not used for the
purchase of shares will be treated as follows:
If the Participant has elected to withdraw from the
ESPP as of the end of the Offering Period, the
Company will deliver the amount of the payroll
deductions to the Participant.
The amount of any other excess payroll deductions
will be applied to the purchase of shares in the
immediately succeeding Offering Period.
Delivery Of As soon as administratively feasible after the options are
Common used to purchase Common Stock, the Company will deliver to
Stock each Participant or, in the alternative, to a custodian
that the Committee designates, the shares of Common Stock
the Participant purchased upon the exercise of the option.
If shares are delivered to a custodian, the Participant may
elect at any time thereafter to take possession of the
shares or to have the Committee deliver the shares to any
brokerage firm. The Committee
B-4
may, in its discretion, establish a program for cashless
sales of Common Stock received under the ESPP.
Subsequent A Participant will be deemed to have elected to participate
Offerings in each subsequent Offering Period following his initial
election to participate in the ESPP, unless the Participant
files a written withdrawal notice with the Human Resources
Department at least ten days before the beginning of the
Offering Period as of which the Participant desires to
withdraw from the ESPP.
Withdrawal A Participant may withdraw all, but not less than all,
From the payroll deductions credited to his account for an Offering
Plan Period before the end of such Offering Period by delivering
a written notice to the Human Resources Department on
behalf of the Committee at least thirty days before the end
of such Offering Period. A Participant who for any reason,
including retirement, termination of employment, or death,
ceases to be an Employee before the last day of any
Offering Period will be deemed to have withdrawn from the
ESPP as of the date of such cessation.
Upon the withdrawal of a Participant from the ESPP under
the terms of the preceding paragraph, his outstanding
options under the ESPP will immediately terminate.
If a Participant withdraws from the ESPP for any reason,
the Company will pay to the Participant all payroll
deductions credited to his account or, in the event of
death, to the persons designated as provided in Designation
of Beneficiary, as soon as administratively feasible after
the date of such withdrawal and no further deductions will
be made from the Participant's Compensation.
A Participant who has elected to withdraw from the ESPP may
resume participation in the same manner and pursuant to the
same rules as any Employee making an initial election to
participate in the ESPP, i.e., he may elect to participate
in the next following Offering Period so long as he files
the authorization form by the deadline for that Offering
Period. Any Participant who is subject to Section 16 of the
Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and who withdraws from the ESPP for any reason will
only be permitted to resume participation in a manner that
will permit transactions under the ESPP to continue to be
exempt within the meaning of Rule 16b-3, as issued under
the Exchange Act.
Stock Subject The shares of Common Stock that the Company will sell to
To Plan Participants under the ESPP will be shares of authorized
but unissued Common Stock. The maximum number of shares
made available for sale under the ESPP will be 1,200,000
(subject to the provisions in Adjustments
B-5
upon Changes in Capital Stock). If the total number of
shares for which options are to be exercised in an Offering
Period exceeds the number of shares then available under
the ESPP, the Company will make, so far as is practicable,
a pro rata allocation of the shares available.
A Participant will have no interest in shares covered by
his option until the Participant exercises the option.
Shares that a Participant purchases under the ESPP will be
registered in the name of the Participant.
The Company will not issue fractional shares pursuant to
the ESPP, but the Administrator may, in its discretion,
direct the Company to make a cash payment in lieu of
fractional shares.
Adjustments Subject to any required action by the Company (which it
Upon Changes shall promptly take) or its stockholders, and subject to
In Capital Stock the provisions of applicable corporate law, if, during an
Offering Period,
the outstanding shares of Common Stock increase or
decrease or change into or are exchanged for a
different number or kind of security by reason of
any recapitalization, reclassification, stock split,
reverse stock split, combination of shares, exchange
of shares, stock dividend, or other distribution
payable in capital stock, or
some other increase or decrease in such Common Stock
occurs without the Company's receiving
consideration,
the Administrator will make a proportionate and appropriate
adjustment in the number of shares of Common Stock
underlying the options, so that the proportionate interest
of the Participant immediately following such event will,
to the extent practicable, be the same as immediately
before such event. Any such adjustment to the options will
not change the total price with respect to shares of Common
Stock underlying the Participant's election but will
include a corresponding proportionate adjustment in the
price of the Common Stock, to the extent consistent with
Section 424 of the Code.
The Administrator will make a commensurate change to the
maximum number and kind of shares provided in the Stock
Subject to Plan section.
Any issue by the Company of any class of preferred stock,
or securities convertible into shares of common or
preferred stock of any class, will not affect, and no
adjustment by reason thereof will be made with
B-6
respect to, the number of shares of Common Stock subject to
any options or the price to be paid for stock except as
this Adjustments section specifically provides. The grant
of an option under the Plan will not affect in any way the
right or power of the Company to make adjustments,
reclassifications, reorganizations or changes of its
capital or business structure, or to merge or to
consolidate, or to dissolve, liquidate, sell, or transfer
all or any part of its business or assets.
Substantial Upon a Substantial Corporate Change, the Plan and the
corporate offering will terminate unless provision is made in writing
change in connection with such transaction for
the assumption or continuation of outstanding
elections, or
the substitution for such options or grants of any
options or grants covering the stock or securities
of a successor employer corporation, or a parent or
subsidiary of such successor, with appropriate
adjustments as to the number and kind of shares of
stock and prices, in which event the options will
continue in the manner and under the terms so
provided.
If an option would otherwise terminate pursuant to the
preceding sentence, the optionee will have the right, at
such time before the consummation of the transaction
causing such termination as the Board reasonably
designates, to exercise any unexercised portions of the
option.
A Substantial Corporate Change means the
dissolution or liquidation of the Company,
merger, consolidation, or reorganization of the
Company with one or more corporations in which the
Company is not the surviving corporation,
the sale of substantially all of the assets of the
Company to another corporation, or
any transaction (including a merger or
reorganization in which the Company survives)
approved by the Board that results in any person or
entity (other than any affiliate of the Company as
defined in Rule 144(a)(1) under the Securities Act)
owning 100% of the combined voting power of all
classes of stock of the Company.
B-7
Designation of A Participant may file with the Committee a written
Beneficiary designation of a beneficiary who is to receive any payroll
deductions credited to the Participant's account under the
ESPP or any shares of Common Stock owed to the Participant
under the ESPP if the Participant dies. A Participant may
change a beneficiary at any time by filing a notice in
writing with the Human Resources Department on behalf of
the Committee.
Upon the death of a Participant and upon receipt by the
Committee of proof of the identity and existence of the
Participant's designated beneficiary, the Company shall
deliver such cash or shares, or both, to the beneficiary.
If a Participant dies and is not survived by a beneficiary
that the Participant designated in accordance with the
immediate preceding paragraph, the Company will deliver
such cash or shares, or both, to the personal
representative of the estate of the deceased Participant.
If, to the knowledge of the Committee, no personal
representative has been appointed within 90 days following
the date of the Participant's death, the Committee, in its
discretion, may direct the Company to deliver such cash or
shares, or both, to the surviving spouse of the deceased
Participant, or to any one or more dependents or relatives
of the deceased Participant, or if no spouse, dependent or
relative is known to the Committee, then to such other
person as the Committee may designate.
No designated beneficiary may acquire any interest in such
cash or shares before the death of the Participant.
Subsidiary Employees of Company Subsidiaries will be entitled to
Employees participate in the ESPP, except as otherwise designated by
the Board of Directors or the Committee.
Eligible Subsidiary means each of the Company's
Subsidiaries, except as the Board otherwise specifies.
Subsidiary means any corporation (other than the Company)
in an unbroken chain of corporations beginning with the
Company if, at the time an option is granted to a
Participant under the ESPP, each of the corporations (other
than the last corporation in the unbroken chain) owns stock
possessing 50% or more of the total combined voting power
of all classes of stock in one of the other corporations in
such chain.
Transfers, A Participant may not assign, pledge, or otherwise dispose
Assignments, of payroll deductions credited to the Participant's account
and Pledges or any rights to exercise an option or to receive shares of
Common Stock under the ESPP other than by will or the laws
of descent and distribution or pursuant to a qualified
domestic relations order, as defined in the Employee
Retirement
B-8
Income Security Act. Any other attempted assignment, pledge
or other disposition will be without effect, except that
the Company may treat such act as an election to withdraw
under the Withdrawal section.
Amendment Or The Board of Directors of the Company may at any time
Termination terminate or amend the ESPP. Any amendment of the ESPP that
Of Plan (i) materially increases the benefits to Participants, (ii)
materially increases the number of securities that may be
issued under the ESPP, or (iii) materially modifies the
eligibility requirements for participation in the ESPP must
be approved by the shareholders of the Company to take
effect. The Company shall refund to each Participant the
amount of payroll deductions credited to his account as of
the date of termination as soon as administratively
feasible following the effective date of the termination.
Notices All notices or other communications by a Participant to the
Committee or the Company shall be deemed to have been duly
given when the Human Resources Department or the Secretary
of the Company receives them or when any other person the
Company designates receives the notice or other
communication in the form the Company specifies.
General Assets Any amounts the Company invests or otherwise sets aside or
segregates to satisfy its obligations under this ESPP will
be solely the Company's property (except as otherwise
required by Federal or state wage laws), and the optionee's
claim against the Company under the ESPP, if any, will be
only as a general creditor. The optionee will have no
right, title, or interest whatever in or to any investments
that the Company may make to aid it in meeting its
obligations under the ESPP. Nothing contained in the ESPP,
and no action taken pursuant to its provisions, will create
or be construed to create an implied or constructive trust
of any kind or a fiduciary relationship between the Company
and any Employee, Participant, former Employee, former
Participant, or any beneficiary.
Privileges of No Participant and no beneficiary or other person claiming
Stock Ownership under or through such Participant will have any right,
title, or interest in or to any shares of Common Stock
allocated or reserved under the Plan except as to such
shares of Common Stock, if any, that have been issued to
such Participant.
Limitations on Notwithstanding any other provisions of the ESPP, no
Liability individual acting as a director, employee, or agent of the
Company shall be liable to any Employee, Participant,
former Employee, former Participant, or any spouse or
beneficiary for any claim, loss, liability or expense
incurred in connection with the ESPP, nor shall such
individual be personally liable because of any contract or
other instrument he executes in such other capacity. The
Company will indemnify and hold harmless each director,
employee, or agent of the Company to whom any duty or power
relating
B-9
to the administration or interpretation of the ESPP has
been or will be delegated, against any cost or expense
(including attorneys' fees) or liability (including any sum
paid in settlement of a claim with the FTI Board's
approval) arising out of any act or omission or act
concerning this ESPP unless arising out of such person's
own fraud or bad faith.
No Employment Nothing contained in this Plan constitutes an employment
Contract contract between the Company or an Eligible Subsidiary and
any Employee. The ESPP does not give an Employee any right
to be retained in the Company's employ, nor does it enlarge
or diminish the Company's right to terminate the Employee's
employment.
Duration of ESPP Unless the FTI Board extends the Plan's term, no Offering
Period will begin after December 31, 2006.
Applicable Law The laws of the State of Maryland (other than its choice of
law provisions) govern the ESPP and its interpretation.
Approval of The ESPP, as amended in 2003, must be submitted to the
Stockholders stockholders of the Company for their approval within 12
months after the Board of Directors of the Company adopts
the amended ESPP. The adoption of the amended ESPP is
conditioned upon the approval of the stockholders of the
Company, and failure to receive their approval will render
the 2003 amendment to the ESPP void and of no effect.
B-10
Exhibit C
FTI CONSULTING, INC.
CHARTER OF AUDIT COMMITTEE
OF THE
BOARD OF DIRECTORS
(as adopted on March 28, 2000 and
amended on March 23, 2003)
Organization and Operation
There shall be a committee of the Board of Directors to be known as the
Audit Committee ("Audit Committee"). The Audit Committee shall be comprised of
at least three directors who are independent of management and FTI Consulting,
Inc. (the "Company"). Members of the Audit Committee shall be considered
independent if they meet the independence requirements of the New York Stock
Exchange, Section 10A of the Securities Exchange Act of 1934 (the "Exchange
Act") and the rules and regulations of the Securities and Exchange Commission.
All Audit Committee members must be financially literate, and at least one
member must have accounting or related financial management expertise. Audit
Committee members shall not simultaneously serve on the audit committees of more
than two other public companies.
The members of the Audit Committee shall be appointed annually by a
majority vote of the entire Board of Directors, and each shall serve until his
or her successor is duly elected and qualified or until such member's earlier
resignation or removal. The members of the Audit Committee may be removed, with
or without cause, by a majority vote of the Board of Directors.
If a Chair has not been elected by the Board of Directors in accordance
with the Corporate Governance Guidelines, the members of the Audit Committee
shall designate a Chair by majority vote of the members of the Audit Committee.
The Chair shall preside at all sessions of the Audit Committee and set the
agenda for each Audit Committee meeting. The Chairman of the Board of Directors
or the Chair of the Audit Committee may call a meeting of the Audit Committee.
The Audit Committee shall cause to be made and retain complete and accurate
minutes of its meetings.
Formal action to be taken by the Audit Committee shall be by unanimous
written consent or by the affirmative vote of a majority of the Audit Committee
members present (in person or by conference telephone) at a meeting at which a
quorum is present. A quorum shall consist of at least one-half of the members of
the Audit Committee. Any non-management member of the Board of Directors may, at
his or her option, attend a meeting of the Audit Committee but shall not be
counted in determining the presence of a quorum and shall not be entitled to
vote.
In fulfilling its responsibilities, the Audit Committee shall be entitled
to delegate any or all of its responsibilities to one or more subcommittees of
the Audit Committee.
Meetings
The Audit Committee shall hold meetings as deemed necessary or desirable by
the Chair of the Audit Committee. In addition to such meetings of the Audit
Committee as may be required to perform the functions described under
"Responsibilities and Duties" below, the Audit Committee shall meet at least
four times per year on a quarterly basis. The Audit Committee shall meet in
separate executive sessions
C-1
during each of its four regularly scheduled meetings with Company management,
the senior internal auditing executive and the Company's independent auditors to
discuss any matters that the Audit Committee (or any of these groups) believes
should be discussed privately; while the Audit Committee is not required to
provide a written report of such executive sessions, it is required to inform
management of any concerns or material issues arising from such sessions
Responsibilities and Duties
The Audit Committee shall provide assistance to the directors in fulfilling
their responsibility to the stockholders, potential stockholders, and investment
community relating to the corporate accounting and reporting practices of the
Company and oversight of (1) the quality and integrity of financial reports of
the Company, (2) the Company's compliance with legal and regulatory
requirements, (3) the independent auditors' qualifications and independence and
(4) the performance of the Company's internal audit function and independent
auditors. In so doing, it is the responsibility of the Audit Committee to
maintain free and open communication between the directors, the independent
auditors and the financial management of the Company.
In carrying out its responsibilities, the Audit Committee believes its
policies and procedures should remain flexible, in order to best react to
changing conditions and to ensure to the directors and stockholders that the
corporate accounting and reporting practices of the Company are in accordance
with all requirements and are of the highest quality. The Audit Committee shall
have the sole authority to appoint or replace the independent auditors The Audit
Committee shall be directly responsible for the compensation and oversight of
the work of the independent auditors (including resolution of disagreements
between management and the independent auditors regarding financial reporting)
for the purpose of preparing or issuing an audit report or related work. The
independent auditors shall report directly to the Audit Committee.
The Audit Committee shall preapprove all auditing services and permitted
non-audit services (including the fees and terms thereof) to be performed for
the Company by its independent auditors, subject to the de minimus exceptions
for non-audit services described in Section 10A(i)(1)(B) of the Exchange Act
which are approved by the Audit Committee prior to the completion of the audit.
The Audit Committee may delegate to subcommittees the authority to grant
preapprovals of audit and permitted non-audit services, provided that decisions
of such subcommittee to grant preapprovals shall be presented to the full Audit
Committee at its next scheduled meeting.
The Audit Committee shall have the authority, to the extent it deems
necessary or appropriate, to retain independent legal, accounting or other
advisors. The Company shall provide for appropriate funding, as determined by
the Audit Committee, for payment of compensation to the independent auditors for
the purpose of rendering or issuing an audit report and to any advisors employed
by the Audit Committee.
In carrying out these responsibilities and duties, the Audit Committee
will:
A. Meet with the independent auditors and financial management of the Company
to review the scope of the proposed audit and timely quarterly reviews for
the current year and the procedures to be utilized, the adequacy of the
independent auditor's compensation, and at the conclusion thereof review
such audit or review, including any comments or recommendations of the
independent auditors.
C-2
B. Review with the independent auditors and financial and accounting
personnel, the adequacy and effectiveness of the accounting and financial
controls of the Company, and elicit any recommendations for the improvement
of such internal controls or particular areas where new or more detailed
controls or procedures are desirable.
C. Receive and review reports from inside and outside legal counsel,
regulators and others regarding legal, regulatory and other matters that
may have a material effect on the financial statements or related Company
compliance policies.
D. Inquire of management and the independent auditors about significant risks
or exposures and assess the steps management has taken to minimize such
risks to the Company.
E. Discuss with management the Company's earnings press releases, including
the use of "pro forma" or "adjusted" non-GAAP information, as well as
financial information and earnings guidance provided to analysts, rating
agencies or the public. Such discussion may be done generally (consisting
of discussing the types of information to be disclosed and the types of
presentations to be made).
F. Review the quarterly financial statements with financial management and the
independent auditors prior to the filing of the Form 10-Q and prior to any
press release of results, to determine that the independent auditors do not
take exception to the disclosure and content of the financial statements,
and discuss any other matters required to be communicated to the Audit
Committee by the auditors. The Chair of the Audit Committee may represent
the full Audit Committee for purposes of this review.
G. Review and discuss quarterly reports from the independent auditors on: (1)
all critical accounting policies and practices to be used, (2) all
alternative treatments of financial information within generally accepted
accounting principles that have been discussed with management,
ramifications of the use of such alternative disclosures and treatments,
and the treatment preferred by the independent auditors, and (3) other
material written communications between the independent auditors and
management, such as any management letter or schedule of unadjusted
differences.
H. Review the financial statements to be contained in the annual report to
stockholders with management and the independent auditors to determine that
the independent auditors are satisfied with the disclosure and content of
the financial statements to be presented to the stockholders. Review with
financial management and the independent auditors the results of their
timely analysis of significant financial reporting issues and practices,
including changes in, or adoptions of, accounting principles and disclosure
practices, and discuss any other matters required to be communicated to the
Audit Committee by the auditors. Also review with financial management and
the independent auditors their judgments about the quality, not just
acceptability, of accounting principles and the clarity of the financial
disclosure practices used or proposed to be used, and particularly, the
degree of aggressiveness or conservatism of the organization's accounting
principles and underlying estimates, and other significant decisions made
in preparing the financial statements.
I. Review disclosures made to the Audit Committee by the Company's Chief
Executive Officer and Chief Financial Officer during their certification
process for the Form 10-K and Form 10-Q about any significant deficiencies
in the design or operation of internal controls or material weaknesses
C-3
therein and any fraud involving management or other employees who have a
significant role in the Company's internal controls.
J. Provide sufficient opportunity for the independent auditors and the
internal auditor to meet with the members of the Audit Committee without
members of management present. Among the items to be discussed in these
meetings are the independent auditors' evaluation of the Company's
financial, accounting, and internal auditing personnel, and the cooperation
that the independent auditors received during the course of audit.
K. Discuss with the independent auditors any audit problems or difficulties
and management's response. As appropriate, and at the Audit Committee's
discretion, it may discuss with the national office of the independent
auditors issues on which they were consulted by the Company's audit team
and matters of audit quality and consistency.
L. Report the results of the annual audit to the Board of Directors. If
requested by the Board, invite the independent auditors to attend the full
Board of Directors meeting to assist in reporting the results of the annual
audit or to answer other directors' questions (alternatively, the other
directors, particularly the other independent directors, may be invited to
attend the Audit Committee meeting during which the results of the annual
audit are reviewed).
M. Review and evaluate the lead partner of the independent auditor team.
Ensure the rotation of the lead (or coordinating) audit partner having
primary responsibility for the audit and the audit partner responsible for
reviewing the audit as required by law.
N. Obtain and review a report from the independent auditors at least annually
regarding (1) the independent auditors' internal quality-control
procedures; (2) any material issues raised by the most recent internal
quality-control review, or peer review, of the firm, or by any inquiry or
investigation by governmental or professional authorities within the
preceding five years respecting one or more independent audits carried out
by the firm; and (3) any steps taken to deal with any such issues. Evaluate
the qualifications and performance of the independent auditors, including
considering whether the auditors' quality controls are adequate. The Audit
Committee shall present its conclusions with respect to the independent
auditors to the Board.
O. On an annual basis, obtain from the independent auditors a written
communication delineating all their relationships and professional services
as required by Independence Standards Board Standard No. 1, Independence
Discussions with Audit Committees. In addition, review with the independent
auditors the nature and scope of any disclosed relationships or
professional services, consider whether the provision of permitted
non-audit services, if any, is compatible with maintaining the auditors'
independence, and take, or recommend that the Board of Directors take,
appropriate action to ensure the continuing independence of the auditors.
P. Recommend to the Board policies for the Company's hiring of employees or
former employees of the independent auditor who participated in any
capacity in the audit of the Company.
Q. Obtain from the independent auditors assurance that Section 10A(b) of the
Exchange Act has not been implicated.
R. Obtain reports from management, the Company's senior internal auditing
executive and the independent auditors that the Company and its
subsidiaries are in conformity with applicable legal requirements and the
Company's Policy on Ethics and Business Conduct. Review reports
C-4
and disclosures of insider and affiliated party transactions. Advise the
Board with respect to the Company's policies and procedures regarding
compliance with applicable laws and regulations and with the Company's
Policy on Ethics and Business Conduct.
S. Establish procedures for the receipt, retention and treatment of complaints
received by the Company regarding accounting, internal accounting controls
or auditing matters, and the confidential, anonymous submission by
employees of concerns regarding questionable accounting or auditing
matters.
T. Review the significant reports to management prepared by the internal
auditing department and management's responses.
U. Discuss with the independent auditors and management the internal audit
department responsibilities, budget and staffing and any recommended
changes in the planned scope of the internal audit.
V. Prepare a report of the Audit Committee to be included in the Company's
proxy statement for its annual meeting of stockholders, disclosing whether
(1) the Audit Committee had reviewed and discussed with management and the
independent auditors, as well as discussed within the Audit Committee
(without management or the independent auditors present), the financial
statements and the quality of accounting principles and significant
judgments affecting the financial statements; (2) the Audit Committee
discussed with the auditors the independence of the auditors; and (3) based
upon the Audit Committee's review and discussions with management and the
independent auditors, the Audit Committee had recommended to the Board of
Directors that the audited financials be included in the Company's annual
report on Form 10-K.
W. Include a copy of this Charter in the annual report to stockholders or the
proxy statement at least triennially or the year after any significant
amendment to the Charter.
X. Regularly submit the minutes of all meetings of the Audit Committee to, or
discuss the matters discussed at each Audit Committee meeting with, the
Board of Directors.
Y. Investigate any matter brought to its attention within the scope of its
duties, with the power to retain outside counsel for this purpose if, in
its judgment, that is appropriate.
Z. Obtain the full Board of Directors' approval of any amendments to this
Charter and review and reassess this Charter as conditions dictate but at
least annually.
AA. Annually review the Audit Committee's performance of its responsibilities
and duties and review, reassess the adequacy of this Charter and recommend
to the Board of Directors any improvements to this Charter that the Audit
Committee considers appropriate.
While the Audit Committee has the responsibilities and powers set forth in
this Charter, it is not the duty of the Audit Committee to plan or conduct
audits or to determine that the Company's financial statements and disclosures
are complete and accurate and are in accordance with generally accepted
accounting principles and applicable rules and regulations. These are the
responsibilities of management and the independent auditors.
C-5
Exhibit D
FTI CONSULTING, INC.
CHARTER OF COMPENSATION COMMITTEE
OF THE
BOARD OF DIRECTORS
Organization and Operation
There shall be a committee of the Board of Directors to be known as the
Compensation Committee ("Compensation Committee"). The Compensation Committee
shall be comprised of at least three member of the Board of Directors who are
independent of management and FTI Consulting, Inc. (the "Company"). Members of
the Compensation Committee shall be considered independent if they meet the
independence requirements of the New York Stock Exchange, Section 10A of the
Securities Exchange Act of 1934 (the "Exchange Act") and the rules and
regulations of the Securities and Exchange Commission. Additionally, no director
may serve on the Compensation Committee unless he (1) is a "Non-employee
Director" for purposes of Rule 16b-3 under the Exchange Act, and (2) satisfies
the requirements of an "outside director" for purposes of Section 162(m) of the
Internal Revenue Code.
The members of the Compensation Committee shall be appointed annually by a
majority vote of the entire Board of Directors, and each shall serve until his
or her successor is duly elected and qualified or until such member's earlier
resignation or removal. The members of the Compensation Committee may be
removed, with or without cause, by a majority vote of the Board of Directors.
If a Chair has not been elected by the Board of Directors in accordance
with the Corporate Governance Guidelines, the members of the Compensation
Committee shall designate a Chair by majority vote of the members of the
Compensation Committee. The Chair shall preside at all sessions of the
Compensation Committee and set the agenda for each Compensation Committee
meeting. The Chairman of the Board of Directors or the Chair of the Compensation
Committee may call a meeting of the Compensation Committee. The Compensation
Committee shall make and retain complete and accurate minutes of its meetings.
Formal action to be taken by the Compensation Committee shall be by
unanimous written consent or by the affirmative vote of a majority of the
Compensation Committee members present (in person or by conference telephone) at
a meeting at which a quorum is present. A quorum shall consist of at least
one-half of the members of the Compensation Committee. Any non-management member
of the Board of Directors may, at his or her option, attend a meeting of the
Compensation Committee but shall not be counted in determining the presence of a
quorum and shall not be entitled to vote.
In fulfilling its responsibilities, the Compensation Committee shall be
entitled to delegate any or all of its responsibilities to one or more
subcommittees of the Compensation Committee.
Meetings
The Compensation Committee shall hold meetings as deemed necessary or
desirable by the Chair of the Compensation Committee. In addition to such
meetings of the Compensation Committee as may be required to perform the
functions described under "Responsibilities and Duties" below, the Compensation
Committee shall meet at least semi-annually. The Compensation Committee should
meet
D-1
at least annually with the Company's Chief Executive Officer and such other
senior executives as the Compensation Committee deems appropriate. However, the
Compensation Committee should meet periodically in executive session without the
presence of management.
Responsibilities and Duties
The Compensation Committee discharges the Board of Directors'
responsibilities relating to compensation of the Company's executive officers
and produces an annual report on executive compensation for inclusion in the
Company's proxy statement. The Compensation Committee approves and administers
executive compensation programs in furtherance of the interests of the
stockholders. The Compensation Committee has the responsibility and authority to
oversee and review the Company's overall programs of employee benefits as well
as the Company's policies and terms and conditions applicable to its employees.
In discharging its oversight role, the Compensation Committee is empowered to
study or investigate any matter of interest or concern that the Compensation
Committee deems appropriate and shall have the sole authority to retain outside
counsel or other experts for this purpose, including the sole authority to
approve the fees payable to such counsel or other experts and all other terms of
retention.
The following shall be the principal recurring duties of the Compensation
Committee in carrying out its responsibilities:
A. Review and approve corporate goals and objectives relevant to the
compensation of the Chief Executive Officer; evaluate the performance
of the Chief Executive Officer in light of those goals and objectives;
and establish the level of the Chief Executive Officer's compensation
based on this evaluation.
B. Approve the base and incentive compensation of the Company's other
executive officers.
C. Review and make recommendations to the Board with respect to the
compensation of non-management directors and directors' and officers'
indemnity and insurance matters.
D. Review and make recommendations to the Board of Directors with respect
to existing or proposed incentive compensation, equity-based
compensation plans and overall compensation and benefits.
E. Administer the Company's stock option and employee stock purchase plans
and any other equity-based plans that may be established in the future.
F. Prepare the compensation committee report required to be included in
the proxy statement for the Company's annual meeting of stockholders.
G. Regularly report to the Board of Directors on the Compensation
Committee's activities.
H. Review and recommend to the Board of Directors, or approve, any
contracts or transactions with current or former executive officers of
the Company, including consulting, employment contracts, severance or
termination arrangements and loans to employees made or guaranteed by
the Company.
D-2
I. Annually review the Compensation Committee's performance of its
responsibilities and duties and review, reassess the adequacy of this
Charter and recommend to the Board of Directors any improvements to
this Charter that the Compensation Committee considers appropriate.
D-3
Exhibit E
FTI CONSULTING, INC.
CHARTER OF NOMINATING AND
CORPORATE GOVERNANCE COMMITTEE
OF THE
BOARD OF DIRECTORS
Organization and Operation
There shall be a committee of the Board of Directors to be known as the
Nominating and Corporate Governance Committee ("Committee"). The Committee shall
be comprised of at least three member of the Board of Directors, each of whom
are independent of management and FTI Consulting, Inc. ("Company"). Members of
the Committee shall be considered independent if they meet the independence
requirements of the New York Stock Exchange, Section 10A of the Securities
Exchange Act of 1934 and the rules and regulations of the Securities and
Exchange Commission.
The members of the Committee shall be appointed annually by a majority
vote of the entire Board of Directors, and each shall serve until his or her
successor is duly elected and qualified or until such member's earlier
resignation or removal. The members of the Committee may be removed, with or
without cause, by a majority vote of the Board of Directors.
If a Chair has not been elected by the Board of Directors in accordance
with the Corporate Governance Guidelines, the members of the Committee shall
designate a Chair by majority vote of the members of the Committee. The Chair
shall preside at all sessions of the Committee and set the agenda for each
Committee meeting. The Chairman of the Board of Directors or the Chair of the
Committee may call a meeting of the Committee. The Committee shall cause to be
made and retain complete and accurate minutes of its meetings.
Formal action taken by the Committee shall be by unanimous written
consent or by the affirmative vote of a majority of the Committee members
present (in person or by conference telephone) at a meeting at which a quorum is
present. A quorum shall consist of at least one-half of the members of the
Committee. Any non-management member of the Board of Directors may, at his or
her option, attend a meeting of the Committee but shall not be counted in
determining the presence of a quorum and shall not be entitled to vote.
In fulfilling its responsibilities, the Committee shall be entitled to
delegate any or all of its responsibilities to one or more subcommittees of the
Committee.
Meetings
The Committee shall hold meetings as deemed necessary or desirable by the
Chair of the Committee. In addition to such meetings of the Committee as may be
required to perform the functions described under "Responsibilities and Duties"
below, the Committee shall meet at least semiannually. The Company's Chief
Executive Officer and other senior executives may attend meetings. However, the
Committee should meet periodically in executive session without the presence of
management.
E-1
Responsibilities and Duties
The Committee has the responsibility and authority to supervise and
review the affairs of the Company as they relate to nominations of directors and
corporate governance. The Committee, in discharging its responsibilities, is
empowered to study or investigate any matter of interest or concern that the
Committee deems appropriate and shall have the authority to retain a search firm
to assist in identifying potential director candidates, outside counsel or other
experts for this purpose, including the authority to approve the fees payable to
such search firm, counsel or other experts and all other terms of retention.
The following shall be the principal recurring duties of the Committee in
carrying out its responsibilities:
A. Review and recommend the size and composition of the Board of
Directors.
B. Develop criteria for selecting candidates for election as
directors, identifying, evaluating (including inquiries into the
background of candidates), recruiting and nominating such new
candidates. In choosing candidates for membership on the Board of
Directors, the Committee shall take into account all factors it
considers appropriate, which may include strength of character,
mature judgment, career specialization, relevant technical skills
and the extent to which the candidate would fill a present need on
the Board of Directors.
C. Identify individuals qualified to become directors of the Company
and recommend to the Board of Directors nominees for all
directorships to be filled by the stockholders or by the Board of
Directors.
D. Review and determine whether existing members of the Board of
Directors should stand for reelection, taking into consideration
such candidates as if they were candidates de novo.
E. Develop and administer a process for, at least annually, the
evaluation of the overall performance of the Board of Directors,
this and the other committees and management and make
recommendations to the Board of Directors, as appropriate, for
improvement.
F. Periodically review the Company's Charter and By-Laws and each
committee Charter and recommend to the Board of Directors, as
appropriate, changes to any of the foregoing, creation of
additional committees or elimination of existing committees.
G. Review corporate governance policies and best practices, recommend
to the Board of Directors a set of corporate governance policies
and practices to be applicable to the Company and monitor the
Company's compliance with those policies and practices.
H. Establish and oversee a program for the continuing education of
the Board of Directors relative to the Company's business and the
directors' fiduciary duties.
E-2
I. Be responsible for the process relating to succession planning for
the Chief Executive Officer and other executive officer positions.
J. Report to the Board of Directors on the Committee's activities as
appropriate, but at least annually.
K. Annually review the Committee's performance of its responsibilities
and duties and review, reassess the adequacy of this Charter and
recommend to the Board of Directors any improvements to this
Charter that the Committee considers appropriate.
E-3
PROXY FOR THE ANNUAL MEETING OF STOCKHOLDERS
FTI CONSULTING, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE
BOARD OF DIRECTORS AND MAY BE REVOKED PRIOR TO ITS EXERCISE
The undersigned stockholder(s) of FTI Consulting, Inc. (the "Company")
hereby appoints Messrs. Jack B. Dunn, IV and Theodore I. Pincus, and each of
them singly, as proxies, each with full power of substitution, for and in the
name of the undersigned at the Annual Meeting of Stockholders of FTI Consulting,
Inc. to be held on May 21, 2003, and at any and all adjournments thereof, to
vote all shares of common stock of said Company held of record by the
undersigned on March 14, 2003, as if the undersigned were present and voting the
shares.
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED IN THE MANNER
DIRECTED. IN THE ABSENCE OF ANY DIRECTION, THE SHARES WILL BE VOTED FOR EACH
NOMINEE NAMED IN PROPOSAL 1 AND FOR PROPOSALS 2 THROUGH 4, AND IN ACCORDANCE
WITH THE PROXIES' DISCRETION ON SUCH OTHER BUSINESS THAT MAY PROPERLY COME
BEFORE THE MEETING TO THE EXTENT PERMITTED BY LAW.
(Continued and to be signed on the reverse side)
ANNUAL MEETING OF STOCKHOLDERS OF
FTI CONSULTING, INC.
May 21, 2003
Please date, sign and mail
your proxy card in the
envelope provided as soon
as possible.
Please detach and mail in the envelope provided.
--------------------------------------------------------------------------------
PLEASE SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE. PLEASE MARK YOUR
VOTE IN BLUE OR BLACK INK AS SHOWN HERE [x]
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1. Election of Class I Directors.
Nominees:
[_] FOR ALL NOMINEES ( ) James A. Flick, Jr.
( ) Peter F. O'Malley
[_] WITHHOLD AUTHORITY
FOR ALL NOMINEES
[_] FOR ALL EXCEPT
(See instructions below)
INSTRUCTIONS: To withhold authority to vote for any individual nominee(s), mark
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"FOR ALL EXCEPT" and fill in the circle next to each nominee you
wish to withhold, as shown here: ( )
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To change the address on your account, please check the box at right
and indicate your new address in the address space above. Please note [_]
that changes to the registered name(s) on the account may not be
submitted via this method.
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FOR AGAINST ABSTAIN
2. Amendment of the Company's Charter to increase the [_] [_] [_]
number of shares authorized by 30,000,000.
3. Amendment of the Company's Employee Stock Purchase
Plan, as amended, to increase the number of shares [_] [_] [_]
authorized by 250,000 shares.
4. Ratification of selection of Ernst & Young, LLP to
serve as independent accountants for the Company [_] [_] [_]
for the fiscal year ending December 31, 2003.
5. The proxies are authorized to vote in their discretion upon such other
business as may properly come before the meeting to the extent permitted
by law.
I PLAN TO ATTEND THE MEETING [_]
Please check here if you plan to attend the meeting.
Signature of Stockholder__________________________ Date:____________________
Signature of Stockholder__________________________ Date:____________________
Note: Please sign exactly as your name or names appear on this Proxy. When
shares are held jointly, each holder should sign. When signing as
executor, administrator, attorney, trustee or guardian, please give
full title as such. If the signer is a corporation, please sign full
corporate name by duly authorized officer, giving full title as such.
If signer is a partnership, please sign in partnership name by
authorized person.