SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of
1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to (section) 240.14a-11(c) or (section)
240.14a-12
FORENSIC TECHNOLOGIES INTERNATIONAL CORPORATION
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if Other than the Registrant )
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) 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:
FORENSIC TECHNOLOGIES INTERNATIONAL CORPORATION
2021 RESEARCH DRIVE
ANNAPOLIS, MARYLAND 21401
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 20, 1998
To the Stockholders of Forensic Technologies International Corporation:
Notice is hereby given that the Annual Meeting of Stockholders of Forensic
Technologies International Corporation (the "Company") will be held at the Loews
Annapolis Hotel, 126 West Street, Annapolis, Maryland, on Wednesday, May 20,
1998, at 9:30 a.m., local time, to consider and act upon the following matters:
1. To elect two (2) Class II Directors, each for a three-year term.
2. To approve the amendment to the Company's charter changing the
name of the Company to FTI Consulting, Inc.
3. To approve, ratify and confirm the amendment of the 1997 Stock
Option Plan of the Company.
4. To ratify the appointment by the Board of Directors of Ernst &
Young LLP as the Company's independent auditors for the fiscal
year ending 1998.
5. To transact such other business as may properly come before the
meeting or any adjournments thereof.
Accompanying this notice is a Proxy Statement and a Proxy Card. Whether or
not you expect to be present at the Annual Meeting, please sign and date the
Proxy Card and return it in the enclosed postage-prepaid, self-addressed
envelope provided for that purpose prior to the date of the Annual Meeting.
April 3, 1998 was fixed by the Board of Directors as the record date for
determination of stockholders entitled to notice of and to vote at the Annual
Meeting or any adjournments thereof. Only stockholders of record at the close of
business on April 3, 1998, will be entitled to vote at the Annual Meeting.
If you attend the meeting, you may vote in person if you wish, even though
you have previously returned your proxy.
By Order of the Board of Directors,
Gary Sindler, Secretary
Annapolis, Maryland
April 25 , 1998
FORENSIC TECHNOLOGIES INTERNATIONAL CORPORATION
2021 RESEARCH DRIVE
ANNAPOLIS, MARYLAND 21401
PROXY STATEMENT FOR THE
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 20, 1998
This Proxy Statement is being furnished in connection with the solicitation
of proxies by the Board of Directors of Forensic Technologies International
Corporation (the "Company") for use at the Annual Meeting of Stockholders to be
held on May 20, 1998, at 9:30 a.m. at the Loews Annapolis Hotel, 126 West
Street, Annapolis, Maryland, and at any adjournments or postponements of that
meeting (the "Meeting"). All proxies will be voted in accordance with the
instructions contained in them. If no choice is specified, the proxies will be
voted in favor of the matters set forth in the accompanying Notice of Meeting
and this Proxy Statement. Any proxy may be revoked by a stockholder at any time
before its exercise by delivery of written revocation to the Secretary of the
Company, by executing and delivering a subsequent dated proxy or by attendance
at the Meeting in person.
The Company's Annual Report for the fiscal year ended December 31, 1997, is
being mailed to stockholders with the mailing of this Notice and Proxy Statement
beginning on or about April 25, 1998.
At the Meeting, the stockholders of the Company at the close of business on
April 3, 1998 (the "Record Date"), will be asked to consider and act upon the
following matters: (i) to elect two (2) Class II Directors, each for a
three-year term; (ii) to approve the amendment to the Company's charter changing
the name of the Company to FTI Consulting, Inc.; (iii) to approve, ratify and
confirm the amendment of the 1997 Stock Option Plan of the Company; (iv) to
ratify the appointment by the Board of Directors of Ernst & Young LLP as the
Company's independent auditors for the fiscal year ending 1998; and (v) to
transact such other business as may properly come before the Meeting or any
adjournments thereof. The matters on which the stockholders are being asked to
vote are referred to in this Proxy Statement as the "proposals."
THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS THAT THE STOCKHOLDERS VOTE
FOR ELECTION OF THE BOARD'S NOMINEES FOR DIRECTOR AND FOR APPROVAL OF EACH OF
THE OTHER PROPOSALS.
Information regarding the persons nominated as directors and regarding each
of the other proposals and the reasons for the proposals is set forth in this
Proxy Statement, as well as certain other information regarding the Company.
Stockholders are encouraged to read this Proxy Statement in its entirety before
determining how to vote on the proposals.
The principal executive offices of the Company are located at 2021 Research
Drive, Annapolis, Maryland 21401 and its telephone number is (410) 224-8770.
Stockholders with questions regarding the matters described herein may contact
Gary Sindler, Secretary of the Company at (410) 224-8770.
SOLICITATION, VOTING AND REVOCABILITY OF PROXIES
The close of business on April 3, 1998 has been fixed by the Company's
Board of Directors as the Record Date for determination of stockholders entitled
to vote at the Meeting. On the Record Date there were outstanding and entitled
to vote an aggregate of 4,733,201 shares of common stock, $.01 par value per
share ("Common Stock"), of the Company. Each share is entitled to one vote. The
presence, in person or by proxy, of stockholders entitled to cast a majority of
all the votes entitled to be cast at the Meeting (2,366,601 votes) is necessary
to constitute a quorum. The affirmative vote of a majority of all the votes cast
at the Meeting will constitute stockholder approval of each of the proposals II,
III and IV. The affirmative vote of a plurality of votes cast at the Meeting
will constitute stockholder approval of the election of the nominees for Class
II Directors of the Company. With respect to the election of directors and each
of the proposals, each share of Common Stock is entitled to one vote.
All proxies submitted on the enclosed form of proxy that are properly
executed and returned to the Company prior to commencement of voting at the
Meeting will be voted at the Meeting or any adjournment or postponement thereof
in accordance with the instructions thereon. The Company has named Joseph R.
Reynolds, Jr. and James A. Flick, Jr., or either of them, as attorneys-in-fact
on the proxy cards. All executed but unmarked proxies will be voted FOR the
Board's nominees for director and FOR approval of the other proposals. Any proxy
may be revoked by any stockholder who attends the Meeting and gives notice of
his or her intention to vote in person without compliance with any other
formalities. In addition, any stockholder of the Company may revoke a proxy at
any time before it is voted by executing and delivering a subsequent dated
proxy, attendance at the meeting in person or delivering a written notice
stating that the proxy is revoked to the Company at 2021 Research Drive,
Annapolis, Maryland 21401, attention: Gary Sindler, Secretary. Shares of Common
Stock represented in person or by proxy at the Meeting will be tabulated by the
persons appointed by the Chairman of the Meeting to act as inspectors of
election at the Meeting, whose tabulation will determine whether or not a quorum
is present. Abstentions and brokers' nonvotes will not be counted as votes cast
at the Meeting for purposes of determining the presence of a quorum with respect
to any proposal and the approval of proposals II, III and IV. With respect to
the election of directors, votes may only be cast "for" the election of a
director.
The Board of Directors and Management of the Company do not know of any
matters other than those set forth herein that may come before the Meeting. If
any other matters are properly presented to the Meeting for action, it is
intended that the persons named in the proxy will vote in accordance with their
best judgment on such matters.
The expense of preparing and printing this Proxy Statement and the proxies
solicited hereby, and any filing fees in connection with this Proxy Statement,
will be borne by the Company. In addition to the use of the mails, proxies may
be solicited by officers, directors and regular employees of the Company,
without additional remuneration, by personal interviews, telephone, telegraph,
letter or otherwise. The Company may also request brokerage firms, nominees,
custodians and fiduciaries to forward proxy materials to beneficial owners of
shares of Common Stock the Company and will provide reimbursement for the cost
of forwarding the materials in accordance with customary charges.
2
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of April 3, 1998 (except as otherwise
footnoted below), certain information regarding the beneficial ownership of
Common Stock of (i) each person known by the Company to be the beneficial owner
of more than five percent of the outstanding Common Stock; (ii) each of the
directors, nominees for director and named executive officers of the Company;
and (iii) all executive officers and directors of the Company as a group.
BENEFICIAL OWNERSHIP
------------------------------------ TYPE OF
NO. OF SHARES PERCENT OF CLASS SECURITIES
--------------- ------------------ -------------
Grotech III Pennsylvania Fund, LP (1) 27,841 .6% Common Stock
9690 Deereco Road, Timonium, MD 21093
Grotech III Companion Fund, LP (1) 46,437 1.0% Common Stock
9690 Deereco Road, Timonium, MD 21093
Grotech Partners III, LP (1) 389,722 8.2% Common Stock
9690 Deereco Road, Timonium, MD 21093
Joseph R. Reynolds, Jr. (2) 441,416 9.3% Common Stock
Daniel W. Luczak (2) -0- 0% Common Stock
Jack B. Dunn, IV (2)(3) 280,823 5.9% Common Stock
Dennis J. Shaughnessy (1)(2)(4) 484,300 10.2% Common Stock
George P. Stamas (2)(5) 26,138 .6% Common Stock
Gary Sindler (2)(6) 53,334 1.1% Common Stock
Patrick A. Brady (2)(7) 67,401 1.4% Common Stock
Peter F. O'Malley (2)(8) 33,763 .7% Common Stock
James A. Flick, Jr. (2)(9) 32,031 .7% Common Stock
McCullough, Andrews & Cappiello, Inc. 210,000 4.4% Common Stock
101 California Street
San Francisco, CA 94111 (10)
State of Wisconsin Investment Board (11) 313,000 6.6% Common Stock
P.O. Box 7842
Madison, WI 53707
All directors and executive officers as a group 1,536,990 32.5% Common Stock
(9 persons) (2)
- ----------
(1) Grotech III Pennsylvania Fund, LP, Grotech III Companion Fund, LP and
Grotech Partners III, LP are affiliates of Grotech Capital Group. Dennis J.
Shaughnessy, a director of the Company, is a General Partner of each of
those Funds. Mr. Shaughnessy, Frank A. Adams, Stuart D. Frankel and Hugh A.
Waltzen each have the right to exercise sole voting and dispositive power
over the shares.
(2) The address for all executive officers and directors is c/o the Company,
2021 Research Drive, Annapolis, Maryland 21401.
(3) Includes 198,093 shares of Common Stock issuable upon the exercise of stock
options exercisable within 60 days under the 1992 and 1997 Stock Option
Plans. Includes 12,730 shares over which Mr. Dunn and his wife, Elizabeth
Dunn, share voting and investment power.
(4) Includes an aggregate of 454,000 shares of Common Stock held by Grotech III
Pennsylvania Fund, LP, Grotech III Companion Fund, LP and Grotech Partners
III, LP, affiliates of Grotech Capital Group. Dennis J. Shaughnessy, a
director of the Company, is a General Partner of each of those Funds. Mr.
Shaughnessy, Frank A. Adams, Stuart D. Frankel and Hugh A. Waltzen each
have the right to exercise sole voting and dispositive power over the
shares. Includes 20,300 shares of Common Stock issuable upon the exercise
of stock options exercisable within 60 days under the 1992 and 1997 Stock
Option Plans.
(5) Includes 20,300 shares of Common Stock issuable upon the exercise of stock
options exercisable within 60 days under the 1992 and 1997 Stock Option
Plans. Includes 5,838 shares over which Mr. Stamas and his wife, Georgia
Stamas, share voting and investment power.
(6) Includes 53,334 shares of Common Stock issuable upon the exercise of stock
options exercisable within 60 days under the 1992 and 1997 Stock Option
Plans.
3
(7) Includes 67,401 shares of Common Stock issuable upon the exercise of stock
options exercisable within 60 days under the 1992 and 1997 Stock Option
Plans.
(8) Includes 20,300 shares of Common Stock issuable upon the exercise of stock
options exercisable within 60 days under the 1992 and 1997 Stock Option
Plans.
(9) Includes 20,300 shares of Common Stock issuable upon the exercise of stock
options exercisable within 60 days under the 1992 and 1997 Stock Option
Plans.
(10) Robert F. McCullough, David H. Andrews and Frank A. Cappiello, Jr., have
shared voting and dispositive power over the shares. Based on Schedule 13G
filed with the Securities and Exchange Commission on January 20, 1998.
(11) Based on Schedule 13G filed with the Securities and Exchange Commission on
January 20, 1998.
PROPOSAL 1 -- ELECTION OF DIRECTORS
The Company's Amended and Restated Articles of Incorporation provides that
the Company's Board of Directors will consist of three classes. The members of
each classes will be elected for three-year terms. The Company currently has
seven directors, of which two directors denominated as Class II Directors are to
be elected at the Meeting. The terms of the Class III and Class I Directors will
expire at the Annual Meetings of Stockholders to be held in 1999 and 2000,
respectively.
CLASS II NOMINEES FOR TERMS EXPIRING IN 1998
It is proposed to elect two Class II directors of the Company to serve
until the next annual meeting at which Class II directors are to be elected in
2001 and until their successors are elected and qualified. Each nominee is
currently a director of the Company. At the Meeting, the persons named in the
enclosed proxy will vote to elect the directors listed below, unless the proxy
is marked otherwise. Each of the nominees has indicated his willingness to
serve, if elected; however, if any nominee should be unable to serve, the
proxies may be voted for a substitute nominee designated by the Board of
Directors.
DIRECTOR PRINCIPAL OCCUPATION AND BUSINESS
NOMINEE AGE SINCE EXPERIENCE DURING THE PAST FIVE YEARS
- ------------------------------- ----- ---------- --------------------------------------------------------
Dennis J. Shaughnessy ......... 50 1992 Since September 1989, Mr. Shaughnessy has been a Managing
Director of Grotech Capital Group, a ven- ture capital
firm headquartered in Timonium, Mary- land. Prior to that
time, Mr. Shaughnessy was the Chief Executive Officer of
CRI International, Inc. Mr. Shaughnessey is a Director of
TESSCO Technologies, Inc., Secure Computing Corporation,
U.S. Vision, Inc. and Polk Audio, Inc.
George P. Stamas .............. 47 1992 Since April 1996, Mr Stamas has been a partner in the law
firm of Wilmer, Cutler & Pickering. Prior to that time,
Mr. Stamas was a partner in the law firm of Piper &
Marbury. Mr. Stamas is counsel to, and a limited partner
of, the Baltimore Orioles.
4
CLASS III DIRECTORS WHOSE TERMS EXPIRE IN 1999
DIRECTOR PRINCIPAL OCCUPATION AND BUSINESS
NOMINEE AGE SINCE EXPERIENCE DURING THE PAST FIVE YEARS
- ---------------------------------- ----- ---------- --------------------------------------------------------
Jack B. Dunn, IV ................. 47 1992 Since January 1996, Mr. Dunn has been President of the
Company. Since October 1995, Mr Dunn has served as Chief
Executive Officer of the Company. From May 1994 through
October 1995, he served as Chief Operating Officer of the
Company. From October 1992 through September 1995, he
served as the Company's Chief Financial Officer. Mr. Dunn
is a limited partner of the Baltimore Orioles. Prior to
joining the Company, he was a Managing Director of Legg
Mason Wood Walker, Incorporated; and directed its Balti-
more corporate finance and investment banking activ-
ities.
Daniel W. Luczak ................. 55 1982 Since October 1995, Mr. Luczak has been Chairman of the
Board of the Company. He co-founded the Company in 1982
and served as the Company's Chief Executive Officer from
September 1988 until October 1995. Mr. Luczak has over 18
years of experience in the litigation support industry.
Joseph R. Reynolds, Jr., P.E...... 56 1982 Since January 1996, Mr. Reynolds has served as Vice
Chairman of the Board of the Company. Mr. Reynolds
co-founded the Company in 1982 and served as the
Company's President from September 1988 until January
1996. Mr. Reynolds is also Chairman, Applied Sciences
Consulting for the Company. Mr. Reynolds has twenty-five
years of forensic engineering experience. Mr. Reynolds
was the founding Chairman of The Johns Hopkins University
Society of Engineering Alumni and is a member of the
National Advisory Council for the School of Engineering
and the Executive Committee for the Johns Hopkins
University Alumni Association.
CLASS I DIRECTORS WHOSE TERMS EXPIRE IN 2000
DIRECTOR PRINCIPAL OCCUPATION AND BUSINESS
NOMINEE AGE SINCE EXPERIENCE DURING THE PAST FIVE YEARS
- ----------------------------- ----- ---------- ---------------------------------------------------------------
James A. Flick, Jr. ......... 63 1992 Since 1995, Mr. Flick has been President and Chief Ex-
ecutive Officer of the Dome Corporation, a real estate
development and management services company. From 1991
through 1994, Mr. Flick was an Executive Vice President
of Legg Mason Wood Walker, Incorporated. Mr. Flick is a
director of the Ryland Group, Inc., Capital One Financial
Corporation; and Bethlehem Steel Credit Affiliates and
Youth Services International, Inc.
5
DIRECTOR PRINCIPAL OCCUPATION AND BUSINESS
NOMINEE AGE SINCE EXPERIENCE DURING THE PAST FIVE YEARS
- --------------------------- ----- --------- -----------------------------------------------------------------
Peter F. O'Malley ......... 59 1992 Since 1989, Mr. O'Malley has been Of Counsel to the law
firm of O'Malley, Miles, Nylen & Gilmore. Prior to that
time he was Managing Partner of O'Malley & Miles. Mr.
O'Malley currently serves as the President of Aberdeen
Creek Corporation, a privately-held company engaged in
investment, business consulting and development
activities, and is a director of Potomac Electric Power
Company, Giant Food Inc. and Legg Mason, Inc.
NON-DIRECTOR EXECUTIVE OFFICERS
PRINCIPAL OCCUPATION AND BUSINESS
NOMINEE AGE EXPERIENCE DURING THE PAST FIVE YEARS
- --------------------------- ----- -----------------------------------------------------------------
Patrick A. Brady ......... 44 Since July 1996, Mr. Brady has been Chief Operating
Officer of the Company. From September 1994 to July
1996, Mr. Brady was Executive Vice President and General
Manager of Visual Communications and Trial Consulting
Services for the Company. Prior to that time, Mr. Brady
spent ten years with the Company specializing in project
management and the development of project management
methodologies for deal- ing with major failure
investigations and complex litigation matters.
Gary Sindler ............. 51 Since July 1996, Mr. Sindler has been Executive Vice
President, Secretary and Chief Financial Officer of the
Company. From August 1993 to July 1996, Mr. Sindler was
Chief Financial Officer of Aon Risk Services of New
York, Inc. Prior to 1993, he held various senior level
positions in finance and administration with Willis
Corroon, PLC and Alexander & Alexander Services Inc.,
two international insurance brokerage firms.
BOARD AND COMMITTEE MEETINGS
During the last fiscal year, the Board of Directors held a total of seven
meetings. All directors attended at least 75% of their scheduled Board meetings
and meetings held by Committees of which they were members.
The Audit Committee consists of Messrs. Flick, O'Malley and Shaughnessy. It
oversees actions taken by the Company's independent auditors and recommends the
engagement of auditors. During the last fiscal year, the Audit Committee held
two meetings.
The Compensation Committee consists of Messrs. Flick, O'Malley and
Shaughnessy. It makes recommendations to the Board of Directors with respect to
the compensation of executives of the Company and administers the Company's 1997
Stock Option Plan, incentive plans and employee benefit plans. During the last
fiscal year, the Compensation Committee held two meetings.
The Board of Directors does not have a Nominating Committee.
COMPENSATION OF DIRECTORS
The Company reimburses its directors for their out-of-pocket expenses
incurred in the performance of their duties as directors of the Company. The
Company does not pay fees to its directors for attendance at meetings.
Non-employee directors are eligible to receive grants of options to acquire
Common
6
Stock under the 1997 Stock Option Plan. Under the current, pre-amendment 1997
Stock Option Plan, each director who is re-elected or continues as a
non-employee director after an Annual Meeting would automatically be granted an
option to purchase 4,200 shares of Common Stock of the Company at the fair
market value on the date of grant. The options would become exercisable one
third after six months after grant, two-thirds after one year after grant and in
full after two years after grant and would have a term of ten years. As
described under Proposal 3, the Board of Directors has amended the Plan,
contingent on stockholder approval, to increase the option compensation to
12,500 shares of Common Stock. Messrs. Shaughnessy and Stamas, who are standing
for election, are non-employee directors of the Company. The other non-employee
directors of the Company are Messrs. Flick, and O'Malley. At April 3, 1998,
92,400 non-qualified stock options had been granted to non-employee directors
with 56,000 of such options currently exercisable.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF THE NOMINATED
DIRECTORS.
PROPOSAL 2 -- AMENDMENT TO THE COMPANY'S CHARTER
The Board of Directors proposes that the stockholders of the Company
approve an amendment to the Charter of the Company changing the Company's name
to FTI Consulting, Inc. The Board of Directors believes that the name change is
more indicative of the current business practices and strategic direction of the
Company while capitalizing on the market recognition of the FTI "brand name"
established over the past 16 years. Additionally, the name change will provide a
clearer identity in both the business and financial marketplaces. The operating
divisions of the Company will continue using names currently recognized in their
specific markets.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE AMENDMENT TO THE CHARTER.
PROPOSAL 3 -- AMENDMENT TO 1997 STOCK OPTION PLAN
The Board of Directors proposes that the stockholders of the Company
approve an amendment to the Forensic Technologies International Corporation 1997
Stock Option Plan (the "1997 Plan" or the "Plan") to increase the number of
shares of Common Stock authorized to be issued pursuant to stock options granted
under the Plan by an additional one million shares. The 1997 Stock Option Plan
became effective March 25, 1997 (the "Effective Date"). As the Company continues
to experience growth, the Company needs to increase the authorized shares to
continue to grant options to its employees, including employees hired through
possible future acquisitions.
The following is a summary of the 1997 Plan. This summary description is a
fair and complete summary of the 1997 Plan; however, it is qualified in its
entirety by reference to the full text of the 1997 Plan, which is attached to
this Proxy Statement as Exhibit A.
GENERAL
Purpose. The 1997 Plan offers eligible employees and non-employee directors
the opportunity to purchase shares of Common Stock. The Plan is intended to
encourage employees and non-employee directors to acquire an equity interest in
the Company, which thereby will create a stronger incentive to expend maximum
effort for the growth and success of the Company and its subsidiaries. The
Company may use funds received under the Plan for any general corporate purpose.
Eligibility. All employees of the Company and its subsidiaries and those
non-employee directors who are not employees of the Company and its subsidiaries
("Eligible Directors") are eligible to participate in the 1997 Plan. As of April
3, 1998, there were 260 employees and four Eligible Directors eligible to
receive grants under this Plan.
Shares Available Under the 1997 Plan. The 1997 Plan currently authorizes
the issuance of up to 1,000,000 shares of Common Stock pursuant to options
granted under the Plan. The proposed amendment to the 1997 Plan would increase
the number of authorized shares of Common Stock reserved for issuance pursuant
to options granted under the 1997 plan to 2,000,000. The shares of Common Stock
will
7
come from authorized but unissued shares or from shares of Common Stock owned by
the Company, including shares of Common Stock purchased on the market. The
number of shares issuable under the Plan will be adjusted for stock dividends,
stock splits, reclassifications and other changes affecting the Company's Common
Stock. If any option granted under the 1997 Plan expires or terminates prior to
exercise in full, the shares subject to that option will be available for future
grants under the Plan. The maximum number of shares that may be granted under
the Plan to any individual in a calendar year is 500,000 shares (increased by
the amendment from 150,000), subject to adjustment for stock dividends, stock
splits, reclassifications, corporate transactions or other changes affecting
Common Stock. Because the Plan provides for discretionary grants of options, the
specific amounts to be granted to particular persons cannot be determined in
advance. As of April 3, 1998, there were 4,733,601 shares of Common Stock
outstanding and 1,317,429 shares of Common Stock reserved for issuance upon
exercise of outstanding options (of which 809,379 shares were previously granted
under the Company's 1992 Stock Option Plan (as amended and restated), which plan
has been superseded by the 1997 Plan), for a total of 6,051,030 shares issued or
reserved for issuance. If the amendment to the 1997 Plan is approved and options
for all of the shares were granted under the 1997 Plan at this time, the
1,314,150 shares remaining under the 1997 Plan would constitute 17.8% of the
shares of Common Stock that would be issued or reserved for issuance.
Administration. The 1997 Plan is administered by the Board of Directors or
the Compensation Committee of the Board of Directors (the "Committee"). The
Committee has the authority and discretion to select employees to participate in
the Plan, to grant options to employees under the Plan, to specify the terms and
conditions of options granted to employees (within the limitations of the Plan),
and to otherwise interpret and construe the terms of the Plan and any agreements
governing options granted under the Plan. The Committee has no discretion over
the options granted to Eligible Directors.
OPTIONS GRANTED UNDER THE PLAN
General. All options granted under the Plan will be evidenced by a written
agreement setting forth the terms and conditions governing the option. The
Committee has broad discretion to determine the timing, amount, exercisability
and other terms and conditions of options granted to employees, but has no
discretion over the terms and conditions of options granted to Eligible
Directors. No options granted under the Plan are assignable or transferable,
other than by will or in accordance with the laws of descent and distribution.
When necessary in connection with an acquisition, the Committee can grant
options that mirror those in effect at the company being acquired.
Options Granted to Employees. Both incentive stock options and nonqualified
stock options are available for employees under the 1997 Plan. For incentive
stock options, the option price will be not less than the fair market value of a
share of Common Stock on the date the option is granted. However, if the
employee receiving the option is a more than 10% owner of Common Stock, the
option price will not be less than the greater of par value or 110% of the fair
market value of a share of Common Stock on the date the option is granted. For
non-qualified options, the option price will be not less than 50% of the fair
market value of the Common Stock. The closing price of a share of Common Stock,
as reported on the NASDAQ National Stock on April 6, 1998 was $14.50.
Formula Options Granted to Directors. All options granted to Eligible
Directors will be non-qualified options. If the amendment to the 1997 Plan is
approved by the stockholders, (i) any Eligible Director first elected after the
1998 Annual Meeting will receive option grants to purchase 16,000 shares of
Common Stock and (ii) any Eligible Director who remains in service beyond an
Annual Meeting will receive a grant of options with respect to 12,500 shares as
of that Annual Meeting. An Option granted upon each Eligible Director's first
election or appointment to the Board will become exercisable for one-third of
the shares it covers on the first anniversary of the date of grant, two-thirds
of the Shares it covers on the second anniversary of the date of grant and for
the remaining one-third of the Shares it covers on the third anniversary of the
date of grant. If the amendment is approved, an option granted each Eligible
Director for Annual Meetings after his or her first election will become
exercisable for one-half of the Shares it covers six months after the date of
grant and for the remaining one-half of the
8
Shares it covers on the first anniversary of the date of grant. Options will
also vest at the earlier of the director's death, disability or attainment of
age 70. The exercise price for options granted to Eligible Directors will be the
fair market value of the Common Stock on the date the option is granted.
Exercise. Options granted under the 1997 Plan to employees or Eligible
Directors may be exercised by delivery to the Committee of a written notice of
exercise. The notice must specify the number of shares being exercised and must
be accompanied by payment in full of the option price for the shares being
exercised (unless the optionee's written notice of exercise directs that the
stock certificates for the shares issued upon the exercise be delivered to a
licensed broker acceptable to the Company as the agent for the optionee and at
the time the stock certificates are delivered to the broker, the broker tenders
to the Company cash or cash equivalents acceptable to the Company equal to the
exercise price).
The option price may be paid, as and if permitted by the option agreement,
(a) in cash or certified check, (b) by tendering shares of Common Stock that the
optionee has held for at least six months; (c) through attestation that the
optionee holds shares equal to the number required to pay the purchase price (in
which case the Company will issue the net number of shares required by the
exercise); or (d) any combination of these methods. An optionee will not have
any of the rights of a stockholder until payment in full for the shares is
received and a stock certificate is issued.
For options granted to employees, the Committee may prescribe in the option
agreement that the optionee may elect to satisfy any federal, state or local
withholding tax requirements by directing the Company to apply shares of Common
Stock to which the optionee is entitled as a result of the exercise of the
option in order to satisfy such withholding requirements.
Termination of Service. The Committee has discretion to fix the period in
which options granted to employees may be exercised after termination of
employment. Vested options granted to Eligible Directors remain exercisable for
the remaining term of the option unless the Board specifies otherwise (see "Term
of Options" below).
Substantial Corporate Changes. If the Company has a "substantial corporate
change" (examples of which include total liquidation, sale of all of the shares
of the Company, a merger in which it does not survive, or sale of substantially
all of its assets), all options will automatically vest, subject to compliance
with the "pooling of interest" accounting rules in applicable situations.
Term of Options. Each option granted under the Plan will terminate no later
than ten years after the date the option is granted. However, options intended
to be incentive stock options granted to employees under the Plan will expire no
later than five years after the date of the grant if the option is granted to an
employee who owns (or is deemed to own) more than 10% of the outstanding Common
Stock.
Shareholder Approval. In general, shareholder approval will only be
required after the initial approval for changes to the incentive stock options
and only to the extent necessary to preserve their tax treatment.
AMENDMENT OR TERMINATION OF THE PLAN
The Board of Directors may amend or terminate the 1997 Plan at any time
and, from time to time, provided, however, that no amendment may, without the
approval of a majority of the stockholders of the Company, amend the provisions
governing incentive stock options other than as permitted under the Internal
Revenue Code. The Plan will terminate no later than 10 years after its effective
date.
TAX CONSEQUENCES
The following is a general summary of the federal income tax treatment of
incentive stock options and non-qualified stock options to be granted under the
1997 Plan based upon the current provisions of the Code and regulations issued
thereunder.
9
Incentive Stock Options. Incentive stock options granted to employees under
the 1997 Plan are intended to meet the requirements of Code Section 422. No tax
consequences result from the grant of an incentive stock option. If an option
holder acquires stock upon the exercise, no income will be recognized by the
option holder for ordinary income tax purposes (although the difference between
the option exercise price and the fair market value of the stock subject to the
option may result in alternative minimum tax liability to the option holder) and
the Company will be allowed no deduction as a result of the exercise, if the
following conditions are met: (a) at all times during the period, beginning with
the date of the granting of the option and ending on the day three months before
the date of such exercise, the option holder is an employee of the Company or of
a subsidiary; and (b) the option holder makes no disposition of the stock within
two years from the date the option is granted nor within one year after the
stock is transferred to the option holder. In the event of a sale of such stock
by the option holder after compliance with these conditions, any gain realized
over the price paid for stock will ordinarily be treated as long-term capital
gain and any loss will be treated as a long-term capital loss in the year of the
sale.
If the option holder fails to comply with the employment or holding period
requirements discussed above, the option holder will recognize ordinary income
in an amount equal to the lesser of (i) the difference between the fair market
value of the Common Stock received upon exercise and the option exercise price
or (ii) the excess of the amount realized upon such disposition over the
exercise price. If the option holder is treated as having received ordinary
income because of his failure to comply with either condition above, an
equivalent deduction will be allowed to the Company in the same year.
Nonqualified Stock Options. No tax consequences result from the grant of a
nonqualified stock option. An option holder who exercises a non-qualified stock
option with cash generally will realize compensation taxable as ordinary income
in an amount equal to the difference between the fair market value of the option
shares on the date of exercise and the option exercise price, and the Company
will be entitled to a deduction from income in the same amount. The option
holder's basis in such shares will be the fair market value of the shares on the
date exercised, and when the shares are disposed of, capital gain or loss,
either long-term or short-term, will be recognized depending on the holding
period of the shares.
NEW PLAN BENEFITS
The following benefits will be awarded by formula under the 1997 Plan:
NAME AND POSITION NUMBER OF SHARES
- -------------------------------------------------- -----------------
Jack B. Dunn, IV
Chief Executive Officer and President ......... *
Daniel W. Luczak
Chairman of the Board ......................... *
Joseph R. Reynolds, Jr.
Vice Chairman of the Board and
Chairman, Applied Sciences
Consulting .................................... *
Patrick A. Brady
Executive Vice President and
Chief Operating Officer ....................... *
Gary Sindler
Executive Vice President, Secretary and
Chief Financial Officer ....................... *
Executive Group ................................ *
Non-Executive Director Group ................... 50,000
Non-Executive Officer Employee Group ........... *
- ----------
* The Committee expects to grant options to Executive Officers, Non-Executive
Officers and other employees but those benefits not been determined at this
time.
10
STOCKHOLDER APPROVAL
Approval of the amendment to the 1997 Plan will require the affirmative
vote of the holders of a majority of the shares of the Company's Common Stock
present in person or by proxy at the Annual Meeting.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE AMENDMENT TO THE 1997
STOCK OPTION PLAN.
PROPOSAL 4 -- RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors is seeking ratification of its appointment of Ernst
& Young LLP as its independent auditors for the fiscal year ending December 31,
1998, as recommended by the Audit Committee. If a majority of stockholders
voting at the Meeting should not approve the selection of Ernst & Young LLP, the
selection of independent auditors may be reconsidered by the Board of Directors.
Ernst & Young LLP is currently the Company's independent auditors. A
representative of Ernst & Young LLP is expected to attend the Meeting and be
available to respond to appropriate questions from stockholders.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR RATIFICATION OF THE
APPOINTMENT OF ERNST & YOUNG LLP.
11
EXECUTIVE COMPENSATION AND OTHER MATTERS
Executive Compensation to Executive Officers. The following table sets
forth information concerning the compensation paid by the Company for services
rendered during the fiscal year ended December 31, 1997, to the Chief Executive
Officer of the Company and to each executive officer whose aggregate
compensation exceeded $100,000.
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION OTHER ANNUAL ALL OTHER LONG-TERM COMPENSATION
------------------------------ ----------------- ----------------- -----------------------
NAME AND PRINCIPAL POSITION YEAR SALARY(1) BONUS COMPENSATION(2) COMPENSATION(3) # OF STOCK OPTIONS
- ------------------------------- ------ ----------- ----------- ----------------- ----------------- -----------------------
Jack B. Dunn 1997 $242,700 $110,600 $ 3,880 $ 3,800 80,000
Chief Executive Officer 1996 $215,000 None $ 2,800 $ 3,000 94,000
and President 1995 $200,000 None $ 4,100 $13,100 35,700
Daniel W. Luczak 1997 $262,000 None $10,000 $ 1,600 None
Chairman of the Board 1996 $264,000 None $10,900 $ 2,100 None
1995 $250,000 None $10,600 $14,400 None
Joseph R. Reynolds, Jr. 1997 $184,400 $ 20,000 $13,900 $ 3,000 None
Vice Chairman of the Board 1996 $197,000 $ 20,000 $10,700 $ 3,200 None
and Chairman, Applied 1995 $182,000 $ 31,500 $10,500 $14,900 None
Sciences Consulting
Patrick A. Brady 1997 $205,200 $ 92,900 $ 600 $ 3,600 150,000
Executive Vice President and 1996 $181,000 None $ 700 $ 3,000 33,600
Chief Operating Officer 1995 $150,000 None $ 600 None None
Gary Sindler 1997 $162,100 $ 75,200 $ 1,300 $ 3,500 100,000
Executive Vice President, 1996 $ 73,000 None $ 2,700 $ 600 30,000
Secretary and Chief 1995 None None None None None
Financial Officer
- ----------
(1) Includes amounts earned but deferred at the election of the executive, such
as salary deferrals under the Company's 401(k) Plan established under
Section 401(k) of the Code.
(2) These amounts represent the Company's payment of matching and discretionary
contributions to the Company's 401(k) Plan, life insurance and long-term
disability coverage. The Company's 401(k) contributions for 1997 for
Messrs. Dunn, Luczak, Reynolds, Brady and Sindler were $1,900, $8,100,
$9,500, $-0- and $400, respectively. The additional life insurance premiums
paid by the Company for 1997 for Messrs. Dunn, Luczak, Reynolds, Brady and
Sindler were $1,600, $1,700, $4,000, $300 and $700, respectively.
(3) These amounts represent the Company's payment for automobile expenses
provided to the named individuals and amounts earned as a member of the
Company's Board of Directors during 1995 to Messrs. Dunn, Luczak and
Reynolds. Beginning in 1996, officers of the Company that serve on the
Board of Directors no longer receive additional compensation for such
services.
EMPLOYMENT AGREEMENTS
The Company has entered into employment agreements (each an "Employment
Agreement") with Mr. Dunn, Mr. Reynolds and Mr. Luczak (each an "Executive").
Each Employment Agreement requires the Executive to devote his full time to the
Company during the term of the agreement.
Each Employment Agreement is for a term that is effective as of January 1,
1996, and expires the third anniversary thereof and, unless terminated, is
automatically renewed annually for an additional one-year period;
notwithstanding the foregoing, the Employment Agreements expire, if not sooner,
on December 31, 2005. The Employment Agreements terminate upon the death or
disability of the Executive or termination of the Executive's employment for
cause. The Employment Agreements with Messrs. Dunn, Reynolds and Luczak provide
for review annually by the Compensation Committee of the Board of
12
Directors. In addition, Mr. Reynolds is eligible to receive an annual bonus
calculated as 1.8% of the earnings of the Engineering and Scientific Services
group 90 days after the end of each fiscal year. The Company maintains a
comprehensive medical plan for the benefit of the Executives.
The Employment Agreements provide that in the event that an Executive's
employment is terminated without cause or an Executive resigns for good reason,
such Executive is entitled to severance benefits equal to the amount of his
annual salary for the remainder of the contract term ("Severance Period"), plus
a bonus based upon the average percentage that any bonus which may have been
paid at the discretion of the Board of Directors over the past three years bears
to the salary paid during such period. During the Severance Period, the
Employment Agreements provide that the Executives continue to be treated as
Executives for purposes of benefit programs.
EMPLOYEE BENEFITS PROGRAMS
The Company has a 401(k) Plan that matches employee pretax contributions
each year, up to 6% of eligible compensation. The matching schedule for employer
contributions is as follows: 10% after one year; an additional 25% after two
years; an additional 5% after years three, four and five; and an additional 10%
for each of years six through ten. In addition, the Company may make an annual
discretionary contribution, based on participants' eligible compensation, once a
year, for all employees with at least one year of service and who are on the
payroll as of December 31 of a given year. Employees may elect to defer up to
15% of their compensation.
OPTION GRANTS IN 1997
Except as set forth below, there were no options granted to the named
Executive Officers during 1997:
OPTION GRANTS IN LAST FISCAL YEAR
NUMBER OF SECURITIES PERCENT OF TOTAL OPTIONS EXERCISE OR
UNDERLYING OPTIONS GRANTED TO EMPLOYEES BASE PRICE EXPIRATION
NAME GRANTED IN FISCAL YEAR ($/SHARE)(1) DATE
- ------------------------- ---------------------- -------------------------- ---------------- -------------
Jack B. Dunn, IV 10,000 1.0% $ 9.35 (2) March 2007
16,668 1.7% $ 6.00 (3) March 2007
16,668 1.7% $ 8.50 (3) March 2007
16,668 1.7% $ 9.50 (3) March 2007
10,000 1.0% $ 8.80 (2) July 2007
10,000 1.0% $ 12.38 (2) October 2007
Daniel W. Luczak None
Joseph R. Reynolds, Jr. None
Patrick A. Brady 50,000 5.1% $ 6.00 (3) March 2007
50,000 5.1% $ 8.50 (3) March 2007
50,000 5.1% $ 9.50 (3) March 2007
Gary Sindler 33,334 3.4% $ 6.00 (3) March 2007
33,333 3.4% $ 8.50 (3) March 2007
33,333 3.4% $ 9.50 (3) March 2007
- ----------
(1) All options were granted at or above the fair market value on the date of
grant.
(2) Options are exercisable upon an increase of 25% in the market value of the
stock after one year.
(3) Options are exercisable one-third on the first anniversary of the date of
grant, an additional one-third on the second anniversary of the date of
grant and the remaining one-third on the third anniversary of the date of
grant.
(4) Mr. Dunn receives an option grant for 10,000 shares of Common Stock on the
day following the announcement of each quarterly earnings release. Such
options are granted at 10% above the fair market value on the date of grant
and become exercisable upon an increase of 25% in the market value of the
stock after one year.
13
OPTIONS EXERCISED IN 1997
Except as set forth below, there were no options exercised by the named
Executive Officers during 1997:
OPTIONS EXERCISED IN LAST FISCAL YEAR AND FISCAL YEAR END OPTION VALUES
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
OPTIONS AT FISCAL YEAR AT FISCAL YEAR
END(#) END($)
----------------------------- ----------------------------
SHARES ACQUIRED VALUE
NAME ON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ------------------------- ----------------- ---------- ------------- --------------- ------------- --------------
Jack B. Dunn, IV 30,000 $246,200 166,092 128,667 $1,404,654 $572,795
Daniel W. Luczak None -0- -0- -0- -0-
Joseph R. Reynolds, Jr. None -0- -0- -0- -0-
Patrick A. Brady None 11,200 172,400 $ 68,544 $812,088
Gary Sindler None 10,000 120,000 $ 37,500 $525,002
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During 1997, Wilmer, Cutler & Pickering, of which George Stamas, a Director
of the Company, is a partner, billed the Company $93,400 for legal services
rendered
14
OTHER MATTERS
The Board of Directors knows of no other business that may come before the
Meeting. If any other business is properly presented at the Meeting, it is the
intention of the persons named in the accompanying proxy to vote, or otherwise
act, in accordance with their judgment on such matters.
THE COMPANY IS PROVIDING A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM
10-KSB FOR THE FISCAL YEAR ENDED DECEMBER 31, 1997, INCLUDING FINANCIAL
STATEMENTS AND SCHEDULES, TO EACH OF THE COMPANY'S STOCKHOLDERS OF RECORD ON
APRIL 3, 1998, AND TO EACH BENEFICIAL OWNER OF STOCK ON THAT DATE. IN THE EVENT
THAT EXHIBITS TO SUCH FORM 10-KSB ARE REQUESTED BY ANY HOLDERS UPON RECEIPT OF A
WRITTEN REQUEST MAILED TO THE COMPANY'S OFFICES, 2021 RESEARCH DRIVE, ANNAPOLIS,
MARYLAND 21401, ATTENTION GARY SINDLER, A FEE WILL BE CHARGED FOR REPRODUCTION
OF SUCH EXHIBITS. REQUESTS FROM BENEFICIAL OWNERS OF COMMON STOCK MUST SET FORTH
A GOOD FAITH REPRESENTATION AS TO SUCH OWNERSHIP.
SOLICITATION OF PROXIES
All costs of solicitation of proxies will be borne by the Company. In
addition to solicitation by mail, the Company's Directors, officers and regular
employees, without additional remuneration, may solicit proxies by telephone,
telegraph and personal interviews. Brokers, custodians and fiduciaries will be
requested to forward proxy soliciting material to the beneficial owners of
Common Stock held in their names, and the Company will reimburse them for their
out-of-pocket expenses incurred in connection with the distribution of proxy
materials.
PROPOSALS FOR THE 1999 ANNUAL MEETING
Proposals of stockholders intended to be presented at the 1999 Annual
Meeting of Stockholders must be received by the Company at its principal office
in Annapolis, Maryland, not later than December 15, 1998 for inclusion in the
proxy statement for that meeting.
By Order of the Board of Directors,
GARY SINDLER, Secretary
April 25, 1998
THE BOARD OF DIRECTORS HOPES THAT YOU WILL ATTEND THE MEETING. WHETHER OR
NOT YOU PLAN TO ATTEND, PLEASE COMPLETE, DATE, SIGN AND RETURN THE ENCLOSED
PROXY IN THE ACCOMPANYING ENVELOPE PROMPTLY. IF YOU ATTEND THE MEETING, YOU MAY
WITHDRAW YOUR PROXY AND VOTE YOUR OWN SHARES.
15
EXHIBIT A
FORENSIC TECHNOLOGIES INTERNATIONAL CORPORATION
ARTICLES OF AMENDMENT
Forensic Technologies International Corporation, a Maryland corporation having
its principal office in Anne Arundel County, hereby certifies to the Maryland
State Department of Assessments and Taxation that:
FIRST: Forensic Technologies International Corporation, a Maryland corporation
(the "Corporation"), desires to amend its Charter as currently in effect.
SECOND: The following provisions are all of the provisions of the Charter as
amended:
ARTICLE FIRST: Article First be and hereby is amended to change the
name of the Corporation and to read in its entirety as follows:
"ARTICLE FIRST: The name of the Corporation (which is hereinafter
called the Corporation) is:
FTI CONSULTING, INC.
THIRD: (A) The directors of the Corporation by unanimous written consent adopted
a resolution that described the foregoing amendment of the Charter, declaring
that said amendment was advisable and directing that said amendment be submitted
for approval by the stockholders.
(B) The holders of all classes of outstanding capital stock of the
Corporation entitled to vote on the Amendment to the Articles of Incorporation
of the Corporation approved this amendment of the Charter on May , 1998 by a
majority of the stockholders at the Annual Meeting of the Stockholders of the
Corporation, at which a quorum was present in person or by proxy and was acting
throughout.
FOURTH: As of immediately prior to this amendment, the total number of shares of
all classes of stock which the Corporation had authority to issue was
20,000,000, of which 16,000,000 were Common Stock having a par value of $.01 per
share, for a total aggregate par value of $160,000 and 4,000,000 shares were
Preferred Stock having a par value of $.01 per share, for a total aggregate par
value of $40,000. These Articles of Amendment do not make any change to the
authorized capital stock of the Corporation.
FIFTH: The undersigned President acknowledges these Articles of Amendment to be
the corporate act of the Corporation and, as to all matters or facts required to
be verified under oath, the undersigned President acknowledges that to the best
of his knowledge, information and belief, these matters and facts are true in
all material respects and this statement is made under the penalties of perjury.
IN WITNESS WHEREOF, the Corporation has caused these presents to be signed
in its name and on its behalf by its President and witnessed by its Secretary on
May , 1998.
WITNESS: FTI CONSULTING, INC.
- ------------------------------- -------------------------------------
Gary Sindler Jack B. Dunn, IV
Secretary President
[CORPORATE SEAL]
A-1
EXHIBIT B
FORENSIC TECHNOLOGIES INTERNATIONAL CORPORATION
1997 STOCK OPTION PLAN, AS AMENDED
PURPOSE................... Forensic Technologies International Corporation, a
Maryland corporation ("FTI" or the "Company"),
wishes to recruit, reward, and retain employees and
outside directors. To further these objectives, the
Company hereby sets forth the Forensic Technologies
International Corporation 1997 Stock Option Plan
(the "Plan"), effective, as of March 25, 1997 (the
"Effective Date"), to provide options ("Options")
to employees and outside directors to purchase
shares of the Company's common stock (the "Common
Stock").
OPTIONEES................. All Employees of FTI and the Eligible Subsidiaries
are eligible for option grants under this Plan, as
are the directors of FTI and the Eligible
Subsidiaries who are not employees ("Eligible
Directors"). Eligible employees and directors
become optionees when the Administrator grants them
an option under this Plan. The Administrator may
also grant options to certain other service
providers. The term optionee also includes, where
appropriate, a person authorized to exercise an
Option in place of the original recipient.
Employee means any person employed as a common law
employee of the Company or an Eligible Subsidiary.
ADMINISTRATOR............. The Administrator will be the Compensation
Committee of the Board of Directors of FTI (the
"Compensation Committee"). The Board may also act
under the Plan as though it were the Compensation
Committee.
The Administrator is responsible for the general
operation and administration of the Plan and for
carrying out its provisions and has full discretion
in interpreting and administering the provisions of
the Plan. Subject to the express provisions of the
Plan, the Administrator may exercise such powers
and authority of the FTI Board as the Administrator
may find necessary or appropriate to carry out its
functions. The Administrator may delegate its
functions (other than those described in the
GRANTING OF OPTIONS section) to officers or
employees of FTI.
The Administrator's powers will include, but not be
limited to, the power to amend, waive or extend any
provision or limitation of any Option other than a
Formula Option. The Administrator may act through
meetings of a majority of its members or by
unanimous consent.
GRANTING OF OPTIONS....... Subject to the terms of the Plan, the Administrator
will, in its sole discretion, determine the
recipients of option grants, the terms of such
grants, the schedule for exercisability (including
any requirements that the optionee or the Company
satisfy performance criteria), the time and
conditions for expiration of the Option, and the
form of payment due upon exercise.
The Administrator's determinations under the Plan
need not be uniform and need not consider whether
possible optionees are similarly situated.
B-1
Options granted to employees may be nonqualified
stock options ("NQSOs") or incentive stock options
("ISOs") within the meaning of Section 422 of the
Internal Revenue Code of 1986, as amended from time
to time (the "Code"), or the corresponding
provision of any subsequently enacted tax statute.
Options granted to Eligible Directors must be
NQSOs.
The Administrator may also grant Options in
substitution for options held by individuals who
become employees of the Company or of an Eligible
Subsidiary as a result of the Company's acquiring
the individual's employer. If necessary to conform
the Options to the options for which they are
substitutes, the Administrator may grant substitute
Options under terms and conditions that vary from
those the Plan otherwise requires.
DATE OF GRANT............. The Date of Grant will be the date as of which the
Administrator awards an Option to an optionee, as
specified in the Administrator's minutes, or as
specified in this Plan.
EXERCISE PRICE............ The Exercise Price is the value of the
consideration that an optionee must provide under
an Option Agreement in exchange for one share of
Common Stock. The Administrator will determine the
Exercise Price under each Option. The Administrator
may set the Exercise Price of an Option without
regard to the Exercise Price of any other Options
granted at the same or any other time.
The Exercise Price per share for NQSOs may not be
less than 50% of the Fair Market Value of a share
on the Date of Grant. If an Option is intended to
be an ISO, the Exercise Price per share may not be
less than 100% of the Fair Market Value (on the
Date of Grant) of a share of Stock covered by the
Option; provided, however, that if the employee
would otherwise be barred from receiving an ISO by
reason of the provisions of Code Sections 422(b)(6)
and 424(d) (relating to more than 10%
stock-owners), the Exercise Price of an Option that
is intended to be an ISO may not be less than 110%
of the Fair Market Value (on the Date of Grant) of
a share of Stock covered by the Option.
Fair Market Value..... Fair Market Value of a share of Common Stock for
purposes of the the Plan 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.
B-2
For any date that is not a trading day, the Fair
Market Value of a share of Common Stock for such
date shall be determined by using the closing sale
price or the average of the closing bid and asked
prices, as appropriate, for the immediately
preceding trading day.
The Company may use the consideration it receives
from the optionee for general corporate purposes.
EXERCISABILITY............ The Administrator will determine the times and
conditions for exercise of each Option but may not
extend the period for exercise beyond the tenth
anniversary of its Date of Grant.
Options will become exercisable at such times and
in such manner as the Administrator determines and
the Option Agreement indicates; provided, however,
that the Administrator may, on such terms and
conditions as it determines appropriate, accelerate
the time at which the optionee may exercise any
portion of an Option.
No portion of an Option that is unexercisable at an
optionee's termination of employment will
thereafter become exercisable, unless the Option
Agreement provides otherwise, either initially or
by amendment.
LIMITATION ON ISOS........ An Option granted to an employee will be an ISO
only to the extent that the aggregate Fair Market
Value (determined at the Date of Grant) of the
stock with respect to which ISOs are exercisable
for the first time by the optionee during any
calendar year (under the Plan and all other plans
of the Company and its subsidiary corporations,
within the meaning of Code Section 422(d)), does
not exceed $100,000. This limitation will be
applied by taking Options into account in the order
in which such Options were granted.
DIRECTOR FORMULA GRANTS... Each Eligible Director who is first elected or
appointed to the Board the first Annual Meeting of
the Stockholders following the Effective Date
(i.e., after the 1998 Meeting) will receive a
Formula Option as of his election or appointment to
purchase 16,000 shares of Common Stock. Each
Eligible Director serving on the Board of Directors
at an Annual Meeting whose term will continue
beyond that Meeting will receive a Formula Option
as of that Meeting to purchase 12,500 shares of
Common Stock.
Exercise Price........ The Exercise Price of each Option granted to an
Eligible Director will be the Fair Market Value on
the Date of Grant.
Exercise Schedule..... A Formula Option granted upon each Eligible
Director's first election or appointment to the
Board will become exercisable for one-third of the
shares it covers on the first anniversary of the
Date of Grant, two-thirds of the shares it covers
on the second anniversary of the Date of Grant and
for the remaining one-third of the shares it covers
on the third anniversary of the Date of Grant. A
Formula Option granted each Eligible Director for
succeeding Annual Meetings will become exercisable
for one-half of the shares it covers six months
after the Date of Grant, and for the remaining
one-half of the shares it covers on the first
anniversary of the Date of Grant. A Formula Option
will become exercisable in its entirety upon the
director's death, disability or attainment of age
70. Options will be forfeited to the extent they
are not then exercisable if a director resigns or
fails to be reelected as a director.
B-3
METHOD OF EXERCISE........ To exercise any exercisable portion of an Option,
the optionee must:
Deliver a written notice of exercise to the
Secretary of the Company (or to whomever the
Administrator designates) in a form complying
with any rules the Administrator may issue,
signed by the optionee and specifying the
number of shares of Common Stock underlying the
portion of the Option the optionee is
exercising;
Pay the full Exercise Price by cashier's or
certified check for the shares of Common Stock
with respect to which the Option is being
exercised, unless the Administrator consents to
another form of payment (which could include
the use of Common Stock); and
Deliver to the Administrator such
representations and documents as the
Administrator, in its sole discretion, may
consider necessary or advisable.
Payment in full of the Exercise Price need not
accompany the written notice of exercise
provided the notice directs that the stock
certificates for the shares issued upon the
exercise be delivered to a licensed broker
acceptable to the Company as the agent for the
individual exercising the option and at the
time the stock certificates are delivered to
the broker, the broker will tender to the
Company cash or cash equivalents acceptable to
the Company and equal to the Exercise Price.
If the Administrator agrees to payment through
the tender to the Company of shares of Common
Stock, the individual must have held the stock
being tendered for at least six months at the
time of surrender. Shares of stock offered as
payment will be valued, for purposes of
determining the extent to which the optionee
has paid the Exercise Price, at their Fair
Market Value on the date of exercise. The
Administrator may also, in its discretion,
accept attestation of ownership of Common Stock
and issue a net number of shares upon Option
exercise.
OPTION EXPIRATION......... No one may exercise an Option more than ten years
after its Date of Grant (or five years, for an ISO
granted to a more-than-10% shareholder). Unless the
Option Agreement provides otherwise, either
initially or by amendment, no one may exercise an
Option after the first to occur of:
Employment Termination. The date of termination of employment (other than
for death or Disability), where termination of
employment means the time when the
employer-employee or other service-providing
relationship between the employee and the Company
ends for any reason, including retirement. Unless
the Option Agreement provides otherwise,
termination of employment does not include
instances in which the Company immediately rehires
a common law employee as an independent contractor.
The Administrator, in its sole discretion, will
determine all questions of whether particular
terminations or leaves of absence are terminations
of employment;
B-4
Disability............ For disability, the earlier of (i) the first
anniversary of the optionee's termination of
employment for disability and (ii) thirty (30) days
after the optionee no longer has a disability,
where disability means the inability to engage in
any substantial gainful activity by reason of any
medically determinable physical or mental
impairment that can be expected to result in death
or that has lasted or can be expected to last for a
continuous period of not less than twelve months;
or
Death................. The date twelve months after the optionee's death.
If exercise is permitted after termination of
employment, the Option will nevertheless expire as
of the date that the former employee violates any
covenant not to compete in effect between the
Company and the former employee.
Nothing in this Plan extends the term of an Option
beyond the tenth anniversary of its Date of Grant,
nor does anything in this OPTION EXPIRATION section
make an Option exercisable that has not otherwise
become exercisable.
OPTION AGREEMENT.......... Option Agreements will set forth the terms of each
Option and will include such terms and conditions,
consistent with the Plan, as the Administrator may
determine are necessary or advisable. To the extent
the agreement is inconsistent with the Plan, the
Plan will govern. The Option Agreements may contain
special rules.
STOCK SUBJECT TO PLAN..... Except as adjusted below under SUBSTANTIAL
CORPORATE CHANGES, the aggregate number of shares
of Common Stock that may be issued under the
Options (whether ISOs or NQSOs) may not exceed
2,000,000 shares and no individual may receive
Options under the Plan for more than 500,000 shares
in a calendar year. The Common Stock will come from
either authorized but unissued shares or from
previously issued shares that the Company
reacquires, including shares it purchases on the
open market. If any Option expires, is canceled or
terminates for any other reason, the shares of
Common Stock available under that Option will again
be available for the granting of new Options (but
will be counted against that calendar year's limit
for a given individual).
No adjustment will be made for a dividend or other
right for which the record date precedes the date
of exercise.
The optionee will have no rights of a stockholder
with respect to the shares of stock subject to an
Option except to the extent that the Company has
issued certificates for such shares upon the
exercise of the Option.
The Company will not issue fractional shares
pursuant to the exercise of an Option, but the
Administrator may, in its discretion, direct the
Company to make a cash payment in lieu of
fractional shares.
PERSON WHO MAY EXERCISE... During the optionee's lifetime, only the optionee
or his duly appointed guardian or personal
representative may exercise the Options. After his
death, his personal representative or any other
person authorized under a will or under the laws of
descent and distribution may exercise any then
exercisable portion of an Option. If someone other
than the original recipient seeks to exercise any
portion of an Option, the Administrator may request
such proof as it may consider necessary or
appropriate of the person's right to exercise the
Option.
B-5
ADJUSTMENTS UPON CHANGES IN
CAPITAL STOCK............ Subject to any required action by the Company
(which it shall promptly take) or its stockholders,
and subject to the provisions of applicable
corporate law, if, after the Date of Grant of an
Option,
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 each Option, so that the
proportionate interest of the optionee immediately
following such event will, to the extent
practicable, be the same as immediately before such
event. Any such adjustment to an Option will not
change the total price with respect to shares of
Common Stock underlying the unexercised portion of
the Option but will include a corresponding
proportionate adjustment in the Option's Exercise
Price.
The Administrator will make a commensurate change
to the maximum number and kind of shares provided
in the STOCK SUBJECT TO PLAN section.
Any issue by the Company of any class of preferred
stock, or securities convertible into shares of
common or preferred stock of any class, will not
affect, and no adjustment by reason thereof will be
made with respect to, the number of shares of
Common Stock subject to any Option or the Exercise
Price except as this Adjustments section
specifically provides. The grant of an Option under
the Plan will not affect in any way the right or
power of the Company to make adjustments,
reclassifications, reorganizations or changes of
its capital or business structure, or to merge or
to consolidate or to dissolve, liquidate, sell, or
transfer all or any part of its business or assets.
Substantial
Corporate Change... a Substantial Corporate Change, the Plan and the
Options will terminate unless provision is made in
writing in connection with such transaction for
the assumption or continuation of outstanding
Options, or
the substitution for such options or grants of
any options or grants covering the stock or
securities of a successor employer corporation,
or a parent or subsidiary of such successor,
with appropriate adjustments as to the number
and kind of shares of stock and prices, in
which event the Options will continue in the
manner and under the terms so provided.
B-6
Unless the Board determines otherwise, if an Option
would otherwise terminate pursuant to the preceding
sentence, the optionee will have the right, at such
time before the consummation of the transaction
causing such termination as the Board reasonably
designates, to exercise any unexercised portions of
the Option, whether or not they had previously
become exercisable. However, the acceleration will
not occur if it would render unavailable "pooling
of interest" accounting for any reorganization,
merger, or consolidation of the Company.
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.
SUBSIDIARY EMPLOYEES...... Employees of Company Subsidiaries will be entitled
to participate in the Plan, 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. For ISO grants, Subsidiary means any
corporation (other than the Company) in an unbroken
chain of corporations beginning with the Company
if, at the time an ISO is granted to a Participant
under the Plan, each of the corporations (other
than the last corporation in the unbroken chain)
owns stock possessing 50% or more of the total
combined voting power of all classes of stock in
one of the other corporations in such chain. For
NQSOs, the Board or the Committee can use a
different definition of Subsidiary in its
discretion.
LEGAL COMPLIANCE.......... The Company will not issue any shares of Common
Stock under an Option until all applicable
requirements imposed by Federal and state
securities and other laws, rules and regulations,
and by any applicable regulatory agencies or stock
exchanges, have been fully met. To that end, the
Company may require the optionee to take any
reasonable action to comply with such requirements
before issuing such shares. No provision in the
Plan or action taken under it authorizes any action
that is otherwise prohibited by Federal or state
laws.
B-7
The Plan is intended to conform to the extent
necessary with all provisions of the Securities Act
of 1933 ("Securities Act") and the Securities
Exchange Act of 1934 and all regulations and rules
the Securities and Exchange Commission issues under
those laws. Notwithstanding anything in the Plan to
the contrary, the Administrator must administer the
Plan and Options may be granted and exercised only
in a way that conforms to such laws, rules, and
regulations. To the extent permitted by applicable
law, the Plan and any Options will be deemed
amended to the extent necessary to conform to such
laws, rules and regulations.
PURCHASE FOR INVESTMENT AND
OTHER RESTRICTIONS....... Unless a registration statement under the
Securities Act covers the shares of Common Stock an
optionee receives upon exercise of his Option, the
Administrator may require, at the time of such
exercise, that the optionee agree in writing to
acquire such shares for investment and not for
public resale or distribution, unless and until the
shares subject to the Option are registered under
the Securities Act. Unless the shares are
registered under the Securities Act, the optionee
must acknowledge:
that the shares purchased on exercise of the
Option are not so registered,
that the optionee may not sell or otherwise
transfer the shares unless
the shares have been registered under the
Securities Act in connection with the sale
or transfer thereof, or counsel
satisfactory to the Company has issued an
opinion satisfactory to the Company that
the sale or other transfer of such shares
is exempt from registration under the
Securities Act, and
such sale or transfer complies with all
other applicable laws, rules and
regulations, including all applicable
Federal and state securities laws, rules
and regulations.
Additionally, the Common Stock, when issued upon
the exercise of an Option, will be subject to any
other transfer restrictions, rights of first
refusal and rights of repurchase set forth in or
incorporated by reference into other applicable
documents, including the Company's articles or
certificate of incorporation, by-laws or generally
applicable stockholders' agreements.
The Administrator may, in its sole discretion, take
whatever additional actions it deems appropriate to
comply with such restrictions and applicable laws,
including placing legends on certificates and
issuing stop-transfer orders to transfer agents and
registrars.
B-8
TAX WITHHOLDING........... The optionee must satisfy all applicable Federal,
state and local income and employment tax
withholding requirements before the Company will
deliver stock certificates upon the exercise of an
Option. The Company may decide to satisfy the
withholding obligations through additional
withholding on salary or wages. If the Company does
not or cannot withhold from other compensation, the
optionee must pay the Company, with a cashier's
check or certified check, the full amounts required
by withholding. Payment of withholding obligations
is due at the same time as is payment of the
Exercise Price. If the Committee so determines, the
optionee may instead satisfy the withholding
obligations by directing the Company to retain
shares from the Option exercise, by tendering
previously owned shares or by attesting to his
ownership of shares (with the distribution of net
shares).
TRANSFERS, ASSIGNMENTS, AND
PLEDGES.................. Unless the Administrator otherwise approves in
advance in writing, an Option may not be assigned,
pledged or otherwise transferred in any way,
whether by operation of law or otherwise, or
through any legal or equitable proceedings
(including bankruptcy), by the optionee to any
person, except by will or by operation of
applicable laws of descent and distribution. If
Rule 16b-3 then applies to an Option, the optionee
may not transfer or pledge shares of Common Stock
acquired upon exercise of an Option until at least
six (6) months have elapsed from (but excluding)
the Date of Grant, unless the Administrator
approves otherwise in advance in writing.
AMENDMENT OR TERMINATION OF
PLAN AND OPTIONS......... The Board may amend, suspend or terminate the Plan
at any time, without the consent of the optionees
or their beneficiaries; provided, however, that no
amendment will deprive any optionee or beneficiary
of any previously declared Option. Except as
required by law or by the CORPORATE CHANGES
section, the Administrator may not, without the
optionee's or beneficiary's consent, modify the
terms and conditions of an Option so as to
adversely affect the optionee. No amendment,
suspension or termination of the Plan will, without
the optionee's or beneficiary's consent, terminate
or adversely affect any right or obligations under
any outstanding Options.
PRIVILEGES OF
STOCK OWNERSHIP........... No optionee and no beneficiary or other person
claiming under or through such optionee will have
any right, title or interest in or to any shares of
Common Stock allocated or reserved under the Plan
or subject to any Option except as to such shares
of Common Stock, if any, that have been issued to
such optionee.
EFFECT ON 1992
OPTION PLAN............. No additional options will be granted under the
Forensic Technologies International Corporation
1992 Stock Option Plan.
EFFECT ON OTHER PLANS..... Whether exercising an Option causes the optionee to
accrue or receive additional benefits under any
pension or other plan is governed solely by the
terms of such other plan.
B-9
LIMITATIONS ON LIABILITY... Notwithstanding any other provisions of the Plan,
no individual acting as a director, employee or
agent of the Company shall be liable to any
optionee, former optionee, spouse, beneficiary or
any other person for any claim, loss, liability or
expense incurred in connection with the Plan, nor
shall such individual be personally liable because
of any contract or other instrument he executes in
such other capacity. The Company will indemnify and
hold harmless each director, employee or agent of
the Company to whom any duty or power relating to
the administration or interpretation of the Plan
has been or will be delegated, against any cost or
expense (including attorneys' fees) or liability
(including any sum paid in settlement of a claim
with the FTI Board's approval) arising out of any
act or omission to act concerning this Plan unless
arising out of such person's own fraud or bad
faith.
NO EMPLOYMENT CONTRACT.... Nothing contained in this Plan constitutes an
employment contract between the Company and the
optionee. The Plan does not give the optionee any
right to be retained in the Company's employ nor
does it enlarge or diminish the Company's right to
terminate the optionee's employment.
APPLICABLE LAW............ The laws of the State of Maryland (other than its
choice of law provisions) govern this Plan and its
interpretation.
DURATION OF PLAN.......... Unless the FTI Board extends the Plan's term, the
Administrator may not grant Options after March 25,
2007. The Plan will then terminate but will
continue to govern unexercised and unexpired
Options.
APPROVAL OF SHAREHOLDERS... The Plan must be submitted to the shareholders of
the Company for their approval within 12 months
after the Board of Directors of the Company adopts
the Plan. The adoption of the Plan is conditioned
upon the approval of the shareholders of the
Company and failure to receive their approval will
render the Plan and any outstanding options
thereunder void and of no effect.
B-10
- --------------------------------------------------------------------------------------------------------------
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY
THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED
FOR PROPOSALS 1, 2, 3 AND 4.
1. Election of Class II Directors NOMINEES: Dennis J. Shaughnessy and George P. Stamas.
FOR all nominees WITHHOLD AUTHORITY to (INSTRUCTION: To withhold authority to
listed to the right vote for all nominees vote for any individual nominee, write
(except as marked to listed to the right each such nominee's name in the space
the contrary) below).
[ ] [ ] ------------------------------------------------------------
2. To approve the amendment to 3. To approve, ratify and confirm 4. Ratification of Ernst & Young
the Company's charter changing the amendment of the 1997 LLP as the independent
the name of the Company to FTI Stock Option Plan of the auditors of Company.
Consulting, Inc. Company.
FOR AGAINST ABSTAIN FOR AGAINST ABSTAIN FOR AGAINST ABSTAIN
[ ] [ ] [ ] [ ] [ ] [ ] [ ] [ ] [ ]
5. In their discretion, the Please sign exactly as name appears hereon. When shares are held by
Proxies are authorized to vote joint tenants, both should sign. When signing as attorney,
FOR such other business as executor, administrator, trustee, or guardian, please give full
may properly come before the title as such. If a corporation, please give full corporate name
meeting. and have a duly authorized officer sign, stating title. If a
partnership, please sign in partnership name by authorized person.
Dated: ------------------------------------------------------, 1998
-------------------------------------------------------------------
-------------------------------------------------------------------
(Signature)
-------------------------------------------------------------------
(Signature if held jointly)
PLEASE VOTE, SIGN, DATE, AND PROMPTLY RETURN THE PROXY CARD USING THE ENCLOSED ENVELOPE.
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
FORENSIC TECHNOLOGIES INTERNATIONAL CORPORATION.
The undersigned hereby appoints Joseph R. Reynolds, Jr. and James A. Flick,
Jr. as attorneys and proxies, each with power to act without the other and with
power of substitution, and hereby authorizes them to represent and vote, as
designated on the other side, all the shares of common stock of Forensic
Technologies International Corporation standing in the name of the undersigned
with all powers which the undersigned would possess if present at the Annual
Meeting of Stockholders of the Company to be held May 20, 1998 and at any and
all continuations and adjournments thereof.
(CONTINUED, AND TO BE MARKED, DATED AND SIGNED, ON THE OTHER SIDE)
- --------------------------------------------------------------------------------
