SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.
SCHEDULE 14A
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
[ ] Fee computed on table below per Exchange Act Rules, 14a-6(i)(1) and 0-11.
[ ] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
[ ] 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 0-111
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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1. (Set forth the amount on which the filing fee is calculated and state how it
it was determined):
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FORENSIC TECHNOLOGIES INTERNATIONAL CORPORATION
2021 RESEARCH DRIVE
ANNAPOLIS, MARYLAND 21401
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 21, 1997
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 21,
1997 at 9:30 a.m., local time, to consider and act upon the following matters:
1. To elect two (2) Class I Directors, each for a three-year term.
2. To approve, ratify and confirm the adoption of the Employee Stock
Purchase Plan of the Company.
3. To approve, ratify and confirm the adoption 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 1997.
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 2, 1997
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 2, 1997 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
Baltimore, Maryland
April 18, 1997
<PAGE>
FORENSIC TECHNOLOGIES INTERNATIONAL CORPORATION
2021 RESEARCH DRIVE
ANNAPOLIS, MARYLAND 21401
PROXY STATEMENT FOR THE
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 21, 1997
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 21, 1997 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, 1996 is
being mailed to stockholders with the mailing of this Notice and Proxy Statement
beginning on or about April 18, 1997.
At the Meeting, the stockholders of the Company at the close of business on
April 2, 1997 (the "Record Date") will be asked to consider and act upon the
following matters: (i) to elect two (2) Class I Directors, each for a three-year
term; (ii) to approve, ratify and confirm the adoption of the Employee Stock
Purchase Plan of the Company; (iii) to approve, ratify and confirm the adoption
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 1997; 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 2, 1997 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 4,526,912 shares of common stock, $.01 par value per share
("Common Stock"), of the Company. 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 (2,263,457 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
<PAGE>
plurality of votes cast at the Meeting will constitute stockholder approval of
the election of the nominees for Class I 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. Votes may only be cast "for" the election of a
director.
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 Dennis J. Shaughnessy, 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
or 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.
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<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of April 2, 1997 (except as otherwise
footnoted below), certain information regarding the 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.
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP
---------------------------
PERCENT TYPE OF
NO. OF SHARES OF CLASS SECURITIES
------------- --------- ------------
<S> <C> <C> <C>
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 8.4% Common Stock
9690 Deereco Road,
Timonium, MD 21093
Joseph R. Reynolds, Jr.(2)..................... 485,625 10.7% Common Stock
Daniel W. Luczak(2)............................ 225,334 5.0% Common Stock
Jack B. Dunn, IV (2)(3)........................ 197,159 4.4% Common Stock
Dennis J. Shaughnessy(1)(2)(4)................. 473,800 10.2% Common Stock
George P. Stamas(2)(5)......................... 15,638 .3% Common Stock
Gary Sindler(2)................................ -0- -0- Common Stock
Patrick A. Brady(2)(6)......................... 11,700 .2% Common Stock
Gary Summers................................... 415,000 9.2% Common Stock
444 Castro Street, Suite 818
Mountain View, CA 94041
Peter F. O'Malley(2)(7)........................ 23,263 .5% Common Stock
James A. Flick, Jr.(2)(8)...................... 22,531 .5% Common Stock
McCullough, Andrews & Cappiello, Inc. ........ 270,000 6.0% Common Stock
101 California Street
San Francisco, CA 94111 (9)
State of Wisconsin Investment Board(10) ....... 268,800 6.0% Common Stock
All directors and executive officers as a group
(9 persons)(2) ............................... 1,445,050 31.9% Common Stock
</TABLE>
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(1) Grotech III Pennsylvania Fund, LP, Grotech III Companion Fund, LP and
Grotech Partners III, LP are affiliates of Grotech Capital Corp. 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, Hugh A.
Waltzen and 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 168,759 shares of Common Stock issuable upon the exercise of stock
options exercisable within 60 days under the 1992 Stock Option Plan.
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 Corp. 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, Hugh A. Waltzen and Deborah
A. Smeltzer each have the right to exercise sole voting and dispositive
power over the shares. Includes 9,800 shares of Common Stock issuable upon
the exercise of stock options exercisable within 60 days under the 1992
Stock Option Plan.
(5) Includes 9,800 shares of Common Stock issuable upon the exercise of stock
options exercisable within 60 days under the 1992 Stock Option Plan.
Includes 5,838 shares over which Mr. Stamas and his wife Georgia Stamas
share voting and investment power.
(6) Includes 11,200 shares of Common Stock issuable upon the exercise of stock
options exercisable within 60 days under the 1992 Stock Option Plan.
(7) Includes 9,800 shares of Common Stock issuable upon the exercise of stock
options exercisable within 60 days under the 1992 Stock Option Plan.
(8) Includes 9,800 shares of Common Stock issuable upon the exercise of stock
options exercisable within 60 days under the 1992 Stock Option Plan.
(9) Robert F. McCullough, David H. Andrews and Frank A. Cappiello, Jr., have
shared voting and dispositive power over the shares. Based on information
included in the Schedule 13G filed on February 14, 1997.
(10) Based on information included in the Schedule 13G filed on January 23,
1997.
3
<PAGE>
PROPOSAL 1 -- ELECTION OF DIRECTORS
The Company's Amended and Restated Articles of Incorporation provide that the
Company's Board of Directors will consist of three classes. The members of each
class will be elected for three-year terms. The Company currently has seven
directors, of which two directors denominated as Class I directors are to be
elected at the Meeting. The terms of the Class II and Class III directors will
expire at the annual meetings of Stockholders to be held in 1998 and 1999,
respectively.
CLASS I NOMINEES FOR TERMS EXPIRING IN 1997.
It is proposed to elect two Class I directors of the Company to serve until
the next annual meeting at which Class I directors are to be elected in 2000 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.
<TABLE>
<CAPTION>
DIRECTOR PRINCIPAL OCCUPATION AND BUSINESS
NOMINEE AGE SINCE EXPERIENCE DURING THE PAST FIVE YEARS
- ------------------------------ --- -------- -----------------------------------------------------
<S> <C> <C> <C>
James A. Flick, Jr............ 62 1992 Since 1995, Mr. Flick has been President and Chief
Executive 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.
Peter F. O'Malley............. 57 1992 Since 1989, Mr. O'Malley has been Of Counsel to the
law firm of O'Malley, Miles, Nylen & Gilmore and
its predecessor O'Malley & Miles. Mr. O'Malley is a
director of Potomac Electric Power Company, Giant
Food Inc. and Legg Mason, Inc.
CLASS II DIRECTORS WHOSE TERMS EXPIRE IN 1998.
DIRECTOR PRINCIPAL OCCUPATION AND BUSINESS
NOMINEE AGE SINCE EXPERIENCE DURING THE PAST FIVE YEARS
- ------------------------------ --- -------- -----------------------------------------------------
Dennis J. Shaughnessy......... 49 1992 Since September 1989, Mr. Shaughnessy has been a
Managing Director of Grotech Capital Group, a
venture capital firm headquartered in Timonium,
Maryland. Prior to that time, Mr. Shaughnessy was
the Chief Executive Officer of CRI International,
Inc.
George P. Stamas.............. 46 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 currently
serves as a director of the Baltimore Orioles and
Georgeson International, Inc.
4
<PAGE>
<CAPTION>
CLASS III DIRECTORS WHOSE TERMS EXPIRE IN 1999.
DIRECTOR PRINCIPAL OCCUPATION AND BUSINESS
NOMINEE AGE SINCE EXPERIENCE DURING THE PAST FIVE YEARS
- ------------------------------ --- -------- -----------------------------------------------------
<S> <C> <C> <C>
Jack B. Dunn, IV ............. 46 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 Director of
the Baltimore Orioles. Prior to joining the
Company, he was a Managing Director of Legg Mason
Wood Walker, Incorporated and directed its
Baltimore corporate finance and investment banking
activities.
Daniel W. Luczak.............. 54 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 15 years of experience in the
litigation support industry.
Joseph R. Reynolds, Jr., P.E. 55 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 President of
Engineering and Scientific Services for the
Company. Mr. Reynolds has twenty years of forensic
engineering experience. Mr. Reynolds is Chairman of
The Johns Hopkins University Society of Engineering
Alumni and a member of the National Advisory
Council for the School of Engineering.
5
<PAGE>
NON-DIRECTOR EXECUTIVE OFFICERS.
<CAPTION>
DIRECTOR PRINCIPAL OCCUPATION AND BUSINESS
NOMINEE AGE SINCE EXPERIENCE DURING THE PAST FIVE YEARS
- ------------------------------ --- -------- -----------------------------------------------------
<S> <C> <C> <C>
Patrick A. Brady.............. 43 1986 Since July 1996, Mr. Brady has been Chief Operating
Officer of the Company. From September, 1994 to
July 1996, he was Executive Vice President and
General Manager of Visual Communications and Trial
Consulting Services. Prior to that time, Mr. Brady
spent ten years with the Company specializing in
project management and the development of project
management methodologies for dealing with major
failure investigations and complex litigation
matters.
Gary Sindler.................. 50 1996 Since July 1996, Mr. Sindler has been Executive
Vice President 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.
</TABLE>
BOARD AND COMMITTEE MEETINGS
During the last fiscal year, the Board of Directors held a total of 7
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, recommends the
engagement of auditors and reviews the Company's internal audits. 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 1992
Stock Option Plan, as amended and restated, 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 currently eligible to receive grants of options to
acquire Common Stock under the 1992 Stock Option Plan, as amended and restated.
If the 1997 stock option is not approved by stockholders, immediately after the
Meeting, each director who is re-elected or continues as a non-employee director
automatically will be granted an option under the 1992 Stock Option Plan to
purchase 4,200 shares of Common Stock of the Company at the fair market value on
the date of grant. The options vest and become exercisable one-third at
six-months after grant, two-thirds at one-year after grant and in full at two
years after grant. The options have a term of ten years. Messrs. Flick and
O'Malley, who are standing for election, are non-employee directors of the
Company. The other non-employee directors of the Company are Messrs. Shaughnessy
and Stamas. At April 2, 1997, 58,800
6
<PAGE>
nonqualified stock options had been granted to non-employee directors with
19,600 of such options currently exercisable. If the 1997 Stock Option Plan is
approved by stockholders at the meeting, each non-employee director will
immediately be granted an option for 4,200 shares of Common Stock under the Plan
at the fair market value at the date granted with the same vesting schedule 25
under the 1992 Stock Option Plan.
COMPLIANCE WITH THE REPORTING REQUIREMENTS OF SECTION 16 OF THE SECURITIES
EXCHANGE ACT OF 1934.
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act") requires the Company's officers (as defined in the rules issued
by the Securities and Exchange Commission (the "SEC")) and directors, and
persons who own more than ten percent of a registered class of the Company's
equity securities, to file reports of ownership and changes in ownership with
the SEC. Officers, directors and greater than ten percent stockholders are
required by the SEC rules to furnish the Company with copies of all Section
16(a) forms they file.
Based solely on a review of copies of such reports of ownership furnished to
the Company, or written representations that no forms were necessary, the
Company believes that during the past fiscal year all filing requirements
applicable to its officers, directors and greater than ten percent beneficial
owners were complied with except for the initial Forms 3 due on the effective
date of the Company's registration statement on May 8, 1996 that were filed one
day late on May 9, 1996 for Messrs. Reynolds, Luczak, Dunn, Patterson, Brady,
McDonough, Shaughnessy, Stamas, Flick, and O'Malley, Mr. George Scheeler, the
former Chief Financial Officer of the Company, Mr. James McDonough and Mr.
Arthur Patterson, previously but no longer executive officers as defined by the
SEC, and Grotech III Pennsylvania Fund, LP, Grotech III Companion Fund, LP,
Grotech Partners III, LP and LM Private Investment Partnership I, Limited
Partnership. Messrs. McDonough, Patterson and Sheeler, and LM Private Investment
Partnership I, Limited Partnership are no longer reporting persons under Section
16. In addition, Gary Summers was a greater than 10% stockholder on September
30, 1996, and filed his Form 3 on October 10, 1996. Mr. Summers is no longer a
10% stockholder of the Company.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION
OF THE NOMINATED DIRECTORS.
PROPOSAL 2 -- EMPLOYEE STOCK PURCHASE PLAN
The Board of Directors proposes that the stockholders of the Company
approve the Forensic Technologies International Corporation Employee Stock
Purchase Plan (the "ESPP"). The ESPP will become effective July 1, 1997, subject
to stockholder approval as proposed herein.
The following is a summary of the ESPP. This summary description is a fair
and complete summary of the ESPP; however, it is qualified in its entirety by
reference to the full text of the ESPP, which is attached to this Proxy
Statement as Exhibit A.
GENERAL
Purpose. The ESPP offers eligible employees the opportunity to purchase
shares of Common Stock through after-tax payroll withholding. The ESPP is
intended to permit employees 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. Funds received by the Company
under the ESPP may be used for any general corporate purpose.
Eligibility. All common law employees of the Company and certain subsidiaries
will be eligible to participate in the ESPP after completion of a year of
service (unless they hold more than 5% of the common stock of the Company and
its subsidiaries, either directly or by attribution). As of April 2, 1997, there
were 170 employees who would be eligible to participate in the ESPP on July 1,
1997.
Shares Available Under the ESPP. The ESPP authorizes the issuance of up to
400,000 shares of Common Stock from authorized but unissued shares or from stock
owned by the Company, including stock purchased on the market. The number of
shares issuable under the ESPP will be adjusted for stock dividends, stock
splits, reclassifications and other changes affecting the Company's Common
Stock.
7
<PAGE>
Because the ESPP permits participants to choose their own level of
participation, subject to overall tax and program limits, the specific amounts
to be granted to particular persons cannot be determined in advance. As of April
2, 1997, there were 4,526,912 shares of Common Stock outstanding and 861,179
shares of Common Stock underlying existing options, for a total of 5,388,091
shares issued or issuable. If the ESPP is approved and if, contrary to the
Company's present intentions, all of the shares were offered for purchase under
the ESPP at this time, the 400,000 shares under the ESPP would constitute 6.9%
of the 5,788,091 shares then issued or issuable.
Administration. The ESPP will be administered by the Compensation Committee
of the Board of Directors (the "Committee"). The Committee will have the
authority and discretion to specify the terms and conditions of options granted
to employees (within the limitations of the ESPP) and to otherwise interpret and
construe the terms of the ESPP and any agreements governing options granted
under the ESPP.
OPTIONS GRANTED UNDER THE ESPP
General. All options granted under the ESPP will be evidenced by
participation agreements. The Committee will have broad discretion to determine
the timing, amount, exercisability, and other terms and conditions of options
granted to employees. No options granted or funds accumulated under the ESPP
will be assignable or transferable, other than by will or in accordance with the
laws of descent and distribution. Offering Periods for the ESPP will run from
July 1 to December 31 and January 1 to June 30 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 will carry forward to future Offering Periods until
revoked. The employee may elect to have 1-15% of compensation set aside for use
in purchasing shares of Common Stock at the end of the Offering Period. The
employee may not change the elected percentage during an Offering Period but may
withdraw entirely, so long as the withdrawal is made at least 30 days before the
end of the Offering Period.
Exercise Price. The exercise price for options under the ESPP will be equal
to the lesser of 85% of the fair market value on the first day of the Offering
Period and 85% of the fair market value on the last day of the Offering Period.
No participant can purchase more than $25,000 worth of Common Stock in all
Offering Periods ending during the same calendar year. The closing price of a
share of Common Stock, as reported on NASDAQ National Market on April 2, 1997
was $6.25.
Exercise. Options granted under the ESPP to employees will be automatically
exercised as of the last day of the Offering Period, unless the participant has
requested withdrawal of his payroll contributions at least thirty days earlier.
The number of shares to be purchased will be determined by dividing the dollars
accumulated through payroll withholding by the exercise price and rounding down
to the nearest whole number of shares.
The option price will ordinarily be paid through payroll withholding, but the
Committee is authorized to accept payment (i) through the tendering of shares of
Common Stock that the optionee has held for at least 6 months or acquired under
an option granted not less than 6 months prior and that will be valued at the
fair market value on the date of exercise or (ii) through attestation that the
optionee holds shares equal to the number required to pay the purchase price (in
which case the Company will issue the net number of shares required by the
exercise). 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.
The Committee may prescribe in the participation 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. Participants who terminate employment or die during
an Offering Period will be deemed to have elected withdrawal of all payroll
contributions.
8
<PAGE>
Substantial Corporate Changes. If the Company has a "substantial corporate
change" (examples of which 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), employees will be permitted to make an early election to exercise
their options, subject to compliance with the "pooling of interest" accounting
rules in applicable situations.
Shareholder Approval. In general, shareholder approval will only be required,
after the initial approval, for changes to the extent necessary to preserve the
ESPP's status as a plan under Section 423 of the Code.
AMENDMENT OR TERMINATION OF THE ESPP
Subject to the foregoing, the Board of Directors may amend or terminate the
ESPP at any time and from time to time. Absent extension by the Board, no
Offering Periods will begin after December 31, 2006.
TAX CONSEQUENCES
The following summarizes certain federal income tax consequences of
participation in the Plan. It does not cover employment taxes except as
specified, nor does it cover other federal, state, local, or foreign tax
consequences, if any.
Rights granted under the Plan are intended to quality for the favorable
federal income tax treatment provided by an employee stock purchase plan that
qualifies under Section 423 of the Code.
A participant's withheld compensation will be post-tax. In other words, the
participant will be taxed on amounts withheld for the purchase of shares of
Common Stock as if he had instead received his full salary or wages. Other than
this, no income will be taxable to a participant until disposition of the shares
acquired, and the method of taxation will depend upon how long the shares were
held 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 participant 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 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 participant sells or disposes of the stock before the expiration of
either of the holding periods described above (a 'disqualifying disposition'),
then the excess of the fair market value of the stock on the exercise date over
the exercise price will be treated as ordinary income at the time of such
disposition. The Company may, in the future, be required to withhold income
taxes relating to such ordinary income from other payments made to the
participant. The balance of any gain on a sale will be treated as capital gain.
Even if the stock is sold for less than its fair market value on the exercise
date, the same amount of ordinary income is attributed to the participant, and a
capital loss is recognized equal to the difference between the sales price and
the fair market value of the stock on the exercise date. Any capital gain or
loss will be long- or short-term depending on whether the stock has been held
for more than one year.
There are no federal income tax consequences to the Company by reason of the
grant or exercise of rights under the Plan. The Company will, in general, be
entitled to a deduction to the extent amounts are taxed as ordinary income to a
participant by reason of a disqualifying disposition of the purchased shares of
stock, but will not be entitled to a deduction in respect of the ordinary income
realized by a participant upon a later disposition, or realized upon death. The
Company's deduction may be limited under Code Section 162(m) and may be subject
to disallowance for failure to report the optionee's income (which could arise
if an optionee does not notify the Company of the sale of stock in a
disqualifying disposition).
NEW PLAN BENEFITS
Benefits to be awarded under the ESPP have not been determined at this time.
9
<PAGE>
Stockholder Approval
Approval of the ESPP 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. Failure of the stockholders to approve the ESPP
will mean the plan will not begin operation.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE EMPLOYEE
STOCK PURCHASE PLAN.
PROPOSAL 3 -- 1997 STOCK OPTION PLAN
The Board of Directors proposes that the stockholders of the Company
approve the Forensic Technologies International Corporation 1997 Stock Option
Plan (the "1997 Plan" or the "Plan"). The 1997 Stock Option Plan became
effective March 25, 1997 (the "Effective Date"), subject to stockholder approval
as proposed herein.
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 B.
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. Funds
received by the Company under the Plan may be used for any general corporate
purpose.
Eligibility. All employees of the Company and certain 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
2, 1997, there were 170 employees and four Eligible Directors eligible to
receive grants under this Plan.
Shares Available Under the 1997 Plan. The 1997 Plan authorizes the issuance
of up to 1,000,000 shares of Common Stock. (If the 1997 Plan is approved by
stockholders, no further options will be issued under the Forensic Technologies
International Corporation 1992 Stock Option Plan (the "1992 Plan"), which had
337,169 shares available for option grants as of April 2, 1997.) The stock will
come from authorized but unissued shares or from stock owned by the Company,
including 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 150,000 shares, 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 2, 1997, there were 4,526,912 shares of
Common Stock outstanding and 861,179 shares of Common Stock underlying existing
options, for a total of 5,388,091 shares issued or issuable. If the 1997 Plan is
approved and if, contrary to the Company's present intentions, all of the shares
were offered for purchase under the 1997 Plan at this time, the 1,000,000 shares
under the 1997 Plan would constitute 15.7% of the 6,388,091 shares then issued
or issuable.
Administration. The 1997 Plan is administered by 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.
10
<PAGE>
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 will have 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 non-qualified
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 Market on April 2, 1997 was $6.25.
Formula Options Granted to Directors. All options granted to Eligible
Directors will be non-qualified options. If the 1997 Plan is approved by the
stockholders, Eligible Directors who were first elected before the Annual
Meeting will receive option grants to purchase 4,200 shares of Common Stock.
Eligible Directors who will remain in service beyond an Annual Meeting will
receive a grant of options with respect to 4,200 shares as of that Annual
Meeting. Any Eligible Director first elected after the Annual Meeting will
receive an initial option with respect to 14,700 shares. Options granted to
Eligible Directors will become one-third vested six months after the date of
grant, two-thirds' vested one year after the date of grant, and fully vested two
years after 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. Formula options under the 1997
Plan prospectively replace the formula options under the 1992 Plan, with
essentially the same terms.
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 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 6 months or acquired under an option granted not
less than 6 months prior and that will be valued at the fair market value on the
date of exercise; (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).
11
<PAGE>
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 10 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 5 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.
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 the 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.
12
<PAGE>
NEW PLAN BENEFITS
The following benefits will be awarded by formula under the 1997 Plan:
NUMBER
NAME AND POSITION 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
President of Engineering and
Scientific Services................. *
Patrick A. Brady
Executive Vice President and
Chief Operating Officer............. *
Gary Sindler
Executive Vice President and
Chief Financial Officer............. *
Executive Group....................... *
Non-Executive Director Group.......... 16,800(a)
Non-Executive Officer Employee Group.. *
- ----------
(a) Of the 16,800 shares, all replace options that would otherwise be granted
under the 1992 Plan.
* The Committee expects to grant options to Executive Officers, Non-Executive
Officers and other employees, but those benefits have not been determined at
this time.
Stockholder Approval
Approval of 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. Failure of the stockholders to approve the 1997
Plan will cause any options to purchase shares granted pursuant to the 1997 Plan
to be void.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR 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,
1997, 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.
13
<PAGE>
EXECUTIVE COMPENSATION AND OTHER MATTERS
EXECUTIVE COMPENSATION
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, 1996, to each executive officer whose aggregate compensation
exceeded $100,000.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM COMPENSATION
-------------------------- OTHER ANNUAL ALL OTHER ----------------------
NAME AND PRINCIPAL POSITION YEAR SALARY(1) BONUS COMPENSATION(2) COMPENSATION(3) # OF STOCK OPTIONS
- ---------------------------- ------ ----------- ------- --------------- --------------- ------------------
<S> <C> <C> <C> <C> <C> <C>
Jack B. Dunn................ 1996 $212,000 None $ 2,800 $ 3,000 94,000
Chief Executive Officer 1995 $200,000 None $ 4,100 $13,100 35,700
and President 1994 $157,000 $17,300 $ 2,300 None None
Daniel W. Luczak............ 1996 $262,000 None $10,900 $ 2,100 None
Chairman of the Board 1995 $250,000 None $10,600 $14,400 None
1994 $171,000 $22,500 $10,600 $14,700 None
Joseph R. Reynolds, Jr. .... 1996 $194,000 $20,000 $10,700 $ 3,200 None
Vice Chairman of the Board 1995 $182,000 $31,500 $10,500 $14,900 None
and President of Engineering 1994 $182,000 None $10,500 $14,600 None
and Scientific Services
Patrick A. Brady............ 1996 $181,000 None $ 700 $ 3,000 33,600
Executive Vice President and 1995 $150,000 None $ 600 None None
Chief Operating Officer 1994 $ 30,000 None $ 40 None None
Gary Sindler................ 1996 $ 73,000 None $ 2,700 $ 600 30,000
Executive Vice President, 1995 None None None None None
Chief Financial Officer and 1994 None None None None None
Secretary
</TABLE>
- ----------
(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) Retirement Plan, life insurance and
long-term disability coverage. The Company's 401(k) contributions for 1996
for Messrs. Dunn, Luczak, Reynolds, Brady and Sindler were $1,192, $9,500,
$9,500, $-0-, and $-0-, respectively. The additional life insurance
premiums paid by the Company's for 1996 for Messrs. Dunn, Luczak, Reynolds,
Brady, and Sindler were $500, $600, $400, $400 and $200, 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 1994 and 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. Additionally, the amount for Mr. Sindler for 1996 includes $2,100
for travel, temporary living, and moving expenses in connection with Mr.
Sindler's relocation to Maryland.
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 on 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 an annual salary of $212,000, $194,000 and $262,000 respectively, subject to
review and increase annually by the Compensation Committee of the Board of
14
<PAGE>
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 employees, including 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 in 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 1996
Except as set forth below, there were no options granted to the Named
Executive Officers during 1996:
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
NUMBER OF PERCENT OF TOTAL
SECURITIES OPTIONS EXERCISE OR
UNDERLYING OPTIONS GRANTED TO EMPLOYEES BASE PRICE EXPIRATION
NAME GRANTED IN FISCAL YEAR ($/SHARE) DATE
- ----------------------- -------------------- ------------------------ ------------- ----------------
<S> <C> <C> <C> <C>
Jack B. Dunn........... 94,000 34% $6.70 December, 1999
Daniel W. Luczak....... None
Joseph R. Reynolds, Jr. None
Patrick A. Brady....... 33,600 12% $6.38 January, 1999
Gary Sindler........... 30,000 11% $8.75 July, 1999
</TABLE>
15
<PAGE>
OPTIONS EXERCISED IN 1996
Except as set forth below, there were no options exercised by the Named
Executive Officers during 1996:
OPTIONS EXERCISED IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
SHARES UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
ACQUIRED VALUE OPTIONS AT FISCAL YEAR AT FISCAL YEAR
NAME ON EXERCISE REALIZED Exercisable Unexercisable Exercisable Unexercisable
---- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Jack B. Dunn........... 10,000 $66,200 150,759 94,000 $1,099,828 $ 287,080
Daniel W. Luczak....... None -0- -0- -0- -0-
Joseph R. Reynolds, Jr. None -0- -0- -0- -0-
Patrick A. Brady....... None -0- 33,600 -0- $ 113,232
Gary Sindler........... None -0- 30,000 -0- $ 30,000
</TABLE>
1992 STOCK OPTION PLAN (AS AMENDED AND RESTATED)
The 1992 Stock Option Plan, as amended and restated, was adopted by the Board
of Directors of the Company on January 12, 1996 and was approved by the
stockholders of the Company at the Company's 1996 annual meeting. The purpose of
the 1992 Stock Option Plan is to provide a performance incentive to key
employees and non-employee directors of the Company and to encourage stock
ownership in the Company by such individuals. The Compensation Committee of the
Board of Directors administers the 1992 Stock Option Plan, but has no discretion
with respect to the timing, pricing or amount of options granted to non-employee
directors under the plan. If the 1997 Stock Option Plan is approved by
stockholders, no further grants will be made from the 1992 Stock Option Plan.
GRANTS TO KEY EMPLOYEES. The 1992 Stock Option Plan provides for the issuance
to key employees of non-qualified and incentive stock options to acquire up to
1,002,548 shares of Common Stock. As of April 2, 1997, options to purchase
871,179 shares of Common Stock had been granted to key employees under the 1992
Stock Option Plan. Under the terms of the 1992 Stock Option Plan, the
Compensation Committee selects the employees of the Company that are eligible to
participate in the plan, the date options are granted, the number of shares
granted, the exercise price and the other terms and conditions of each option
granted to an employee. Options granted under the plan that are intended to be
incentive stock options within the meaning of Section 422 of the Code are
required to have an option exercise price of not less than 100% of fair market
value of the underlying shares on the date of grant (110% of such value if the
option is granted to a "ten percent shareholder" as set forth in Section
422(c)(5) of the Code). Options granted to employees under the plan that are
intended to be non-qualified options are required to have an option exercise
price of not less than 50% of fair market value of the underlying shares on the
date of grant. Options granted under the 1992 Stock Option Plan expire no later
than 10 years from the date of grant (five years from the date of grant in the
case of a ten percent shareholder).
GRANTS TO NON-EMPLOYEE DIRECTORS. The 1992 Stock Option Plan provides for the
issuance to non-employee directors of options to acquire up to 210,000 shares of
Common Stock. Options granted under the plan to non-employee directors are
non-qualified stock options under the Code. Each person who is first elected or
appointed to serve as a non-employee director of the Company will automatically
be granted an option to purchase 14,700 shares of Common Stock at the then fair
market value of the Common Stock. Immediately after each annual meeting of
stockholders, each person who is re-elected or continues as a non-employee
director automatically will be granted an option to purchase 4,200 shares of
Common Stock at the then fair market value of the Common Stock. Options granted
under the plan to non-employee directors vest one-third after six months,
two-thirds after one year and entirely after two years, and are exercisable for
10 years from the date of grant.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In August 1995, the Company purchased 50,291 shares of Class A Common Stock
from Daniel W. Luczak, the Chairman of the Board, for an aggregate purchase
price of $119,740. The shares were
16
<PAGE>
purchased by the Company pursuant to an option granted by Mr. Luczak to a former
officer of the Company. The Company acquired the option upon such former
officer's separation from the Company in November 1994.
In 1996, the Company repurchased 44,209 shares of Common Stock from Joseph R.
Reynolds, the Vice-Chairman of the Board for $105,269. The shares were purchased
by the Company pursuant to an option granted by Mr. Reynolds to a former officer
of the Company. The Company acquired the option upon such former officer's
separation from the Company in November 1994.
On February 1, 1995, the Company acquired for $200,000 in cash certain assets
of a sole proprietorship doing business as "Applix Software Computer Service"
and formed the Annapplix division of the Company. The Annapplix division was a
provider of general data processing consulting services and network
administration services and was considered a separate segment of the Company's
operations. Effective March 31, 1996, the Company sold Annapplix for $150,000 to
an investment group that included its former owner, who managed the division as
an officer of the Company, and the Company's President and Chairman of the
Board, Messrs. Dunn and Luczak. Messrs. Dunn and Luczak each purchased a $50,000
equity interest in Annapplix representing an outstanding equity interest of
4.85% each. In addition, investment limited partnerships associated with Grotech
Capital Group have provided Annapplix with an aggregate of $300,000 in
subordinated debt financing. The term of the subordinated debt is for one year
and accrues interest at the rate of prime, plus 1%, with interest payable
quarterly from the issue date. The Grotech investment partnerships and an
investor, who is not affiliated with the Company or Grotech, each received
five-year warrants to purchase 10,000 shares of Common Stock of the Company at
$8.50 per share for advising the Company regarding the structure of the
transaction. The holders of the warrants have the right to request the Company
to include the Common Stock issued upon exercise of the warrants, from time to
time, in registration statements filed by the Company.
During 1996, Wilmer, Cutler & Pickering, of which George Stamas, a director
of the Company, is a partner, billed the Company $173,303.82 for legal services
rendered. During the 1996, Piper, Marbury, of which Mr. Stamas was previously a
partner, billed the Company $175,000, for legal services rendered primarily
while Mr Stamas was with the firm.
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 FOR THE FISCAL
YEAR ENDED DECEMBER 31, 1996, INCLUDING FINANCIAL STATEMENTS AND SCHEDULES, TO
EACH OF THE COMPANY'S STOCKHOLDERS OF RECORD ON APRIL 2, 1997, AND TO EACH
BENEFICIAL OWNER OF STOCK ON THAT DATE. IN THE EVENT THAT EXHIBITS TO THE
COMPANY'S ANNUAL REPORT ON 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.
17
<PAGE>
PROPOSALS FOR THE 1997 ANNUAL MEETING
Proposals of stockholders intended to be presented at the 1998 Annual Meeting
of Stockholders must be received by the Company at its principal office in
Annapolis, Maryland not later than December 15, 1997 for inclusion in the proxy
statement for that meeting.
By Order of the Board of Directors,
GARY SINDLER, Secretary
April 18, 1997
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.
18
<PAGE>
EXHIBIT A
FORENSIC TECHNOLOGIES INTERNATIONAL CORPORATION
EMPLOYEE STOCK PURCHASE PLAN
PURPOSE....................... The Forensic Technologies International
Corporation Employee Stock Purchase Plan (the
"ESPP" or the "Plan") provides employees of
Forensic Technologies International Corporation
(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................... An Employee whom the Company or a Eligible
Subsidiary has employed continuously for one
year as of the first day of an Offering Period
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). 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 PERIOD............... Offering Periods are successive six month
periods beginning 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 un-
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<PAGE>
der the ESPP will have the same rights and
privileges.
METHOD OF PAYMENT............. A Participant may contribute to the ESPP through
payroll 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.
GRANTING OF OPTIONS........... On the first day of each Offering Period, a
Participant 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 VALUE............. The Fair Market Value of a share of Common Stock
for 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
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<PAGE>
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 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 OF OPTION............ Unless a Participant effects a timely withdrawal
pursuant 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 COMMON STOCK...... As soon as administratively feasible after the
options are used to purchase Common Stock, the
Company will deliver to 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 may, in its
discretion, establish a program for cashless
sales of Common Stock received under the ESPP.
SUBSEQUENT OFFERINGS.......... A Participant will be deemed to have elected to
participate 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
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<PAGE>
days before the beginning of the Offering Period
as of which the Participant desires to withdraw
from the ESPP.
WITHDRAWAL FROM THE PLAN...... A Participant may withdraw all, but not less
than all, payroll deductions credited to his
account for an Offering 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 TO PLAN......... The shares of Common Stock that the Company will
sell to 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 400,000 (subject to
the provisions in Adjustments upon Changes in
Capital Stock). If the total number of shares
for which options are to be exercised in an
Offering Period exceeds the number of shares
then available under the ESPP, the Company will
make, so far as is practicable, a pro rata
allocation of the shares available.
A Participant will have no interest in shares
covered by his option until the Participant
exercises the option.
Shares that a Participant purchases under the
ESPP will be registered in the name of the
Participant.
The Company will not issue fractional shares
pursuant to the ESPP, but the Administrator may,
in its discretion, direct the Company to make a
cash payment in lieu of fractional shares.
A-4
<PAGE>
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, 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 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 CORPORATE CHANGE.. Upon a Substantial Corporate Change, the Plan
and the offering will terminate unless provision
is made in writing 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. However,
the Board may determine that allowing such
exercise before the end of the Offering
Period will not occur if the election would
render unavailable "pooling of interest"
accounting for any reorganization, merger,
or consolidation of the Company.
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<PAGE>
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.
DESIGNATION OF BENEFICIARY.... A Participant may file with the Committee a
written 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's 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.......... Employees of Company Subsidiaries will be
entitled to 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, ASSIGNMENTS, AND
PLEDGES..................... A Participant may not assign, pledge, or
otherwise dispose of payroll deductions credited
to the Participant's account or any rights to
exercise an option or to receive shares of
Common Stock un-
A-6
<PAGE>
der the ESPP other than by will or the laws of
descent and distribution or pursuant to a
qualified domestic relations order, as defined
in the Employee Retirement Income Security Act.
Any other attempted assignment, pledge or other
disposition will be without effect, except that
the Company may treat such act as an election to
withdraw under the WITHDRAWAL section.
AMENDMENT OR TERMINATION OF
PLAN........................ The Board of Directors of the Company may at any
time terminate or amend the ESPP. Any amendment
of the ESPP that (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 STOCK OWNERSHIP. No Participant and no beneficiary or other
person claiming 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 LIABILITY...... Notwithstanding any other provisions of the
ESPP, no 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 to the administration or
interpretation of the ESPP has been or will be
delegated, against any cost or expense
(including attorneys'
A-7
<PAGE>
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 ESPP 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 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 SHAREHOLDERS...... The ESPP 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 ESPP. The adoption of the
ESPP is conditioned upon the approval of the
shareholders of the Company, and failure to
receive their approval will render the ESPP and
any outstanding options thereunder void and of
no effect.
A-8
<PAGE>
EXHIBIT B
FORENSIC TECHNOLOGIES INTERNATIONAL CORPORATION
1997 STOCK OPTION PLAN
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,
subject to stockholder approval, 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.
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<PAGE>
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.
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 the greater 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 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.
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
B-2
<PAGE>
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 after the first Annual
Meeting of the Stockholders following the
Effective Date (i.e., after the 1997 Meeting)
will receive a Formula Option as of his election
or appointment to purchase 14,700 shares of
Common Stock. Each Eligible Director serving on
the Board of Directors at the 1997 Meeting whose
term will continue beyond the 1997 Meeting will
receive a Formula Option as of the 1997 Meeting
to purchase 4,200 shares of Common Stock. For
succeeding Annual Meetings, Eligible Directors
who will continue in service beyond that Annual
Meeting will receive additional grants of
Formula Options for 4,200 shares of Common Stock
as of the Annual Meeting.
EXERCISE PRICE................ The Exercise Price of each Option granted to an
Eligible Director will be the higher of the Fair
Market Value on the Date of Grant or on the date
of initial shareholder approval of the Plan, if
later.
EXERCISE SCHEDULE............. Formula Options will become exercisable for
one-third of the Shares it covers six months
after the Date of Grant, for another one-third
on the first anniversary of the Date of Grant,
and for the remaining one-third on the second
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
<PAGE>
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 or must have acquired the
stock under an option granted at least six
months before 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;
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
B-4
<PAGE>
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 ADJUSTMENTS UPON
CHANGES IN CAPITAL STOCK, the aggregate number
of shares of Common Stock that may be issued
under the Options (whether ISOs or NQSOs) may
not exceed 1,000,000 shares and the maximum
number of shares that may be subject to Options
for a single individual in a calendar year may
not exceed 150,000 shares. 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
<PAGE>
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.. Upon 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.
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.
B-6
<PAGE>
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.
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:
B-7
<PAGE>
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
appliable laws, including placing legends on
certificates and issuing stop-transfer orders to
transfer agents and registrars.
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 ADJUSTMENTS OR SUBSTANTIAL CORPORATE
B-8
<PAGE>
CHANGES sections, 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.... If and when the stockholders approve this 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.
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-9
<PAGE>
PLEASE DATE, SIGN AND MAIL YOUR
PROXY CARD BACK AS SOON AS POSSIBLE!
ANNUAL MEETING OF STOCKHOLDERS
FORENSIC TECHNOLOGIES INTERNATIONAL CORPORATION
MAY 21, 1997
PLEASE DETACH AND MAIL IN THE ENVELOPE PROVIDED
- --------------------------------------------------------------------------------
[ X ] PLEASE MARK YOUR
VOTES AS IN THIS I
EXAMPLE I____
FOR all WITHHOLD
nominees listed to the AUTHORITY
right (except as to vote for all nominees
marked to the contrary) listed to the right
1. ELECTION I I I I
OF CLASS 1 I I I I
DIRECTORS I____I I____I
INSTRUCTION: To withhold authority in vote for any
individual nominee, write such nominee's name in the
space below.
- ----------------------------------------------------
<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN
<S> <C> <C> <C> <C> <C>
NOMINEES: James A. Flick, Jr. 2. To approve, ratify and confirm the adoption I I I I I I
of the Employee Stock Purchase Plan of I I I I I I
the Company. I____I I____I I____I
Peter F. O'Malley
3. To approve, ratify and confirm the adoption I I I I I I
of the 1997 Stock Option Plan of the I I I I I I
Company. I____I I____I I____I
4. Ratification of Ernst & Young LLP as the I I I I I I
independent auditors of the Company. I I I I I I
I____I I____I I____I
5. In their discretion, the Proxies are authorized to vote upon such other
matters as may properly come before the meeting.
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.
PLEASE VOTE, SIGN, DATE AND PROMPTLY RETURN THE PROXY CARD
USING THE ENCLOSED ENVELOPE.
</TABLE>
(Signature) Date , 1997
-------------------- -------------------------- -----------
(Signature if held jointly)
NOTE: Please sign exactly as name appears hereon. When shares are held by
joint tenants, both should sign. When signing as attorney executor,
administrator, trustee or guardian, please give full title as such. If a
corporation, please sign in full corporate name and have a duly
authorized officer sign, stating title, if a partnership, please sign in
partnership name by authorized person.
<PAGE>
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 Dennis J.
Shaughnessy, 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 21, 1997 and at
any and all continuations adjournments thereof.
(CONTINUED, AND TO BE MARKED, DATED AND SIGNED, ON THE OTHER SIDE).
