<PAGE>
===============================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement
[_] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S) 240.14a-11(c) or (S) 240.14a-12
FTI CONSULTING, INC.
(Name of the Registrant as Specified in its Charter)
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rule 14a-6(i)(1) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
===============================================================================
<PAGE>
FTI/Consulting [LOGO]
2021 Research Drive
Annapolis, Maryland 21401
(410) 224-8770
April 28, 2000
Dear Stockholder:
On behalf of the Board of Directors, I cordially invite you to attend the
2000 Annual Meeting of Stockholders of FTI Consulting, Inc. on May 23, 2000,
at 9:30 a.m., EDT, at FTI Consulting's principal business office, located at
2021 Research Drive, Annapolis, Maryland 21401.
Enclosed with this letter is a Notice of the Annual Meeting, a Proxy
Statement, a proxy card, and a return envelope. Both the Notice of the Annual
Meeting and the Proxy Statement provide details of the business that we will
conduct at the Annual Meeting and other information about FTI Consulting. Also
enclosed with this letter is FTI Consulting's Annual Report to Stockholders
for 1999.
At the Annual Meeting, we will ask you to:
. Elect two Class I directors;
. Ratify the selection of Ernst & Young LLP as independent accountants for
the year ending December 31, 2000; and
. Transact any other business that is properly presented at the Annual
Meeting.
Whether or not you plan to attend the Annual Meeting, please sign, date and
promptly return the proxy card in the enclosed prepaid return envelope. Your
shares of Common Stock will be voted at the Annual Meeting in accordance with
your proxy instructions. Of course, if you attend the Annual Meeting you may
vote in person. If you plan to attend the meeting, please mark the appropriate
box on the enclosed proxy card.
Sincerely,
/s/ Jack B. Dunn, IV
----------------------------------
Jack B. Dunn, IV
Chief Executive Officer and
Chairman of the Board of Directors
Your Vote Is Important
Please Sign, Date and Return Your Proxy Card Before the Annual Meeting
If you have any questions about voting your shares, please contact
Theodore I. Pincus, Executive Vice President, Chief Financial Officer and
Secretary, FTI Consulting, Inc., 2021 Research Drive,
Annapolis, Maryland 21401, telephone no. (410) 224-8770.
<PAGE>
FTI CONSULTING, INC.
NOTICE OF 2000 ANNUAL MEETING OF STOCKHOLDERS
Date:May 23, 2000
Time: 9:30 a.m., EDT
Place: 2021 Research Drive, Annapolis, Maryland
Dear Stockholder:
At the Annual Meeting, we will ask you to:
. Elect two Class I directors;
. Ratify the selection of Ernst & Young LLP as our independent accountants
for the year ending December 31, 2000; and
. Transact any other business that is properly presented at the Annual
Meeting.
You will be able to vote your shares of Common Stock at the Annual Meeting
if you were a stockholder of record at the close of business on April 24,
2000.
By Order of the Board of Directors
/s/ Theodore I. Pincus
------------------------
Theodore I. Pincus
Secretary
April 28, 2000
YOUR VOTE AT THE ANNUAL MEETING IS IMPORTANT.
Please indicate your vote on the enclosed proxy card and return it in the
enclosed envelope as soon
as possible, even if you plan to attend the meeting.
If you have questions about voting your shares, please contact
Theodore I. Pincus, Executive Vice President, Chief Financial Officer and
Secretary, FTI Consulting, Inc., 2021 Research Drive,
Annapolis, Maryland 21401, telephone no. (410) 224-8770.
If you attend the meeting, you will be able to revoke your proxy and
vote in person.
<PAGE>
FTI/Consulting [LOGO]
2021 Research Drive
Annapolis, Maryland 21401
April 28, 2000
PROXY STATEMENT FOR ANNUAL MEETING
This Proxy Statement provides information that you should read before you
vote on the proposals that will be presented to you at the 2000 Annual Meeting
of Stockholders of FTI Consulting, Inc. The 2000 Annual Meeting will be held
on May 23, 2000, at 9:30 a.m., EDT, at FTI Consulting's principal business
office, located at 2021 Research Drive, Annapolis, Maryland 21401.
This Proxy Statement provides information about the Annual Meeting, the
proposals on which you will be asked to vote at the Annual Meeting, and other
relevant information.
On April 28, 2000, we began mailing information to people who, according to
our records, owned shares of our Common Stock at the close of business on
April 24, 2000. We have mailed with that information a copy of FTI
Consulting's Annual Report to Stockholders for 1999.
<PAGE>
INFORMATION ABOUT THE 2000 ANNUAL MEETING AND VOTING
The Annual Meeting
The Annual Meeting will be held on May 23, 2000, at 9:30 a.m., EDT, at FTI
Consulting's principal business office, located at 2021 Research Drive,
Annapolis, Maryland 21401.
This Proxy Solicitation
We are sending you this Proxy Statement because FTI Consulting's Board of
Directors is seeking a proxy to vote your shares of our Common Stock at the
Annual Meeting. This Proxy Statement is intended to assist you in deciding how
to vote your shares. On April 28, 2000, we began mailing this Proxy Statement
to all people who, according to our stockholder records, owned shares of our
Common Stock at the close of business on April 24, 2000.
FTI Consulting is paying the cost of requesting these proxies. FTI
Consulting's directors, officers and employees may request proxies in person
or by telephone, mail, telecopy or letter. FTI Consulting will reimburse
brokers and other nominees their reasonable out-of-pocket expenses for
forwarding proxy materials to beneficial owners of our Common Stock.
Voting Your Shares
You have one vote for each share of our Common Stock that you owned of
record at the close of business on April 24, 2000. The number of shares you
own (and may vote at the Annual Meeting) is listed on the enclosed proxy card.
You may vote your shares of our Common Stock at the Annual Meeting either in
person or by proxy. To vote in person, you must attend the Annual Meeting and
submit a ballot. Ballots for voting in person will be available at the Annual
Meeting. To vote by proxy, you must complete and return the enclosed proxy
card. By completing and returning the proxy card, you will be directing the
persons designated on the proxy card to vote your shares of our Common Stock
at the Annual Meeting in accordance with the instructions you give on the
proxy card.
IF YOU DECIDE TO VOTE BY PROXY, YOUR PROXY CARD WILL BE VALID ONLY IF YOU
SIGN, DATE AND RETURN IT BEFORE THE ANNUAL MEETING.
If you complete the proxy card except for the voting instructions, then your
shares will be voted FOR the proposed election of the Class I directors and
FOR ratification of the selection of Ernst & Young LLP as our independent
accountants for the year 2000.
Revoking Your Proxy
If you decide to change your vote, you may revoke your proxy at any time
before it is voted. You may revoke your proxy in any one of three ways:
. You may notify the Secretary of FTI Consulting in writing that you wish
to revoke your proxy.
. You may submit a proxy dated later than your original proxy.
. You may attend the Annual Meeting and vote. Merely attending the Annual
Meeting will not by itself revoke a proxy. You must submit a ballot and
vote your shares of Common Stock.
1
<PAGE>
Vote Required for Approval
Proposal 1: Election of The two nominees for election as Class I
Two Class I Directors directors who receive the most votes will
be elected. So, if you do not vote for a
particular nominee, or you indicate
"withhold authority to vote" for a
particular nominee on your proxy card, your
vote will not count either for or against
the nominee.
Proposal 2: Ratification The affirmative vote of a majority of the
of Selection of votes cast at the Annual Meeting is
Independent Accountants required to ratify the selection of our
independent accountants. So, if you abstain
from voting, your abstention will not count
as a vote for or against the proposal.
If you hold your shares with a broker and you do not tell your broker how to
vote, your broker has the authority to vote on Proposals 1 and 2.
Quorum. On April 24, 2000, the record date for the Annual Meeting, 6,384,601
shares of our Common Stock were issued and outstanding. A quorum must be
present at the Annual Meeting in order to transact business. A quorum will be
present if a majority of the shares of Common Stock entitled to vote are
represented at the Annual Meeting, either in person or by proxy. If a quorum
is not present, a vote cannot occur. In deciding whether a quorum is present,
abstentions will be counted as shares of Common Stock that are represented at
the Annual Meeting.
Additional Information
FTI Consulting's Annual Report to Stockholders for the year ended December
31, 1999, including our consolidated financial statements, is being mailed to
all stockholders entitled to vote at the Annual Meeting together with this
Proxy Statement. The Annual Report does not constitute a part of the proxy
solicitation material. The Annual Report provides you with additional
information about FTI Consulting.
2
<PAGE>
PROPOSALS TO BE PRESENTED AT THE ANNUAL MEETING
We will present the following two proposals at the Annual Meeting. We have
described in this Proxy Statement all the proposals that we expect will be
made at the Annual Meeting. If we or a stockholder properly presents any other
proposal at the meeting, we will, to the extent permitted by applicable law,
use your proxy to vote your shares of Common Stock on the proposal in our best
judgment.
1. ELECTION OF DIRECTORS
FTI Consulting's Amended and Restated Articles of Incorporation provide that
its Board of Directors will consist of three classes. The members of each
class are elected for three-year terms. We currently have seven directors, of
which the two directors constituting the Class I directors are to be elected
at the 2000 Annual Meeting. The terms of the Class II and Class III directors
will expire at the Annual Meetings of Stockholders to be held in 2001 and
2002, respectively.
The nominees for election to the Board of Directors as Class I directors
are:
James A. Flick, Jr.
Peter F. O'Malley
Each director will be elected to serve for a three-year term, or thereafter
until his replacement is chosen and qualifies. Messrs. Flick and O'Malley are
currently members of the Board of Directors, and each has agreed to continue
to serve as a director if elected. More detailed information about each of the
nominees is provided in the section of this Proxy Statement titled "The Board
of Directors."
If either of the nominees cannot serve for any reason (which is not
anticipated), the Board of Directors may designate a substitute nominee or
nominees. If that happens, we will vote all valid proxies for the election of
the substitute nominee or nominees. The Board of Directors may also decide to
leave the Board seat or seats open until a suitable candidate or candidates
are located, or it may decide to reduce the size of the Board.
The Board of Directors unanimously recommends that you vote FOR the nominees
for election as Class I directors.
2. RATIFICATION OF ERNST & YOUNG LLP AS INDEPENDENT ACCOUNTANTS
Upon the recommendation of the Audit Committee, the Board of Directors has
appointed Ernst & Young LLP to serve as FTI Consulting's independent
accountants for its year ending December 31, 2000. The Board of Directors is
seeking ratification of the appointment of Ernst & Young. A representative
from Ernst & Young will be available at the Annual Meeting to answer your
questions and make a statement if he or she desires.
The Board of Directors unanimously recommends that you vote FOR this proposal.
3
<PAGE>
STOCK OWNERSHIP
There were 6,384,601 shares of our Common Stock issued and outstanding on
April 24, 2000. The following table shows the beneficial ownership of our
Common Stock as of April 17, 2000 by: (1) each person or entity that we know
beneficially owns more than 5% of our Common Stock; (2) each of our current
executive officers and directors; and (3) all of our current directors and
executive officers as a group.
<TABLE>
<CAPTION>
Percent of
Number of Shares Common Stock
Name of Beneficial Owner (1) Beneficially Owned(2) Beneficially Owned
- ---------------------------- --------------------- ------------------
<S> <C> <C>
Jack B. Dunn, IV(3).................. 367,689 5.5%
Stewart J. Kahn(4)................... 441,861 6.8
Theodore I. Pincus(5)................ 8,667 *
Patrick A. Brady(6).................. 184,100 2.8
Glenn R. Baker(7).................... 16,866 *
Barry M. Monheit(8).................. 143,319 2.2
Robert Manzo(9)...................... 507,500 7.8
Michael Policano(10)................. 507,500 7.8
Scott S. Binder(11).................. 20,000 *
James A. Flick, Jr.(12).............. 69,331 1.1
Peter F. O'Malley(13)................ 79,063 1.2
Dennis J. Shaughnessy(14)............ 80,600 1.3
George P. Stamas(15)................. 61,438 1.0
Allied Capital Corporation(16)(17)... 469,935 6.9
Allied Investment Corpora-
tion(17)(18)........................ 166,938 2.5
Grotech Partners III,
LP(19)(20)(21)...................... 389,721 6.1
Grotech III Companion Fund,
LP(19)(20)(22)...................... 46,439 *
Grotech Capital Group,
Inc.(19)(20)(23).................... 55,600 *
Grotech III Pennsylvania Fund,
LP(19)(20)(24)...................... 27,840 *
Joseph R. Reynolds, Jr............... 441,416 6.9
Investment Counselors of Maryland,
Inc.(25)............................ 391,000 6.1
All directors and executive officers
as a group (11 persons)............. 1,472,934 21.7
</TABLE>
- --------
* Less than 1%.
(1) Unless otherwise specified, the address of these persons is c/o FTI
Consulting, Inc., 2021 Research Drive, Annapolis, Maryland 21401.
(2) We use the SEC's definition of beneficial ownership. This means that the
persons named in this table have sole or shared voting and/or investment
power over the shares shown. Beneficial ownership also includes shares
underlying options or warrants currently exercisable or exercisable
within 60 days.
(3) Includes 84,730 shares of Common Stock and 274,759 shares of Common Stock
issuable upon the exercise of options. Includes 8,000 shares of Common
Stock over which Mr. Dunn and his wife share voting and investment power
and includes 200 shares over which Mr. Dunn and his son share voting and
investment power.
(4) Includes 348,528 shares of our Common Stock, 60,000 shares of our Common
Stock issuable on exercise of a currently exercisable warrant and 33,333
shares of our Common Stock issuable upon exercise of stock options.
(5) Includes 2,000 shares of our Common Stock and 6,667 shares of our Common
Stock issuable upon exercise of stock options.
(6) Includes 2,500 shares of our Common Stock and 181,600 shares of our
Common Stock issuable upon exercise of stock options.
(7) Includes 10,200 shares of our Common Stock and 6,666 shares of our Common
Stock issuable upon exercise of stock options.
(8) Includes 102,653 shares of our Common Stock, 23,333 shares of our Common
Stock issuable upon exercise of stock options and a warrant for 17,333
shares of our Common Stock.
4
<PAGE>
(9) Includes 407,500 shares of our Common Stock and 100,000 shares of our
Common Stock issuable upon exercise of stock options.
(10) Includes 407,500 shares of our Common Stock and 100,000 shares of our
Common Stock issuable upon exercise of stock options.
(11) Represents 20,000 shares of our Common Stock issuable upon the exercise
of options granted to Mr. Binder as one of our non-employee directors.
(12) Includes 13,731 shares of our Common Stock and 55,600 shares of our
Common Stock issuable upon exercise of stock options.
(13) Includes 23,463 shares of our Common Stock and 55,600 shares of our
Common Stock issuable upon exercise of stock options.
(14) Includes 25,000 shares of our Common Stock and 55,600 shares of our
Common Stock issuable upon exercise of options granted to Mr. Shaughnessy
as one of our non-employee directors. Mr. Shaughnessy disclaims
beneficial ownership of all shares of our Common Stock and shares
issuable upon exercise of warrants held by Grotech III Pennsylvania Fund,
Grotech III Companion Fund and Grotech Partners III.
(15) Includes 5,838 shares of our Common Stock over which Mr. Stamas and his
wife share voting and investment power and 55,600 shares of our Common
Stock issuable upon exercise of options granted to Mr. Stamas as one of
our non-employee directors.
(16) Includes a warrant for 449,935 shares of our Common Stock.
(17) Includes 20,000 shares of our Common Stock issuable upon the exercise of
options granted to Mr. Binder as one of our non-employee directors.
Mr. Binder is a principal of Allied Capital Corporation and Allied
Investment Corporation. Mr. Binder disclaims beneficial ownership of the
warrants and underlying shares held by Allied Capital Corporation and
Allied Investment Corporation. Allied entities' addresses are 1919
Pennsylvania Avenue, N.W. Washington, DC 20006.
(18) Includes a warrant for 146,938 shares of our Common Stock.
(19) Grotech Capital Group is the general partner of Grotech III Pennsylvania
Fund, Grotech III Companion Fund and Grotech Partners III. Dennis J.
Shaughnessy, one of our directors, is a Managing Director of Grotech
Capital Group. Grotech Capital Group maintains beneficial ownership over
each Fund's shares. Mr. Shaughnessy disclaims beneficial ownership of all
shares of our Common Stock and shares issuable upon exercise of warrants
held by Grotech III Pennsylvania Fund, Grotech III Companion Fund and
Grotech Partners III.
(20) Grotech entities' addresses are 9690 Deereco Road, Timonium, Maryland
21093.
(21) Includes 381,322 shares of our Common Stock and a warrant for 8,399
shares of our Common Stock.
(22) Includes 45,438 shares of our Common Stock and a warrant for 1,001 shares
of our Common Stock.
(23) Represents 55,600 shares of our Common Stock issuable upon exercise of
stock options granted to Mr. Shaughnessy, one of our directors. Pursuant
to an arrangement between Mr. Shaughnessy and Grotech Capital Group,
Grotech Capital Group has the sole right to exercise the options and to
vote or invest the Common Stock issuable thereunder.
(24) Includes 27,240 shares of our Common Stock and a warrant for 600 shares
of our Common Stock.
(25) Investment Counselors of Maryland's address is 803 Cathedral Street,
Baltimore, Maryland 21401. Information is based on an amended Schedule
13G filed with the SEC on February 9, 2000.
5
<PAGE>
THE BOARD OF DIRECTORS
We have set forth below information about the members of our Board of
Directors. We have nominated James A. Flick, Jr. and Peter F. O'Malley for re-
election as the Class I directors.
Class I Director Nominees
<TABLE>
<CAPTION>
Director Principal Occupation and
Name Age Since Business Experience Other Directorships
---- --- -------- ------------------------ -------------------
<C> <C> <C> <S> <C>
James A. Flick, Jr. 65 1992 Mr. Flick is President, Chief Mr. Flick is a director of
Executive Officer and a Capital One Financial
director of the Dome Corporation and Bethlehem
Corporation, a real estate Steel Credit Affiliates.
development and management
services company. He is also
the President of Winnow, Inc.
From 1991 through 1994, Mr.
Flick was an Executive Vice
President of Legg Mason Wood
Walker, Incorporated. Mr. Flick
is a certified public
accountant.
Peter F. O'Malley 61 1992 Mr. O'Malley is President of Mr. O'Malley is a director
Aberdeen Creek Corporation, a of Potomac Electric Power
privately-held company engaged Company and Legg Mason,
in investment, business Inc.
consulting and development
activities. He is the founder
of, and since 1989 has been Of
Counsel to, the law firm of
O'Malley, Miles, Nylen &
Gilmore.
Class II Directors
<CAPTION>
Director Principal Occupation and
Name Age Since Business Experience Other Directorships
---- --- -------- ------------------------ -------------------
<C> <C> <C> <S> <C>
Dennis J. Shaughnessy 52 1992 Mr. Shaughnessy is a Managing Mr. Shaughnessy is a
Director of Grotech Capital director of TESSCO
Group, Inc., a venture capital Technologies, Inc. and
firm headquartered in Timonium, U.S. Vision, Inc.
Maryland. Prior to becoming a
Managing Director of Grotech
Capital Group in 1989, Mr.
Shaughnessy was the Chief
Executive Officer of CRI
International, Inc.
George P. Stamas 49 1992 Since December 1999, Mr. Stamas None
has been Vice Chairman of
Deutsche Banc Alex. Brown, a
global investment bank. From
1996 to 1999, Mr. Stamas was a
partner in the law firm of
Wilmer, Cutler & Pickering LLP.
Before then, he was a partner
in the law firm of Piper &
Marbury L.L.P. Mr. Stamas was
counsel to, and is a limited
partner of the Baltimore
Orioles. Wilmer, Cutler &
Pickering and Piper Marbury
Rudnick & Wolfe LLP (the
successor to Piper & Marbury
L.L.P.) are among several law
firms that provide services to
us.
</TABLE>
6
<PAGE>
Class III Directors
<TABLE>
<CAPTION>
Director Principal Occupation and
Name Age Since Business Experience Other Directorships
---- --- -------- ------------------------ -------------------
<S> <C> <C> <C> <C>
Scott S. Binder 45 1999 Since 1997, Mr. Binder has been None
a principal with Allied Capital
Corporation, a Washington, D.C.
based firm that invests in
small to medium size
businesses. From 1985 until
1997, Mr. Binder was President
of Overland Capital
Corporation, an owner and
operator of cable television
systems and radio stations.
From 1991 until 1998, Mr.
Binder was a director of CIH,
Ltd., a Washington, D.C. public
affairs consulting firm. Mr.
Binder is a certified public
accountant.
Jack B. Dunn, IV 49 1992 Mr. Dunn became Chairman of our None
Board of Directors in December
1998. Since October 1995, he
has served as our Chief
Executive Officer. From October
1995 to December 1998, he also
served as our President. From
May 1994 to October 1995, he
served as our Chief Operating
Officer. From October 1992
through September 1995, he
served as our Chief Financial
Officer. Mr. Dunn is a limited
partner of the Baltimore
Orioles. Prior to joining us,
he was a Managing Director of
Legg Mason Wood Walker,
Incorporated and directed its
Baltimore corporate finance and
investment banking activities.
Stewart J. Kahn 56 1999 Mr. Kahn has served as our None
President since December 29,
1998 and as our Chief Operating
Officer since September 14,
1999. Mr. Kahn is also a
director of Kahn Consulting,
Inc. and KCI Management, Inc.,
which became our subsidiaries
in September 1998. Mr. Kahn has
been a director of Kahn
Consulting and KCI Management
since 1989.
</TABLE>
Board Organization and Meetings
During 1999, our Board of Directors met ten times in person and held two
telephonic meetings. Except as noted, each of the nominees and our other
directors attended at least 75% of the total Board meetings and meetings of
committees of the Board of Directors on which he served. Mr. Shaughnessy
attended six of the ten meetings in person and one of the telephone meetings
and consulted with our Chairman and the other members of the Board on numerous
other occasions.
The Board of Directors has the following committees:
Audit Committee. The Audit Committee makes recommendations to the Board of
Directors concerning the engagement of independent accountants; reviews with
our independent accountants the plans and results of the annual audit
engagement; approves other professional services provided to us by our
independent accountants; reviews the independence of our accountants;
considers the range of audit and non-audit fees; and reviews the adequacy of
internal accounting controls. In 1999, the Audit Committee met three times.
The members of the Audit Committee are: Messrs. Binder, Flick, O'Malley and
Shaughnessy. In accordance with SEC requirements, in 2000, our Board of
Directors approved an audit committee charter adopted by the Audit Committee,
a copy of which is attached hereto as Exhibit A.
7
<PAGE>
Compensation Committee. The Compensation Committee makes recommendations to
the Board of Directors with respect to the compensation of our executive
officers and administers our stock option, incentive and employee benefit
plans. The Compensation Committee met one time, held one telephonic meeting
and acted nine times by unanimous written consent in 1999. The members of the
Compensation Committee are: Messrs. Binder, Flick, O'Malley and Shaughnessy.
Compensation of Directors
We reimburse our directors for their out-of-pocket expenses incurred in the
performance of their duties as our directors. We do not pay fees to our
directors for attendance at meetings. Non-employee directors are eligible
to receive options to acquire shares of our Common Stock under our 1997 Stock
Option Plan. Under this plan, each non-employee director elected after May
1998 would receive options for 16,000 shares of Common Stock, exercisable at
the fair market value of our Common Stock on the date of grant. The initial
option grants became exercisable one-third after six months, two-thirds after
one year and in full after two years from the date of grant and have a term of
ten years. Each non-employee director who is elected or continues as a non-
employee director after an Annual Meeting would automatically be granted an
additional option to purchase 12,500 shares of our Common Stock, exercisable
at the fair market value of our Common Stock on the date of grant. These
options become exercisable one-half after six months and in full after one
year from the date of grant and have a term of ten years. On May 19, 1999,
instead of receiving option grants for 1999, 2000 and 2001, each of our five
non-employee directors elected to receive options for 60,000 shares,
exercisable at $4.25, the fair market value of our Common Stock on that date.
These options become exercisable one-third per year for three years and have a
term of ten years. As of April 17, 2000, 442,400 non-qualified stock options
have been granted to non-employee directors, 142,400 of which are currently
exercisable and 100,000 of which will become exercisable within 60 days.
8
<PAGE>
EXECUTIVE OFFICERS
We have set forth below information about each of our executive officers who
is not also a director.
<TABLE>
<CAPTION>
Officer
Name Age Since Principal Business Experience for Past Five Years
---- --- ------- -------------------------------------------------
<C> <C> <C> <S>
Glenn R. Baker 58 1998 Mr. Baker has been the President of our Applied
Sciences Division since September 1998. Prior to
joining us, he was Chief Executive Officer and
President of S.E.A., Inc., which we acquired in
September 1998. Mr. Baker co-founded SEA in 1970. He is
a certified fire investigator and obtained his MBA in
1966.
Patrick A. Brady 46 1994 Mr. Brady has been President of our Litigation Services
Division since May 1999. From 1994 to May 1999, he was
our Executive Vice President and was also our Chief
Operating Officer from 1996 to May 1999. From 1994 to
1996, Mr. Brady was Executive Vice President and
General Manager of our Visual Communications and Trial
Consulting Services. Mr. Brady joined us in 1986 and
specialized in project management methodologies for
dealing with major failure investigations and complex
litigation matters.
Barry M. Monheit 53 1998 Mr. Monheit has been the President of our Expert
Financial Services Division since May 1999. Since 1992,
Mr. Monheit has been a Managing Director of KCI, which
we acquired in September 1998. Prior to joining KCI,
Mr. Monheit was the Partner-In-Charge of Arthur
Andersen & Co.'s New York Financial Consulting Division
and its U.S. bankruptcy and reorganization practice.
Before joining Arthur Andersen in 1988, he served as
Partner-In-Charge of Spicer and Oppenheim's bankruptcy
and reorganization practice and as managing director of
its Houston Office.
Theodore I. Pincus 57 1999 Mr. Pincus has been our Executive Vice President and
Chief Financial Officer since April 1999. Prior to
joining us, Mr. Pincus was Executive Vice President and
Chief Financial Officer of Nitinol Medical Technologies
from May 1995 to March 1999. Before then, he was
President of the Pincus Group, a financial consulting
firm, from December 1989 to May 1995. Earlier in his
career, he rose to Partner at Ernst & Young and was
Partner-in-Charge of Management Consulting in the New
York Region of KMG Main Hurdman, both public accounting
firms. He is a certified public accountant.
</TABLE>
Our executive officers are elected by the Board of Directors, and they serve
at the pleasure of our Board, subject to the terms of the employment
agreements that we have with some of them.
9
<PAGE>
SUMMARY COMPENSATION TABLE
We have set forth below information concerning the cash and non-cash
compensation earned by our Chief Executive Officer and our four most highly
compensated persons who were serving as our executive officers on December 31,
1999.
<TABLE>
<CAPTION>
Long Term
Compensation
Annual Compensation Awards
---------------------------------- ------------
Securities
Underlying
Name and Principal Other Annual Options/ All Other
Position Year Salary(1) Bonus Compensation(2) SARs(#) Compensation(3)
- ------------------ ---- --------- -------- --------------- ------------ ---------------
<S> <C> <C> <C> <C> <C> <C>
Jack B. Dunn, IV(4)..... 1999 $330,012 $200,000 $12,300 40,000 $2,900
Chairman and Chief 1998 312,000 60,000 7,300 40,000 3,800
Executive Officer 1997 242,700 110,600 3,880 80,000 3,800
Stewart J. Kahn(5)...... 1999 506,694 115,000 2,100 -- 2,300
President and Chief 1998 142,900 -- 850 100,000 --
Operating Officer
Patrick A. Brady(6)..... 1999 250,016 283,815 5,400 -- 3,300
President, Litigation 1998 241,500 10,000 1,100 -- 3,500
Services Division 1997 205,200 92,900 600 150,000 3,600
Glenn R. Baker(7)....... 1999 321,419 50,000 5,300 -- 700
President, Applied
Sciences Division
Barry M. Monheit(8)..... 1999 504,798 315,000 1,400 -- --
President, Expert
Financial Services
Division
</TABLE>
- --------
(1) Includes amounts earned but deferred at the election of the executive
officer, such as salary deferrals under our 401(k) Plan.
(2) These amounts represent our payment of matching and discretionary
contributions to our 401(k) Plan and payments of premiums on life
insurance and long-term disability coverage. Our 401(k) contributions for
1999 for Messrs. Dunn, Kahn, Brady, Baker and Monheit were $10,000, $0,
$4,300, $3,200 and $0, respectively. The life insurance premiums paid by
us for 1999 for Messrs. Dunn, Kahn, Brady, Baker and Monheit were $2,000,
$1,800, $800, $1,800 and $1,100, respectively.
(3) These amounts represent our payments of automobile expenses on behalf of
the named officers.
(4) Mr. Dunn was also our President until December 1998.
(5) Mr. Kahn joined us in September 1998 upon our acquisition of KCI and
became our President on December 29, 1998. Mr. Kahn did not earn any
compensation in that position during 1998 and 1999. Mr. Kahn is also
employed under a written employment agreement as Managing Director of Kahn
Consulting, Inc. and KCI Management, Inc., our subsidiaries. The amounts
reported were earned by Mr. Kahn for serving in those positions from the
date of our acquisition of KCI.
(6) Mr. Brady became President of our Litigation Services Division in May
1999. Prior to then, he was our Executive Vice President and Chief
Operating Officer.
(7) Mr. Baker joined us in September 1998 upon our acquisition of SEA and
became President of our Applied Sciences Division at that time. He became
an executive officer of FTI Consulting in May 1999. The amounts reported
were earned by Mr. Baker during all of 1999.
(8) Mr. Monheit joined us in September 1998 upon our acquisition of KCI and
became President of our Expert Financial Services Division and one of our
executive officers in May 1999. He is also employed under a written
employment agreement as a Managing Director of Kahn Consulting, Inc., our
subsidiary. The amounts reported were earned by Mr. Monheit for serving
in both capacities during 1999.
10
<PAGE>
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth the options granted to our named officers
during 1999:
<TABLE>
<CAPTION>
Potential
Realizable
Individual Grants Value at Assumed
-------------------------------------------- Annual Rates of
Number of Percent of Stock Price
Securities Total Options Appreciation for
Underlying Granted to Option Term
Options Employees in Exercise Expiration ----------------
Name Granted(1) Fiscal Year Price(2) Date 5%(3) 10%(3)
- ---- ---------- ------------- -------- ---------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
Jack B. Dunn, IV (4).... 10,000 2.5% $4.13 2-09 $26,813 $ 70,538
10,000 2.5 4.68 5-09 30,420 80,028
10,000 2.5 6.60 7-09 42,900 112,860
10,000 2.5 4.88 10-09 31,720 83,448
Stewart J. Kahn......... -- -- -- -- -- --
Patrick A. Brady........ -- -- -- -- -- --
Glenn R. Baker.......... -- -- -- -- -- --
Barry M. Monheit........ -- -- -- -- -- --
</TABLE>
- --------
(1) All options become exercisable one-third on the first anniversary of the
date of grant, two-thirds on the second anniversary of the date of grant
and in full on the third anniversary of the date of grant.
(2) All options were granted at or above the fair market value of our Common
Stock on the date of grant.
(3) The dollar amounts are the result of calculations at assumed 5% and 10%
compounded rates of stock appreciation from the date of grant to the
expiration date of the options. The potential realizable value is reported
net of the option price but before income taxes associated with exercise.
These assumed rates of growth were selected by the SEC for illustration
purposes only. They are not intended to forecast possible future
appreciation, if any, of our stock price. No gain to the optionees is
possible without an increase in stock price.
(4) Mr. Dunn receives an option grant for 10,000 shares of our Common Stock on
the day following each quarterly earnings release. These options are
granted with an exercise price 10% higher than the fair market value of
our Common Stock on the date of grant and become fully exercisable upon an
increase of 25% in the market value of the Common Stock but not earlier
than one year after the date of grant.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND YEAR END VALUE OF OPTIONS
The following table sets forth information about outstanding options held by
the named officers as of December 31, 1999:
<TABLE>
<CAPTION>
Number of Securities
Underlying Unexercised Value of Unexercised
Options Held at Fiscal In-the-Money Options
Year-End(1) at Fiscal Year-End(2)
Shares Acquired ------------------------- -------------------------
Name on Exercise (#) Value Realized ($) Exercisable Unexercisable Exercisable Unexercisable
- ---- --------------- ------------------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Jack B. Dunn, IV........ -- -- 274,759 60,000 $143,573 $1,200
Stewart J. Kahn......... -- -- 33,333 66,667 -- --
Patrick A. Brady........ -- -- 181,600 -- -- --
Glenn R. Baker.......... -- -- 6,666 13,334 -- --
Barry M. Monheit........ -- -- 23,333 46,667 -- --
</TABLE>
- --------
(1)Includes both "in-the-money" and "out-of-the-money" options.
(2)Based on the market price of our Common Stock on December 31, 1999 ($5.00).
11
<PAGE>
Employment Arrangements
Mr. Dunn. We entered into an employment agreement with Mr. Dunn as of
January 1, 1996. This agreement had an initial rolling three year term that is
automatically extended by one year on each December 31 unless by that date
either we or Mr. Dunn give the other notice of an intention not to further
extend the term. The agreement expires at the end of 2005 but would
automatically terminate earlier if Mr. Dunn dies or becomes disabled. If we
terminate Mr. Dunn's employment without cause or Mr. Dunn resigns for a
specified good reason, he remains entitled to his salary and benefits through
the end of the then current term of the agreement and a bonus equal to the
average annual bonus he received for the prior three years through the end of
the then current term. Under the agreement, Mr. Dunn receives an annual base
salary, set at $330,000 for 1999. His annual salary is subject to annual
increases at our discretion. Effective January 1, 2000, Mr. Dunn received an
increase in his annual base salary to $500,000. If Mr. Dunn dies or becomes
totally disabled, he is entitled to continue his salary for three years as in
effect when he dies or becomes totally disabled. Our obligation to continue
his salary, however, is reduced by any life insurance proceeds we pay to his
estate as a result of insurance policies we owned or any disability insurance
proceeds paid directly to him. Mr. Dunn's agreement contains a non-competition
clause that lasts for one year from the end of his employment. The clause
prohibits Mr. Dunn from soliciting any entity or person that was our client,
customer, employee or consultant at any time from January 1, 1996 to the date
Mr. Dunn leaves us.
Messrs. Kahn and Monheit. Messrs. Kahn and Monheit entered into employment
agreements with KCI when we acquired it in September 1998. These agreements
have four year terms and expire on September 16, 2002. However, either Mr.
Kahn or Mr. Monheit may resign upon 60 days notice. Messrs. Kahn and Monheit
each are entitled to annual salaries, subject to increases at our discretion.
They each are also entitled to annual bonuses equal to 12.5% of KCI's EBITDA
above $3 million, so long as KCI's EBITDA is at least 25% of its total
revenues. If we terminate either agreement without cause or Mr. Kahn or Mr.
Monheit resigns for a specified good reason, the employee remains entitled to
his salary through the end of the agreement's term and one-half of the bonus
he received in the prior year. Each of these agreements contains a non-
competition clause that lasts until the later of September 17, 2003 or one
year from the end of employment. Each non-competition clause prohibits the
employee from soliciting any entity or person that was our client, customer,
employee or consultant at any time from September 17, 1998 to the date Mr.
Kahn or Mr. Monheit leaves KCI.
Mr. Brady. Mr. Brady entered into an employment agreement with us in
November 1999, effective as of January 1999. This agreement has a three year
term and expires on January 1, 2002. However, Mr. Brady may resign upon 60
days notice. Mr. Brady is entitled to an annual salary of $250,000, subject to
annual increases. He is also entitled to an annual bonus of the first $250,000
in pre-tax earnings of our Litigation Services division above $6,300,000 plus
10% of such pre-tax earnings in excess of $6,550,000. If we terminate Mr.
Brady's employment without cause, he remains entitled to his salary through
the end of the agreement's term. Mr. Brady's agreement contains a non-
competition clause that lasts until the later of January 1, 2004 or one year
from the end of his employment. This non-competition clause prohibits Mr.
Brady from competing with us in any standard metropolitan statistical area or
county where we have an office or provide services. The clause also prohibits
Mr. Brady from soliciting any entity or person that was our client, customer,
employee or consultant at any time from January 1999 to the later of January
1, 2004 or one year from the end of his employment.
Mr. Baker. Mr. Baker entered into an employment agreement with SEA when we
acquired it in September 1998. This agreement has a five year term and expires
on September 25, 2003. However, Mr. Baker may resign upon 60 days notice. Mr.
Baker is entitled to an annual salary of $300,000, subject to annual
increases. He is also entitled to an annual bonus of $25,000 in each year
SEA's pre-tax profits equal or exceed $1 million and an additional $25,000 in
each year SEA's pre-tax profits equal or exceed $2 million. If we terminate
Mr. Baker's employment without cause, he remains entitled to his salary
through the end of the agreement's term. Mr. Baker's agreement contains a non-
competition clause that lasts until the later of September 25, 2002 or one
year from the end of his employment. This non-competition clause prohibits Mr.
Baker from competing with SEA or us in any standard metropolitan statistical
area or county where we or SEA have an office or provide services. The clause
also prohibits Mr. Baker from soliciting any entity or person that was our
client, customer, employee or consultant at any time from September 25, 1998
to the date Mr. Baker leaves SEA.
12
<PAGE>
Compensation Committee Report on Executive Compensation
Compensation Philosophy. Our goal is to design and administer an executive
compensation program to (i) attract and retain qualified executive officers,
(ii) reward executive officers for performance in achieving FTI Consulting's
business objectives and enhancing stockholder value, (iii) align the executive
officers' interests with those of the stockholders, and (iv) provide
incentives for the creation of long-term stockholder value. The key elements
of executive compensation are base salary, annual incentive and performance
bonuses, and equity options. We review and approve FTI Consulting's policies
and practices regarding executive compensation, including (a) base salary
levels, (b) incentive compensation plans and related performance awards, and
(c) long-term incentives, principally equity option awards.
We believe that compensation must be competitive, as well as directly and
materially linked to FTI Consulting's performance. In administering the
compensation program, our objectives include the following: attracting and
retaining executive talent, motivating executives to maximize operating
performance, measuring performance on both an individual and a company-wide
basis, reflecting FTI Consulting's progress in meeting growth and
profitability targets, and linking executive and stockholder interests through
the grant of stock options and other equity-based compensation.
The key components of FTI Consulting's executive compensation program have
historically consisted of salary, annual incentive bonuses and stock options.
The long-term compensation of FTI Consulting's executive officers has
consisted primarily of stock options. The short-term compensation has
consisted principally of base salary and a cash bonus. Our policy with respect
to each of these elements is discussed below.
Base Salary Levels. We believe that base salary levels at FTI Consulting are
reasonably related to the salary levels of executive officers of comparable
companies at similar stages of development. The Board and we set base salaries
and determined other compensation for 1999 based on those factors. Some of the
senior executives have employment agreements that set floors on base salary
and other elements of compensation for their contract terms, but we can
increase the base salary at any point. We expect that any such increases will
take into account such factors as individual past performance, changes in
responsibilities, changes in pay levels of companies we consider comparable,
and inflation.
Bonus Awards. FTI Consulting uses performance bonuses to reflect the level
of involvement and success of its executive officers in advancing corporate
goals. The awards earned depend on the extent to which FTI Consulting and
individual performance objectives are achieved. FTI Consulting's objectives
consist of operating, strategic and financial goals that are considered to be
critical to our fundamental long-term goal of building stockholder value. For
fiscal year 1999, these objectives were: (i) evaluating, negotiating, and
reaching agreement as to expansion of the business and its prospects, (ii)
implementation of the planned growth of FTI Consulting, (iii) continued
advances toward project goals in consolidation and management, and (iv)
progress in certain financial and administrative activities. In 2000, the
Committee awarded approximately $990,000 in bonuses to named officers for
1999.
Long-Term Incentive Compensation. The Board and stockholders approved the
1997 Plan as the principal means of providing long-term incentives. We believe
that the use of equity incentives better aligns the interest of executive
officers with those of stockholders and promotes long-term stockholder value
than does cash alone. We administer the 1997 Plan, determine the terms of the
options and the number of shares of Common Stock subject to option grants, and
set significant terms. In setting the grants, we relied on our own experience
and that of our financial and other advisers.
Compensation of the Chief Executive Officer. We use the same procedures
described above in setting the annual salary, bonus, and long-term incentive
compensation of the chief executive officer (the "CEO"). The Board had
established the CEO's salary for this report's period by contract, and we had
granted him incentive stock options and nonqualified stock options. He
continued to receive formula grants of options under a program we had
previously established. In considering the CEO's compensation, we considered
FTI Consulting's
13
<PAGE>
achievements of some of its performance goals and further considered key
subjective factors such as the CEO's work in negotiating and supervising
acquisitions, rebuilding a management team, recruiting and retaining highly
qualified individuals. In awarding any future long-term incentive
compensation, we will consider the CEO's performance, overall contribution to
the Company, retention of employees, the number of options not yet exercisable
and the total number of options to be granted.
Compensation Deduction Limit. The Securities and Exchange Commission (the
"SEC") requires that this report comment on the Company's policy with respect
to a special rule under the tax laws, Section 162(m) of the Internal Revenue
Code. That section can limit the deductibility on a Subchapter C corporation's
federal income tax return of compensation of $1.0 million to any of the named
officers.
A company can deduct compensation (including from exercising options)
outside that limit if it pays the compensation under a plan that its
stockholders approve and that is performance-related and non-discretionary.
Option exercises are typically deductible under such a plan if granted with
exercise prices at or above the market price when granted. Our policy with
respect to this section is to make every reasonable effort to ensure that
compensation complies with Section 162(m), while simultaneously providing
Company executives with the proper incentives to remain with and increase the
prospects of the Company. The Company did not pay any compensation with
respect to 1999 that would be outside the limits of Section 162(m).
Compensation Committee
Scott S. Binder
James A. Flick, Jr.
Peter F. O'Malley
Dennis J. Shaughnessy
14
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Messrs. Kahn and Monheit
Stewart J. Kahn is our President and Chief Operating Officer and serves as a
director on our Board of Directors and on the Boards of Directors of Kahn
Consulting, Inc. ("KCI") and KCI Management, Inc. ("KCIM"), our subsidiaries.
Barry M. Monheit is President of our Expert Financial Services Division and
President of KCI and KCIM. We acquired KCI and KCIM on September 17, 1998.
Messrs. Kahn and Monheit were stockholders of KCI and KCIM. We acquired KCI
and KCIM pursuant to a stock purchase agreement for an aggregate consideration
of $20 million, of which $10 million was paid in cash and $10 million was in
the form of promissory notes.
As of March 31, 1999, we and Messrs. Kahn and Monheit and some other holders
of these promissory notes agreed to restructure the notes. With regard to Mr.
Kahn, $500,000 of his notes were paid as of March 31, 1999; $4.5 million would
be due to him on June 30, 2002; $1.5 million of the notes would accrue
interest at 6% per year and would be convertible at his option into 300,000
shares of our Common Stock (a conversion rate of $5.00 per share); and $3
million of the notes would accrue interest at 9.25% per year. With regard to
Mr. Monheit, $2.3 million of his notes were paid as of March 31, 1999; $1.3
million would be due to him on June 30, 2002; $433,300 of the notes would
accrue interest at 6% per year and would be convertible at his option into
86,660 shares of our Common Stock (a conversion rate of $5.00 per share); and
$866,700 of the notes would accrue interest at 9.25% per year.
When we restructured Mr. Kahn's and Mr. Monheit's notes, we issued Mr. Kahn
a warrant for 60,000 shares of our Common Stock and Mr. Monheit a warrant for
17,333 shares of our Common Stock. These warrants have an exercise price of
$3.21 per share and expire on March 31, 2004.
On February 4, 2000, we repaid a portion of the outstanding principal under
the promissory notes in cash and the remaining portion was exchanged for
shares of our Common Stock. Mr. Kahn received $3 million in cash and 338,028
shares of Common Stock in exchange for the remaining unpaid principal balance
of $4.5 million under the promissory note. Mr. Monheit received $866,667 in
cash and 97,652 shares of Common Stock in exchange for the remaining unpaid
principal balance of $1.3 million under the promissory note.
Mr. Baker
Glenn R. Baker became President of our Applied Sciences Division in 1998.
Mr. Baker was Chief Executive Officer and President of SEA and owned 50% of
SEA's Common Stock. We acquired SEA for $15.6 million in September 1998. We
paid $10 million of the purchase price in cash and the balance in our 7.5%
promissory notes. We paid Mr. Baker $5 million in cash and issued him $2.8
million of notes. Mr. Baker's notes were originally due in two principal
installments, one of $1.5 million on September 30, 1999, and the other of $1.3
million on September 30, 2000. In June 1999, we and Mr. Baker agreed to reduce
Mr. Baker's September 2000 note by $175,000 to $1.14 million as a result of
our requiring him to indemnify us from a payment we made on his behalf in
settlement of litigation. On February 4, 2000, we repaid the outstanding
principal under the promissory notes in cash.
Allied Capital Corporation
In March 1999, we sold $13 million of our subordinated debentures to Allied
Capital Corporation and affiliates. Of this amount, $5.7 million of the
debentures were sold to Allied Capital Corporation, and $7.3 million were sold
to Allied Investment Corporation, an affiliate of Allied Capital Corporation.
One of our directors, Scott S. Binder, is a principal of Allied Capital
Corporation. The subordinated debentures bore interest at 9.25% per year
through June 2000 increasing to 12% per year from then until March 2004, when
they were to mature. The subordinated debentures were secured by a second
security interest in all of our assets. We also issued warrants to purchase a
total of 392,506 shares of our Common Stock at an exercise price of $3.205 per
share to Allied Capital Corporation and Allied Investment Corporation.
15
<PAGE>
In February 2000, we refinanced our outstanding indebtedness. In connection
with the refinancing, we repaid the subordinated debentures issued to Allied
Capital Corporation and its affiliates in March 1999 and sold new $30.0
million of subordinated debentures to Allied Capital Corporation and other
institutional investors, of which $15.0 million of debentures were purchased
by Allied Capital Corporation. The subordinated debentures mature on January
31, 2007, and bear interest at 17% per annum, payable semi-annually. The
interest rate of 17% per annum consists of a cash component equal to 12% per
annum of principal and a component payable in additional notes equal to 5% per
annum of principal. Allied Capital Corporation and the other lenders also
received warrants to purchase 670,404 shares of our Common Stock at an
exercise price of $4.44 per share that expire on January 31, 2010, of which
Allied Capital Corporation received warrants to purchase 335,202 shares of our
Common Stock. Under our agreement with Allied Capital Corporation, if we
repaid the subordinated debentures issued in March in full before June 30,
2000, the number of shares of our Common Stock issuable on exercise of the
warrants would be reduced. Therefore, when we repaid the subordinated
debentures issued in March in 2000, Allied surrendered warrants to purchase
130,835 shares of our Common Stock.
Mr. Shaughnessy
Dennis J. Shaughnessy, one of our directors, is a Managing Director of
Grotech Capital Group, Inc. Grotech Capital Group, Inc. and three funds it
manages own a total of 519,600 shares of our Common Stock, including shares
issuable upon exercise of options and warrants that are currently exercisable.
These shares represent about 8.1% of our currently outstanding Common Stock.
Mr. Stamas
During 1999, Wilmer, Cutler & Pickering LLP, of which George Stamas, a
director of FTI Consulting, was a partner, provided legal services to FTI
Consulting. During 1999, FTI Consulting incurred legal fees in the aggregate
amount of $297,427.
16
<PAGE>
OTHER INFORMATION
Company Performance
The following graph compares the cumulative total stockholder return on our
Common Stock from May 8, 1996 (the date the shares of Common Stock were first
offered and sold to the public at the initial public offering price of $8.50
per share) through December 31, 1999 with the cumulative total return of The
Nasdaq Stock Market ("Nasdaq") Index and a peer group index comprised of
Charles River Associates, Inc., Engineering Animation Inc., Esquire
Communications Ltd., Exponent Inc., FYI Inc., Hagler Bailly Inc., The Kroll-
O'Gara Company, Navigant, Inc. and Profit Recovery Group International Inc.
(collectively, the "Peer Group") Index. FTI Consulting's Common Stock price
and the price of the Nasdaq Index are published daily. The Peer Group Index
was compiled by FTI Consulting as of December 31, 1999. The Peer Group Index
in this Proxy Statement contains two changes from the Peer Group Index in last
year's Proxy Statement. FTI Consulting removed Lai Worldwide Inc. from the
Peer Group Index because the company was acquired by another company that is
not in the same line of business as FTI Consulting. Further, Metzler Group
Inc. changed its name to Navigant, Inc.
The graph assumes an investment of $100 in each of FTI Consulting, the
Nasdaq Index and the Peer Group on May 8, 1996. The comparison assumes that
all dividends, if any, are reinvested into additional shares of Common Stock
during the holding period.
COMPARISON OF 44 MONTH CUMULATIVE TOTAL RETURN*
AMONG FTI CONSULTING, INC., THE NASDAQ STOCK MARKET (U.S.) INDEX
AND A PEER GROUP
[GRAPH APPEARS HERE]
Cumulative Total Return
----------------------------------------------
5/8/96 12/96 12/97 12/98 12/99
FTI CONSULTING, INC. 100.00 114.71 147.06 39.71 58.82
PEER GROUP 100.00 92.83 125.87 202.37 139.03
NASDAQ STOCK MARKET (U.S.) 100.00 109.17 133.77 188.50 340.54
* $100 INVESTED ON 5/8/96 IN STOCK OR INDEX - INCLUDING REINVESTMENT OF
DIVIDENDS. FISCAL YEAR ENDED DECEMBER 31.
17
<PAGE>
Section 16(a) Beneficial Ownership Reporting Compliance
Based on our records and other information, we believe that our directors
and officers who are required to file reports under Section 16 reported all
transactions in FTI Consulting's shares of Common Stock and derivative
securities, including options for shares and warrants for shares, on a timely
basis during the fiscal year ended December 31, 1999, except that George P.
Stamas filed the Form 5 for the fiscal year ended December 31, 1999 on
February 16, 2000 instead of February 14, 2000.
Proposals for the 2001 Annual Meeting
If you want to include a proposal in the proxy statement for FTI
Consulting's 2001 Annual Meeting, send the proposal to FTI Consulting, Inc.,
Attn: Theodore I. Pincus, Executive Vice President and Chief Financial
Officer, at 2021 Research Drive, Annapolis, Maryland 21401. Proposals must be
received on or before December 27, 2000 to be included in next year's proxy
statement. Please note that proposals must comply with all of the requirements
of Rule 14a-8 under the Securities Exchange Act of 1934, as well as the
requirements of FTI Consulting's Amended and Restated Articles of
Incorporation, as amended, and By-Laws, as amended. FTI Consulting will be
able to use proxies given to it for next year's meeting to vote for or against
any such proposal at FTI Consulting's discretion unless the proposal is
submitted to FTI Consulting on or before March 10, 2001.
18
<PAGE>
Exhibit A
FTI CONSULTING, INC.
Audit Committee Charter
Organization
There shall be a committee of the Board of Directors to be known as the
Audit Committee. The Audit Committee shall be comprised of at least three
directors who are independent of management and FTI Consulting, Inc. (the
"Company"). Members of the Audit Committee shall be considered independent if
they have no relationship to the Company that may interfere with the exercise
of their independence from management and the Company. All Audit Committee
members will be financially literate, and at least one member will have
accounting or related financial management expertise.
Statement of Policy
The Audit Committee shall provide assistance to the directors in fulfilling
their responsibility to the stockholders, potential stockholders, and
investment community relating to corporate accounting, reporting practices of
the Company, and the quality and integrity of financial reports of the
Company. In so doing, it is the responsibility of the Audit Committee to
maintain free and open communication between the directors, the independent
auditors and the financial management of the Company.
Responsibilities
In carrying out its responsibilities, the Audit Committee believes its
policies and procedures should remain flexible, in order to best react to
changing conditions and to ensure to the directors and stockholders that the
corporate accounting and reporting practices of the Company are in accordance
with all requirements and are of the highest quality.
In carrying out these responsibilities, the Audit Committee will:
. Obtain the full Board of Directors' approval of this Charter and review
and reassess this Charter as conditions dictate (at least annually).
. Review and recommend to the directors the independent auditors to be
selected to audit the financial statements of the Company and its
divisions and subsidiaries.
. Have a clear understanding with the independent auditors that they are
ultimately accountable to the Audit Committee and the Board of
Directors, as the stockholders' representatives, who have the ultimate
authority in deciding to engage, evaluate, and if appropriate, terminate
their services.
. Meet with the independent auditors and financial management of the
Company to review the scope of the proposed audit and timely quarterly
reviews for the current year and the procedures to be utilized, the
adequacy of the independent auditor's compensation, and at the
conclusion thereof review such audit or review, including any comments
or recommendations of the independent auditors.
. Review with the independent auditors and financial and accounting
personnel, the adequacy and effectiveness of the accounting and
financial controls of the Company, and elicit any recommendations for
the improvement of such internal controls or particular areas where new
or more detailed controls or procedures are desirable. Review reports
received from regulators and other legal and regulatory matters that may
have a material effect on the financial statements or related company
compliance policies.
. Inquire of management and the independent auditors about significant
risks or exposures and assess the steps management has taken to minimize
such risks to the Company.
A-1
<PAGE>
. Review the quarterly financial statements with financial management and
the independent auditors prior to the filing of the Form 10-Q (or prior
to the press release of results, if possible) to determine that the
independent auditors do not take exception to the disclosure and content
of the financial statements, and discuss any other matters required to
be communicated to the committee by the auditors. The chair of the
Committee may represent the entire Committee for purposes of this
review.
. Review the financial statements to be contained in the annual report to
stockholders with management and the independent auditors to determine
that the independent auditors are satisfied with the disclosure and
content of the financial statements to be presented to the stockholders.
Review with financial management and the independent auditors the
results of their timely analysis of significant financial reporting
issues and practices, including changes in, or adoptions of, accounting
principles and disclosure practices, and discuss any other matters
required to be communicated to the committee by the auditors. Also
review with financial management and the independent auditors their
judgments about the quality, not just acceptability, of accounting
principles and the clarity of the financial disclosure practices used or
proposed to be used, and particularly, the degree of aggressiveness or
conservatism of the organization's accounting principles and underlying
estimates, and other significant decisions made in preparing the
financial statements.
. Provide sufficient opportunity for the independent auditors and the
internal auditor, if any, to meet with the members of the Audit
Committee without members of management present. Among the items to be
discussed in these meetings are the independent auditors' evaluation of
the company's financial, accounting, and internal auditing personnel, if
any, and the cooperation that the independent auditors received during
the course of audit.
. Review accounting and financial human resources and succession planning
within the Company.
. Report the results of the annual audit to the Board of Directors. If
requested by the Board, invite the independent auditors to attend the
full Board of Directors meeting to assist in reporting the results of
the annual audit or to answer other directors' questions (alternatively,
the other directors, particularly the other independent directors, may
be invited to attend the Audit Committee meeting during which the
results of the annual audit are reviewed).
. On an annual basis, obtain from the independent auditors a written
communication delineating all their relationships and professional
services as required by Independence Standards Board Standard No. 1,
Independence Discussions with Audit Committees. In addition, review with
the independent auditors the nature and scope of any disclosed
relationships or professional services and take, or recommend that the
Board of Directors take, appropriate action to ensure the continuing
independence of the auditors.
. Prepare a report of the Audit Committee to be included in the Company's
proxy statement for its annual meeting of stockholders, disclosing
whether (1) the Committee had reviewed and discussed with management and
the independent auditors, as well as discussed within the Committee
(without management or the independent auditors present), the financial
statements and the quality of accounting principles and significant
judgments affecting the financial statements; (2) the Committee
discussed with the auditors the independence of the auditors; and (3)
based upon the Committee's review and discussions with management and
the independent auditors, the Committee had recommended to the Board of
Directors that the audited financials be included in the Company's
annual report on Form 10-K.
. Include a copy of this Charter in the annual report to stockholders or
the proxy statement (effective for year ending December 31, 2000) at
least triennially or the year after any significant amendment to the
Charter.
. Submit the minutes of all meetings of the Audit Committee to, or discuss
the matters discussed at each Committee meeting with, the Board of
Directors.
. Investigate any matter brought to its attention within the scope of its
duties, with the power to retain outside counsel for this purpose if, in
its judgment, that is appropriate.
A-2
<PAGE>
PROXY FOR THE ANNUAL MEETING OF STOCKHOLDERS
FTI CONSULTING, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE
BOARD OF DIRECTORS AND MAY BE REVOKED PRIOR TO ITS EXERCISE
The undersigned stockholder(s) of FTI Consulting, Inc. (the "Company")
hereby appoints Messrs. Jack B. Dunn, IV and Theodore I. Pincus, and each of
them singly, as proxies, each with full power of substitution, for and in the
name of the undersigned at the Annual Meeting of Stockholders of FTI Consulting,
Inc. to be held on May 23, 2000, and at any and all adjournments thereof, to
vote all shares of common stock of said Company held of record by the
undersigned on April 24, 2000, as if the undersigned were present and voting the
shares.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS GIVEN, THIS PROXY WILL
BE VOTED FOR PROPOSALS 1 AND 2.
(TO BE SIGNED ON REVERSE SIDE)
<PAGE>
Please date, sign and mail your
proxy card back as soon as possible!
Annual Meeting of Stockholders
FTI CONSULTING, INC.
May 23, 2000
(arrow) Please Detach and Mail in the Envelope Provided (arrow)
A [X] Please mark your
votes as in this
example.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
FOR all nominees WITHHOLD
(except as AUTHORITY to vote
marked to the for the nominees
contrary) listed at right
1. ELECTION OF [ ] [ ] Nominees: James A. Flick, Jr.
CLASS I Peter F. O'Malley
DIRECTORS.
(INSTRUCTIONS: To withhold authority to vote for any
nominee, write the nominee's name on the space provided
below.)
- -------------------------------------------------
FOR AGAINST ABSTAIN
2. Ratification of selection of Ernst & Young, LLP to
serve as independent accountants for FTI [ ] [ ] [ ]
Consulting, Inc. for the fiscal year ending
December 31, 2000.
3. The proxies are authorized to vote in their discretion upon such other business
as may properly come before the meeting to the extent permitted by law.
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED IN THE
MANNER DIRECTED. IN THE ABSENCE OF ANY DIRECTION, THE SHARES
WILL BE VOTED FOR EACH NOMINEE NAMED IN PROPOSAL 1 AND FOR
PROPOSAL 2, AND IN ACCORDANCE WITH THE PROXIES' DISCRETION ON
SUCH OTHER BUSINESS THAT MAY PROPERLY COME BEFORE THE
MEETING TO THE EXTENT PERMITTED BY LAW.
I PLAN TO ATTEND THE MEETING [ ]
SIGNATURE:____________________ SIGNATURE IF HELD JOINTLY:____________________ Date __________, 2000
Note: Please date this Proxy and sign exactly as your name(s) appears hereon. When signing as
attorney, administrator, trustee or guardian, please give your full title as such. If there is
more than one trustee, all should sign. All joint owners should sign.
</TABLE>
