2009 Annual Report (PDF) - FTI Consulting

Employment AgreementsAs of December 31, 2009, we had written employment agreements with 189 of our 281 senior managingdirectors and senior vice presidents in the segments, who we are collectively referring to as SMDs. We do nothave written employment agreements with substantially all of our professionals below the SMD level. Theemployment agreements with our SMDs expire between 2010 and 2019, with 12 SMD agreements expiring in2010, 53 SMD agreements expiring in 2011 and 42 SMD agreements expiring in 2012 primarily as a result of our2006 and 2007 initiatives to renegotiate long-term employment arrangements with certain SMDs who participatein our senior managing director incentive compensation program (SMD IC Program). These long-termemployment arrangements and the SMD IC Program are discussed below.The employment agreements with employees at the SMD and equivalent level generally provide for fixedsalary and participation in incentive payment programs (which in some cases may be based on financial measuressuch as earnings before interest, taxes, depreciation and amortization (EBITDA)). They may also provide forlong-term equity incentives in the form of stock options and/or restricted stock awards. In some cases, we extendunsecured general recourse forgivable loans to professionals. We believe that the loan arrangements enhance ourability to attract and retain professionals. Some or all of the principal amount and accrued interest of the loans wemake to employees will be forgiven by us upon the passage of time, provided that the professional is anemployee on the forgiveness date, and upon other specified events, such as death or disability, as applicable tosuch loan. Our executive officers are not eligible to receive loans and no loans have been made to them.Generally, our employment agreements with SMDs provide for salary continuation benefits, accruedbonuses and other benefits beyond the termination date if such professional leaves our employ for specifiedreasons prior to the expiration date of the employment agreement. The length and amount of payments to be paidby us following the termination or resignation of a professional varies depending on whether the person resignedfor “good reason” or was terminated by us with “cause,” resigned without “good reason” or was terminated by uswithout “cause,” died or became “disabled,” or was terminated as a result of a “change in control” (all such termsas defined in such professional’s employment agreement). These employment agreements containnon-competition and non-solicitation covenants, which under specified circumstances may extend beyond theexpiration or termination of the employment term. Under the non-competition covenants, the professionalgenerally agrees not to offer or perform services of the type performed during his employment with us, directlyor indirectly through another person or entity, in competition with us, within specified geographic areas, subject,in some cases, to specified exceptions. Generally, such professionals also agree not to solicit business regardingany case, matter or client with or on which such professional worked on our behalf, or to solicit, hire, orinfluence the departure of any of our employees, consultants or independent contractors. In these employmentagreements, the professionals also agree to maintain the confidentiality of our proprietary information and affirmthat we are the owners of copyrights, trademarks, patents and inventions developed during the course of theiremployment.Senior Managing Director Incentive Compensation Program and Employment TermsIn 2006, we implemented our SMD IC Program, which is designed to align the interests of SMDs with theinterests of our company and its stakeholders. As of December 31, 2009, there were 66 SMDs participating in theSMD IC Program from our Corporate Finance/Restructuring, Forensic and Litigation Consulting, EconomicConsulting and Technology segments, representing approximately 28%, 26%, 4% and 53% of the total SMDs ineach such segment, respectively. Senior management designates the participants in the SMD IC Program, subjectto approval by the Compensation Committee of our Board of Directors. As current written employmentagreements approach their expiration date and as part of our annual performance evaluation process, we consideradmitting other SMDs into the program. Each year we also evaluate whether current participants should beeligible for additional upfront awards under this program. Our executive officers are not eligible to participate inthe SMD IC Program.The benefits under our SMD IC Program include a cash payment in the form of an unsecured generalrecourse forgivable loan. We also provide significant additional payments up-front and during the term of the17