LETTER FROM KORN/FERRY INTER. FUTURESTEP, INC.
Published on August 12, 2002
EXHIBIT 10.29
[KORN/FERRY INTERNATIONAL FUTURESTEP, INC. LETTERHEAD]
December 3, 2001
PERSONAL AND CONFIDENTIAL
Mr. Robert H. McNabb
10919 Wickline Drive
Houston, Texas 77024
Dear Bob:
I am delighted to extend to you this offer of employment with Korn/Ferry
International Futurestep, Inc. ("Futurestep") for the position of President of
Futurestep's Americas and Asia-Pacific regions. In this capacity, you will have
overall responsibility for Futurestep's operations within North America, Latin
and South America, and Asia with the ultimate objective of optimizing revenue
growth and profitability subject to market and economic conditions and within
the context of Korn/Ferry's overall strategy. You initially will report directly
to me. Your employment will be effective December 3, 2001 or such other date as
may be mutually agreed upon.
Salary and Cash Bonus Opportunity
Your entry compensation program will consist of an annual base salary of
$425,000, payable in semi-monthly increments. In addition, you will be eligible
for a target annual cash bonus of 100% of base salary ($425,000). Your maximum
annual cash bonus opportunity will equal 200% of base salary ($850,000). Your
actual cash bonus will be based on the performance of Korn/Ferry International
("Korn/Ferry") as a whole, the performance of Futurestep as a whole, the
performance of the business units under your direct responsibility, and an
assessment of your individual performance. The assessment of performance for
cash bonus determination purposes will be conducted by me and the Boards of
Directors of Futurestep and Korn/Ferry under a process to be mutually
determined. The award of any cash bonus is contingent upon your continued active
employment with Futurestep as of the date bonuses are awarded, generally in July
following the close of the firm's fiscal year (April 30). Eligibility for
earning an annual cash bonus will begin immediately upon your employment with
the firm. Your bonus opportunity for the fiscal year ending April 30, 2002
(FY02) will be pro-rated based on the number of days you are employed by the
firm during FY02.
Annual Stock Option Grant
In addition to the annual cash bonus opportunity described above, you will
be eligible to receive an annual grant of options to purchase Korn/Ferry common
stock. The
Mr. Robert H. McNabb
Page 2
target grant value is 50% of annual base salary ($212,500), while the maximum
grant value is 100% of annual base salary ($425,000). Grant value will be
determined by the Black-Scholes Option Pricing Model, using the same assumptions
the Korn/Ferry Compensation Committee applies to determine annual stock option
grants for Korn/Ferry's executive officers. Your actual option grant will be
based on an assessment of your individual performance with emphasis on your
adherence to firm values, such as teaming. This assessment of performance will
be conducted by me and the Boards of Directors of Futurestep and Korn/Ferry.
Stock Option Hiring Grant
Executive Management will recommend to the Korn/Ferry Compensation
Committee that you be granted 35,000 Korn/Ferry stock options with an exercise
price equal to the closing market price of Korn/Ferry's common stock on the date
the grant is approved by the Committee or your first day of active full-time
employment, whichever is later. This hiring option grant will vest in three
annual installments. With the approval of the Committee, the first third of the
grant (11,667 shares) will vest six months from your initial date of employment;
the second third of the grant (11,667 shares) will vest two years from your
initial date of employment; and the final third of the grant (11,666 shares)
will vest three years from your initial date of employment. The grant will be
made under the terms and conditions of the Korn/Ferry International Performance
Award Plan and is subject to such other terms and conditions as may be required
by the Committee.
Stock Ownership Guideline
As a senior officer of Futurestep, you will be expected to acquire and
retain in your name (or jointly in the name of you and your spouse) Korn/Ferry
common stock with a market value equal to at least 150% of your annual base
salary. Stock options are not counted as part of this requirement until they
have been exercised and converted into actual shares. You will have a period of
three years from your hire date to meet this commitment. It is anticipated that
this ownership commitment can be satisfied through the gain realized upon the
exercise of accumulated options. In the event that the performance of the firm's
stock is insufficient to achieve this objective, the period of time required to
meet the stock ownership goal will be extended.
Termination Protection
Notwithstanding Futurestep's or Korn/Ferry's severance policy, your
employment will be governed by a two-year employment agreement subject to
automatic renewal for successive 12-month periods unless the agreement is
terminated in writing by
Mr. Robert H. McNabb
Page 3
you or the firm prior to 60 days from expiration. If you are terminated without
"cause" during the initial two-year term of the agreement, you will receive
severance equal to 150% of your then current annual base salary. If Futurestep
fails to renew your agreement within the renewal period, you will receive
severance equal to 100% of your then current annual base salary. For purposes of
this paragraph, "cause" is defined as any of the following: (a) conviction of a
felony involving moral turpitude; (b) behavior which is fraudulent or, in the
opinion of the Chairman and Board of Directors of Futurestep or Korn/Ferry,
materially harmful to Futurestep or Korn/Ferry; (c) willful neglect of duties;
(d) continued poor performance after receiving written notification of such by
the Board of Directors of Futurestep which specifies the areas of poor
performance, and your failure to cure such performance deficiency(ies) within 90
days of receiving Board notice. The details of these termination provisions will
be set forth in and governed by the Employment Agreement referred to below.
Employee Benefits
You will be eligible for the same level of employee benefits as other
employees of your position level and tenure. Currently, these benefits are
summarized below.
You will be entitled to ten holidays per year, twenty days vacation, and
fifteen days sick leave. You will also be enrolled in Korn/Ferry's group
insurance program, which includes life, accidental death and dismemberment, and
health benefits. Life insurance coverage, which may be limited by the
underwriters, will be three times your base salary up to a maximum of $500,000;
of which $50,000 will be provided under the group program and the remainder
under the Korn/Ferry Worldwide Executive Benefit - Life Plan. You may also
enroll for supplemental, employee paid life insurance coverage. If you elect
this coverage, you will pay the premium cost through payroll deduction. Your
enrollment for life insurance benefits will take effect 60 days after your first
day of employment.
You will also participate in Korn/Ferry's health benefits plan, which
includes medical, dental and vision care coverage. Based on the plan you select,
your monthly contribution for health benefits coverage will range from $40 -
$120 for the Preferred Provider Plan (PPO) or $0 - $100 for the Health
Maintenance Organization Plan (HMO) depending on the number of family members
covered. Your payments, if any, will be made through payroll deductions and may
be done on a pre-tax basis if you choose to participate in the Korn/Ferry
Flexible Spending Plan described below. Your enrollment for health benefits will
take effect 60 days after your first day of employment and your completion of
the enrollment forms.
Mr. Robert H. McNabb
Page 4
You will also have the opportunity to enroll in Korn/Ferry's Flexible
Benefit Account Plan. This is a Section 125 plan by which you may: (1) defer a
portion of your income on a pre-tax basis, (2) pay your contribution for
dependent health coverage, (3) reimburse you for certain health expenses not
covered by insurance, and (4) reimburse you for dependent (child or elder) care
expenses. You are eligible to enroll in this plan at the beginning of the first
plan quarter (January 1, April 1, July 1 and October 1) after you have completed
60 days of employment and enrolled in the group health plan. If you do not
enroll at that time, you must wait until the annual enrollment in December.
After you have completed 60 days of employment, Korn/Ferry will provide you
with short-term disability coverage. This coverage will protect you against loss
of income if you are unable to work because you are disabled due to a non-work
related illness or injury. If you become disabled, this benefit provides 70
percent of your basic weekly salary to a maximum of $1,500 per week for up to 12
weeks. You would be eligible to receive benefits under this program after you
have been disabled for seven calendar days.
In addition, you may enroll in Korn/Ferry's group long-term disability
insurance program which provides disability benefits of 60 percent of your
monthly base salary to a maximum of $10,000 per month. The monthly premiums for
this benefit are based on your salary. If you elect this benefit, Futurestep
will pay 75 percent of the premium and you will pay the remaining 25 percent
through payroll deduction. Your eligibility for enrollment for long-term
disability benefits will take effect 60 days after your first day of employment.
Futurestep will also provide you $500,000 in travel accident insurance. You
may also enroll in Korn/Ferry's family travel accident insurance program which
provides 24-hour coverage to your dependents for travel accidents. If you elect
this benefit, you will pay the premium cost through payroll deduction.
You may participate in the Korn/Ferry International Employee Tax Deferred
Savings Plan which is a qualified 401(k) plan. Tax-deferred employee
contributions can begin on the fiscal quarterly enrollment period following six
months of employment. You will be eligible for employer contributions on the
fiscal quarterly enrollment date after you have been employed one year.
You will receive a complete health benefits package with enrollment forms
and plan descriptions approximately thirty days prior to your eligibility date.
Mr. Robert H. McNabb
Page 5
Coverage in Korn/Ferry's employee and executive benefits programs is
dependent upon your timely completion and our receipt of all forms and materials
required for enrollment.
Executive Benefits
You will be eligible for the same level of executive benefits as other
employees of your position level and tenure. Currently, these benefits are as
summarized below.
In December, you will be given an opportunity to enroll in the Korn/Ferry
Enhanced Wealth Accumulation Plan. This benefit is a deferred compensation plan
that provides retirement, survivor, and disability benefits. Retirement and
survivor benefits can total $500,000 per unit and you are eligible to enroll in
one additional unit every five years.
You will also participate in the Korn/Ferry Worldwide Executive Benefit -
Retirement Plan. This plan supplements the 401(k) Plan and social security, to
provide a total target retirement benefit for executives of 25% of final average
salary with twenty years of service.
On the date you become eligible for the health benefits plan, you will
automatically be enrolled in the Korn/Ferry Executive Medical Plan. This plan
provides you with additional benefit payments, above those paid under the
standard group health insurance, as well as reimbursement for certain medical
services not covered under the group health insurance. Your coverage under this
plan will be a maximum of $2,500 per year. Further information about this
program will be provided with your benefits package.
After completing one year of employment, you may also participate in the
Korn/Ferry College Tuition Program. This executive benefit provides $2,000 per
year up to a maximum of $8,000 for each dependent child enrolled full-time as an
undergraduate in an accredited college or university.
You will receive $600.00 per month as an automobile allowance. In addition,
Futurestep will reimburse you for monthly membership dues at the CCA Club (up to
$300 monthly) and the Champions Country Club (up to $350 monthly).
It is understood that you plan to continue in your role as Chairman of the
Board of Winrock Human Resources. This commitment will be reviewed periodically
and, provided such activity does not interfere with the performance of your
duties, you have my support to continue in this role.
Mr. Robert H. McNabb
Page 6
Professional Requirements
As part of our standard employment practice, you are being asked to sign an
Employment Agreement with Futurestep. An Employment Agreement is attached for
your execution.
As part of your employment by Futurestep, we also ask that you provide a
detailed description of your job history and educational background. A form for
this purpose is enclosed. The information you provide concerning past employment
and educational history will be verified by the firm. Your employment is
contingent on the accuracy of the information you provide.
Pursuant to the Immigration and Nationality Act, our firm is required to
verify the identity and employment eligibility of all new hires. In order to
comply with this legal obligation, we must complete an Employment Eligibility
Verification Form I-9 within three days of hire. We have enclosed a Form I-9 for
your review. Please note that you will need to provide either (i) one document
from "List A" or (ii) one document from "List B" and one document from "List C"
of the form (see page two of the enclosed I-9 Form). If you anticipate having
difficulty completing the Form I-9 or producing the required documents, please
contact me.
Further, all Futurestep professional employees are required to review and
acknowledge the firm's Personnel Policies & Procedures, which govern all aspects
of our professional practice. A copy of the Policies & Procedures is enclosed.
Your employment is contingent on your abiding by the provisions of this
document. Please review it carefully and return the signed acknowledgment form
with your acceptance of this offer. Please keep the Policies and Procedures for
your personal files.
Business Information and Non-Competition
Please review the provisions of the Employment Agreement setting forth your
confidentiality and non-competition obligations with care. In accepting this
offer of employment with Futurestep, you are making a personal commitment to
adhere to those provisions.
Acceptance of Employment
Mr. Robert H. McNabb
Page 7
Upon your acceptance of this offer of employment, please acknowledge your
agreement with the terms set forth in this letter by signing in the designated
space below. A copy of this letter is enclosed for your records.
Please also complete and sign the enclosed documents and return them to me
with your signed letter:
- Employment Agreement
- Applicant History Form
- Personnel Policies & Procedures: Acknowledgment Form
- Insider Trading Policy: Acknowledgment Form
- Personnel Information Form: (Section A)
- W-4 form & EDD Form
- I-9 form
- Direct Deposit Request Form
I look forward to your joining us and to your success with Korn/Ferry
International Futurestep, Inc. If you have any questions, please don't hesitate
to call me.
Sincerely,
Paul C. Reilly
Chairman
ACCEPTED:
/s/ Robert H. McNabb
- --------------------------- -------------------------------
Robert H. McNabb Date