FORM OF SUPPLEMENTAL EXECUTIVE EQUITY PARTICIPATION PROGRAM
Published on September 4, 1998
EXHIBIT 10.28
SUPPLEMENTAL EXECUTIVE EQUITY PARTICIPATION PROGRAM
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STOCK SUBSCRIPTION AGREEMENT
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(BASIC EQUITY ACCOUNT)
THIS STOCK SUBSCRIPTION AGREEMENT (the "Agreement") is entered into as
of _______________ by and between Korn/Ferry International, a California
corporation (the "Company") and __________________, an officer of the Company
("Executive").
RECITALS
A. The Company is a corporation duly organized and existing under
the laws of the State of California.
B. In 1998, the Company adopted the Supplemental Executive Equity
Participation Program, which provides for the sale to certain officers of the
Company of shares of Company Common Stock ("Shares") on the terms and subject to
the conditions set forth in this Agreement and the schedules and exhibits
hereto.
C. Executive desires to purchase Shares under the Supplemental
Executive Equity Participation Program on the terms and subject to the
conditions set forth in this Agreement and the schedules and exhibits hereto.
NOW, THEREFORE, in consideration of the foregoing and the mutual
promises set forth below, the parties hereto agree as follows:
1. DEFINITIONS. For all purposes of this Agreement, the following
definitions apply:
"Basic Equity Account" means the dollar amount set forth as
Item 1 of Schedule 1 hereto .
"Fiscal Year" means the fiscal year of the Company, which is
currently specified as of the period beginning each May 1 and ending each April
30 or any other period specified by the Board of Directors of the Company as the
fiscal year of the Company.
"First Installment" means the dollar amount set forth as
Item 2 of Schedule 1 hereto, which equals twenty percent (20%) of the Basic
Equity Account.
"First Installment Shares" means the number of Shares equal
to the First Installment divided by the Value.
"Second Installment" means the dollar amount set forth as
Item 3 of Schedule 1 hereto, which equals eighty (80%) of the Basic Equity
Account.
"Second Installment Shares" means the number of Shares equal
to the Second Installment divided by the Value.
"Shares" has the meaning set forth in Recital B.
"U.S. Person" has the meaning set forth in Regulation S of
the Securities Act of 1933, as amended. Without limitation and as further
qualified in Regulation S, a "U.S. Person" is as set forth on Schedule 2 hereto
and incorporated herein by this reference.
"Value" means, for purposes of determining the price at
which a Share will be sold or purchased pursuant to this Agreement, (a) the
value of such Share as of June 30, 1998 (or as of such later date prior to the
date of this Agreement as established by the Company's Board of Directors), as
determined by an independent appraiser appointed by the Company, or (b) such
other value or formula for determining value as may be specified from time to
time after the date hereof in a resolution adopted by the Board of Directors of
the Company for purposes of this Agreement.
2. SUBSCRIPTION. Executive hereby subscribes for and agrees to
purchase the First Installment Shares and the Second Installment Shares for an
amount equal to the Basic Equity Account, with such Shares being issuable and
such amount being payable in accordance with the provisions of this Agreement.
Executive agrees that this subscription is subject to acceptance or rejection by
the Company, in its discretion, in whole or in part, and shall be irrevocable
upon acceptance by the Company.
3. METHOD OF PAYMENT. Executive shall pay the Total Purchase Price by
a combination of the options described in Sections 4 and 5 below. Simultaneously
with executing and delivering this Agreement, Executive shall complete, execute
and deliver to the Company a Payment Election in the form of Exhibit A hereto,
which Payment Election shall indicate the methods of payment selected by
Executive. Executive acknowledges that such Payment Election shall be
irrevocable and may only be modified with the prior written consent of the
Company.
4. FIRST INSTALLMENT. The First Installment shall be paid by
Executive to Company on or prior to the date hereof pursuant to paragraphs (a)
or (b) below:
(a) in cash; or
(b) By delivery of a promissory note in the form of Exhibit B
attached hereto (the "First Installment Note"). The First Installment Note shall
bear interest at a rate per annum equal to the reference rate plus .75% (i.e.,
75 basis points) of Bank of America or its successor, as in effect from time to
time, commencing on the date hereof. Principal and interest payments on the
First Installment Note shall be payable as follows:
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(i) One-fourth of the principal, plus all accrued and
unpaid interest on the principal through the date payment is made, on the last
business day of the first full month immediately following the date hereof
(i.e., if the date hereof is not the first day of a month, then such payment
will be due on the last business day of the following month);
(ii) One-fourth of the principal, plus all accrued and
unpaid interest on the principal through the date payment is made, on the last
business day of the sixth month following the date hereof; and
(iii) One-fourth of the principal, plus all accrued and
unpaid interest on the principal through the date payment is made, on the last
business day of the twelfth month following the date hereof.
(iv) One-fourth of the principal, plus all accrued and
unpaid interest on the principal through the date payment is made, on the last
business day of the eighteenth month following the date hereof.
5. SECOND INSTALLMENT. The Second Installment shall be paid by
Executive to Company on or prior to the date hereof pursuant to paragraphs (a),
(b) or (c) below;
(a) In cash;
(b) By delivery of a promissory note in the form of Exhibit C
attached hereto (the "Second Installment Note - Option 1"). The Second
Installment Note -Option 1 shall bear interest at a rate per annum equal to the
reference rate plus .75% (i.e., 75 basis points) of Bank of America, as in
effect from time to time, commencing on the date hereof. Principal and interest
payments on the Second Installment Note - Option 1 shall commence on the 15th of
the first full month following the date hereof and be payable semi-monthly and
on the date any bonus payment is made by the Company to Executive, and will be
computed based on levels of gross compensation for each Fiscal Year as set forth
in the Second Installment Note -Option 1, as follows:
(i) Six percent (6%) of the first $100,000 of compensation;
(ii) Ten percent (10%) of the next $50,000 of compensation;
(iii) Fifteen percent (15%) of the next $100,000 of
compensation; and
(iv) Twenty-five percent (25%) of compensation in excess of
$250,000.
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Payments will be applied first to accrued and unpaid
interest and second to reduce the principal outstanding;
Simultaneously with executing and delivering the Second
Installment Note - Option 1, Executive shall execute and deliver to the Company
the Authorization for Payroll Deduction for Loan attached hereto as Exhibit E;
or
(c) By delivery of a promissory note in the form of Exhibit D
attached hereto (the "Second Note - Option 2"). The Second Installment Note -
Option 2 shall bear interest at a rate per annum equal to the reference rate
plus .75% (i.e., 75 basis points) of Bank of America or its successor, as in
effect from time to time, commencing on the date hereof. Principal and interest
payments shall commence on the last day of the fiscal quarter ending after the
date hereof and shall be made on a quarterly basis insixteen (16) equal
installments of principal plus all accrued and unpaid interest on the total
principal amount.
6. ISSUANCE OF SHARES. Subject to the provisions of Section 7 below,
Company will issue to the Executive against payment of the purchase price
therefor the First Installment Shares and the Second Installment Shares.
Notwithstanding any other provision hereof, the Company will not issue
any fractional Shares, but rather will make an appropriate cash payment to
Executive in lieu of any issuance of a fractional Share.
7. STOCK REPURCHASE AGREEMENT AND SHARE PLEDGE AGREEMENT. The Shares
will be subject to the terms and conditions of a Stock Repurchase Agreement in
the form of Exhibit F hereto (the "Stock Repurchase Agreement"). Executive shall
execute and deliver to the Company an original counterpart thereof. The Stock
Repurchase Agreement provides that the certificates evidencing the Shares will
remain in the possession of the Company to secure the Company's purchase rights
thereunder. Further, all of the promissory notes made by Executive in favor of
Company pursuant to Sections 4 or 5 will be secured by the Shares pursuant to a
Share Pledge Agreement in the form of Exhibit G attached hereto. Executive shall
execute and deliver to the Company an original counterpart thereof.
8. INVESTMENT REPRESENTATIONS AND WARRANTIES. Executive hereby
represents and warrants as indicated below:
(a) Executive has reviewed, completed and executed Schedule 3
hereto which is incorporated herein and made a part hereof by this reference,
and the information provided to the Company in such Schedule 3 is complete and
accurate.
(b) Executive has such knowledge and experience in financial and
business matters and Executive is capable of evaluating the merits and risks of
an
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investment in the Company and of making an informed investment decision with
respect thereto.
(c) Executive has adequate means of providing for current needs
and personal contingencies, has no need for liquidity in the investment, and is
able to bear the economic risk of an investment in the Company of the size
contemplated.
(d) Executive will purchase the Shares for Executive's own
account and for investment purposes only, and Executive is not purchasing the
Shares with a view to or for sale in connection with any distribution, resale or
disposition of the Shares.
(e) The information provided in this Section (including without
limitation the information set forth on Schedule 3 hereto) may be relied upon in
determining whether the offering in which the Executive proposes to participate
is exempt from registration under the Securities Act of 1933, as amended, and
applicable state securities laws and the rules promulgated thereunder.
(f) Executive will notify the Company immediately of any
material changes to the information given by Executive in this Section occurring
prior to the closing of any purchase by Executive of the Shares.
(g) Executive is an officer of the Company and as such has a
high degree of familiarity with the business and operations of the Company and
understands and has evaluated the merits and risks of the purchase of the
Shares.
(h) Executive has received a copy of the most recent Executive
Equity Participation Materials of the Company (the "Materials"), prepared by the
Company to describe the investment in the Company through purchase of the
Shares, and Executive understands all of the information contained therein.
Executive represents that Executive is relying solely upon the Materials and
Executive's knowledge of the Company for the purpose of making Executive's
decision to purchase the Shares, and Executive understands that no person has
been authorized in connection with this offering to make any representations
other than those contained in the Materials, and any representations not therein
contained, if given or made, must not be relied upon as having been authorized
by the Company.
9. ACKNOWLEDGMENTS AND COVENANTS OF EXECUTIVE. Executive acknowledges
and agrees as follows:
(a) The Company has made available to Executive the opportunity
to ask questions of, and receive answers from, persons acting on behalf of the
Company concerning the Company and the proposed sale of Shares to Executive as
described in the Materials, and otherwise to obtain any additional information,
to the extent that the Company or its executive officers possess such
information or could acquire it without
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unreasonable effort or expense, necessary to verify the accuracy of the
information contained in the Materials; and
(b) Executive further acknowledges and agrees with the Company
that (i) the Shares have not been, and the sale of the Shares will not be,
registered under the Act, or qualified under any state securities laws; (ii) any
sale or other disposition of the Shares by Executive or by any transferee from
Executive will be limited to a transaction permitted by the Stock Repurchase
Agreement and as to which, in each instance, an exemption from the registration
requirements of the Act and any applicable requirements under state securities
laws can be established.
10. MISCELLANEOUS.
(a) Amendment. No change, amendment or modification of this
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Agreement shall be valid unless it is in writing and signed by the Company and
the Executive.
(b) Entire Agreement. This Agreement contains the entire
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agreement of the parties hereto and supersedes any prior written or oral
agreements between them concerning the subject matter contained herein.
(c) Counterparts. This Agreement may be executed in counterparts,
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each of which shall be deemed an original but all of which together shall
constitute one and the same instrument.
(d) Waiver. No waiver of any right pursuant hereto or waiver of
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any breach hereof shall be effective unless in writing and signed by the party
waiving such right or breach. No waiver of any right or waiver of any breach
shall constitute a waiver of any other or similar right or breach, and no
failure to enforce any right hereunder shall preclude or effect the latter
enforcement of such right.
(e) Headings. The headings of the various sections herein are
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solely for the convenience of the parties and shall not effect or control the
meaning or construction of this Agreement.
(f) Notices. Any notice required or permitted to be given
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hereunder shall be in writing and shall be mailed first class, postage prepaid,
or shall be personally delivered, or delivered by telecopier. Any communication
so addressed and mailed shall be deemed to be given seven days after mailing and
any communication delivered in person shall be deemed to be given when receipted
for, or actually received by, the recipient. All such communications shall be
addressed as follows:
If to the Company:
Korn/Ferry International
6
1800 Century Park East
Suite 900
Los Angeles, California 90067
Attn: Corporate Secretary
If to the Executive:
At Executive's address as shown in the Company's books or to such
other address as is provided by the parties hereto from time to time.
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IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the day and year first above written.
EXECUTIVE
By: _________________________________________
Name: _________________________________________
KORN/FERRY INTERNATIONAL,
a California corporation
By: _________________________________________
Name: Elizabeth S.C.S. Murray
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Title: Executive VP & CFO
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SCHEDULE 1
Attached to and made a part of that certain Supplemental Executive Equity
Participation Program Stock Subscription Agreement (Basic Equity Account)
dated ______________ between Korn/Ferry International and
________________.*
1. Basic Equity Account and Total Purchase Price
equal $_________
2. First Installment equals $_________
3. Second Installment equals $_________
_________________
* All dollar amounts are in U.S, dollars.
EXECUTIVE
By: _________________________
Name:_________________________
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SCHEDULE 2
"U.S. PERSON"
1. Any natural person resident in the United States;
2. Any partnership or corporation organized or incorporated under the
laws of the United States;
3. Any estate of which any executor or administrator is a U.S. Person;
4. Any trust of which trustee is a U.S. Person;
5. Any agency or branch of a foreign entity located in the United States;
6. Any non-discretionary account or similar account (other than an estate
or trust) held by a dealer or other fiduciary for the benefit or account of a
U.S. Person;
7. Any discretionary account or similar account (other than an estate or
trust) held by a dealer or other fiduciary organized, incorporated, or (if an
individual) resident in the United States; and
8. Any partnership or corporation if;
(a) Organized or incorporated under the laws of any foreign
jurisdiction; and
(b) Formed by a U.S. Person principally for the purpose of investing
in securities not registered under the Securities Act of 1933, as amended.
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SCHEDULE 3
REPRESENTATIONS AND WARRANTIES
Attached to and made a part of that certain Supplemental Executive
Equity Participation Program Stock Subscription Agreement (Basic Equity Account)
dated ______________ between Korn/Ferry International and
_________________________________.
(a) Accredited Domestic Executives. Executive should initial each of
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the following representations, if applicable:
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______ (i) Executive is a U.S. Person.
______ (ii) Executive's individual net worth or joint net worth with
Executive's spouse exceeds $1,000,000.
______ (iii) Executive's income (including, but not limited to, salary,
bonus, interest and dividend income and vested contributions to any
pension or profit sharing plan) was in excess of $200,000 in each of
the last two years, and Executive reasonably expects an income in
excess of $200,000 in this year.
______ (iv) Executive's joint income with Executive's spouse
(including, but not limited to salary, bonus, interest and dividend
income and vested contributions to any pension or profit sharing plan)
was in excess of $200,000 in each of the last two years, and Executive
reasonably expects a joint income in excess of $200,000 in this year.
______ (v) Executive's joint income with Executive's spouse
(including, but not limited to salary, bonus, interest and dividend
income and vested contributions to any pension or profit sharing plan)
was in excess of $300,000 in each of the last two years, and Executive
reasonably expects a joint income in excess of $300,000 in this year.
______ (vi) Executive's investment in the Shares does not exceed 10% of
Executive's joint net worth with Executive's spouse.
(b) Foreign Executives. Initial the following representation, if
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applicable:
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______ (i) Executive is not a US Person and is not entering into this
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Agreement for the account or benefit of a US Person.
______ (ii) Executive acknowledges and agrees that he or she may resell
the Shares only in accordance with the provisions of Regulation S, and
pursuant to registration under the Securities Act of 1933, as amended,
or pursuant to an available exemption from registration and that the
Company will refuse to register any transfer of the Shares not made in
accordance with the provisions of Regulation S.
EXECUTIVE
By: _______________________________
Name:_______________________________
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EXHIBIT A
PAYMENT ELECTION
PAYMENT ELECTION
Delivered pursuant to that certain Stock Subscription Agreement (Basic
Equity Account) (the "Agreement") entered into as of _________________ by and
between Korn/Ferry International, a California corporation (the "Company") and
__________________, an officer of the Company ("Executive").
Capitalized terms used but not otherwise defined in this Exhibit A
have the same meanings set forth in the Agreement.
Pursuant to Section 3 of the Agreement, Executive hereby elects to pay
the Total Purchase Price of $____________ in the methods indicated in paragraphs
1 and 2 below. Executive acknowledges that this Payment Election is irrevocable
and may only be modified with the prior written consent of the Company. All
amounts are in United States dollars.
1. First Installment
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First Installment = $____________
The First Installment shall be paid by the Executive to the Company on or
prior to the date of the Agreement pursuant to the paragraphs initialed and
completed below as follows:
2. Second Installment
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Second Installment = $________
The Second Installment shall be paid by the Executive to the Company on or
prior to the date of the Agreement pursuant to the paragraphs initialed and
completed below as follows:
A-1
Dated: ________________ By: ____________________
Name:____________________
A-2
EXHIBIT B
FIRST INSTALLMENT NOTE
SECURED PROMISSORY NOTE
FIRST INSTALLMENT NOTE
$ ____________ Dated: ________________
FOR VALUE RECEIVED, the undersigned, __________________, an individual
("Maker"), hereby unconditionally promises to pay to the order of KORN/FERRY
INTERNATIONAL ("Payee"), in the manner and at the place hereinafter provided,
the principal amount of $____________ (the "Principal Amount"). Maker shall make
mandatory payments in accordance with Section 2 below and Maker may make
voluntary prepayments in accordance with Section 3 below.
Maker also promises to pay interest on the unpaid Principal Amount
hereof, which shall accrue commencing on the date hereof until paid in full, at
an adjustable rate determined for each Fiscal Year (as defined below) that is
equal to the reference rate plus .75% (i.e., 75 basis points) of Bank of America
as in effect on the last day of the preceding Fiscal Year (which reference rate
was ____%). For purposes hereof, "Fiscal Year" shall mean the twelve month
period commencing each May 1 and ending each April 30. All computations of
interest shall be made by Payee on the basis of a 365 day year, for the actual
number of days elapsed during the relevant period (including the first day but
excluding the last day).
This Note is issued pursuant to the Stock Subscription Agreement
(Basic Equity Account) (the "Subscription Agreement") and the Stock Repurchase
Agreement (the "Stock Repurchase Agreement"), each between Maker and Payee and
dated as of the date hereof, and is subject to the terms and conditions thereof.
The shares of common stock of Payee issuable to Maker pursuant to the
Subscription Agreement are referred to herein as the "Shares".
1. PAYMENTS. All payments of principal and interest in respect of
this Note shall be made in lawful money of the United States of America in same
day funds at the executive offices of Payee located at 1800 Century Park East,
Suite 900, Los Angeles, California 90067, or at such other place as shall be
designated in a written notice delivered to Maker. Whenever any payment on this
Note shall be stated to be due on a day that is not a business day, such payment
shall instead be made on the next succeeding business day, and such extension of
time shall be included in the computation of interest payable on this Note. Each
payment hereunder shall be credited first to interest then due and the remainder
of such payment shall be credited to principal.
2. MANDATORY PAYMENTS.
(a) Maker shall make payments on this Note in an amount equal to:
B-1
(i) One-fourth of the Principal Amount, plus all interest
accrued on the Principal Amount through the date payment is made, on the last
business day of the first full month immediately following the date hereof;
(ii) One-fourth of the Principal Amount, plus all interest
accrued on the Principal Amount through the date payment is made, on the last
business day of the sixth month following the date hereof; and
(iii) One-fourth of the Principal Amount, plus all interest
accrued on the Principal Amount through the date payment is made, on the last
business day of the twelfth month following the date hereof.
(iv) One-fourth of the Principal Amount, plus all interest
accrued on the Principal Amount through the date payment is made, on the last
business day of the eighteenth month following the date hereof.
(b) Maker may authorize Payee to withhold amounts, if any, otherwise
payable to Maker from Payee as bonus payments or advances on bonus prior to
final maturity hereof, and to apply such to payments then due under this Note by
delivering to Payee the Authorization for Payroll Deduction for Loan in
accordance with the terms of the Subscription Agreement.
(c) Notwithstanding the foregoing, the Principal Amount, together with
accrued interest thereon, shall become due and payable in full immediately upon
the termination of Maker's employment with Payee or its affiliates or Maker's
death; provided, however, that if upon such termination of employment or death
Payee is prohibited from purchasing the Shares by applicable law or any contract
or agreement binding on Payee, this Note shall continue in full force and effect
until such time as Payee notifies Maker in writing that it is legally and
contractually permitted to purchase the Shares, at which time the principal
amount of this Note, together with accrued interest thereon, shall become
immediately due and payable.
3. VOLUNTARY PREPAYMENTS. Maker shall have the right at any time and
from time to time to prepay the principal and interest of this Note in whole or
in part, without premium or penalty; provided that each such prepayment shall be
in a minimum amount of One Thousand Dollars ($1,000) and integral multiples of
that amount, or the amount of principal and interest then outstanding, whichever
is less. All prepayments will be applied to payments in reverse order of
maturity.
4. PLEDGE OF SECURITY. Maker has entered into a Pledge Agreement with
Payee dated as of the date hereof (the "Pledge Agreement") pursuant to which
Maker pledges the Shares as security for this Note. All certificates or other
instruments representing or evidencing such Shares shall be delivered to and
held by Payee pursuant to the terms of the Stock Repurchase Agreement and the
Pledge Agreement.
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5. REPRESENTATIONS AND WARRANTIES. Maker hereby represents and warrants to
Payee that:
(a) This Note constitutes the legally valid and binding obligation of
Maker enforceable against Maker in accordance with its terms.
(b) Maker is the legal and beneficial owner of the Shares free and
clear of any lien, security interest, preferential arrangement or other charge
or encumbrance except for the security interest created by the Pledge Agreement.
(c) The pledge of the Shares pursuant to the Pledge Agreement creates
a valid first priority security interest in the Shares, securing the payment of
the obligations under this Note.
6. EVENTS OF DEFAULT. The occurrence of any of the following events
shall constitute an "Event of Default":
(a) failure of Maker to pay any principal or interest under this Note
when due, whether by acceleration (including, without limitation, acceleration
pursuant to Section 2(c) hereof), by mandatory payment or otherwise, and such
failure is not cured within 10 days;
(b) Maker shall (i) apply for or consent to the appointment of, or the
taking of possession by, a receiver, custodian, trustee or liquidator of itself
or of all or substantially all of its property, (ii) make a general assignment
for the benefit of its creditors, (iii) commence a voluntary case of bankruptcy
under the U.S. Federal Bankruptcy Code (as now or hereafter in effect), or (iv)
file a petition seeking to take advantage of any other law relating to
bankruptcy, insolvency, reorganization, winding-up or composition or
readjustment of debts;
(c) a proceeding or case shall be commenced, without application or
consent of Maker, in any court of competent jurisdiction, seeking (i) the
liquidation, reorganization, dissolution or winding-up, or the composition or
readjustment of the debts of Maker, (ii) the appointment of a trustee, receiver,
custodian or liquidator of all or substantially all of the assets of Maker, or
(iii) similar relief in respect of Maker under any applicable law relating to
bankruptcy, insolvency, reorganization, winding-up or composition or adjustment
of debts, and, in any such case, such proceeding or case shall continue
undismissed, or an order, judgment or decree approving or ordering any of the
foregoing shall be entered and continue unstayed and in effect, for a period of
60 or more business days; or an order for relief against Maker shall be entered
in an involuntary case under the U.S. Federal Bankruptcy Code (as now or
hereafter in effect);
(d) Maker shall challenge, or institute any proceedings to challenge,
the validity, binding effect or enforceability of this Note or any other
obligation to Payee;
B-3
(e) Payee shall not have or cease to have a first priority security
interest in the Shares;
(f) failure by Maker to perform or observe any other term, covenant or
agreement on its part to be performed or observed pursuant to this Note, the
Pledge Agreement, the Subscription Agreement or the Stock Repurchase Agreement,
and such failure is not cured within 10 days; or
(g) any representation or warranty made by Maker to Payee herein shall
prove to be false in any material respect when made.
7. REMEDIES. Upon the occurrence of any Event of Default specified in
Section 6 above, the Principal Amount of this Note together with accrued
interest thereon shall become immediately due and payable without notice of
default, presentment or demand for payment, protest or other notices or demands
of any kind (all of which are hereby expressly waived by Maker). Maker agrees to
pay all cost and expenses, including without limitation, reasonable attorneys'
fees and legal expenses, incurred by Payee in the enforcement and collection of
this Note.
8. GOVERNING LAW. This Note and the rights and obligations of the
Maker and the Payee hereunder shall be governed by, and construed and enforced
in accordance with the laws of the State of California.
IN WITNESS WHEREOF, Maker has executed and delivered this Note as of
the day and year first above written.
MAKER
By: __________________________
Name: __________________________
B-4
EXHIBIT C
SECOND INSTALLMENT NOTE - OPTION 1
SECURED PROMISSORY NOTE
SECOND INSTALLMENT NOTE - OPTION 1
$ _______________ Dated:_________________
FOR VALUE RECEIVED, the undersigned, __________________, an individual
("Maker"), hereby unconditionally promises to pay to the order of KORN/FERRY
INTERNATIONAL ("Payee"), in the manner and at the place hereinafter provided,
the principal amount of $________________ (the "Principal Amount"). Maker shall
make mandatory payments in accordance with Section 2 below and Maker may make
voluntary prepayments in accordance with Section 3 below.
Maker also promises to pay interest on the unpaid Principal Amount
hereof, which shall accrue commencing on the date hereof until paid in full, at
an adjustable rate determined for each Fiscal Year (as defined below) that is
equal to the reference rate plus .75% (i.e., 75 basis points) of Bank of America
as in effect on the last day of the preceding Fiscal Year (which reference rate
was ___%). For purposes hereof, "Fiscal Year" shall mean the twelve month period
commencing each May 1 and ending each April 30. All computations of interest
shall be made by Payee on the basis of a 365 day year, for the actual number of
days elapsed during the relevant period (including the first day but excluding
the last day).
This Note is issued pursuant to the Stock Subscription Agreement
(Basic Equity Account) (the "Subscription Agreement") and the Stock Repurchase
Agreement (the "Stock Repurchase Agreement"), each between Maker and Payee and
dated as of the date hereof, and is subject to the terms and conditions thereof.
The shares of common stock of Payee issuable to Maker pursuant to the
Subscription Agreement are referred to herein as the "Shares".
1. PAYMENTS. All payments of principal and interest in respect of
this Note shall be made in lawful money of the United States of America in same
day funds at the executive offices of Payee located at 1800 Century Park East,
Suite 900, Los Angeles, California 90067, or at such other place as shall be
designated in a written notice delivered to Maker. Whenever any payment on this
Note shall be stated to be due on a day that is not a business day, such payment
shall instead be made on the next succeeding business day, and such extension of
time shall be included in the computation of interest payable on this Note. Each
payment hereunder shall be credited first to interest then due and the remainder
of such payment shall be credited to principal.
2. MANDATORY PAYMENTS. Maker hereby agrees to make mandatory payments
of principal and interest on this Note based on Maker's compensation from Payee
for each Fiscal Year during the term of this Note. Such mandatory payments may
C-1
vary from Fiscal Year to Fiscal Year depending on the level of Maker's base
compensation and bonus compensation in any particular Fiscal Year, as follows:
(a) Maker shall make semi-monthly payments on this Note commencing on
the 15th of the first full month following the date hereof in an amount equal to
(x) the Base Formula Amount (as defined below) for the Fiscal Year in which such
payment is made, divided by (y) 24. The Base Formula Amount for each Fiscal Year
shall equal:
(i) Six percent (6%) of the first One Hundred Thousand Dollars
($100,000) of Maker's base compensation from Payee payable with respect to such
Fiscal Year; plus
(ii) Ten percent (10%) of the next Fifty Thousand Dollars
($50,000) of Maker's base compensation from Payee payable with respect to such
that Fiscal Year; plus
(iii) Fifteen percent (15%) of the next One Hundred Thousand
Dollars ($100,000) of Maker's base compensation from Payee with respect to such
Fiscal Year; plus
(iv) Twenty-five percent (25%) of Makers' base compensation from
Payee in excess of Two Hundred Fifty Thousand Dollars ($250,000) with respect to
such Fiscal Year.
For example, if Maker's base salary from Payee for the Fiscal Year
commencing May 1, 1996 were $160,000, Maker would make 24 semi-monthly payments
of $520.83 to Payee (i.e., 6% of $100,000 = $6,000; 10% of $50,000 = $5,000; and
15% of $10,000 = $1,500. $6,000 + $5,000 + $1,500 = $12,500. $12,500 / 24 =
$520.83).
(b) In addition, Maker shall make mandatory payments on this Note each
December 31 and April 30 (or on such other dates as the Company may adopt for
payment of bonus advances and/or bonus payments) from each bonus advance and
bonus payment, if any, from Payee in an amount equal to the Bonus Formula
Amount. The Bonus Formula Amount for each Fiscal Year shall equal the amount
determined pursuant to the following formula minus all prior payments made in
such Fiscal Year with respect to base compensation pursuant to subsection 2(a)
and bonus compensation pursuant to this subsection 2(b):
(i) Six percent (6%) of the first One Hundred Thousand Dollars
$100,000) of Maker's total Compensation (i.e., base compensation plus bonus)
from Payee with respect to such Fiscal Year; plus
(ii) Ten percent (10%) of the next Fifty Thousand Dollars
($50,000) of Maker's total compensation (i.e., base compensation plus bonus)
from Payee with respect to such Fiscal Year; plus
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(iii) Fifteen percent (15%) of the next One Hundred Thousand
Dollars ($100,000) of Maker's total compensation (i.e., base compensation plus
bonus) from Payee with respect to such Fiscal Year; plus
(iv) Twenty-five percent (25%) of Maker's total compensation
(i.e., base compensation plus bonus) from Payee in excess of Two Hundred Fifty
Thousand Dollars ($250,000) with respect to such Fiscal Year.
For example, if Maker's base salary from Payee for the Fiscal Year
commencing May 1, 1996 were $160,000, and Maker's annual bonus from Payee for
such Fiscal Year were $50,000, Maker would make a payment on the date such bonus
payment is made of $7,500 to Payee. (i.e., Maker's total compensation for Fiscal
Year 1997 would equal $210,000. 6% of $100,000 = $6,000; 10% of $50,000 =
$5,000; and 15% of $60,000 = $9,000. $6,000 + $5,000 + $9,000 = $20,000. $20,000
- - $12,500 (the amount that would have been paid pursuant to Section 2(a) =
$7,500.)
(c) Maker may authorize Payee to deduct from each semi-monthly payment
of salary and from each bonus advance and bonus payment, if any, the amounts due
under subparagraphs 2(a) and 2(b) above by delivering to Payee an executed
Authorization for Payroll Deduction for Loan pursuant to the terms of the
Subscription Agreement.
(d) Notwithstanding the foregoing, the Principal Amount, together with
accrued interest thereon, shall become due and payable in full immediately upon
the termination of Maker's employment with Payee or its affiliates or Maker's
death; provided, however, that if upon such termination of employment or death
Payee is prohibited from purchasing the Shares by applicable law or any contract
or agreement binding on Payee, this Note shall continue in full force and effect
until such time as Payee notifies Maker in writing that it is legally and
contractually permitted to purchase the Shares, at which time the Principal
Amount, together with accrued interest thereon, shall become immediately due and
payable.
3. VOLUNTARY PREPAYMENTS. Maker shall have the right at any time and
from time to time to prepay the principal and interest of this Note in whole or
in part, without premium or penalty; provided that each such prepayment shall be
in a minimum amount of One Thousand Dollars ($1,000) and integral multiples of
that amount, or the amount of principal and interest then outstanding, whichever
is less. All prepayments will be applied to payments in reverse order of
maturity.
4. PLEDGE OF SECURITY. Maker has entered into a Pledge Agreement with
Payee dated as of the date hereof (the "Pledge Agreement"), pursuant to which
Maker pledges the Shares as security for this Note. All certificates or other
instruments representing or evidencing such Shares shall be delivered to and
held by Payee pursuant to the terms of the Stock Repurchase Agreement and the
Pledge Agreement.
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5. REPRESENTATIONS AND WARRANTIES. Maker hereby represents and warrants to
Payee that:
(a) This Note constitutes the legally valid and binding obligation of
Maker enforceable against Maker in accordance with its terms.
(b) Maker is the legal and beneficial owner of the Shares free and
clear of any lien, security interest, preferential arrangement or other charge
or encumbrance except for the security interest created by the Pledge Agreement.
(c) The pledge of the Shares pursuant to the Pledge Agreement creates
a valid first priority security interest in the Shares, securing the payment of
the obligations under this Note.
6. EVENTS OF DEFAULT. The occurrence of any of the following events
shall constitute an "Event of Default":
(a) failure of Maker to pay any principal or interest under this Note
when due, whether by acceleration (including, without limitation, acceleration
pursuant to Section 2(d) hereof), by mandatory payment or otherwise, and such
failure is not cured within 10 days;
(b) Maker shall (i) apply for or consent to the appointment of, or the
taking of possession by, a receiver, custodian, trustee or liquidator of itself
or of all or substantially all of its property, (ii) make a general assignment
for the benefit of its creditors, (iii) commence a voluntary case of bankruptcy
under the U.S. Federal Bankruptcy Code (as now or hereafter in effect), or (iv)
file a petition seeking to take advantage of any other law relating to
bankruptcy, insolvency, reorganization, winding-up or composition or
readjustment of debts;
(c) a proceeding or case shall be commenced, without application or
consent of Maker, in any court of competent jurisdiction, seeking (i) the
liquidation, reorganization, dissolution or winding-up, or the composition or
readjustment of the debts of Maker, (ii) the appointment of a trustee, receiver,
custodian or liquidator of all or substantially all of the assets of Maker, or
(iii) similar relief in respect of Maker under any applicable law relating to
bankruptcy, insolvency, reorganization, winding-up or composition or adjustment
of debts, and, in any such case, such proceeding or case shall continue
undismissed, or an order, judgment or decree approving or ordering any of the
foregoing shall be entered and continue unstayed and in effect, for a period of
60 or more business days; or an order for relief against Maker shall be entered
in an involuntary case under the U.S. Federal Bankruptcy Code (as now or
hereafter in effect);
(d) Maker shall challenge, or institute any proceedings to challenge,
the validity, binding effect or enforceability of this Note or any other
obligation to Payee;
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(e) Payee shall not have or cease to have a first priority security
interest in the Shares;
(f) failure by Maker to perform or observe any other term, covenant or
agreement on its part to be performed or observed pursuant to this Note, the
Pledge Agreement, the Stock Repurchase Agreement or the Subscription Agreement,
and such failure is not cured within 10 days; or
(g) any representation or warranty made by Maker to Payee herein shall
prove to be false in any material respect when made.
7. REMEDIES. Upon the occurrence of any Event of Default specified in
Section 6 above, the Principal Amount of this Note together with accrued
interest thereon shall become immediately due and payable without notice of
default, presentment or demand for payment, protest or other notices or demands
of any kind (all of which are hereby expressly waived by Maker). Maker agrees to
pay all costs and expenses, including without limitation, reasonable attorneys'
fees and legal expenses, incurred by Payee in the enforcement and collection of
this Note.
8. GOVERNING LAW. This Note and the rights and obligations of the
parties hereunder shall be governed by, and construed and enforced in accordance
with the laws of the State of California.
IN WITNESS WHEREOF, Maker has executed and delivered this Note as of
the day and year first above written.
MAKER
By: _____________________
Name: _____________________
C-5
EXHIBIT D
SECOND INSTALLMENT NOTE - OPTION 2
SECURED PROMISSORY NOTE
SECOND INSTALLMENT NOTE - OPTION 2
$__________ Dated: _____________
FOR VALUE RECEIVED, the undersigned, _________________________, an
individual ("Maker"), hereby unconditionally promises to pay to the order of
KORN/FERRY INTERNATIONAL ("Payee"), in the manner and at the place hereinafter
provided, the principal amount of $_________ (the "Principal Amount"). Maker
shall make mandatory prepayments in accordance with Section 2 below and Maker
may make voluntary prepayments in accordance with Section 3 below.
Maker also promises to pay interest on the unpaid principal amount
hereof, which shall accrue commencing on the date hereof until paid in full, at
an adjustable rate determined for each Fiscal Year (as defined below) that is
equal to the reference rate plus .75% of Bank of America as in effect on the
last day of the preceding Fiscal Year (which reference rate was ___%). For
purposes hereof, "Fiscal Year" shall mean the twelve month period commencing
each May 1 and ending each April 30. All computations of interest shall be made
by Payee on the basis of a 365 day year, for the actual number of days elapsed
during the relevant period (including the first day but excluding the last day).
This Note is issued pursuant to the Stock Subscription Agreement
(Basic Equity Account) (the "Subscription Agreement") and the Stock Repurchase
Agreement (the "Stock Repurchase Agreement"), each between Maker and Payee and
dated as of the date hereof, and is subject to the terms and conditions thereof.
The shares of common stock of Payee issuable to Maker pursuant to the
Subscription Agreement are referred to herein as the "Shares".
1. PAYMENTS. All payments of principal and interest in respect of
this Note shall be made in lawful money of the United States of America in same
day funds at the executive offices of Payee located at 1800 Century Park East,
Suite 900, Los Angeles, California 90067, or at such other place as shall be
designated in a written notice delivered to Maker. Whenever any payment on this
Note shall be stated to be due on a day that is not a business day, such payment
shall instead be made on the next succeeding business day, and such extension of
time shall be included in the computation of interest payable on this Note.
Each payment hereunder shall be credited first to interest then due and the
remainder of such payment shall be credited to principal.
2. MANDATORY PAYMENTS.
(a) Maker shall make quarterly mandatory payments on this Note on
each July 31, October 31, January 31 and April 30, commencing on the first such
date
D-1
to follow the date hereof, in sixteen (16) installments, with each installment
consisting of a principal payment in the amount of $ ____________, plus all
interest accrued on the Principal Amount through the date such payment is made.
(b) Notwithstanding the foregoing, the Principal Amount, together
with accrued interest thereon, shall become due and payable in full immediately
upon the termination of Maker's employment with Payee or its affiliates or
Maker's death; provided, however, that if upon such termination of employment or
death Payee is prohibited from purchasing the Shares by applicable law or any
contract or agreement binding on Payee, this Note shall continue in full force
and effect until such time as Payee notifies Maker in writing that it is legally
and contractually permitted to purchase the Shares, at which time the principal
amount of this Note, together with accrued interest thereon, shall become
immediately due and payable.
3. VOLUNTARY PREPAYMENTS. Maker shall have the right at any time and
from time to time to prepay the principal and interest of this Note in whole or
in part, without premium or penalty; provided that each such prepayment shall be
in a minimum amount of One Thousand Dollars ($1,000) and integral multiples of
that amount, or the amount of principal and interest then outstanding, whichever
is less. All prepayments will be applied to payments in reverse order of
maturity.
4. PLEDGE OF SECURITY. Maker has entered into a Pledge Agreement
with Payee dated as of the date hereof (the "Pledge Agreement") pursuant to
which Maker pledges the Shares as security for this Note. All certificates or
other instruments representing or evidencing such Shares shall be delivered to
and held by Payee pursuant to the terms of the Stock Repurchase Agreement and
the Pledge Agreement.
5. REPRESENTATIONS AND WARRANTIES. Maker hereby represents and
warrants to Payee that:
(a) This Note constitutes the legally valid and binding
obligation of Maker enforceable against Maker in accordance with its terms.
(b) Maker is the legal and beneficial owner of the Shares free
and clear of any lien, security interest, preferential arrangement or other
charge or encumbrance except for the security interest created by the Pledge
Agreement.
(c) The pledge of the Shares pursuant to the Pledge Agreement
creates a valid first priority security interest in the Shares, securing the
payment of the obligations under this Note.
6. EVENTS OF DEFAULT. The occurrence of any of the following events
shall constitute an "Event of Default":
(a) failure of Maker to pay any principal or interest under this
Note when due, whether by acceleration (including, without limitation,
acceleration pursuant
D-2
to Section 2(b) hereof, by mandatory payment or otherwise, and such failure is
not cured within 10 days;
(b) Maker shall (i) apply for or consent to the appointment of, or the
taking of possession by, a receiver, custodian, trustee or liquidator of itself
or of all or substantially all of its property, (ii) make a general assignment
for the benefit of its creditors, (iii) commence a voluntary case of bankruptcy
under the U.S. Federal Bankruptcy Code (as now or hereafter in effect), or (iv)
file a petition seeking to take advantage of any other law relating to
bankruptcy, insolvency, reorganization, winding-up or composition or
readjustment of debts;
(c) a proceeding or case shall be commenced, without application or
consent of Maker, in any court of competent jurisdiction, seeking (i) the
liquidation, reorganization, dissolution or winding-up, or the composition or
readjustment of the debts of Maker, (ii) the appointment of a trustee, receiver,
custodian or liquidator of all or substantially all of the assets of Maker, or
(iii) similar relief in respect of Maker under any applicable law relating to
bankruptcy, insolvency, reorganization, winding-up or composition or adjustment
of debts, and, in any such case, such proceeding or case shall continue
undismissed, or an order, judgment or decree approving or ordering any of the
foregoing shall be entered and continue unstayed and in effect, for a period of
60 or more business days; or an order for relief against Maker shall be entered
in an involuntary case under the U.S. Federal Bankruptcy Code (as now or
hereafter in effect);
(d) Maker shall challenge, or institute any proceedings to challenge,
the validity, binding effect or enforceability of this Note or any other
obligation to Payee;
(e) Payee shall not have or cease to have a first priority security
interest in the Shares;
(f) failure by Maker to perform or observe any other term, covenant or
agreement on its part to be performed or observed pursuant to this Note, the
Pledge Agreement, the Subscription Agreement or the Stock Repurchase Agreement,
and such failure is not cured within 10 days; or
(g) any representation or warranty made by Maker to Payee herein shall
prove to be false in any material respect when made.
7. REMEDIES. Upon the occurrence of any Event of Default specified in
Section 6 above, the Principal Amount of this Note together with accrued
interest thereon shall become immediately due and payable without notice of
default, presentment or demand for payment, protest or other notices or demands
of any kind (all of which are hereby expressly waived by Maker). Maker agrees to
pay all cost and expenses, including without limitation, reasonable attorneys'
fees and legal expenses, incurred by Payee in the enforcement and collection of
this Note.
D-3
8. GOVERNING LAW. This Note and the rights and obligations of the
Maker and the Payee hereunder shall be governed by, and construed and enforced
in accordance with the laws of the State of California.
IN WITNESS WHEREOF, Maker has executed and delivered this Note as of
the day and year first above written.
MAKER
By: _______________________
Name: _______________________
D-4
EXHIBIT E
AUTHORIZATION FOR PAYROLL DEDUCTION FOR LOAN
AUTHORIZATION FOR PAYROLL DEDUCTION FOR LOAN
I, _____________________, hereby agree and acknowledge that as a
result of [a] loan(s) to me by Korn/Ferry International (the "Company"), which
is my employer or the parent or affiliate corporation of my employer, pursuant
to that certain Stock Subscription Agreement dated as of ________________ (the
"Subscription Agreement"), I owe the Company the aggregate sum of $____________
which is evidenced by the Second Installment Note -- Option 1 dated as of
___________, delivered to the Company pursuant to the terms of the Subscription
Agreement, copies of which are attached hereto and incorporated herein by this
reference (the "Note"). I wish to repay this sum to the Company in the form of
semi-monthly payroll deductions and deductions from annual bonus advances and
bonus payments, if any. Therefore, in accordance with California Labor Code
Section 224 and other applicable laws, I hereby authorize my employer to deduct
from each of my payroll checks and bonus advance and bonus payment checks, if
any, the payments due under and in accordance with the terms of the Note. Such
deductions are authorized over and above any other deductions I may have already
authorized (e.g., insurance premiums, hospital or medical dues). If I should for
any reason cease employment with my employer, any unpaid balance of the Note may
be deducted from my final payroll check, or from any other check for
compensation I may receive from my employer (e.g., for unused vacation).
EXECUTED ON: _____________, 19___
By: ________________________
Name: ________________________
E-1
EXHIBIT F
STOCK REPURCHASE AGREEMENT
STOCK REPURCHASE AGREEMENT
THIS STOCK REPURCHASE AGREEMENT (the "Agreement") is entered into as
of ________________ by and between Korn/Ferry international, a California
corporation (the "Company"), and _________________________, an individual (the
"Shareholder").
RECITALS
A. The Company is a corporation duly organized and existing under
the laws of the State of California.
B. In 1998, the Company adopted the Supplemental Executive Equity
Participation Program (the "Supplemental Equity Plan"), which provides for the
sale of shares of Company common stock to certain officers of the Company.
C. The Shareholder desires to participate in the Supplemental Equity
Plan and to purchase the amount of shares of Company Common Stock set forth in
the Executive Participation Program Stock Subscription Agreement (Basic Equity
Account) between Company and Shareholder dated as of _______________ (the
"Subscription Agreement"), which requires that Shareholder enter into this
Agreement with the Company.
NOW, THEREFORE, in consideration of the foregoing and the mutual
promises set forth below, the parties hereto agree as follows:
1. DEFINITIONS. For all purposes of this Agreement, the following
definitions apply:
"Equity Committee" shall mean a committee appointed by the Board
of Directors of the Company. The Equity Committee shall be comprised of three
members of the board of directors of the Company, at least two of which shall
not be officers or employees of the Company.
"Fiscal Year" means the fiscal year of the Company, which is
currently specified as the period beginning each May 1 and ending each April 30,
or any other period specified by the Board of Directors of the Company as the
fiscal year of the Company.
"401(k) Plan" means the Korn/Ferry International Employee Tax
Deferred Savings Plan.
"Shares" means the shares of Company Common Stock currently owned
by the Shareholder from any source or which may be acquired by Shareholder in
the future under the Equity Plan, or distributed to the Shareholder under the
401(k)
F-1
Plan. Shares acquired on the public market following the Company's initial
public offering shall not be considered as "Shares".
"Value" means, for purposes of determining the price at which a
Share will be purchased pursuant to this Agreement, (a) the lesser of (i) the
value of such Share as determined under the Subscription Agreement, plus
interest at the rate of eight and one-half percent (8.5%) per annum, or (ii) the
closing New York Stock Exchange trading price of such Share at the time of
purchase pursuant to this Agreement, or (b) such other value or formula for
determining value as may be specified from time to time after the date hereof in
a resolution adopted by the Board of Directors of the Company for purposes of
this Agreement.
2. COMPLIANCE WITH AGREEMENT. Except as expressly set forth herein,
the Shareholder shall not sell, transfer, hypothecate, pledge or otherwise
dispose of the Shares or any interest therein held by Shareholder (a "Transfer")
without the prior written consent of the Company. Any purported Transfer not in
compliance with the terms and conditions of this Agreement shall be void and of
no force and effect. If the Shares are Transferred, in whole or part,
voluntarily or involuntarily, by operation of law or otherwise, by reason of
insolvency or bankruptcy of the Shareholder, or otherwise in violation of the
provisions of this Agreement, the recipient of any of the Shares shall not be
registered on the books of the Company and shall not be recognized as the holder
of the Shares by the Company and shall not acquire any voting, dividend or other
rights in respect thereof.
3. INVESTMENT INTENT. The Shareholder hereby represents and warrants
to the Company that the Shareholder's purchase of the Shares has been made for
his or her own account, for investment purposes only and not with a view to
distribution or resale of the Shares. The sale of the Shares has not been
registered under the Securities Act of 1933, as amended, or the securities laws
of any state. Except as expressly set forth herein, the Shareholder may not
sell the Shares unless they have been so registered or unless, in the opinion of
counsel satisfactory to the Company, such registration is not required.
4. RESTRICTION ON CERTIFICATES. Shareholder understands and agrees
that the certificate(s) issued to him or her representing the Shares:
(i) Shall contain the following legend:
"TRANSFER OF THE SHARES REPRESENTED BY THIS CERTIFICATE MAY REQUIRE
REGISTRATION UNDER THE SECURITIES ACT OF 1933 (THE "ACT") AND THIS
CERTIFICATE MAY NOT BE TRANSFERRED WITHOUT EVIDENCE OF SUCH REGISTRATION OR
OF AN EXEMPTION FROM THE REGISTRATION REQUIREMENT OF THE ACT. THE RIGHT TO
SELL, TRANSFER OR OTHERWISE DISPOSE OF OR PLEDGE THE SHARES REPRESENTED BY
THIS CERTIFICATE IS PROHIBITED BY THE TERMS OF A
F-2
STOCK REPURCHASE AGREEMENT. A COPY OF SUCH AGREEMENT IS ON FILE AT THE
COMPANY'S PRINCIPAL PLACE OF BUSINESS."
(ii) May contain additional legends as required by state
securities laws.
5. PERMITTED SALES AT AND FOLLOWING IPO. Notwithstanding the
restrictions on the sale of Shares contained herein, the Shareholder may sell
Shares according to the following schedule:
The foregoing schedule of permissible sales shall be applied as follows:
(a) The percentages shall be applied with respect to the sum of
the Shareholder's current Shares as of the time of a sale, plus any Shares
previously sold. As an example by way of illustration only, and not reflective
of the Shareholder's actual number of Shares, assume the Shareholder had 100
Shares on the IPO Date, and that an additional 50 Shares were beneficially owned
by the Shareholder under the 401(k) Plan. The Shareholder would have the right,
as of the IPO Date, to sell ten percent (10 shares) of the Shares held by the
Shareholder other than the Shares beneficially owned under the 401(k) Plan.
(Sale of Shares beneficially owned under the 401(k) Plan are governed by the
provisions of the 401(k) Plan rather than this Agreement.) If the Shareholder
sold the permitted ten Shares on the IPO Date, and, before the second
anniversary of the IPO Date, received a distribution from the 401(k) Plan of the
Shareholder's fifty Shares, the Shareholder would have 140 Shares on the second
anniversary of the IPO Date. The Shareholder would be permitted to sell up to 35
shares on the second anniversary of the IPO Date (the sum of the Shares then
held (140), plus the shares previously sold (10), times 30%, less the shares
previously sold, equals 35 shares).
(b) Shares sold on the IPO Date shall be sold pursuant to the
procedures established by the Company. No Shares may be sold in the period from
the
F-3
day after the IPO Date to the second anniversary of the IPO Date. Fifty percent
(50%) of the proceeds of the sale of the Shareholder's shares on the IPO Date
(or, if less, the outstanding balance of the Shareholder's notes under the
Subscription Agreement) shall be used by the Company to reduce the balance of
the Shareholder's notes under the Subscription Agreement.
(c) Any Company Common Stock beneficially owned by the
Shareholder in the 401(k) Plan shall not count towards determining the Shares
which may be sold unless and until such Shares are distributed to the
Shareholder from the 401(k) Plan.
(d) The foregoing schedule shall cease to apply to the
Shareholder's Shares and the Shares may be sold without restriction in the event
of the Shareholder's death.
6. POSSESSION OF CERTIFICATES. The Company shall hold the
certificates evidencing the Shares as custodian to protect its interests
hereunder until the Shareholder has the right to sell the Shares, as set forth
in Section 5 above. In furtherance thereof, Shareholder shall execute and
deliver to the Company assignment(s) in blank, in the form of Exhibit A hereto,
for the transfer of such certificates. The Company will deliver to Shareholder
a receipt for such Shares in the form of Exhibit B hereto.
Upon the request of Shareholder, when the Shareholder has the
right to sell Shares, the Company shall deliver the Shares which may be sold to
the Shareholder, and the Company and the Shareholder shall appropriately modify
the assignment(s) in blank and the receipt to reflect the delivery of Shares.
7. REPURCHASE OF SHARES BY COMPANY.
(a) Upon an occurrence described in Section 7(b) or 7(c) hereof,
and subject to any prohibitions on the purchase of Shares by the Company under
applicable law or any agreement binding on the Company, the Shareholder shall
sell, if the Company elects to purchase, the number of Shares determined under
the applicable subsection at a price per share equal to the Value as of the date
on which such Shares are to be purchased by the Company. Notwithstanding the
foregoing, if the Company is prohibited from purchasing the Shares by applicable
law or by any contract or agreement binding on the Company, including without
limitation any loan agreement, the Company may elect to purchase the Shares
determined under the applicable subsection as soon as practicable after it
determines in good faith that it is legally and contractually permitted to do
so. If Shareholder paid for all or any part of the Shares with a promissory note
or notes payable to the Company, the Company will, and Shareholder hereby
authorizes the Company to, offset against any amounts owing to Shareholder by
the Company with respect to Shares purchased hereunder any amounts outstanding
for principal or accrued interest under such promissory note(s). Any amount so
offset shall be deducted from the purchase price to be paid under this section
F-4
upon the purchase of the Shares by the Company. The balance of the purchase
price for the Shares, if any, shall be paid by the Company, in its sole and
absolute discretion, either in cash or by delivery of a non-transferable
promissory note in the form of Exhibit C hereto (the "Note"). The Note shall
bear simple interest at Bank of America's (or its successor's) reference rate as
of the date hereof and may be for term of up to five years. The Note shall be
paid in equal annual installments of principal plus all accrued and unpaid
interest on the total principal amount. Subject to the preceding sentence, the
actual term of the Note will be determined in the sole and absolute discretion
of the Company. The indebtedness evidenced by the Note, both principal and
interest, shall be subordinated and junior, to the extent set forth in the next
sentence, to all indebtedness of the Company, both principal and interest
(accrued and accruing thereon both before and after the date of filing a
petition in any bankruptcy, insolvency, reorganization or receivership
proceedings, whether or not allowed as a claim in such case or proceeding) in
respect of borrowed money, whether outstanding on the date of the Note or
thereafter created, incurred or assumed (collectively, the "Senior Debt");
provided, that such Senior Debt shall not include any obligation of the Company
under the Equity Plan to repurchase shares of its common stock. Upon the
maturity of any of the Senior Debt by lapse of time, acceleration or otherwise,
all principal of, and interest on, all such matured Senior Debt shall first be
paid in full before any payment is made by the Company on account of principal
of, or interest on, the Note.
(b) The Company shall have the right to purchase, and in the
event the Company elects to purchase, the Shareholder shall sell to the Company,
all of the Shareholder's Shares, if the Company determines that any one or more
of the following past or present acts or events have occurred: (1) the
Shareholder engages or has engaged in behavior that is disruptive to the
Company, or (2) the Shareholder interferes with (or has interfered with) or
engages in conduct that interferes with (or has interfered with) the efficient
operation of the Company or any office of the Company, or (3) the Shareholder
engages or has engaged in acts or conduct that are injurious to or otherwise
harm the Company or any office of the Company, or (4) the Shareholder breaches
or has breached any agreement with the Company, or (5) the Shareholder engages
or has engaged in conduct or acts detrimental to the Company, or (6) the
Shareholder becomes or became affiliated with a competitor, or develops, or make
a contribution to, a competing enterprise, (7) the Shareholder discloses or has
disclosed confidential Company information to a third party, or (8) the
Shareholder is or was convicted of a felony or other crime involving fraud,
dishonesty or acts of moral turpitude.
If the Company determines that any one or more of the
foregoing acts or events has occurred, the Shareholder may appeal such
determination to the Equity Committee within ten days of receipt of written
notice of such determination from the Company. The Equity Committee shall have
30 days to either confirm or overturn the Company's determination. If the Equity
Committee confirms the Company's determination, the Equity Committee shall also
determine if the Shareholder's acts or conduct are curable by the Shareholder.
If the Equity Committee
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determines that the Shareholder's acts or conduct are curable, then the
Shareholder shall be given thirty (30) days following notice of the Equity
Committee's decision to cure such acts or conduct, and an additional ten (10)
days to provide proof of such cure acceptable to the Equity Committee. If the
Equity Committee determines that the acts or conduct are not curable, or the
Shareholder does not provide proof that curable acts or conduct have been cured,
then the determination that the Shareholder engaged in acts or conduct
detrimental to the Company shall be final and binding.
Shareholder acknowledges that the Company's purchase right
under this subsection 7(b) may be financially disadvantageous to the Shareholder
if, at the time of the purchase, there is a large differential between the Value
(as that term is defined herein) of the Shares to be purchased and the then
market value of such shares.
(c) At any time, but not more frequently than once in any two-
year period, the Equity Committee may determine that the Company shall have the
right to purchase the number of Shares determined by the Equity Committee (a
"Company Call"). No Company Call shall be for a number of Shareholder's Shares
greater than ten percent (10%) of the Shares for which Sales are not yet
permissible under Section 5 hereof. The Equity Committee shall make its
determination under this Section 7(c) based upon the Equity Committee's
assessment of market conditions for the Company's common stock and the Company's
recent financial performance. Any Company Call shall be made on a pro rata basis
among the shareholders with whom the Company has entered into agreements similar
to this Agreement.
Provided, however, this Section 7 does not apply to Shares released
for sale under Section 5 herein.
8. ASSIGNMENT OF PURCHASE RIGHTS. The Company may assign, in whole
or part, its right to purchase the Shares under this Agreement to a designee(s).
9. PRESENTLY OWNED AND AFTER-ACQUIRED SHARES. The Shareholder agrees
that the terms and conditions of this Agreement shall be binding upon him or her
as to any Shares.
10. CHANGE IN MARITAL STATUS. In the event that the Shareholder's
marital status is altered by dissolution or divorce or by the death of the
Shareholder's spouse, any interest of his or her former spouse in the Shares,
whether as community property or as a result of a property settlement agreement,
a divorce decree or other legal proceeding, may be purchased by the Company and
shall be sold by the Shareholder's former spouse or his or her estate according
to the provisions of this Agreement. The Shareholder agrees to notify the
Company of any change in marital status, including, without limitation,
marriage, dissolution of marriage, divorce or death of spouse; within 10
business days of said event. The Shareholder agrees to cause any spouse who has
not signed a consent to this Agreement in the form of Exhibit D to do so at the
time notice is given to the Company under this Section.
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11. AMENDMENT. No change, amendment or modification of this Agreement
shall be valid unless it is in writing and signed by the Company and the
Shareholder.
12. REMEDIES. The parties agree that the Company will be irreparably
damaged in the event the agreements contained herein are not specifically
enforced. If any dispute arises concerning the transfer of any Shares, an
injunction may be issued restraining any such transfer pending the determination
of such controversy. In the event of any controversy, such rights or
obligations shall be enforceable in a court by a decree of specific performance.
Such remedy shall, however, be cumulative and not exclusive, and shall be in
addition to any other remedy which the Company may have.
13. EXPENSES. Shareholder agrees to pay to the Company the amount of
any and all reasonable expenses, including, without limitation, reasonable
attorneys' fees and expenses, which the Company may incur in connection with the
enforcement of its rights hereunder.
14. NOTICES. Any notice required or permitted to be given hereunder
shall be in writing and shall be mailed first-class, postage prepaid, or shall
be personally delivered, or shall be sent by telecopier. Any communication so
addressed and mailed shall be deemed to be given seven days after mailing and
any communication delivered in person shall be deemed to be given when receipted
for, or actually received by, an authorized officer of the recipient. All such
communications, if intended for the Company, shall be addressed to the Company
as follows:
Korn/Ferry International
1800 Century Park East
Suite 900
Los Angeles, California 90067
Attn.: Corporate Secretary
and if intended for the Shareholder shall be addressed to the Shareholder at his
or her address as shown on the Company's books. Any party may change his, her
or its address for notice by giving notice thereof to the other party to this
Agreement. A change of address notice by the Shareholder shall be recorded in
the books of the Company as the Shareholder's address for notice unless the
Shareholder otherwise instructs the Company.
15. GOVERNING LAW. All questions with respect to the construction of
this Agreement and the rights and liabilities of the parties hereto shall be
governed by the laws of California.
16. SUCCESSORS AND ASSIGNS. Subject to the terms herein, this
Agreement shall inure to the benefit of, and shall be binding upon, the assigns,
successors in interest, personal representatives, estates, heirs and legatees of
each of the parties hereto. Nothing herein shall obligate the Company to obtain
the consent of Shareholder
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if the Company undergoes a reorganization, restructuring or recapitalization,
including without limitation, the acquisition by the Company of an entity or
entities controlled by the Company in connection with the reincorporation of the
Company in a state other than California.
17. ENTIRE AGREEMENT. This Agreement contains the entire Agreement
of the parties hereto and supersedes any prior written or oral agreements
between them concerning the subject matter contained herein. There are no
representations, agreements, arrangements or understandings, oral or written,
between and among the parties hereto relating to the subject matter contained in
this Agreement which are not fully set forth herein.
18. COUNTERPARTS. This Agreement may be executed in counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
19. WAIVER. No waiver of any right pursuant hereto or waiver of any
breach hereof shall be effective unless in writing and signed by the party
waiving such right or breach. No waiver of any right or waiver of any breach
shall constitute a waiver of any other or similar right or breach, and no
failure to enforce any right hereunder shall preclude or affect the later
enforcement of such right.
20. CAPTIONS. The captions of the various sections herein are solely
for the convenience of the parties hereto and shall not affect or control the
meaning or construction of this Agreement.
21. SEVERABILITY. Should any portion of this Agreement be declared
invalid and unenforceable, then such portion shall be deemed to be severable
from this Agreement and shall not affect the remainder hereof.
22. AGREEMENT AVAILABLE FOR INSPECTION. An original copy of this
Agreement, together with all amendments, duly executed by the Company and the
Shareholder, shall be delivered to the Secretary of the Company and maintained
by him or her at the principal executive office of the Company and shall be
available for inspection by any person requesting to see it.
23. REGULATION G, T, U OR X. The Company's possession of the
certificates evidencing the Shares pursuant to Section 6 of this Agreement does
not violate Regulation G, T, U or X of the Board of Governors of the Federal
Reserve System.
24. ADDITIONAL DOCUMENTS. The parties hereto agree to sign all
necessary documents and take all other actions necessary to carry out the
provisions of this Agreement.
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IN WITNESS, WHEREOF, the parties have executed this Agreement as of
the date first written above.
SHAREHOLDER
By:___________________________________
Name:_________________________________
KORN/FERRY INTERNATIONAL
By:___________________________________
Name: Elizabeth S.C.S. Murray
-------------------------------
Title: Executive VP & CFO
-------------------------------
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EXHIBIT A
IRREVOCABLE STOCK ASSIGNMENT
For good and valuable consideration pursuant to Section 6 of that
certain Stock Repurchase Agreement between the undersigned and Korn/Ferry
International, the undersigned hereby sells, assigns and transfers to
______________________________ shares of common stock of Korn/Ferry
International, represented by Certificate No(s). _______________ standing in the
name of the undersigned on the books of said company.
By:____________________________________
Name:__________________________________
Dated:______________, 19__
WITNESS:
By:____________________________
Name:__________________________
Dated:___________________, 19__
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EXHIBIT B
RECEIPT
Korn/Ferry International, a California corporation (the "Company"),
hereby acknowledges that it has received and is holding as custodian on behalf
of ______________________________________________________________, an officer of
the Company ("Executive"), _______ shares of Company Common Stock (the
"Shares"), represented by certificate(s) number _________, _________ and
__________ issued on _____________, 19___ in the name of Executive (copies of
which are attached hereto), together with an Irrevocable Stock Assignment
executed by Executive (the "Stock Assignment"). The Shares and the Stock
Assignment are being held by the Company pursuant to and in accordance with the
terms of that certain Stock Repurchase Agreement between the Company and
Executive, and any promissory note(s) and related Stock Pledge Agreement
delivered by Executive to the Company in connection with the purchase of all or
a portion of the Shares.
KORN/FERRY INTERNATIONAL
By:_________________________________
Name:_______________________________
Title:______________________________
Dated:__________, 19_____
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EXHIBIT C
KORN/FERRY INTERNATIONAL
NON-TRANSFERABLE SUBORDINATED PROMISSORY NOTE
$______________ _____________,19__
FOR VALUE RECEIVED, the undersigned, KORN/FERRY INTERNATIONAL, a
California corporation (the "Company") hereby promises to pay to the order of
_____________________ __________________ ("Payee") the principal sum of
______________________________ dollars ($___________), plus interest on the
unpaid balance thereof at the rate of ______% per annum [reference rate of Bank
of America (or its successor) on the date hereof].
Payments of principal and interest hereunder shall be in lawful money
of the United States of America and shall be payable in ______________ (____)
annual payments, the first such payment to be made on ___________, 19__, and the
final such
payment to be made on ____________, 19__. Interest shall be simple interest and
shall be paid on the basis of a 360-day year and a 30-day month.
Principal and interest on this note are payable, at __________________
_____________________________, or such other place as Payee shall designate in
writing for such purpose at least five business days in advance of the
applicable payment date. Principal and interest on this note may be prepaid at
any time, in whole or in part, without premium or penalty. The timely tender of
any payment of principal or interest on this note shall be deemed to have been
made if a check for such payment is mailed two business days before the day such
payment is due.
If any payment of principal or interest on this note shall be due on a
Saturday, Sunday or legal holiday under the laws of the State of California, or
any other day on which banking institutions in the City of Los Angeles are
obligated or authorized by law or executive order to close, such payment shall
be made on the next succeeding business day in California, and any such extended
time shall not be included in computing interest in connection with such
payment.
The indebtedness evidenced by this note, both principal and interest,
is subordinated and junior to the extent set forth in Section 7 of that certain
Stock Repurchase Agreement dated as of _________________ between the Company and
Payee.
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Payee shall not sell, assign or otherwise transfer or dispose of all
or any part of this note to any person, partnership, corporation, firm or other
entity, except with the prior written consent of the Company.
This note is made and delivered in California and shall be governed,
construed and enforced according to the laws of the State of California.
KORN/FERRY INTERNATIONAL
By:______________________________________
Name:____________________________________
Title:___________________________________
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EXHIBIT D
CONSENT OF SPOUSE OF SHAREHOLDER
The undersigned, being the spouse of the Shareholder, _______________,
who has signed the foregoing Agreement, hereby acknowledges that he or she has
read and is familiar with the provisions of said Agreement including but not
limited to Section 10 herein and agrees to be bound thereby and join therein to
the extent, if any, that his or her agreement and joinder may be necessary. The
undersigned hereby agrees that the Shareholder may join in any future amendment
or modifications of the Agreement without any further signature, acknowledgment,
agreement or consent on his or her part; and the undersigned hereby further
agrees that any interest which he or she may have in the Shares held by
Shareholder shall be subject to the provisions of this Agreement.
By:____________________________________
Name:__________________________________
Dated:_________________________________
FD-1
EXHIBIT G
STOCK PLEDGE AGREEMENT
STOCK PLEDGE AGREEMENT
THIS STOCK PLEDGE AGREEMENT (the "Agreement") is entered into as of
_________________ by and between Korn/Ferry International, a California
corporation (the "Company"), and _____________________________, an officer of
the Company ("Executive").
R E C I T A L S
A. In 1998, the Company adopted the Supplemental Executive Equity
Participation Program (the "Supplemental Equity Plan"), which provides for the
sale of shares of Company common stock to certain officers of the Company.
B. Executive has agreed to participate in the Supplemental Equity
Plan and to purchase from the Company shares of Common Stock (the "Shares") of
the Company, in the amount and pursuant to the terms of the Supplemental
Executive Equity Participation Program Stock Subscription Agreement (Basic
Equity Account), dated as of ______________ (the "Subscription Agreement").
C. The Shares are also subject to the terms of that certain Stock
Repurchase Agreement dated as of _______________ between Company and Executive
delivered pursuant to the Subscription Agreement (the "Stock Repurchase
Agreement").
D. Executive has agreed to pledge all of the Shares being acquired
by Executive to secure payment of the promissory note(s) made as of the date
hereof or at any future date by Executive in favor of the Company pursuant to
Section 3 of the Subscription Agreement (the "Promissory Note(s)").
NOW, THEREFORE, in consideration of the foregoing and in consideration
of the mutual promises set forth below, the parties hereto agree as follows:
1. CREATION OF SECURITY INTEREST. As security for the prompt
payment and performance in full when due, whether on the respective maturity
dates, by acceleration or otherwise (including payments of amounts that would
become due by operation of the automatic stay under Section 362(a) of the
Bankruptcy Code, or any successor provision thereto), of the Promissory Note(s),
Executive hereby assigns, transfers to and pledges for the purpose of creating a
security interest for the benefit of Company, all of the Shares and the
certificates representing the Shares and any interest of Executive in the
entries on the Company's books pertaining to the Shares, and all dividends,
cash, warrants, rights, instruments and other property or proceeds from time to
time received, receivable or otherwise distributed in respect of or in exchange
for any and all of the Shares (the "Collateral"). The Company shall retain
possession of any and all of the stock certificates representing the Shares
pursuant to the terms of this
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Agreement and the Stock Repurchase Agreement, which also provides for the
delivery of executed stock powers, but shall not encumber or dispose of the
Collateral except in accordance with the provisions of this Agreement.
2. REPRESENTATIONS AND WARRANTIES OF EXECUTIVE. Executive represents
and warrants as follows:
(a) Executive has good title to the Shares as the legal and
beneficial owner thereof.
(b) There are no restrictions upon the transfer of the Shares
other than pursuant to the Subscription Agreements, the Stock Repurchase
Agreement and applicable securities laws.
(c) Except for the security interest granted in this Pledge
Agreement, there is no adverse lien, security interest or encumbrance in or on
said Shares.
3. DIVIDENDS. During the term of this Pledge Agreement, any
dividends declared on the Collateral shall be paid to the Executive provided
that there has not been an Event of Default (as defined in Paragraph 6 hereof).
Upon occurrence of any Event of Default, all such amounts shall thereafter be
paid to Company.
4. VOTING RIGHTS. During the term of this Pledge Agreement and so
long as there has not been an Event of Default (as defined in Paragraph 6
hereon, Executive shall have the right to vote the Collateral. Upon occurrence
of any Event of Default, such rights shall immediately be transferred to
Company.
5. STOCK ADJUSTMENT. In the event that during the term of this
Pledge Agreement any stock dividend, reclassification, readjustment or other
change is declared or made in the capital structure of the Company, all new,
substituted and additional shares or other securities issued by reason of any
such changes in the Collateral shall be held by the Company under the terms of
this Pledge Agreement in the same manner as the Shares originally transferred
hereunder.
6. EVENTS GIVING RISE TO DEFAULT. The occurrence of any of the
following events shall constitute an "Event of Default":
(a) Failure of Executive to keep or perform any of the terms or
provisions of this Pledge Agreement.
(b) The occurrence of an Event of Default as defined in any
Promissory Note.
7. REMEDIES ON EVENT OF DEFAULT. Upon the occurrence of an Event of
Default as specified in Paragraph 6 hereof, Company may then elect to sell all
or any
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part of the Collateral or may elect to exercise any other rights or pursue any
other lawful remedies pursuant to applicable provisions of the California
Commercial Code. The Company may buy all or any part of the Collateral at any
such sale. The proceeds of any such sale shall be applied, in order, to the
following:
(a) The reasonable expenses of retaking, holding, preparing for
sale, selling, and the like, including, without limitation, reasonable
attorneys' fees and legal expenses incurred by the Company;
(b) The unpaid balance of principal and interest due under the
Promissory Note(s).
The surplus, if any, shall be paid to the person or persons entitled
thereto. If there be a deficiency, Executive shall be personally liable to the
Company for any such deficiency.
Upon the occurrence of an Event of Default, the Company may propose
to accept the Collateral, which acceptance shall discharge any then undischarged
obligation of Executive hereunder, all as in accordance with applicable
provisions of the California Commercial Code.
8. PAYMENT OF INDEBTEDNESS. Upon the fulfillment of all obligations of
Executive for payment in full of the Promissory Note(s), the Company shall
continue to hold all of the certificates representing the Shares and the related
Stock powers pursuant to the terms of the Stock Repurchase Agreement.
9. CONTINUING AGREEMENT. Until all indebtedness pursuant to the
Promissory Note(s) shall have been paid in full, all rights, powers and remedies
granted to the Company hereunder shall continue to exist and may be exercised by
the Company at any time.
10. RIGHTS OF COMPANY. The rights, powers and remedies given to the
Company by virtue of this Agreement shall be in addition to all rights, powers
and remedies given to the Company by virtue of any statute or rule of law. Any
forbearance, failure or delay by the Company in exercising any right, power or
remedy hereunder shall not be deemed to be a waiver of such right, power or
remedy, and any single or partial exercise of any right, power or remedy
hereunder shall not preclude the further exercise thereof; and every right,
power and remedy of the Company shall continue in full force and effect until
such right, power or remedy is specifically waived by an instrument in writing
executed by the Company.
11. EXPENSES. Executive agrees to pay all costs and expenses, including,
without limitation, reasonable attorneys' fees and legal expenses, incurred in
the enforcement of this Agreement.
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12. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of California.
13. BENEFIT. This Agreement shall inure to the benefit of and be binding
upon the parties hereto, their successors, assigns, administrators and
executors.
14. NOTICES. Any notice required or permitted to be given hereunder shall
be in writing and shall be mailed first class, postage prepaid, or shall be
personally delivered. Any communication so addressed and mailed shall be deemed
to be given seven days after mailing and any communication delivered in person
shall be deemed to be given when receipted for, or actually received by, the
recipient. All such communications shall be addressed as follows:
If to the Company:
Korn/Ferry International
1800 Century Park East
Suite 900
Los Angeles, California 90067
Attn.: Corporate Secretary
If to the Executive:
At Executives address as shown in the Company's books or to such
other address as is provided by the parties hereto from time to time.
15. COUNTERPARTS. This Agreement may be executed in counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
EXECUTIVE
By:_____________________________________
Name:___________________________________
COMPANY:
KORN/FERRY INTERNATIONAL
By:_____________________________________
Name: Elizabeth S.C.S. Murray
-----------------------------------
Title: Executive VP & CFO
----------------------------------
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