FORM OF ADDITIONAL REDEMPTION AGREEMENT
Published on December 24, 1998
EXHIBIT 10.25
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ADDITIONAL REDEMPTION AGREEMENT
This Additional Redemption Agreement (the "Agreement") is made as of
December __, 1998 by and between KORN/FERRY INTERNATIONAL, a California
corporation (the "Company") and RICHARD M. FERRY ("Ferry").
R E C I T A L S
WHEREAS, pursuant to certain Purchase Agreements between the Company
and certain shareholders of the Company (the "Sellers") dated as of December 31,
1994 and January __, 1995 (collectively, the "1994 Purchase Agreement"), the
Sellers agreed to have certain shares of the Company's common stock, no par
value (the "Common Stock"), redeemed by the Company in an integrated fixed
redemption plan initiated by the Company that required the redemption of a
portion of the holdings of any shareholder whose aggregate ownership of
securities exceeded a certain level of equity ownership in the Company (the
"Redemption").
WHEREAS, pursuant to the Redemption, 304,223 shares of Common Stock
owned by Ferry were redeemed by the Company (the "Redeemed Stock");
WHEREAS, the redemption price consisted of (i) a fixed amount of $7.29
per share (the "Fixed Redemption Amount"), (ii) a contingent additional amount
(the "Additional Redemption Amount") payable if the Company engaged in any
extraordinary transaction, such as a public offering of the Common Stock of the
Company at any time prior to December 31, 2004 (an "Initial Public Offering")
and (iii) one share of Series A Preferred Stock for each 100 shares of Common
Stock redeemed;
WHEREAS, the Fixed Redemption Amount resulted in a total payment of
$2,217,785.60, with $369,484.77 paid in cash and the balance of $1,848,300.90
paid in the form of a promissory note in the principal amount of $1,826,124.72
(the "Fixed Redemption Promissory Note") and $22,176.18 in the form of 3,042
shares of Series A Preferred Stock @ $7.29 per share;
WHEREAS, in the event of an Initial Public Offering, the Additional
Redemption Amount per share was defined in the 1994 Purchase Agreement to be an
amount equal to the amount Ferry would have received in an Initial Public
Offering had the Redeemed Stock not been redeemed in the Redemption, reduced by
the Fixed Redemption Amount plus 8.5% per annum accrued interest;
WHEREAS, because the Company's current balance of cash and cash
equivalents is not sufficient to pay the aggregate Additional Redemption Amount
and therefore a substantial amount of the proceeds from the Initial Public
Offering would have been required to pay the total aggregate Additional
Redemption Amount rather than providing new capital for the Company, each Seller
has agreed with the Company to reduce the Additional Redemption Amount otherwise
required to be paid to such Seller by 30.25% (the "Negotiated Adjustment
Percentage");
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WHEREAS, the Company and Ferry desire to enter into this Agreement to
reduce the Additional Redemption Amount otherwise required to be paid to Ferry
by the Negotiated Adjustment Percentage;
WHEREAS, concurrent with the transactions contemplated in this
Agreement and as part of the Redemption, all shares of Series A Preferred Stock
issued pursuant to the 1994 Purchase Agreement will be retired in an amount
equal to $7.29 per share of Series A Preferred Stock (the "Preferred Stock
Amount"); and
WHEREAS, upon completion of the transactions contemplated in this
Agreement and the retirement of all shares of Series A Preferred Stock, all
obligations of the Company and Ferry in respect of the Redemption will have been
satisfied.
A G R E E M E N T
NOW, THEREFORE, in consideration of the mutual promises and covenants
contained herein, the Company and Ferry hereby agree as follows:
SECTION 1
PAYMENT; MUTUAL RELEASE
1.1 PAYMENT. Subject to the terms and conditions contained herein,
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the Company agrees to pay Ferry at the time and manner set forth in Section 4
the sum of (i) the outstanding balance of the Fixed Redemption Promissory Note
at the Closing (as defined in Section 4.1) plus all accrued and unpaid interest
thereon; (ii) the Preferred Stock Amount and (iii) an amount equal to the
product of 304,223 times the difference between (a) the initial price of the
shares of Common Stock sold by the Underwriters to the public in the Initial
Public Offering (the "Initial Offering Price") times 0.6975 and (b) the Fixed
Redemption Amount plus 8.5% per annum accrued interest since ____________ 1995,
the date of the Redemption (collectively, the "Payment Amount") as payment in
full of (x) the Fixed Redemption Promissory Note, (y) the retirement of the
Series A Preferred Stock; and (z) the Additional Redemption Amount owed to Ferry
under the 1994 Purchase Agreement. The Company shall pay Ferry the Preferred
Stock Amount upon the retirement of the Series A Preferred Stock.
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1.2 MUTUAL RELEASE. Subject to the terms and conditions contained
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herein, at the Closing each of Ferry and the Company agree to execute a mutual
release, in the form attached hereto as Exhibit A (the "Mutual Release").
SECTION 2
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Ferry as follows:
2.1 ORGANIZATION AND POWERS. The Company is a corporation duly
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organized, validly existing and in good standing under the laws of the State of
California and has all requisite corporate power and authority to own and
operate its properties and assets, to carry on its business as presently
conducted and as now proposed to be conducted and to enter into this Agreement
and carry out the transactions contemplated hereby.
2.2 AUTHORIZATION AND BINDING OBLIGATION. The execution, delivery
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and performance of this Agreement, including, but not limited to, the payment of
the Payment Amount, have been duly authorized by all necessary corporate action
on the part of the Company. This Agreement is the legally valid and binding
obligation of the Company, enforceable against it in accordance with its terms,
except as enforcement may be limited by bankruptcy, insolvency, reorganization,
moratorium or similar laws or equitable principles relating to or limiting
creditors' rights generally.
2.3 COMPLIANCE WITH OTHER INSTRUMENTS. The Company is not in
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violation of any term of its Articles of Incorporation or Bylaws, or in any
material respect of any term or provision of any material mortgage,
indebtedness, indenture, contract, agreement, instrument, judgment or decree,
and, to the best of its knowledge, is not in violation of any order, statute,
rule or regulation applicable to the Company where such violation would
materially and adversely affect the Company. The execution, delivery and
performance of and compliance with this Agreement, and the payment of the
Payment Amount, have not resulted and will not result in any violation of, or
conflict with, or constitute a default under, the Company's Articles of
Incorporation or Bylaws or any of its material agreements nor result in the
creation of any mortgage, pledge, lien, encumbrance or charge upon any material
portion of the properties or assets of the Company.
SECTION 3
REPRESENTATIONS AND WARRANTIES OF FERRY
Ferry hereby represents and warrants to the Company as follows:
3.1 EXPERIENCE. Ferry, through his authorized representative or
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otherwise, has experience in evaluating the fairness of the Negotiated
Adjustment Percentage to the Additional Redemption Amount and the terms of this
Agreement, and is capable of evaluating
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the merits and risks of this Agreement and has the capacity to protect his own
interest in entering into this Agreement with the Company.
3.2 AUTHORIZATION AND BINDING OBLIGATION. Ferry is duly authorized to
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execute, deliver and perform this Agreement. This Agreement is the legally valid
and binding obligation of Ferry, enforceable against him in accordance with its
terms, except as enforcement may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws or equitable principles relating to
or limiting creditors' rights generally.
3.3 COMPLIANCE WITH OTHER INSTRUMENTS. The execution of this
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Agreement by Ferry does not, and the performance by Ferry of his obligations
hereunder will not, constitute a violation of, conflict with or result in a
default under, any contract, commitment, agreement, understanding, arrangement
or restriction of any kind to which Ferry is bound.
3.4 NO PRIOR TRANSFER. Ferry has not transferred, assigned or
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pledged all, or any part, of his rights under the 1994 Purchase Agreement, and
the release by Ferry of his rights under the 1994 Purchase Agreement will
constitute a full and complete release of any right owed under the 1994 Purchase
Agreement, subject to Section 1546 of the California Civil Code.
3.5 REVIEW OF APPRAISALS. Ferry has reviewed the appraisals of the
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fair market value of the Common Stock of the Company as of April 30, 1998 and
June 30, 1998 prepared by Houlihan Lokey Howard & Zukin.
SECTION 4
CLOSING
4.1 CLOSING. The closing of the transaction contemplated in Section
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1 of this Agreement (the "Closing") will take place at the offices of
________________, 9:00 a.m. two business days after the consummation of the
Initial Public Offering.
4.2 PAYMENT BY WIRE TRANSFER. At the Closing, the Company will pay
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the Payment Amount by wire transfer to Ferry's account.
4.3 DELIVERY OF EXECUTED RELEASE. At the Closing, Ferry will deliver
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to the Company an executed copy of the Release, in the form attached as Exhibit
A.
SECTION 5
CONDITIONS PRECEDENT TO CLOSING
5.1 CONDITIONS PRECEDENT TO CLOSING. The obligations of the Company
and Ferry under this Agreement will be subject to the fulfillment of each and
all of the following conditions at or before the Closing, each of which is
individually deemed material.
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5.2 REPRESENTATIONS AND WARRANTIES. The representations and
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warranties made by the Company and Ferry will be true and correct on and as of
the Closing to the same extent and with the same effect as if made on and as of
the Closing.
5.3 CONSUMMATION OF INITIAL PUBLIC OFFERING. The Initial Public
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Offering of the Common Stock of the Company will have been consummated.
SECTION 6
TERMINATION
6.1 TERMINATION. If the Closing does not occur on or before
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September 1, 1999, this Agreement will terminate.
SECTION 7
MISCELLANEOUS
7.1 GOVERNING LAW. This Agreement will be governed and construed in
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all respects in accordance with the laws of the State of California.
7.2 SUCCESSORS AND ASSIGNS. Except as otherwise provided herein, the
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provisions hereof will inure to the benefit of, and be binding upon, the
successors, assigns, heirs, executors and administrators of the parties hereto.
7.3 ENTIRE AGREEMENT; AMENDMENT. This Agreement and the other
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documents delivered pursuant hereto constitute the full and entire understanding
and agreement between the parties with regard to the subjects hereof and
thereof, and no party shall be liable or bound to any other party in any manner
by any warranties, representations or covenants except as specifically set forth
herein or therein. Except as expressly provided herein, neither this Agreement
nor any term hereof may be amended, waived, discharged or terminated other than
by a written instrument signed by the party against whom enforcement of any such
amendment, waiver, discharge or termination is sought.
7.4 NOTICES, ETC. All notices and other communications required or
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permitted hereunder will be in writing and will be mailed by registered or
certified mail, postage prepaid, or otherwise delivered by messenger, addressed
to the address set forth on the signature page hereto, or at such other address
as a party shall have furnished the other party by notice given in the above
manner.
Each such notice or other communication will for all purposes of this
Agreement be treated as effective or having been given when delivered if
delivered personally, or, if sent by mail, at the earlier of its receipt or ten
(10) business days after the same has been deposited in a regularly maintained
receptacle for the deposit of the United States mail, addressed and mailed as
aforesaid.
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7.5 EXPENSES. Each party hereto will bear all expenses it incurs
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with respect to the negotiation, execution, delivery and performance of this
Agreement. If any action at law or in equity is necessary to enforce or
interpret the terms of this Agreement or the Articles, the prevailing party will
be entitled to reasonable attorney's fees, costs and necessary disbursements in
addition to any other relief to which such party may be entitled.
7.6 COUNTERPARTS. This Agreement may be executed in any number of
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counterparts, each of which may be executed by less than all of the parties,
each of which will be enforceable against the party actually executing such
counterpart, and all of which together will constitute one instrument.
7.7 SEVERABILITY. In the event that any provision of this Agreement
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becomes or is declared by a court of competent jurisdiction to be illegal,
unenforceable or void, this Agreement will continue in full force and effect
without said provision.
7.8 TITLES AND SUBTITLES. The titles and subtitles used in this
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Agreement are used for convenience only and are not considered in construing or
interpreting this Agreement.
7.9 LEGAL COUNSEL. In entering into this Agreement, the parties
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represent that they have relied upon the advice of their respective attorneys,
who are attorneys of their own choice, and that the terms of this Agreement have
been completely read and explained to them by their attorneys, and that those
terms are fully understood and voluntarily accepted by them.
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IN WITNESS WHEREOF, the parties hereto have executed this Additional
Redemption Agreement as of the date first above written.
"COMPANY"
KORN/FERRY INTERNATIONAL
By:___________________________
Name: Elizabeth S.C.S. Murray
Title: Chief Financial Officer
and Executive Vice President
Notice Address: Korn/Ferry International
1800 Century Park East
Suite 900
Los Angeles, CA 90067
"FERRY"
RICHARD M. FERRY
_____________________________
Name: Richard M. Ferry
Notice Address: c/o Korn/Ferry International
1800 Century Park East
Suite 900
Los Angeles, CA 90067
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