PRE 14A: Preliminary proxy statement not related to a contested matter or merger/acquisition
Published on July 26, 1999
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
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RULE 14A-6(E)(2))
[_] Definitive Proxy Statement
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[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
Korn/Ferry International
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Notes:
[LOGO] KORN/FERRY INTERNATIONAL
-----------------------------------------------
1800 Century Park East
Suite 900
Los Angeles, CA 90067
August 20, 1999
Dear Stockholders:
We are pleased to invite you to attend the 1999 Annual Meeting of
Stockholders of Korn/Ferry International to be held on Wednesday, September 22,
1999 at 10:00 a.m. at the Park Hyatt Los Angeles at Century City located at 2151
Avenue of the Stars, Los Angeles, California 90067.
The agenda for our 1999 Annual Meeting includes three proposals, each
of which is identified and described in the enclosed materials. While all of
the issues to be considered are important, the proposal to change the Company's
state of incorporation from California to Delaware is especially important. The
Proxy Statement describes this proposed change in detail, as well as all other
items to be presented at the meeting.
We are delighted that you have chosen to invest in Korn/Ferry
International and hope that, whether or not you attend the meeting, you will
vote as soon as possible by completing, signing and returning the enclosed proxy
card in the envelope provided. Your vote is important, and voting by written
proxy will ensure your representation at the 1999 Annual Meeting. You may
revoke your proxy in accordance with the procedures described in the Proxy
Statement at any time before it is voted.
Sincerely,
Richard M. Ferry Windle B. Priem
Chair of the Board Chief Executive Officer and President
[LOGO] KORN/FERRY INTERNATIONAL
----------------------------------------------------
1800 Century Park East, Suite 900
Los Angeles, California 90067
NOTICE OF ANNUAL MEETING
To Be Held on September 22, 1999
Dear Stockholder:
On Wednesday, September 22, 1999, Korn/Ferry International (the "Company") will
hold its 1999 Annual Meeting of Stockholders at the Park Hyatt Los Angeles at
Century City located at 2151 Avenue of the Stars, Los Angeles, California 90067.
The meeting will begin at 10:00 a.m.
Only stockholders who owned the Company's Common Stock at the close of business
on the record date of August 2, 1999 can vote at this meeting or any
adjournments that may take place. At the meeting we will:
1. Elect twelve Directors to the Board of Directors: four Directors to serve
for a three-year term, four Directors to serve for a two-year term and
four Directors to serve for a one-year term;
2. Consider a proposal to change the Company's state of incorporation from
California to Delaware;
3. Ratify the appointment of Arthur Andersen LLP as independent auditors for
fiscal 2000; and
4. Attend to other business properly presented at the meeting.
Your Board of Directors recommends that you vote in favor of each of the three
proposals outlined in the Proxy Statement accompanying this Notice.
The approximate date of mailing for the Company's 1999 Proxy Statement and proxy
card(s) to all stockholders is August 20, 1999. The Company's 1999 Annual
Report was mailed separately to stockholders on August ___, 1999.
A quorum comprised of the holders of a majority of the outstanding shares of
Common Stock of the Company on the record date must be present or represented
for the transaction of business at the meeting. Accordingly, it is important
that your shares be represented at the meeting. WHETHER OR NOT YOU PLAN TO
ATTEND THE MEETING, PLEASE COMPLETE, DATE AND SIGN THE ENCLOSED PROXY CARD AND
RETURN IT IN THE ENVELOPE PROVIDED.
You may revoke your proxy at any time prior to the time it is voted by (1)
notifying the Corporate Secretary of the Company in writing; (2) returning a
later-dated proxy card; or (3) attending the meeting and voting in person.
At the meeting we will also report on the Company's fiscal 1999 business results
and other matters of interest to stockholders.
Please read the proxy materials carefully. Your vote is important and the
Company appreciates your cooperation in considering and acting on the matters
presented.
By Order of the Board of Directors,
Peter L. Dunn
Vice Chair, General Counsel and
Corporate Secretary
August 20, 1999
Los Angeles, California
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TABLE OF CONTENTS
QUESTIONS AND ANSWERS ABOUT THE PROXY MATERIALS AND THE ANNUAL MEETING
1. Q: Why am I receiving this proxy statement and the other enclosed
materials?
A: The Board of Directors (the "Board") of Korn/Ferry
International (also referred to as the "Company") is providing
these materials to you in connection with, and soliciting
proxies for use at, the Company's 1999 Annual Meeting of
Stockholders, which will take place on September 22, 1999 (the
"Annual Meeting"). You are requested to vote on each of the
proposals described in this proxy statement.
2. Q: What information is included in this mailing?
A: The information included in this proxy statement relates to,
among other things, the proposals to be voted on at the Annual
Meeting, the voting process and the Company's compensation of
its directors and executive officers. The Company's 1999
Annual Report was mailed separately to stockholders on August
___, 1999.
3. Q: What proposals will be voted on at the Annual Meeting?
A: (1) The election of twelve directors to serve on the Board;
(2) The reincorporation of the Company in Delaware (the
"Proposed Reincorporation"); and
(3) The ratification of the appointment of Arthur Andersen
LLP as the Company's independent auditors for fiscal
2000.
4. Q: How does the Board recommend I vote on each of the proposals?
A: The Board recommends that you vote your shares "FOR" all of
its nominees to the Board and "FOR" each of the other
proposals.
5. Q: Who is entitled to vote at the Annual Meeting?
A: Holders of the Company's Common Stock as of the close of
business on August 2, 1999 (the "Record Date") are entitled to
vote at the Annual Meeting.
6. Q: How many votes are provided to each share of Common Stock?
A: Each share of the Company's Common Stock outstanding as of the
Record Date is entitled to one vote. As of the Record Date,
____________ shares of Common Stock (the Company's only voting
securities) were issued and outstanding.
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7. Q: How do I vote?
A: You can vote either by completing, signing and dating each
proxy card you receive and returning it in the envelope
provided or by attending the Annual Meeting and voting in
person. Once you have submitted your proxy, you have the right
to revoke your proxy at any time before it is voted by:
(1) Notifying the Corporate Secretary of the Company in
writing;
(2) Returning a later-dated proxy card; OR
(3) Attending the Annual Meeting and voting in person.
8. Q: Who will count the votes?
A: Representatives of Chase Mellon Stockholder Services L.L.C.
will count the votes and act as the inspector of election at
the Annual Meeting.
9. Q: What does it mean if I receive more than one proxy card?
A: If your shares are registered differently and are in more than
one account, you will receive more than one proxy card. Sign
and return all proxy cards to ensure that all your shares are
voted.
10. Q: What shares are included on the enclosed proxy card(s)?
A: The shares on the enclosed proxy card(s) represent all shares
owned by you as of the Record Date (except for any shares that
are held in the Company's 401(k) plan, which shares will be
voted by the trustees of the 401(k) plan). These shares
include shares (1) held directly in your name as the
"stockholder of record" and (2) held for you as the
"beneficial owner" through a stockbroker, bank or other
nominee (except, as indicated above, those shares held by the
trustees on your behalf pursuant to the Company's 401(k)
plan). If you do not return your proxy card(s), your shares
will not be voted.
11. Q: What is the difference between holding shares as a
"stockholder of record" and as a "beneficial owner"?
A: "Stockholder of record": If your shares are registered
directly in your name with the Company's transfer agent, Chase
Mellon Stockholder Services L.L.C., you are considered, with
respect to those shares, to be the stockholder of record, and
these proxy materials have been sent directly to you by the
Company. As the stockholder of record, you have the right to
grant your voting proxy to the Company or to vote in person at
the Annual Meeting. The Company has enclosed a proxy card for
you to use.
"Beneficial owner": If your shares are held in a stock
brokerage account (including an Individual Retirement Account)
or by a bank or other nominee, you are considered to be the
beneficial owner of shares held in street name, and these
proxy materials are being forwarded to you by your broker or
nominee, who is considered, with respect to those shares, to
be the stockholder of record. As the beneficial owner, you
have the right to direct your broker or nominee on how to vote
(your broker or nominee has enclosed a voting instruction card
for you to use) and you are invited to attend the Annual
Meeting. However, because you are not the stockholder of
record, you may not vote your shares in person at the Annual
Meeting.
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12. Q: What if a beneficial owner does not provide the stockholder
of record with voting instructions for a particular proposal?
A: If you are a beneficial owner and you do not provide the
stockholder of record with voting instructions for a
particular proposal, your shares may constitute "broker non-
votes," as described below, with respect to that proposal.
13. Q: What are "broker non-votes"?
A: "Broker non-votes" are shares held by a broker or nominee with
respect to which the broker or nominee does not have
discretionary power to vote on a particular proposal or with
respect to which instructions were never received from the
beneficial owner. Shares which constitute broker non-votes
with respect to a particular proposal will not be considered
present and entitled to vote on that proposal at the Annual
Meeting, even though the same shares will be considered
present for quorum purposes and may be entitled to vote on
other proposals.
14. Q: How are votes counted?
A: In the election of directors, you may vote "FOR" all of the
nominees or your vote may be "WITHHELD" with respect to one or
more of the nominees. For each of the other proposals, you may
vote "FOR," "AGAINST" or "ABSTAIN". If you sign your proxy
card or broker voting instruction card without voting "FOR,"
"AGAINST" or "ABSTAIN" for any of the proposals, your shares
will be voted in accordance with the recommendations of the
Board. With respect to Proposal No. 2, abstentions and broker
non-votes will be equivalent to "AGAINST" votes. With respect
to Proposal No. 3, abstentions will be equivalent to "AGAINST"
votes, while broker non-votes will be disregarded and will
have no effect on the approval or rejection of the proposal.
15. Q: What is the voting requirement to approve each proposal?
A: In order to conduct business at the Annual Meeting, a
"quorum", as described below, must be established. In the
election of directors, the Board's twelve nominees will become
directors of the Company so long as they receive a plurality
of "FOR" votes; however, if any additional nominees for
director are properly brought before the stockholders for
consideration, only the twelve nominees who receive the
highest number of "FOR" votes will become directors of the
Company. Approval of Proposal No.2, the proposal relating to
the Proposed Reincorporation, will require affirmative "FOR"
votes from a majority of the outstanding shares eligible to be
voted at the Annual Meeting as of the Record Date, whether or
not present at the Annual Meeting. Approval of Proposal No.3,
relating to ratification of the auditors appointed by the
Board, will require affirmative "FOR" votes from a majority of
those shares present (either in person or by proxy) and
entitled to vote at the Annual Meeting.
16. Q: What is a "quorum"?
A: A "quorum" is a majority of the holders of the outstanding
shares entitled to vote. A quorum must be present or
represented by proxy at the Annual Meeting for business to be
conducted. Abstentions and broker non-votes will be counted as
present for quorum purposes.
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17. Q: What happens if additional matters (other than the proposals
described in this proxy statement) are presented at the Annual
Meeting?
A: The Board is not aware of any additional matters to be
presented for a vote at the Annual Meeting; however, if any
additional matters are properly presented at the Annual
Meeting, your signed proxy card gives authority to Peter L.
Dunn and Elizabeth S.C.S. Murray to vote on such matters in
their discretion.
18. Q: How much did this proxy solicitation cost?
A: The Company hired Chase Mellon Stockholder Services, L.L.C. to
assist in the distribution of proxy materials and solicitation
of votes for approximately $5,500, including out-of-pocket
expenses. The Company also reimburses brokerage houses and
other custodians, nominees and fiduciaries for their
reasonable out-of-pocket expenses for forwarding proxy and
solicitation materials to beneficial owners.
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PROPOSAL NO. 1 - ELECTION OF DIRECTORS
There is a total of twelve nominees for election as directors of the
Company at the Annual Meeting. This is a larger number of nominees than
will be considered for election to the Board in future years because this
is the first year in which the Company has a staggered board of directors
(i.e., a board of directors comprised of directors whose terms expire in
different years) and is a publicly-held company. The twelve nominees have
been grouped into three classes, each comprised of four directors.
Directors elected to serve as Class 2000 Directors will serve until the
2000 Annual Meeting of Stockholders, while Class 2001 Directors will serve
until the 2001 Annual Meeting of Stockholders and Class 2002 Directors will
serve until the 2002 Annual Meeting of Stockholders. Beginning with the
2000 Annual Meeting of Stockholders, four directors will be elected
annually at the Company's annual meetings of stockholders, each to serve
for a term of three years.
The nominees for election at the Annual Meeting to serve as Class 2000
Directors are Paul Buchanan-Barrow, Manuel A. Papayanopulos, Windle B.
Priem and Michael A. Wellman. The nominees for election at the Annual
Meeting to serve as Class 2001 Directors are Richard M. Ferry, Timothy K.
Friar, Sakie Fukushima and Scott E. Kingdom. The nominees for election at
the Annual Meeting to serve as Class 2002 Directors are Frank V. Cahouet,
Peter L. Dunn, Charles D. Miller and Gerhard Schulmeyer. Detailed
information regarding each of these twelve nominees is provided on pages 22
through 24 of this proxy statement. The Company does not expect any of the
twelve nominees to become unavailable to stand for election, but, should
this happen, the Board will designate a substitute for each unavailable
nominee. Proxies voting for any unavailable nominee will be cast for that
nominee's substitute.
Required Vote
The Board's twelve nominees will become directors of the Company so long as
they receive a plurality of "FOR" votes; however, if any additional
nominees for director are properly brought before the stockholders for
consideration, only the twelve nominees who receive the highest number of
"FOR" votes will become directors of the Company.
Recommendation of the Board
The Board unanimously recommends a vote "FOR" all of its twelve nominees
for director.
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PROPOSAL NO. 2 - REINCORPORATION IN DELAWARE
Introduction
For the reasons set forth below, the Board believes that it is in the best
interests of the Company and its stockholders to change the state of
incorporation of the Company from California to Delaware (the "Proposed
Reincorporation"). Throughout this proxy statement, the Company as
currently incorporated in California will be referred to as "KFY
California" and the Company as reincorporated in Delaware (which
reincorporation is subject to approval of the Proposed Reincorporation by
the stockholders at the Annual Meeting) will be referred to as "KFY
Delaware."
STOCKHOLDERS ARE URGED TO READ CAREFULLY THIS SECTION OF THIS PROXY
STATEMENT, INCLUDING THE RELATED EXHIBITS REFERENCED BELOW AND ATTACHED
HERETO, BEFORE VOTING ON THE PROPOSED REINCORPORATION.
The principal reasons for the Proposed Reincorporation are the greater
predictability and flexibility provided by the General Corporation Law of
the State of Delaware (the "Delaware General Corporation Law"),
particularly as construed by the Delaware courts; the increased ability of
the Company to attract and retain qualified directors and officers,
especially in light of prior initiatives in California to attempt to
severely limit the ability of companies to indemnify directors and
officers; and the reduction of the Company's vulnerability to unsolicited
or hostile attempts to obtain control of the Company. The Board believes
that the Company's stockholders will benefit from the well-established
principles of corporate governance that Delaware law affords. The proposed
KFY Delaware Charter and Bylaws are similar to those currently in effect
for KFY California; however, as described below, the Proposed
Reincorporation includes the implementation of certain provisions in the
KFY Delaware Charter and Bylaws which alter the rights of stockholders and
the powers of management and which, in some cases, reduce stockholder
participation in important corporate decisions. The Proposed
Reincorporation is not being proposed in response to any present attempt,
known to the Board, to acquire control of the Company, to obtain
representation on the Board, or to take significant corporate action that
would materially affect the governance of the Company.
The Proposed Reincorporation will be effected by merging KFY California
into a new Delaware corporation that is a wholly-owned subsidiary of KFY
California (the "Merger"). Upon completion of the Merger, KFY California,
as a corporate entity, will cease to exist and the new Delaware corporation
(post-Merger referred to throughout this proxy statement as "KFY Delaware")
will succeed to the assets and assume the liabilities of KFY California and
will continue to operate the business of the Company under its current
name, Korn/Ferry International.
As provided by the Agreement and Plan of Merger, in substantially the form
attached hereto as Appendix A (the "Merger Agreement"), each outstanding
share of KFY California Common Stock, no par value per share, will be
automatically converted into one share of KFY Delaware Common Stock, $0.01
par value per share, upon the effective date of the Merger. Each stock
certificate representing issued and outstanding shares of KFY California
Common Stock will continue to represent the same number of shares of KFY
Delaware Common Stock. IT WILL NOT BE NECESSARY FOR STOCKHOLDERS TO
EXCHANGE THEIR EXISTING KFY CALIFORNIA STOCK CERTIFICATES FOR KFY DELAWARE
STOCK CERTIFICATES. However, stockholders may request that their
certificates be exchanged if they so choose.
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KFY California Common Stock is listed for trading on the New York Stock
Exchange and, after the Merger, KFY Delaware Common Stock will be traded on
the New York Stock Exchange under the same symbol ("KFY") as the shares of
KFY California Common Stock are currently traded. There will be no
interruption in the trading of the Company's Common Stock as a result of
the Merger. As of the date the Board resolved to undertake the Proposed
Reincorporation, the closing price of KFY California Common Stock on the
New York Stock Exchange was $14.0625 per share.
Under California law, the affirmative vote of the holders of a majority of
the outstanding shares of KFY California Common Stock is required for
approval of the Merger Agreement and the other terms of the Proposed
Reincorporation. See "Vote Required for the Proposed Reincorporation"
below. The Proposed Reincorporation has been approved by the members of
the Board, who unanimously recommend a vote in favor of the proposal. If
approved by the stockholders, it is anticipated that the Merger will become
effective (the "Effective Date") as soon as practicable following the
Annual Meeting. However, as described in the Merger Agreement, the Merger
(and thus the Proposed Reincorporation) may be abandoned or the Merger
Agreement may be amended by the Board (except that the principal terms may
not be amended without stockholder approval) either before or after
stockholder approval has been obtained and prior to the Effective Date if,
in the opinion of the Board, circumstances arise which make it inadvisable
to proceed with the Proposed Reincorporation under the original terms of
the Merger Agreement.
As provided in the California General Corporation Law, stockholders of KFY
California will not have appraisal rights with respect to the Merger. See
"Comparison of the Charters and Bylaws of KFY California and KFY Delaware
and Significant Differences Between the Corporation Laws of California and
Delaware - Appraisal Rights" below.
The discussion set forth below is qualified in its entirety by reference to
the Merger Agreement, the KFY Delaware Charter (also referred to as its
certificate of incorporation) and the KFY Delaware Bylaws, copies of which
are attached to this proxy statement as Appendices A, B and C,
respectively.
APPROVAL BY STOCKHOLDERS OF THE PROPOSED REINCORPORATION WILL ALSO
CONSTITUTE APPROVAL OF THE MERGER AGREEMENT, THE KFY DELAWARE CHARTER AND
THE KFY DELAWARE BYLAWS AND ALL PROVISIONS THEREOF.
Principal Reasons for the Proposed Reincorporation
As the Company plans for the future, the Board and the Company's management
believe that it is in the best interests of the Company and its
stockholders that the Company be able to draw upon well-established
principles of corporate governance in making legal and business decisions.
The predictability of Delaware corporate law provides a reliable foundation
on which the Company's governance decisions can be based, and the Company
believes that its stockholders will benefit from the responsiveness of
Delaware corporate law to their needs and to those of the corporation they
own.
Predictability and Flexibility Of Delaware Law. For many years, Delaware
has followed a policy of encouraging incorporation in that state and, in
furtherance of that policy, has been a leader in adopting, construing and
implementing comprehensive, flexible corporate laws that are responsive to
the legal and business needs of the corporations organized under its laws.
Many corporations have chosen Delaware as their original state of
incorporation or have subsequently changed their corporate domiciles to
Delaware for these reasons. Because of Delaware's popularity as the state
of incorporation for many major corporations, both the legislature and the
courts in Delaware have demonstrated an ability and a willingness to act
quickly and effectively to meet changing business needs. The Delaware
courts have developed considerable expertise in dealing with corporate
issues, and a substantial body of case law has developed construing
Delaware law and establishing public policies with respect to corporate
legal affairs.
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Increased Ability to Attract and Retain Qualified Directors and Officers.
Both California and Delaware law permit a corporation to reduce or limit
the monetary liability of directors for breaches of fiduciary duty in
certain circumstances and to indemnify directors and officers against
certain monetary liability, fees and expenses incurred in connection with
the performance of their respective duties relating to the corporation.
The increasing frequency of claims and litigation directed against
directors and officers has greatly expanded the risks facing directors and
officers of corporations in exercising their respective duties. The amount
of time and money required to respond to such claims and to defend such
litigation can be substantial. It is the Company's desire to reduce these
risks to its directors and officers, to limit to the extent possible the
situations in which monetary damages can be recovered against directors and
to indemnify its directors and officers to the extent possible so that the
Company may continue to attract and retain qualified directors and officers
who otherwise might be unwilling to serve because of the risks involved.
The Company believes that, in general, Delaware law provides greater
protection to directors and officers than California law and that Delaware
case law regarding a corporation's ability to limit director liability and
to indemnify directors and officers is better developed and provides more
guidance than California law.
Approximately two and a half years ago, Proposition 211 was rejected by the
California electorate. Proposition 211, which was voted upon in November
1996, would have, if enacted, severely limited the ability of California
companies to indemnify their directors and officers. While Proposition 211
was defeated, similar initiatives or legislation containing similar
provisions may be proposed in California in the future. As a result, the
Company believes that the more favorable corporate environment afforded by
Delaware will enable it to compete more effectively with other public
companies in attracting and retaining qualified directors and officers.
Well-Established Principles of Corporate Governance. There is substantial
judicial precedent in the Delaware courts as to the legal principles
applicable to measures that may be taken by corporations and as to the
conduct of boards of directors under the business judgment rule and other
standards. The Company believes that its stockholders will benefit from
the well-established principles of corporate governance that Delaware law
affords.
Reduced Vulnerability to Unsolicited Takeover Attempts. Delaware, like
many other states, permits a corporation to adopt a number of measures
designed to reduce a corporation's vulnerability to unsolicited takeover
attempts through provisions in the corporate charter or bylaws or
otherwise. The Proposed Reincorporation is intended to reduce the
Company's vulnerability to unsolicited or hostile attempts to obtain
control of the Company and to increase the likelihood that stockholders
will receive a fair price for their shares in transactions relating to such
attempts. The Proposed Reincorporation is not, however, being proposed in
response to any present attempt, known to the Board, to acquire control of
the Company, to obtain representation on the Company's Board, or to take
significant corporate action that would materially affect the governance of
the Company.
In the discharge of its fiduciary obligations to the Company's
stockholders, the Board has evaluated the Company's vulnerability to
potential unsolicited bidders. In the course of such evaluation, the Board
has considered, or may consider in the future, certain defensive strategies
designed to enhance the Board's ability to negotiate with such unsolicited
bidders. These strategies include, but are not limited to, the adoption of
a stockholder rights plan, the adoption of a severance plan for the
Company's management and key employees that becomes effective upon the
occurrence of a change in control of the Company, the establishment of a
staggered board of directors, the elimination of cumulative voting, the
elimination of the right to remove a director other than for cause and the
authorization of "blank-check" preferred stock (the rights and preferences
of which may be determined by the board of directors). The establishment
of a staggered board of directors, the elimination of cumulative voting and
the authorization of "blank-check" preferred stock each have been
previously adopted by KFY California and will continue with respect to KFY
Delaware following the Proposed Reincorporation. For a detailed discussion
of the changes that will be
8
implemented as part of the Proposed Reincorporation, see "Comparison of the
Charters and Bylaws of KFY California and KFY Delaware and Significant
Differences Between the Corporation Laws of California and Delaware" below.
The Board believes that unsolicited takeover attempts may be unfair or
disadvantageous to the Company and its stockholders because, among other
reasons: (i) a non-negotiated takeover bid may be timed to take advantage
of temporarily depressed stock prices; (ii) a non-negotiated takeover bid
may be designed to foreclose or minimize the possibility of more favorable
competing bids or alternative transactions; (iii) a non-negotiated takeover
bid may involve the acquisition of only a controlling interest in the
Company's stock, without affording all stockholders the opportunity to
receive the same economic benefits; (iv) a non-negotiated takeover bid may
deprive stockholders of an adequate opportunity to evaluate the merits of
the proposed transaction and (v) certain of the Company's contractual
arrangements provide that they may not be assigned in connection with a
transaction that results in a "change of control" of the Company without
the prior written consent of the licensor or other contracting party.
By contrast, in a transaction in which a potential acquirer must negotiate
with the Board, the Board can and will take account of the underlying and
long-term values of the Company's business, technology and other assets,
the possibilities for alternative transactions on more favorable terms, the
possible advantages from a tax-free reorganization, the anticipated
favorable developments in the Company's business not yet reflected in the
stock price and the equality of treatment of all stockholders.
The Board believes that, for the protection of the Company's stockholders,
any proposed acquisition of control of the Company or proposed business
combination in which the Company might be involved should be thoroughly
studied by the Board to assure that such transaction would be in the best
interests of the Company and its stockholders and that all of the Company's
stockholders would be treated fairly in such transaction. In sum, the
Board believes that the Proposed Reincorporation is prudent and in the best
interests of the Company and its stockholders and should be adopted for
their protection.
Possible Disadvantages of Reincorporation
Despite the beliefs of the Board as to the benefits of the Proposed
Reincorporation to the Company and its stockholders, the Proposed
Reincorporation may have the effect of discouraging a future takeover
attempt that is not approved by the Board but is favored by individual
stockholders. This outcome could result even if a majority of the
stockholders deem such future takeover attempt to be in their best
interests or if the stockholders might receive a substantial premium for
their shares over the then current market value or over their cost basis in
such shares. As a result of the adoption of the proposal, stockholders who
wish to participate in an unsolicited tender offer may not have an
opportunity to do so if such tender officer is not approved by the Board.
In addition, the Proposed Reincorporation could make it more difficult to
change the existing Board and management. Furthermore, adoption of the
proposal will not necessarily ensure or guarantee that stockholders will
receive a price for their shares in connection with an acquisition of
control of the Company that reflects the value of such shares or that is
fair and equitable, although, in the opinion of the Board, the likelihood
that the price will reflect such value and be fair and equitable will be
increased by the Proposed Reincorporation. See "Comparison of the Charters
and Bylaws of KFY California and KFY Delaware and Significant Differences
Between the Corporation Laws of California and Delaware" below.
9
No Change in the Corporate Name, Board Members, Business, Management,
Employee Benefit Plans or Location of Principal Facilities of the Company
The Proposed Reincorporation will effect only a change in the legal
domicile of the Company and certain other changes of a legal nature, the
most significant of which are described in this proxy statement. The
Proposed Reincorporation will NOT result in any change in the name,
business, management, fiscal year, assets, liabilities or location of the
principal facilities of the Company. The directors elected at the Annual
Meeting to serve on the Board of KFY California will become the directors
of KFY Delaware. All employee benefit, stock option and employee stock
purchase plans of KFY California will be assumed and continued by KFY
Delaware, and each option or right issued by such plans will automatically
be converted into an option or right to purchase the same number of shares
of KFY Delaware Common Stock, at the same price per share, upon the same
terms and subject to the same conditions. Stockholders should note that
approval of the Proposed Reincorporation will also constitute approval of
the assumption of these plans by KFY Delaware. Other employee benefit
arrangements of KFY California will also be continued by KFY Delaware upon
the terms and subject to the conditions currently in effect.
As noted above, after the Merger, the shares of the Company's Common Stock
will continue to be traded, without interruption, on the same exchange (the
New York Stock Exchange) and under the same symbol ("KFY"). The Company
believes that the Proposed Reincorporation will not affect any of its
material contracts with any third parties and that KFY California's rights
and obligations under such material contractual arrangements will continue
and be assumed by KFY Delaware.
Comparison of the Charters and Bylaws of KFY California and KFY Delaware
and Significant Differences Between the Corporation Laws of California and
Delaware
General. The provisions of the KFY Delaware Charter (also referred to as
its certificate of incorporation) and Bylaws are similar to those of the
KFY California Charter (also referred to as its articles of incorporation)
and Bylaws in many respects. However, as described below, the Proposed
Reincorporation includes the implementation of certain provisions in the
KFY Delaware Charter and Bylaws which alter the rights of stockholders and
the powers of management and which, in some cases, may reduce stockholder
participation in important corporate decisions and may have "anti-takeover"
implications. See "Principal Reasons for the Proposed Reincorporation -
Reduced Vulnerability to Unsolicited Takeover Attempts" and "Possible
Disadvantages of Reincorporation" above.
In addition, pursuant to Delaware law, certain other changes altering the
rights of stockholders and powers of management could be implemented in the
future by amendment of the KFY Delaware Charter following stockholder
approval or by amendment of the KFY Delaware Bylaws by the Board without
stockholder approval. Except for the provisions described below, the Board
does not have any current plans to implement any additional provisions to
the KFY Delaware Charter or Bylaws that may have "anti-takeover"
implications.
Approval by the stockholders of the Proposed Reincorporation will
constitute approval of the inclusion in the KFY Delaware Charter and Bylaws
of each of the provisions contained in such documents. In addition,
approval of the Proposed Reincorporation will result in certain major
substantive differences in the corporate law governing the Company. While
the KFY Delaware and KFY California Charters and Bylaws and the respective
laws of California and Delaware are discussed below, such discussion
contains neither an exhaustive description of all differences between the
KFY Delaware and KFY California Charters and Bylaws nor an exhaustive
description of the differences between the laws of the two states. The
discussion below of the KFY Delaware Charter and Bylaws is qualified by
reference to Appendices B and C hereto, respectively.
10
Authorized Capitalization. If the Proposed Reincorporation is approved,
the authorized capitalization of KFY Delaware will be the same as that of
KFY California, except that each share of KFY Delaware stock will have a
par value of $0.01 per share while each share of KFY California stock has
no par value. Article IV of the KFY Delaware Charter authorizes KFY
Delaware to issue 150,000,000 shares of Common Stock, $0.01 par value per
share, and 50,000,000 shares of Preferred Stock, $0.01 par value per share.
"Blank-Check" Preferred Stock. The KFY Delaware and KFY California
Charters both authorize the Board to issue "blank-check" Preferred Stock.
Pursuant to the KFY Delaware Charter, the Board is authorized to issue,
without any action on the part of the Company's stockholders, up to
50,000,000 shares of such "blank-check" Preferred Stock. The KFY Delaware
Charter grants the Board the authority to divide such share into one or
more series and to fix and determine the relative rights and preferences,
including the voting rights, of the shares of each series. The issuance of
Preferred Stock could be used by the Board as a method of discouraging,
delaying or preventing a change in control of the Company or to resist
takeover offers opposed by the Company's management. Under certain
circumstances, the Board could create impediments for or frustrate persons
seeking to effect a hostile takeover or otherwise gain control of the
Company by causing shares of Preferred Stock with voting or conversion
rights to be issued to a holder or holders who side with the Board.
Classification of the Board of Directors. A classified board of directors
is one on which a certain number, but not all, of the directors are elected
on a rotating basis each year. California law permits a "listed
corporation" (such as the Company) to divide its board of directors into
two or three classes by providing for such division in the corporation's
charter or bylaws. Delaware law permits, but does not require, a
classified board of directors, whereby the directors can be divided into as
many as three classes with staggered terms of office, with only one class
of directors standing for election each year. Both the KFY California
Bylaws and the KFY Delaware Charter provide for the Board to be classified
and to be divided into three classes.
Elimination of Cumulative Voting for Directors. Cumulative voting rights
in the election of directors entitle a stockholder to give one nominee as
many votes as are equal to the number of directors to be elected multiplied
by the number of shares owned by the stockholder, or to distribute such
votes among two or more nominees, as the stockholder sees fit. In the
absence of cumulative voting, the holder or holders of the majority of the
shares present or represented at a meeting have the power to elect each
director to be elected at such meeting. The absence of cumulative voting
would make it more difficult for minority stockholders adverse to a
majority of the stockholders to obtain representation on a corporation's
board of directors.
California law requires cumulative voting in the election of directors but
permits a "listed" corporation, such as the Company, to eliminate
cumulative voting, which the Company has chosen to do. Under Delaware law,
shares may not be cumulatively voted for the election of directors of the
Company unless the KFY Delaware Charter specifically provides for
cumulative voting, which it does not.
11
Amendment of Bylaws. Under California law, a corporation's bylaws may be
adopted, amended or repealed either by the vote of a majority of the
outstanding shares or by the approval of the board of directors of such
corporation. Neither the KFY California Charter nor the KFY California
Bylaws contain provisions restricting or eliminating the rights to adopt,
amend or repeal granted under California law. Delaware law provides that a
corporation's bylaws may be amended by that corporation's stockholders or,
if so provided in the corporation's charter, by the corporation's board of
directors. The KFY Delaware Charter gives the Board the power to alter,
amend or repeal the KFY Delaware Bylaws. In addition, the KFY Delaware
Charter gives KFY Delaware's stockholders the right to adopt, amend or
repeal the KFY Delaware Bylaws, but only with the affirmative vote of the
holders of not less than 66 2/3% of the outstanding shares of KFY Delaware
Common Stock entitled to vote on such matters. As a result, the percentage
of stockholder approval required to adopt, amend, or repeal a bylaw of KFY
Delaware will be higher than the corresponding percentage with respect to
the KFY California Bylaws.
Right to Call Special Stockholders' Meetings. Pursuant to California law,
the KFY California Bylaws provide that a special meeting of stockholders
may be called by the Board, the Chair of the Board or the President of the
Company or by the holders of shares of the Company entitled to cast not
less than 10% of the votes at such meeting. Under Delaware law, a special
meeting of stockholders may be called by the board of directors of a
corporation or by any other person authorized to do so in the corporation's
charter or bylaws. The KFY Delaware Charter authorizes only the Board, the
Chair of the Board, the Chief Executive Officer or the President of the
Company to call a special meeting of stockholders. Therefore, under the
KFY Delaware Charter, holders of 10% or more of the voting shares of the
Company will not be able to call a special meeting of stockholders.
The Board believes this change is warranted as a prudent corporate
governance measure to prevent an inappropriately small number of
stockholders from prematurely forcing stockholder consideration of a
proposal over the opposition of the Board by calling a special
stockholders' meeting before (i) the time that the Board believes such
consideration to be appropriate or (ii) the next annual meeting. Such
special meetings would involve substantial expense and diversion of Board
and management time, results which the Board believes to be inappropriate
for an enterprise the size of the Company.
The elimination of the procedures for stockholders to call special meetings
could discourage hostile takeover attempts or tender offers for control of
KFY Delaware which might be approved by many, or indeed by a majority, of
KFY Delaware's stockholders. In addition, elimination of the ability of
stockholders to call a special meeting means that a proposal to replace the
Board could be delayed until the next annual meeting, thereby making the
removal of directors by stockholders more difficult. See "Possible
Disadvantages of Reincorporation" above.
Aside from the foregoing, no other change is contemplated in the procedures
to call a special stockholders' meeting, although in the future the Board
could amend the KFY Delaware Bylaws without stockholder approval. See
"Amendment of Bylaws" above.
Filling Vacancies on the Board. Under California law, any vacancy on the
Board (other than one created by removal of a director) may be filled by a
majority of the remaining directors of the Company constituting no less
than a quorum. If the number of directors is less than a quorum, a vacancy
may be filled by the unanimous written consent of the directors then in
office or by the affirmative vote of a majority of the directors at a
meeting held based on notice or waiver of notice. A vacancy created by
removal of a director may be filled by the Board only if so authorized by
the KFY California Charter or Bylaws, which do not authorize such action by
the Board.
Delaware law differs in that vacancies and newly-created positions on the
Board may be filled by a majority of the directors of the Company then in
office (even though less than a quorum) or by a sole remaining director,
unless otherwise provided in the KFY Delaware Charter or Bylaws (or unless
the
12
KFY Delaware Charter directs that a particular class of stock is to elect
such directors, in which case a majority of the directors elected by such
class would fill such vacancy or newly-created position). Unlike the KFY
California Bylaws, the KFY Delaware Bylaws provide that the remaining
directors can fill any vacancy on the Board, including a vacancy created by
the removal of a director.
Nomination of Directors and Introduction of Business at Stockholder
Meetings. The KFY Delaware Bylaws include advance notice procedures
similar to those included in the KFY California Bylaws with regard to the
nomination of directors, other than by or at the direction of the Board
(the "Nomination Procedure"), and with regard to other matters to be
brought before an annual meeting of stockholders by a stockholder of the
Company (the "Business Procedure"), except that the KFY Delaware Bylaws
change the timeline for such notice from 120 days in advance of the annual
meeting date for the year in question or, if such date had not been set,
120 days in advance of the first anniversary of the preceding year's annual
meeting (as provided by the KFY California Bylaws) to not less than 90 days
nor more than 120 days prior to the first anniversary of the preceding
year's annual meeting.
By requiring advance notice of nominations by stockholders, the Nomination
Procedure affords the Board an opportunity to consider the qualifications
of the proposed nominees and, to the extent deemed necessary or desirable
by the Board, to inform the stockholders about such qualifications. By
requiring advance notice of proposed business, the Business Procedure
provides the Board with an opportunity to inform stockholders of the nature
of any business proposed to be conducted at a meeting and the Board's
position on any such proposal, enabling stockholders to better determine
how to vote their shares in regard to such business.
The Nomination Procedure and the Business Procedure may have the effect of
precluding a nomination for the election of directors or of precluding any
other business at a particular meeting if the proper procedures are not
followed. In addition, the procedures may discourage or deter a third
party from conducting a solicitation of proxies to elect its own slate of
directors or otherwise attempting to obtain control of the Company, even if
such nominations for the election of directors or other business might be
deemed by the majority of stockholders to be beneficial to the Company and
its stockholders.
Stockholder Approval of Certain Business Combinations. Under Section 203
of the Delaware General Corporation Law, a Delaware corporation is
prohibited from engaging in a "business combination" with an "interested
stockholder" for three years following the time that such person or entity
becomes an interested stockholder. With certain exceptions, an interested
stockholder is a person or entity who or which owns, individually or with
or through certain other persons or entities, fifteen percent (15%) or more
of the corporation's outstanding voting stock (including any rights to
acquire stock by an option, warrant, agreement, arrangement or
understanding, or upon the exercise of conversion or exchange rights, and
stock with respect to which the person has voting rights only). The three-
year moratorium imposed by Section 203 on business combinations does not
apply if (i) prior to the time such stockholder becomes an interested
stockholder, the board of directors of the subject corporation approves
either the business combination or the transaction that resulted in the
person or entity becoming an interested stockholder; (ii) upon consummation
of the transaction that made him or her an interested stockholder, the
interested stockholder owns at least eighty-five percent (85%) of the
corporation's voting stock outstanding at the time the transaction
commenced (excluding from the 85% calculation shares owned by directors who
are also officers of the subject corporation and shares held by employee
stock plans that do not give employee participants the right to decide
confidentially whether to accept a tender or exchange offer) or (iii) at or
after the time such person or entity becomes an interested stockholder, the
board of directors approves the business combination and it is also
approved at a stockholder meeting by sixty-six and two-thirds percent (66
2/3%) of the outstanding voting stock not owned by the interested
stockholder. Although a Delaware corporation to which Section 203 applies
may elect not to be governed by Section 203, the Board intends that the
Company
13
be governed by Section 203. The Board believes that most Delaware
corporations have availed themselves of this statute and have not opted out
of Section 203.
The Board believes that Section 203 will encourage any potential acquirer
to negotiate with the Board. Section 203 also might have the effect of
limiting the ability of a potential acquirer to make a two-tiered bid for
KFY Delaware in which all stockholders would not be treated equally.
Stockholders should note, however, that the application of Section 203 to
KFY Delaware will confer upon the Board the power to reject a proposed
business combination in certain circumstances, even though a potential
acquirer may be offering a substantial premium for KFY Delaware's shares
over the then-current market price. Section 203 would also discourage
certain potential acquirers who are unwilling to negotiate with the Board.
California law requires that holders of common stock receive common stock
in a merger of the corporation with the holder of more than fifty percent
(50%) but less than ninety percent (90%) of the target's common stock or
its affiliate unless all of the target company's stockholders consent to
the transaction. This provision of California law may have the effect of
making a "cash-out" merger by a majority stockholder more difficult to
accomplish. Although Delaware law does not parallel California law in this
respect, under some circumstances Section 203 does provide similar
protection to stockholders against coercive two-tiered bids for a
corporation in which the stockholders are not treated equally.
Action By Written Consent of Stockholders. Unless otherwise provided in a
corporation's charter, both California and Delaware law permit any action
which may be taken at any annual or special meeting of stockholders to be
taken without a meeting and without prior notice if a written consent,
setting forth the action to be taken, is signed by the holders of
outstanding shares of the corporation's capital stock having not less than
the minimum number of votes that would be necessary to authorize or take
such action at a meeting at which all shares entitled to vote thereon were
present and voted. The KFY California Charter does not contain a provision
limiting the Company's stockholders' right to take action by written
consent. In contrast, the KFY Delaware Charter does not permit the
Company's stockholders to take action by written consent unless both the
action to be taken and the taking of such action by written consent have
been expressly approved in advance by the Board. In addition, the KFY
Delaware Charter requires the affirmative vote of two-thirds of the voting
power of the outstanding voting stock of the Company to amend, repeal or
adopt any provision inconsistent with this restriction on action by written
consent of the stockholders.
Removal of Directors. Under California law, any director or the entire
board of directors may be removed, with or without cause, by approval of a
majority of the outstanding shares entitled to vote; however, no individual
director may be removed (unless the entire board is removed) if the number
of votes cast against such removal would be sufficient to elect the
director under cumulative voting. The KFY California Bylaws provide that
any or all directors of the Company may be removed without cause if such
removal is approved by the holders of a majority of the outstanding shares
entitled to vote at an election of directors and a director may also be
removed without cause if such removal is approved by a majority of the
Board. Delaware law provides that a director of a corporation with a
classified board of directors can be removed only for cause unless the
charter of the corporation provides otherwise. The KFY Delaware Charter
does not provide for the removal of directors of the Company without cause.
Limitation of Liability of Directors. California and Delaware have similar
laws respecting the elimination of the liability of a director to the
corporation or its stockholders for monetary damages for breach of the
director's fiduciary duty. California law does not permit the elimination
or limitation of monetary liability where such liability is based on: (i)
intentional misconduct or knowing and culpable violation of law; (ii) acts
or omissions that a director believes to be contrary to the best interests
of the corporation or its stockholders or that involve the absence of good
faith on the part of
14
the director; (iii) receipt of an improper personal benefit; (iv) acts or
omissions that show reckless disregard for the director's duty to the
corporation or its stockholders, where the director in the ordinary course
of performing a director's duties should be aware of a risk of serious
injury to the corporation or its stockholders; (v) acts or omissions that
constitute an unexcused pattern of inattention that amounts to an
abdication of the director's duty to the corporation and its stockholders;
(vi) transactions between the corporation and a director who has a material
financial interest in such transaction or (vii) liability for improper
distributions, loans or guarantees.
Delaware law does not permit the elimination or limitation of director
monetary liability for: (i) breaches of the director's duty of loyalty to
the corporation or its stockholders; (ii) acts or omissions not in good
faith or involving intentional misconduct or knowing violations of law;
(iii) the payment of unlawful dividends or unlawful stock repurchases or
redemptions or (iv) transactions in which the director received an improper
personal benefit. Such provision also may not limit a director's liability
for violation of, or otherwise relieve the Company or its directors from
the necessity of, complying with federal or state securities laws, or
affect the availability of non-monetary remedies such as injunctive relief
or rescission.
The KFY California and KFY Delaware Charters both provide for the
elimination of personal monetary liability of directors to the fullest
extent permissible under the law of the respective states. However,
because Delaware law is more permissive under certain circumstances than
California law with respect to eliminating monetary liability of directors,
the KFY Delaware Charter is potentially broader in application than the KFY
California Charter. In addition, the KFY Delaware Charter provision
incorporates any future amendments to Delaware law that further eliminate
or limit such liability.
Indemnification. California and Delaware have similar laws respecting
indemnification by a corporation of its officers, directors, employees and
other agents. California law requires indemnification when the individual
has defended successfully the action on the merits while Delaware law
requires indemnification when there has been a successful defense on the
merits or otherwise. If the individual loses or settles, the laws of both
states, with some differences, provide for permissive indemnification
(i.e., it is not required, but the corporation may indemnify). Delaware
law generally permits indemnification of expenses, including attorneys'
fees, actually and reasonably incurred in the defense or settlement of a
derivative or third-party action, provided there is a determination (i) by
a majority vote of the directors who are not parties to such action, suit
or proceeding, even though less than a quorum, (ii) by a committee of such
directors designated by majority vote of such directors, even though less
than a quorum, (iii) by independent legal counsel or (iv) by a majority
vote of a quorum of the stockholders that the person seeking
indemnification acted in good faith and in a manner reasonably believed to
be in or not opposed to the best interests of the corporation. Without
court approval, however, no indemnification may be made in respect of any
derivative action in which such person is adjudged liable for negligence or
misconduct in the performance of his or her duty to the corporation.
California law allows indemnification if, with respect to the matter giving
rise to the lawsuit, the individual acted (i) in good faith and (ii) for
the purpose or in a manner that he reasonably believed to be in the best
interests of the corporation. Although California law is similar to
Delaware law in that it requires determination to be made by the majority
vote of non-party directors or by the majority vote of a quorum of the
stockholders, California law also provides for determination to be made by
the court. However, it does not allow for determination to be made by an
independent counsel.
Expenses incurred by an officer or director in defending an action may be
paid in advance, under Delaware law and California law, if such director or
officer undertakes to repay such amounts if it is ultimately determined
that he or she is not entitled to indemnification. In addition, the laws
of both states authorize a corporation's purchase of indemnity insurance
for the benefit of its officers,
15
directors, employees and agents whether or not the corporation would have
the power to indemnify against the liability covered by the policy.
California law permits the Company to provide such additional rights to
indemnification beyond those mandated by statute to the extent such
additional indemnification is authorized in the KFY California Charter.
The KFY California Charter permits indemnification beyond that expressly
mandated by California law and limits director monetary liability to the
extent permitted by California law.
Delaware law also permits the Company to provide indemnification in excess
of that mandated by statute, but Delaware law does not require authorizing
provisions in the KFY Delaware Charter and does not contain express
prohibitions on indemnification in certain circumstances. Limitations on
indemnification may be imposed by a court, however, based on principles of
public policy. KFY Delaware's Bylaws allow for indemnification to the
maximum extent permitted by Delaware law.
Inspection of Stockholder List. Both California and Delaware law allow any
stockholder to inspect the stockholder list for a purpose reasonably
related to such person's interest as a stockholder. Like California law,
Delaware law provides for inspection rights as to a list of stockholders
entitled to vote at a meeting for any purpose germane to the meeting, but
limits such inspection to the 10-day period preceding a stockholders'
meeting. California law, unlike Delaware law, also provides that persons
holding an aggregate of five percent (5%) or more of the corporation's
voting shares and that persons holding an aggregate of one percent (1%) or
more of such shares who have contested the election of directors have the
right to inspect and copy the corporation's stockholder list without
establishing the purpose for such inspection.
Sources of Dividends and Repurchases of Shares. California law dispenses
with the concepts of par value of shares as well as statutory definitions
of capital, surplus and the like. The concepts of par value, capital and
surplus exist under Delaware law.
Delaware law permits a corporation to declare and pay dividends out of
surplus or, if there is no surplus, out of net profits for the fiscal year
in which the dividend is declared and/or for the preceding fiscal year as
long as the amount of capital of the corporation following the declaration
and payment of the dividend is not less than the aggregate amount of the
capital represented by the issued and outstanding stock of all classes
having a preference upon the distribution of assets. In addition, Delaware
law generally provides that a corporation may redeem or repurchase its
shares only if the capital of the corporation is not impaired (meaning that
the value of the assets of the corporation is less than the amount
represented by the aggregate outstanding shares of the capital stock of the
corporation) and such redemption or repurchase would not impair the capital
of the corporation. The ability of a Delaware corporation to pay dividends
on, or to make repurchases or redemptions of, its shares is dependent on
the financial status of the corporation standing alone and not on a
consolidated basis. In determining the amount of surplus of a Delaware
corporation, the assets of the corporation, including stock of subsidiaries
owned by the corporation, may be valued at their fair market value as
determined by the board of directors, regardless of their historical book
value.
Under California law, a corporation may not make any distribution to its
stockholders unless either: (i) the corporation's retained earnings
immediately prior to the proposed distribution equal or exceed the amount
of the proposed distribution or (ii) immediately after giving effect to
such distribution, the corporation's assets (exclusive of goodwill,
capitalized research and development expenses and deferred charges) would
be at least equal to 1 1/4 times its liabilities (not including deferred
taxes, deferred income and other deferred credits), and the corporation's
current assets would be at least equal to its current liabilities (or 1 1/4
times its current liabilities if the average pre-tax and pre-interest
expense earnings for the preceding two fiscal years were less than the
average interest expense for such years). Such tests are applied to
California corporations on a consolidated basis.
16
Stockholder Approval of Mergers. Both California and Delaware law
generally require that the holders of majority of the shares of both
acquiring and target corporations approve statutory mergers with differing
exceptions to this general requirement.
Delaware law does not require a stockholder vote of the surviving
corporation in a merger (unless the corporation provides otherwise in its
charter) if: (i) the merger agreement does not amend the existing charter;
(ii) each share of stock of the surviving corporation outstanding
immediately before the effective date of the merger is an identical
outstanding share after the merger and (iii) either (a) no shares of common
stock of the surviving corporation and no shares, securities or obligations
convertible into such stock are to be issued or delivered under the plan of
merger or (b) the authorized unissued shares or shares of common stock of
the surviving corporation to be issued or delivered under the plan of
merger plus those initially issuable upon conversion of any other shares,
securities or obligations to be issued or delivered under such plan do not
exceed twenty percent (20%) of the shares of common stock of such
constituent corporation outstanding immediately prior to the effective date
of the merger.
California law contains a similar exception to its voting requirements for
reorganizations where stockholders or the corporation itself, or both,
immediately prior to the reorganization will own immediately after the
reorganization equity securities constituting more than 83 1/3% (or five-
sixths) of the voting power of the surviving or acquiring corporation or
its parent entity.
Loans to Directors, Officers and Other Employees. Under California law, a
corporation may make loans to, or guarantees for the benefit of, directors
and officers if such loans or guarantees are approved by a majority of the
corporation's stockholders or, for corporations with 100 or more
stockholders of record, by its board of directors acting under a
stockholder-approved bylaw. The KFY California Bylaws allow the Company to
make loans or guarantees of up to U.S. $100,000 to any director or officer
of the Company if the Board, by a vote sufficient without counting the vote
of any interested directors, determines that such loans or guarantees may
reasonably be expected to benefit the Company. Under Delaware law, the
Company may make loans to, guarantee the obligations of or otherwise assist
its officers or other employees (including directors who are officers of
employees) and those of its subsidiaries when such action, in the judgment
of the Board, may reasonably be expected to benefit the corporation, and
the KFY Delaware Bylaws have a provision to that effect. Unlike the KFY
California Bylaws, the KFY Delaware Bylaws (i) allow for loans to employees
of the Company who are not officers or directors, (ii) do not allow for
loans to directors who are not officers or employees of the Company and
(iii) do not limit the amount of such loans or guarantees to U.S. $100,000.
Appraisal Rights. Under both California and Delaware law, a stockholder of
a corporation participating in certain major corporate transactions may,
under varying circumstances, be entitled to appraisal rights under which
such stockholder may receive cash in the amount of the fair market value of
his or her shares in lieu of the consideration he or she would otherwise
receive in the transaction.
Under Delaware law, such appraisal rights are not available: (i) with
respect to the sale, lease or exchange of all or substantially all of the
assets of a corporation; (ii) with respect to a merger or consolidation by
a corporation the shares of which are listed on a national securities
exchange, designated as a national market system on an interdealer
quotation system by the National Association of Securities Dealers, Inc. or
held of record by more than 2,000 holders if such stockholders receive only
shares of the surviving corporation or shares of any other corporation that
are either listed on a national securities exchange or held of record by
more than 2,000 holders, plus cash in lieu of fractional shares of such
corporations; or (iii) to stockholders of a corporation surviving a merger
if no vote of the stockholders of the surviving corporation is required to
approve the merger under Delaware law.
17
The limitations on the availability of appraisal rights under California
law are different from those under Delaware law. Stockholders of a
California corporation whose shares are listed on a national securities
exchange generally do not have such appraisal rights unless the holders of
at least five percent (5%) of the class of outstanding shares claim the
right or the corporation or any law restricts the transfer of such shares.
Appraisal rights are also unavailable if the stockholders of a corporation
or the corporation itself, or both, immediately prior to the reorganization
will own immediately after the reorganization equity securities
constituting more than 83.3% (or five-sixths) of the voting power of the
surviving or acquiring corporation or its parent entity. California law
generally affords appraisal rights in sale of asset reorganizations.
Pursuant to California law, appraisal rights are not available to
stockholders of KFY California with respect to the Merger.
Dissolution. Under California law, stockholders holding fifty percent
(50%) or more of the total voting power of the Company may authorize the
Company's dissolution, with or without the approval of the Board, and this
right may not be modified by the KFY California Charter. Under Delaware
law, without the Board's approval of a dissolution of the Company, a
dissolution must be unanimously approved by all the stockholders entitled
to vote thereon, while a dissolution that is approved by the Board only
requires the approval of a simple majority of such stockholders. In the
event of such a Board-initiated dissolution, Delaware law allows the
Company to include in the KFY Delaware Charter a supermajority (greater
than a simple majority) voting requirement in connection with dissolutions.
The KFY Delaware Charter does not contain a supermajority voting
requirement in connection with dissolutions.
Interested Director Transactions. Under both California and Delaware law,
certain contracts or transactions in which one or more of the Company's
directors has an interest are not void or voidable because of such
interest, provided that certain conditions, such as obtaining the required
approval and fulfilling the requirements of good faith and full disclosure,
are met. With certain minor exceptions, the conditions are similar under
California and Delaware law.
Stockholder Derivative Suits. California law provides that a stockholder
bringing a derivative action on behalf of the Company need not have been a
stockholder at the time of the transaction in question, provided that
certain tests are met. Under Delaware law, a stockholder may bring a
derivative action on behalf of the Company only if the he or she was a
stockholder of the Company at the time of the transaction in question or if
his or her stock thereafter devolved upon him or her by operation of law.
California law also provides that the Company or the defendant in a
derivative suit may make a motion to the court for an order requiring the
plaintiff stockholder to furnish a security bond, while Delaware law does
not.
Application of the California General Corporation Law to Delaware
Corporations. Under Section 2115 of the California General Corporation
Law, certain foreign corporations (i.e., corporations not organized under
California law) which have significant contacts with California are subject
to a number of key provisions of the California General Corporation Law.
However, an exemption from Section 2115 is provided for corporations whose
shares are listed on a major national securities exchange, such as the New
York Stock Exchange. Following the Proposed Reincorporation, the Company's
Common Stock will continue to be traded on the New York Stock Exchange and,
accordingly, KFY Delaware would be exempt from Section 2115.
Certain Federal Income Tax Consequences. The following is a discussion of
certain federal income tax considerations that may be relevant to holders
of KFY California Common Stock who receive KFY Delaware Common Stock in
exchange for their KFY California Common Stock as a result of the Proposed
Reincorporation. The discussion does not address all of the tax
consequences of the Proposed Reincorporation that may be relevant to
particular KFY California stockholders, such as
18
dealers in securities, or those KFY California stockholders who acquired
their shares upon the exercise of stock options, nor does it address the
tax consequences to holders of options or warrants to acquire KFY
California Common Stock. Furthermore, no foreign, state or local tax
considerations are addressed herein. In view of the varying nature of such
tax consequences, each stockholder is urged to consult his or her own tax
advisor as to the specific tax consequences of the Proposed
Reincorporation, including the applicability of federal, state, local or
foreign tax laws.
Subject to the limitations, qualifications and exceptions described herein,
and assuming the Proposed Reincorporation qualifies as a reorganization
within the meaning of Section 368(a) of the Internal Revenue Code of 1986,
as amended (the "Code"), the following tax consequences generally should
result:
(a) No gain or loss should be recognized by holders of KFY California
Common Stock upon receipt of KFY Delaware Common Stock under the Proposed
Reincorporation;
(b) The aggregate tax basis of KFY Delaware Common Stock received by each
stockholder in the Proposed Reincorporation should be equal to the
aggregate tax basis of KFY California Common Stock surrendered in exchange
therefor; and
(c) The holding period of KFY Delaware Common Stock received by each
stockholder of KFY California should include the period for which such
stockholder held KFY California Common Stock surrendered in exchange
therefor, provided that such KFY California Common Stock was held by the
stockholder as a "capital asset" (as defined in Section 1221 of the Code)
at the time of the Proposed Reincorporation.
The Company does not intend to request a ruling from the Internal Revenue
Service (the "IRS") with respect to the federal income tax consequences of
the Proposed Reincorporation under the Code. The Company will, however,
receive an opinion from the Company's general tax counsel substantially to
the effect that the Proposed Reincorporation will qualify as a
reorganization within the meaning of Section 368(a) of the Code (the "Tax
Opinion"). The Tax Opinion will neither bind the IRS nor preclude it from
asserting a contrary position. In addition, the Tax Opinion will be
subject to certain assumptions and qualifications and will be based in part
upon the truth and accuracy of representations made by KFY Delaware and its
wholly-owned Delaware subsidiary. Of particular importance will be
assumptions and representations relating to the requirement under Section
368 of the Code that, after the Proposed Reincorporation, the stockholders
of KFY California retain, through ownership of KFY Delaware stock, a
significant equity interest in the assets previously held by KFY California
(the "continuity of interest" requirement).
A successful IRS challenge to the reorganization status of the Proposed
Reincorporation (in consequence of a failure to satisfy the "continuity of
interest" requirement or otherwise) would result in a stockholder
recognizing gain or loss with respect to each share of KFY California
Common Stock exchanged in the Proposed Reincorporation equal to the
difference between (i) the stockholder's basis in such share and (ii) the
fair market value, as of the time of the Proposed Reincorporation, of KFY
Delaware Common Stock received in exchange therefor. In such event, a
stockholder's aggregate basis in the shares of KFY Delaware Common Stock
received in the exchange would equal their fair market value on such date,
and the stockholder's holding period for such shares would not include the
period during which the stockholder held KFY California Common Stock.
State, local and foreign income tax consequences to stockholders may vary
from the federal tax consequences described above.
19
The Company does not expect to recognize gain or loss for federal income
tax purposes as a result of the Proposed Reincorporation, and KFY Delaware
should succeed, without adjustment, to the federal income tax attributes of
KFY California.
Vote Required for the Proposed Reincorporation
The affirmative "FOR" vote of the holders of a majority of the shares of
the Company's Common Stock outstanding on the Record Date is required for
approval of the Proposed Reincorporation, which will also constitute
approval of the Merger Agreement, the Certificate of Incorporation of KFY
Delaware and the KFY Delaware Bylaws.
Recommendation of the Board
The Board unanimously recommends a vote "FOR" the Proposed Reincorporation.
20
PROPOSAL NO. 3 - RATIFICATION OF THE APPOINTMENT
OF ARTHUR ANDERSEN LLP AS INDEPENDENT AUDITORS
The Audit Committee has recommended, and the Board has approved, the
appointment of Arthur Andersen LLP ("Arthur Andersen") as the Company's
independent auditors for fiscal 2000. Arthur Andersen has served as the
Company's independent auditors since 1971, including assisting the Company
with accounting matters relating to the initial public offering of the
Company's Common Stock. They have unrestricted access to the Audit
Committee to discuss audit findings and other financial matters.
Representatives of Arthur Andersen will attend the Annual Meeting to answer
appropriate questions and may also make a statement if they so desire.
Audit services provided by Arthur Andersen during fiscal 1999 included an
audit of the Company's consolidated financial statements and consultation
on various tax and accounting matters.
Required Vote
Ratification of the auditors appointed by the Board will require
affirmative "FOR" votes from a majority of those shares present (either in
person or by proxy) and entitled to vote at the Annual Meeting.
Recommendation of the Board
The Board unanimously recommends a vote "FOR" the ratification of Arthur
Andersen's appointment as independent auditors for fiscal 2000.
21
THE BOARD OF DIRECTORS
Nominees for Director - Class 2000
The following table sets forth certain information regarding the directors
in Class 2000, who are nominees for election to the Board for a one-year term.
22
Nominees for Director - Class 2001
The following table sets forth certain information regarding the directors
in Class 2001, who are nominees for election to the Board for a two-year term.
23
Nominees for Director - Class 2002
The following table sets forth certain information regarding the directors
in Class 2002 who are nominees for election to the Board for a three-year term.
24
Statement on Corporate Governance
The Board held 10 meetings during fiscal 1999, and all of the directors attended
at least 75% of the Board meetings and committee meetings of which they were
members.
Although the full Board considers all major decisions of the Company, the KFY
California Bylaws permit the Board to have the following four standing
committees to more fully address certain areas of importance to the Company: an
audit committee, a compensation committee, an executive committee and a
nominating committee. Prior to the Company's initial public offering of its
Common Stock, the Board had standing Audit, Compensation and Nominating
Committees. The Board also had established a Senior Executive Compensation
Committee to address compensation matters for the most senior officers of the
Company. After consummation of the public offering, the Board reconstituted the
Audit and Compensation Committees (the latter now being referred to as the
Compensation and Personnel Committee). The Compensation and Personnel Committee
also performs the functions previously performed by the Senior Executive
Compensation Committee.
The members of the Company's standing committees and the Senior Executive
Compensation Committee prior to the initial public offering were:
NOTES TO MEMBERSHIP ROSTER:
/1/ Committee Chair.
The members of the current standing committees are:
NOTES TO MEMBERSHIP ROSTER:
/1/ Committee Chair.
/2/ The Audit Committee was reconstituted in May 1999 and the Compensation and
Personnel Committee was reconstituted in June 1999. Each of the two
committees is now composed entirely of outside directors.
/3/ The Board intends to reconstitute the Nominating Committee during fiscal
2000 to be composed entirely of outside directors.
25
Audit Committee. The Audit Committee makes recommendations concerning the
engagement of independent public accountants, reviews the plans and results of
the audit engagement with the independent public accountants, approves
professional services provided by the independent public accountants, reviews
the independence of the public accountants, considers the range of audit and
non-audit fees, reviews the adequacy of the Company's internal accounting
controls and ensures the integrity of financial information supplied to
stockholders. The Audit Committee is also available to receive reports,
suggestions, questions and recommendations from the independent public
accountants, the Chief Financial Officer and the General Counsel. It also
confers with those parties in order to assure the sufficiency and effectiveness
of the programs being followed by corporate officers in the area of compliance
with the law and conflicts of interest. The Audit Committee met _______ times
in fiscal 1999. The Audit Committee, as reconstituted following the initial
public offering, is composed entirely of outside directors.
Compensation and Personnel Committee. The Compensation and Personnel Committee
determines the compensation of the Company's executive officers and administers
the Performance Award Plan. The current executive officer salaries were set by
the Board on May 4, 1998. The Compensation and Personnel Committee also has the
responsibility for the compensation of the senior executives of the Company
including salaries and benefits. In addition, the Compensation and Personnel
Committee reviews and makes recommendations to the Board with respect to the
Company's overall compensation program for directors and officers, including
salaries, employee benefit plans, stock options granted, equity incentive plans
and payment of bonuses. The Compensation and Personnel Committee, as
reconstituted following the initial public offering, is composed entirely of
outside directors. The Senior Executive Compensation Committee and the
Compensation Committee, the predecessors to the Compensation and Personnel
Committee, met ___ and ___ times, respectively, in fiscal 1999. See
"Compensation Decisions and Insider Participation" below.
Nominating Committee. The Nominating Committee recommends criteria to the Board
for the selection of nominees to the Board, evaluates all proposed nominees,
recommends nominees to the Board to fill vacancies on the Board, and, prior to
each annual meeting of stockholders, recommends to the Board a slate of nominees
for election to the Board by the stockholders of the Company at the annual
meeting. The Nominating Committee also seeks possible nominees for the Board
and otherwise serves to aid in attracting qualified nominees to be elected to
the Board. The Nominating Committee met ___ times in fiscal 1999. The Board
intend to reconstitute the Nominating Committee in fiscal 2000 to be composed
entirely of outside directors.
Directors' Compensation
Directors who are also employees or officers of the Company do not receive any
additional compensation for their service on the Board. Non-employee directors
receive a $25,000 annual retainer in cash, $4,000 for each committee chair and
up to $1,000 in cash for each regular or special meeting attended. In addition,
all directors are reimbursed for their out-of-pocket expenses incurred in
connection with their duties as directors.
Directors who are not officers or employees of the Company (each a "Non-Employee
Director") are eligible to receive annual stock option grants under the
Korn/Ferry International Performance Award Plan (the "Performance Award Plan").
Under the Performance Award Plan, a Non-Employee Director is automatically
granted a nonqualified stock option to purchase 2,000 shares of Common Stock
when the person takes office, at an exercise price equal to the market price of
the Common Stock at the close of trading on that date. In addition, on the day
of the annual stockholders meeting in each calendar year, beginning with the
Annual Meeting and continuing for each subsequent year during the term of the
Performance Award Plan, each continuing Non-Employee Director will be granted a
nonqualified stock option to purchase 2,000 shares of Common Stock at an
exercise price equal to the market price of the Common at the close of trading
on that date. Non-Employee Directors may also be granted discretionary awards.
All automatically granted Non-Employee Director stock options will have a ten-
year term and will be immediately exercisable. If a Non-Employee Director's
services are terminated for any reason, any automatically granted stock options
held by such Non-Employee Director that are exercisable will remain exercisable
for twelve months after such
26
termination of service or until the expiration of the option term, whichever
occurs first. Automatically-granted options are subject to the same adjustment,
change in control, and acceleration provisions that apply to awards generally,
except that any changes or Board or Committee actions (1) will be effected
through a stockholder approved reorganization agreement or will be consistent
with the effect on options held by other than executive officers and (2) will be
consistent in respect of the underlying shares with the effect on stockholders
generally. Any outstanding automatic option grant that is not exercised prior to
a change in control event in which the Company is not to survive will terminate,
unless such option is assumed or replaced by the surviving corporation.
Employment Agreements
Windle B. Priem, Chief Executive Officer and President. In June 1999, the
Company entered into an employment agreement with Windle B. Priem as Chief
Executive Officer and President of the Company, effective May 1, 1999. The term
of the agreement is for three years, with one renewal term for a two-year
period. The agreement provides for a minimum base salary of $600,000 annually,
with an annual target bonus equal to 100% of base salary and an annual maximum
bonus of up to 200% of base salary.
If Mr. Priem's employment terminates due to death or disability, then (1) the
Company will pay Mr. Priem, or his legal representatives, all accrued
compensation as of the date of termination and (2) all of Mr. Priem's
outstanding stock options as of the effective date of the employment agreement
will vest and remain exercisable until their originally scheduled expiration
dates. If Mr. Priem's employment is terminated by the Company for cause,
terminated by Mr. Priem prior to its expiration or Mr. Priem fails to renew the
agreement after its initial term, then the Company will pay Mr. Priem all
accrued compensation as of the date of termination.
Prior to a change in control of the Company, if Mr. Priem's employment is
terminated by the Company without cause, terminated by Mr. Priem for good reason
or the Company fails to renew the agreement, then (1) the Company will pay Mr.
Priem all accrued compensation as of the date of termination, (2) a lump sum
equal to 200% of the then base salary and target bonus and (3) all of Mr.
Priem's outstanding stock options as of the effective date of the employment
agreement will vest and remain exercisable for their originally scheduled
expiration dates. Following a change in control of the Company, if Mr. Priem's
employment is terminated by the Company without cause or by Mr. Priem for good
reason, then (A) the Company will pay Mr. Priem all accrued compensation as of
the date of termination, (B) a lump sum equal to 200% of then base salary and
maximum bonus in effect immediately prior to the date of termination or the then
base salary and maximum bonus applicable to Mr. Priem just prior to the change
in control event, whichever is higher, (C) all of Mr. Priem's outstanding stock
options as of the effective date of the employment agreement will vest and
remain exercisable for their originally scheduled expiration dates.
In connection with the execution of the employment agreement in June 1999, the
Board of Directors has also granted Mr. Priem an option to purchase 100,000
shares of the Company's Common Stock at an exercise price of $13.6875 per share.
The option will expire on September 2, 2004, unless earlier terminated as
provided below. The option will vest upon the earlier to occur of: (1) if the
stock price of the Company remains at or above $18 per share for 10 consecutive
trading days during the period between the grant date and the second anniversary
of the grant date; (2) if the stock price of the Company remains at or above $20
per share for 10 consecutive trading days during the period between the second
anniversary of the grant date and the third anniversary of the grant date; (3)
the expiration of the initial term of Mr. Priem's employment agreement and the
Company elects not to renew for an additional term; (4) death or disability of
Mr. Priem; (5) prior to a change in control of the Company, termination of Mr.
Priem's employment by the Company without cause or by Mr. Priem for good reason;
(6) following a change in control of the Company, termination of Mr. Priem's
employment by the Company without cause or by Mr. Priem for good reason; or (7)
expiration of the additional two-year renewal period of the employment
agreement.
27
The option will be exercisable when vested and at any time prior to the
expiration; provided that the option will terminate, and not be exercisable,
prior to the expiration date under the following circumstances: (1) upon death,
disability or retirement, the option will expire 12 months following the date of
termination unless the option has expired earlier and (2) upon termination of
Mr. Priem's employment for any reason (other than for death, disability or
retirement), the option will expire 3 months following the date of termination.
Peter L. Dunn, Vice Chair and General Counsel. In June 1999, the Company
entered into an employment agreement with Peter L. Dunn as Vice Chair and
General Counsel of the Company, effective April 29, 1999. The term of the
agreement is for three years, and will automatically renew for successive two-
year periods thereafter until the first April 30th following the date on which
Mr. Dunn reaches age 65; provided, however, that either the Company or Mr. Dunn
may terminate this Agreement at the end of the initial term or renewal term by
delivering to the other party at least 120 days' prior written notice. The
agreement provides for a minimum base salary of $465,000 annually, with an
annual target bonus equal to 100% of base salary and an annual maximum bonus of
up to 200% of base salary.
If Mr. Dunn's employment terminates due to death or disability, then (1) the
Company will pay Mr. Dunn, or his legal representatives, all accrued
compensation as of the date of termination and (2) all of Mr. Dunn's outstanding
stock options as of the effective date of the employment agreement will vest and
remain exercisable until their originally scheduled expiration dates. If Mr.
Dunn's employment is terminated by the Company for cause, terminated by Mr. Dunn
prior to its expiration without good reason or Mr. Dunn fails to renew the
agreement after its initial term, then the Company will pay Mr. Dunn all accrued
compensation as of the date of termination.
Prior to a change in control of the Company, if Mr. Dunn's employment is
terminated by the Company without cause, terminated by Mr. Dunn for good reason
or the Company fails to renew the agreement, then (1) the Company will pay Mr.
Dunn all accrued compensation as of the date of termination, (2) a lump sum
equal to 200% of the then base salary and target bonus; provided however that if
Mr. Dunn's employment is terminated because the Company elects not to renew the
agreement, then Mr. Dunn shall be entitled only to a lump sum equal to one times
the then base salary and target bonus and (3) all of Mr. Dunn's outstanding
stock options as of the effective date of the employment agreement will vest and
will remain exercisable until their originally scheduled expiration dates.
Prior to a change in control of the Company, if Mr. Dunn's employment is
terminated by the Company for performance reasons, then (1) the Company will pay
Mr. Dunn all accrued compensation as of the date of termination, (2) a lump sum
equal to one and one-half times the then base salary and target bonus and (3)
all of Mr. Dunn's outstanding stock options as of the effective date of the
employment agreement will vest.
Following a change in control of the Company and if within 12 months after the
date on which the change in control occurs Mr. Dunn's employment is terminated
by the Company without cause, by the Company because it elects not to renew the
agreement, by the Company for a performance reason, or by Mr. Dunn for good
reason, then (1) the Company will pay Mr. Dunn all accrued compensation as of
the date of termination, (2) a lump sum equal to (i) 200% of the then base
salary or 200% of the annual base salary in effect just prior to the Change in
Control, whichever amount is higher, plus (ii) the higher of 200% of the maximum
bonus for the incentive year in which such termination occurs or 200% of the
maximum bonus for the preceding fiscal year and (3) all of Mr. Dunn's
outstanding stock options as of the effective date of the employment agreement
will vest and will remain exercisable until their originally scheduled
expiration dates.
28
Elizabeth S.C.S. Murray, Chief Financial Officer and Executive Vice President.
In June 1999, the Company entered into an employment agreement with Elizabeth
S.C.S. Murray as Chief Financial Officer and Executive Vice President of the
Company, effective April 29, 1999. The term of the agreement is for three
years, and will automatically renew for successive two-year periods thereafter
until the first April 30th following the date on which Ms. Murray reaches age
65; provided, however, that either the Company or Ms. Murray may terminate this
Agreement at the end of the initial term or renewal term by delivering to the
other party at least 120 days' prior written notice. The agreement provides for
a minimum base salary of $350,000 annually, with an annual target bonus equal to
100% of base salary and an annual maximum bonus of up to 200% of base salary.
If Ms. Murray's employment terminates due to death or disability, then (1) the
Company will pay Ms. Murray, or her legal representatives, all accrued
compensation as of the date of termination and (2) all of Ms. Murray's
outstanding stock options as of the effective date of the employment agreement
will vest and will remain exercisable until their originally scheduled
expiration dates. If Ms. Murray's employment is terminated by the Company for
cause, terminated by Ms. Murray prior to its expiration without good reason or
Ms. Murray fails to renew the agreement after its initial term, then the Company
will pay Ms. Murray all accrued compensation as of the date of termination.
Prior to a change in control of the Company, if Ms. Murray's employment is
terminated by the Company without cause, terminated by Ms. Murray for good
reason or the Company fails to renew the agreement, then (1) the Company will
pay Ms. Murray all accrued compensation as of the date of termination, (2) a
lump sum equal to 200% of the then base salary and target bonus; provided
however that if Ms. Murray's employment is terminated because the Company elects
not to renew the agreement, then Ms. Murray shall be entitled only to a lump sum
equal to one times the then base salary and target bonus and (3) all of Ms.
Murray's outstanding stock options as of the effective date of the employment
agreement will vest and will remain exercisable until their originally scheduled
expiration dates. Prior to a change in control of the Company, if Ms. Murray's
employment is terminated by the Company for performance reasons, then (1) the
Company will pay Ms. Murray all accrued compensation as of the date of
termination, (2) a lump sum equal to the then base salary and target bonus and
(3) all of Ms. Murray's outstanding stock options as of the effective date of
the employment agreement will vest and will remain exercisable until their
originally scheduled expiration dates.
Following a change in control of the Company and if within 12 months after the
date on which the change in control occurs Ms. Murray's employment is terminated
by the Company without cause, by the Company because it elects not to renew the
agreement, by the Company for a performance reason, or by Ms. Murray for good
reason, then (1) the Company will pay Ms. Murray all accrued compensation as of
the date of termination, (2) a lump sum equal to (i) 200% of then base salary or
200% of the annual base salary in effect just prior to the Change in Control,
whichever amount is higher, plus (ii) the higher of 200% of the maximum bonus
for the incentive year in which such termination occurs or 200% of the maximum
bonus for the preceding fiscal year and (3) all of Ms. Murray's outstanding
stock options as of the effective date of the employment agreement will vest and
will remain exercisable until their originally scheduled expiration dates.
29
Security Ownership of Certain Beneficial Owners and Management
The following table sets forth as of ____________, 1999 the names, addresses,
and holdings of those persons known to the Company to be beneficial owners of
more than 5% of its Common Stock, the names and holdings of each director and
each nominee for director, the names and holdings of each executive officer
named in the Summary Compensation Table (the "named executive officers"), and
the holdings of all executive officers and directors as a group:
NOTES TO STOCK OWNERSHIP TABLE:
* Holdings represent less than 1% of all shares outstanding.
/1/ The address of each director, executive officer and key employee listed is
in care of Korn/Ferry International, 1800 Century Park East, Suite 900, Los
Angeles, California 90067.
/2/ If applicable, holdings include shares of Common Stock held by the Trustees
of the Korn/Ferry Employee Tax Deferred Savings Plan (401(k) Plan) for the
benefit of the listed individual. Other than with respect to such shares
held under the Company's 401(k) plan, each person has sole voting and
dispositive power with respect to the shares shown unless otherwise
indicated.
/3/ A named executive officer of the Company.
/4/ Excludes 359,548 shares of Common Stock held by The Ferry Family Charitable
Foundation. Mr. Ferry does not have a beneficial interest in the shares of
Common Stock held by such foundation but does share voting power, as one of
three trustees, of the shares held by The Ferry Family Charitable
Foundation.
/5/ Mr. Boxberger resigned his positions as Chief Executive Officer, President,
Director and a member of the Office of the Chief Executive in December
1998.
/6/ Messrs. Nider and Kuan-Sing's terms as directors of the Company expire at
the Annual Meeting and neither director will stand for reelection at the
Annual Meeting.
30
Compensation Committee Interlocks and Insider Participation
In fiscal 1999, decisions concerning compensation of executive officers were
made by the Company's Senior Executive Compensation Committee, consisting of
Messrs. Buchanan-Barrow (as Chair), Wellman and Nider, with Messrs. Ferry and
Priem, each of whom is an executive officer of the Company, serving in advisory
roles. The Senior Executive Compensation Committee, which has been reorganized
as part of the Compensation and Personnel Committee effective June 1999, reviews
and approves the comprehensive compensation program for senior executives of the
Company and reviews the salaries of executive vice presidents and senior vice
presidents, subject to the ratification of the salary programs established for
the positions of the Chair and the Chief Executive Officer by the Board acting
as a whole. Messrs. Miller (as Chair), Cahouet and Schulmeyer, each of whom is a
non-employee member of the Board, are the members of the new Compensation and
Personnel Committee.
31
EXECUTIVE COMPENSATION
Report of the Senior Executive Compensation Committee*
Charter of Committee.
The charter of the Senior Executive Compensation Committee (the "Committee")
provided that the Committee make recommendations to the Board of Directors
regarding the compensation for the Chair and the Chief Executive Officer of the
Company. In turn, the CEO made recommendations to the Committee and to the Board
regarding compensation for other members of senior management.
Compensation Policy.
It has been and currently is the Company's policy to position its total
compensation for its senior executive officers and other key employees at levels
competitive with those of other major executive recruiting firms. Because a
number of these organizations are privately-held, precise information regarding
compensation practices within the Company's competitor group is difficult to
obtain. From time to time, the Company has employed the services of an outside
compensation consulting firm to collect such information. Much of the
information used to assess competitive pay practices is therefore derived from
data obtained from executives and senior search consultants recruited by the
Company, and general knowledge of pay practices and trends within the industry.
Performance Related Goals.
To make recommendations regarding the Chair and the CEO's compensation, the
Committee reviewed their performance relative to goals established at the
beginning of and during the fiscal year ended April 30, 1999. For the 1999
performance year, these goals related largely to the financial performance of
the firm, both globally and within specific markets, progress in pursuing
targeted acquisitions, leadership, and the success of the Company's initial
public offering. The Committee also took into consideration that the Chair and
the CEO had both assumed new responsibilities during the fiscal year as a result
of the resignation of Mr. Michael Boxberger, the Company's former CEO, and as a
result of the Company's initial public offering.
Compensation and Options for CEO and Chair.
On December 1, 1998, the salary of Windle Priem, the Company's CEO & President,
was increased from $465,000 to $525,000 to reflect his assumption of the role of
CEO following Mr. Boxberger's resignation. On May 1, 1999, Mr. Priem's salary
was further increased to $600,000 as part of a three-year employment agreement
approved by the Board of Directors. Effective February 15, 1999, the salary of
Richard Ferry, the Company's Chair, was reduced from $572,000 to $465,000 to
more appropriately reflect a voluntary change in his ongoing responsibilities
following the completion of the Company's initial public offering.
On May 1, 1999, Mr. Ferry and Mr. Priem were awarded cash bonuses of $538,000
and $606,000, respectively, for the 1999 performance year based upon the
Committee's recommendation to the Board of Directors. The Committee's
recommendation was based on an assessment of Mr. Ferry's and Mr. Priem's
performance during the year in view of the factors described above.
_________________________
* As a privately held company through February 10, 1999, the Senior Executive
Compensation Committee was staffed by three inside directors. Further, its
charter was designed for a committee administering the compensation of a
privately held company. As noted in this Report, in June 1999 a new committee
was formed, the Compensation and Personnel Committee, and its three members are
non-employee directors.
32
It is the Company's intention to tie a meaningful portion of the compensation of
its executive officers and key search professionals to the performance of the
Company's stock price. In this regard, in August 1998 the Company received
shareholder authorization to make stock option grants under the Company's
Performance Award Plan effective with the initial public offering. The Board of
Directors granted Mr. Priem 80,000 option shares under this Plan on February 10,
1999 (the initial public offering date) and an additional 23,250 shares on April
20, 1999. Mr. Ferry was offered option grants on February 10, 1999 and April 20,
1999, but declined the option grants in view of his existing substantial
ownership in the equity of the Company.
The option granted to Mr. Priem on February 10, 1999 has a term of seven years
and vests in three equal annual installments beginning one year from the grant
date. The option granted to Mr. Priem on April 20, 1999 has a term of ten years
and vests in three equal annual installments beginning one year from the grant
date. The exercise price for these options is the closing market price of the
Company's common stock on the grant date.
Employment Agreement for CEO.
As part of a new three-year employment agreement between Mr. Priem and the
Company, Mr. Priem was granted an additional 100,000 option shares on June 2,
1999. These options have a term of five years and three months and an exercise
price equal to the closing market price of the Company's common stock on the
grant date. The option shares vest in full at the termination of his employment
agreement, but vest earlier if the Company's stock attains specified price
hurdles during the first three years following grant.
Section 162(m).
Unless sound business reasons dictate otherwise, it is the Company's intent to
meet the requirements of Section 162(m) of the Internal Revenue Code in order
that the bonus compensation and stock options awarded to its executive officers
be considered "performance based" and therefore deductible by the Company for
tax purposes. In this regard, the Company received shareholder approval for the
Korn/Ferry International Performance Award Plan concurrent with the Company's
initial public offering, a plan designed to comply with Section 162(m).
New Compensation and Personnel Committee
In recognition of the Company's new public status, a new Compensation and
Personnel Committee was constituted in June 1999 consisting solely of non-
employee members of the Board of Directors (Chair: Charles D. Miller; Members:
Frank V. Cahouet and Gerhard Schulmeyer).
Paul Buchanan-Barrow
(Chair)
Raimondo Nider
Michael A. Wellman
33
Summary Compensation Table
NOTES TO SUMMARY COMPENSATION TABLE:
/1/ In February 1999 and April 1999, the Board proposed to authorize the grant
of options to Mr. Ferry, but Mr. Ferry declined to accept such grants.
/2/ Represents contributions of $12,528 to the executive's 401(k) plan and $905
paid by the Company for insurance premiums.
/3/ Represents contributions of $10,961 to the executive's 401(k) plan and $915
paid by the Company for insurance premiums.
/4/ Mr. Boxberger resigned his positions as Chief Executive Officer, President,
Director and a member of the Office of the Chief Executive in December
1998. See "Certain Relationships and Related Transactions - Resignation of
Michael D. Boxberger" below.
/5/ Represents amounts reimbursed by the Company for interest paid on a
promissory note and income taxes. See "Certain Relationships and Related
Transactions - Resignation of Michael D. Boxberger" below.
/6/ Represents contributions of $12,528 to the executive's 401(k) plan and $534
paid by the Company for insurance premiums.
/7/ Represents contributions of $10,961 to the executive's 401(k) plan and $839
paid by the Company for insurance premiums.
/8/ Represents compensation paid to Ms. Murray from January 12, 1998, when she
joined the Company, through the end of fiscal 1998. Ms. Murray's base
salary for fiscal 1998 was paid at an annual rate of $250,000.
/9/ Represents $905 paid by the Company for insurance premiums.
/10/ Represents $125,000 paid to Ms. Murray as a signing bonus and $76 paid by
the Company for insurance premiums.
/11/ Represents compensation paid to Mr. Hourihan from January 28, 1999, when he
joined the Company, through the end of fiscal 1999. Mr. Hourihan's base
salary for fiscal 1999 was paid at an annual rate of $300,000.
/12/ Represents $125,000 paid to Mr. Hourihan as the first installment of a
signing bonus.
34
Option Grant Table
The following table presents additional information concerning the stock
options shown in the Summary Compensation Table and granted to the named
executive officers for fiscal 1999:
NOTES TO OPTION GRANT TABLE:
/1/ In February 1999 and April 1999, the Board proposed to authorize the grant
of options to Mr. Ferry, but Mr. Ferry declined to accept such grants.
/2/ Mr. Boxberger resigned his positions as Chief Executive Officer, President,
Director and a member of the Office of the Chief Executive in December
1998.
/3/ Options have a term of seven years and vest in three equal annual
installments beginning one year from the grant date.
/4/ Options have a term of ten years and vest in three equal annual
installments beginning one year from the grant date.
/5/ During fiscal 1999, the Company granted options to ___ employees to
purchase an aggregate of 3,466,250 shares of the Company's Common Stock.
/6/ Options were granted at an exercise price equal to the fair market value on
the date of the grant.
/7/ The weighted average fair value of options at the date of grant was
determined using the Black-Scholes option pricing model.
35
Aggregated Option Exercises and Year-End Option Values
The following table shows information for the named executive officers,
concerning:
(1) exercises of stock options during fiscal 1999; and
(2) the amount and values of unexercised stock options as of April
30, 1999.
NOTES TO OPTION EXERCISE TABLE:
/1/ This amount represents solely the difference between the closing price on
April 30, 1999 of $11.9375 per share of the Company's Common Stock and the
respective exercise prices of those unexercised options that had an
exercise price below such market price (i.e., "in-the-money" options). No
assumptions or representations regarding the "value" of such options are
made or intended.
/2/ In February 1999 and April 1999, the Board proposed to authorize the grant
of options to Mr. Ferry, but Mr. Ferry declined to accept such grants.
/2/ Mr. Boxberger resigned his positions as Chief Executive Officer, President,
Director and a member of the Office of the Chief Executive in December
1998.
Certain Relationships and Related Transactions
Additional Redemption Amounts. In fiscal 1995, certain stockholders of the
Company (the "Sellers"), at the request of the Company, agreed to have certain
of their shares of Common Stock redeemed by the Company in a fixed redemption
plan initiated by the Company (the "Redemption"). The Redemption required that
any stockholder whose aggregate ownership of Common Stock, phantom units or
stock appreciation rights exceeded a certain share level have a portion of his
or her holdings redeemed. The Sellers agreed to the Redemption, which benefited
the Company in achieving a more widely-held equity ownership.
The redemption price consisted of (i) a fixed amount of $1.82 per share, which
represented the book value of a share of Common Stock as of the end of fiscal
1994, plus 10% of such fixed amount to reflect appreciation on the book value
from the end of fiscal 1994 to the date of the redemption (the "Fixed Redemption
Amount"), (ii) a contingent amount (the "Additional Redemption Amount") equal to
the difference between (a) the Fixed Redemption Amount plus 8.5% accrued
interest and (b) the public offering price per share of the Common Stock and
(iii) one share of Series A Preferred Stock for each 400 shares of Common Stock
redeemed. The Fixed Redemption Amount consisted of 16 2/3% cash, with the
balance in the form of a five-year promissory note. The aggregate Additional
Redemption Amount is determined by multiplying the difference described under
item (ii) above by the number of shares redeemed by the Company from each holder
of redeemed shares. The Additional Redemption Amount was payable if the Company
consummated an extraordinary transaction, such as a public offering of the
Common Stock of the Company, at any time before December 31, 2004. The
Additional Redemption Amount was paid upon consummation of the Company's initial
public offering of its Common Stock (the "Offering").
The Series A Preferred Stock of the Company had a liquidation value of $1.82 per
share plus cumulative unpaid dividends at 8.5% per annum until redemption.
Shares of Series A Preferred Stock had voting rights
36
equivalent to 400 shares of Common Stock for each share outstanding, except that
holders of Series A Preferred Stock must vote in favor of certain transactions
approved by holders of two-thirds or more of the shares of Common Stock of the
Company. The Series A Preferred Stock was designed to give the Sellers the
voting power necessary to protect their rights to receive payment on the
promissory note issued in the Redemption and the Additional Redemption Amounts.
The Company had the right to redeem all or any part of the outstanding Preferred
Stock at the earlier of either (i) payment in full of all promissory notes of
the Company issued in the Redemption or (ii) the approval of the holders of a
majority of the shares of the Series A Preferred Stock. The Company has redeemed
all of the outstanding Preferred Stock.
Simultaneously with the Redemption, certain holders of phantom units and stock
appreciation rights (the "Rights Holders") agreed to terminate their phantom
units and stock appreciation rights in return for payments corresponding to the
Fixed Redemption Amounts and the Additional Redemption Amounts.
Because some of the proceeds from the Offering otherwise would have been used to
pay the aggregate Additional Redemption Amount payable upon an initial public
offering, each of the Sellers and the Rights Holders agreed to a negotiated
discount (the "Negotiated Adjustment") from the Additional Redemption Amount
they were originally entitled to receive upon the initial public offering. As a
result, upon consummation of the Offering, the Sellers and the Rights Holders as
a group received in the aggregate a payment of $29.1 million and the Company's
stockholders' equity was reduced by the same amount. Mr. Priem, Chief Executive
Officer, President and Director of the Company received a discounted payment of
approximately $1.4 million. Mr. Ferry, the Chair of the Company's Board of
Directors, received a discounted payment of approximately $9.3 million.
Termination of Stock Right Plan and Phantom Stock Plan. In contemplation of the
Offering, each of the Stock Right Plan and Phantom Stock Plan was terminated and
each previous participant in either the Stock Right Plan or Phantom Stock Plan
(the "Participants") was offered the opportunity to receive a cash payment of
$11.15 per phantom unit or stock appreciation right or receive shares of the
Common Stock (the number of which was adjusted to reflect the 4-to-1 stock
split) valued at the book value of a share of Common Stock as of April 30, 1998,
which was approximately $2.79 per share after giving effect to the 4-to-1 stock
split. The Company had 275,954 phantom units and 114,356 stock appreciation
rights outstanding as of June 30, 1998, the effective date of the surrender,
termination and cancellation of all the outstanding phantom units and stock
appreciation rights of the Company. With the exception of one, all Participants,
including Messrs. Dunn, Papayanopulos and Young, elected to receive shares of
Common Stock in the conversion program and 1,551,008 shares were issued as of
June 30, 1998.
Liquidity Schedule. In contemplation of the Offering, the Company also
established a liquidity schedule (the "Liquidity Schedule") for its pre-Offering
stockholders. Substantially all of the Company's pre-Offering stockholders
agreed to be subject to the Liquidity Schedule. At the time of the Offering, the
pre-Offering stockholders were allowed to sell up to 10% of their pre-Offering
Common Stock holdings. From February 11, 1999 (the date of the Offering) to
February 11, 2001 (the second anniversary of the Offering), all stockholders
subject to the Liquidity Schedule are restricted from selling any of their pre-
Offering Common Stock holdings. On February 11, 2001 or thereafter, the pre-
Offering stockholders may sell up to 30% of their pre-Offering Common Stock
holdings. On February 11, 2002 or thereafter, the pre-Offering stockholders may
sell up to 50% of their pre-Offering Common Stock holdings, and on February 11,
2003, all restrictions will cease. Upon the death or permanent incapacity of the
stockholder or a change in control of the Company, the Liquidity Schedule will
cease to apply and all of the stockholder's Common Stock that is still subject
to the Liquidity Schedule will become transferable.
37
Strategic Compensation Associates. The Company owned 47% of Strategic
Compensation Associates ("SCA") during fiscal 1995 and 1996. During fiscal 1996,
the Company paid approximately $131,000 for services to SCA. In fiscal 1996, the
Company sold its entire membership interest in SCA and a portion of its capital
account interest in SCA, pursuant to purchase agreements executed with other
members of SCA who formed SCA LLC. The purchase agreements, as amended, provided
for the members of SCA LLC, which includes Gary C. Hourihan, an elected
executive officer of the Company, to purchase the Company's remaining capital
account interest in six annual installments, with the last payment to be on
December 31, 2001. In December 1998, the members of SCA LLC completed the
transaction by making a cash payment to the Company of $2,487,985.
Resignation of Michael D. Boxberger. In December 1998, Michael D. Boxberger
resigned from his positions as President, Chief Executive Officer, Director and
a member of the Office of the Chief Executive of the Company. Mr. Boxberger and
the Company have entered into the Settlement Agreement under which Mr. Boxberger
will receive approximately $1.2 million payable over a 12-month period. In
addition, Mr. Boxberger will continue to receive reimbursement for reasonable
expenses, including office and secretarial support as well as medical and other
benefits until the earlier to occur of December 3, 1999 or commencement of new
employment. At the time of his resignation, Mr. Boxberger owned 393,256 shares
of Common Stock. The Company repurchased 228,088 of those shares at book value,
equal to $2.79 per share, pursuant to a Stock Repurchase Agreement between Mr.
Boxberger and the Company. Mr. Boxberger retained the remaining 165,168 such
shares with the right to sell such shares in accordance with the Liquidity
Schedule.
Mr. Boxberger had loans outstanding with the Company which, as of December 3,
1998, amounted to an aggregate principal amount of $99,989. Such loans were
repaid by Mr. Boxberger in full in February 1999. In addition, Mr. Boxberger and
the Company were co-obligors on a promissory note in the principal amount of $1
million entered into by Mr. Boxberger for home loan purposes. The promissory
note was secured by shares of Common Stock owned by Mr. Boxberger. The Company
reimbursed Mr. Boxberger for interest on the promissory note until the sale of
Mr. Boxberger's home. Mr. Boxberger sold the subject home in March 1999 and the
$1 million promissory note was repaid in full as of April 22, 1999.
38
Performance Graph
The Securities and Exchange Commission (the "SEC") requires the Company to
present a chart comparing the cumulative total stockholder return on its shares
with the cumulative total stockholder return on (1) a broad equity market index
and (2) a published industry index or a company-established peer group. The
following graph compares the monthly percentage change in the Company's
cumulative total stockholder return with the cumulative total return of the
companies in the Standard & Poor's 500 Stock Index and a Peer Group constructed
by the Company. Cumulative total return for each of the periods shown in the
Performance Graph is measured assuming an initial investment of $100 on February
11, 1999, the date trading began in connection with the Offering, and the
reinvestment of any dividends paid by any company in the Peer Group on the date
the dividends were declared.
The Peer Group is comprised of publicly-traded companies which are engaged
principally or in significant part in professional staffing and consulting. The
returns of each company have been weighted according to their respective stock
market capitalization at the beginning of each measurement period for purposes
of arriving at a Peer Group average. The members of the Peer Group are
Careerbuilder, Inc., Heidrick & Struggles International, Inc., LAI Worldwide,
Inc. (formerly known as Lamalie Associates Inc.), Topjobs.net, Plc and TMP
Worldwide, Inc.
The stock price performance depicted in this graph is not necessarily indicative
of future price performance. This graph will not be deemed to be incorporated by
reference by any general statement incorporating this proxy statement into any
filing by the Company under the Securities Act of 1933, as amended, or the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), except to the
extent the Company specifically incorporates this information by reference, and
shall not otherwise be deemed soliciting material or deemed filed under those
Acts.
EDGAR REPRESENTATION OF DATA POINTS
USED IN PRINTED GRAPH
39
OTHER MATTERS
Section 16(a) Beneficial Ownership Reporting Compliance
The Company believes that all SEC filings of its officers, directors and ten
percent stockholders complied with the requirements of Section 16 of the
Exchange Act during fiscal 1999, based on a review of forms filed, or written
notice that no annual forms were required, with the exception of (i) Mr. Ferry,
Mr. Priem, Mr. Dunn, Ms. Murray, Mr. Hourihan, Mr. Buchanan-Barrow, Mr. Friar,
Ms. Fukushima, Mr. Kingdom, Mr. Nider, Mr. Papayanopulos, Mr. Wellman, Mr.
Kuan-Sing and Man Jit Singh (chief executive officer of Korn/Ferry International
Futurestep, Inc.), each of whom did not timely file Form 5, and (ii) Donald E.
Jordan, the Company's chief accounting officer, who did not timely file Form 3
and Form 5.
Annual Report to Stockholders
The Annual Report of the Company for fiscal 1999 was mailed to stockholders on
________, 1999. The Annual Report should not be viewed as part of these proxy
solicitation materials. If any person who was a beneficial owner of Common Stock
of the Company on the Record Date for the Annual Meeting desires additional
information, a copy of the Company's Annual Report on Form 10-K, including the
exhibits thereto, will be furnished upon written request. The request should
identify the person requesting the Annual Report on Form 10-K as a stockholder
of the Company as of August 2, 1999 and should be directed to Evelyn W. Y. Mak,
Esq., Korn/Ferry International, 1800 Century Park East, Suite 900, California
90067. The Company's Annual Report on Form 10-K, including the exhibits thereto,
is also available through the SEC's web site (http://www.sec.gov).
Submission of Stockholder Proposals for Consideration and Nominations of Persons
for Election as Directors at the Annual Meeting
In order for business to be brought before the Annual Meeting by a stockholder,
the stockholder must give notice of such business in writing to Peter L. Dunn,
Esq., Vice Chair, General Counsel and Corporate Secretary, Korn/Ferry
International, 1800 Century Park East, Suite 900, California 90067 by the tenth
day after such stockholder first received notice of the date of the Annual
Meeting.
With respect to Stockholder Proposals, such notice must set forth as to each
matter the stockholder proposes to bring before the meeting: (1) a brief
description of the business desired to be brought before the Annual Meeting and
the reasons for conducting such business at the Annual Meeting, (2) the name and
address, as they appear on the corporation's books, of the stockholder proposing
such business, (3) the classes and number of shares of the corporation
beneficially owned by the stockholder, (4) any material interest of the
stockholder in such business, and (5) any other information that is required to
be provided by the stockholder, in his or her capacity as a proponent of a
stockholder proposal, pursuant to Regulation 14A under the Exchange Act.
A stockholder's notice of nomination of a person for election as director must
set forth: (1) the name and address of the stockholder who intends to make the
nomination and the address of the person or persons to be nominated, (2) a
representation that such stockholder is a holder of record of stock of the
corporation entitled to vote at such meeting and intends to appear in person or
by proxy at the meeting to nominate the person or persons specified in the
notice, (3) a description of all arrangements or understandings between such
stockholder and each nominee and any other person or persons (naming such person
or persons) pursuant to which the nomination or nominations are to be made by
such stockholder, (4) such other information regarding each nominee proposed by
such stockholder as would have been required to be included in a proxy statement
filed pursuant to the proxy rules of the SEC had each nominee been nominated, or
intended to be nominated by the Board of Directors, and (5) the consent of each
nominee to serve as a director of the corporation if so elected.
40
Stockholder Proposals for Next Year's Annual Meeting
Notice of any stockholder proposal or nomination of a person for election as
director that is intended by a stockholder to be included in the Company's proxy
statement relating to its 2000 annual meeting of stockholders must be received
by Peter L. Dunn, Esq., Vice Chair, General Counsel and Corporate Secretary,
Korn/Ferry International, 1800 Century Park East, Suite 900, California 90067 by
April 22, 2000.
A stockholder proposal submitted outside of the processes of Rule 14a-8 under
the Exchange Act (i.e., a proposal to be presented at the next annual meeting of
stockholders but not submitted for inclusion in the Company's proxy statement)
will be considered untimely under the SEC's proxy rules (1) by July 1, 2000 if
the Proposed Reincorporation has been completed or (2) by May 25, 2000 if the
Proposed Reincorporation has not been completed.
Each notice of any stockholder proposal must comply with the Exchange Act, the
rules and regulations thereunder, and the Company's Bylaws as in effect at the
time of such notice.
By Order of the Board of Directors,
Peter L. Dunn
Vice Chair, General Counsel and
Corporate Secretary
August 20, 1999
41
YOUR VOTE IS IMPORTANT
PLEASE SIGN, DATE AND RETURN
YOUR PROXY CARD
IN THE ENVELOPE PROVIDED
AS SOON AS POSSIBLE
42
EXHIBIT A
AGREEMENT AND PLAN OF MERGER
of
KORN/FERRY INTERNATIONAL
(a Delaware Corporation)
and
KORN/FERRY INTERNATIONAL
(a California Corporation)
THIS AGREEMENT AND PLAN OF MERGER dated as of September ____, 1999
(this "Merger Agreement") is between Korn/Ferry International, a Delaware
corporation ("KFY Delaware"), and Korn/Ferry International, a California
corporation ("KFY California"). KFY Delaware and KFY California are sometimes
referred to herein as the "Constituent Corporations."
RECITALS
A. KFY California desires to merge with and into KFY Delaware and KFY
Delaware desires to merge with KFY California, all upon the terms and subject to
the conditions of this Merger Agreement.
B. KFY Delaware is a corporation duly organized and existing under the
laws of the State of Delaware and has an authorized capital of 200,000,000
shares, 150,000,000 of which are designated "Common Stock," par value $0.01 per
share, and 50,000,000 of which are designated "Preferred Stock," par value $0.01
per share. The Preferred Stock of KFY Delaware is undesignated as to series,
rights, preferences, privileges or restrictions. As of the date hereof,
_________ shares of Common Stock are issued and outstanding, all of which are
held by KFY California, and no shares of Preferred Stock are issued and
outstanding.
C. KFY California is a corporation duly organized and existing under the
laws of the State of California and has an authorized capital of 200,000,000
shares, 150,000,000 of which are designated "Common Stock," no par value per
share, and 50,000,000 of which are designated "Preferred Stock," no par value
per share. The Preferred Stock of KFY California is undesignated as to series,
rights, preferences, privileges or restrictions. As of September ____, 1999,
________ shares of Common Stock and no shares of Preferred Stock were issued and
outstanding.
D. The Board of Directors of KFY California has determined that, for the
purpose of effecting the reincorporation of KFY California in the State of
Delaware, it is advisable and in the best interests of KFY California and its
shareholders that KFY California merge with and into KFY Delaware upon the terms
and conditions herein provided.
E. The respective Boards of Directors of KFY Delaware and KFY California
have approved this Merger Agreement and have directed that this Merger Agreement
be submitted to a vote of their respective sole stockholder and shareholders and
executed by the undersigned officers.
NOW, THEREFORE, in consideration of the mutual agreements and
covenants set forth herein, KFY Delaware and KFY California hereby agree,
subject to the terms and conditions hereinafter set forth, as follows:
ARTICLE I
MERGER
1.1 MERGER. In accordance with the provisions of this Merger
Agreement, the Delaware General Corporation Law and the California General
Corporation Law, KFY California shall be merged with and into KFY Delaware (the
"Merger"), the separate existence of KFY California shall cease and KFY Delaware
shall survive the Merger and shall continue to be governed by the laws of the
State of Delaware. KFY Delaware shall be, and is herein sometimes referred to
as, the "Surviving Corporation." The name of the Surviving Corporation shall be
Korn/Ferry International.
1.2 FILING AND EFFECTIVENESS. The Merger shall become effective when
the following actions shall have been completed:
(a) This Merger Agreement and the Merger shall have been adopted and
approved by the sole stockholder of KFY Delaware and the shareholders of KFY
California, in accordance with the requirements of the Delaware General
Corporation Law and the California General Corporation Law;
(b) All of the covenants and conditions precedent to the consummation
of the Merger specified in this Merger Agreement shall have been satisfied or
duly waived by the party entitled to satisfaction thereof;
(c) An executed Certificate of Merger or an executed counterpart of
this Merger Agreement meeting the requirements of the Delaware General
Corporation Law shall have been filed with the Secretary of State of the State
of Delaware; and
(d) An executed Certificate of Merger or an executed counterpart of
this Merger Agreement meeting the requirements of the California General
Corporation Law shall have been filed with the Secretary of State of the State
of California.
The date and time when the Merger shall become effective, as aforesaid, is
herein called the "Effective Date of the Merger."
2
1.3 EFFECT OF THE MERGER. Upon the Effective Date of the Merger, the
separate existence of KFY California shall cease and KFY Delaware, as the
Surviving Corporation, (i) shall continue to possess all of its assets, rights,
powers and property as constituted immediately prior to the Effective Date of
the Merger, (ii) shall be subject to all actions previously taken by its and KFY
California's Board of Directors, (iii) shall succeed, without other transfer, to
all of the assets, rights, powers and property of KFY California in the manner
more fully set forth in Section 259 of the Delaware General Corporation Law,
(iv) shall continue to be subject to all of the debts, liabilities and
obligations of KFY Delaware as constituted immediately prior to the Effective
Date of the Merger and (v) shall succeed, without other transfer, to all of the
debts, liabilities and obligations of KFY California in the same manner as if
KFY Delaware had itself incurred them, all as more fully provided under the
applicable provisions of the Delaware General Corporation Law and the California
General Corporation Law.
ARTICLE II
CHARTER DOCUMENTS, DIRECTORS AND OFFICERS
2.1 CERTIFICATE OF INCORPORATION. The Certificate of Incorporation of
KFY Delaware as in effect immediately prior to the Effective Date of the Merger
shall continue in full force and effect as the Certificate of Incorporation of
the Surviving Corporation until duly amended in accordance with the provisions
thereof and applicable law.
2.2 BYLAWS. The Bylaws of KFY Delaware as in effect immediately prior
to the Effective Date of the Merger shall continue in full force and effect as
the Bylaws of the Surviving Corporation until duly amended in accordance with
the provisions thereof and applicable law.
2.3 DIRECTORS AND OFFICERS. The directors and officers of KFY
California immediately prior to the Effective Date of the Merger shall be the
directors and officers of the Surviving Corporation until their successors shall
have been duly elected and qualified or until as otherwise provided by law, the
Certificate of Incorporation of the Surviving Corporation or the Bylaws of the
Surviving Corporation.
ARTICLE III
MANNER OF CONVERSION OF STOCK
3.1 KFY CALIFORNIA COMMON STOCK. Upon the Effective Date of the
Merger, each share of KFY California Common Stock issued and outstanding
immediately prior thereto shall, by virtue of the Merger and without any action
by the Constituent Corporations, the holder of such shares or any other person,
be converted into and exchanged for one (1) fully paid and nonassessable share
of Common Stock, par value $0.01 per share, of the Surviving Corporation.
3
3.2 KFY CALIFORNIA OPTIONS, STOCK PURCHASE RIGHTS AND CONVERTIBLE
SECURITIES.
(a) Upon the Effective Date of the Merger, the Surviving Corporation
shall assume and continue the stock option plans and all other employee benefit
plans of KFY California. Each outstanding and unexercised option or other right
to purchase or security convertible into KFY California Common Stock shall
become an option or right to purchase or a security convertible into the
Surviving Corporation's Common Stock on the basis of one share of the Surviving
Corporation's Common Stock for each share of KFY California Common Stock
issuable pursuant to any such option, stock purchase right or convertible
security, on the same terms and conditions and at an exercise price per share
equal to the exercise price applicable to any such KFY California option, stock
purchase right or convertible security at the Effective Date of the Merger.
There are no options, purchase rights for or securities convertible into
Preferred Stock of KFY California.
(b) A number of shares of the Surviving Corporation's Common Stock
shall be reserved for issuance upon the exercise of options, stock purchase
rights and convertible securities equal to the number of shares of KFY
California Common Stock so reserved immediately prior to the Effective Date of
the Merger.
3.3 KFY DELAWARE COMMON STOCK. Upon the Effective Date of the Merger,
each share of Common Stock, par value $0.01 per share, of KFY Delaware issued
and outstanding immediately prior thereto shall, by virtue of the Merger and
without any action by KFY Delaware, the holder of such shares or any other
person, be canceled and returned to the status of authorized but unissued
shares.
3.4 EXCHANGE OF CERTIFICATES. After the Effective Date of the Merger,
each holder of an outstanding certificate representing shares of KFY California
Common Stock may, at such holder's option, surrender the same for cancellation
to Chase Mellon Stockholder Services L.L.C., as exchange agent (the "Exchange
Agent"), and each such holder shall be entitled to receive in exchange therefor
a certificate or certificates representing the number of shares of the Surviving
Corporation's Common Stock into which the surrendered shares were converted as
herein provided. Unless and until so surrendered, each outstanding certificate
theretofore representing shares of KFY California Common Stock shall be deemed
for all purposes to represent the number of shares of the Surviving
Corporation's Common Stock into which such shares of KFY California Common Stock
were converted in the Merger.
The registered owner on the books and records of the Surviving
Corporation or the Exchange Agent of any shares of stock represented by such
outstanding certificate shall, until such certificate shall have been
surrendered for transfer or conversion or otherwise accounted for to the
Surviving Corporation or the Exchange Agent, have and be entitled to exercise
any voting and other rights with respect to and to receive dividends and other
distributions upon the shares of Common Stock of the Surviving Corporation
represented by such outstanding certificate as provided above.
4
Each certificate representing Common Stock of the Surviving
Corporation so issued in the Merger shall bear the same legends, if any, with
respect to the restrictions on transferability as the certificates of KFY
California so converted and given in exchange therefore, unless otherwise
determined by the Board of Directors of the Surviving Corporation in compliance
with applicable laws, and any additional legends agreed upon by the holder and
the Surviving Corporation.
If any certificate for shares of KFY Delaware stock is to be issued in
a name other than that in which the certificate surrendered in exchange therefor
is registered, it shall be a condition of issuance thereof that the certificate
so surrendered shall be properly endorsed and otherwise in proper form for
transfer, that such transfer otherwise be proper and comply with applicable
securities laws and that the person requesting such transfer pay to KFY Delaware
or the Exchange Agent any transfer or other taxes payable by reason of issuance
of such new certificate in a name other than that of the registered holder of
the certificate surrendered or establish to the satisfaction of KFY Delaware
that such tax has been paid or is not payable.
ARTICLE IV
GENERAL
4.1 COVENANTS OF KFY DELAWARE. KFY Delaware covenants and agrees that
it will, on or before the Effective Date of the Merger:
(a) qualify to do business as a foreign corporation in the State of
California and in connection therewith irrevocably appoint an agent for service
of process as required under the provisions of Section 2105 of California
Corporations Law;
(b) file any and all documents with the California Franchise Tax
Board necessary for the assumption by KFY Delaware of all of the franchise tax
liabilities of KFY California; and
(c) take such other actions as may be required by the California
General Corporation Law.
4.2 FURTHER ASSURANCES. From time to time, as and when required by
KFY Delaware or by its successors or assigns, there shall be executed and
delivered on behalf of KFY California such deeds and other instruments, and
there shall be taken or caused to be taken by KFY California such further and
other actions as shall be appropriate or necessary in order to vest or perfect
in or conform of record or otherwise by KFY Delaware the title to and possession
of all the property, interests, assets, rights, privileges, immunities, powers,
franchises and authority of KFY California and otherwise to carry out the
purposes of this Merger Agreement , and the officers and directors of KFY
Delaware are fully authorized in the name and on behalf of KFY California or
otherwise to take any and all such action and to execute and deliver any and all
such deeds and other instruments.
5
4.3 ABANDONMENT. At any time before the Effective Date of the Merger,
this Merger Agreement may be terminated and the Merger may be abandoned for any
reason whatsoever by the Board of Directors of either KFY California or KFY
Delaware, or both, notwithstanding the approval of this Merger Agreement by
either the shareholders of KFY California or the sole stockholder of KFY
Delaware, or both.
4.4 AMENDMENT. The Boards of Directors of the Constituent
Corporations may amend this Merger Agreement at any time prior to the filing of
this Merger Agreement (or certificate in lieu thereof) with the Secretaries of
State of the States of Delaware and California, provided that an amendment made
subsequent to the adoption of this Merger Agreement by either the sole
stockholder of KFY Delaware or the shareholders of KFY California shall not: (i)
alter or change the amount or kind of shares, securities, cash, property and/or
rights to be received in exchange for or on conversion of all or any of the
shares of any class or series thereof of such Constituent Corporation; (ii)
alter or change any term of the Certificate of Incorporation of the Surviving
Corporation to be effective immediately after the Merger or (iii) alter or
change any of the terms and conditions of this Merger Agreement if such
alteration or change would adversely affect the holders of any class or series
of capital stock of either Constituent Corporation.
4.5 REGISTERED OFFICE. The registered office of the Surviving
Corporation in the State of Delaware shall be [1209 Orange Street, Wilmington,
Delaware 19801, County of New Castle, and The Corporation Trust Company] will be
the registered agent of the Surviving Corporation at such address.
4.6 AGREEMENT. Executed copies of this Merger Agreement will be on
file at the principal place of business of the Surviving Corporation at 1800
Century Park East, Suite 900, Los Angeles, California 90067 and copies thereof
will be furnished to any holder of any class or series of capital stock of
either Constituent Corporation, upon request and without cost.
4.7 GOVERNING LAW. This Merger Agreement shall in all respects be
construed, interpreted and enforced in accordance with and governed by the laws
of the State of Delaware and, so far as applicable, the merger provisions of the
California General Corporation Law.
4.8 COUNTERPARTS. In order to facilitate the filing and recording of
this Merger Agreement, the same may be executed in any number of counterparts,
each of which shall be deemed to be an original and all of which together shall
constitute one and the same instrument.
[Remainder of Page Intentionally Left Blank]
6
IN WITNESS WHEREOF, this Merger Agreement having first been approved
by the resolutions of the Boards of Directors of Korn/Ferry International, a
Delaware corporation, and Korn/Ferry International, a California corporation, is
hereby executed on behalf of each of such two corporations and attested by their
respective officers thereunto duly authorized as of the date first written
above.
KORN/FERRY INTERNATIONAL
a Delaware corporation
By: ________________________________
Windle B. Priem
Chief Executive Officer,
President and Director
ATTEST:
________________________________
Peter L. Dunn
Corporate Secretary
KORN/FERRY INTERNATIONAL
a California corporation
By: _________________________________
Windle B. Priem
Chief Executive Officer,
President and Director
ATTEST:
________________________________
Peter L. Dunn
Corporate Secretary
S-1
EXHIBIT B
CERTIFICATE OF INCORPORATION
OF
KORN/FERRY INTERNATIONAL
I, the undersigned, for the purposes of incorporating and organizing a
corporation under the General Corporation Law of the State of Delaware, do
execute this Certificate of Incorporation and do hereby certify as follows:
Article I: Name
----------------
The name of the corporation is Korn/Ferry International (the
"Corporation").
Article II: Registered Office
------------------------------
The address of the registered office of the Corporation in the State
of Delaware is [1209 Orange Street, Wilmington, Delaware 19801, County of New
Castle]. The name of its registered agent at such address is [Corporation Trust
Company].
Article III: Purpose
---------------------
The purpose of the Corporation is to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law of the State of Delaware.
Article IV: Stock
------------------
Section 1. Authorized Shares. The total number of shares of all
-----------------
classes which the Corporation shall have the authority to issue shall be
200,000,000, which shall be divided into two classes, one to be designated
"Common Stock," which shall consist of 150,000,000 authorized shares, $0.01 par
value per share, and a second class to be designated as "Preferred Stock," which
shall consist of 50,000,000 authorized shares, $0.01 par value per share.
Section 2. Preferred Stock of the Corporation. The Preferred Stock
----------------------------------
may be issued in one or more series, from time to time, each series to be
appropriately designated by a distinguishing number, letter or title, prior to
the issuance of any shares thereof.
Section 3. Authority of Board of Directors to Issue Stock. Each
----------------------------------------------
series of Preferred Stock shall consist of such number of shares and have such
voting powers, full or limited, or no voting powers, and such designations,
preferences and relative, participating, optional or other special rights, and
the qualifications, limitations or restrictions thereof, as shall be stated in
the resolutions or resolutions providing for the issuance of such series adopted
by the Board of Directors of the Corporation (the "Board of Directors"), and the
Board of Directors is hereby expressly vested with authority, to the full extent
now or hereafter provided by law, to adopt any such resolution or resolutions.
The authority of the Board of Directors with respect to each series
shall include, but not be limited to, determination of the following:
(a) The number of shares constituting the series and the distinctive
designation of that series;
(b) The dividend rate on the shares of that series, whether dividends
shall be cumulative, and, if so, from which date or dates, and the relative
rights of priority, if any, of payment of dividends on shares of that series;
(c) Whether that series shall have voting rights, in addition to the
voting rights provided by law, and, if so, the terms of such voting rights;
(d) Whether that series shall have conversion privileges, and, if so,
the terms and conditions of such conversion, including provision for adjustment
of the conversion rate in such events as the Board of Directors shall determine;
(e) Whether or not the shares of that series shall be redeemable, and,
if so, the terms and conditions of such redemption, including the date or date
upon or after which they shall be redeemable, and the amount per share payable
in case of redemption, which amount may vary under different conditions and at
different redemption dates;
(f) Whether that series shall have a sinking fund for the redemption
or purchase of shares of that series, and, if so, the terms and amount of such
sinking fund;
(g) The rights of the shares of that series in the event of voluntary
or involuntary liquidation, dissolution or winding-up of the Corporation, and
the relative rights of priority, if any, of payment of shares of that series;
and
(h) Any other relative rights, preferences and limitations of that
series.
Section 4. No Preemptive or Preferential Rights. No holders of
------------------------------------
shares of the Corporation of any class, now or hereafter authorized, shall have
any preferential or preemptive rights to subscribe for, purchase or receive any
shares of the Corporation of any class, now or hereafter authorized, or any
options or warrants to subscribe for such shares, or any rights to subscribe
for, purchase or receive any securities convertible to or exchangeable for such
shares, which may at any time be issued, sold or offered for sale by the
Corporation.
Article V: Incorporator
------------------------
The name and mailing address of the incorporator are as follows: Peter
L. Dunn, Korn/Ferry International, 1800 Century Park East, Suite 900, Los
Angeles, California 90067.
2
Article VI: Bylaws
-------------------
In furtherance and not in limitation of the powers conferred by the
laws of the State of Delaware, the Board of Directors is expressly authorized to
adopt, alter, amend and repeal the Bylaws of the Corporation, subject to the
power of the stockholders of the Corporation to alter or repeal any bylaw
whether adopted by them or otherwise; provided, however, that the affirmative
vote of 66 and 2/3 percent of the voting power of the capital stock of the
Corporation entitled to vote thereon shall be required for stockholders to
adopt, amend, alter or repeal any provision of the Bylaws of the Corporation.
Article VII: Election of Directors
-----------------------------------
Unless and except to the extent that the Bylaws of the Corporation
shall so require, the election of directors of the Corporation need not be by
written ballot.
Article VIII: Number of Directors
----------------------------------
Except as otherwise provided for or fixed by or pursuant to the
provisions of Article IV of this Certificate of Incorporation or any resolution
or resolutions of the Board of Directors providing the issuance of any class or
series of stock having a preference over the Common Stock as to dividends or
upon liquidation to elect additional directors under specified circumstances,
the Board of Directors shall consist of not fewer than 8 nor more than 15
directors, the exact number of directors within such limits to be determined
solely by the Board of Directors in the manner set forth in the Bylaws of the
Corporation. The directors, other than those who may be elected by the holders
of Preferred Stock or any other class or series of stock having a preference
over the Common Stock as to dividends or upon liquidation pursuant to the terms
of this Certificate of Incorporation or any resolution or resolutions providing
for the issuance of such class or series of stock adopted by the Board of
Directors, shall be divided into three classes, as nearly equal in number as
possible. The initial Class I, Class II and Class III Directors, or, if
applicable, their respective successors by reason of merger of the Corporation
with another corporation prior to the first annual meeting of the stockholders
following the filing of this Certificate of Incorporation, shall serve for a
term expiring at the first, second and third annual meetings of the stockholders
following the filing of this Certificate of Incorporation, respectively. Each
director in each of the initial classes of directors shall hold office until his
or her successor is duly elected and qualified. At each annual meeting of the
stockholders beginning with the first annual meeting of the stockholders
following the filing of this Certificate of Incorporation, the successors of the
class of directors whose term expires at that meeting shall be elected to hold
office for a term expiring at the annual meeting of the stockholders to be held
in the third year following the year of their election, with each director in
each such class to hold office until his or her successor is duly elected and
qualified.
3
Article IX: Director Liability
-------------------------------
A director of the Corporation shall not be liable to the Corporation
or its stockholders for monetary damages for breach of fiduciary duty as a
director, except to the extent such exemption from liability or limitation
thereof is not permitted under the General Corporation Law of the State of
Delaware as the same exists or may hereafter be amended. Any amendment,
modification or repeal of the foregoing sentence shall not adversely affect any
right or protection of a director of the Corporation hereunder in respect of any
act or omission occurring prior to the time of such amendment, modification or
repeal.
Article X: Removal of Directors
--------------------------------
Any or all directors may be removed for cause if such removal is
approved by the holders of a majority of the outstanding shares entitled to vote
at an election of directors.
Article XI: Reservation of Rights by the Corporation
-----------------------------------------------------
The Corporation hereby reserves the right at any time and from time to
time to amend, alter, change or repeal any provisions contained in this
Certificate of Incorporation, and other provisions authorized by the laws of the
State of Delaware at the time in force may be added or inserted, in the manner
now or hereafter prescribed by law, and all rights, preferences and privileges
of whatsoever nature conferred upon stockholders, directors or any other persons
whomsoever by or pursuant to this Certificate of Incorporation in its present
form or as hereafter amended are granted subject to the right reserved in this
Article XI.
Article XII: Meetings of the Stockholders
------------------------------------------
Section 1. Place of Meetings. Meetings of the stockholders may be
-----------------
held within or without the State of Delaware, as the Bylaws of the Corporation
may provide.
Section 2. Ability to Call Special Meetings. Special meetings of the
--------------------------------
stockholders may be called only by the Board of Directors, the Chair of the
Board of Directors, the Chief Executive Officer or the President of the
Corporation, and may not be called by any other person or persons.
4
Article XIII: Books of the Corporation
---------------------------------------
The books of the Corporation may be kept (subject to any provision
contained in the laws of the State of Delaware) outside of the State of Delaware
at such place or places as may be designated from time to time by the Board of
Directors or in the Bylaws of the Corporation.
Article XIV: Action by Written Consent of Stockholders Prohibited
------------------------------------------------------------------
No action that is required or permitted to be taken by the
stockholders of the Corporation at any annual or special meeting of the
stockholders may be effected by written consent of the stockholders in lieu of a
meeting of the stockholders, unless the action to be effected by written consent
of stockholders and the taking of such action by such written consent have
expressly been approved in advance by the Board of Directors of the Corporation.
Notwithstanding anything contained in this Certificate of Incorporation to the
contrary, the affirmative vote of at least 66 and 2/3 percent in voting power of
the then outstanding voting stock of the Corporation, voting together as a
single class, shall be required to amend, repeal or adopt any provision
inconsistent with this Article XIV.
[Remainder of this page intentionally left blank]
5
The undersigned Incorporator hereby acknowledges that the foregoing
Certificate of Incorporation is his act and deed on July ___, 1999.
___________________________
Peter L. Dunn
Incorporator
EXHIBIT C
BYLAWS
of
KORN/FERRY INTERNATIONAL
I N D E X
---------
i
ii
BYLAWS
for the regulation, except
as otherwise provided by statute or
its Certificate of Incorporation,
of
KORN/FERRY INTERNATIONAL
ARTICLE I. OFFICES.
-------
Section 1. REGISTERED OFFICE.
The registered office of the corporation in the State of Delaware
shall be fixed in the Certificate of Incorporation of the corporation.
Section 2. PRINCIPAL EXECUTIVE OFFICE.
The corporation's principal executive office shall be fixed and
located at such place, either within or without the State of Delaware, as the
Board of Directors of the corporation (the "Board") shall determine. The Board
is granted full power and authority to change said principal executive office
from one location to another.
Section 3. OTHER OFFICES.
The corporation may have such other offices, either within or without
the State of Delaware, as the Board may designate or the business of the
corporation may from time to time require.
ARTICLE II. STOCKHOLDERS.
------------
Section 1. PLACE OF MEETINGS.
Meetings of the stockholders shall be held either at the principal
executive office of the corporation or at any other place within or without the
State of Delaware as may be designated by the Board and filed with the Secretary
of the corporation.
Section 2. ANNUAL MEETINGS.
The annual meetings of the stockholders shall be held at such time,
date and place, either within or without the State of Delaware, as may be fixed
by the Board. At such meetings, directors shall be elected and any other proper
business may be transacted.
1
Section 3. BUSINESS WHICH MAY BE CONDUCTED AT MEETINGS OF THE
STOCKHOLDERS.
(a) Annual Meetings of the Stockholders.
-----------------------------------
(i) Nominations of persons for election to the Board and the
proposal of business to be considered by the stockholders may be made at an
annual meeting of the stockholders only (A) pursuant to the corporation's
notice of meeting (or any supplement thereto), (B) by or at the direction
of the Board or (C) by any stockholder of the corporation who was a
stockholder of record of the corporation at the time the notice provided
for in this Section 3 is delivered to the Secretary of the corporation, who
is entitled to vote at the meeting and who complies with the notice
procedures set forth in this Section 3.
(ii) For nominations or other business to be properly brought
before an annual meeting by a stockholder pursuant to clause (C) of
paragraph (a)(i) of this Section 3, the stockholder must have given timely
notice thereof in writing to the Secretary of the corporation and any such
proposed business other than the nominations of persons for election to the
Board must constitute a proper matter for stockholder action. To be timely,
a stockholder's notice shall be delivered to the Secretary at the principal
executive offices of the corporation not later than the close of business
on the 90th day nor earlier than the close of business on the 120th day
prior to the first anniversary of the preceding year's annual meeting
(provided, however, that in the event that the date of the annual meeting
is more than 30 days before or more than 70 days after such anniversary
date, notice by the stockholder must be so delivered not earlier than the
close of business on the 120th day prior to such annual meeting and not
later than the close of business on the later of the 90th day prior to such
annual meeting or the 10th day following the day on which public
announcement of the date of such meeting is first made by the corporation).
In no event shall the public announcement of an adjournment or postponement
of an annual meeting commence a new time period (or extend any time period)
for the giving of a stockholder's notice as described above. Such
stockholder's notice shall set forth: (A) as to each person whom the
stockholder proposes to nominate for election as a director all information
relating to such person that is required to be disclosed in solicitations
of proxies for election of directors in an election contest, or is
otherwise required, in each case pursuant to Regulation 14A under the
Securities Exchange Act of 1934, as amended (the "Exchange Act") and Rule
14a-11 thereunder (and such person's written consent to being named in the
proxy statement as a nominee and to serving as a director if elected); (B)
as to any other business that the stockholder proposes to bring before the
meeting, a brief description of the business desired to be brought before
the meeting, the text of the proposal or business (including the text of
any resolutions proposed for consideration and, in the event that such
business includes a proposal to amend the Bylaws of the corporation, the
language of the proposed amendment), the reasons for conducting such
business at the meeting and any material interest in such business of such
stockholder and the beneficial owner, if any, on whose behalf the proposal
is made; and (C) as to the stockholder giving the notice and the beneficial
owner, if any, on whose behalf the nomination or proposal is made (1) the
name and address of such stockholder, as they appear on the corporation's
books, and of
2
such beneficial owner, (2) the class and number of shares of capital stock
of the corporation which are owned beneficially and of record by such
stockholder and such beneficial owner, (3) a representation that the
stockholder is a holder of record of stock of the corporation entitled to
vote at such meeting and intends to appear in person or by proxy at such
meeting to propose such business or nomination, and (4) a representation
whether the stockholder or beneficial owner, if any, intends or is part of
a group which intends (x) to deliver a proxy statement and/or form of proxy
to holders of at least the percentage of the corporation's outstanding
capital stock required to approve or adopt the proposal or elect the
nominee and/or (y) otherwise to solicit proxies from stockholders in
support of such proposal or nomination. The corporation may require any
proposed nominee to furnish such other information as it may reasonably
require to determine the eligibility of such proposed nominee to serve as a
director of the corporation.
(iii) Notwithstanding anything in the second sentence of paragraph
(a)(ii) of this Section 3 to the contrary, in the event that the number of
directors to be elected to the Board of the corporation at the annual
meeting is increased and there is no public announcement by the corporation
naming the nominees for the additional directorships at least 100 days
prior to the first anniversary of the preceding year's annual meeting, a
stockholder's notice required by this Section 3 shall also be considered
timely, but only with respect to nominees for the additional directorships,
if it shall be delivered to the Secretary of the corporation at the
principal executive offices of the corporation not later than the close of
business on the 10th day following the day on which such public
announcement is first made by the corporation.
(b) Special Meetings of the Stockholders. Only such business shall be
------------------------------------
conducted at a special meeting of the stockholders as shall have been brought
before the meeting pursuant to the corporation's notice of meeting. Nominations
of persons for election to the Board may be made at a special meeting of the
stockholders at which directors are to be elected pursuant to the corporation's
notice of meeting (i) by or at the direction of the Board or (ii) provided that
the Board has determined that directors shall be elected at such meeting, by any
stockholder of the corporation who is a stockholder of record at the time the
notice provided for in this Section 3 is delivered to the Secretary of the
corporation, who is entitled to vote at the meeting and upon such election, and
who complies with the notice procedures set forth in this Section 3. In the
event the corporation calls a special meeting of the stockholders for the
purpose of electing one or more directors to the Board, any stockholder entitled
to vote in such election of directors may nominate a person or persons (as the
case may be) for election to such position(s) as specified in the corporation's
notice of meeting, if the stockholder's notice required by paragraph (a)(ii) of
this Section 3 shall be delivered to the Secretary at the principal executive
offices of the corporation not earlier than the close of business on the 120th
day prior to such special meeting and not later than the close of business on
the later of the 90th day prior to such special meeting or the 10th day
following the day on which public announcement is first made of the date of the
special meeting and of the nominees proposed by the Board to be elected at such
meeting. In no event shall the public announcement of an adjournment or
postponement of a special meeting commence a new time period (or extend any time
period) for the giving of a stockholder's notice as described above.
3
(c) General.
-------
(i) Only persons who are nominated in accordance with the
procedures set forth in this Section 3 shall be eligible to be elected at
an annual or special meeting of the stockholders of the corporation to
serve as directors and only such business shall be conducted at a meeting
of the stockholders as shall have been brought before the meeting in
accordance with the procedures set forth in this Section 3. Except as
otherwise provided by law, the Chair of the Board, as chair of the meeting,
shall have the power and duty (A) to determine whether a nomination or any
business proposed to be brought before the meeting was made or proposed, as
the case may be, in accordance with the procedures set forth in this
Section 3 (including whether the stockholder or beneficial owner, if any,
on whose behalf the nomination or proposal is made or solicited (or is part
of a group which solicited) or did not so solicit, as the case may be,
proxies in support of such stockholder's nominee or proposal in compliance
with such stockholder's representation as required by clause (a)(ii)(C)(4)
of this Section 3) and (B) if any proposed nomination or business was not
made or proposed in compliance with the Section 3, to declare that such
nomination shall be disregarded or that such proposed business shall not be
transacted.
(ii) For purposes of this Section 3, "public announcement" shall
include disclosure in a press release reported by the Dow Jones News
Service, Associated Press or comparable national news service or in a
document publicly filed by the corporation with the Securities and Exchange
Commission pursuant to Section 13, 14 or 15(d) of the Exchange Act.
(iii) Notwithstanding the foregoing provisions of this Section 3,
a stockholder shall also comply with all applicable requirements of the
Exchange Act and the rules and regulations thereunder with respect to the
matters set forth in this Section 3. Nothing in this Section 3 shall be
deemed to affect any rights (A) of stockholders to request inclusion of
proposals in the corporation's proxy statement pursuant to Rule 14a-8 under
the Exchange Act or (B) of the holders of any series of Preferred Stock to
elect directors pursuant to any applicable provisions of the Certificate of
Incorporation of the corporation.
Section 4. SPECIAL MEETINGS.
Special meetings of the stockholders may be called only by the Board,
the Chair of the Board, the Chief Executive Officer or the President, and may
not be called by any other person or persons. Upon written request delivered to
the Secretary of the corporation by any person or persons (other than the Board)
entitled to call a special meeting of the stockholders, the Secretary shall
cause notice to be given to the stockholders entitled to vote that a meeting
will be held at the time requested by the person or persons calling the meeting.
If notice of a special meeting of the stockholders is not given within 20 days
after the Secretary's receipt of the request, the person or persons entitled to
call the meeting may give the notice. Subject to the provisions of applicable
law, only such business shall be considered at a special meeting of the
stockholders as shall have been stated in the notice for such meeting.
4
Section 5. NOTICE OF ANNUAL OR SPECIAL MEETINGS.
(a) Time Periods. Written notice of each annual or special meeting of
------------
the stockholders shall be given not less than 10 nor more than 60 days before
the date of the meeting to each stockholder entitled to vote at such meeting.
Such notice shall state the place, date and hour of the meeting and (i) in the
case of the annual meeting, those matters which the Board, at the time of the
mailing of the notice, intends to present for action by the stockholders (but,
subject to Section 3 of this Article II and the provisions of applicable law,
any other matters properly brought may be presented at the meeting for action)
or (ii) in the case of a special meeting, the purpose or purposes for which the
meeting was called. The notice of any meeting at which directors are to be
elected shall include the names of nominees intended at the time of the notice
to be presented by the Board for election.
(b) Method. Notice of a stockholders' meeting shall be given: (i) in
------
writing or (ii) by United States mail, addressed to the stockholder at the
address of such stockholder appearing on the books of the corporation or given
by the stockholder to the corporation for the purpose of notice.
Notice by mail shall be deemed to have been given at the time written
notice is deposited in the United States mail, postage prepaid. Any other
written notice shall be deemed to have been given at the time it is personally
delivered to the recipient, delivered to a common carrier for transmission or
actually transmitted by the person giving the notice by electronic means to the
recipient.
Section 6. QUORUM -- REQUIRED VOTES.
Except as otherwise provided by law, the Certificate of Incorporation
of the corporation or these bylaws, at each meeting of the stockholders the
presence in person or by proxy of the holders of a majority in voting power of
the outstanding shares of stock entitled to vote at the meeting shall be
necessary and sufficient to constitute a quorum. In the absence of a quorum,
the stockholders so present may, by a majority in voting power thereof, adjourn
the meeting from time to time in the manner provided in Section 7 of this
Article II until a quorum shall attend.
Section 7. ADJOURNED MEETINGS AND NOTICE THEREOF.
Any meeting of the stockholders, annual or special, may adjourn from
time to time to reconvene at the same or some other place, and notice need not
be given of any such adjourned meeting if the time and place thereof are
announced at the meeting at which the adjournment is taken. At the adjourned
meeting the corporation may transact any business which might have been
transacted at the original meeting. If the adjournment is for more than 30
days, or if after the adjournment a new record date is fixed for the adjourned
meeting, notice of the adjourned meeting shall be given to each stockholder of
record entitled to vote at the meeting.
5
Section 8. VOTING.
The stockholders entitled to notice of any meeting or to vote at any
such meeting shall be only those persons in whose name shares stand on the stock
records of the corporation on the record date determined in accordance with
Section 9 of this Article II.
Voting at meetings of the stockholders need not be by written ballot.
At all meetings of the stockholders for the election of directors, a plurality
of the votes cast shall be sufficient to elect. All other elections and
questions shall, unless otherwise provided by the Certificate of Incorporation
of the corporation, these bylaws, the rules or regulations of any stock exchange
applicable to the corporation or as otherwise provided by law or pursuant to any
regulation applicable to the corporation, be decided by the affirmative vote of
the holders of a majority in voting power of the shares of stock of the
corporation which are present in person or by proxy and entitled to vote
thereon.
Voting shall in all cases be subject to the following provisions:
(a) The stockholders of the corporation shall not have the right to
cumulate their votes for the election of directors of the corporation.
(b) Shares held by an administrator, executor, guardian, conservator
or custodian may be voted by such holder either in person or by proxy, without a
transfer of such shares into the holder's name; and shares standing in the name
of a trust may be voted by the trustee of such trust, either in person or by
proxy, but no trustee shall be entitled to vote shares held by such trust
without a transfer of such shares into the trust's name.
(c) Shares standing in the name of a receiver may be voted by such
receiver, and shares held by or under the control of a receiver may be voted by
such receiver without the transfer thereof into the receiver's name if authority
to do so is contained in the order of the court by which such receiver was
appointed.
(d) Except where otherwise agreed in writing between the parties, a
stockholder whose shares are pledged shall be entitled to vote such shares until
the shares have been transferred into the name of the pledgee, and thereafter
the pledgee shall be entitled to vote the shares so transferred.
(e) Shares standing in the name of a minor may be voted by, and the
corporation may treat all rights incident thereto as exercisable by, the minor,
in person or by proxy, whether or not the corporation has notice, actual or
constructive, of the minor's actual age, unless a guardian of the minor's
property has been appointed and written notice of such appointment has been
given to the corporation.
(f) Shares standing in the name of another corporation, domestic or
foreign, may be voted by such officer, agent or proxyholder of such other
corporation as the bylaws of such other corporation may prescribe or, in the
absence of such provision, as the board of directors of such other corporation
may determine or, in the absence of such determination, by the chair of the
board of directors, president or any vice president of such other corporation,
or by any other person authorized to do so by the chair of the board, president
or any vice president
6
of such other corporation. Shares which are purported to be voted or any proxy
purported to be executed in the name of a corporation (whether or not any title
of the person signing is indicated) shall be presumed to be voted or the proxy
executed in accordance with the provisions of this clause, unless the contrary
is shown.
(g) Shares of the corporation owned by its subsidiaries shall not be
entitled to vote on any matter.
(h) If shares stand of record in the names of two or more persons,
whether fiduciaries, members of a partnership, joint tenants, tenants in common,
husband and wife as community property, tenants by the entirety, voting
trustees, persons entitled to vote under a stockholder voting agreement or
otherwise, or if two or more persons (including proxyholders) have the same
fiduciary relationship respecting the same shares, unless the Secretary of the
corporation is given written notice to the contrary and is furnished with a copy
of the instrument or order appointing them or creating the relationship wherein
it is so provided, their acts with respect to voting shall have the following
effect:
(i) If only one votes, such act binds all;
(ii) If more than one vote, the act of the majority so voting
binds all; or
(iii) If more than one vote, but the vote is evenly split on any
particular matter, each faction may vote the securities in question
proportionately.
If the instrument so filed or the registration of the shares shows that any such
tenancy is held in unequal interests, a majority or even split for the purpose
of this Section 8 shall be a majority or even split in interest.
Section 9. RECORD DATE.
In order that the corporation may determine the stockholders entitled
to notice of or to vote at any meeting of the stockholders or any adjournment
thereof, or to express consent to corporate action in writing without a meeting,
or entitled to receive payment of any dividend or other distribution or
allotment of any rights, or entitled to exercise any rights in respect of any
change, conversion or exchange of stock or for the purpose of any other lawful
action, the Board may fix a record date, which record date shall not precede the
date upon which the resolution fixing the record date is adopted by the Board,
and which record date: (a) in the case of determination of stockholders
entitled to vote at any meeting of stockholders or adjournment thereof, shall,
unless otherwise required by law, not be more than 60 nor less than 10 days
before the date of such meeting; (b) in the case of determination of
stockholders entitled to express consent to corporate action in writing without
a meeting, shall not be more than 10 days from the date upon which the
resolution fixing the record date is adopted by the Board and (c) in the case of
any other action, shall not be more than 60 days prior to such other action. If
no record date is fixed: (a) the record date for determining stockholders
entitled to notice of or to vote at a meeting of stockholders shall be at the
close of business on the day next preceding the day on which notice is given,
or, if notice is waived, at the close of business on the day next preceding the
day on which the meeting is held; (b) the record date for determining
stockholders entitled to express consent to corporate action in writing without
a meeting, when no prior action of the
7
Board is required by law or the Certificate of Incorporation of the corporation,
shall be the first date on which a signed written consent setting forth the
action taken or proposed to be taken is delivered to the corporation in
accordance with applicable law, or, if prior action by the Board is required by
law or the Certificate of Incorporation of the corporation, shall be at the
close of business on the day on which the Board adopts the resolution taking
such prior action and (c) the record date for determining stockholders for any
other purpose shall be at the close of business on the day on which the Board
adopts the resolution relating thereto. A determination of stockholders of
record entitled to notice of or to vote at a meeting of stockholders shall apply
to any adjournment of the meeting; provided, however, that the Board may fix a
new record date for the adjourned meeting.
Section 10. CONSENT OF ABSENTEES.
The transactions of any meeting of the stockholders, however called
and noticed, and wherever held, are as valid as though conducted at a meeting
duly held after regular call and notice, if a quorum is present either in person
or by proxy, and if, either before or after the meeting, each of the persons
entitled to vote, not present in person or by proxy, signs a written waiver of
notice, or a consent to the holding of the meeting or an approval of the minutes
thereof. All such waivers, consents or approvals shall be filed with the
corporate records or made a part of the minutes of the meeting. Attendance of a
person at a meeting shall constitute a waiver of notice of and presence at such
meeting, except when the person objects, at the beginning of the meeting, to the
transaction of any business because the meeting is not lawfully called or
convened and except that attendance at a meeting is not a waiver of any right to
object to the consideration of matters required by the General Corporation Law
of the State of Delaware to be included in the notice but not so included, if
such objection is expressly made at the meeting. Neither the business to be
transacted at nor the purpose of any regular or special meeting of the
stockholders need be specified in any written waiver of notice, consent to the
holding of the meeting or approval of the minutes thereof, except as provided in
the General Corporation Law of the State of Delaware.
Section 11. PROXIES.
Each stockholder entitled to vote at a meeting of the stockholders or
to express consent or dissent to corporate action in writing without a meeting
may authorize another person or persons to act for such stockholder by proxy,
but no such proxy shall be voted or acted upon after three years from its date,
unless the proxy provides for a longer period. A proxy shall be irrevocable if
it states that it is irrevocable and if, and only as long as, it is coupled with
an interest sufficient in law to support an irrevocable power. A stockholder
may revoke any proxy which is not irrevocable by attending the meeting and
voting in person or by filing an instrument in writing revoking the proxy or by
delivering a proxy in accordance with applicable law bearing a later date to the
Secretary of the corporation.
A proxy or consent validly delivered to the corporation shall mean any
written authorization which is signed by the person executing the proxy, as well
as any electronic transmission (to include without limitation transmissions by
facsimile and by computer messaging systems), which is authorized by a
stockholder or the stockholder's attorney in fact, which gives another person or
persons power to vote with respect to the shares of such
8
stockholder. A stockholder may authorize another person or persons to act for
such stockholder as proxy by transmitting or authorizing the transmission of a
telegram, cablegram, or other means of electronic transmission to the person who
will be the holder of the proxy or to a proxy solicitation firm, proxy support
service organization or like agent duly authorized by the person who will be the
holder of the proxy to receive such transmission, provided that any such
telegram, cablegram or other means of electronic transmission must either set
forth or be submitted with information from which it can be determined that the
telegram, cablegram or other electronic transmission was authorized by the
stockholder. If it is determined that such telegrams, cablegrams or other
electronic transmissions are valid, the inspectors or, if there are no
inspectors, such other persons making that determination shall specify the
information upon which they relied. Any copy, facsimile telecommunication or
other reliable reproduction of the writing or transmission created pursuant to
this Section 11 may be substituted or used in lieu of the original writing or
transmission for any and all purposes for which the original writing or
transmission could be used, provided that such copy, facsimile telecommunication
or other reproduction shall be a complete reproduction of the entire original
writing or transmission.
Section 12. INSPECTORS OF ELECTION.
(a) Appointment of Inspectors. In advance of any meeting of the
-------------------------
stockholders, the Board shall appoint inspectors of election to act at such
meeting and any adjournment thereof. If inspectors of election are not so
appointed, or if any persons so appointed fail to appear or refuse to act, the
Chair of the Board presiding at any such meeting may, and on the request of any
stockholder or stockholder's proxy shall, make such appointment at the meeting.
The number of inspectors shall be either one or three. If appointed at a
meeting on the request of one or more stockholders' proxies, the majority of
shares present shall determine whether one or three inspectors are to be
appointed.
(b) Duties of Inspectors. The duties of such inspectors shall
--------------------
include: determining the number of shares outstanding and the voting power of
each; determining the shares represented at the meeting; determining the
existence of a quorum; determining the authenticity, validity and effect of
proxies; receiving votes, ballots or consents; hearing and determining all
challenges and questions in any way arising in connection with the right to
vote; counting and tabulating all votes or consents; determining when the polls
shall close; determining the result; and doing such acts as may be proper to
conduct the election or vote with fairness to all stockholders. If there are
three inspectors, the decision, act or certificate of a majority is in all
respects the decision, act or certificate of all.
Section 13. CONDUCT OF MEETING.
The Chair of the Board shall preside at all meetings of the
stockholders. The Chair shall conduct each such meeting in a businesslike and
fair manner, but shall not be obligated to follow any technical, formal or
parliamentary rules or principles of procedure. The Chair's rulings on
procedural matters shall be conclusive and binding on all stockholders, unless
at the time of a ruling a request for a vote is made to the stockholders holding
shares entitled to vote and which are represented in person or by proxy at the
meeting, in which case the decision of a majority of such shares shall be
conclusive and binding on all stockholders. Without
9
limiting the generality of the foregoing, the Chair shall have all of the powers
usually vested in the chair of a meeting of stockholders.
Section 14. LIST OF STOCKHOLDERS ENTITLED TO VOTE.
The Secretary of the corporation shall prepare and make, at least 10
days before every meeting of the stockholders, a complete list of the
stockholders entitled to vote at the meeting, arranged in alphabetical order and
showing the address of each stockholder and the number of shares registered in
the name of each stockholder. Such list shall be open to the examination of any
stockholder, for any purpose germane to the meeting, during ordinary business
hours, for a period of at least 10 days prior to the meeting, either at a place
within the city where the meeting is to be held, which place shall be specified
in the notice of the meeting or, if not so specified, at the place where the
meeting is to be held. The list shall also be produced and kept at the time and
place of the meeting during the whole time thereof and may be inspected by any
stockholder who is present. Upon the willful neglect or refusal of the
directors to produce such a list at any meeting for the election of directors,
such directors shall be ineligible for election to any office at such meeting.
Except as otherwise provided by law, the stock ledger shall be the only evidence
as to who are the stockholders entitled to examine the stock ledger, the list of
stockholders or the books of the corporation, or to vote in person or by proxy
at any meeting of the stockholders.
Section 15. CONSENT OF STOCKHOLDERS IN LIEU OF MEETING.
(a) Any action required to be taken at any annual or special meeting
of the stockholders of the corporation, or any action which may be taken at any
annual or special meeting of the stockholders duly called in accordance with the
Certificate of Incorporation of the corporation, may be taken without a meeting,
without prior notice and without a vote, if a consent or consents in writing,
setting for the action so taken, shall be signed by the holders of outstanding
stock having not less than the minimum number of votes that would be necessary
to authorize or take such action at a meeting at which all shares entitled to
vote thereon were present and voted and shall be delivered to the corporation by
delivery to its registered office in Delaware, its principal place of business,
or an officer or agent of the corporation having custody of the book in which
proceedings of meetings of the stockholders are recorded. Delivery made to the
corporation's registered office shall be made by hand or by certified or
registered mail, return receipt requested.
(b) Every written consent shall bear the date of signature of each
stockholder who signs the consent and no written consent shall be effective to
take the corporate action referred to therein unless, within 60 days of the date
the earliest dated consent is delivered to the corporation, a written consent or
consents signed by a sufficient number of holders to take action are delivered
to the corporation in the manner prescribed in paragraph (c) of this Section 15.
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(c) In order that the corporation may determine the stockholders
entitled to consent to corporate action in writing without a meeting, the Board
may fix a record date, which record date shall not precede the date upon which
the resolution fixing the record date is adopted by the Board, and which date
shall not be more than 10 days after the date upon which the resolution fixing
the record date is adopted by the Board. Any stockholder of record seeking to
have the stockholders authorize or take corporate action by written consent
shall, by written notice to the Secretary, request the Board to fix a record
date. The Board shall promptly, but in all events within 10 days after the date
on which such a request is received, adopt a resolution fixing the record date.
If no record date has been fixed by the Board within 10 days of the date on
which such a request is received, the record date for determining stockholders
entitled to consent to corporate action in writing without a meeting, when no
prior action by the Board is required by applicable law, shall be the first date
on which a signed written consent setting forth the action taken or proposed to
be taken is delivered to the corporation in accordance with paragraphs (a) and
(b) of this Section 15. If no record date has been fixed by the Board and prior
action by the Board is required by applicable law, the record date for
determining stockholders entitled to consent to corporate action in writing
without a meeting shall be at the close of business on the date on which the
Board adopts the resolution taking such prior action.
(d) Within 5 business days after receipt of the earliest dated consent
delivered to the corporation in the manner provided in this Section 15, the
corporation, shall retain nationally recognized independent inspectors of
elections for the purposes of performing a ministerial review of the validity of
consents and any revocations thereof. The cost of retaining inspectors of
election shall be borne by the corporation.
(e) At any time that stockholders soliciting consents in writing to
corporate action have a good faith belief that the requisite number of valid and
unrevoked consents to authorize or take the action specified has been received
by them, the consents shall be delivered by the soliciting stockholders of the
corporation's registered office in the State of Delaware or principal place of
business or to the Secretary of the corporation, together with a certificate
stating their belief that the requisite number of valid and unrevoked consents
has been received as of a specific date, which date shall be identified in the
certificate. In the event that delivery shall be made to the corporation's
registered office in Delaware, such delivery shall be made by hand or by
certified or registered mail, return receipt requested. Upon receipt of such
consents, the corporation shall cause the consents to be delivered promptly to
the inspectors of election. The corporation also shall deliver promptly to the
inspectors of election any revocations of consents in its possession, custody or
control as of the time of receipt of the consents.
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(f) As promptly as practicable after the consents and revocations are
received by them, the inspectors of election shall issue a preliminary report to
the corporation stating: (i) the number of shares represented by valid and
unrevoked consents; (ii) the number of shares represented by invalid consents;
(iii) the number of shares represented by invalid revocations and (iv) the
number of shares entitled to submit consents as of the record date. Unless the
corporation and the soliciting stockholders agree to a shorter or longer period,
the corporation and the soliciting stockholders shall have 5 [business] days to
review the consents and revocations and to advise the inspectors and the
opposing party in writing as to whether they intend to challenge the preliminary
report. If no timely written notice of an intention to challenge the
preliminary report is received, the inspectors shall certify the preliminary
report (as corrected or modified by virtue or the detection by the inspectors of
clerical errors) as their final report and deliver it to the corporation. If
the corporation or the soliciting stockholders give timely written notice of an
intention to challenge the preliminary report, a challenge session shall be
scheduled by the inspectors as promptly as practicable. A transcript of the
challenge session shall be recorded by a certified court reporter. Following
completion of the challenge session, the inspectors shall issue as promptly as
practicable their final report and deliver it to the corporation. A copy of the
final report shall be included in the book in which the proceedings of meetings
of the stockholders are required.
(g) The corporation shall give prompt notice to the stockholders of
the results of any consent solicitation or the taking of corporate action
without a meeting by less than unanimous written consent.
(h) This Section 15 shall in no way impair or diminish the right of
any stockholder or director, or any officer whose title to office is contested,
to contest the validity of any consent or revocation thereof, or to take any
other action with respect thereto.
ARTICLE III. DIRECTORS.
---------
Section 1. POWERS.
Subject to limitations of the Certificate of Incorporation of the
corporation, of these bylaws and of the General Corporation Law of the State of
Delaware relating to action required to be approved by the stockholders or by
the outstanding shares, the business and affairs of the corporation shall be
managed by or under the direction of the Board and it shall have the final
authority in matters of strategy and policy matters for the corporation.
The Board may delegate management duties for the operation of the
business of the corporation to those persons to whom authority is properly
delegated by the Board, including officers of the company, provided that the
business and affairs of the corporation shall be managed and all corporate
powers shall be exercised under the ultimate direction of the Board. Without
prejudice to such general powers, but subject to the same limitations, it is
hereby expressly declared that the Board shall have the following powers in
addition to the other powers enumerated in these bylaws:
12
(a) To select and remove all the other officers (in accordance with
the provisions of these bylaws), agents and employees of the corporation;
prescribe the powers and duties for them as may not be inconsistent with law,
the Certificate of Incorporation of the corporation or these bylaws; fix their
compensation and require from them an affidavit providing for the good faith
exercise of their duties only in the best interests of the corporation.
(b) To conduct, manage and control the affairs and business of the
corporation and to make such rules and regulations therefor not inconsistent
with law, the Certificate of Incorporation of the corporation or these bylaws,
as they may deem best.
(c) To adopt, alter, amend and repeal these bylaws from time to time
as they may deem best.
(d) To adopt, make and use a corporate seal, and to prescribe the
forms of certificates of stock, and to alter the form of such seal and of such
certificates from time to time as they may deem best.
(e) To authorize the issuance of shares of stock of the corporation
from time to time, upon such terms and for such consideration as may be lawful.
(f) To borrow money and incur indebtedness for the purposes of the
corporation, and to cause to be executed and delivered, in the corporate name,
promissory notes, bonds, debentures, deeds of trust, mortgages, pledges,
hypothecations or other evidences of debt and securities therefor.
Section 2. NUMBER OF DIRECTORS.
The authorized number of directors shall be as set forth in the
Certificate of Incorporation of the corporation. The Board shall fix the exact
number of directors by resolution duly adopted by the Board.
Section 3. NOMINATION, ELECTION, QUALIFICATION AND TERM OF OFFICE.
(a) Eligibility for Election as Director. Only persons who are
------------------------------------
nominated by, or at the direction of the Board or the Chair of the Board, or by
a stockholder who has given timely written notice to the Secretary of the
corporation in accordance with Section 3 of Article II of these bylaws, will be
eligible for election as directors of the corporation.
(b) Meetings at which Directors May Be Elected. The directors shall
------------------------------------------
be elected at each annual meeting of the stockholders, but if any such annual
meeting is not held or the directors are not elected thereat, the directors may
be elected at any special meeting of the stockholders called for that purpose.
(c) Classes of the Board of Directors. The Board shall be divided
---------------------------------
into three classes in accordance with the provisions of the Certificate of
Incorporation of the corporation.
13
(d) Qualified Directors. For a person to be qualified to serve as a
-------------------
director of the corporation, such person need not be an employee or stockholder
of the corporation during his or her directorship.
(e) Length of Term for Directors. At each annual meeting of the
----------------------------
stockholders beginning with the first annual meeting of the stockholders, the
successors of the class of directors whose term expires at that meeting shall be
elected to hold office for a term expiring at the annual meeting of stockholders
to be held in the third year following the year of their election, with each
director in each class to hold office until his or her successor is duly elected
and qualified or until his or her earlier death, resignation or removal.
(f) Removal of Directors. Any director, or the entire Board, may be
--------------------
removed only for cause, by the affirmative vote of a majority of the shares then
entitled to vote at the election of directors.
Section 4. VACANCIES.
Any director may resign, to be effective upon giving written notice to
the Board or to the Chair of the Board, President or Secretary of the
corporation, unless the notice specifies a later time for the effectiveness of
such resignation. If the resignation is effective at a future time, a successor
may be elected to take office when the resignation becomes effective.
Any newly-created directorship resulting from an increase in the
authorized number of directors or any vacancies in the Board occurring by reason
of death, resignation, retirement, disqualification or removal may be filled by
a majority of the remaining directors, though less than a quorum, or by a sole
remaining director, and each director so elected shall hold office until the
next annual meeting at which the class of which he is a member becomes subject
to re-election and until such director's successor has been elected and
qualified.
A vacancy or vacancies in the Board shall be deemed to exist in case
of the death, resignation or removal of any director, or if the authorized
number of directors is increased, or if the stockholders fail, at any annual or
special meeting of the stockholders at which any director or directors are
elected, to elect the full authorized number of directors to be voted for at
that meeting.
The stockholders may elect a director or directors at any time to fill
any vacancy or vacancies not filled by the directors.
No reduction of the authorized number of directors shall have the
effect of removing any director prior to the expiration of the director's term
of office.
Section 5. PLACE OF MEETING.
Regular or special meetings of the Board shall be held at any place
within or without the State of Delaware which has been designated from time to
time by the Board. In the absence of such designation, regular meetings shall
be held at the principal executive office of the corporation.
14
Section 6. REGULAR MEETINGS.
Following each annual meeting of the stockholders, the Board shall
hold a regular meeting for the purpose of organization, election of officers and
the transaction of other business.
Other regular meetings of the Board shall be held without call on such
dates and at such times as may be fixed by the Board. Call and notice of all
regular meetings of the Board are hereby dispensed with.
Section 7. SPECIAL MEETINGS.
Special meetings of the Board for any purpose or purposes may be
called at any time by the Chair, the Chief Executive Officer, any Vice Chair,
the President, the Secretary of the corporation or by any two directors.
Special meetings of the Board shall be held upon four days' written
notice or at least twenty-four hours' notice given personally or by telephone,
including a voice messaging system or other system or technology designed to
record and communicate messages, telegraph, facsimile, electronic mail or other
electronic means of communication. Any written notice shall be addressed or
delivered to each director at such director's address as it is shown upon the
records of the corporation or as may have been given to the corporation by the
director for purposes of notice or, if such address is not shown on such records
or is not readily ascertainable, at the place in which the meetings of the
directors are regularly held.
Notice by mail shall be deemed to have been given at the time a
written notice is deposited in the United States mails, postage prepaid. Any
other written notice shall be deemed to have been given at the time it is
personally delivered to the recipient or is delivered to a common carrier for
transmission, or actually transmitted by the person giving the notice by
electronic means to the recipient. Oral notice shall be deemed to have been
given at the time it is communicated, in person or by telephone or wireless, to
the recipient or to a person at the office of the recipient who the person
giving the notice has reason to believe will promptly communicate it to the
recipient.
Section 8. QUORUM.
A majority of the whole Board constitutes a quorum of the Board for
the transaction of business, except to adjourn as provided in Section 11 of this
Article III. Every act or decision done or made by a majority of the directors
present at a meeting duly held at which a quorum is present shall be regarded as
the act of the Board, unless a greater number is required by law or by the
Certificate of Incorporation of the corporation. A meeting at which a quorum is
initially present may continue to transact business notwithstanding the
withdrawal of directors, if any action taken is approved by at least a majority
of the required quorum for such meeting.
15
Section 9. PARTICIPATION IN MEETINGS BY COMMUNICATIONS EQUIPMENT.
(a) Participation by Conference Telephone. Members of the Board, or
-------------------------------------
any committee thereof, may participate in a meeting through the use of
conference telephones. Participation in such a meeting shall constitute
presence in person at that meeting as long as all members participating in such
meeting are able to hear one another.
(b) Participation by Electronic Video Screen Equipment or Other
-----------------------------------------------------------
Similar Communications Equipment. Members of the Board may participate in a
- --------------------------------
meeting through the use of electronic video screen equipment or other similar
communications equipment. Participation in such a meeting shall constitute
presence in person at that meeting by a member of the Board if all of the
following apply:
(i) each member participating in the meeting can communicate
with all of the other members concurrently;
(ii) each member is provided the means of participating in all
matters before the Board, including, without limitation, the capacity to
propose, or to interpose an objection to, a specific action to be taken by
the corporation; and
(iii) the corporation adopts and implements some means of
verifying both of the following: (x) a person participating in the meeting
is a director or other person entitled to participate in the Board meeting,
and (y) all actions of, or votes by, the Board are taken or cast only by
the directors and not by persons who are not directors.
Section 10. WAIVER OF NOTICE.
Notice of a meeting need not be given to any director who signs a
waiver of notice or a consent to holding the meeting or an approval of the
minutes thereof, whether before or after the meeting, or who attends the meeting
without protesting, prior thereto or at its commencement, the lack of notice to
such director. All such waivers, consents and approvals shall be filed with the
corporate records or made a part of the minutes of the meeting.
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Section 11. ADJOURNMENT.
A majority of the directors present, whether or not a quorum is
present, may adjourn any directors' meeting to another time and place. Notice
of the time and place of an adjourned meeting need not be given to absent
directors if the time and place has been fixed at the meeting adjourned, except
as provided in the next sentence. If the meeting is adjourned for more than 24
hours, notice of any adjournment to another time or place shall be given prior
to the time of the commencement of the adjourned meeting to the directors who
were not present at the time of the adjournment.
Section 12. FEES AND COMPENSATION.
Directors and members of committees may receive such compensation, if
any, for their services, and such reimbursement for expenses, as may be fixed or
determined by the Board. The corporation shall not compensate directors or
committee members who are also employees of the corporation.
Section 13. ACTION WITHOUT MEETING.
Any action required or permitted to be taken by the Board may be taken
without a meeting if all members of the Board shall consent in writing to such
action. Such consent or consents shall have the same effect as a unanimous vote
of the Board and shall be filed with the minutes of the proceedings of the
Board.
Section 14. RIGHTS OF INSPECTION.
Every director shall have the right at any reasonable time to examine
the corporation's stock ledger, a list of the stockholders of the corporation
and the corporation's other books and records for any purpose reasonably related
to such director's position as a director and to make copies or extracts
therefrom. Such inspection by a director may be made in person or by such
director's agent or attorney.
Section 15. COMMITTEES.
The Board may appoint one or more committees, each consisting of one
or more directors, and delegate to such committees any of the powers and
authority of the Board, except no such committee shall have power or authority
in reference to the following:
(a) Approving, adopting or recommending to the stockholders any action
or matter expressly required by the General Corporation Law of the State of
Delaware to be submitted to the stockholders for approval; or
(b) Adopting, altering, amending or repealing these bylaws or any of
them.
17
Any such committee must be designated, and the members or alternate
members thereof appointed, by resolution adopted by a majority of the whole
Board and any such committee may be designated an Executive Committee or by such
other name as the Board shall specify. Alternate members of a committee may
replace any absent member at any meeting of the committee. The Board shall have
the power to prescribe the manner in which proceedings of any such committee
shall be conducted. In the absence of any such prescription, such committee
shall have the power to prescribe the manner in which its proceedings shall be
conducted. Unless the Board or such committee shall otherwise provide, the
regular and special meetings and other action of any such committee shall be
governed by the provisions of this Article III applicable to meetings and
actions of the Board. Minutes shall be kept of each meeting of each committee.
Section 16. STANDING COMMITTEES.
The Board may have the following standing committees: Audit,
Executive, Nominating and Compensation.
(a) Audit Committee. The Audit Committee shall be responsible for
---------------
reviewing the activities of the corporation to ensure that such activities are
being conducted within the boundaries of corporate policy and appropriate
regulatory and legal requirements and for ensuring the integrity of financial
information supplied to the stockholders. The Audit Committee also shall make
recommendations to the Board after consultation with the Chief Financial Officer
as to the selection of independent public accountants to examine the
consolidated financial statements of the corporation and its subsidiaries. The
Audit Committee also shall discuss with the independent public accountants the
scope of their examination, recommend supplemental audit reviews or audit steps
as deemed desirable, and review the accounting policies of the corporation. The
Audit Committee also shall be available to receive reports, suggestions,
questions and recommendations from the independent public accountants, the Chief
Financial Officer and the General Counsel. It also shall confer with those
parties in order to assure the sufficiency and effectiveness of the programs
being followed by corporate officers in the area of compliance with the law and
conflicts of interest.
(b) Executive Committee of the Board. The Executive Committee of the
--------------------------------
Board shall have all of the authority of the Board, except with respect to the
approval of any action which requires stockholder approval under the General
Corporation Law of the State of Delaware.
18
(c) Nominating Committee. The Nominating Committee shall recommend to
--------------------
the Board criteria for the selection of candidates to serve on the Board,
evaluate all proposed candidates, recommend to the Board nominees to fill
vacancies on the Board, and prior to the annual meeting of the stockholders
recommend to the Board a slate of nominees for election to the Board by the
stockholders of the Corporation at the annual meeting. In carrying out its
duties, the committee shall seek possible candidates for the Board and otherwise
aid in attracting qualified candidates to the Board. The committee shall be
available to the Chair or President and other members of the Board for
consultation concerning candidates for the Board. The committee shall
periodically review, assess and make recommendations to the Board with regard to
the size and composition of the Board. The committee shall have all additional
powers necessary to carry out its responsibilities and such other duties as may
be assigned by the Board from time to time.
The Nominating Committee also shall have the authority to administer a
self-appraisal process by members of the Board and make a report thereon to the
Board, from time to time, or as designated by the Board.
(d) Compensation Committee. The Compensation Committee shall have the
----------------------
responsibility for the compensation of the senior executives of the Corporation
including salaries and benefits. In carrying out its duties, the committee
shall review and approve overall executive compensation programs which are
market competitive for the officers of the Corporation, and shall review the
specific salaries of Executive Vice Presidents and senior vice presidents
subject to the ratification of the salary programs established for the Chair and
the Chief Executive Officer of the Corporation by the Board acting as a whole.
The committee shall also review and make recommendations to the Board with
respect to the Corporation's overall compensation program for directors and
officers, including salaries, employee benefit plans, stock options granted,
equity incentive plans and payment of bonuses. The committee shall also have
all additional powers necessary to carry out its responsibilities and such other
duties as may be assigned by the Board from time to time.
ARTICLE IV. OFFICERS.
--------
Section 1. OFFICERS.
The senior officers of the corporation shall be a Chair of the Board,
a Chief Executive Officer, a Chief Operating Officer, a Chief Financial Officer
and a Secretary. The corporation may also have, at the discretion of the Board,
a President, a Chief Administrative Officer, one or more Vice Chairs of the
Board, one or more Vice Presidents, one or more Assistant Secretaries,
Treasurers, Assistant Treasurers, and such other officers as may be elected or
appointed in accordance with the provisions of Section 2 of this Article IV.
19
Section 2. ELECTION OR APPOINTMENT.
The senior officers of the corporation shall be elected by the Board
on an annual basis. In addition, other officers may be elected or appointed in
accordance with the provisions of Section 5 of this Article IV. All officers,
whether elected or appointed, shall be chosen annually by, and shall serve at
the pleasure of, the Board, and shall hold their respective offices until their
resignation, removal or other disqualification from service, or until their
respective successors shall be elected.
The Board may elect, and may empower the Chair or the Chief Executive
Officer to appoint, such other subordinate officers as the business of the
corporation may require, each of whom shall hold office for such period and
shall have such authority and perform such duties as are provided in these
bylaws or as the Board may from time to time determine.
Section 3. ELECTED SENIOR OFFICERS.
The elected senior officers of the corporation shall have those
positions and those duties named below in this Section 3. Further, in each
case, the named officer also shall have the general powers and duties of
governance or management usually vested in that office and such other powers and
duties as may be prescribed by the Board.
In the case of the Chair of the Board, the Chair shall, if present,
preside at all meetings of the Board and shall preside at all meetings of the
stockholders. The Chair of the Board has the general powers and duties of
management usually vested in the office of chair of the board of a corporation
and such other powers and duties as may be prescribed by the Board. The Chief
Executive Officer shall be the senior executive officer of the corporation. The
President has the general powers and duties of management of the corporation.
The Chief Operating Officer shall have the general powers and duties to carry
out general administrative and financial management of the corporation. The
Board also may elect one or more Vice Chairs of the Board who, in the absence of
the Chair, will assume the duties of that position.
In the absence or disability of the Chief Executive Officer, the
President, the Chief Operating Officer, the Vice Chair, or any Executive Vice
President designated by the Board, shall perform all the duties of the Chief
Executive Officer and, when so acting, shall have all the powers of, and be
subject to all the restrictions upon, the Chief Executive Officer.
The Secretary shall keep or cause to be kept, at the principal
executive office and such other place as the Board may order, a book of minutes
of all meetings of stockholders, the Board and its committees, with the time and
place of holding, whether regular or special, and if special, how authorized,
the notice thereof given, the names of those present at Board and committee
meetings, the number of shares present or represented at stockholders' meetings,
and the proceedings thereof. The Secretary shall keep, or cause to be kept, a
copy of these bylaws of the corporation at the principal executive office or
such other place as the Board may order.
20
The Secretary shall keep, or cause to be kept, at the principal
executive office or at the office of the corporation's transfer agent or
registrar, if one has been appointed, a share register, or a duplicate share
register, showing the names of the stockholders and their addresses, the number
and classes of shares held by each, the number and date of certificates issued
for the same, and the number and date of cancellation of every certificate
surrendered for cancellation.
The Secretary shall give, or cause to be given, notice of all meetings
of the stockholders and of the Board and any committees thereof required by
these bylaws or by law to be given, shall keep the seal of the corporation in
safe custody, and shall have such other powers and perform such other duties as
may be prescribed by the Board.
The Chief Financial Officer shall keep and maintain, or cause to be
kept and maintained, adequate and correct accounts of the properties and
business transactions of the corporation, and shall send or cause to be sent to
the stockholders of the corporation such financial statements and reports as are
by law or these bylaws required to be sent to them. The books of account shall
at all times be open to inspection by any director.
The Chief Financial Officer shall deposit all moneys and other
valuables in the name and to the credit of the corporation with such
depositaries as may be designated by the Board. The Chief Financial Officer
shall disburse the funds of the corporation as may be ordered by the Board,
shall render to the Chair of the Board, the Chief Executive Officer, the
President and the directors, whenever they request it, an account of all
transactions as Chief Financial Officer and of the financial condition of the
corporation, and shall have such other powers and perform such other duties as
may be prescribed by the Board.
Section 4. REMOVAL AND RESIGNATION.
Any officer elected by the Board may be removed only by the Board,
either with or without cause, at any time. In the case of an officer not
elected by the Board, such an officer may be removed by another officer upon
whom such power of removal may be conferred by the Board. Any removal shall be
without prejudice to the rights, if any, of the officer under any contract of
employment of the officer.
Any officer may resign at any time by giving written notice to the
corporation, subject to the rights of the corporation under any contract between
the corporation and the officer. Any such resignation shall take effect at the
date of the receipt of such notice or at any later time specified therein and,
unless otherwise specified therein, the acceptance of such resignation shall not
be necessary to make it effective.
Section 5. VACANCIES.
A vacancy in any office because of death, resignation, removal,
disqualification or any other cause shall be filled in the manner prescribed in
these bylaws for regular election or appointment to such office.
21
ARTICLE V. OTHER PROVISIONS.
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Section 1. INSPECTION OF CORPORATE RECORDS.
Any stockholder of record, in person or by attorney or other agent,
shall, upon written demand under oath stating the purpose thereof, have the
right during the usual hours for business to inspect for any proper purpose the
corporation's stock ledger, a list of its stockholders, and its other books and
records and to make copies or extracts therefrom. A proper purpose shall mean a
purpose reasonably related to such person's interest as a stockholder. In every
instance where an attorney or other agent is the person who seeks the right to
inspection, the demand under oath shall be accompanied by a power of attorney or
such other writing that authorizes the attorney or other agent to so act on
behalf of the stockholder. The demand under oath shall be directed to the
corporation at its registered office in the State of Delaware or at its
principal executive office.
Section 2. INSPECTION OF BYLAWS.
The corporation shall keep in its principal executive office in the
State of California, or if its principal executive office is not in such State
at its principal business office in such State, the original or a copy of these
bylaws as amended to date, which shall be open to inspection by stockholders at
all reasonable times during office hours. If the principal executive office of
the corporation is located outside the State of California and the corporation
has no principal business office in such state, it shall upon the written
request of any stockholder furnish to such stockholder a copy of these bylaws as
amended to date.
Section 3. ENDORSEMENT OF DOCUMENTS; CONTRACTS.
Subject to the provisions of applicable law, any note, mortgage,
evidence of indebtedness, contract, share certificate, conveyance or other
instrument in writing and any assignment or endorsements thereat executed or
entered into between the corporation and any other person, when signed by the
Chair of the Board, the Chief Executive Officer, the Chief Operating Officer,
the President, the Vice Chair, an Executive Vice President, or any senior vice
president and the Secretary, any Assistant Secretary, the Chief Financial
Officer or any Assistant Treasurer of the corporation shall be valid and binding
on the corporation in the absence of actual knowledge on the part of the other
person that the signing officers had no authority to execute the same. Any such
instruments may be signed by any other person or persons and in such manner as
from time to time shall be determined by the Board, and, unless so authorized by
the Board, no officer, agent or employee shall have any power or authority to
bind the corporation by any contract or engagement or to pledge its credit or to
render it liable for any purpose or amount.
22
Section 4. CERTIFICATES OF STOCK.
Every holder of shares of the corporation shall be entitled to have a
certificate signed in the name of the corporation by the Chair of the Board, the
President, the Vice Chair and by the Chief Financial Officer or an Assistant
Treasurer or the Secretary or an Assistant Secretary, certifying the number of
shares and the class or series of shares owned by the stockholder. Any or all
of the signatures on the certificate may be facsimile. If any officer, transfer
agent or registrar who has signed or whose facsimile signature has been placed
upon a certificate shall have ceased to be such officer, transfer agent or
registrar before such certificate is issued, it may be issued by the corporation
with the same effect as if such person were an officer, transfer agent or
registrar at the date of issue.
Certificates for shares may be issued prior to full payment under such
restrictions and for such purposes as the Board may provide; provided, however,
that on any certificate issued to represent any partly paid shares, the total
amount of the consideration to be paid therefor and the amount paid thereon
shall be stated.
Except as provided in this Section 4, no new certificate for shares
shall be issued in lieu of an old one unless the latter is surrendered and
cancelled at the same time. The Board may, however, if any certificate for
shares is alleged to have been lost, stolen or destroyed, authorize the issuance
of a new certificate in lieu thereof, and the corporation may require that the
corporation be given a bond or other adequate security sufficient to indemnify
it against any claim that may be made against it (including expense or
liability) on account of the alleged loss, theft or destruction of such
certificate or the issuance of such new certificate.
The Company shall not register the transfer of any securities issued
in reliance on Regulation S promulgated under the Securities Act of 1933, as
amended, unless the Company has received such assurances as it may reasonably
request that the transfer of such securities was made in accordance with the
provisions of such Regulation S.
Section 5. REPRESENTATION OF SHARES OF OTHER CORPORATIONS.
The Chair of the Board or any other officer or officers authorized by
the Board or the Chair of the Board are each authorized to vote, represent and
exercise on behalf of the corporation all rights incident to any and all shares
of any other corporation or corporations standing in the name of the
corporation. The authority herein granted may be exercised either by any such
officer in person or by any other person authorized so to do by proxy or power
of attorney duly executed by said officer.
23
Section 6. STOCK PURCHASE PLANS.
The corporation may adopt and carry out a stock purchase plan or
agreement or stock option plan or agreement providing for the issue and sale for
such consideration as may be fixed of its unissued shares, or of issued shares
acquired or to be acquired, to one or more of the employees or directors of the
corporation or of a subsidiary or to a trustee on their behalf and for the
payment for such shares in installments or at one time, and may provide for
aiding any such persons in paying for such shares by compensation for services
rendered, promissory notes or otherwise.
Any such stock purchase plan or agreement or stock option plan or
agreement may include, among other features, the fixing of eligibility for
participation therein, the class and price of shares to be issued or sold under
the plan or agreement, the number of shares which may be subscribed for, the
method of payment therefor, the reservation of title until full payment
therefor, the effect of the termination of employment, an option or obligation
on the part of the corporation to repurchase the shares upon termination of
employment, restrictions upon transfer of the shares, the time limits of and
termination of the plan, and any other matters, not in violation of applicable
law, as may be included in the plan as approved or authorized by the Board or
any committee of the Board.
Section 7. ELECTION OF FISCAL YEAR.
Upon the election of the Board, the Board may authorize the change of
the current Fiscal Year of the Corporation to begin on January 1 of each year
and end on December 31 of each subsequent year.
Section 8. CONSTRUCTION AND DEFINITIONS.
Unless the context otherwise requires, the general provisions, rules
of construction and definitions contained in the General Corporation Law of the
State of Delaware shall govern the construction of these bylaws.
Section 9. AMENDMENTS.
These bylaws may be altered, amended or repealed either by the
approval of 66 and 2/3 percent of the outstanding shares of the corporation
entitled to vote on such action or, subject to the provisions of the General
Corporation Law of the State of Delaware, by the approval of the Board.
Section 10. LOANS TO OFFICERS AND OTHER EMPLOYEES.
The corporation may lend money to, guarantee any obligation of or
otherwise assist any officer or other employee of the corporation or of any of
its subsidiaries, including any officer or employee who is director of the
corporation or any of its subsidiaries, whenever, in the judgment of the Board,
such loan, guaranty or assistance may reasonably be expected to benefit the
corporation. The loan, guaranty or other assistance may be with or without
interest and may be unsecured or secured in such manner as the Board shall
approve, including, without limitation, a pledge of shares of stock of the
corporation.
24
Section 11. EMERGENCY BYLAWS.
(a) The Board may adopt emergency bylaws, subject to repeal or change
by action of the stockholders, which shall, notwithstanding any different
provision in the General Corporation Law of the State of Delaware, the
Certificate of Incorporation of the corporation or these bylaws, be operative
during any emergency resulting from an attack on the United States or on a
locality in which the corporation conducts its business or customarily holds
meetings of the Board or its stockholders, or during any nuclear or atomic
disaster, or during the existence of any catastrophe, or other similar emergency
condition, as a result of which a quorum of the Board or a standing committee
thereof cannot readily be convened for action. The emergency bylaws may make
any provision that may be practical and necessary for the circumstances of the
emergency, including provisions that:
(1) A meeting of the Board or a committee thereof may be called
by any officer or director in such manner and under such conditions as
shall be prescribed in the emergency bylaws;
(2) The director or directors in attendance at the meeting, or
any greater number fixed by the emergency bylaws, shall constitute a
quorum; and
(3) The officers or other persons designated on a list approved
by the Board before the emergency, all in such order of priority and
subject to such conditions and for such period of time (not longer than
reasonably necessary after the termination of the emergency) as may be
provided in the emergency bylaws or in the resolution approving the list,
shall, to the extent required to provide a quorum at any meeting of the
Board, be deemed directors for such meeting.
(b) The Board, either before or during any such emergency, may
provide, and from time to time modify, lines of succession in the event that
during such emergency any or all officers or agents of the corporation shall for
any reason be rendered incapable of discharging their duties.
(c) The Board, either before or during any such emergency, may,
effective in the emergency, change the head office or designate several
alternative head offices or regional offices, or authorize the officers so to
do.
(d) No officer, director or employee acting in accordance with any
emergency bylaws shall be liable except for willful misconduct.
(e) To the extent not inconsistent with any emergency bylaws so
adopted, these bylaws shall remain in effect during any emergency and upon its
termination the emergency bylaws shall cease to be operative.
(f) Unless otherwise provided in emergency bylaws, notice of any
meeting of the Board during such an emergency may be given only to such of the
directors as it may be feasible to reach at the time and by such means as may be
feasible at the time, including publication or radio.
25
(g) To the extent required to constitute a quorum at any meeting of
the Board during such an emergency, the officers of the corporation who are
present shall, unless otherwise provided in emergency bylaws, be deemed, in
order of rank and within the same rank in order of seniority, directors for such
meeting.
(h) Nothing contained in this Section 11 shall be deemed exclusive of
any other provisions for emergency powers consistent with the General
Corporation Law of the State of Delaware.
ARTICLE VI. INDEMNIFICATION.
------------ ---------------
Section 1. RIGHT TO INDEMNIFICATION.
The corporation shall indemnify and hold harmless, to the fullest
extent permitted by applicable law as it presently exists or may hereafter be
amended, any person (an "Indemnitee") who was or is made or is threatened to be
made a party or is otherwise involved in any action, suit or proceeding, whether
civil, criminal, administrative or investigative (a "proceeding"), by reason of
the fact that he, or a person for whom he is the legal representative, is or was
a director or officer of the corporation or, while a director or officer of the
corporation, is or was serving at the written request of the corporation as a
director, officer, employee or agent of another corporation or of a partnership,
joint venture, trust, enterprise or non-profit entity, including service with
respect to employee benefit plans, against all liability and loss suffered and
expenses (including attorneys' fees) reasonably incurred by such Indemnitee.
Notwithstanding the preceding sentence, except as otherwise provided in Section
3 of this Article VI, the corporation shall be required to indemnify an
Indemnitee in connection with a proceeding (or part thereof) commenced by such
Indemnitee only if the commencement of such proceeding (or part thereof) by the
Indemnitee was authorized by the Board.
Section 2. PREPAYMENT OF EXPENSES.
The corporation shall pay the expenses (including attorneys' fees)
incurred by an Indemnitee in defending any proceeding in advance of its final
disposition, provided, however, that, to the extent required by law, such
-------- -------
payment of expenses in advance of the final disposition of the proceeding shall
be made only upon receipt of an undertaking by the Indemnitee to repay all
amounts advanced if it should be ultimately determined that the Indemnitee is
not entitled to be indemnified under this Article VI or otherwise.
Section 3. CLAIMS.
If a claim for indemnification of advancement of expenses under this
Article VI is not paid in full within 60 days after a written claim therefor by
the Indemnitee has been received by the corporation, the Indemnitee may file
suit to recover the unpaid amount of such claim and, if successful in whole or
in part, shall be entitled to be paid the expense of prosecuting such claim. In
any such action the corporation shall have the burden of proving that the
Indemnitee is not entitled to the requested indemnification or advancement of
expenses under applicable law.
26
Section 4. NON-EXCLUSIVITY OF RIGHTS.
The rights conferred on any Indemnitee by this Article VI shall not be
exclusive of any other rights which such Indemnitee may have or hereafter
acquire under any statute, provision of the Certificate of Incorporation of the
corporation, these bylaws, agreement, vote of the stockholders or disinterested
directors or otherwise.
Section 5. OTHER SOURCES.
The corporation's obligation, if any, to indemnify or to advance
expenses to any Indemnitee who was or is serving at its request as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust, enterprise or non-profit entity shall be reduced by any amount such
Indemnitee may collect as indemnification or advancement of expenses from such
other corporation, partnership, joint venture, trust, enterprise or non-profit
entity.
Section 6. AMENDMENT OR REPEAL.
Any repeal or modification of the foregoing provisions of this Article
VI shall not adversely affect any right or protection hereunder of any
Indemnitee in respect of any act or omission occurring prior to the time of such
repeal or modification.
Section 7. OTHER INDEMNIFICATION AND PREPAYMENT OF EXPENSES.
This Article VI shall not limit the right of the corporation, to the
extent and in the manner permitted by law, to indemnify and to advance expenses
to persons other than Indemnitees when and as authorized by appropriate
corporate action.
27
CERTIFICATE OF ADOPTION OF BYLAWS
OF
KORN/FERRY INTERNATIONAL
ADOPTION BY INCORPORATOR
The undersigned person appointed in the Certificate of Incorporation
as the Incorporator of Korn/Ferry International hereby adopts the foregoing
bylaws, comprising twenty-seven (27) pages, as the Bylaws of the corporation.
Executed this _____ day of ______________, 1999.
__________________________________
Peter L. Dunn
Incorporator
CERTIFICATE BY SECRETARY OF ADOPTION BY INCORPORATOR
The undersigned hereby certifies that he is the duly elected,
qualified, and acting Secretary of Korn/Ferry International and that the
foregoing Bylaws, comprising twenty-seven (27) pages, were adopted as the Bylaws
of the corporation on _______________, 1999, by the person appointed in the
Certificate of Incorporation as the Incorporator of the corporation.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this
_____ day of ______________, 1999.
__________________________________
Peter L. Dunn
Corporate Secretary
[Proxy Card]
[LOGO OF KORN/FERRY INTERNATIONAL APPEARS HERE]
Annual Meeting of Stockholders to be held on September 22, 1999
This proxy is solicited on behalf of the Board of Directors of
Korn/Ferry International
The undersigned hereby appoints Peter L. Dunn and Elizabeth S.C.S. Murray, and
each of them, proxyholders, each with full power of substitution to vote for the
undersigned at the Annual Meeting of Stockholders of Korn/Ferry International to
be held on September 22, 1999, and at any adjournments thereof, with respect to
the following matters, which were more fully described in the Proxy Statement
dated August 20, 1999, receipt of which is hereby acknowledged by the
undersigned.
This proxy will be voted as directed. Unless otherwise directed, this proxy will
be voted (1) FOR the election of the twelve director nominees, (2) FOR the
reincorporation of the Company in Delaware and (3) FOR the ratification of the
appointment of Arthur Andersen LLP as the Company's independent auditors for
fiscal 2000.
Important - This proxy must be signed and dated.
[See Reverse Side]
_______________shares of common stock
The Board recommends that you vote FOR all of the nominees on Proposal 1, FOR
Proposal 2 and FOR Proposal 3. Please indicate your choice below with respect to
each Proposal. Please mark your choices like this: /X/
(1) The election of the nominees for director specified in the Proxy Statement
to their respective classes on the Board of Directors.
Paul Buchanan-Barrow, Manuel A. Papayanopulos, Windle B. Priem and
Michael A. Wellman as Directors for Class 2000;
Richard M. Ferry, Timothy K. Friar, Sakie Fukushima and Scott E.
Kingdom as Directors for Class 2001; and
Frank V. Cahouet, Peter L. Dunn, Charles D. Miller and Gerhard
Schulmeyer as Directors for Class 2002.
(To withhold authority to vote for any individual nominee, strike through
his/her name listed above and initial such strike through.)
(2) The reincorporation of the Company in Delaware.
FOR AGAINST ABSTAIN
/ / / / / /
(3) The ratification of the appointment of Arthur Andersen LLP as the Company's
independent auditors for fiscal 2000.
FOR AGAINST ABSTAIN
/ / / / / /
(4) Any other matters as may properly come before the meeting or any
adjournment thereof. As to these other matters, the undersigned hereby
confers discretionary authority.
If you plan to attend the annual meeting, please check here: / /
Dated: ________________________, 1999
_____________________________________
(Please print name)
_____________________________________ __________________________________
(Signature of holder of Common Stock) (Additional signature if held
jointly)
NOTE: Please sign exactly as your name is printed. Each joint tenant should
sign. Executors, administrators, trustees and guardians should give full
titles when signing. Corporations and partnerships should sign in full
corporate or partnership name by an authorized person. Please mark, sign,
date and return your proxy promptly in the enclosed envelope, which
requires no postage if mailed in the United States.
2