UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
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Korn/Ferry International
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SEC 1913 (3-99)
[LOGO OF KORN/FERRY INTERNATIONAL]
1800 Century Park East, Suite 900
Los Angeles, California 90067
August 21, 200020, 2001
Dear Stockholders:
We are pleasedIt is my pleasure to invite you to attend the 2000 annual meeting2001 Annual Meeting of
stockholdersStockholders of Korn/Ferry International toInternational. The Annual Meeting will be held on
Tuesday, September 26,
200025, 2001 at 10:00 a.m. at the Park Hyatt Los Angeles Hotel
at Century City located at 2151 Avenue of the Stars, Los Angeles, California
90067.
The agenda for our 2000 annual meeting includes three proposals, eachAt the Annual Meeting we will discuss the items of which is identified and describedbusiness discussed in
the enclosed proxy statement.attached notice and give a report on our business operations.
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, dating 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 2000 annual meeting. You may revoke your
proxy in accordance with the procedures described in the proxy statement at
any time prior to the time it is voted. If you attend the meeting, you may
vote in person even if you previously mailed your proxy card.
Sincerely,
/s/ Richard M. Ferry /s/ Windle B. Priem
Richard M. Ferry Windle B. Priem[SIGNATURE OF PAUL C. REILLY]
Paul C. Reilly
Chairman of the Board
and Chief Executive Officer
and President
[LOGO OF KERN/KORN/FERRY INTERNATIONAL]
1800 Century Park East, Suite 900
Los Angeles, California 90067
NOTICE OF ANNUAL MEETING
TO BE HELD ON SEPTEMBER 26, 2000
Dear Stockholder:To Be Held on September 25, 2001
To the Stockholders:
On Tuesday, September 26, 2000,25, 2001, Korn/Ferry International will hold its 20002001
Annual Meeting of Stockholders at the Park Hyatt Los Angeles Hotel 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 our common stock at the close of business on
the record date of August 2, 20001, 2001 can vote at this meeting or any adjournments
that may take place. AtThe purposes of the meeting we will:Annual Meeting are to:
1. Elect three directors to serve for three-year terms and one director
to serve for a three-yeartwo year term;
2. Approve the amendment of our Performance Award Plan to increase the
number of shares which may be issued under the Plan and approve the
limits on the maximum number of awards that may be granted to
individuals as currently provided for in the Plan;
3. Ratify the appointment of Arthur Andersen LLP as independent auditors
for fiscal 2001;2002; and
4. Attend to3. Transact any other business properly presented at the meeting.
OUR 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 dateOur Board of mailing forDirectors recommends that you vote in favor of each of the two
proposals outlined in the Proxy Statement accompanying this proxy statement and proxy cards to
all stockholders is August 21, 2000.notice.
A quorum comprised of the holders of a majority of the outstanding shares
of our common stock 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 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 our fiscal 2000 business results and
other matters of interest to stockholders.
Please read the proxy materials carefully. Your vote is important and we
appreciate your cooperation in considering and acting on the matters
presented.
By Order of the Board of Directors,
/s/ Peter L. Dunn
Peter L. Dunn
Vice Chairman,[SIGNATURE OF J. TIMOTHY SCOTT]
J. Timothy Scott
Corporate Secretary and Associate
General Counsel
and
Corporate Secretary
August 21, 200020, 2001
Los Angeles, California
TABLE OF CONTENTS
PAGEPage
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QUESTIONS AND ANSWERS ABOUT THE PROXY MATERIALS AND THE ANNUAL MEETING....MEETING...... 1
PROPOSAL NO. 1--ELECTION OF DIRECTORS.....................................DIRECTORS....................................... 4
PROPOSAL NO. 2--AMENDMENT OF THE PERFORMANCE AWARD PLAN................... 5
PROPOSAL NO. 3--RATIFICATION2--RATIFICATION OF THE APPOINTMENT OF
ARTHUR ANDERSEN LLP AS INDEPENDENT AUDITORS..................................................... 8AUDITORS................................ 5
THE BOARD OF DIRECTORS.................................................... 9DIRECTORS...................................................... 6
Class 2002 Directors, Class 2003 Directors and Nominee, and Nominees for
Director--Class 2003....................................... 11Class 2004 Directors..................................................... 6
Statement on Corporate Governance....................................... 12Governance......................................... 9
Directors' Compensation................................................. 12
Employment Agreements................................................... 13Compensation................................................... 9
Security Ownership of Certain Beneficial Owners and Management.......... 17
Certain Relationships and Transactions With Related Parties............. 18Management............ 11
EXECUTIVE COMPENSATION.................................................... 19COMPENSATION...................................................... 13
Report of the Compensation & Personnel Committee........................ 19Committee.......................... 13
Summary Compensation Table.............................................. 21
AggregatedTable................................................ 15
Employment Agreements..................................................... 16
Aggregate Option Exercises and Year-End Option Values.................. 22Values..................... 21
Option Grants in Last Fiscal Year.......................................Year......................................... 21
Performance Graph......................................................... 22
Performance Graph.......................................................REPORT OF AUDIT COMMITTEE................................................... 23
OTHER MATTERS.............................................................MATTERS............................................................... 24
Section 16(a) Beneficial Ownership Reporting Compliance.................Compliance................... 24
Annual Report to Stockholders...........................................Stockholders............................................. 24
Submission of Stockholder Proposals for Consideration and Nominations of
Persons for Election as Directors at the Annual Meeting................Meeting.................. 24
Stockholder Proposals for Next Year's Annual Meeting....................Meeting...................... 25
QUESTIONS AND ANSWERS ABOUT THE PROXY MATERIALS AND THE ANNUAL MEETING
1. Q: WHY AMWhy am I RECEIVING THIS PROXY STATEMENT AND THE OTHER ENCLOSED
MATERIALS?receiving this proxy statement and the other enclosed
materials?
A: Our boardBoard is providing these materials to you in connection with, and
soliciting proxies for use at, our 20002001 Annual Meeting of Stockholders,
which will take place on September 26, 2000. You25, 2001. As a stockholder on the
record date, you are invited to attend the Annual Meeting and you are
requested to vote on each of the proposals described in this proxy
statement. You do not need to attend the Annual Meeting to vote your
shares.
2. Q: WHAT INFORMATION IS INCLUDED IN THIS MAILING?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 our compensation of directors and executive
officers.
3. Q: WHAT PROPOSALS WILL BE VOTED ON AT THE ANNUAL MEETING?What proposals will be voted on at the annual meeting?
A: (1) The election of three directors to serve on the board;Board; and
(2) The approval of the amendment of our Performance Award Plan to
increase the number of shares which may be issued under the Plan
and the approval of the limits on the maximum number of awards that
may be granted to individuals as currently provided for in the
Plan; and
(3) The ratification of the appointment of Arthur Andersen LLP as our
independent auditors for fiscal 2001.2002.
4. Q: HOW DOES THE BOARD RECOMMENDHow does the Board recommend I VOTE ON EACH OF THE PROPOSALS?vote on each of the proposals?
A: The boardBoard recommends that you vote your shares "FOR" all of its
nominees to the board, "FOR" the approval of the amendment of our
Performance Award PlanBoard and "FOR" the proposal onratification of the appointment of
the independent auditors.
5. Q: WHO IS ENTITLED TO VOTE AT THE ANNUAL MEETING?Who is entitled to vote at the annual meeting?
A: Holders of our common stock as of the record date, which is the close
of business on August 2, 2000,1, 2001, are entitled to vote at the annual
meeting.
6. Q: HOW MANY VOTES ARE PROVIDED TO EACH SHARE OF COMMON STOCK?How many votes are provided to each share of common stock?
A: Each share of our Common Stockcommon stock outstanding as of the Record Daterecord date is
entitled to one vote. As of the Record Date, 37,689,982record date, 37,504,027 shares of our
common stock were issued and outstanding.
7. Q: HOW DOHow do I VOTE?vote?
A: You can vote either by completing, signing and dating each proxy card
you received 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 in writing;
(2) Returning a later-dated proxy card; ORor
(3) Attending the annual meeting and voting in person.
8. Q: WHO WILL COUNT THE VOTES?Who will count the votes?
A: Representatives of ChaseMellon ShareholderMellon Investor 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 IFWhat does it mean if I RECEIVE MORE THAN ONE PROXY CARD?receive more than one proxy card?
A: IfIt means that your shares are registered differently and are in more
than one account, you will receive more than one proxy card.account. Sign and return all proxy cards to ensure that all
your shares are voted.
1
10. Q: WHAT SHARES ARE INCLUDED ON THE ENCLOSED PROXY CARD(S)What shares are covered by 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 our
401(k) plan, which shares will be voted by the trustees of the 401(k)
plan).record date. 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 our 401(k) plan).nominee. If you do not return your proxy card(s), with respect to these
shares, your shares willmay not be voted. If you own shares that are held
in our 401(k) plan, you will receive a proxy card for those shares
also. While the trustees of the 401(k) will vote those shares, you are
requested to return that proxy card to advise the trustees of your
wishes with respect to the matters to be voted on.
11. Q: WHAT IS THE DIFFERENCE BETWEEN HOLDING SHARES AS A "STOCKHOLDER OF
RECORD" AND AS A "BENEFICIAL OWNER"What is the difference between holding shares as a "stockholder of
record" and as a "beneficial owner"?
A: Those terms refer to the following. You are a:
"Stockholder of record": If, if your shares are registered directly in your
name with our transfer agent, ChaseMellon Shareholder Services L.L.C.,
youMellon Investor Services. 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 us.
As the stockholder of record, you have the right to grant your voting
proxy to us or to vote in person at the annual meeting.Annual Meeting. We have
enclosed a proxy card for you to use.
"Beneficial owner": If, 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,"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.
12. Q: WHAT IF A BENEFICIAL OWNER DOES NOT PROVIDE THE STOCKHOLDER OF RECORD
WITH VOTING INSTRUCTIONS FOR A PARTICULAR PROPOSAL?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"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?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 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.Board. With respect to Proposal Nos.No. 2, and 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 proposals.
2
15. Q: WHAT IS THE VOTING REQUIREMENT TO APPROVE EACH PROPOSAL?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 threeBoard's nominees will become directors so long as
2
they receive a
plurality of "FOR" votes; however, if any additional nominees for
director are properly brought before the stockholders for
consideration, only the three nominees who receive the highest number of
"FOR" votes will become directors. Approval of Proposal No. 2, (relating to the amendment of the Performance Award Plan) and Proposal
No. 3 (relatingrelating
to ratification of the auditors appointed by the board),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"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.
17. Q: WHAT HAPPENS IF ADDITIONAL MATTERS (OTHER THAN THE PROPOSALS DESCRIBED
IN THIS PROXY STATEMENT) ARE PRESENTED AT THE ANNUAL MEETING?What happens if additional matters (other than the proposals described
in this proxy statement) are presented at the Annual Meeting?
A: The boardBoard is not aware of any additional matters to be presented for a
vote at the annual meeting;Annual Meeting; however, if any additional matters are
properly presented at the annual meeting, your signed proxy card gives
authority to Peter L. DunnPaul C. Reilly and Elizabeth S.C.S. MurrayMichael D. Bekins to vote on those
matters in their discretion.
18. Q: HOW MUCH DID THIS PROXY SOLICITATION COST?How much did this proxy solicitation cost?
A: We hired ChaseMellon ShareholderMellon Investor Services L.L.C. to assist in the distribution of
proxy materials and solicitation of votes for approximately $7,000,
including out-of-pocket expenses. We also reimburse brokerage houses
and other custodians, nominees and fiduciaries for their reasonable
out-of-pocket expenses for forwarding proxy and solicitation materials
to beneficial owners.
19. Q: CAN I CHANGE MY VOTE AFTER I RETURN MY PROXY CARD?
A: Yes. You may change your vote at any time before the proxy is exercised
by:
(1) notifying the Corporate Secretary of Korn/Ferry in writing;
(2) returning a later-dated proxy card; or
(3) attending the annual meeting and voting in person.
3
PROPOSAL NO. 1--ELECTION OF DIRECTORS
ThereOur Board is adivided into three classes, with one class elected at each
Annual Meeting. Directors of each class are elected to serve for three year
terms. At this Annual Meeting we will elect four directors and our Board for
the coming year will be composed of ten directors. Of the total of three nominees for
election as directors, eachthree will be elected to serve for a term of three
years.years and one will be elected to serve for the remaining two years of a three
year term. The nominees for election at the annual meetingAnnual Meeting to serve as Class
20032004 Directors are Patti S. Hart, Windle B. PriemJames E. Barlett, Richard M. Ferry, and MarkSakie Fukushima.
The nominee for election at the Annual Meeting to serve as a Class 2003
Director for two years until the Annual Meeting of Stockholders in 2003 is
Paul C. Thompson.Reilly. Mr. Reilly is the Chairman and Chief Executive Officer of our
company and was first elected to the Board in June 2001. Detailed information
regarding each of these three nominees is provided on page 11pages 6-8 of this proxy
statement. We do not expect any of the three nominees to become unavailable to stand
for election, but, should this happen, the boardBoard will designate a substitute
for each unavailable nominee. Proxies voting for any unavailable nominee will
be cast for that nominee's substitute. REQUIRED VOTEEach of the nominees has consented to
be named as a nominee in this proxy statement.
Required Vote
The board's threeBoard's nominees will become directors 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 threefour
nominees who receive the highest number of "FOR" votes will become directors.
RECOMMENDATION OF THE BOARD
THE BOARD UNANIMOUSLY RECOMMENDS A VOTERecommendation of the Board
The Board unanimously recommends that you vote "FOR" ALL OF ITS THREE NOMINEES FOR
DIRECTOR.each of the nominees
named above for election as a director. Proxies will be voted "FOR" each of
the nominees named above unless you otherwise specify on your proxy card.
4
PROPOSAL NO. 2--AMENDMENT OF THE PERFORMANCE AWARD PLAN
Our Performance Award Plan, or the Plan, was adopted by our board and
approved by our shareholders in August 1998. Our board has adopted and
recommends that you approve an amendment to the Plan that would increase the
maximum number of shares of common stock that may be delivered pursuant to
awards granted under the Plan from 7,000,000 to 13,000,000, representing an
amount equal to approximately 35% of our outstanding shares of common stock on
the date hereof. Our board also recommends that you approve the limits, as
described below, on the maximum number of awards that may be granted to
individuals as currently set forth in the Plan. The approval of these limits
will enable us to continue to be entitled to federal tax deductions with
respect to awards of stock options and performance based compensation under
the Plan. A summary of the Plan, as amended, is set forth below.
The purpose of the Plan is to promote our success and the interests of our
stockholders by attracting, motivating, retaining and rewarding directors,
officers, employees and other eligible persons with awards and incentives for
high levels of individual performance and improved company financial
performance; to attract, motivate and retain experienced and knowledgeable
independent directors through the benefits provided under the Plan; and to
further align their respective interests with those of our stockholders
through awards of stock-based incentives. The granting of performance awards
pursuant to the Plan has been and will continue to be an important part of the
compensation of our employees.
Awards under the Plan may be in the form of nonqualified stock options,
incentive stock options, stock appreciation rights, or SARs, restricted stock,
performance shares, stock bonuses, or cash bonuses based on performance.
Awards may be granted individually or in combination with other awards. Any
cash bonuses and other performance awards under the Plan will depend upon the
extent to which performance goals set by our board or the Compensation
Committee are met during the performance period. Awards under the Plan
generally will be nontransferable by the holder of the award (other than by
will or the laws of descent and distribution). During the holder's lifetime,
rights under the Plan generally will be exercisable only by the holder,
subject to such exceptions as may be authorized by the Compensation Committee
in accordance with the Plan. No incentive stock option may be granted at a
price that is less than the fair market value of the common stock (110% of
fair market value of the common stock for certain participants) on the date of
grant. Nonqualified stock options and other awards may be granted at prices
below the fair market value of the common stock on the date of grant.
Restricted stock awards can be issued for nominal or the minimum lawful
consideration. Typically, the participant may vote restricted stock, but any
dividend on restricted shares will be held in escrow subject to forfeiture
until the shares have vested. No more than 350,000 shares will be available
for restricted stock awards, subject to exceptions for restricted stock awards
based on past service, deferred compensation and performance awards.
The maximum number of shares subject to those options and SARs that are
granted during any one calendar year to any one individual is limited to
700,000 shares while the maximum number of shares subject to all awards
(either performance or otherwise) that may be granted to an individual in the
aggregate in any one calendar year is 1,050,000. A non-employee director may
not receive awards in respect of more than 50,000 shares in the aggregate in
any one calendar year. With respect to cash-based performance awards, no more
than $2.5 million per year, per performance cycle may be awarded to any one
individual. No more than one performance cycle may begin in any one year with
respect to cash-based performance awards.
Section 162(m) Performance-Based Awards. In addition to options and SARs
granted under other provisions of the Plan, performance-based awards payable
in cash or shares within the meaning of Section 162(m) of the Internal Revenue
Code of 1986, as amended, which depend on the achievement of pre-established
financial performance goals, may be granted under the Plan. The specific
performance goals will be set by a qualified committee of our board created
for these purposes and the specific targets will be set by the Compensation
Committee when their attainment is substantially uncertain. The permitted
performance goals under the Plan may include any one or more of the following:
revenue growth, net earnings (before or after taxes or before or after
interest, taxes, depreciation and amortization), cash flow, return on equity,
return on assets or
5
return on net investment, or cost containment or reduction. The applicable
performance cycle may not be less than one nor more than ten years, or five
years in respect of such awards payable only in cash.
Administration. The Plan will be administered by our board or the
Compensation Committee. The Compensation Committee will have broad authority
to:
. designate recipients of discretionary awards,
. determine or modify (subject to any required consent) the terms and
provisions of awards, including the price, vesting provisions, terms of
exercise and expiration dates,
. approve the form of award agreements,
. determine specific objectives and performance criteria with respect to
performance awards, and
. construe and interpret the Plan.
The Compensation Committee will have the discretion to accelerate and
extend the exercisability or term and establish the events of termination or
reversion of outstanding awards.
Change in Control. Upon a Change in Control Event, each option and SAR will
become immediately exercisable; restricted stock will immediately vest free of
restrictions; and the number of shares, cash or other property covered by each
performance share award will be issued to the holder, unless the Compensation
Committee determines to the contrary. A "Change in Control Event" is defined
generally to include
. certain changes in a majority of the membership of our board over a
period of two years or less,
. the acquisition of more than 30% of our outstanding voting securities by
any person other than us, any of our benefit plans or one of their
affiliates, successors, heirs, relatives or certain donees or certain
other affiliates, or
. shareholder approval of a transfer of substantially all of our assets,
the dissolution or liquidation of us, or a merger, consolidation or
reorganization (other than with an affiliate) whereby stockholders hold
or receive less than 70% of the outstanding voting securities of the
resulting entity after such event.
In addition, if any participant's employment is terminated by us for any
reason other than for cause either in express anticipation of, or within one
year after a Change in Control Event, then all awards held by that participant
will vest in full immediately before his or her termination date
The Compensation Committee may also provide for alternative settlements
(including cash payments), the assumption or substitution of awards or other
adjustments in the Change in Control context of any other reorganization of
us.
Plan Amendment, Termination and Term. Our board has the authority to amend,
suspend or discontinue the Plan at any time, but no such action will affect
any outstanding award in any manner materially adverse to a participant
without the consent of the participant. The Plan may be amended by our board
without stockholder approval unless such approval is required by applicable
law.
The Plan will remain in existence as to all outstanding awards until such
awards are exercised or terminated. The maximum term of options, SARs and
other rights to acquire common stock under the Plan is ten years after the
initial date of award, subject to provisions for further deferred payment in
certain circumstances. No award can be made after August 4, 2008. Awards may
remain exercisable for a period of time determined by the Compensation
Committee after termination of employment for certain reasons, after which, to
the extent not exercised, such awards terminate.
Automatic Grants to Non-Employee Directors. Under the Plan, each director
who is not an officer or employee and who is or thereafter becomes a director
will be automatically granted a nonqualified stock option
6
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 shareholders
meeting in each calendar year beginning in 1999 and continuing for each
subsequent year during the term of the Plan, each then-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
stock 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
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 Compensation 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
we are not to survive will terminate, unless such option is assumed or
replaced by the surviving corporation.
Payment for Shares. The exercise price of options and other awards may be
paid in cash, promissory note or (subject to certain restrictions) shares of
common stock. We may finance the exercise or purchase and (subject to any
applicable legal limits) offset shares to cover the exercise or purchase price
and withholding taxes.
Federal Tax Consequences. The current federal income tax consequences of
awards authorized under the Plan follow certain basic patterns. Generally,
awards under the Plan that are includable in income of the recipient at the
time of award or exercise (such as nonqualified stock options, SARs,
restricted stock and performance awards) are deductible by us, and awards that
are not required to be included in income of the recipient at such times (such
as incentive stock options) are not deductible by us.
Non-Exclusive Plan. The Plan is not exclusive. Our board may grant stock
and performance incentives or other compensation, in stock or cash, under
other plans or authority.
Our board believes it would be in the best interests of us and our
stockholders to amend the Plan to increase the number of shares available for
grant thereunder as described herein and to approve the limits on the maximum
number of awards that may be granted to individuals as currently set forth in
the Plan. There are several years remaining in the life of the Plan as awards
can be made under the Plan until August 4, 2008. Increasing the number of
shares we are authorized to issue will help ensure that we will be able to
continue to grant awards during the life of the Plan. This will enable us to
further fulfill the purpose of the Plan and provide us with greater
flexibility in making awards which we continue to believe is an important
component of compensation and is necessary to attract and retain outstanding
employees. Except as so amended by this Proposal No. 2, the Plan will continue
unchanged and in full force and effect.
REQUIRED VOTE
Approval of the amendment to the Plan and the approval of the limits on the
maximum number of awards that may be granted to individuals 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
OUR BOARD UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE APPROVAL OF THIS PROPOSAL
NO. 2 RELATING TO THE PLAN.
7
PROPOSAL NO. 3--RATIFICATION2--RATIFICATION OF THE APPOINTMENT
OF ARTHUR ANDERSEN LLP AS INDEPENDENT AUDITORS
The audit committeeAudit Committee has recommended, and the boardBoard has approved, the
appointment of Arthur Andersen LLP as our independent auditors for fiscal
2001.2002. Arthur Andersen LLP has served as our independent auditors since 1971,
including assisting us with accounting matters relating to the initial public
offering of our common stock. They have unrestricted access to the audit
committeeAudit
Committee to discuss audit findings and other financial matters.
Representatives of Arthur Andersen LLP will attend the annual meeting to
answer appropriate questions and may also make a statement if they so desire.
Audit services providedFees
The aggregate fees billed by Arthur Andersen during fiscal 2000 included anLLP for professional services
rendered for the audit of our consolidatedconsoldiated and subsidiary annual financial
statements for the fiscal year ended April 30, 2001 and consultationfor the reviews of the
financial statements included in our quarterly reports on various taxForm 10-Q for that
fiscal year were $957,139.
Financial Information Systems Design and accounting matters.
REQUIRED VOTEImplementation Fees
The aggregate fees billed by Arthur Andersen LLP for professional services
rendered for information technology services relating to financial information
systems design and implementation for the fiscal year ended April 30, 2001
were $39,690.
All Other Fees
The aggregate fees billed by Arthur Andersen LLP for services rendered
other than the services described above under "Audit Fees" and "Financial
Information Systems Design and Implementation Fees" for the fiscal year ended
April 30, 2001 were $1,278,059.
Required Vote
Ratification of the auditors appointed by the boardBoard 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 VOTERecommendation of the Board
The Board unanimously recommends a vote "FOR" THE RATIFICATION OF ARTHUR
ANDERSEN'S APPOINTMENT AS INDEPENDENT AUDITORS FOR FISCAL 2001.
8the ratification of Arthur
Andersen LLP's appointment as independent auditors for fiscal 2002.
5
THE BOARD OF DIRECTORS
The twelve members of our boardBoard of directorsDirectors are grouped into three classes: Class 2001 Directors will serve until the 2001 Annual Meeting of
Stockholders, Class
2002 Directors will serve until the 2002 Annual Meeting of Stockholders and the Directors elected to serve asin 2002;
Class 2003 Directors will serve until the 2003 Annual Meeting of Stockholders.
CLASS 2001 DIRECTORS
The following table sets forth information regarding theStockholders in
2003; and Class 20012004 Directors who will serve on the board until the 2001 annual meetingAnnual Meeting of
stockholders:
DIRECTOR
NAME AGE LAST FIVE YEARS SINCE
---- --- --------------- --------
James E. Barlett 56 Mr. Barlett is Chairman, President and Chief 1999
Executive Officer of Galileo International.
From 1994 to 1997, Mr. Barlett was President
and Chief Executive Officer of Galileo
International. Mr. Barlett is also a director
of TeleTech Holdings, Inc.
Richard M. Ferry 62 Mr. Ferry is a founder of Korn/Ferry 1969
International, has been Chairman of the board
since 1991 and is also a member of the Office
of the Chief Executive. Mr. Ferry served as
Chief Executive Officer from May 1991 to April
1997. He also serves on the Board ofStockholders in 2004.
Class 2002 Directors
of Avery Dennison Corp., Dole Food Company,
Mrs. Fields' Original Cookies, Inc., and
Pacific Life Insurance Company.
Timothy K. Friar 42 Mr. Friar has been a Vice President since 1998
1995. He is currently responsible for managing
our New York, Princeton and Philadelphia
offices. He also serves on our Professional
Development Committee. Mr. Friar joined us in
1993 and has eight years of executive search
experience.
Sakie Fukushima 50 Ms. Fukushima has been a Vice President since 1995
1993. She is currently responsible for our
Consumer/Entertainment Practice in Japan.
Ms. Fukushima joined us in 1991 and has nine
years of executive search experience.
Scott E. Kingdom 41 Mr. Kingdom has been a Vice President since 1998
1993. He is currently responsible for managing
our Austin, Chicago, Dallas, Denver, Houston,
and Minneapolis offices and for executing
senior level search engagements. Mr. Kingdom
joined us in 1988 and has 13 years of
executive search experience.
9
CLASS 2002 DIRECTORS
The following table sets forth certain information regarding the Class 2002
Directors, who will serve on the boardBoard until the 2002 annual meetingAnnual Meeting of stockholders:Stockholders in
2002.
DIRECTOR
NAME AGE LAST FIVE YEARS SINCEDirector
Name Age Business Experience Since
---- --- ---------------------------------- --------
Frank V. Cahouet 6869 Mr. Cahouet retired as Chairman, President 1999
and Chief Executive Officer of Mellon
Financial Corporation in 1998, positions
which he had held since 1987. Mr. Cahouet is
a director of Avery Dennison Corporation,
Allegheny Technologies Inc., Teledyne
Technologies Inc., and Saint-Gobain
Corporation.
Peter L. Dunn 55 Mr. Dunn serves as Vice Chair and General 1992
Counsel and is also a member of the Office
of the Chief Executive. Mr. Dunn also serves
as Corporate Secretary. Mr. Dunn joined us
in 1980. Mr. Dunn is currently also the
acting Chief Executive Officer of
Futurestep, a subsidiary of ours.
Charles D. Miller 7273 Mr. Miller retired as Chairman of Avery 1999
Avery
Dennison Corporation in April 2000. From
April 1983 through April 1998, Mr. Miller
was Chairman and Chief Executive Officer of
Avery Dennison Corporation. Mr. Miller is
also Chairman of Nationwide Health
Properties, Inc. and a director of The Air
Group, Avery Dennison Corporation, Edison
International, and Pacific Life Insurance
Company.Mellon West, a subsidiary
of Mellon Financial Corporation.
Gerhard Schulmeyer 6162 Mr. Schulmeyer is President and Chief 1999
Executive Officer of Siemens Corporation.
From 1994 through 1998, Mr. Schulmeyer was
President and Chief Executive Officer of
Siemens Nixdorf, Munich/Paderborn.
Mr. Schulmeyer is also a director of Alcan
Aluminium Ltd., Allied Zurich p.l.c.,
FirePond, Inc., and Ingram Micro Inc.
106
NOMINEES FOR CLASSClass 2003 DIRECTORSDirectors and Nominee
The following table sets forth certain information regarding the Class 2003
Directors, who will serve on the Board until the Annual Meeting of
Stockholders in 2003. Mr. Reilly was elected by the Board to serve as a
director and as its Chairman, effective June 29, 2001. In electing Mr. Reilly,
the Board directed that his candidacy be brought before the stockholders at
the 2001 Annual Meeting and, if elected, at the 2000 annual meeting,Mr. Reilly will serve on the boardBoard
until the 2003 annual meetingAnnual Meeting of stockholders:Stockholders in 2003.
DIRECTOR
NAME AGE LAST FIVE YEARS SINCEDirector
Name Age Business Experience Since
---- --- --------------- ---------------------------- --------
Patti S. Hart 4445 Ms. Hart is PresidentChairman and Chief Executive (Director2000
Officer of Telocity, Inc. From 1994 through Nominee)
1999,Excite@Home, positions she was
elected to in April 2001. Prior to joining
Excite@Home, Ms. Hart wasserved as Chief
Executive Officer and President of Telocity,
Inc., from June 1999 until April 2001. From
February 1994 to April 1999, she served as
President and Chief Operating Officer of
Sprint's Long Distance Division. Ms. Hart is also
aserves as director of
Telocity, Inc., Brigade Solutions, Mariner
Networks and Plantronics.
Windle B. Priem 6263 Mr. Priem has beenwas Chief Executive Officer and 1993
and President, since December 1998 and is a member of the Office of the
Chief Executive.Executive, from December 1998 until June
2001. From May 1997 to December 1998, he
served as Vice Chairman and Chief Operating
Officer. From May 1995 to May 1997, he was the
President of the North AmericaAmerican region. Mr.
Priem joined us in 1976 and has 24 years of
executive search experience.
Paul C. Reilly 47 Mr. Reilly was elected to the position of 2001
Chairman of the Board and Chief Executive
Officer on June 29, 2001. Prior to joining
Korn/Ferry International, Mr. Reilly was Chief
Executive Officer of KPMG International from
October 1998. Prior to being named to that
position, Mr. Reilly served as Vice Chairman
Financial Services of KPMG LLP, the United
States member firm of KPMG International. Mr.
Reilly joined KPMG International as a partner
in 1987.
Mark C. Thompson 4243 Mr. Thompson is Chairman of the Board of 2000
Rioport, Inc., a media company, since 2000 and
of Integration (Director
Technology,Associates, Inc., a technology
company, since 1999. From 1988 to 2000, he was
an Nominee) officer of The Charles Schwab Corporation,
where he was most recently Senior Vice
President and Executive Producer and Senior Vice President.of
Schwab.com. Mr. Thompson is also a director of
Integration Associates,
Inc., Best Buy Co., Inc., Eloquent, Inc.,
Esurance, Inc., Interwoven, Inc.,
Investorplus.com,Pure Markets Corp. and
Rioport,Kabira Technologies, Inc.
117
STATEMENT ON CORPORATE GOVERNANCENominees for Class 2004 Directors
The boardfollowing table sets forth information regarding the Class 2004
Directors, who, if elected at the 2001 Annual Meeting, will serve on the Board
until the Annual Meeting of Stockholders in 2004.
Director
Name Age Business Experience Since
---- --- ------------------- --------
James E. Barlett 57 Mr. Barlett is Chairman, President and Chief 1999
Executive Officer of Galileo International.
From 1994 to 1997, Mr. Barlett was President
and Chief Executive Officer of Galileo
International. Mr. Barlett is also a director
of TeleTech Holdings, Inc.
Richard M. Ferry 63 Mr. Ferry is a founder of Korn/Ferry 1969
International and was Chairman of the Board
from May 1991 to June 2001. Mr. Ferry served
as Chief Executive Officer from May 1991 to
April 1997. He also serves on the Board of
Directors of Avery Dennison Corp., Dole Food
Company, Mrs. Field's Original Cookies, Inc.
and Pacific Life Insurance Company.
Sakie Fukushima 51 Ms. Fukushima has been a Vice President since 1995
1993. She is currently responsible for our
Consumer/Entertainment Practice in Japan.
Ms. Fukushima joined the company in 1991 and
has ten years of executive search experience.
8
Statement on Corporate Governance
The Board held nineeleven meetings during fiscal 2000,2001, and all of the directors
attended at least 75% of the boardBoard meetings and committeethe meetings of committees of
which they were members.members, except for Patti Hart who joined the Board during the
year and participated in the three of the five Board meetings since her
election.
Although the full boardBoard considers all major decisions, the Bylaws permit
the boardBoard to have the following standing committees to more fully address
certain areas of importance: an audit committee,Audit Committee, a compensationCompensation and personnel
committee,Personnel
Committee, and a nominating committee.Nominating Committee. The members of the current standing
committees are:
COMPENSATION AND
NAME AUDIT PERSONNEL NOMINATINGCompensation
Name Audit and Personnel Nominating
James E. Barlett X X(Chair)
Frank V. Cahouet X(Chair) X
Charles D. Miller X X(Chair)
Gerhard Schulmeyer X X
Audit Committee. The audit committeeAudit Committee makes recommendations concerning the
engagement of independent auditors, reviews the plans and results of the audit
engagement with the independent auditors, approves professional services
provided by the independent auditors, reviews the independence of the
auditors, considers the range of audit and non-audit fees, reviews the
adequacy of our internal accounting controls and ensures the integrity of
financial information supplied to stockholders. The audit committeeAudit Committee is also
available to receive reports, suggestions, questions and recommendations from
the independent auditors, 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 committeeAudit Committee is
composed entirely of outside directors. The audit committeedirectors and met twiceeight times in fiscal 2000.2001. The
Board has adopted a written charter for the Audit Committee, a copy of which
is attached as an appendix to this proxy statement. The Board, in its business
judgment, has determined that all members of the Audit Committee are
"independent" as required by the applicable listing standards of the New York
Stock Exchange.
Compensation and Personnel Committee. The compensationCompensation and personnel
committeePersonnel
Committee determines the compensation of our executive officers and
administers the Performance Award Plan. In addition, the compensationCompensation and
personnel committeePersonnel Committee reviews and makes recommendations to the boardBoard with
respect to our overall compensation program for managing directors, vice
presidents and other employees, including salaries, employee benefit plans,
stock option grants and payment of bonuses. The compensationCompensation and personnel
committeePersonnel
Committee is composed entirely of outside directors. The compensationCompensation and
personnel committeePersonnel Committee met threetwelve times during fiscal 2000.2001.
Nominating Committee. The nominating committeeNominating Committee recommends criteria to the
boardBoard for the selection of nominees to the board,Board, evaluates all proposed
nominees, recommends nominees to the boardBoard to fill vacancies on the board,Board,
and, prior to each annual meetingAnnual Meeting of stockholders,Stockholders, recommends to the boardBoard a
slate of nominees for election to the boardBoard by the stockholders at the annual
meeting.Annual
Meeting. The nominating committeeNominating Committee also seeks possible nominees for the boardBoard
and otherwise serves to aid in attracting qualified nominees to be elected to
the board.Board. The nominating committeeNominating Committee is composed of two outside directors, with
four inside directors as ex-officio members. The nominating committeeNominating Committee met oncefive
times in fiscal 2000.
DIRECTORS' COMPENSATION2001.
Directors' Compensation
Directors who are also employees or officers do not receive any additional
compensation for their service on the board.Board. Non-employee directors receive a
$25,000$28,000 annual retainer in cash $4,000 for eachand committee chair and up to
$1,000chairs receive an additional
$4,000. For meetings, outside directors receive $1,200 in cash for each
regular or special meeting
attended.9
attended and $600 for telephonic meetings. 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 are eligible to receive annual
stock option grants under our Performance Award Plan. Under the Performance
Award Plan, a non-employee director is automatically granted a nonqualified
stock option to purchase 2,0002,500 shares of common stock when the person takes
office, at an 12
exercise price equal to the market price of the Common Stockcommon stock at
the close of trading on that date. In addition, on the day of the annual stockholders
meetingAnnual
Meeting of Stockholders in each calendar year, beginning with the Annual Meetingyear after
they are first elected and continuing for each subsequent year during the term
of the Performance Award Plan, each continuing non-employee director will beis
granted a nonqualified stock option to purchase 2,0002,500 shares of common stock
at an exercise price equal to the market price of the common stock 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 the non-employee director that are
exercisable will remain exercisable for twelve months after such 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 boardBoard 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 Korn/Ferry iswe do not to survive will terminate, unless
the option is assumed or replaced by the surviving corporation.
EMPLOYMENT AGREEMENTS
Windle B. Priem, Chief Executive Officer10
Security Ownership of Certain Beneficial Owners and President. In June 1999, we
entered into an employment agreement with Windle B. Priem as Chief Executive
Officer and President, 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 we
will pay Mr. Priem, or his legal representatives, all accrued compensation as
of the date of termination and 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 us for cause, terminated by Mr. Priem prior to its
expiration or Mr. Priem fails to renew the agreement after its initial term,
then we will pay Mr. Priem all accrued compensation as of the date of
termination.
Prior to a change in control, if Mr. Priem's employment is terminated by us
without cause, terminated by Mr. Priem for good reason or we fail to renew the
agreement, then we will pay Mr. Priem all accrued compensation as of the date
of termination, a lump sum equal to 200% of the then base salary and target
bonus and 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, if
Mr. Priem's employment is terminated by us without cause or by Mr. Priem for
good reason, then we will pay Mr. Priem all accrued compensation as of the
date of termination, 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, 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 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 agreement provided for vesting upon the earlier
to occur of:
(1) the stock price of the Company remaining 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) the stock price remaining 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;
13
(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) termination of Mr. Priem's employment by us without cause or by Mr.
Priem for good reason; or
(6) expiration of the additional two-year renewal period of the
employment agreement. The option did vest on October 6, 1999 under
alternative (1) set forth above.
The option has been exercisable since October 6, 1999 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:
upon death, disability or retirement, the option will expire 12 months
following the date of termination unless the option has expired earlier and
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, we entered into
an employment agreement with Peter L. Dunn as Vice Chair and General Counsel,
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 we 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 we will
pay Mr. Dunn, or his legal representatives, all accrued compensation as of the
date of termination and 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 we will pay Mr. Dunn all accrued compensation as of the
date of termination.
Prior to a change in control, if Mr. Dunn's employment is terminated by us
without cause, terminated by Mr. Dunn for good reason or we fail to renew the
agreement, then we will pay Mr. Dunn all accrued compensation as of the date of
termination, 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 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, if Mr.
Dunn's employment is terminated by us for performance reasons, then we will pay
Mr. Dunn all accrued compensation as of the date of termination, a lump sum
equal to one and one-half times the then base salary and target bonus and all
of Mr. Dunn's outstanding stock options as of the effective date of the
employment agreement will vest.
Following a change in control and if within 12 months after the date on
which the change in control occurs Mr. Dunn's employment is terminated by us
without cause, by us because we elect not to renew the agreement, by us for a
performance reason, or by Mr. Dunn for good reason, then we will pay Mr. Dunn
all accrued compensation as of the date of termination, a lump sum equal to (1)
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 (2) 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 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.
14
Elizabeth S.C.S. Murray, Chief Financial Officer and Executive Vice
President. In June 1999, we entered into an employment agreement with
Elizabeth S.C.S. Murray as Chief Financial Officer and Executive Vice
President, 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 we 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 we
will pay Ms. Murray, or her legal representatives, all accrued compensation as
of the date of termination and 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 us 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 we 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 us without cause, terminated by Ms. Murray for good reason or we
fail to renew the agreement, then we will pay Ms. Murray all accrued
compensation as of the date of termination, 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 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 us for performance reasons, then we will pay Ms.
Murray all accrued compensation as of the date of termination, a lump sum
equal to the then base salary and target bonus and 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 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 us because we elect not to renew the agreement,
by us for a performance reason, or by Ms. Murray for good reason, then we will
pay Ms. Murray all accrued compensation as of the date of termination, a lump
sum equal to (1) 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, and
(2) 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 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.
Gary C. Hourihan, Executive Vice President, Organizational Development. In
March 2000, we entered into an employment agreement with Gary C. Hourihan as
Executive Vice President, Organizational Development, effective March 6, 2000.
The initial term of the agreement is through April 30, 2002 and the term will
automatically renew for successive two-year periods thereafter until the first
April 30th following the date on which Mr. Hourihan reaches age 65; provided,
however, that either we or Mr. Hourihan 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 $340,000 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. Hourihan's employment terminates due to death or disability, then we
will pay Mr. Hourihan, or his legal representatives, all accrued compensation
as of the date of termination and all of Mr. Hourihan'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
Mr. Hourihan's employment is terminated by us for cause, terminated by Mr.
Hourihan prior to its expiration without good reason or Mr. Hourihan fails to
renew
15
the agreement after its initial term, then we will pay Mr. Hourihan all
accrued compensation as of the date of termination.
Prior to a change in control, if Mr. Hourihan's employment is terminated by
us without cause, terminated by Mr. Hourihan for good reason or we fail to
renew the agreement, then we will pay Mr. Hourihan all accrued compensation as
of the date of termination, a lump sum equal to 150% of the then base salary
and target bonus; provided however that if Mr. Hourihan's employment is
terminated because we elect not to renew the agreement, then Mr. Hourihan
shall be entitled only to a lump sum equal to one times the then base salary
and target bonus and all of Mr. Hourihan'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, if Mr. Hourihan's employment is terminated by us for
performance reasons, then we will pay Mr. Hourihan all accrued compensation as
of the date of termination, a lump sum equal to the then base salary and
target bonus and all of Mr. Hourihan'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 and if within 12 months after the date on
which the change in control occurs Mr. Hourihan's employment is terminated by
us without cause, by us because we elect not to renew the agreement, by us for
a performance reason, or by Mr. Hourihan for good reason, then we will pay Mr.
Hourihan all accrued compensation as of the date of termination, a lump sum
equal to (1) 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, and
(2) 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 all of Mr. Hourihan'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.
Michael D. Bekins, Chief Operating Officer. We entered into an employment
agreement with Michael D. Bekins as Chief Operating Officer of the Company,
effective May 1, 2000. 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. Bekins reaches age 65; provided,
however, that either we or Mr. Bekins 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 $450,000 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. Bekins' employment terminates due to death or disability, then we
will pay Mr. Bekins, or his legal representatives, all accrued compensation as
of the date of termination and all of Mr. Bekins' 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 Mr. Bekins'
employment is terminated by us for cause, terminated by Mr. Bekins prior to
its expiration without good reason or Mr. Bekins fails to renew the agreement
after its initial term, then we will pay Mr. Bekins all accrued compensation
as of the date of termination.
Prior to a change in control, if Mr. Bekins' employment is terminated by us
without cause, terminated by Mr. Bekins for good reason or we fail to renew
the agreement, then we will pay Mr. Bekins all accrued compensation as of the
date of termination, a lump sum equal to 200% of the then base salary and
target bonus; provided however that if Mr. Bekins' employment is terminated
because the Company elects not to renew the agreement, then Mr. Bekins shall
be entitled only to a lump sum equal to one times the then base salary and
target bonus and all of Mr. Bekins' 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, if Mr. Bekins' employment is terminated by us for
performance reasons, then we will pay Mr. Bekins all accrued compensation as
of the date of termination, a lump sum equal to the then base salary and
target bonus and all of Mr. Bekins' outstanding stock options as of the
effective date of the employment agreement will vest and will remain
exercisable until their originally scheduled expiration dates.
16
Following a change in control and if within 12 months after the date on
which the change in control occurs Mr. Bekins' employment is terminated by us
without cause, by us because we elect not to renew the agreement, by us for a
performance reason, or by Mr. Bekins for good reason, then we will pay Mr.
Bekins all accrued compensation as of the date of termination, a lump sum
equal to (1) 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, and
(2) 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 all of Mr. Bekins' outstanding stock options as of the effective date
of the employment agreement will vest and will remain exercisable until their
originally scheduled expiration dates.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENTManagement
The following table sets forth as of August 2, 20001, 2001 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""named
executive officers"), and the holdings of all directors, nominees and
executive officers and directors as a group. There are noThe following table also sets forth the names
of those persons known to us to be beneficial owners of more than 5% of our
common stock.
NAME OF AMOUNT BENEFICIALLY OWNED AND
BENEFICIAL OWNER NATURE OF BENEFICIAL OWNERSHIP (12) PERCENT OF CLASSName of Amount Beneficially Owned and
Beneficial Owner Nature of Beneficial Ownership(1) Percent of Class
Paul C. Reilly 100,000(2) *
James E. Barlett 4,500(3) *
Frank V. Cahouet 21,700(3) *
Peter L. Dunn 363,542(4) *
Richard M. Ferry 1,031,456(1) 2.72%1,013,456(5) 2.68%
Sakie Fukushima 130,159(6) *
Patti S. Hart 2,500(7) *
Charles D. Miller 34,500(8) *
Windle B. Priem 736,084(2) 1.94%
Peter L. Dunn 343,543(3) 0.91%
James E. Barlett 2,000(4) 0.01%
Frank V. Cahouet 19,200(4) 0.05%
Timothy K. Friar 128,458(5) 0.34%
Sakie Fukushima 115,076(6) 0.30%
Patti S. Hart 0 0.00%
Scott E. Kingdom 107,924(7) 0.28%
Charles D. Miller 32,000(8) 0.08%746,501(9) 1.65%
Gerhard Schulmeyer 2,000(4) 0.01%4,500(3) *
Mark C. Thompson 0 0.00%2,500(7) *
Elizabeth S.C.S. Murray 109,124 0.29%130,874(10) *
Gary C. Hourihan 56,113(9) 0.15%66,112(11) *
Michael D. Bekins 213,778(10) 0.56%213,778(12) *
All directors and
executive officers as a
group (15(14 persons) 2,840,643(11) 7.65%2,526,155(13) 6.67%
Farralon Capital
Management, L.L.C.
and Farralon Partners,
L.L.C. 1,974,100(14) 5.3%
NOTES TO STOCK OWNERSHIP TABLE:* Designates ownership of less than 1% of the company's outstanding common
shares.
(1) Other than with respect to the shares held under the 401(k) plan and the
options under the Performance Award Plan, each person has sole voting
and dispositive power with respect to the shares shown unless otherwise
indicated.
(2) Restricted stock as to which Mr. Reilly has voting power.
(3) Holding includes right to acquire beneficial ownership of 4,500 shares
of common stock within 60 days through the exercise of option granted
under the Performance Award Plan.
(4) Holding includes 19,985 shares of common stock held by the trustees of
the 401(k) Plan for the benefit of the listed individual and right to
acquire beneficial ownership 26,833 shares of common stock within
60 days through the exercise of option granted under the Performance
Award Plan.
(5) Holding includes 658,184 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.
(2)(6) Holding includes right to acquire beneficial ownership of 30,167 shares
of common stock within 60 days through the exercise of option granted
under the Performance Award Plan.
(7) Holding includes right to acquire beneficial ownership of 2,500 shares
of common stock within 60 days through the exercise of option granted
under the Performance Award Plan.
11
(8) Holding includes 30,000 shares of common stock held by the Miller Family
Trust dated September 8, 1988 and right to acquire beneficial ownership
of 4,500 shares of common stock within 60 days through the exercise of
the option granted under the Performance Award Plan.
(9) Holding includes 215,015 shares of common stock held by the trustees of
the 401(k) Plan for the benefit of the listed individual and right to
acquire beneficial ownership of 109,717120,134 shares of common stock within 60
days through the exercise of option granted under the Performance Award
Plan.
(3)(10) Holding includes 19,985 shares of common stock held by the trustees of
the 401(k) Plan for the benefit of the listed individual and right to acquire beneficial ownership of 6,83421,750 shares
of common stock within 60 days through the exercise of option granted
under the Performance Award Plan.
(4)(11) Holding includes right to acquire beneficial ownership of 2,00014,500 shares
of common stock within 60 days through the exercise of option granted
under the Performance Award Plan.
17
(5) Holding includes right to acquire beneficial ownership of 16,334 shares
of common stock within 60 days through the exercise of option granted
under the Performance Award Plan.
(6) Holding includes right to acquire beneficial ownership of 15,084 shares
of common stock within 60 days through the exercise of option granted
under the Performance Award Plan.
(7) Holding includes right to acquire beneficial ownership of 15,000 shares
of common stock within 60 days through the exercise of option granted
under the Performance Award Plan.
(8) Holding includes 30,000 shares of common stock held by the Miller Family
Trust dated September 8, 1988 and right to acquire beneficial ownership
of 2,000 shares of common stock within 60 days through the exercise of
option granted under the Performance Award Plan.
(9) Holding includes right to acquire beneficial ownership of 4,501 shares of
common stock within 60 days through the exercise of option granted under
the Performance Award Plan.
(10)(12) Holding includes 3,763 shares of common stock held by the trustees of
the 401(k) Plan for the benefit of the listed individual and right to
acquire beneficial ownership of 10,167 shares of common stock within
60 days through the exercise of option granted under the Performance
Award Plan.
(11)(13) Total holding as a group includes 896,947 shares of common stock held by
the trustees of the 401(k), 30,000 shares of common stock held by the
Miller Family Trust dated September 8, 1988 and right to acquire
beneficial ownership of a total of 185,637368,605 shares of common stock within 60
days through the exercise of options granted under the Performance Award
Plan.
(12) Other than with respect to the shares held under the 401(k) plan(14) Shares are owned of record by several Farralon affiliates. The
investment managers that hold beneficial ownership of all such
securities include Enrique H. Boilini, David I. Cohen, Joseph F. Downes,
William F. Duhamel, Andrew B. Fremder, Richard B. Fried, Monica R.
Landry, William F. Mellin, Steven L. Millham, Meridee A. Moore, Thomas
F. Steyer and the
options under the Performance Award Plan, each person has sole voting and
dispositive power with respect to the shares shown unless otherwise
indicated.
CERTAIN RELATIONSHIPS AND TRANSACTIONS WITH RELATED PARTIES
In November 1999, our Chairman, Richard Ferry, exercised his option to
purchase from us five insurance policies we were carrying to insure his life.
The total purchase price paid to us by Mr. Ferry to purchase the policies was
$1,415,436.Mark C. Wehrly. This purchase price equaled the total cumulative premiums we had
previously paid. The option was granted to Mr. Ferry pursuant to a Stock
Purchase Agreement, as amended, dated June 2, 1995, by and among Mr. Ferry, us
and various third parties. Under the original terms of the Stock Purchase
Agreement, we agreed to purchase all the shares of our stock then owned by Mr.
Ferry in the event of his death. The purchase of the stock would have been
funded by the proceeds we receivedinformation is obtained from the
life insurance policies. Our
recent public offering obviated the need for the stock repurchase and an
amendment, dated April 25, 1999, to the Stock Purchase Agreement was entered
into to eliminate our obligation to purchase Mr. Ferry's stock and removed
certain conditions under which the option could be exercised.
18Schedule 13G filed on January 22, 2001.
12
EXECUTIVE COMPENSATION
REPORT OF THE COMPENSATIONReport of the Compensation & PERSONNEL COMMITTEE
COMMITTEE COMPOSITION AND ROLEPersonnel Committee
Committee Composition and Role
The Compensation Committee is comprised entirely of directors who have
never served as our officers. The Committee (a) approves and oversees our
compensation programs, including incentive and stock option programs provided
to members of our senior management group, including all named executive
officers, and (b) approves or recommends to our board,Board, as required, specific
compensation actions, including salary adjustments, annual cash bonuses, stock
option grants, and employment contracts for our Chief Executive Officer and
other members of our senior officer group. The Committee met threetwelve times
during fiscal 2000.
EXECUTIVE COMPENSATION PHILOSOPHY2001.
Executive Compensation Philosophy
In establishing and assessing the compensation programs and compensation
policies for the executive officers and other senior executives, the Committee
is guided by the following principles:
. The total compensation of our executive officers and other key employees
must be competitive with those of other major executive recruiting
firms, recognizing our size and complexity relative to our peers;
. Individual cash bonuses and stock option awards should be closely tied
to the performance of the company as a whole, as well as to the team and
individual performance of the senior management team both as a group and as individual
contributors;executive group; and
. The interests of senior management and our stockholders should be
closely aligned through direct management ownership of our common stock,
and by providing a meaningful portion of each key employee's total
compensation in the form of stock options.
Because a number of our peer organizations are privately-held, precise
information regarding the senior executive compensation practices among our
competitor group is difficult to obtain. In addition, even when such data are
available, meaningful differences in size, complexity and organizational
structure among our competitor group make direct comparisons of compensation
practices problematic. In assessing the competitiveness of our senior
executive compensation, the Committee relies on information obtained from the
proxies of publicly-traded competitors, information derived from data obtained
from executives and senior search consultants we recruited from competitor
organizations, and the Committee's general knowledge of the market for senior
management positions. From time to time, the Committee also retains
compensation consultants to assess the competitiveness of our officer
compensation and to make suggestions regarding compensation program design.
SENIOR EXECUTIVE COMPENSATIONSenior Executive Compensation
The compensation provided to our senior officers, including the named
executive officers, consists of an annual base salary, an annual cash bonus
and stock options granted at the market price of our common stock as of the
date of grant.
(1) BASE SALARIESBase Salaries
Base salaries for our executive officers, including theour Chief Executive
Officer, and selected other key employees, are established annually by the
Committee based on the Committee's understanding of competitive practices
among our major competitors, internal equity considerations, and individual
performance. Effective July 1, 2000,For fiscal 2002, the salaries of our executive officers were not
increased as follows: Windle Priem, Chief Executive Officer, from $600,000 to $640,000 (6.7%), Peter Dunn, from $465,000 to $495,000 (6.5%),
Elizabeth Murray, from $350,000 to $370,000 (5.7%), and Gary Hourihan, from
$340,000 to $360,000 (5.9%). The annual base salary of Richard Ferry,
Chairman, was reduced effective May 1, 2000 to $400,000, while the base salary
of Michael Bekins, Chief Operating Officer, was set at $450,000 upon his
assumption of the role on May 1, 2000.
19
(2) CASH BONUSESthose in effect for fiscal 2001.
Cash Bonuses
The maximum aggregate annual cash bonuses paid to our executive officers is
limited by a formula that ties aggregate bonuses to a percentage of our net
income. The actual annual cash bonus of each executive officer, including the
Chief Executive Officer, is determined by the Committee based on its
assessment of the
13
performance of the Company and of the executive officers both as a group (team
performance) and as individuals duringindividuals. The assessment of individual performance is
based on objectives established and mutually agreed to at the beginning of the
fiscal 2000.year, as well as other factors deemed important by the Committee.
Subject to the maximum aggregate cash bonuses dictated by the above mentionedabove-mentioned
formula, the target and maximum cash bonusbonuses available to each executive
officer isare one times and two times base salary.
For fiscal 2000, the Committee determined that cash bonuses for our
executive officers, including the Chief Executive Officer, should be team-
oriented to recognize the contributions of the executive officers as a group
in guiding the company during its first year of public trading.salary, respectively.
In determining the level of cash bonuses for our executive officers for
fiscal 2001, the Committee took into consideration our recordthe Company's financial
performance and strong stock price performance, the numerous acquisitions closed during the year,performance of our subsidiary
operations, including Futurestep, and the successful transitionperformance of our reward programs and cultureeach officer with
respect to better reflect its
publicly-traded status. Based on these considerations, the Committee awarded
each executive officer, including the Chief Executive Officer, a cash bonus
equal to 1.8 times base salary.their individual objectives. This decisionprocess resulted in the following
cash bonuses awarded to our executive officers for fiscal 2000:2001: Windle Priem,
$1,080,000;$500,000; Richard Ferry, $837,000;$300,000; Michael Bekins, $325,000; Peter Dunn,
$837,000;$300,000; Elizabeth Murray, $630,000;$220,000; Gary Hourihan, $612,000.
(3) STOCK OPTIONS$250,000. These awards
represented the following percentage of each individual's target award
opportunity: Windle Priem, 77%; Richard Ferry, 75%; Michael Bekins, 72%; Peter
Dunn, 61%; Elizabeth Murray, 55%; Gary Hourihan 70%.
Stock Options
As part of their total compensation package, each of our executive
officers, including the Chief Executive Officer, is eligible to receive an
annual grant of stock options (performance options) with a Black-Scholes value
equal to a percentage of their cash bonus award. The specific percentage
awarded each executive officer, isincluding the Chief Executive Officer, was
based on the Committee's assessment of Company, team, and individual
performance during fiscal 2000. In recognition
of our record financial performance, successful acquisition program, and
progress in other areas, including the successful cultural transition to a
publicly-traded firm, the Committee granted each executive officer the maximum
number of options for fiscal 2000 performance.2001. This decisionprocess resulted in the following option
awards:awards for fiscal 2001 performance: Windle Priem, 57,32518,990 shares; Michael
Bekins, 13,160 shares; Peter Dunn, 44,42514,480 shares; Elizabeth Murray, 33,45011,700
shares; Gary Hourihan, 32,47510,530 shares. Richard Ferry, as in the past, declined
the grant of options to preserve the shares for other employees.
EMPLOYMENT CONTRACTSEmployment Contracts
Each of our named executive officers except Richard Ferry, is covered by an employment agreement
that provides for a minimum level of salary, cash bonus potential, and option
and benefit eligibility. The agreements also provide for a defined severance
benefit of up to two times base salary plus the average of
the most recent two-year cash bonus in the event of a termination of employment without "cause" or for
"good reason" as such terms are defined in the agreements. Such severance
benefits range up to two times salary and target bonus depending upon the
officer. The agreements also provide for the continuation of health and
welfare benefits upon a termination without cause or for good reason. It is
the Committee's belief that such agreements are necessary from a competitive
perspective and also contribute to the stability of the management team.
INTERNAL REVENUE CODE SECTIONInternal Revenue Code Section 162(m)
As one of the factors in the review of compensation matters, the
Compensation Committee considers the anticipated tax treatment to the company.
The deductibility of some types of compensation for executive officers depends
upon the timing of an executive's vesting or exercise of previously granted
rights or on whether such plans qualify as "performance-based" plans under the
provisions of the tax laws. It is the Committee's policy, to the extent that
such policy does not conflict with prudent management practices, to satisfy
the requirements necessary to allow the compensation of its executive officers
to be deductible under Section 162(m) of the Internal Revenue Code, as
amended.
Compensation and Personnel Committee
Charles D. Miller, (Chair)Chair
Frank V. Cahouet
Gerhard Schulmeyer
2014
SUMMARY COMPENSATION TABLESummary Compensation Table
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDSLong-Term
Compensation
Annual Compensation Awards
---------------------------------- SECURITIES
OTHER ANNUAL UNDERLYING ALL OTHER
NAME AND PRINCIPAL FISCAL SALARY BONUS COMPENSATION OPTIONS COMPENSATION
POSITION YEARSecurities
Other Annual Underlying All Other
Fiscal Salary Bonus Compensation Options Compensation
Name and Principal Position Year ($) ($) ($) (#) ($) (1)
Richard M. Ferry 2001 400,000 300,000 0 0(22) 51,688(2)
Chairman of the Board 2000 465,000 837,000 0 0(13) 26,403(1)
Chair of the Board0(22) 58,377(3)
1999 551,502 538,000 0 0(13) 13,433(2)
1998 550,000 1,375,000 0 0 11,876(3)0(22) 45,105(4)
Windle B. Priem 2001 633,333 500,000 0 18,990 42,944(5)
Chief Executive 2000 600,000 1,080,000 0 157,325 20,809(1)
Chief Executive40,543(6)
Officer and President 1999 489,130 606,000 0 103,250 13,433(2)
Officer and President 1998 410,000 1,150,000 0 0 11,876(3)41,203(7)
Peter L. Dunn 2001 490,000 300,000 0 14,480 30,644(8)
Vice Chair and 2000 465,000 837,000 0 44,425 17,739(4)
Vice Chair,36,993(9)
General Counsel 1999 455,232 538,000 0 80,500 13,433(2)
Counsel and Corporate 1998 375,000 937,500 0 0 11,876(3)
Secretary35,653(10)
Elizabeth S.C.S. Murray,Murrary 2001 380,532 220,000 0 11,700 21,099(11)
Chief Financial Officer, 2000 350,000 630,000 0 33,450 9,747(1)
Chief Financial29,241(12)
Treasurer and Executive 1999 293,748 347,000 0 65,250 905(1)
Officer, 1998 78,450(5) 125,000 0 0 125,076(6)
Treasurer and Executive
Vice President21,863(13)
Vice-President
Gary C. Hourihan 2001 356,666 250,000 0 10,530 26,729(14)
Executive Vice-President 2000 333,333(12)333,333(15) 612,000 0 32,475 129,273(8)
Executive Vice146,568(16)
--Organizational 1999 82,725(7)82,725(17) 95,000 0 43,500 125,000(9)
President-- 1998 -- -- -- --
Organizational126,100(18)
Development
Michael D. Bekins 2001 450,000 325,000 0 13,160 15,889(19)
Chief Operating Officer 2000 300,000 556,475 0 23,325 11,227(1)
Chief Operating Officer43,325 25,216(20)
1999 260,000 215,000 0 30,500 23,132(10)
1998 200,000 350,000 0 0 12,542(11)38,004(21)
NOTES TO SUMMARY COMPENSATION TABLE:
(1) Represents insurance premiums paid by the Company.
(2) Represents contributions of $12,528Contributions to the executive'sour 401(k) plan and
$905 paid by the Company for fiscal year 2001 have not yet been
determined.
(2) Represents insurance premiums.
(3) Represents contributionsinsurance premiums of $10,961 to the executive's$48,102 and a 401(k) plan contribution
of $10,275.
(4) Represents insurance premiums of $40,485 and $915 paid by the Company fora 401(k) plan contribution
of $4,620
(5) Represents insurance premiums.
(4)(6) Represents insurance premiums of $30,268 and a 401(k) plan contribution
of $10,275
(7) Represents insurance premiums of $29,916 and a 401(k) plan contribution
of $11,287.
(8) Represents insurance premiums of $28,644 and a tuition contribution of
$2,000$2,000.
(9) Represents insurance premiums of $24,718, a 401(k) plan contribution of
$10,275 and $15,739 paid by the Company
fora tuition reimbursement of $2,000.
(10) Represents insurance premiums of $24,366 and a 401(k) plan contribution
of $11,287.
(11) Represents insurance premiums.
(5)(12) Represents compensation paid to Ms. Murray from January 12, 1998, when
she joined the Company, through the endinsurance premiums of fiscal 1998. Ms. Murray's$18,966 and a 401(k) plan contribution
of $10,275.
(13) Represents insurance premiums of $18,614 and a 401(k) plan contribution
of $3,249.
(14) Represents insurance premiums of $24,729 and a tuition reimbursement of
$2,000
15
(15) Represents Mr. Hourihan's base salary for fiscal 1998 was paidfrom May 1, 1999 to June 30, 1999
at an annual rate of $250,000.
(6)$300,000 and from July 1, 1999 to April 30, 2000 at
an annual rate of $340,000.
(16) Represents $125,000 paid to Ms. Murray asinsurance premiums of $13,547, a 401(k) plan contribution of
$8,021 and second installment of a signing bonus, and $76 paid by
the Company for insurance premiums.
(7)$125,000.
(17) 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.
(8)(18) Represents $125,000 paid to Mr. Hourihan as the balanceinsurance premiums of a signing
bonus$1,100 and $4,273 paid by the Company for insurance premiums.
21
(9) Represents $125,000 paid to Mr. Hourihan as the first installment of a
signing bonus.
(10)bonus, $125,000.
(19) Represents contributionsinsurance premiums.
(20) Represents insurance premiums of $11,304 to Mr. Bekins'$14,941 and a 401(k) plan contribution
of $10,275.
(21) Represents insurance premiums of $14,889, a 401(k) plan contribution of
$11,287 and a $11,828 tax equalization amount paid to Mr. Bekins for relocation toin
connection with his service in Asia.
(11) Represents contributions to the executive's 401(k) plan
(12) Represents Mr. Hourihan's base salary from May 1, 1999 to June 30, 1999
at an annual rate of $300,000 and from July 1, 1999 to April 30, 2000 at
an annual rate of $340,000.
(13)(22) Mr. Ferry declined the grants of options to preserve the shares for
other employees.
AGGREGATED OPTION EXERCISES AND YEAR-END OPTION VALUESEmployment Agreements
Paul C. Reilly, Chairman and Chief Executive Officer since June 29,
2001. In connection with the election of Paul C. Reilly as Chairman and Chief
Executive Officer, we entered into an employment agreement with Mr. Reilly.
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. Reilly reaches age 65; provided, however, that either we
or Mr. Reilly may terminate this agreement at the end of the initial term or
any renewal term by delivering to the other party at least 60 days' prior
written notice. Mr. Reilly's base salary is $650,000 and the agreement
provides for an annual target bonus equal to 150% of base salary and an annual
maximum bonus of up to 300% of base salary. In addition, the agreement
provides that Mr. Reilly will be eligible for an annual grant of stock options
having a target grant value of $1,250,000 and a maximum grant value of
$1,750,000 based on a Black-Scholes option pricing model valuation. We have
also agreed to pay certain transition and relocation costs incurred by
Mr. Reilly.
In connection with his election, Mr. Reilly was granted options to purchase
450,000 shares with an exercise price of $15.50 per share, the closing price
of the stock in trading in the New York Stock Exchange on June 29, 2001. Of
these options 300,000 vest in equal installments over three years and 150,000
vest in three equal installments based on the attainment of specified price
levels in our stock. The price levels for vesting are $28 per share, $33 per
share and $38 per share. In addition, the Board made a restricted stock award
of 100,000 shares to Mr. Reilly. The restricted stock awarded to Mr. Reilly
will vest in three annual installments beginning in June 2002. To the extent
not vested, the restricted stock will be forfeited if Mr. Reilly is terminated
with cause or he resigns without good reason.
If Mr. Reilly's employment terminates due to death or disability, then we
will pay Mr. Reilly, or his legal representatives, all accrued compensation as
of the date of termination, and all outstanding stock options held by
Mr. Reilly at the time of termination will vest and remain exercisable until
their originally scheduled expiration dates. If Mr. Reilly's employment is
terminated by us for cause, is terminated by Mr. Reilly prior to its
expiration without good reason or if Mr. Reilly fails to renew the agreement
after its initial term, then we will pay Mr. Reilly all accrued compensation
as of the date of termination.
Prior to a change in control, if Mr. Reilly's employment is terminated by
us without cause or is terminated by Mr. Reilly for good reason then we will
pay Mr. Reilly all accrued compensation as of the date of termination, and a
lump sum amount equal to 200% of his base salary and target bonus. If prior to
a change in control, Mr. Reilly's employment is terminated because the Company
elects not to renew the agreement, then Mr. Reilly will be entitled to a lump
sum amount equal to his base salary and target bonus. On termination in any of
the
16
foregoing circumstances, all of Mr. Reilly's outstanding stock options as of
the date of termination will vest and will remain exercisable until their
originally scheduled expiration dates.
If there is a change in control and within 12 months Mr. Reilly's
employment is terminated by us, either without cause, because we elect not to
renew the agreement or for a performance reason, or by Mr. Reilly for good
reason, then we will pay Mr. Reilly all accrued compensation as of the date of
termination, and a lump sum equal to (1) 200% of the greater of his base
salary or the annual base salary in effect just prior to the change in
control, whichever amount is higher, plus (2) the greater of 200% of his
maximum bonus for the incentive year in which such termination occurs or the
maximum bonus for the preceding fiscal year. On termination in any of the
foregoing circumstances, all of Mr. Reilly's outstanding stock options as of
the date of termination will vest and will remain exercisable until their
originally scheduled expiration dates.
Windle B. Priem, Chief Executive Officer and President until June 29,
2001. Upon the election of Mr. Reilly, Mr. Priem stepped down as Chief
Executive Officer and President. In connection with this change, we entered
into a new employment agreement with Mr. Priem in July 2001. This agreement
provides for a term extending through September 30, 2003. Pursuant to the
agreement, Mr. Priem's annual salary is $450,000 and provides that Mr. Priem
shall be eligible for discretionary bonus awards. This agreement supersedes
the employment agreement previously in effect, which is described below.
Until the effectiveness of the foregoing agreement in July 2001, Mr. Priem
was subject to an employment agreement entered into in June 1999. The
agreement entered into in June 1999 provided for a term of three years. The
agreement provided 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 were terminated due to death or disability, we
were to pay Mr. Priem, or his legal representatives, all accrued compensation
as of the date of termination and all of Mr. Priem's outstanding stock options
as of the effective date of the employment agreement vested and remained
exercisable until their originally scheduled expiration dates. If Mr. Priem's
employment was terminated by us for cause, terminated by Mr. Priem prior to
its expiration or if Mr. Priem failed to renew the agreement after its initial
term, then were to pay Mr. Priem all accrued compensation as of the date of
termination.
Under this former agreement if, prior to a change in control, Mr. Priem's
employment were terminated by us without cause, terminated by Mr. Priem for
good reason or if we failed to renew the agreement, we were to pay Mr. Priem
all accrued compensation as of the date of termination, a lump sum equal to
200% of the then base salary and target bonus and all of Mr. Priem's
outstanding stock options as of the effective date of the employment agreement
would have vested and remained exercisable for their originally scheduled
expiration dates. Following a change in control, if Mr. Priem's employment
were terminated by us without cause or by Mr. Priem for good reason, we were
to pay Mr. Priem all accrued compensation as of the date of termination, 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 would be higher, and all of Mr. Priem's outstanding stock
options as of the effective date of the employment agreement would have vested
and remained exercisable for their originally scheduled expiration dates.
In connection with the execution of the employment agreement in June 1999,
the Board of Directors also granted Mr. Priem an option to purchase 100,000
shares of our 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 agreement provided for vesting upon satisfaction of certain
stock performance thresholds, which have been met. This option became
exercisable on October 6, 1999 and shall terminate prior to expiration on the
death, disability or termination of Mr. Priem's employment for any reason.
Following death, disability or retirement, this option shall remain
exercisable for a period of twelve months, but not beyond the original
expiration date. Upon a termination of Mr. Priem's employment for any other
reason, this option shall remain exercisable for a period of three months, but
not beyond the original expiration date.
17
Richard M. Ferry, Chairman of the Board until June 29, 2001. In January
2001, we entered into an employment agreement with Richard M. Ferry. Under
this agreement Mr. Ferry will be paid a salary of $400,000 through September
2001 at which time his salary will be reduced to $300,000 until September 30,
2002. Thereafter, Mr. Ferry will be eligible for discretionary bonuses and
will be entitled to certain benefits and perquisites until September 2007. If
Mr. Ferry is terminated by us without cause or he resigns for good reason
prior to September 2002, he will be entitled to receive a lump sum payment
equal to the remainder of the salary payable to him under the agreement.
Peter L. Dunn, General Counsel and, until August 2001, Vice Chair. In June
1999, we entered into an employment agreement with Peter L. Dunn as Vice Chair
and General Counsel, 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 we or Mr. Dunn may terminate
this agreement at the end of the initial term or any renewal term by
delivering to the other party at least 120 days' prior written notice.
Mr. Dunn's base salary is $495,000 and the agreement provides for an annual
target bonus equal to 100% of base salary and an annual maximum bonus of up to
200% of base salary. In connection with Mr. Reilly's election as Chairman and
Chief Executive Officer, Mr. Dunn has agreed to step down from his positions
as Vice Chair and as a director.
If Mr. Dunn's employment terminates due to death or disability, then we
will pay Mr. Dunn, or his legal representatives, all accrued compensation as
of the date of termination, and all outstanding stock options held by Mr. Dunn
at the time of termination will vest and remain exercisable until their
originally scheduled expiration dates. If Mr. Dunn's employment is terminated
by us for cause, is terminated by Mr. Dunn prior to its expiration without
good reason or if Mr. Dunn fails to renew the agreement after its initial
term, then we will pay Mr. Dunn all accrued compensation as of the date of
termination.
If, prior to a change in control, Mr. Dunn's employment is terminated by us
without cause or is terminated by Mr. Dunn for good reason then we will pay
Mr. Dunn all accrued compensation as of the date of termination, and a lump
sum amount equal to 200% of his base salary and target bonus. If Mr. Dunn's
employment is terminated because the Company elects not to renew the
agreement, then Mr. Dunn will be entitled to a lump sum amount equal to one
times his base salary and target bonus. If Mr. Dunn's employment is terminated
by us for performance reasons, then Mr. Dunn will be entitled to a lump sum
amount equal to one and one-half times his base salary and target bonus. On
termination in any of the foregoing circumstances, all of Mr. Dunn's
outstanding stock options as of the date of termination will vest and will
remain exercisable until their originally scheduled expiration dates.
If there is a change in control and within 12 months Mr. Dunn's employment
is terminated by us, either without cause, because we elect not to renew the
agreement or for a performance reason, or is terminated by Mr. Dunn for good
reason, then we will pay Mr. Dunn all accrued compensation as of the date of
termination, and a lump sum equal to (1) 200% of the greater of his base
salary plus (2) the greater of 200% of his maximum bonus for the incentive
year in which such termination occurs or the maximum bonus for the preceding
fiscal year. On termination in any of the foregoing circumstances, all of
Mr. Dunn's outstanding stock options as of the date of termination will vest
and will remain exercisable until their originally scheduled expiration dates.
Elizabeth S.C.S. Murray, Chief Financial Officer and Executive Vice
President. In June 1999, we entered into an employment agreement with
Elizabeth S.C.S. Murray as Chief Financial Officer and Executive Vice
President, 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 we or Ms. Murray may terminate this
agreement at the end of the initial term or any renewal term by delivering to
the other party at least 120 days' prior written notice. Ms. Murray's base
salary is $400,000 and the agreement provides for an annual target bonus equal
to 100% of base salary and an annual maximum bonus of up to 200% of base
salary.
18
If Ms. Murray's employment terminates due to death or disability, then we
will pay Ms. Murray, or her legal representatives, all accrued compensation as
of the date of termination, and all outstanding stock options held by
Ms. Murray at the time of termination will vest and remain exercisable until
their originally scheduled expiration dates. If Ms. Murray's employment is
terminated by us for cause, is terminated by Ms. Murray prior to its
expiration without good reason or if Ms. Murray fails to renew the agreement
after its initial term, then we will pay Ms. Murray all accrued compensation
as of the date of termination.
If, prior to a change in control, Ms. Murray's employment is terminated by
us without cause or is terminated by Ms. Murray for good reason then we will
pay Ms. Murray all accrued compensation as of the date of termination, and a
lump sum amount equal to 200% of her base salary and target bonus. If
Ms. Murray's employment is terminated because the Company elects not to renew
the agreement, then Ms. Murray will be entitled to a lump sum amount equal to
one times her base salary and target bonus. If Ms. Murray's employment is
terminated by us for performance reasons, then Ms. Murray will be entitled to
a lump sum amount equal to one and one-half times her base salary and target
bonus. On termination in any of the foregoing circumstances, all of
Ms. Murray's outstanding stock options as of the date of termination will vest
and will remain exercisable until their originally scheduled expiration dates.
If there is a change in control and within 12 months Ms. Murray's
employment is terminated by us, either without cause, because we elect not to
renew the agreement or for a performance reason, or by Ms. Murray for good
reason, then we will pay Ms. Murray all accrued compensation as of the date of
termination, and a lump sum equal to (1) 200% of the greater of her base
salary or the annual base salary in effect just prior to the change in
control, whichever amount is higher, plus (2) the greater of 200% of her
maximum bonus for the incentive year in which such termination occurs or the
maximum bonus for the preceding fiscal year. On termination in any of the
foregoing circumstances, all of Ms. Murray's outstanding stock options as of
the date of termination will vest and will remain exercisable until their
originally scheduled expiration dates.
Gary C. Hourihan, Executive Vice President, Organizational Development. In
March 2000, we entered into an employment agreement with Gary C. Hourihan as
Executive Vice President, Organizational Development. The initial term of the
agreement is through April 30, 2002 and the term will automatically renew for
successive two-year periods thereafter until the first April 30th following
the date on which Mr. Hourihan reaches age 65; provided, however, that either
we or Mr. Hourihan 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. Mr. Hourihan's base salary is $360,000 and the agreement
provides for an annual target bonus equal to 100% of base salary and an annual
maximum bonus of up to 200% of base salary.
If Mr. Hourihan's employment terminates due to death or disability, then we
will pay Mr. Hourihan, or his legal representatives, all accrued compensation
as of the date of termination, and all outstanding stock options held by
Mr. Hourihan at the time of termination will vest and remain exercisable until
their originally scheduled expiration dates. If Mr. Hourihan's employment is
terminated by the Company for cause, is terminated by Mr. Hourihan prior to
its expiration without good reason or if Mr. Hourihan fails to renew the
agreement after its initial term, then we will pay Mr. Hourihan all accrued
compensation as of the date of termination.
If, prior to a change in control, Hourihan's employment is terminated by us
without cause or is terminated by Mr. Hourihan for good reason then we will
pay Mr. Hourihan all accrued compensation as of the date of termination, and a
lump sum amount equal to 200% of his base salary and target bonus. If Mr.
Hourihan's employment is terminated because the Company elects not to renew
the agreement, then Mr. Hourihan will be entitled to a lump sum amount equal
to one times his base salary and target bonus. If Mr. Hourihan's employment is
terminated by us for performance reasons, then Mr. Hourihan will be entitled
to a lump sum amount equal to one and one-half times his base salary and
target bonus. On termination in any of the foregoing circumstances, all of
Mr. Hourihan's outstanding stock options as of the date of termination will
vest and will remain exercisable until their originally scheduled expiration
dates.
19
If there is a change in control and within 12 months Mr. Hourihan's
employment is terminated by us, either without cause, because we elect not to
renew the agreement or for a performance reason, or by Mr. Hourihan for good
reason, then we will pay Mr. Hourihan all accrued compensation as of the date
of termination, and a lump sum equal to (1) 200% of the greater of his base
salary or the annual base salary in effect just prior to the change in
control, whichever amount is higher, plus (2) the greater of 200% of his
maximum bonus for the incentive year in which such termination occurs or the
maximum bonus for the preceding fiscal year. On termination in any of the
foregoing circumstances, all of Mr. Hourihan's outstanding stock options as of
the date of termination will vest and will remain exercisable until their
originally scheduled expiration dates.
Michael D. Bekins, Chief Operating Officer. We entered into an employment
agreement with Michael D. Bekins as Chief Operating Officer, effective May 1,
2000. 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. Bekins reaches age 65; provided, however, that
either we or Mr. Bekins 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. Mr. Bekin's base salary is $450,000 and the agreement provides
for an annual target bonus equal to 100% of base salary and an annual maximum
bonus of up to 200% of base salary.
If Mr. Bekins' employment terminates due to death or disability, then we
will pay Mr. Bekins, or his legal representatives, all accrued compensation as
of the date of termination, and all outstanding stock options held by Mr.
Bekins at the time of termination will vest and remain exercisable until their
originally scheduled expiration dates. If Mr. Bekins' employment is terminated
by us for cause, is terminated by Mr. Bekins prior to its expiration without
good reason or if Mr. Bekins fails to renew the agreement after its initial
term, then we will pay Mr. Bekins all accrued compensation as of the date of
termination.
If, prior to a change in control, Mr. Bekins' employment is terminated by
us without cause or is terminated by Mr. Bekins for good reason then we will
pay Mr. Bekins all accrued compensation as of the date of termination, and a
lump sum amount equal to 200% of his base salary and target bonus. If Mr.
Bekins' employment is terminated because the Company elects not to renew the
agreement, then Mr. Bekins will be entitled to a lump sum amount equal to one
times his base salary and target bonus. If Mr. Bekins' employment is
terminated by us for performance reasons, then Mr. Bekins will be entitled to
a lump sum amount equal to one and one-half times his base salary and target
bonus. On termination in any of the foregoing circumstances, all of Mr.
Bekins' outstanding stock options as of the date of termination will vest and
will remain exercisable until their originally scheduled expiration dates.
If there is a change in control and within 12 months Mr. Bekins' employment
is terminated by us, either without cause, because we elect not to renew the
agreement, or for a performance reason, or by Mr. Bekins for good reason, then
we will pay Mr. Bekins all accrued compensation as of the date of termination,
and a lump sum equal to (1) 200% of the greater of his base salary or the
annual base salary in effect just prior to the change in control, whichever
amount is higher, plus (2) the greater of 200% of his maximum bonus for the
incentive year in which such termination occurs or the maximum bonus for the
preceding fiscal year. On termination in any of the foregoing circumstances,
all of Mr. Bekins' outstanding stock options as of the date of termination
will vest and will remain exercisable until their originally scheduled
expiration dates.
20
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 2000;2001; and
(2) the amount and values of unexercised stock options as of April 30,
2000.2001.
NUMBER OF SECURITIES VALUE OF UNEXERCISED IN-
SHARES UNDERLYING OPTIONS THE-MONEY OPTIONS
ACQUIRED ON VALUE AT FY-END(#) AT FY-END($)Number of Securities Value of Unexercised In-the-
Shares Underlying Options Money Options
Acquired on Value At FY-End at FY-End (1)
EXERCISE REALIZED ---------------------------------------------------
NAME (#)Exercise Realized ------------------------- --------------------------------
Name (2) ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLEUnexercisable Exercisable Unexercisable Exercisable
Richard M. Ferry 0 0 0 0 0 0
Windle B. Priem 24,700 $455,836 109,717 68,833 $1,399,780 $869,13124,000 $593,075 91,741 120,134 $ 142,023 $ 503,776
Peter L. Dunn 20,000 $307,500 6,834 53,666$164,539 71,258 26,833 $ 89,269 $678,512111,176 $ 111,176
Elizabeth S.C.S. Murray 17,334 $266,510 4,417 43,499 $ 57,697 $548,70691,653 55,199 21,750 $ 89,480 $ 89,485
Gary C. Hourihan 10,000 $150,000 4,501 28,999$110,113 46,974 14,500 $ 56,919 $363,80058,652 $ 58,656
Michael D. Bekins 010,167 $249,212 53,491 10,167 $ 0 10,167 20,33342,633 $ 129,056 $258,10042,637
NOTES TO OPTION EXERCISE TABLE:
(1) This amount represents solely the difference between the closing price on
April 30, 20002001 of $26.50$18.88 per share of our common stock and the respective
exercise prices of those unexercised options that had an exercise price
below such market price (i.e., "in-the-money" options). No assumptions or
representations regarding the "value" of such options are made or
intended.
(2) This amount represents the number of securities with respect to which the
options were exercised with no shares acquired.
OPTION GRANTS IN LAST FISCAL YEAROption Grants in Last Fiscal Year
POTENTIAL
REALIZABLE
VALUE AT
ASSUMED ANNUAL
RATES OF STOCK ALTERNATIVE
PRICE TO (f) AND
APPRECIATION (g): GRANT
INDIVIDUAL GRANTS FOR OPTION TERM DATE VALUE
- - -----------------------------------------------------------------------------------------------------
PERCENT OF
NUMBER OF TOTAL
SECURITIES OPTIONS/SARS EXERCISE
UNDERLYING GRANTED TO OF BASE
OPTION/SARS EMPLOYEES IN PRICE GRANT DATE
GRANTED(#) FISCAL YEARPotential
Realizable
Value At Assumed
Annual Rates Of
Stock Price
Appreciation For
Individual Grants Option Term
----------------------------------------------------------------------------------------
Percent of
Number Of Total
Securities Options/SAR's Exercise
Underlying Granted To Of Base
Option/SAR's Employees In Price Expiration
Name Granted Fiscal Year ($/SH) EXPIRATIONSh) Date 5% ($) 10% ($)
PRESENT
NAME(A) (b) (c) (d) DATE (e) (f) (g) VALUE $ (h)
Richard M. Ferry 0
Windle B. Priem 100,000 9.06% 13.6875 09/02/04 284,158 626,76657,325 1.44% 22.4375 06/06/10 808,903 2,049,919
Peter L. Dunn 044,425 1.11% 22.4375 06/06/10 626,873 1,588,620
Elizabeth S.C.S. Murray 033,450 0.84% 22.4375 06/06/10 472,007 1,196,159
Gary C. Hourihan 032,475 0.81% 22.4375 06/06/10 458,249 1,161,293
Michael D. Bekins 023,325 0.58% 22.4375 06/06/10 329,135 834,093
20,000 0.50% 28.0000 05/02/10 352,181 892,496
2221
PERFORMANCE GRAPHPerformance Graph
The Securities and Exchange Commission requires us 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 our 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 us.
Cumulative total return for each of the periods shown in the Performance Graphperformance graph
is measured assuming an initial investment of $100 on February 11, 1999, the
date public trading of our common stock began in connection with our initial
public offering, and the reinvestment of any dividends paid by any company in
the Peer Grouppeer group on the date the dividends were declared.
The peer group is comprised of publicly-tradedpublicly 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 Grouppeer group average. The members of the peer group
are Careerbuilder, Inc. (CBDR), Heidrick & Struggles International, Inc. (HSII), Headhunter.net (HHNT),
Hotjobs.com (HOTJ), Topjobs.net, Plc (TJOB), and TMP Worldwide, Inc./LAI Worldwide, Inc. (TMPW/LAIX) (TMPW).
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 us under the Securities Act of 1933 or the
Securities Exchange Act of 1934, except to the extent we specifically
incorporate this information by reference, and shall not otherwise be deemed
soliciting material or deemed filed under those Acts.
PERFORMANCE GRAPH APPEARS HERE
Measurement Period S&P *COMPARABLE
(Fiscal Year Covered)COMPARABLE
KFI 500 INDEX INDEX
- - --------------------- ---------------- --------- ---------------------
Measurement Pt- 11-Feb-99 $100 $100 $100
30-Apr-99Pt-2/11/99 $100.0 $100.0 $100.0
FYE 4/30/99 $ 85.2 $106.5 $129.0
30-Jul-99 $108.8$121.6
FYE 7/30/99 $ 97.1 $106.0 $ 97.4
$106.0
29-Oct-99 $158.9FYE 10/29/99 $158.8 $108.7 $134.4
31-Jan-00$132.6
FYE 1/30/00 $247.9 $111.2 $269.0
28-Apr-00$264.5
FYE 4/28/00 $195.0 $115.8 $260.6
31-Jul-00$147.5
FYE 7/31/00 $252.2 $114.1 $179.7
FYE 10/30/00 $263.7 $114.0 $175.5
FYE 1/31/00 $149.6 $108.9 $152.5
FYE 4/30/01 $134.6 $ 52.2 $114.1 $319.999.6 $119.1
FYE 7/31/01 $115.4 $ 99.6 $127.8
* COMPARABLE INDEXComparable Index = CAREERBUILDER, INC. (CBDR), HEIDRICKHeidrick & STRUGGLES
INTERNATIONAL, INC.Struggles International, Inc. (HSII),
HEADHUNTER.NETHeadhunter.net (HHNT), HOTJOBS.COMHotjobs.com (HOTJ), TOPJOBS.NET, PLC (TJOB), &and TMP WORLDWIDE, INC./LAI WORLDWIDE, INC.
(TMPW/LAIX)Worldwide, Inc. (TMPW).
22
REPORT OF AUDIT COMMITTEE
The role of the Audit Committee is to assist the Board of Directors in its
oversight of the company's financial reporting process. The Audit Committee of
the Board of Directors, comprised of three outside directors, held eight
meetings during 2000. The Audit Committee met with the independent auditors,
management and internal auditors to assure that all were carrying out their
respective responsibilities. The Committee reviewed the performance and fees
of the independent auditors, and met with them to discuss the scope and
results of their audit work, including the adequacy of internal controls and
the quality of the company's reporting. The Committee discussed with the
independent auditors their judgments regarding the quality and acceptability
of the company's accounting principles, the clarity of its disclosure and the
degree of aggressiveness or conservatism of its accounting principles and
underlying estimates. The Committee discussed with and received a letter from
the independent auditors confirming their independence. The Committee also
considered whether the provision of non-audit services by the independent
auditors to the company is compatible with maintaining the auditor's
independence, and the Committee has discussed with the auditors their
independence.
The members of the Audit Committee are not professionally engaged in the
practice of auditing or accounting and are not experts in the fields of
accounting or auditing, or with respect to the assessment of auditor
independence. Members of the Committee rely without independent verification
on the information provided to them and on the representations made by
management and the independent auditors. Accordingly, the Audit Committee's
oversight does not provide an independent basis to determine that management
has maintained appropriate accounting and financial reporting principles or
appropriate internal control and procedures designed to assure compliance with
accounting standards and applicable laws and regulations. Furthermore, the
Audit Committee's considerations and discussions referred to above do not
assure that the audit of the company's financial statements has been carried
out in accordance with generally accepted auditing standards, that the
financial statements are presented in accordance with generally accepted
accounting principles or that the company's auditors are in fact
"independent".
Based upon the reports and discussions described in this report, and
subject to the limitations on the role and responsibilities of the Committee
referred to above and in its charter, the Committee reviewed and discussed the
audited financial statements for the fiscal year ended April 30, 2001with
management and recommended to the Board of Directors that those financial
statements be included in the company's Form 10-K filing with the Securities
and Exchange Commission.
Audit Committee
Frank V. Cahouet, Chair
James E. Barlett
Charles D. Miller
23
OTHER MATTERS
SECTIONSection 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCEBeneficial Ownership Reporting Compliance
We believe that all SEC filings of our officers, directors and ten percent
stockholders complied with the requirements of Section 16 of the Securities
Exchange Act of 1934 during fiscal 2000,2001, based on a review of forms filed.
ANNUAL REPORT TO STOCKHOLDERSfiled,
except that one Form 3 regarding a new senior officer was filed late. The
report was for Stephen Semprevivo and reflected only a grant of options.
Annual Report to Stockholders
Enclosed with this proxy statement is our Annual Reportannual report for fiscal 2000,2001,
which includes the Company'sour Annual Report on Form 10-K (excluding the exhibits
thereto). The Annual Reportannual report is enclosed for the convenience of stockholders
and should not be viewed as part of these proxy solicitation materials. If any
person who was a beneficial owner of our common stock on August 2, 20001, 2001 for
the annual meeting desires additional information, a complete copy of our
Annual Report on Form 10-K, including the exhibits thereto, will be furnished
upon written request. The request should identify the requesting person as a
stockholder as of August 2, 20001, 2001 and should be directed to Peter L. Dunn,J. Timothy Scott,
Esq., Vice Chair, General Counsel and Corporate Secretary, Korn/Ferry International, 1800 Century Park East,
Suite 900, California 90067. Our Annual Report on Form 10-K, including the
exhibits thereto, is also available through the SEC's web site at
http://www.sec.gov.
SUBMISSION OF STOCKHOLDER PROPOSALS FOR CONSIDERATION AND NOMINATIONS OF
PERSONS FOR ELECTION AS DIRECTORS AT THE ANNUAL MEETINGSubmission of Stockholder Proposals for Consideration and Nominations of
Persons for Election as Directors at the Annual Meeting
In order for business to be properly brought before the annual meetingAnnual Meeting by a
stockholder, the stockholder must give notice of such business in writing to
Peter L. Dunn,J. Timothy Scott, Esq., Vice Chair, General Counsel and Corporate Secretary, Korn/Ferry International, 1800
Century Park East, Suite 900, California 90067, byat least 90 and not more than
120 days prior to the tenth day after such stockholder first received noticeanniversary of the dateAnnual Meeting of Stockholders in the
annual meeting.previous year.
With respect to director nominations and stockholder proposals, such notice
must set forth as to each matter the stockholder proposes to bring before the
meeting:
. 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,
. the name and address, as they appear on the corporation'scompany's books, of the
stockholder proposing such business,
. the number of shares of the corporationcompany owned of record and beneficially owned by
the stockholder .and any material interest ofbeneficial owner raising the stockholder in such business, and
. 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:
. the name and address of the stockholder who intends to make the
nomination and the address of the person or persons to be nominated,matter,
. a representation that such stockholder is a holder of record of stock of
the corporationcompany entitled to vote at such meeting and intends to appear in
person or by proxy at the meeting propose such business or nomination,
. a representation whether the stockholder or beneficial holder or any
group with which such person is affiliated intends to nominatedistribute proxy
materials or solicit proxies with respect to the person or persons
specified in the notice,matter,
. as to any director nomination, 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,
. as to any director nomination, 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 boardBoard of directors,Directors, and
. as to any director nomination, the consent of each nominee to serve as a
director of the corporationcompany if so elected.elected,
24
STOCKHOLDER PROPOSALS FOR NEXT YEAR'S ANNUAL MEETING. as to any business other than director nominations, 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, and if the
business is a proposal to amend the Bylaws, the language of the proposed
amendment,
. as to any business other than director nominations, any material
interest of the stockholder in such business, and
. as to any business other than director nominations, any other
information that is required to be provided by the stockholder, in his
or her capacity as a proponent of a proposal, pursuant to Regulation 14A
under the Exchange Act.
Stockholder Proposals and Nominations 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 our proxy
statement relating to our 2001 Annual Meeting of Stockholders in 2002 must be
received by Peter L. Dunn,J. Timothy Scott, Esq., Vice Chair, General Counsel and Corporate Secretary, Korn/Ferry
International, 1800 Century Park East, Suite 900, California 90067 by April
23, 2001.22, 2002.
Each notice of any stockholder proposal must comply with the Securities
Exchange Act of 1934, the rules and regulations thereunder, and our Bylaws as
in effect at the time of such notice.
By Order of the Board of Directors,
/s/ Peter L. Dunn
Peter L. Dunn
Vice Chair,[SIGNATURE OF J. TIMOTHY SCOTT]
J. Timothy Scott
Corporate Secretary and
Associate General Counsel
and
Corporate Secretary
August 21, 200020, 2001
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YOUR VOTE IS IMPORTANT
PLEASE SIGN, DATE AND RETURN
YOUR PROXY CARD
IN THE ENVELOPE PROVIDED
AS SOON AS POSSIBLE
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APPENDIX
AMENDED AND RESTATED
AUDIT COMMITTEE CHARTER
The Board of Directors shall appoint annually the members of the Audit
Committee. Members of the Committee shall serve at the will of the Board of
Directors.
Members
The Committee shall be comprised of three or more directors, each of whom
shall be independent of management and the Company and free from any
relationships to the Company that might in the opinion of the Board of
Directors interfere with the exercise of his or her independent judgment in
carrying out the functions of the Committee. The Board of Directors shall
apply the New York Stock Exchange corporate governance listing standards for
purposes of evaluating a Committee member's independence. Each member of the
Committee shall, when appointed to the Committee, or within a reasonable
period of time thereafter, be "financially literate" in the business judgment
of the Board of Directors. "Financially literate" is defined as familiar with
fundamental financial statements. At least one member of the Committee shall
have accounting or related financial management "expertise" as such
qualification is interpreted by the Board of Directors in its business
judgment.
Responsibilities
The Committee shall:
1. Provide assistance to the Board of Directors in fulfilling its
statutory and fiduciary responsibilities for fiscal examinations of the
Company and in monitoring management's and the outside auditors'
participation in the Company's accounting and financial reporting
process.
2. Review the Company's financial and accounting controls and procedures
with the outside auditors and the Company's financial management.
3. Review the engagement and independence of the outside auditors.
4. Recommend to the Board of Directors whether, based on discussions with
management and the outside auditors, the financial statements shall be
included in the Company's Annual Report on Form 10-K.
5. Annually, review and reassess the adequacy of the Audit Committee
Charter.
Notwithstanding that the Committee has the responsibilities and powers set
forth in this Charter, it is not the duty of the Committee to plan or conduct
audits or to determine that the Company's financial statements are complete
and accurate and are in accordance with generally accepted accounting
principles or to set auditor independence standards. Management is responsible
for maintaining a system of internal controls, appropriate accounting and
financial reporting principles and policies and preparing the Company's
financial statements. The outside auditors are responsible for planning and
carrying out a proper audit of the financial statements and other procedures
requested by the Company. The function of the Committee is oversight.
Each member of the Committee shall be entitled to rely on (i) the integrity
of those persons and organizations within and outside the Company from which
it receives information, (ii) the accuracy of the financial and other
information provided to the Committee by such persons or organizations absent
actual knowledge to the contrary and (iii) representations made by management
as to any information technology, internal audit and other non-audit services
provided by the auditors to the Company.
The outside auditors shall submit to the Company annually a formal written
statement delineating all relationships between the outside auditors and the
Company ("Statement as to Independence"), addressing each non-audit service
provided to the Company and the matters set forth in Independence Standards
Board No. 1. In addition, the outside auditors shall also submit to the
Company annually a formal written statement of the fees
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billed for each of the following categories of services rendered by the
outside auditors: (i) the audit of the Company's annual financial statements
for the most recent fiscal year and the reviews of the financial statements on
Form 10-Q for that fiscal year; (ii) information technology consulting
services for the most recent fiscal years, in the aggregate and by each
service (and separately identifying fees for such services relating to
financial information systems design and implementation); and (iii) all other
services rendered by the independent auditors for the most recent fiscal year,
in the aggregate and by each service.
Authority
The Committee shall have authority appropriate to discharge its
responsibilities set forth in this Charter. The Committee may access internal
and external resources, including counsel, experts and consultants, as
required to perform its functions.
Functions
The Committee shall:
1. Recommend to the Board of Directors the appointment or nomination of
the outside auditors for the coming year, considering the independence
and effectiveness of the outside auditors. The outside auditors shall
ultimately be accountable to the Committee and the Board of Directors.
The Board of Directors, with the assistance of the Committee, has the
ultimate authority and responsibility to select, evaluate and, where
appropriate, replace the outside auditors.
2. Review the scope and general extent of the annual audit plan and other
activities and proposed fees of the outside auditors for audit and non-
audit services.
3. Ensure that the outside auditors prepare and deliver annually a
Statement as to Independence (it being understood that the outside
auditors are responsible for the accuracy and completeness of this
Statement) and discuss with the outside auditors any disclosed
relationships or services that may impair the objectivity and
independence of the outside auditors in order to recommend that the
Board of Directors take appropriate action, as necessary, in response
to such relationships in order to satisfy itself of the accountants'
independence.
4. If applicable, consider whether the outside auditors' provision of (a)
information technology consulting services relating to financial
information systems design and implementation and (b) other non-audit
services to the Company is compatible with maintaining the independence
of the outside auditors.
5. Prior to the filing of the Company's Quarterly Report on Form 10-Q the
Chair of the Committee shall review with the outside auditors and
management of the Company the interim financial statements and discuss
whether any matters are required to be communicated by the outside
auditors to the Committee under generally accepted auditing standards.
If matters are required to be communicated, the Committee shall discuss
such matters with the outside auditors and the management of the
Company.
6. Review and discuss with management and the outside auditors, upon
completion of the annual audit, the Company's financial statements and
related SEC reports for their adequacy and compliance with generally
accepted accounting, reporting and disclosure principles. Obtain
communications from the outside auditors (and management's responses
thereto) concerning matters relating to the scope and results of their
audit that the outside auditors are required to provide to the
Committee under Statement on Auditing Standards No. 61.
7. Prepare (a) any report or other disclosures, including any
recommendation of the Committee, required by the rules of the
Securities and Exchange Commission to be included in the Company's
annual proxy statement and (b) such written affirmation regarding the
Committee as is required by New York Stock Exchange corporate
governance listing standards.
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8. Evaluate the effectiveness of the external audit efforts, the Company's
accounting and financial controls, policies and procedures, and the
Company's business ethics policies and practices through a review of
reports by, and at regular meetings with, the external auditors and
with management, as appropriate.
9. Promote quality in the financial reporting and accounting practices of
the Company by maintaining regular and open channels of communication
between the Board of Directors, the outside auditors, and the financial
management of the Company.
Meetings
The Committee shall hold at least four meetings each year and others as
deemed necessary by its Chair. A report on all Committee meetings will be
provided to the Board of Directors.
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[LOGO OF KORN/FERRY INTERNATIONAL]
PROXY FOR THE 2001 ANNUAL MEETING OF STOCKHOLDERS
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
The undersigned hereby acknowledges receipt of the accompanying Notice of Annual
Meeting of Stockholders, dated August 21, 2000,September 25, 2001, and the related Proxy
Statement and hereby appoints Peter L. DunnMichael D. Bekins and Elizabeth S.C.S. MurrayPaul C. Reilly, and each of
them the attorney(s), agent(s) and proxy of the undersigned, with full power of
substitution, to vote all stock of Korn/Ferry International which the
undersigned is entitled to vote, for the following matter indicated on the reverse side of
this proxy card in the manner designated belowon the reverse side, or if not
indicated by the undersigned in their discretion, and to vote in their
discretion with respect to such other mattersmatter (including mattersmatter incident to the
conduct of the meeting) as may properly come before the meeting.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT
SHAREHOLDERS VOTE "FOR" THE PROPOSALS.
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COMMENTS/ADDRESS CHANGE: PLEASE MARK COMMENT/ADDRESS |
BOX ON REVERSE SIDE |please mark comment/address box on reverse side
(Continued and to be | signed on
other side)
|
|
|
. FOLD AND DETACH HERE .
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Please mark
your votes as -----
indicated in | X |
this example -----
FORFor all nominees noted WITHHOLD AUTHORITY
listed1. To elect 01 James E. Barlett, 02 Richard M. Ferry and 03 Sakie Fuhuskima at left (except as marked to vote for (except as marked all
nominees
1. To elect Patti S. Hart, Windle B. PriemDirectors for Class 2004 and Mark04 Paul C. Thompson as DirectorsReilly Director for Class 2003. to the contrary) nominees listed at left
----- -----
(To withhold authority to vote for any individual nominee, strike through his/her [_] [_]
name listed | | | | above and initial such strike through.) ----- -----
FOR AGAINST ABSTAIN
[_] [_] [_]
2. To amend the Korn/Ferry International Performance Award Plan to increase the number of shares ----- ----- -----
which may be issued thereunder and to approve the limits on the maximum number of awards that | | | | | |
may be granted to individuals as currently set forth in the Plan. ----- ----- -----
----- ----- -----
3. To ratify the retention of Arthur Andersen LLP as our independent auditors for
Fiscal 2001. | | | | | |
----- ----- -----2002.
3. To act upon any other matters that may properly come before the meeting and any
adjournments or postponements thereof.
MARK HERE FOR COMMENT/ADDRESS -----[_]
CHANGE AND NOTE ON REVERSE SIDE | |
-----
IMPORTANT PLEASE SIGN, DATE AND RETURN
THIS PROXY PROMPTLY IN THE ENCLOSED --------- ENVELOPE,
WHICH REQUIRES NO POSTAGE IF | MAILED IN THE
[_] UNITED STATES.
|
Signature _______________________________________________________________________________________________________________________________________ Date ________________________________________________________________________
NOTE: [Please(Please sign EXACTLY as name appears on this card. Joint Owners should each sign. Attorneys-in-fact,sign Attorney-in-fact, executors, administrators,
trustees, guardians or corporation officers should give FULL title.side. This proxy shall be valid and may be valid and may be voted regardless of the form
of the form of signature however.)
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- FOLD AND DETACH HERE -
. FOLD AND DETACH HERE .