EXHIBIT 10.1
HEIDRICK & STRUGGLES
March 28,
2007
Mr. L. Kevin
Kelly
Woodcote
House
14a Fairmile
Avenue
Cobham
Surrey
KT11 2JB
Dear Kevin:
On behalf of
Heidrick & Struggles International, Inc. (the "Company"),
I am pleased to
confirm the terms of your employment arrangement in
this letter
agreement (the "Agreement").
1. TERM OF EMPLOYMENT.
Unless terminated
earlier in accordance with
the provisions of Section 9, your employment under this
Agreement
shall be effective for a term commencing on September 13, 2006
(the "Start Date") and ending on the three (3) year anniversary
of the Start Date (the "Employment Term"). Thereafter, the
Employment Term shall be automatically extended for subsequent
one (1)-year periods unless written notice to the contrary is
given by either the Company or you within ninety (90) days
prior
to the
expiration of the Employment Term or the expiration of any
subsequent one (1)-year extension thereof.
2. TITLE AND DUTIES.
During the Employment
Term, you will serve as
Chief Executive Officer of the Company, reporting to the Board
of
Directors of the Company (the "Board"), with such duties and
responsibilities as are customarily assigned to such position,
and such other duties and responsibilities not inconsistent
therewith as may from time to time be assigned to you by the
Board. The Company
shall nominate you for election as a member
of the Board for each term of Board service during the
Employment
Term.
During the Employment Term, you agree that you will devote
substantially all of your business time, energy, and skill to
the
business of the Company and shall use your reasonable best
efforts to promote the Company's best interest. During the
Employment Term, you may:
(a) in addition to being a director of
the Company and with the
prior written approval of the Chairman of the Board, serve
as a director, trustee or member of: (i) up to three (3)
corporate or charitable entities and (ii) trade or other
associations related to the Company's industry;
(b) manage your
personal investments; and
Mr. L. Kevin
Kelly
March 28,
2007
Page 2
(c) participate in
civic, community, philanthropic and
educational endeavors;
to the extent that such activities do not materially inhibit or
materially interfere with the performance of your duties under
this Agreement.
3. COMPENSATION.
(a) BASE SALARY.
Beginning on the Start
Date, you will receive
an annual base salary of $800,000, payable in accordance
with the Company's usual payroll practices. Promptly after
your execution of this Agreement, you will receive a lump-
sum payment to reflect this rate of annual base salary back
to the Start Date.
After twelve (12) months from the Start
Date, the Board shall review and may consider for increase
(but not decrease) your base salary, in its sole discretion.
Your base salary, as increased from time to time shall be
referred to herein as the "Base Salary."
(b) INCENTIVE
COMPENSATION. For
2007, you will be eligible for
an annual Target
Management Bonus of 100% of your Base
Salary ($800,000) and you will participate in the Company's
Management Incentive Plan (Tier I). Subsequent to 2007, you
will participate in the Company's senior-executive bonus
programs, per the terms in place from time to time or as may
be determined by the Board, in its sole discretion.
(c) GENERAL PROVISIONS
REGARDING BONUSES.
Except as explicitly
set forth herein (including with respect to 2006), all
bonuses, including the Target Management Bonus, are
discretionary and are not earned until approved by the Board
or the Compensation Committee of the Board. Bonuses will be
payable only if you are in the Company's employ on the
regular or specifically described bonus payment date.
(d) EQUITY GRANTS.
On March 30, 2007 (the
"Grant Date"), the
Company will cause to be issued to you the following equity
grants, which will vest at the rate of one-third on each of
the first, second and third anniversaries of the Grant Date,
subject to the approval by the Board and your execution of
the grant agreements.
(i)
3,125 - HSII Restricted Stock Units; and
(ii) 6,250 -
HSII Stock Options.
Mr. L. Kevin
Kelly
March 28,
2007
Page 3
In addition, as part of the Company's annual management
equity grants, on the Grant Date, the Company will cause to
be issued to you the following equity grants, which will
vest at the rate of one-third on each of the first, second
and third anniversaries of the Grant Date:
(iii) 12,500 - HSII
Restricted Stock Units; and
(iv) 25,000 -
HSII Stock Options.
Whenever equity awards are made to executives of the Company
generally, you will be considered to receive such awards.
4. BENEFITS. During the Employment Term, you
will be eligible to
participate in the Company's benefit programs at the same level
as such benefits are generally provided by the Company from
time
to
time to the other senior executives of the Company. The
benefits program includes group health, dental, vision,
life/AD&D, long-term disability, short-term disability
salary
continuation, paid holidays, Flexible Spending Account and the
Heidrick & Struggles, Inc. 401(k) Profit-Sharing and
Retirement
Plan. During the
Employment Term, you will also be eligible to
participate in the Company's Physical Examination and Financial
Planning Programs, as in place from time to time. Your
eligibility for all such programs and plans is determined under
the terms of those programs/plans as applied generally.
Our
benefits program, compensation programs, and policies are
reviewed from time to time and may be modified, amended, or
terminated at any time.
5. EXPENSES AND OTHER
BENEFITS.
(a) EXPENSES.
During the Employment
Term, the Company will
reimburse you for all reasonable business expenses incurred
by you in the performance of your duties hereunder, in
accordance with the Company's expense reimbursement
policies.
(b) VACATION.
You will be entitled
to four weeks of paid
vacation during each calendar year in the Employment Term.
Vacation will be earned ratably over the course of the
calendar year and must be used during such calendar year.
Unused vacation will not be banked or carried over to any
succeeding year.
(c) OTHER BENEFITS.
During the Employment
Term, you shall be
provided with the opportunity to receive or participate in
perquisites and other benefits on a comparable basis as such
perquisites are generally provided by the Company from time
Mr. L. Kevin
Kelly
March 28,
2007
Page 4
to time to the Company's other senior executives. Without
limiting the generality of the foregoing, the Company shall
reimburse you for the monthly dues of one country club or
luncheon club and any initial membership costs. In
addition, you shall also receive other benefits, including
tax preparation services, in connection with your assignment
to the London office and your relocation to the Chicago
office, on a comparable basis as such benefits are provided
to other senior executives assigned to international
offices, and taking into account your relocation to the
United States.
(d) INDEMNIFICATION.
The Company shall:
(a) during the
Employment Term and thereafter, indemnify you to the maximum
extent allowed under Delaware law and the Company's by-laws,
and (b) during the Employment Term and for a period of two
(2)-years after the termination of your employment with the
Company (or, if longer, for the post-termination period
generally provided to executives as of the date of your
termination of employment), maintain directors' and
officers' liability insurance for your benefit in a form at
least as comprehensive as, and in an amount that is at least
equal to, that maintained by the Company at such time for
any officer or director of the Company.
(e) ATTORNEY FEES.
The Company will pay
up to $10,000 in
reasonable attorneys' fees and related expenses incurred by
you in connection with the negotiation and review of this
Agreement.
6. SECONDMENT. You will be permitted to continue
working out of the
Company's offices in London, England, from the Start Date
through
July 15, 2007, at which time you will return to the United
States
and work out of the Company's Chicago headquarters office.
During the time you work out of the Company's office in London,
England, you agree that you will spend a significant amount of
your time in the United States, working at the Company's U.S.
offices, including the Company's headquarters office in
Chicago.
7. RELOCATION TO CHICAGO -
RELATED EXPENSES. The
Company will
reimburse you, according to its applicable policies on expense
reimbursement, for the reasonable and necessary expenses
incurred
in connection with your relocation to Chicago, Illinois,
subject
to the limitations set forth in and as more fully described in
EXHIBIT A to this Agreement (the "Covered Expenses").
8. COMPLIANCE WITH POLICIES.
Subject to the terms
of this
Agreement, you agree that you will comply in all material
respects with all
policies and procedures applicable to similarly
Mr. L. Kevin
Kelly
March 28,
2007
Page 5
situated employees of the Company, generally and specifically;
provided that any such failure to comply shall not be an event
constituting "Cause" for termination of employment except to
the
extent specifically provided in Section 9(f) hereof.
9. TERMINATION OF EMPLOYMENT.
Notwithstanding any
other provision
of the Agreement:
(a) FOR CAUSE BY THE
COMPANY OR VOLUNTARY RESIGNATION WITHOUT
GOOD REASON. If you
are terminated by the Company for Cause
(as defined in Section 9(f) below) or if you voluntarily
resign without Good Reason (as defined in Section 9(g)), you
shall be entitled to receive as soon as reasonably
practicable after your date of termination (but in no event
later than 30 days following termination) or such earlier
time as may be required by applicable statute or regulation:
(i) your earned but unpaid Base Salary through the date of
termination; (ii) payment in respect of any vacation days
accrued but unused through the date of termination; (iii)
reimbursement for all business expenses properly incurred in
accordance with Company policy prior to the date of
termination and not yet reimbursed by the Company; and (iv)
any earned but unpaid annual bonus in respect of any of the
Company's fiscal years preceding the fiscal year in which
the termination occurs (provided, however that if your
termination is by the Company for Cause and such event(s)
and/or
action(s) that constitute Cause are materially and
demonstrably injurious to the business or reputation of the
Company, then no payment will be made pursuant to this
clause (iv)) (the aggregate benefits payable pursuant to
clauses (i), (ii), (iii) and (iv) hereafter referred to as
the "Accrued Obligations"); and except as provided herein
you shall have no further rights to any compensation
(including any Base Salary or annual bonus, if any) or any
other benefits under this Agreement. All equity-based
awards shall be treated as set forth under the terms of the
applicable plan or agreement. All other accrued and vested
benefits, if any, due to you following your termination of
employment pursuant to this Section 9(a) shall be determined
and paid in accordance with the plans, policies, and
practices of the Company.
(b)
DISABILITY OR DEATH.
Following your
termination of
employment for Disability (as defined in Section 9(h) below)
or death, you (or your estate) shall be entitled to receive:
(i) the Accrued Obligations; and (ii) subject to Section
9(l), (A) a pro-rata bonus, if any, for the year of your
termination of employment, based on the target bonus for
such year, and paid when bonuses under such applicable bonus
Mr. L. Kevin
Kelly
March 28,
2007
Page 6
plans are normally paid (but no later than 2 1/2 months
after the end of the performance period), (B) treatment of
all equity-based awards per the terms of such applicable
plan or agreement, (C) all other benefits and payments per
the terms of the applicable plan or program, and (D) life
insurance and disability benefits paid per such applicable
plans. Except as
provided herein, you (or your estate)
shall have no further rights to any compensation (including
any Base Salary) or any other benefits under this Agreement.
All other accrued and vested benefits, if any, due to you
following your
termination of employment for Disability or
death shall be determined in accordance with the plans,
policies, and practices of the Company.
(c) WITHOUT CAUSE BY
THE COMPANY OR VOLUNTARY RESIGNATION FOR
GOOD REASON.
(i) If you are
terminated by the Company other than for
Cause, Disability or death, or if you voluntarily resign for
Good
Reason, you shall receive: (A) the Accrued Obligations; and
(B)
subject to Section 9(l), (I) a pro-rata bonus, if any, for the
year of your termination of employment, based on the target
bonus
for such year, and paid when bonuses under such applicable
bonus
plans are normally paid (but no later than 2 1/2 months after
the
end of the performance period), (II) contingent upon your
election of COBRA continuation coverage, the continuation of
medical benefits under COBRA at a cost to you no greater than
the
cost to active employees for twelve (12) months following your
termination; provided, however, that such benefit shall be
reduced or eliminated to the extent you receive similar
benefits
from a subsequent employer, and (III) a lump-sum amount equal
to
one and one-half (1.5) times your Annual Cash Compensation (as
defined in Section 9(i) below). Except as provided herein, you
shall have no further rights to any compensation (including any
Base Salary) or any other benefits under this Agreement.
All
other accrued and vested benefits, if any, due to you following
your termination of employment pursuant to this Section 9(c)
shall be determined in accordance with the plans, policies and
practices of the Company. Payments and benefits provided
pursuant to this Section 9(c) shall be subject to Section 9(e)
below, if applicable.
(ii) The payments and benefits provided in this Section 9(c)
are in lieu of payments and benefits under any other severance
arrangement of the Company, except that, to the extent the
aggregate payments and benefits under such other severance
arrangement would be more favorable to you, you will receive
such
payments and benefits in lieu of what is provided in this
Section
9(c).
Mr. L. Kevin
Kelly
March 28,
2007
Page 7
(d) TERMINATION
FOLLOWING A CHANGE IN CONTROL.
(i) If, during the
period beginning on the date six (6)
months prior to a Change in Control (as defined in Section 9(j)
below) and ending on the date two (2) years after a Change in
Control, (A) you are terminated by the Company other than for
Cause, Disability or death, or (B) you voluntarily resign for
Good Reason, you shall receive: (I) the Accrued Obligations
and
(II) subject to Section 9(l): the benefits and payments set
forth in Section 9(c) above; provided, however, the cash
payment
provided in clause (III) of Section 9(c) shall equal two and
one-
half (2.5) times your Annual Cash Compensation instead of one
and
one-half (1.5) times your Annual Cash Compensation.
(ii) In the event that the severance and other benefits
provided for in this Agreement or otherwise payable to you in
connection with a Change in Control (the "Total Payments")
constitute "parachute payments" within the meaning of Section
280G of the Internal Revenue Code of 1986, as amended (the
"Code") and will be subject to the excise tax imposed by
Section
4999 of the Code, then you shall receive (a) a payment from the
Company sufficient to pay such excise tax, and (b) an
additional
payment from the Company sufficient to pay the excise tax and
federal and state income taxes arising from the payments made
by
the Company to you pursuant to this sentence, which payment
shall
not include any payments to cover taxes or interest that may
arise as a result of Section 409A of the Code; provided,
however,
in the event the aggregate value of the Total Payments exceeds
three times your "base amount," as defined in Section
280G(b)(3)
of
the Code, (the "Parachute Threshold") by less than 10% of the
Parachute Threshold, then one or more of the Total Payments, as
designated by you, shall be reduced so that the aggregate value
of the Total Payments is $1.00 less than the Parachute
Threshold.
Unless you and the Company otherwise agree in writing, the
determination of your excise tax liability and the amount
required to be paid under this subsection (ii) shall be made in
writing by an independent national accounting firm selected by
you and the Company (the "Accountants"). In the event that the
excise tax incurred by you is determined by the Internal
Revenue
Service to be greater or lesser than the amount so determined
by
the Accountants, you and the Company agree to promptly make
such
additional payment, including interest and any tax penalties,
to
the other party as the Accountants reasonably determine is
appropriate to ensure that the net economic effect to you under
this subsection (ii), on an after-tax basis, is as if the Code
Section 4999 excise tax did not apply to you. For purposes of
making the calculations required by this subsection (ii), the
Accountants may make reasonable assumptions and approximations
concerning applicable taxes and may rely on interpretations of
Mr. L. Kevin
Kelly
March 28,
2007
Page 8
the Code for which there is a "substantial authority" tax
reporting position.
You and the Company shall furnish to the
Accountants such information and documents as the Accountants
may
reasonably request in order to make a determination under this
subsection (ii). The
Company shall bear all costs the
Accountants may reasonably in
