Employment Agreement - Heidrick & Struggles Inc. and Brian M. Sullivan
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT is made and entered into as of this 27th
day of August, 1999, by and between HEIDRICK & STRUGGLES, INC., a Delaware
corporation (the "Company"), and BRIAN M. SULLIVAN, residing at Holly Glen,
P0 Box 396, New Vernon, New Jersey 07976 (the "Partner").
W I T N E S S E T H:
1. EMPLOYMENT
The Company hereby employs the Partner, and the Partner hereby
accepts such employment, upon the terms and subject to the conditions set forth
in this Agreement.
2. TERM
(a) Employment Term. Subject to the provisions for termination as
hereinafter provided, the term of employment under this Agreement shall commence
on September 1, 1999 (the "Effective Date"), and shall continue for a period of
five (5) years thereafter (the "Term").
(b) Prior Agreements. This Agreement supersedes all agreements and
understanding (including oral agreements) between Partner and the Company and/or
its affiliates regarding the terms and conditions of Partner's employment with
the Company or any predecessor and/or affiliates.
3. COMPENSATION
(a) Partner Compensation Policy. Except as otherwise provided herein
for the bonus (calendar) years ending December 31, 1999, 2000 and 2001, the
determination of annual compensation to be paid by the Company to the Partner
shall be subject to the guidelines of the U.S. Partner/Consultant Cash
Compensation Policy effective October 1, 1998, as amended or modified from time
to time (the "Partner Compensation Policy").
(b) Base Salary. The Company shall pay to the Partner as base
compensation for all services rendered by the Partner during the term of this
Agreement an initial monthly base salary of $33,333.33 (which is $400,000
annually), payable monthly or in other more frequent installments, as determined
by the Company (the "Base Salary"), commencing on the Effective Date. It is
current Company policy that salaries are reviewed annually in November or
December, so that the Partner's first salary review will be in November or
December 2000, and any increase in such base compensation shall thereafter be
deemed to be the Base Salary for the purposes of this Agreement. In event that
the Partner does not meet the actual fee and Source of Business (as defined in
the Partner Compensation Policy) ("SOB") expectations for 2001 (as set
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forth below) or any calendar year thereafter, the Company may decrease the
Partner's Base Salary in accordance with the Partner Compensation Policy at the
beginning of the following calendar year, and such decreased amount shall
thereafter be deemed to be the Base Salary for the purposes of this Agreement.
As of the Effective Date through December 31, 2001, the actual fee and SOB
expectations of the Partner are as follows (which for 1999 and 2000 are for
reference purposes only):
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
Year Fee SOB
---- --- ---
--------------------------------------------------------------------------------
<S> <C> <C>
September 1,1999 to December 31, 1999 $ 449,000 $1,360,000
--------------------------------------------------------------------------------
January 1, 2000 to December 31, 2000 $2,000,000 $4,000,000
--------------------------------------------------------------------------------
January 1, 2001 to December 31, 2001 $2,000,000 $4,250,000
--------------------------------------------------------------------------------
</TABLE>
The parties expect that fee and SOB amounts for years 2002, 2003 and 2004
(through the end of the Term) will exceed the above numbers (after adjusting for
inflation).
(c) Bonus Compensation. In addition to the Base Salary to be paid
pursuant to Section 3(b) of this Agreement, during the Term of this Agreement or
any renewal or extension thereof, the Partner will be entitled to or eligible
for (as the case may be) the following bonus compensation:
(i) The Sullivan Collections Bonus. For the period beginning
with the Effective Date and continuing through December 31, 2000, the Partner is
entitled to receive a bonus based upon the actual post-August 31, 1999 cash
collection of the Partner's fees that were invoiced by Sullivan & Company
("Sullivan") prior to September 1, 1999, provided that the cash is received by
the Company on or before December 31, 2000 (the "Sullivan Collections Bonus").
The Sullivan Collections Bonus, if any is due, will be payable monthly by the
15th day of the month following the Company's receipt of the cash from such
invoices. The amounts of the bonus payable to the Partner will be equal to the
amount to which the Partner would have been entitled under the Sullivan
"commission program" in which the Partner participated as of August 31, 1999.
The Sullivan Collections Bonus is payable only if the Partner is employed on the
respective bonus payment dates, unless his termination of employment is due to
the Partner's death, disability or termination Without Cause or for Good Reason,
in which case such bonus is payable in accordance with the terms of the
applicable termination provision hereof.
(ii) Heidrick & Struggles Bonus: The Partner will be eligible
to receive a bonus, payable on January 15, 2000, equal to an amount based upon
cash collections from the Partner's fees and SOB credits (as defined in the
Partner Compensation Policy) invoiced by the Company from September 1, 1999
through December 31, 1999 (the "Initial Stub Period"), and determined in
accordance with Exhibit A hereto using a "plus one" level, with the Partner's
fee and SOB credits for such purposes determined by including the Partner's
revenue generation during his employment with Sullivan in 1999 (assuming $1.00
of fee and SOB credit for each dollar of revenue production), less the portion
of the Partner's Base Salary actually paid
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during the Initial Stub Period (the "Heidrick & Struggles Bonus"). The Heidrick
& Struggles Bonus is payable only if the Partner is in the Company's employ on
the bonus payment date, unless his termination of employment is due to the
Partner's death, disability or termination Without Cause or for Good Reason, in
which case such bonus is payable in accordance with the terms of the applicable
termination provision hereof.
(iii) Minimum Bonus. For each of the bonus (calendar) years
ending December 31, 2000 and 2001, the Partner shall receive a minimum annual
bonus of $1,600,000 (the "Minimum Bonus"), payable when bonuses are paid for
these bonus years (currently December and the following March), provided that
the Partner is in the Company's employ on the respective bonus payment dates,
unless his termination is due to the Partner's death, disability or termination
Without Cause or for Good Reason, in which case such bonus is payable in
accordance with the terms of the applicable termination provision hereof.
(iv) Discretionary Annual Bonus. Beginning with the bonus
(calendar) year ending December 31, 2000, the Partner will be eligible to be
considered for a discretionary annual bonus based upon the Partner Compensation
Policy (the "Discretionary Annual Bonus"), which Discretionary Annual Bonus
currently is payable in December and the following March. The Discretionary
Annual Bonus shall not be earned until declared by the Board or appropriate
committee of the Board, and shall be payable only if the Partner is in the
Company's employ on the applicable payment date, unless, during the Term of this
Agreement (but not any renewal or extension thereof), the Partner's termination
is due to his death, disability or termination Without Cause or for Good Reason,
in which case such bonus is payable in accordance with the terms of the
applicable termination provision hereof. For the bonus (calendar years) ending
December 31, 2000 and December 31, 2001, the Minimum Bonus payable pursuant to
section (iii) above shall be part of, and not in addition to, the Discretionary
Annual Bonus.
(d) Benefits. In order to facilitate the transition of benefits, the
Company is maintaining, for current plan participants only, the Sullivan benefit
plans and policies through December 31, 1999. If the Partner is currently
eligible, the Partner will continue participation in the Sullivan plans and
policies through December 31, 1999. If the Partner has not yet met the
eligibility requirements to participate in the Sullivan & Company Plan (the
401(k) plan) (the "Sullivan Plan"), the Partner will no longer be able to enter
the Sullivan Plan, but will be eligible to participate in the Heidrick &
Struggles, Inc. 401(k) Profit Sharing and Retirement Plan ("H&S 401(k) Plan") as
described below.
Beginning January 1, 2000, the Sullivan benefit plans and
policies will no longer be maintained, and the Partner will then be eligible to
participate in Company benefit programs and policies available to Company
executives of comparable rank, in accordance with the terms of those programs
and policies. Notwithstanding the foregoing, the Company's GlobalShare programs
will apply to the Partner effective September 1, 1999, provided the Partner
meets the programs' eligibility requirements.
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Beginning January 1, 2000, and subject to the requirements of
applicable law, the Partner will receive past service credit for the Partner's
term of employment with Sullivan for purposes of determining the term of paid
vacation benefits and short-term disability salary continuation benefits. In
addition, vacation time accrued through December 31, 1999, but unused, due to
the Partner from Sullivan, will be carried forward for the Partner's use up to
and including March 31, 2000, in accordance with Sullivan policy.
The Partner will be automatically eligible to participate in
the H&S 401(k) Plan beginning January 1, 2000, if the Partner has previously met
the eligibility requirements to participate in the Sullivan Plan. If the Partner
has not yet met the eligibility requirements for the Sullivan Plan, the Partner
will be eligible to participate in the H&S 401(k) Plan upon meeting the age and
service requirements under the terms of that Plan. Effective January 1, 2000,
and subject to the requirements of applicable law, the Partner will receive
credit for service with Sullivan for purposes of eligibility to participate and
vesting in the H&S 401(k) Plan.
The Company benefit programs, bonus programs, and policies are
reviewed from time to time by the Company's management, and Company programs and
policies may be modified, amended or completely terminated at any time.
(e) Business Expenses. During the Term, reasonable business expenses
incurred by the Partner in the performance of Partner's duties hereunder shall
be reimbursed by the Company in accordance with Company policies.
4. DUTIES
(a) General. The Partner is engaged as an executive search
consultant of the Company and shall have duties and responsibilities consistent
therewith. In addition, and consistent with the foregoing, the Partner shall
have such specific duties and responsibilities as may be assigned to the Partner
by the Chief Executive Officer, the Regional Managing Partner, or the Office
Managing Partner. The Partner shall be considered a "director-elect" for all
intra-company purposes, it being understood that this position is separate and
distinct from the legal status of a member of the Company's Board of Directors.
(b) Title; Committees. As of the Effective Date, the Partner shall
be given the title of Managing Partner, Global Financial Institutions Practice,
and shall be appointed a member of the Global Management Committee for the Term
of this Agreement, provided the Partner remains in a significant senior
management position.
(c) Home Office. The Partner shall render services and the Company
shall employ the Partner principally at the Company's office located at 40 Wall
Street, New York, New York or, following August 31, 2001, at such other location
in Manhattan as the Company may direct (the Partner's "Home Office").
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5. EXTENT OF SERVICES
During the Term of this Agreement, the Partner shall devote the
Partner's full-time business energy and attention to the benefit and business of
the Company as may be reasonably necessary in performing the Partner's duties
pursuant to this Agreement.
6. ILLNESS OR INCAPACITY, TERMINATION ON DEATH, ETC.
(a) Death. The Term of this Agreement and the Partner's employment
hereunder shall terminate upon the death of the Partner. Upon the termination of
this Agreement on account of the Partner's death, the Company shall pay to the
estate of the Partner within thirty (30) days after the date of death the
Partner's Base Salary, benefits and reimbursable expenses accrued but unpaid as
of the date of termination. In addition, should the Partner's death occur during
the Term of this Agreement (but not any renewal or extension thereof), the
Company shall pay to the Partner's estate the bonus amount(s) hereunder accrued
but unpaid as of date of death, which amount(s) shall be paid at the time such
bonuses are due to be paid under the Company's bonus payment schedule. For
purposes of the prior sentence:
(i) amounts accrued under Section 3(c)(i) shall mean bonus
with respect to amounts collected through date of death;
(ii) amounts accrued under Section 3(c)(ii) shall mean bonus
based on the Partner's fees and SOB credits through date of death, determined
pursuant to the Partner Compensation Policy as of such date using a "plus one"
level;
(iii) amounts accrued under Section 3(c)(iii) shall mean that
portion of the Minimum Bonus payable with respect to the bonus (calendar) year
in which death occurs as results by multiplying the Minimum Bonus payable for
such year by a fraction, the numerator of which shall be the numbers of days
elapsed in such calendar year as of the date of death and the denominator of
which shall be 365; and
(iv) amounts accrued under Section 3(c)(iv) shall mean that
portion of the bonus that would be payable based upon the Partner's cumulative
fee and SOB credits based upon his total cash collections for the calendar year
in which death occurs through the date of death annualized, with "total cash
compensation" determined using the cash compensation guidelines of the Partner
Compensation Policy at a "plus one" level of the bonus range, less any Minimum
Bonus, if any, payable for such year.
After receiving the payment provided in this Section 6(a), the Partner's estate
shall have no further rights to any compensation or any other benefits under
this Agreement.
(b) Disability. The Term of this Agreement and the Partner's
employment hereunder shall terminate upon the Partner's Permanent Disability. As
used in this Agreement, the term "Permanent Disability" shall mean, in the event
a disability insurance policy is provided
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or paid for by the Company covering the Partner at such time and is in full
force and effect, the definition of permanent disability set forth in such
policy. If no such disability policy is so maintained at such time or is then in
full force and effect, the term "Permanent Disability" shall mean the inability
of the Partner, as reasonably determined by an independent medical doctor
designated by the Company and reasonably agreeable to the Partner or his
representative, by reason of physical or mental disability, to perform the
duties required of the Partner under this Agreement and such disability has
lasted for a period of at least three (3) consecutive months or four (4) months
in the aggregate in any twelve (12) month period. The Partner's Base Salary,
benefits and reimbursable expenses as provided for hereunder shall continue to
be paid, and the Partner shall continue to be eligible for bonus payments due to
be paid during any period of incapacity prior to and including the date upon
which the Partner's employment is terminated on account of Permanent Disability.
Notwithstanding the above, should the Partner's employment be terminated on
account of Permanent Disability during the Term of this Agreement (but not any
renewal or extension thereof), the Company shall pay to the Partner the bonus
amount(s) hereunder accrued but unpaid as of the date of such termination, which
amount(s) shall be paid at the time such bonuses are due to be paid under the
Company's bonus payment schedule. For purposes of the prior sentence:
(i) amounts accrued under Section 3(c)(i) shall mean bonus
with respect to amounts collected through date of termination on account of
Permanent Disability;
(ii) amounts accrued under Section 3(c)(ii) shall mean bonus
based on the Partner's fees and SOB credits through date of termination on
account of Permanent Disability, determined pursuant to the Partner Compensation
Policy as of such date using a "plus one" level;
(iii) amounts accrued under Section 3(c)(iii) shall mean that
portion of the Minimum Bonus payable with respect to the bonus (calendar) year
in which termination on account of Permanent Disability occurs as results by
multiplying the Minimum Bonus payable for such year by a fraction, the numerator
of which shall be the numbers of days elapsed in such calendar year as of the
date of such termination and the denominator of which shall be 365; and
(iv) amounts accrued under Section 3(c)(iv) shall mean that
portion of the bonus that would be payable based upon the Partner's cumulative
fee and SOB credits based upon his total cash collections for the calendar year
in which termination on account of Permanent Disability occurs through the date
of such termination annualized, with "total cash compensation" determined using
the cash compensation guidelines of the Partner Compensation Policy at a "plus
one" level of the bonus range, less any Minimum Bonus, if any, payable for such
year.
After receiving the payment provided in this Section 6(b), the Partner shall
have no further rights to any compensation or any other benefits under this
Agreement.
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7. OTHER TERMINATIONS
(a) Good Reason. (i) The Partner may terminate the Term of this
Agreement and Partner's employment hereunder for "Good Reason," as hereinafter
defined, and Partner shall be entitled to receive the same compensation upon the
same terms as would be payable if he had been terminated "Without Cause"
pursuant to Section 7(c)(i). For purposes hereof, "Good Reason" shall mean:
(A) the failure of the Company to pay or cause to be
paid the Partner's compensation described in Section 3(b) or (c), when due
hereunder;
(B) a reduction in the Partner's total compensation
which is inconsistent with the fee and SOB guidelines of the Partner
Compensation Policy, without good reason (determined by reference to the
subjective standards applied to other Company executive search consultants of
similar rank);
(C) a material breach by the Company of any material
provision of this Agreement;
(D) the failure of the Company to supply the Partner
with the level of support services provided to other search consultants at the
Partner's Home Office;
(E) the failure of the Company to follow Company
policies with respect to sexual and other harassment complaints duly made by the
Partner in accordance with such policies;
(F) any substantial and sustained diminution in the
Partner's duties as set forth in Section 4(a) hereof; provided, however, that
the removal of the Partner from the Global Management Committee or the failure
of the Company to maintain the Partner as Managing Partner, Global Financial
Institutions Practice, shall not be events constituting Good Reason unless such
removal is either (I) without the Partner's consent or (II) based on Partner's
performance in such capacities (in the Company's reasonable discretion); or
(G) a significant change in business practices
resulting from, or following, a transaction involving the Company or Parent
which requires Parent shareholder approval, and which change has, or, with the
passage of time, could reasonably be expected to have, a material adverse effect
on the partner's ability to generate fee and SOB credits under the Company's
then current policies relating to same;
provided, however, that an event described in this Section 7(a) shall not
constitute "Good Reason" unless the Partner shall have notified the Company in
writing describing the events which constitute Good Reason and then only if the
Company shall have failed to cure such events within thirty (30) days after the
Company's receipt of such written notice.
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(ii) The parties agree that the payments paid pursuant to
Section 7(a)(i) of this Agreement shall constitute full consideration for any
damages to the Partner on account of such termination of employment and shall be
considered as liquidated damages.
(b) Termination for "Cause." (i) Except as otherwise provided in
this Agreement, the Company may terminate the employment of the Partner
hereunder for "Cause," which shall mean:
(A) the Partner's continued failure to perform the
Partner's material duties hereunder (other than as a result of total or partial
incapacity due to physical or mental illness), it being agreed that the
Partner's failure to achieve fee and SOB numbers set for any calendar year shall
not be determinative evidence of the Partner's failure to perform his duties but
may be considered an indicium of such failure to perform;
(B) any act of fraud, embezzlement or other
misappropriation or similar act by the Partner against the Company;
(C) conviction of the Partner for (x) a felony under
the laws of the United States or any state thereof or (y) a misdemeanor
involving moral turpitude;
(D) the Partner's willful malfeasance or willful
misconduct in connection with the Partner's duties hereunder or any other act or
omission which, in each case, intentionally is materially injurious to the
financial condition or business reputation of the Company or any of its
subsidiaries or affiliates,
(E) the Partner's violation of any of the sexual or
other harassment policies of the Company, in which case any termination must be
in accordance with the terms of the applicable policy or policies, unless the
Partner challenges such termination and such challenge is ultimately and finally
successful; or
(F) the Partner's breach of the provisions of Sections
8, 9 or 10 of this Agreement; provided, in the case of a breach of Sections 8 or
9, such breach has a material adverse effect on the Company.
(ii) None of the events or circumstances described in clause
(i) of this Section 7(b) shall constitute Cause for purposes of this Agreement
unless the Company shall have provided the Partner with written notice
specifying such event or circumstance and Company's intention to terminate the
Partner's employment if such event or circumstance is not cured and the Partner
shall have failed to cure such event or circumstance to the reasonable
satisfaction of the Company within thirty (30) days following the delivery of
such notice.
(iii) If the Term of this Agreement and the employment of the
Partner hereunder is terminated for Cause under Section 7(b)(i) of this
Agreement, the Company shall pay to the Partner any Base Salary, benefits and
reimbursable expenses accrued but unpaid as of
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the effective date of termination. Such payment shall be in full and complete
discharge of any and all liabilities or obligations of the Company to the
Partner under Sections 1, 2 and 3 of this Agreement, and the Partner shall have
no further rights to any compensation or any other benefits under this
Agreement.
(c) Termination Without Cause. (i) Notwithstanding any other
provision of this Agreement, the Company shall have the right with or without
notice to terminate the Term of this Agreement and the Partner's employment
"Without Cause" pursuant to the provisions of this Section 7(c). If the Company
shall terminate the Term of this Agreement or the employment of the Partner
Without Cause during the Term of this Agreement (but not any renewal or
extension thereof), (A) the Company shall pay to the Partner the Partner's Base
Salary, bonus, benefits, and reimbursable expenses accrued but unpaid as of the
date of such termination, it being understood that any bonus amount(s) payable
hereunder shall be paid at the time such bonuses are due to be paid under the
Company's bonus payment schedule, and (B) the Partner shall continue to receive
Base Salary and benefits for a period of three months following the date of
termination Without Cause. For purposes of the prior sentence, accrued bonus as
of date of termination Without Cause shall be determined in the same manner as
accrued bonus is determined under Section 6(a) in the event of death, with date
of such termination substituted for date of death in all instances.
(ii) The parties agree that the payments paid pursuant to this
Section 7(c) shall constitute full consideration for any damages to the Partner
on account of such termination of employment and shall be considered as
liquidated damages and not a penalty for the Company's termination of the
Partner's employment Without Cause.
(d) Release. Payment of any compensation to the Partner under this
Section 7 following termination of employment, other than accrued but unpaid
Base Salary, shall be conditioned upon the prior receipt by the Company of a
fully effective release executed by the Partner in substantially the form
attached to this Agreement as Exhibit B. No release shall be considered fully
effective, and no payment shall be made, until all revocation periods with
respect to such release shall have expired.
(e) Effect on Certain Covenants. Notwithstanding any termination of
the Term of this Agreement and Partner's employment hereunder for any reason,
including but not limited to the natural expiration of the Term, the parties'
covenants set forth in Sections 9,10, 11, and 12 of this Agreement are intended
to and shall remain in full force and effect and shall survive such termination,
provided, however, that the covenants set forth in Section 10(b) shall terminate
upon the termination of the Term by the Partner for Good Reason or by the
Company Without Cause.
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8. DISCLOSURE
The Partner agrees that during the Term of the Partner's employment
by the Company, the Partner will disclose only to the Company all ideas,
methods, plans, developments or improvements known by the Partner which relate
to the business of the Company acquired by the Partner in the course of the
Partner's employment by the Company. Nothing in this Section 8 shall be
construed as requiring any such communication where the idea, plan, method or
development is lawfully protected from disclosure as a trade secret of a third
party or by any other lawful prohibition against such communication. The
covenants contained in this Section 8 shall not prevent any disclosure required
by law or order of a court or governmental agency; provided, that the Partner
subject to any such requirement shall, prior to any such disclosure, give the
Company prompt notice of any such requirement and shall cooperate with the
Company in obtaining a protective order or other means of protecting the
confidentiality of the Company's proprietary information and confidential
records.
9. CONFIDENTIALITY
The Partner agrees to keep in strict secrecy and confidence any and
all information proprietary to the Company that the Partner learns or to which
the Partner has access during the Partner's employment by the Company (including
any such information acquired by the Company from Sullivan) and which has not
been publicly disclosed and is not a matter of common knowledge in the fields of
work of the Company, including but not limited to information regarding the
Company's industry practice strategy both generally and as it may be directed at
particular existing and prospective clients, the Company's past, current and
future strategic plans and underlying data and confidential and proprietary
information regarding search candidates and companies, including but not limited
to that available on the Company's computer systems (collectively, the
"Confidential Information"). The Partner agrees that both during and after the
Term of the Partner's employment by the Company, the Partner will not, without
the prior written consent of the Company, disclose any Confidential Information
to any third person, partnership, joint venture, company, corporation or other
organization. The foregoing covenants shall not be breached to the extent that
any such Confidential Information was known to the Partner prior to his
employment with the Company or becomes a matter of general knowledge other than
through a breach by the Partner. Upon termination of employment with the
Company, the Partner shall promptly return to the Company any and all Company
property, including personal property, software, files and materials used or
developed by the Partner during the Partner's employment with the Company or
Sullivan (but excluding the Partner's Rolodex of personal contacts, provided
that the Company is given a copy of such Rolodex), regardless of whether such
materials are in analog, digital, paper or electronic documents, files or other
media forms. The covenants contained in this Section 9 shall not prevent any
disclosure required by law or order of a court or governmental agency; provided,
that the Partner subject to any such requirement shall, prior to any such
disclosure, give the Company prompt notice of any such requirement and shall
cooperate with the Company in obtaining a protective order or other means of
protecting the confidentiality of the Company's proprietary information and
confidential records.
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10. NON-COMPETITION AND NONSOLICITATION OF EMPLOYEES
(a) General. The Partner hereby acknowledges that during and as a
result of the Partner's employment by the Company, the Partner has received and
shall continue to receive: (i) special training and education with respect to
executive search research and methods and other related matters and (ii) access
to confidential information and business and professional contacts, including
contacts with clients and prospective clients of the Company. In consideration
of the special and unique opportunities afforded to the Partner by the Company
as a result of the Partner's employment, as outlined in the previous sentence,
the Partner agrees to the restrictive covenants in this Section 10. The parties
hereto also acknowledge that the restrictive covenants in this Section 10 are
being entered into between the parties in connection with and as a result of the
transactions contemplated by the Agreement and Plan of Merger, dated as of
August 27, 1999, among Heidrick & Struggles International, Inc., the Company,
Brian Sullivan, Brendan Burnett-Stohner, Jory Marino, Marguerite McMahon, Leslie
Stern, Barry Bregman (collectively, the "Stockholders"), and Sullivan (the
"Merger Agreement").
(b) Non-Competition.
(i) Restriction. (A) If the Partner's employment with the
Company should terminate during the Term (as set forth in Section 2(a) hereof)
for any reason other than Good Reason or Without Cause, then for the greater of
(x) one-half of the unexpired Term (as set forth in Section 2(a) hereof) and (y)
twelve (12) months following such termination of the Partner's employment, or
(B) at any time while employed by the Company (the applicable time period in
(A)(x), (A)(y) or (B) being defined as the "Competition Period"), the Partner
shall not, directly or indirectly, own, manage, operate, join, control,
participate in, invest in or otherwise be connected or associated with, in any
manner (including as an officer, director, employee, independent contractor,
partner, consultant, advisor, agent, proprietor, trustee or investor), any
Competing Business (as defined in Section 10(b)(ii) of this Agreement) located
or operating in the Territory (as defined in Section 10(b)(iii) of this
Agreement); provided, however, that nothing contained in this Section 10(b)(i)
shall prevent the Partner from owning less than two percent (2%) of the voting
stock of a publicly held corporation for investment purposes.
(ii) Competing Business. For purposes hereof, "Competing
Business" shall mean (A) the furnishing of executive search and related
consulting services and (B) any business or venture which engages in or provides
executive search and related consulting services substantially similar to the
whole or any significant part of the services rendered by the Partner in his
employment with the Company.
(iii) Territory. For purposes hereof, "Territory" shall mean
the United Kingdom and the United States of America and its territories and
possessions.
(c) Non-solicitation of Employees. During any Competition Period (as
defined in Section 10(b)(i)), the Partner shall not, directly or indirectly,
either as an individual,
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partner, officer, director, stockholder, executive, advisor, independent
contractor, joint venturer, proprietor, trustee, investor, consultant, agent,
employee, representative or salesman for any person, firm, partnership,
corporation or other entity, or otherwise (I) solicit any of the current
employees, consultants, directors or officers of the Company or any of its
affiliates to terminate any business relationship with the Company or any of its
affiliates or (II) employ or retain as an independent contractor, consultant or
agent any current or former employees, consultants, directors or officers of the
Company or any of its affiliates, unless such persons have been separated from
any relationship with the Company or any of its affiliates for at least twelve
(12) months, unless any such employees, consultants, directors or officers of
the Company or any of its affiliates are or have been terminated by the Company
or any of its affiliates.
(d) Essential Element. It is understood by and between the parties
hereto that the foregoing restrictive covenants set forth in this Section 10 are
essential elements of this Agreement, and that, but for the agreement of the
Partner to comply with such covenants, the Company would not have agreed to
enter into this Agreement. Such covenants by the Partner shall be construed as
agreements independent of any other provision in this Agreement.
11. REMEDIES
(a) Specific Performance. The Partner agrees damages at law will be
an insufficient remedy to the Company if the Partner violates the terms of
Sections 8, 9 or 10 of this Agreement and that the Company would suffer
irreparable damage as a result of any such violation. Accordingly, it is agreed
that the Company shall be entitled, upon application to a court of competent
jurisdiction, to obtain injunctive relief to enforce the provisions of such
Sections without posting any bond and without proving that damages would be an
inadequate remedy, which injunctive relief shall be in addition to any other
rights or remedies available to the Company hereunder. The parties consent to
the modification or termination of any injunctive relief obtained pursuant to
this Section 11(a) in accordance with and upon the entry of a final decision
obtained in arbitration pursuant to Section 11(c) of this Agreement with respect
to the subject matter of any such injunction.
(b) Liquidated Damages. Partner acknowledges and recognizes the
highly competitive nature of the Company's business. Partner further
acknowledges and recognizes that because his services are special and unique,
the Partner's continued employment, after the merger of Sullivan and the
Company, is critical to the operations of the Company. Partner further
acknowledges and recognizes that no exact measure of the damage caused to the
Company if his employment is terminated by the Partner (other than for death,
Permanent Disability or Good Reason as defined in Section 7(a)) or the Term of
this Agreement is terminated by the Company for Cause as defined in Section 7(b)
of this Agreement can be determined by precise calculation. Moreover, Partner
acknowledges and recognizes that if he does not remain in the Company's employ
for the entire term of this Agreement, the Company will not be receiving the
full benefit of its merger with Sullivan pursuant to the Merger Agreement.
<PAGE>
13
Therefore, for the purpose of liquidated damages and not as a
penalty, the Partner agrees that in the case of (x) a termination of employment
by the Partner (other than for death, Permanent Disability, or Good Reason as
defined in Section 7(a)) or (y) termination of the Partner's employment by the
Company for Cause (as defined in Section 7(b) of this Agreement), on or before
the date forty-eight (48) months after the Effective Date, and in addition to
the injunctive relief provided for by Section 11(a) of this Agreement, for the
purpose of liquidated damages and not as a penalty, the damages caused shall be
and are fixed, liquidated and determined at an amount which shall be equal to
the sum of (i), (ii) and (iii) below and payable as follows:
(i) (A) if the termination date occurs on or before the
first anniversary of the Effective Date of this Agreement, a payment in an
amount equal to seven (7) times the Partner's SOB expectation set forth in
Section 3(b) for the 1999 ("1999 SOB Expectation");
(B) if the termination date occurs after the
first anniversary but on or before the second anniversary of the Effective Date
of this Agreement, a payment in an amount equal to six (6) times the 1999 SOB
Expectation;
(C) if the termination date occurs after the
second anniversary but on or before the third anniversary of the Effective Date
of this Agreement, a payment in an amount equal to four (4) times the 1999 SOB
Expectation; and
(D) if the termination date occurs after the
third anniversary but on or before the fourth anniversary of the Effective Date
of this Agreement, a payment in an amount equal to two (2) times the 1999 SOB
Expectation.
In each case, one hundred percent (100%) of the amount due shall be payable in
cash, or alternatively, at the Company's option, the Partner may be permitted to
pay fifty percent (50%) of the amount due in cash and fifty percent (50%) by the
Partner's execution and delivery to the Company of a promissory note in the form
of Exhibit C, such payment and delivery to be made within two (2) weeks of the
Partner's termination of employment.
The Company agrees that the Partner may satisfy all or a portion of his
obligation through the sale or other disposition of Parent Common Stock. If, as
of the Partner's employment termination date, sale of all or any shares of
Parent Common Stock owned by the Partner is subject to a contractual or legal
restriction or limitation (including as a result of the volume limitations of
Rule 144 of the Securities Exchange Act of 1934), then, at the Company's option:
(x) payment of the amount due, plus interest at
eight percent (8%), compounded annually from date of termination through date of
payment, shall not be required until two (2) weeks following the effective date
of the waiver or elimination of all such restrictions or limitations, or
<PAGE>
14
(y) the Company may accept in satisfaction of the
obligation the delivery from the Partner to the Company of such number of
shares, valued at the fair market value as of the date of delivery, of Parent
Common Stock as shall be necessary to satisfy such obligation,
it being understood that any shortfall remaining after Partner has sold,
transferred, delivered or otherwise disposed of his Parent Common Stock shall be
payable in cash.
(ii) Fifty percent (50%) of the gross fee revenues
derived by the Partner personally or by any entity with which the Partner
becomes employed or otherwise associated (whichever is greater) from any
executive search work performed or assignment obtained as a result of or in
connection with Competition by the Partner with the Company as defined below
during the Competition Period as defined in Section 10(b)(i) of this Agreement,
including revenues paid later than the Competition Period as a result of work
performed during the Competition Period, to the extent that such revenues are
generated from (A) clients of Sullivan as of the Effective Date of this
Agreement, (B) clients of the Company or any of its affiliates as of the
Effective Date of this Agreement, or (C) clients of the Company or any of its
affiliates acquired after the date of this Agreement.
(c) "Competition" by the Partner with the Company for purposes of
this Section 11 shall be defined as any of the following actions taken by the
Partner, directly or indirectly, either as an individual, partner, officer,
director, stockholder, executive, advisor, independent contractor, joint
venturer, proprietor, trustee, investor, consultant, agent, employee,
representative or salesman for any person, firm, partnership, corporation or
other entity, or otherwise, during the Competition Period: (i) soliciting or
counseling any third person, partnership, joint venture, company, corporation,
association or other organization that is or was a client (including for
purposes of this clause (i) and not for purposes of clause (ii) below, any
individual who is or was an employee, agent, principal, partner, officer or
director of a client) of the Company, Sullivan or any of their affiliates,
regardless of such person's or entity's location, to terminate any business
relationship with the Company or any of its affiliates and/or to commence a
similar Competing Business business relationship with any other individual or
entity, or (ii) accepting, with or without solicitation, any Competing Business
from any third person, partnership, joint venture, company, corporation,
association or other organization that is or was a client of the Company,
Sullivan or any of their affiliates, regardless of such person's or entity's
location.
(d) Mandatory Arbitration. (i) General. Should any dispute arise
among or between one or more of the parties to this Agreement relating to this
Agreement, the interpretation of any provision hereof, or any of the rights or
obligations hereunder of any of the parties to this Agreement, then at the
election of any party involved in such dispute, such dispute shall be resolved
finally by a single arbitrator (who, to the extent reasonably practical in
accordance with the rules and procedures of the American Arbitration
Association, will be a retired judge) in an arbitration proceeding conforming to
the rules of the American Arbitration Association applicable to commercial
arbitrations. If the arbitration proceeding would qualify as
<PAGE>
15
an expedited arbitration proceeding pursuant to the rules of the American
Arbitration Association based on the amount in controversy, the rules applicable
to expedited arbitrations shall apply.
(ii) Appointment of Arbitrator. The arbitrator shall be
appointed as follows: The party not electing to submit the matter to arbitration
(the "Non-Electing Party") shall provide to the other (the "Electing Party") a
list of three proposed arbitrators, each of whom shall be knowledgeable as to
matters that are the subject of the dispute and each of whom shall be completely
independent of and with no prior affiliation or direct or indirect relationship
with any party or any of their affiliates. The Electing Party shall then select
the arbitrator from such list or, if all such proposed arbitrators are
reasonably unacceptable to such party, so advise the Non-Electing Party,
whereupon such party shall prepare a new list of three proposed arbitrators and
the selection process shall begin anew.
(iii) Location of Arbitration. The arbitration shall
take place in New York City, New York.
(iv) Effect of Arbitration. The decision of such
arbitrator shall be final and binding upon the parties, and such decision shall
be enforceable as a judgment in a court of competent jurisdiction. Other than
the Company's right to seek specific performance by way of injunctive relief to
enforce the provisions of Sections 8, 9 and 10 set forth in Section 11(a) of
this Agreement, each party to this Agreement covenants not to institute any suit
or other proceeding in any court with respect to any matter arising under or
pursuant to or directly or indirectly relating to this Agreement, the subject
matter hereof or the other agreements, documents and instruments delivered or
required to be delivered hereunder or in connection herewith unless the intended
subject matter thereof has first been submitted for arbitration in accordance
with the foregoing procedure and such arbitration proceeding has been completed.
(v) Confidentiality of Arbitration. In order to
maintain the confidentiality of the dispute intended to be resolved by
arbitration as provided in this Agreement as well as the information adduced and
contentions asserted in any such arbitration, the parties agree to maintain in
strict confidence and agree to neither make nor suffer any public disclosure of
the fact of, contentions or evidence, discovered, developed or introduced in and
the result of any such arbitration; provided, however, the foregoing to the
contrary notwithstanding, that the Company may make public disclosures regarding
the existence of the arbitration, the nature of the dispute and the results
thereof as may be necessary or appropriate to satisfy the Company's disclosure
obligations under applicable securities or other laws, and the Partner may make
such disclosures as may be necessary or appropriate to satisfy his disclosure
obligations under applicable laws.
12. MISCELLANEOUS
(a) Waiver of Breach. The waiver by either party to this Agreement
of a breach of any of the provisions of this Agreement by the other party shall
not be construed as a waiver of any subsequent breach by such other party.
<PAGE>
16
(b) Compliance With Other Agreements. Each of the parties hereto
represents and warrants that the execution of this Agreement by such party and
the party's performance of such party's obligations hereunder will not conflict
with, result in the breach of any provision of or the termination of, or
constitute a default under, any agreement to which the party is a party or by
which the party is or may be bound.
(c) Binding Effect; Assignment. The rights and obligations of the
Company under this Agreement shall inure to the benefit of and shall be binding
upon the successors and assigns of the Company. This Agreement is a personal
employment contract and the rights, obligations and interests of the parties
hereunder may not be sold, assigned, transferred, pledged or hypothecated.
(d) Entire Agreement. This Agreement contains the entire agreement
and supersedes all prior agreements and understandings, oral or written, with
respect to the subject matter hereof. This Agreement may be changed only by an
agreement in writing signed by (i) the Partner, and (ii) the New York Office
Managing Partner or the President-North America of the Company, together with
any one of the CEO or the CAO of the Company.
(e) Headings, Etc. The headings contained in this Agreement are for
reference purposes only and shall not affect the meaning or interpretation of
this Agreement. Use of the term "Partner" is for the convenience of the parties
and is not intended to alter the employee-employer relationship between the
Company as a corporation and the Partner as an employee of a corporation
described in this Agreement.
(f) Governing Law. This Agreement shall be governed by and construed
pursuant to the substantive laws of the State of New York (except that any
provision of New York law shall not apply if the application of such provision
would result in the application of the law of a state or jurisdiction other than
New York).
(g) Venue; Process. To the extent it is necessary to resolve any
disputes arising under this Agreement and the agreements, instruments and
documents contemplated hereby in a court and resolution by a court is consistent
with the provisions of Section 11 of this Agreement, the parties to this
Agreement agree that jurisdiction and venue in any action brought pursuant to
this Agreement to enforce its terms or otherwise with respect to the
relationships between the parties shall lie exclusively in the Courts of New
York County, New York or in the United States District Court for the Southern
District of New York. The parties further agree that the mailing by certified or
registered mail, return receipt requested, of any process required by any such
court shall constitute valid and lawful service of process against them, without
the necessity for service by any other means provided by statute or rule of
court. The parties agree that they will not object that any action commenced in
the foregoing jurisdictions is commenced in a forum non conveniens.
(h) Severability. Any provision of this Agreement which is
determined pursuant to arbitration under Section 11 of this Agreement (or to the
extent it is necessary to
<PAGE>
17
resolve any disputes arising under this Agreement and the agreements and
instruments and documents contemplated hereby in a court and resolution by a
court is consistent with the provisions of Section 11 of this Agreement, by a
court of competent jurisdiction) to be prohibited, unenforceable or not
authorized in any jurisdiction shall, as to such jurisdiction, be ineffective to
the extent of such prohibition, unenforceability or non-authorization without
invalidating the remaining provisions hereof or affecting the validity,
enforceability or legality of such provision in any other jurisdiction. In any
such case, such determination shall not affect any other provision of this
Agreement, and the remaining provisions of this Agreement shall remain in full
force and effect. If any provision or term of this Agreement is susceptible to
two or more constructions or interpretations, one of more of which would render
the provision or term void or unenforceable, the parties agree that a
construction or interpretation which renders the term or provision valid shall
be favored.
(i) Notices. All notices which are required or may be given under
this Agreement shall be in writing and shall be deemed to have been duly given
(A) when received, if personally delivered; (B) when transmitted, if transmitted
by telecopy or similar electronic transmission method, with evidence of such
transmission; (C) one working day after it is sent, if sent by recognized
overnight delivery service; and (D) five days after it is sent, if mailed, first
class mail, certified mail, return receipt requested, with postage prepaid. In
each case, notice shall be sent to the following addresses (or to such other
address as either party may specify by like notice to the other):
(x) if to the Company:
HEIDRICK & STRUGGLES, INC.
Sears Tower - Suite 4200
233 South Wacker Drive
Chicago, IL 60606-6303
Attn: Chief Administrative Officer
with copies to:
HEIDRICK & STRUGGLES, INC.
Sears Tower - Suite 4200
233 South Wacker Drive
Chicago, IL 60606-6303
Attn: Chief Financial Officer
and
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017-3954
Attn: Vincent Pagano, Esq.
<PAGE>
18
(y) if to the Partner
At the Partner's address as set forth on the first page
of this Agreement
with a copy to:
Rosenman & Cohn LLP
575 Madison Avenue
New York, New York 10022
Attn: Todd J. Emmerman, Esq.
(j) Withholding Taxes. The Company may withhold from any amounts payable
under this Agreement such Federal, state and local taxes as may be required to
be withheld pursuant to any applicable law or regulation.
<PAGE>
19
(k) Counterparts. This Agreement may be signed in counterparts, each of
which shall be an original, with the same effect as if the signatures thereto
and hereto were upon the same instrument.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
/s/ Brian M. Sullivan
----------------------------------------
Brian M. Sullivan
Heidrick & Struggles, Inc.
By: /s/ Richard D. Nelson
-------------------------------------
Title: Secretary
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