Document:

Unassociated Document

Exhibit 10.1

 

 

UNITED STATES OF AMERICA

BEFORE THE

BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM

WASHINGTON, D.C.

STATE CORPORATION COMMISSION

BUREAU OF FINANCIAL INSTITUTIONS

RICHMOND, VIRGINIA

 

	
 

Written Agreement by and among

 

COMMUNITY BANKERS TRUST

CORPORATION

Glen Allen, Virginia

 

ESSEX BANK

Tappahannock, Virginia

 

FEDERAL RESERVE BANK

 OF RICHMOND

Richmond, Virginia

 

and

 

STATE CORPORATION COMMISSION

 BUREAU OF FINANCIAL INSTITUTIONS

Richmond, Virginia

 

	
 

 

 

Docket No.   

	
 

 

 

11-031-WA/RB-BHC

11-031-WA/RB-SM

WHEREAS, in recognition of their common goal to maintain the financial soundness of Community Bankers Trust Corporation, Glen Allen, Virginia (“CBT”), a registered bank holding company, and its subsidiary bank, Essex Bank, Tappahannock, Virginia (the “Bank”), a state-chartered bank that is a member of the Federal Reserve System, CBT, the Bank, the Federal Reserve Bank of Richmond (the “Reserve Bank”), and the State Corporation Commission Bureau of Financial Institutions (the “Bureau”) have mutually agreed to enter into this Written Agreement (the “Agreement”); and

 

  

  

  

 

WHEREAS, on April 21, 2011, CBT’s and the Bank’s boards of directors, at duly constituted meetings, adopted resolutions authorizing and directing Alexander F. Dillard, Jr., to consent to this Agreement on behalf of CBT and the Bank, and consenting to compliance with each and every applicable provision of this Agreement by CBT, the Bank, and their institution-affiliated parties, as defined in sections 3(u) and 8(b)(3) of the Federal Deposit Insurance Act, as amended (the “FDI Act”) (12 U.S.C. §§ 1813(u) and 1818(b)(3)).

 

NOW, THEREFORE, CBT, the Bank, the Reserve Bank, and the Bureau agree as follows:

 

Source of Strength

 

1.           The board of directors of CBT shall take appropriate steps to fully utilize CBT’s financial and managerial resources, pursuant to section 225.4(a) of Regulation Y of the Board of Governors of the Federal Reserve System (the “Board of Governors”) (12 C.F.R. § 225.4(a)), to serve as a source of strength to the Bank, including, but not limited to, taking steps to ensure the Bank complies with this Agreement and any other supervisory action taken by the Bank’s federal or state regulators.

 

Board Oversight

 

2.           Within 60 days of this Agreement, the boards of directors of CBT and the Bank shall submit to the Reserve Bank and the Bureau a written plan to strengthen board oversight of the management and operations of the Bank.  The plan shall, at a minimum, address, consider, and include:

 

(a)           The actions the Bank’s board of directors will take to improve the Bank’s condition and maintain effective control over, and supervision of, the Bank’s major operations and activities, including but not limited to, credit risk management, capital, and earnings;

 

  

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(b)           means to improve communications throughout the organization with respect to strategic initiatives and corrective actions;

 

(c)           the responsibility of the Bank’s board of directors to clearly define all lines of responsibility within the organization;

 

(d)           the responsibility of the Bank’s board of directors to monitor management’s adherence to approved Bank policies and procedures, and to require management to document exceptions thereto;

 

(e)           enhanced reports to be regularly reviewed by CBT and the Bank’s board of directors and board committees in their oversight of the operations and management of the Bank, including information on the Bank’s loan portfolio, adversely classified assets, concentrations of credits, allowance for loan and lease losses (“ALLL”), capital, earnings, and tracking of remedial actions taken in response to examination and audit findings; and

 

(f)           measures to fully address the findings and recommendations of CBT and the Bank’s independent consultant regarding corporate governance and to strengthen CBT and the Bank’s board of directors.

 

Management Review and New Management

 

3.           Within 60 days of this Agreement, the boards of directors of CBT and the Bank shall submit a written management plan to the Reserve Bank and the Bureau that describes the specific actions that the boards of directors will take to strengthen the Bank’s management and to hire, as necessary, additional or replacement personnel and to address the findings and conclusions of the management review completed by an independent consultant.

 

  

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4.           Within 60 days of the Agreement, the Bank shall employ a permanent full-time Chief Executive Officer and Chief Credit Officer with demonstrated, ability, experience, training, and other necessary qualifications required to perform present and anticipated duties.

 

Credit Risk Management

 

5.           Within 60 days of this Agreement, the Bank shall submit to the Reserve Bank and the Bureau an acceptable written plan to strengthen and maintain credit risk management practices.  The plan shall, at a minimum, address, consider, and include:

 

(a)           The responsibility of the board of directors to establish appropriate risk tolerance guidelines and risk limits;

 

(b)           establish loan policies and controls to ensure  they are adhered to;

 

(c)           periodic review and revision of risk exposure limits to address changes in market conditions;

 

(d)           specific steps to ensure timely and accurate identification and quantification of credit risk within the loan portfolio;

 

(e)           strategies to minimize credit losses and reduce the level of problem assets;

 

(f)           enhance stress testing of loan portfolio segments; and

 

(g)           measures to ensure accurate, detailed , and consistent problem loan and watch list reports;

 

(h)           procedures to identify, limit, and manage concentrations of credit that are consistent with the Interagency Guidance on Concentrations in Commercial Real Estate Lending, Sound Risk Management Practices, dated December 12, 2006 (SR 07-1); and

 

(i)           ensure staffing levels and expertise, audit, and internal controls, policies and procedures, and management information systems, are sufficient to meet all requirements of the FDIC Loss Sharing Program, including, but not limited to, the timely filing of the Loss-Sharing Certificates.

 

  

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Lending and Credit Administration

 

6.           Within 60 days of this Agreement, the Bank shall submit to the Reserve Bank and the Bureau an acceptable written lending and credit administration program that shall, at a minimum, address, consider, and include:

 

(a)          Documented analysis of the borrower’s and guarantor’s repayment sources, credit worthiness, global cash flow, leverage, liquidity, and overall debt services ability;

 

(b)          types of financial and collateral information that must be obtained and the timing and frequency for receipt of such information;

 

(c)          standards for renewing, extending, or modifying existing loans;

 

(d)          ongoing assessment, independent inspection, and reporting of real estate development project status;

 

(e)          appropriate controls on loan draws, including, but not limited to, a description of the documents necessary to support the draw;

 

(f)          monitoring and reporting of exceptions to loan policies and procedures;

 

(g)          policies and procedures to minimize financial and document exceptions;

 

(h)          standards for the management of collateral including accurate and timely valuation of collateral;

 

(i)          procedures for initial underwriting and monitoring loan participations; and

 

(j)          develop comprehensive policies and procedures for the implementation of loan workout strategies.

 

  

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Loan Review

 

7.           Within 60 days of this Agreement, the Bank shall submit to the Reserve Bank and the Bureau an acceptable written program for the ongoing review and grading of the Bank’s loan portfolio by a qualified independent party or by qualified staff  independent of the Bank’s lending function.  The program shall, at a minimum, address, consider, and include:

 

(a)          The scope and frequency of the loan review;

 

(b)          standards and criteria for assessing the credit quality of the loans;

 

(c)          application of loan grading standards and criteria to the loan portfolio; and

 

(d)          quarterly written reports to the board of directors  identifying the status of those loans adversely graded and the prospects for full collection or strengthening of the quality of any such loans.

 

Asset Improvement

 

8.           The Bank shall not, directly or indirectly, extend, renew, or restructure any credit to or for the benefit of any borrower, including any related interest of the borrower, whose loans or other extensions of credit are criticized in the report of examination of the Bank conducted by the Reserve Bank that commenced on July 2, 2010 (the “Report of Examination”) or in any subsequent report of examination, without the prior approval of a majority of the full board of directors or a designated committee thereof.  The board of directors or its committee shall document in writing the reasons for the extension of credit, renewal, or restructuring, specifically certifying : (i) the Bank’s risk management policies and practices for loan workout activity are acceptable; (ii) the extension of credit is necessary to improve and protect the Bank’s interest in the ultimate collection of the credit already granted and maximize its potential for collection; (iii) the extension of credit reflects prudent underwriting based on reasonable repayment terms and is adequately secured; and all necessary loan documentation has been properly and accurately prepared and filed; (iv) the Bank has performed a comprehensive credit analysis  indicating  the borrower has the willingness and ability to repay the debt as supported by an adequate workout plan, as necessary; and (v) the board of directors or its designated committee reasonably believes  the extension of credit will not impair the Bank’s interest in obtaining repayment of the already outstanding credit and  the extension of credit or renewal will be repaid according to its terms.  The written certification shall be made a part of the minutes of the meetings of the board of directors or its committee, as appropriate, and a copy of the signed certification, together with the credit analysis and related information  used in the determination, shall be retained by the Bank in the borrower’s credit file for subsequent supervisory review.  For purposes of this Agreement, the term “related interest” is defined as set forth in section 215.2(n) of Regulation O of the Board of Governors of the Federal Reserve System (the “Board of Governors”) (12 C.F.R. § 215.2(n)).

 

  

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9.           (a)           Within 60 days of this Agreement, the Bank shall submit to the Reserve Bank and the Bureau an acceptable written plan designed to improve the Bank’s position through repayment, amortization, liquidation, additional collateral, or other means on each loan or other asset in excess of $1,000,000, including OREO, that: (i) is past due as to principal or interest more than  90 days as of the date of this Agreement; (ii) is on the Bank’s watch list or problem loan list; or (iii) was adversely classified in the Report of Examination.  In developing the plan for each loan, the Bank shall, at a minimum, review, analyze, and document the financial position of the borrower, including source of repayment, repayment ability, and alternative repayment sources, as well as the value and accessibility of any pledged or assigned collateral, and any possible actions to improve the Bank’s collateral position.

 

(b)           Within 30 days of the date that any additional loan or other asset in excess of $1,000,000, including OREO: (i) becomes past due as to principal or interest for more than 90 days; (ii) is on the Bank’s watch list or problem loan list; or (iii) is adversely classified in any subsequent report of examination of the Bank, the Bank shall submit to the Reserve Bank and the Bureau an acceptable written plan to improve the Bank’s position on such loan or asset.

 

(c)           Within 30 days after the end of each calendar quarter thereafter, the Bank shall submit a written progress report to the Reserve Bank and the Bureau to update each asset improvement plan, to include, at a minimum, the carrying value of the loan or other asset and changes in the nature and value of supporting collateral, along with a copy of the Bank’s current watch list or problem loan list, a list of all loan renewals and extensions without full collection of interest in the last quarter, and past due/non-accrual report.  The board of directors shall review the progress reports before submission to the Reserve Bank and the Bureau and shall document the review in the minutes of the board of directors’ meetings.

 

Allowance for Loan and Lease Losses

 

10.           (a)           Within 10 days of this Agreement, the Bank shall eliminate from its books, by charge-off or collection, all assets or portions of assets classified “loss” in the Report of Examination that have not been previously collected in full or charged off.  Thereafter the Bank shall, within 30 days from the receipt of any federal or state report of examination, charge off all assets classified “loss” unless otherwise approved in writing by the Reserve Bank and the Bureau.

 

(b)           Within 60 days of this Agreement, the Bank shall review and revise its ALLL methodology consistent with relevant supervisory guidance, including the Interagency Policy Statements on the Allowance for Loan and Lease Losses, dated July 2, 2001 (SR 01-17 (Sup)) and December 13, 2006 (SR 06-17), and the findings and recommendations regarding the ALLL set forth in the Report of Examination, and submit a description of the revised methodology to the Reserve Bank and the Bureau.  The revised ALLL methodology shall be designed to maintain an adequate ALLL and shall address, consider, and include, at a minimum, the reliability of the Bank’s loan grading system, the volume of criticized loans, concentrations of credit, the current level of past due and nonperforming loans, past loan loss experience, evaluation of probable losses in the Bank’s loan portfolio, including adversely classified loans, and the impact of market conditions on loan and collateral valuations and collectibility.

 

  

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(c)           Within 60 days of this Agreement, the Bank shall submit to the Reserve Bank and the Bureau an acceptable written program for the maintenance of an adequate ALLL.  The program shall include policies and procedures to ensure adherence to the revised ALLL methodology and provide for periodic reviews and updates to the ALLL methodology, as appropriate.  The program shall also provide for a review of the ALLL by the board of directors on at least a quarterly calendar basis.  Any deficiency found in the ALLL shall be remedied in the quarter it is discovered, prior to the filing of the Consolidated Reports of Condition and Income, by additional provisions.  The board of directors shall maintain written documentation of its review, including the factors considered and conclusions reached by the Bank in determining the adequacy of the ALLL.  During the term of this Agreement, the Bank shall submit to the Reserve Bank and the Bureau, within 30 days after the end of each calendar quarter, a written report regarding the board of directors’ quarterly review of the ALLL and a description of any changes to the methodology used in determining the amount of ALLL for that quarter.

 

Capital Plan

 

11.           Within 60 days of this Agreement, CBT and the Bank shall submit to the Reserve Bank and the Bureau an acceptable joint written plan to maintain sufficient capital at CBT on a consolidated basis, and the Bank as a separate legal entity on a stand-alone basis.  The plan shall, at a minimum, address, consider, and include:

 

(a)           CBT’s current and future capital requirements, including compliance with the Capital Adequacy Guidelines for Bank Holding Companies: Risk-Based Measure and Tier 1 Leverage Measure, Appendices A and D of Regulation Y of the Board of Governors (12 C.F.R. Part 225, App. A and D);

 

(b)           the Bank’s current and future capital requirements, including compliance with the Capital Adequacy Guidelines for State Member Banks: Risk-Based Measure and Tier 1 Leverage Measure, Appendices A and B of Regulation H of the Board of Governors (12 C.F.R. Part 208, App. A and B);

 

(c)           the adequacy of the Bank’s capital, taking into account the volume of classified assets, concentrations of credit, the adequacy of the ALLL, current and projected asset growth, projected retained earnings, and anticipated and contingency funding needs;

 

(d)           the source and timing of additional funds to fulfill CBT’s and the Bank’s future capital requirements; and

 

(e)           the requirements of section 225.4(a) of Regulation Y of the Board of Governors (12 C.F.R. § 225.4(a)) that CBT serve as a source of strength to the Bank.

 

12.           CBT and the Bank shall notify the Reserve Bank and the Bureau, in writing, no more than 30 days after the end of any calendar quarter in which any of CBT’s consolidated capital ratios or the Bank’s capital ratios (total risk-based, Tier 1 risk-based, or leverage) fall below the approved capital plan’s minimum ratios.  Together with the notification, the CBT and the Bank shall submit an acceptable written plan that details the steps CBT or the Bank, as appropriate, will take to increase CBT’s or the Bank’s capital ratios to or above the approved capital plan’s minimums.

 

  

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Strategic Plan and Budget

 

13.           (a)           Within 60 days of this Agreement, the Bank shall submit to the Reserve Bank and the Bureau a strategic plan to improve the Bank’s earnings and a budget for 2011.  The written plan and budget shall include, but not be limited to:

 

(i)           Identification of the major areas where, and means by which, the board of directors will seek to improve the Bank’s operating performance;

 

(ii)           a realistic and comprehensive budget for calendar year 2011, including income statement and balance sheet projections; and

 

(iii)           a description of the operating assumptions that form the basis for, and adequately support, major projected income, expense, and balance sheet components.

 

(b)           A strategic plan and budget for each calendar year subsequent to 2011 shall be submitted to the Reserve Bank and the Bureau at least 30 days prior to the beginning of that calendar year.

 

Dividends and Distributions

 

14.           (a)           The Bank shall not declare or pay any dividends without the prior written approval of the Reserve Bank, the Director of the Division of Banking Supervision and Regulation of the Board of Governors (the “Director”), and the Bureau.

 

(b)           CBT shall not declare or pay any dividends without the prior written approval of the Reserve Bank, the Director, and the Bureau.

 

  

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(c)           CBT shall not take any other form of payment representing a reduction in capital from the Bank without the prior written approval of the Reserve Bank and the Bureau.

 

(d)           CBT and its nonbank subsidiaries shall not make any distributions of interest, principal, or other sums on subordinated debentures or trust preferred securities without the prior written approval of the Reserve Bank, the Director, and the Bureau.

 

(e)           All requests for prior approval shall be received at least 30 days prior to the proposed dividend declaration date, proposed distribution on subordinated debentures, and required notice of deferral on trust preferred securities.  All requests shall contain, at a minimum, current and projected information, as appropriate, on the parent’s capital, earnings, and cash flow; the Bank’s capital, asset quality, earnings and ALLL needs; and identification of the sources of funds for the proposed payment or distribution.  For requests to declare or pay dividends, CBT and the Bank, as appropriate, must also demonstrate the requested declaration or payment of dividends is consistent with the Board of Governors’ Policy Statement on the Payment of Cash Dividends by State Member Banks and Bank Holding Companies, dated November 14, 1985 (Federal Reserve Regulatory Service, 4-877 at page 4-323), and provisions of Section 6.2-869 of the Code of Virginia.

 

Debt and Stock Redemption

 

15.           (a)           CBT, and its nonbank subsidiaries, shall not, directly or indirectly, incur, increase, or guarantee any debt without the prior written approval of the Reserve Bank and the Bureau.  All requests for prior written approval shall contain, but not be limited to, a statement regarding the purpose of the debt, the terms of the debt, and the planned source(s) for debt repayment, and an analysis of the cash flow resources available to meet such debt repayment.

 

  

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(b)           CBT shall not, directly or indirectly, purchase or redeem any shares of its stock without the prior written approval of the Reserve Bank and the Bureau.

 

Compliance with Laws and Regulations

 

16.           (a)           In appointing any new director or senior executive officer, or changing the responsibilities of any senior executive officer so the officer would assume a different senior executive officer position, the Bank shall comply with the notice provisions of section 32 of the FDI Act (12 U.S.C. § 1831i) and Subpart H of Regulation Y of the Board of Governors (12 C.F.R. §§ 225.71 et seq.).

 

(b)           The Bank shall comply with the restrictions on indemnification and severance payments of section 18(k) of the FDI Act (12 U.S.C. § 1828(k)) and Part 359 of the Federal Deposit Insurance Corporation’s regulations (12 C.F.R. Part 359).

 

Compliance with the Agreement

 

17.           Within 30 days after the end of each calendar quarter following the date of this Agreement, CBT and the Bank shall submit to the Reserve Bank and the Bureau joint written progress reports detailing the form and manner of all actions taken to secure compliance with this Agreement and the results thereof.

 

Approval and Implementation of Acceptable Plans, Policies, Procedures, and Programs 

 

18.           (a)           The written plans, policies, procedures and programs, required by paragraphs 5, 6, 7, 9(a), 9(b), 10(c), 11, and 12 of this Agreement shall be submitted to the Reserve Bank and the Bureau for review and approval.  Acceptable plans, policies, procedures and programs shall be submitted within the time periods set forth in the Agreement. 

 

(b)           Within 10 days of approval by the Reserve Bank and the Bureau, the Bank shall adopt the approved plans, policies, procedures and programs.  Upon adoption, the Bank shall promptly implement the approved plans, policies, procedures and programs and thereafter fully comply with them.

 

  

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(c)           During the term of this Agreement, the approved plans, policies, procedures and programs shall not be amended or rescinded without the prior written approval of the Reserve Bank and the Bureau.

 

Communications

 

19.           All communications regarding this Agreement shall be sent to:

 

	 	
(a) 

	
Eugene W. Johnson, Jr.

Vice President

Federal Reserve Bank of Richmond

P.O. Box 27622

Richmond, Virginia  23261-7622

 

	 	
(b) 

	
John M. Crockett

Deputy Commissioner

State Corporation Commission Bureau of Financial Institutions

P.O. Box 640

Richmond, Virginia 23218

 

	 	
(c) 

	
Rex L. Smith, III

Chief Banking Officer

Community Bankers Trust Corporation.

Essex Bank

4235 Innslake Drive, Suite 200

Glen Allen, Virginia  23060

 

 Miscellaneous

 

20.           Notwithstanding any provision of this Agreement, the Reserve Bank and the Bureau may, in their sole discretion, grant written extensions of time to CBT and the Bank to comply with any provision of this Agreement.

 

21.           The provisions of this Agreement shall be binding upon CBT and the Bank and their institution-affiliated parties, in their capacities as such, and their successors and assigns.

 

  

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22.           Each provision of this Agreement shall remain effective and enforceable until stayed, modified, terminated, or suspended in writing by the Reserve Bank and the Bureau.

 

23.           The provisions of this Agreement shall not bar, estop, or otherwise prevent the Board of Governors, the Reserve Bank, the Bureau, or any other federal or state agency from taking any other action affecting CBT and the Bank or any of their current or former institution-affiliated parties and their successors and assigns.

 

24.           Pursuant to section 50 of the FDI Act (12 U.S.C. § 1831aa), this Agreement is enforceable by the Board of Governors under section 8 of the FDI Act (12 U.S.C. § 1818).  This Agreement is enforceable by the Bureau under the Code of Virginia Chapter 8 (§6.2-800 et.seq.).

 

IN WITNESS WHEREOF, the parties have caused this Agreement to be executed as of the 21 day of April, 2011.

 

	
COMMUNITY BANKERS 

TRUST CORPORATION,

ESSEX BANK

	  	
FEDERAL RESERVE BANK OF 

RICHMOND

	 
	  	  	  	  	  	 
	  	  	  	  	  	 
	
By:

	
/s/ Alexander F. Dillard, Jr.

	  	
By:

	
/s/ Eugene W. Johnson, Jr.

	 
	  	
Alexander F. Dillard, Jr.

	  	  	
Eugene W. Johnson, Jr.

	 
	  	
Chairman

	  	  	
Vice President

	 
	  	  	  	  	  	 
	  	  	  	  	  	 
	  	  	  	
STATE CORPORATION COMMISSION 

BUREAU OF FINANCIAL 

INSTITUTIONS

	 
	  	  	  	  	  	 
	  	  	  	  	  	 
	
By:

	
n/a

	  	
By:

	
/s/ John M. Crockett

	 
	  	  	  	  	
John M. Crockett

	 
	  	  	  	  	
Deputy Commissioner

	 

 

  

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SEPARATION AGREEMENT AND GENERAL RELEASE

This Separation Agreement and General Release ("Agreement") is made as of this 22nd day of April, 2011 (the "Effective Date"), by and between Scott J. Krenz (the "Executive") and Heidrick & Struggles International, Inc. and its affiliates (collectively, the "Company"), concerning the Executive's separation from employment with the Company.

WHEREAS, the Company and the Executive entered into a Letter Agreement dated June 9, 2008 (the "Letter Agreement");

WHEREAS, the Executive and the Company have agreed that the Executive's employment with the Company will end effective on April 22, 2011 or on such earlier date as may be mutually agreed upon by the Company and the Executive (the "Separation Date"); and

WHEREAS, the Company and the Executive intend this Agreement to document the complete understanding of the parties as to all rights of the Executive under the Letter Agreement and the Heidrick & Struggles International, Inc. Management Severance Pay Plan ("MSPP") or otherwise relating to the Executive's employment by, and separation from employment with, the Company.

NOW THEREFORE, in consideration of the mutual promises and agreements set forth below, the receipt and adequacy of which is hereby acknowledged, the Company and the Executive agree as follows:

	SEPARATION/TRANSITION.  The Executive's employment as Executive Vice President and Chief Financial Officer shall terminate as of the close of business on the Separation Date.  The Executive hereby resigns from all other officer, director and other positions with the Company and any and all of its affiliates effective as of the close of business on the Separation Date.  Through the Separation Date, the Executive shall take reasonable and appropriate actions to cooperatively and smoothly transition the duties and responsibilities of the position of Executive Vice President and Chief Financial Officer to his successor or successors.  Through the Separation Date, the Executive will (a) be paid the Executive's currently monthly salary ($31,250.00 per month), and (b) be eligible to participate in all benefit plans and programs available to employees of Heidrick & Struggles, Inc. generally, in accordance with the terms of such plans and programs.  Any business expenses properly incurred by the Executive prior to the Separation Date will be reimbursed in accordance with the Company's expense reimbursement policy.

	CONSIDERATION.

	Separation Payment.  In exchange for (i) the Executive's execution of the General Release and Waiver provided in Exhibit A to this Agreement ("Release"), which Executive can execute no earlier than the Separation Date, and delivery of same during the 21-day period following the Separation Date with such delivery pursuant to Section 14(d) below, (ii) non-revocation of the Release, and (iii) continued compliance with all of the terms and conditions of this Agreement, the Executive shall receive a separation payment (the "Separation Payment") of (i) 18 months of Base Salary equal to $562,500.00, and (ii) 18 months of Target Bonus equal to $562,500.00, for a total Separation Payment of $1,125,000.00.  These payments will be made in equal installments over the eighteen months following the end of the revocation period set forth in Paragraph 4 of Exhibit A hereto in accordance with payroll procedures applicable to similarly situated employees of the Company ("Severance Period").

	Health Benefits. In exchange for (i) the Executive's execution of the Release, which Executive can execute no earlier than the Separation Date, and delivery of same during the 21-day period following the Separation Date with such delivery pursuant to Section 14(d) below, (ii) non-revocation of the Release, and (iii) continued compliance with all of the terms and conditions of this Agreement, the Executive's Health Benefits (as defined in the MSPP) shall be maintained during the Severance Period.  The Executive and the Company shall share the costs of continuation of such Health Benefits in the same proportion as such costs were shared immediately prior to the Separation Date.  Continued Health Benefits shall cease on the date Executive becomes employed and covered under another employer's benefit plan.  The last day of the Severance Period shall be considered a "qualifying event" under COBRA and Executive may exercise what continuation rights exist at his own expense.

(c) Outplacement.  In exchange for (i) the Executive's execution of the Release, which Executive can execute no earlier than the Separation Date, and delivery of same during the 21-day period following the Separation Date with such delivery pursuant to Section 14(d) below, (ii) non-revocation of the Release, and (iii) continued compliance with all of the terms and conditions of this Agreement, Executive shall be entitled to receive executive outplacement services at a level commensurate with Executive's title and level of experience until March 31, 2012.  Executive shall be reimbursed for expenses incurred by Executive pursuant to this subparagraph within 30 days of submission of satisfactory documentation of expenses incurred by Executive to Heidrick & Struggles.

	TERMINATION OF BENEFITS.  Except as specifically provided in this Agreement with respect to plans or arrangements specifically identified in this Agreement, the Executive's continued participation in all employee benefit plans (pension and welfare) and compensation plans will cease as of the Separation Date. Any payments made to the Executive pursuant to this Agreement, other than with respect to the continued payment of salary to the Separation Date, shall be disregarded for purposes of determining the amount of benefits to be accrued on behalf of the Executive under any pension or other benefit plan maintained by the Company. Nothing contained herein shall limit or otherwise impair the Executive's right to receive pension or similar benefit payments which are vested as of the Separation Date under any applicable tax qualified pension or other tax qualified benefit plan.

	NO OTHER PAYMENTS.  The Executive agrees and acknowledges that, other than as specifically provided for in this Agreement, no additional payments are due from the Company on any basis whatsoever. 

	TRANSITION.  Executive agrees, without condition or qualification, to make himself available at reasonable times to assist the Company as requested during the Severance Period.

	RELEASE.  As part of this Agreement, and in consideration of the additional payments provided to the Executive in accordance with this Agreement, the sufficiency of which is hereby acknowledged, the Executive is required to execute the General Release and Waiver attached as Exhibit A hereto in accordance with paragraph 2 above, deliver the executed Release to the Company per Section 14(d) below, and not revoke the Release.

	ASSISTANCE WITH CLAIMS.  The Executive agrees to fully cooperate with the Company or any affiliate in the defense, prosecution or evaluation of any pending or potential claims or proceedings involving or affecting the Company or any affiliate arising during the period of the Executive's employment with the Company (the "Employment Period") or relating to any decisions in which the Executive participated or any matter of which the Executive had knowledge. The Executive agrees, unless precluded by law, to promptly inform the Company if the Executive is asked to participate (or otherwise become involved) in any claims that may be filed against the Company or any affiliate relating to the Employment Period. The Executive also agrees, unless precluded by law, to promptly inform the Company if the Executive is asked to assist in any investigation (whether governmental or private) of the Company or any affiliate (or their actions) relating to any matter, regardless of whether a lawsuit has then been filed against the Company or any affiliate with respect to such investigation.  Specifically and without limitation, the Executive will attend and participate in meetings and interviews conducted by Company personnel, and/or attorneys appointed by the Company and may be represented by counsel who may attend such meetings and interviews, and execute written affidavits confirming the Executive's statements in such meetings in respect of any such matters; provided such meetings do not unreasonably interfere with the Executive's employment or self-employment entered into after the Separation Date. The Executive will make himself available for the foregoing at mutually convenient times during business hours from time to time as reasonably requested by the Company. Promptly upon the receipt of the Executive's written request, the Company agrees to reimburse the Executive for all reasonable out-of-pocket expenses associated with such cooperation, including, without limitation, meals, lodging, travel, and ground transportation expenses; provided, however, subject to Paragraph 13 of this Agreement, that such reimbursement shall specifically exclude any fees for legal representation engaged by the Executive, that is not otherwise reimbursable pursuant to the Company's policies in effect at such time or the Company's By-Laws.  This Paragraph 7 shall not preclude the Executive from responding to an inquiry in an honest manner.

	NON-DISPARAGEMENT.  (a) The Executive agrees that on and after the Effective Date, the Executive will not make any disparaging, critical or derogatory statement about the Company or any affiliate or their shareholders or any of their current or former officers, directors or employees or otherwise make disparaging comment on any aspects of the Executive's employment with the Company or the separation therefrom; (b) the Company and its current executive officers agree not to make any disparaging or derogatory public disclosure statement in their capacities as executive officers of the Company about the Executive or the Executive's employment with the Company or the separation therefrom; and (c) the provisions of this paragraph 8(a) and 8(b) shall not apply to testimony as a witness, any disclosure required by law to be made by the Company or the Executive, or the assertion of or defense against any claim of breach of this Agreement and shall not require either party to make false statements or  disclosures. All inquiries shall be referred to the Company's Human Resources Department and shall be handled in a manner consistent with the Company's then-applicable policies.

	CONTINUED APPLICATION OF RESTRICTIVE COVENANTS CONTAINED IN LETTER AGREEMENT.  Except as may be modified by the following provisions of this Paragraph 9, the Executive expressly acknowledges and agrees that the Executive will continue to remain subject to the Confidentiality provision (Section 13) and Non-Solicitation/Non-Competition provisions (Section 14) of the Letter Agreement, and any confidentiality, non-solicitation and non-competition provisions entered into in connection with any other agreement or compensation award with the Company (the "Covenants"), and further agrees that the obligations under the Covenants are not limited in any way by this Agreement or separation from employment with the Company.

	The Executive shall return all documents, records and property of the Company no later than the Separation Date.  Without limiting the generality of the foregoing, the Executive shall return to the Company no later than the Separation Date any and all original and duplicate copies of all the Executive's work product and of files, calendars (except for personal calendars and contacts), books, records, notes, notebooks, customer lists and proposals to customers, manuals, computer equipment (including any desktop and/or laptop computers, handheld computing devices, home systems, flash drives, USB drives, external hard drives, computer disks and diskettes), mobile telephones (including SIM cards and the like), Blackberry devices, personal data assistants (PDAs), fax machines, and any other magnetic and other media materials the Executive has in the Executive's possession or under the Executive's control that belong to the Company or that contain confidential or proprietary information concerning the Company or its clients or operations.  The Executive also must return to the Company by the Separation Date any keys, credit cards and I.D. cards that belong to the Company or any of its affiliates but are in the Executive's possession or within the Executive's control.

	The Company shall return all personal property of the Executive at a time and in a manner mutually convenient to the Executive and the Company.

	The Executive agrees not to instigate or participate in any administrative or judicial proceeding against the Company or any affiliate (except for proceedings to enforce this Agreement) unless requested by the Company or otherwise required by law.  Excluded from this covenant not to sue are any claims that by law cannot be waived, including but not limited to the right to participate in an investigation conducted by certain government agencies.  The Parties specifically intend that this Release shall not be asserted or construed to limit the Equal Employment Opportunity Commission from investigating or acting upon any claim, nor shall it limit Executive's right to cooperate in such an investigation or action by any governmental agency. The Executive is, however, waiving the Executive's right to any monetary recovery should any such agency ( including, but not limited to, the Equal Employment Opportunity Commission) pursue any claims on the Executive's behalf.

	Subject to the foregoing provisions of this Paragraph 9, the Company will continue to have the right to enforce such obligations of the Covenants.

	DISCLOSURE OF COVENANTS TO PROSPECTIVE NEW EMPLOYER(S).  The Executive agrees that, prior to the commencement of any new employment, if prior to the end of the expiration of the restrictive provisions of the Covenants, the Executive will furnish the prospective new employer with a copy of the provisions of this Agreement (and as needed, relevant provisions of the Letter Agreement or any other agreement with the Company) relating to the Covenants.  The Executive also agrees that, during such period, the Company may advise any new employer or prospective new employer of the provisions of this Agreement relating to the Covenants and furnish the new employer or prospective new employer with a copy of such provisions (and as needed, relevant provisions of the Letter Agreement or any other agreement with the Company).

	WITHHOLDING FOR TAXES.  All benefits and payments provided to the Executive pursuant to this Agreement, which are required to be treated as compensation shall be subject to all applicable tax withholding and reporting requirements.

	SETTLEMENT OF DISPUTES.  The settlement of disputes provisions set forth in Section 15(d) of the Letter Agreement are hereby incorporated by reference and are made part of this Agreement and shall be applicable for all disputes as may arise hereunder, regardless of whether the Letter Agreement is, or may deemed to be, in full force and effect.

	ATTORNEYS FEES.  In the event of any dispute with respect to a breach or asserted breach of this Agreement, the prevailing party as determined by the presiding judge or arbitration panel in said proceeding shall be entitled to recover such party's reasonable attorneys' fees, experts' fees, costs and expenses from the other party.

	MISCELLANEOUS.

	Binding Effect.  This Agreement shall be binding upon each of the parties and upon their respective heirs, administrators, representatives, executors, successors and assigns, and shall inure to the benefit of each party and to their heirs, administrators, representatives, executors, successors and assigns.

	Applicable Law.  This Agreement shall be construed in accordance with the laws of the State of Illinois, without regard to the conflict of law provisions of any jurisdiction.

	Entire Agreement.  This Agreement reflects the entire agreement between the Executive and the Company and, except as specifically provided herein, supersedes all prior agreements and understandings, written or oral, relating to the subject matter hereof, it being acknowledged, however, that the Executive shall continue to be subject to the Covenants. To the extent that the terms of this Agreement (including Exhibits to this Agreement) are to be determined under, or are to be subject to, the terms or provisions of any other document, this Agreement (including Exhibits to this Agreement) shall be deemed to incorporate by reference such terms or provisions of such other documents.

	Notices.  Any notice pertaining to this Agreement shall be in writing and shall be deemed to have been effectively given on the earliest of (a) when received, (b) upon personal delivery to the party notified, (c) one business day after delivery via facsimile with electronic confirmation of successful transmission, (d) one business day after delivery via an overnight courier service or (e) five days after deposit with the United Postal Service, and addressed as follows:

to the Executive at:826 W. Illinois Avenue

Palatine, IL 60067

to the Company at:Heidrick & Struggles International, Inc.

Attn:  General Counsel

233 South Wacker Drive Suite 4200

Chicago, IL 60606-6303 

Fax: (312) 496-1297

	Waiver of Breach.  The waiver by either party to this Agreement of a breach of any provision of this Agreement shall not operate as or be deemed a waiver of any subsequent breach by such party. Continuation of benefits hereunder by the Company following a breach by the Executive of any provision of this Agreement shall not preclude the Company from thereafter exercising any right that it may otherwise independently have to terminate said benefits based upon the same violation.

	Amendment.  This Agreement may not be modified or amended except by a writing signed by the parties to this Agreement.

	Counterparts.  This Agreement may be signed in multiple counterparts, each of which shall be deemed an original.  Any executed counterpart returned by facsimile shall be deemed an original executed counterpart.

	No Third Party Beneficiaries.  Unless specifically provided herein, the provisions of this Agreement are for the sole benefit of the parties to this Agreement and are not intended to confer upon any person not a party to this Agreement any rights hereunder.

	Terms and Construction.  Each party has cooperated in the drafting and preparation of this Agreement. The language in all parts of this Agreement shall be in all cases construed according to its fair meaning and not strictly for or against either party.

	Admissions.  Nothing in this Agreement is intended to be, or will be deemed to be, an admission of liability by the Executive or the Company to each other, or an admission that they or any of their agents, affiliates, or employees have violated any state, federal or local statute, regulation or ordinance or any principle of common law of any jurisdiction, or that they have engaged in any wrongdoing towards each other.

	Indemnification.  The Executive shall continue to be eligible for indemnification by the Company to the extent provided to other former executives of the Company, as provided in the Company By-Laws as currently in effect, any policy of insurance obtained by the Company or as may be required by Delaware law.

	Internal Revenue Code Section 409A.   This Agreement is intended to comply with the requirements of Section 409A of the Internal Revenue Code of 1986, as amended (the "Code"), and shall be interpreted and construed consistently with such intent.  Payments made under this Agreement are also intended to be exempt from Section 409A of the Code to the maximum extent possible, under either the separation pay exemption pursuant to Treasury regulations Section 1.409A-1(b)(9)(iii) or as short-term deferrals pursuant to Treasury regulation Section 1.409A-1(b)(4), and for this purpose each payment shall be considered a separate payment.  In the event the terms of this Agreement would subject a Executive to taxes or penalties under Section 409A of the Code ("409A Penalties"), the Company and the Executive shall cooperate diligently to amend the terms of this Agreement to avoid such 409A Penalties, to the extent possible, including but not limited to accelerating or deferring any payments called for under this Agreement.  To the extent any amounts under this Agreement are payable by reference to the Executive's "termination of employment," such term shall be deemed to reference to the Executive's "separation from service," within the meaning of Section 409A of the Code.  Notwithstanding any other provision in this Agreement, if the Executive is a "specified employee," as defined in Section 409A of the Code, as of the date of Executive's separation from service, then to the extent any amount payable to the Executive (i) constitutes the payment of nonqualified deferred compensation, within the meaning of Section 409A of the Code, (ii) is payable upon the Executive's separation from service and (iii) under the terms of this Agreement would be payable prior to the six-month anniversary of the Executive's separation from service, such payment shall be delayed until the earlier to occur of (a) the six-month anniversary of the separation from service and (b) the date of Executive's death.

IN WITNESS WHEREOF, this Transition and Separation Release has been duly executed as of the Effective Date.

	
/s/ Scott J. Krenz

Scott J. Krenz

	
/s/ Richard J. Caldera       

Heidrick & Struggles International, Inc.

By:Richard J. Caldera

Title:Chief Human Resources Officer

	 	 

 

 

Do Not Sign Before Separation Date

Exhibit A

GENERAL RELEASE AND WAIVER

	This document (the "Release") is attached to, is incorporated into, and forms a part of, a Transition and Separation Agreement and General Release, dated April 22, 2011 (the "Agreement") by and between Heidrick & Struggles International, Inc. (the "Company") and Scott Krenz (the "Executive"). Except for (i) a Claim (as defined below) based upon a breach of the Agreement, (ii) a Claim which is expressly preserved by the Agreement, (iii) a Claim duly filed pursuant to the group welfare and retirement plans of the Company, or (iv) a Claim filed pursuant to any policy of liability insurance or the Company's By-Laws, the Executive, on behalf of himself and the other Executive Releasors (as defined below), releases and forever discharges the Company and the other Company Releasees (as defined below) from any and all Claims which the Executive now has or claims, or might hereafter have or claim, whether known or unknown, suspected or unsuspected (or the other Executive Releasors may have, to the extent that it is derived from a Claim which the Executive may have), against the Company Releasees based upon or arising out of any matter or thing whatsoever, from the beginning of time to the date affixed beneath the Executive's signature on this General Release and Waiver and shall include, without limitation, Claims (other than those specifically excepted above) arising out of or related to the Letter Agreement dated June 9, 2008, Claims arising out of or related to the Executive's separation of employment from the Company, and Claims arising under (or alleged to have arisen under) (a) the Age Discrimination in Employment Act of 1967, as amended; (b) Title VII of the Civil Rights Act of 1964, as amended; (c) The Civil Rights Act of 1991; (d) Section 1981 through 1988 of Title 42 of the United States Code, as amended; (e) the Employee Retirement Income Security Act of 1974, as amended; (f) The Immigration Reform Control Act, as amended; (g) The Americans with Disabilities Act of 1990, as amended; (h) The National Labor Relations Act, as amended; (i) The Occupational Safety and Health Act, as amended; (j) The Family and Medical Leave Act of 1993; (k) any state or local anti-discrimination law; (l) any other local, state or federal law, regulation or ordinance; (m) any public policy, contract (including the MSPP), tort, or common law; or (n) any allegation for costs, fees, or other expenses including attorneys' fees incurred in these matters. The Executive further represents that, except as set forth in the following sentence, the Executive has not, and never will, institute against the Company or any of the Company Releases any action or other proceeding in any court, administrative agency, or other tribunal of the United States, any State thereof or any foreign jurisdiction, with respect to any Claim or cause of action of any type, other than as provided under (i), (ii), (iii) or (iv) above, arising or which may have existed at any time prior to the effective date of the Agreement. Excluded from this covenant not to sue are any claims that by law cannot be waived, including but not limited to the right to participate in an investigation conducted by certain government agencies. Specifically, the Parties intend that this Release shall not be asserted or construed to limit the Equal Employment Opportunity Commission from investigating or acting upon any claim, nor shall it limit Executive's right to cooperate in such an investigation or action by any government agency. The Executive is, however, waiving the Executive's right to any monetary recovery should any such agency (including, but not limited to the Equal Employment Opportunity Commission) pursue any claims on the Executive's behalf. If the Executive institutes a claim that is not permitted by the foregoing, the Executive agrees to pay the reasonable costs incurred by the Company or any of the Company Releasees in defending such action, including reasonable attorneys' fees, experts' fees and costs.

	Executive acknowledges that he has reported all hours worked as of the date of this Agreement and Release and that he has received all compensation to which he may be entitled.  He represents that he is not aware of any facts on which a claim under the Fair Labor Standards Act, the Attorney Fees in Wage Action Act, or under applicable state minimum wage or wage payment laws, could be brought.

	For purposes of this Release, the terms set forth below shall have the following meanings:

	The term "Agreement" shall include the Agreement and the Exhibits thereto.

	The term "Claims" shall include any and all rights, claims, demands, debts, dues, sums of money, accounts, attorneys' fees, experts' fees, complaints, judgments, executions, actions and causes of action of any nature whatsoever, cognizable at law or equity.

	The term "Company Releasees" shall include the Company and its affiliates and their current, former and future officers, directors, trustees, members, employees, partners, assigns and administrators and fiduciaries under any employee benefit plan of the Company and of any affiliate, and insurers, and their predecessors and successors.

	The term "Executive Releasors" shall include the Executive, and the Executive's family, heirs, executors, representatives, agents, insurers, administrators, successors, assigns, and any other person claiming through the Executive.

	The Executive acknowledges that: (a) the Executive has read and understands this Release and the Agreement in their entirety; (b) the payments and other benefits provided to the Executive under the Agreement exceed the nature and scope of that to which the Executive would otherwise have been entitled to receive from the Company; (c) the Executive has been advised in writing to consult with an attorney about this Release and the Agreement before signing and has had ample opportunity to do so; (d) the Executive has been given twenty-one (21) days to consider this Release and the Agreement before signing; (e) the Executive has the right to revoke this Release in full within seven (7) calendar days of signing it by providing written notice to the Company per the notice provisions of Section 14(d) of the Agreement, and that this Release shall not become effective until that seven-day revocation period has expired; and (f) the Executive enters into this Release knowingly and voluntarily, without duress or reservation of any kind, and after having given the matter full and careful consideration.

*   *   *   *

 

 

	 	

Scott J. Krenz

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