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SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of the Securities

Exchange Act of 1934 (Amendment No.     )

Filed by the Registrant    x

Filed by a Party other than the Registrant    ¨

Check the appropriate box:

Heidrick & Struggles International, Inc.

(Name of Registrant as Specified In Its Charter)

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

x    No fee required.

¨    Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.

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NOTICE OF

ANNUAL MEETING OF STOCKHOLDERS

AND

PROXY STATEMENT

April 23, 2007

Greetings to the stockholders of Heidrick & Struggles International, Inc. I am pleased to invite you to attend our Annual Meeting of Stockholders.

The meeting will be held on May 24, 2007 at 9:00 a.m. Central Daylight Time at the Conrad Chicago Hotel, located at 521 N. Rush Street, Chicago, Illinois.

The Notice of Annual Meeting of Stockholders accompanying this letter describes the business we will be transacting at the meeting.

Whether or not you plan to attend the Annual Meeting in person, I urge you to sign and date the enclosed Proxy Card and return it as soon as possible so that your shares will be represented at the meeting. The vote of every stockholder is important!

I look forward to seeing you on May 24th.

Sincerely,

L. Kevin Kelly

Chief Executive Officer

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HEIDRICK & STRUGGLES INTERNATIONAL, INC.

233 South Wacker Drive, Suite 4200

Chicago, Illinois 60606-6303

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

Dear Stockholders:

At our Annual Meeting, we will ask you to:

If you were a stockholder of record at the close of business on April 9, 2007, you are entitled to vote at the Annual Meeting or any adjournment of the meeting. A stockholder list will be available at our principal executive offices located at 233 South Wacker Drive, Suite 4200, Chicago, Illinois 60606, beginning April 23, 2007 during normal business hours, for examination by any stockholder registered on our stock ledger as of April 9, 2007, for any purpose germane to the Annual Meeting.

Your attention is called to the accompanying Proxy Card and Proxy Statement. A copy of our Annual Report to Stockholders (including our Annual Report on Form 10-K) for the year ended December 31, 2006 is also enclosed.

Sincerely,

K. Steven Blake

Secretary

YOUR VOTE IS IMPORTANT. Whether or not you plan to attend the Annual Meeting in person, please sign and return the Proxy Card in the enclosed postage prepaid envelope so your shares may be voted.

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VOTING INFORMATION

Proxy Solicitation.    The Board of Directors is furnishing you with this Proxy Statement in connection with the solicitation of your proxy for the Annual Meeting of Stockholders to be held on May 24, 2007 and at any adjournment thereof. This solicitation is being made by mail. The Company may also use its officers and other employees to solicit proxies from stockholders, personally or by telephone, facsimile, letter or electronic mail. The Company will pay all costs associated with the solicitation of proxies. The Company has retained Morrow & Co., Inc. to aid in the solicitation of proxies. The Company will pay Morrow & Co., Inc. a fee of $7,500 as compensation for its services and will reimburse it for its reasonable out-of-pocket expenses. If the Company requests nominees and brokers to solicit their principals and customers for their proxies, it will reimburse the nominees and brokers for their reasonable out-of-pocket expenses.

Annual Meeting of Stockholders.    The Annual Meeting of Stockholders will be held on May 24, 2007 at 9:00 a.m. Central Daylight Time at the Conrad Chicago Hotel located at 521 North Rush Street, Chicago, Illinois. This Proxy Statement is first being mailed on or about April 23, 2007 to Company stockholders entitled to notice of, and to vote at, the Annual Meeting.

Record Date.    Each share of Company common stock that you owned as of April 9, 2007, the record date for the Annual Meeting, entitles you to one vote. On April 9, 2007 there were 17,995,338 shares of Company common stock outstanding.

Quorum.    A quorum of stockholders is necessary for the Company to hold a valid meeting. If at least a majority of the Company’s common stock is present in person or by proxy, a quorum will exist. The inspector of election appointed for the Annual Meeting will determine whether a quorum is present. Abstentions and broker non-votes are counted as present to establish a quorum. A broker non-vote occurs when a broker does not vote on some matters presented at the meeting because the broker does not have discretionary voting authority with respect to that matter and has not received voting instructions from the beneficial owner on those matters.

Voting.    You may vote on the proposals presented at the Annual Meeting in one of two ways:

If you grant the Company a proxy, you may revoke your proxy at any time before it is exercised by (1) sending notice to the Company Secretary at the Company’s principal executive offices in writing; (2) providing to the Company a later-dated proxy; or (3) attending the Annual Meeting in person and voting your shares. Merely attending the Annual Meeting, without further action, will not revoke your proxy.

Required Vote.    Proposal I requires a plurality of the votes cast to elect a director. This means that the three director nominees receiving the highest number of votes cast “FOR” their election will be elected. Proposals II and III require the affirmative vote of a majority of those shares present in person or represented by proxy and entitled to vote thereon at the Annual Meeting.

Votes withheld and abstentions are deemed “present” at the Annual Meeting and are counted for quorum purposes but are not counted for purposes of election of directors (Proposal I) and, with respect to Proposals II and III, will have the same effect as a vote against the matter. Broker non-votes, if any, while counted for general quorum purposes, are not deemed to be present with respect to any matter for which a broker does not have authority to vote and will have the same effect as a vote against Proposals II and III.

If your broker holds your shares in its name, the broker is permitted to vote your shares for the election of each nominee for director even if the broker does not receive voting instructions from you. If your broker does receive voting instructions from you, it must vote in accordance with these instructions.

The inspector of election appointed for the Annual Meeting will tabulate votes.

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DESCRIPTION OF THE COMPANY’S CAPITAL STOCK

The Company’s Amended and Restated Certificate of Incorporation provides for its authorized capital stock to consist of 100,000,000 shares of common stock, $.01 par value per share, of which 17,995,338 shares were issued and outstanding on April 9, 2007; and 10,000,000 shares of preferred stock, $.01 par value per share, none of which have been issued. The Company’s common stock is included for quotation on the NASDAQ Stock Market under the symbol “HSII.”

Each stockholder is entitled to one vote per share on all matters to be voted upon by the stockholders. The holders of common stock do not have cumulative voting rights. Holders of common stock are entitled to receive dividends if and when dividends are declared by the Board of Directors and out of funds legally available, after payment of dividends required to be paid on outstanding preferred stock, if any. To date, the Company has not declared any dividends. In the event of the Company’s liquidation, dissolution or winding up, the holders of common stock are entitled to share ratably in all assets remaining after payment of liabilities and accrued but unpaid dividends and liquidation preferences on any outstanding preferred stock. The shares of common stock have no preemptive or conversion rights and are not subject to the Company’s further calls or assessment. There are no redemption or sinking fund provisions applicable to the common stock.

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PROPOSAL I

ELECTION OF CLASS II DIRECTORS

The Board of Directors currently has ten members, three of whom are Company employees and seven of whom are non-employees.

The Board of Directors is divided into three classes (classes I, II, and III) for purposes of election. The Certificate of Incorporation calls for each class to consist, as nearly as possible, of one-third of the total number of directors that make up the Board of Directors. Typically, one class is elected at each Annual Meeting of Stockholders to serve for a three-year term. The Board of Directors recommends that three directors be elected at the Annual Meeting as Class II directors to hold office for a three-year term expiring in 2010. Except for Mr. Thomas J. Friel, who will retire as a director at the conclusion of the Annual Meeting, directors who are not standing for election this year will continue in office for the remainder of their respective terms.

The Board of Directors has recommended and nominated each of the following persons to be reelected to the Board of Directors as Class II directors with terms expiring in 2010: Messrs. Richard I. Beattie, Antonio Borges and John A. Fazio.

The enclosed Proxy will be voted FOR the election of each of the three nominees unless it is marked to withhold authority to vote for one or more nominees. Proxies cannot be voted for more than three nominees.

If any nominee ceases to be a candidate for election for any reason, the Proxy will be voted for a substitute nominee designated by our Board of Directors. The Board of Directors currently has no reason to believe that any nominee will not remain a candidate for election as a director or will be unwilling to serve as a director if elected.

Below is certain information about each director nominee and each director whose term of office will continue after the Annual Meeting. There are no family relations among any directors, executive officers, or persons nominated to become a director.

NOMINEES FOR ELECTION AS CLASS II DIRECTORS

(Directors with Terms Expiring in 2010)

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CLASS III DIRECTORS

(Directors with Terms Expiring in 2009)

CLASS I DIRECTORS

(Directors with Terms Expiring in 2008)

THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE ELECTION OF RICHARD I. BEATTIE, ANTONIO BORGES AND JOHN A. FAZIO TO THE BOARD OF DIRECTORS.

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CORPORATE GOVERNANCE

Board of Director and Stockholder Meetings.    The Board of Directors met six times during 2006. Each of the directors attended at least 75% of the meetings of the Board and the committees of which they were members. It is the Company’s policy to encourage the directors to attend the Annual Meetings of Stockholders unless circumstances impair their ability to do so. Eight of the Company’s directors attended the 2006 Annual Meeting of Stockholders.

Board of Director Independence.    Each year, the Board of Directors reviews the relationships that each director has with the Company and with other parties. Only those directors who do not have any of the categorical relationships that preclude them from being independent within the meaning of applicable NASDAQ Stock Market, Inc. Marketplace Rules (the “NASDAQ Rules”), and who the Board of Directors affirmatively determines have no relationships that would interfere with the exercise of independent judgment in carrying out the responsibilities of a director, are considered to be independent directors. The Board of Directors has adopted Director Independence Standards to use in evaluating the independence of directors. After a review of the relevant information, the Board of Directors has determined that Richard I. Beattie, Antonio Borges, John A. Fazio, Jill Kanin-Lovers, Robert E. Knowling, Jr., V. Paul Unruh and Douglas C. Yearley are independent directors of the Company within the meaning of applicable NASDAQ Rules and the Company’s Director Independence Standards. You can access the Director Independence Standards on the Corporate Governance portion of the Company’s website at: http://www.heidrick.com

Corporate Governance Guidelines.    The Board of Directors has adopted corporate governance practices to help it fulfill its responsibilities to the stockholders in overseeing the work of management and the Company’s business results. These guidelines are intended to ensure that the Board of Directors has the necessary authority and practices in place to review and evaluate the business operations, as needed, and to make decisions that are independent of the management. In addition, the guidelines are intended to align the interests of directors and management with those of the Company’s stockholders. A copy of the Corporate Governance Guidelines is available on the Corporate Governance portion of the Company’s website at: http://www.heidrick.com

Director Nominating Procedures.    Directors may be nominated by the Board of Directors or by stockholders in accordance with the Company’s Bylaws. The Nominating and Board Governance Committee reviews all proposed nominees for the Board of Directors, including those proposed by stockholders, in accordance with its mandate contained in its charter. This includes a review of the person’s occupation, experience, time commitments, financial literacy, independence, judgment, understanding of the Company’s business or other related industries, and such other factors as the Nominating and Board Governance Committee determines are relevant in light of the needs of the Board of Directors and the Company. The Nominating and Board Governance Committee selects qualified candidates and reviews its recommendations with the Board of Directors, which determines whether to nominate them for election to the Board of Directors. To date, the Nominating and Board Governance Committee has not paid a fee to any third party to assist in the process of identifying or evaluating director candidates; however, the Nominating and Board Governance Committee has worked with search consultants from the Company to identify director candidates.

Stockholder Recommendations for Nominations.    Stockholders who wish to recommend individuals for consideration by the Nominating and Board Governance Committee to be nominees for election to the Board of Directors may do so by notifying the Company’s Corporate Secretary. In addition, the Company’s Bylaws permit stockholders to nominate directors at a stockholder meeting. To nominate a director at the 2008 Annual Meeting, a stockholder must notify the Corporate Secretary not less than sixty days, nor more than ninety days, prior to May 22, 2008. Notices should be sent to: Corporate Secretary, Heidrick & Struggles International, Inc., 233 South Wacker Drive, Suite 4200, Chicago, Illinois 60606. In either case, the notice must meet all of the requirements contained in the Company’s Bylaws. The notice must set forth:

(1) the name, age, business address and residence address of the proposed nominee, the class and number of voting shares of the Company’s capital stock the nominee beneficially owns and any other

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information relating to the nominee that is required to be disclosed in solicitations for proxies for the election of directors pursuant to Section 14 of the Securities Exchange Act of 1934 and the rules and regulations thereunder; and

(2) as to the stockholder proposing such nominee, that stockholder’s name and address, the class and number of voting shares of the Company’s capital stock the stockholder beneficially owns, a description of all arrangements and understandings between the stockholder and the nominee or any other person (including their names) pursuant to which the nomination is made, a representation that the stockholder intends to appear in person or by proxy at the meeting to nominate the person named in its notice and any other information relating to the stockholder that is required to be disclosed in solicitations for election of directors pursuant to Section 14 of the Securities Exchange Act of 1934 and the rules and regulations thereunder.

The notice must also be accompanied by a written consent of the proposed nominee to being both named as a nominee and to serving as a director if elected.

Stockholder Communications.    Stockholders may communicate directly with the Board of Directors. All communications should be directed to: Corporate Secretary, Heidrick & Struggles International, Inc., 233 South Wacker Drive, Suite 4200, Chicago, Illinois 60606. Any such communication should prominently indicate on the outside of the envelope that it is intended for the Board of Directors or a particular director. Each communication intended for the Board of Directors or a particular director and received by the Secretary will be forwarded to the specified party following its clearance through normal security procedures.

Code of Ethics.    The Board of Directors has adopted a Code of Business Conduct that applies to all of the Company’s employees, officers and directors. You can access this Code of Business Conduct on the Corporate Governance portion of the Company’s website at: http://www.heidrick.com

EthicsLine.    The Board of Directors has established the Heidrick & Struggles EthicsLine, a service that provides a mechanism for reporting to the Company alleged breaches of any legal or regulatory obligations, financial fraud, including accounting, internal controls and auditing, or any alleged violation of the Company’s Code of Business Conduct or corporate policies.

The EthicsLine is a confidential number, (toll free in the US) available to all Company employees, contractors, vendors, stockholders or other interested parties. Calls are not recorded and callers may remain anonymous. The EthicsLine is operational 24 hours a day, seven days a week and may be reached at 1-800-735-0589 or, if calling from outside the United States, at +1 704 731 7242

COMMITTEES OF THE BOARD OF DIRECTORS

The Board of Directors has a standing Audit and Finance Committee, Human Resources and Compensation Committee, and Nominating and Board Governance Committee. The Board of Directors has determined that all of the directors who serve on these committees are independent within the meaning of the Company’s Director Independence Standards and the applicable NASDAQ Rules, including, in the case of members of the Audit and Finance Committee, the specific independence requirements for audit committees.

The Board of Directors has adopted a charter for each of the three standing committees. You can access these committee charters on the Corporate Governance portion of the Company’s website at: http://www.heidrick.com

Audit and Finance Committee.    The Audit and Finance Committee of the Board of Directors is presently composed of four directors, Messrs. Fazio, Knowling and Unruh and Ms. Kanin-Lovers, each of whom is independent within the meaning of applicable NASDAQ Rules. Mr. Fazio is the Chair of the Audit and Finance Committee. The Board of Directors has determined that Mr. Fazio and Mr. Unruh are “audit committee financial experts” as defined in Securities and Exchange Commission Rules. During 2006, the Audit Committee met twelve times.

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The Audit and Finance Committee recommends to the Board of Directors the appointment of an independent registered public accounting firm annually to audit the Company’s books and records; meets with and reviews the activities and the reports of the Company’s independent registered public accounting firm; and reports the results of the review to the Board of Directors. The Audit and Finance Committee also periodically reviews the adequacy of the Company’s internal controls and pre-approves all services to be provided by the Company’s independent registered public accounting firm, KPMG LLP. These and other aspects of the Audit and Finance Committee’s authority are more particularly described in the Audit and Finance Committee Charter.

Nominating and Board Governance Committee.    The Nominating and Board Governance Committee consists of three independent directors, Messrs. Beattie, Borges and Yearley, each of whom is independent under the applicable NASDAQ Rules. Mr. Beattie is the Chair of the Nominating and Board Governance Committee. The Nominating and Board Governance Committee makes recommendations to the Board of Directors concerning candidates for nomination to the Board of Directors, the membership on committees of the Board of Directors, compensation of the Board of Directors and other corporate governance matters. The Nominating and Board Governance Committee also reviews and approves related party transactions. These and other aspects of the Nominating and Board Governance Committee’s authority are more particularly described in the Nominating and Board Governance Committee Charter. During 2006, the Nominating and Board Governance Committee met two times.

Human Resources and Compensation Committee.    The Human Resources and Compensation Committee consists of four independent directors, Messrs. Beattie, Knowling and Yearley and Ms. Kanin-Lovers. Ms. Kanin-Lovers is the Chair of the Human Resources and Compensation Committee. Each member also qualifies as a “non-employee director” for purposes of Section 16 of the Securities Exchange Act of 1934 and an “outside director” for purposes of Section 162(m) of the Internal Revenue Code.

The Human Resources and Compensation Committee of the Board reviews and approves employment and compensation matters involving the Company’s executive officers, as well as those of other senior-level employees whose compensation arrangements exceed certain parameters. Specifically, the Committee’s responsibilities include:

The agenda for meetings of the Human Resources and Compensation Committee is determined by its Chair with the assistance of the Company’s Secretary and Chief Human Resources Officer. The Chairman of the Board, the Chief Executive Officer and the Chief Administrative Officer regularly attend Human Resources and Compensation Committee meetings. The Human Resources and Compensation Committee also meets in executive session as appropriate. The Chair of the Human Resources and Compensation Committee reports the Committee’s recommendations on executive compensation to the Board of Directors. Independent advisors and the Company’s Human Resources Department support the Human Resources and Compensation Committee in its duties and the Committee may delegate authority to fulfill certain administrative duties regarding the compensation programs to the Chief Executive Officer and Chief Human Resources Officer. The Human

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Resources and Compensation Committee has authority under its charter to retain advisors, consultants and agents as it deems necessary to assist in the fulfillment of its responsibilities. The Human Resources and Compensation Committee has retained Mercer Human Resource Consulting (“Mercer”) to advise it on executive compensation, director compensation and related corporate governance matters. During 2006, the Human Resources and Compensation Committee met five times.

HUMAN RESOURCES AND COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

The Human Resources and Compensation Committee consists of four independent directors (Messrs. Knowling, Beattie and Yearley and Ms. Kanin-Lovers). During 2006, no person who was a member of the Human Resources and Compensation Committee was one of the Company’s officers or employees, nor did any of those executive officers serve as a member of the Board of Directors or Human Resources and Compensation Committee of any entity that has one or more executive officers serving on the Company’s Board of Directors or Human Resources and Compensation Committee. From time to time, the Chief Executive Officer, certain other officers and outside consultants may attend meetings of the Human Resources and Compensation Committee, but none of the Company’s officers may be present during discussions or deliberations regarding his or her own compensation, nor may they vote on any matters brought before the Human Resources and Compensation Committee.

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EXECUTIVE COMPENSATION

Compensation Discussion & Analysis

Our Business

Heidrick & Struggles is a leading provider of executive search and leadership consulting services. The Company helps its clients build leadership teams by facilitating the recruitment, management and deployment of senior executives for their executive management teams and boards of directors. Focusing on top-level services offers the Company several advantages, including access to, and influence with, key decision makers, increased potential for recurring consulting engagements, higher fees per search, and enhanced brand visibility, all of which create added barriers to entry for potential competitors. Working with top tier executives also allows the Company to attract and retain high-caliber consultants.

The Company provides its services to a broad range of clients through the expertise of more than 400 consultants located in more than 30 countries throughout the world. As such, the executives in the Company need to have the skills and experience to manage and motivate an organization spread over a large number of countries with varying business and regulatory environments. The market for these talented individuals is competitive, and as such, the Company’s compensation philosophy is focused on ensuring that the right candidates can be attracted, retained and properly rewarded for their contributions.

Oversight of Compensation Programs

The Human Resources and Compensation Committee of the Board (the “Committee”) is responsible for overseeing the Company’s executive compensation program. The individuals who served as the Company’s Chief Executive Officer and Chief Financial Officer during 2006, as well as other executives included in the Summary Compensation Table on page 19, are referred to as the “named executive officers” throughout this proxy statement. See page 7 of this proxy statement for more information on the role and responsibilities of the Committee as regards executive compensation and related corporate governance.

Role of Executive Officers in Compensation Decisions

The Committee makes all compensation decisions for the Company’s executive officers as well as for certain other senior-level employees whose compensation arrangements exceed certain parameters. The Committee also reviews and approves recommendations regarding equity awards.

The Chief Executive Officer, with the assistance of the Chief Human Resources Officer, annually reviews the performance of each of the executive officers (other than the Chief Executive Officer, whose performance is reviewed by the Committee). The conclusions reached and recommendations based on these reviews, including compensation adjustments, are presented to the Committee for consideration. The Committee can exercise its discretion in modifying any recommended adjustments or awards to executives.

Executive Compensation Philosophy

The Company believes that the executive compensation programs should (i) link pay and performance and (ii) attract, retain, and reward the best talent. To achieve this, the Company’s executive compensation philosophy is to provide compensation levels and programs that are:

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The Company strives to align executive compensation programs and levels with its objective to attract, retain and reward the best talent needed to maximize stockholder value creation, serve the Company’s clients, and continue on a path of profitable growth for the Company.

Setting Executive Compensation

The Committee evaluates the Company’s executive compensation programs in comparison to those of a selected peer group consisting of sixteen professional services companies. The peer group is used to compare total direct compensation and the mix of compensation elements for each executive officer against peer group positions with responsibilities of similar scope. The peer group is also used to review executive pay programs and practices available at those companies. The peer group consists of companies with which the Company believes it competes for executive talent and stockholder investment. In setting compensation levels, the Committee often gives more consideration to the peer group companies with which the Company directly competes within the executive search and leadership consulting services sector. The peer group consists of the following companies:

Mercer provides the Committee with an analysis of peer group compensation data and supplements this information with compensation survey data to assist the Committee in making informed executive compensation decisions.

The Company does not set a relative percentile positioning for total direct compensation as a target for executive pay levels. Rather, it reviews the total direct compensation range for each position and the mix of elements, to ensure that compensation is adequate to attract and retain key executives.

To ensure that compensation is linked to performance, the Company’s executive compensation program is designed to deliver more than 50% of total direct compensation through variable pay.

Overview of Executive Compensation Components

Alignment with the Company’s executive compensation philosophy is achieved through the three key total direct compensation components outlined below.

Base Salary.    The objective of base salary is to compensate executives for services rendered during the year in the form of fixed cash compensation. Base salary reflects the executive’s role and responsibilities, value to the Company, incumbent experience and performance, internal equity, and other relevant criteria that impact base salary levels with respect to market competitiveness for a similar position at peer group companies.

Annual Incentives.    The objective of annual incentives is to motivate and reward executives for achieving specific performance goals over a one-year period. Payment is not guaranteed and levels vary according to

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Company and individual performance. Annual incentives generally are payable 80% in cash and 20% in restricted stock units to further align executives’ interests with those of its stockholders and to ensure that the achievement of short-term goals leads to the Company’s long-term success.

Long Term Incentives.    The objective of long-term incentives is to directly align executives’ interests with those of its stockholders and to retain top talent. Long-term incentive awards are made 100% in the form of equity, specifically stock options and restricted stock units. Equity also facilitates ownership of Company stock and thus, the achievement of the stock ownership guidelines adopted by the Committee.

Stock Ownership Guidelines.    To enhance the alignment of executives’ interests with that of stockholders as per the Company’s executive compensation philosophy, the Committee approved in 2004 stock ownership guidelines for its executives. Senior officers have five years to achieve a stock ownership level of two times their average annual compensation. Stock included for determining the satisfaction of the guidelines includes direct stock ownership and unvested restricted stock units.

Base Salary

The Committee determines annually the base salary for each executive based on comparative data prepared by Mercer, the Chief Executive Officer’s recommendations for his direct reports and other considerations taken into account by the Committee. When a change in role occurs for an executive during the year, the base salary is typically reviewed and adjusted (if necessary) by the Committee. All base salary increases in 2006 were approved by the Committee. Most of the changes were approved on February 17, 2006 in an executive session (outside the presence of the Chief Executive Officer) and were deemed effective as of January 1, 2006. On September 13, 2006, the Committee approved a base salary increase of 10% for the newly promoted Chief Executive Officer.

For each executive, the base salary is reviewed against levels for positions with similar responsibilities at the peer companies and a broader group of similarly-sized publicly-traded companies where relevant. The Committee then gives consideration to individual performance, internal equity, expertise, experience, and scope of responsibilities in approving any changes to the base salary.

For executives who have dual roles (management and consultant), the base salary consists of a combination of management salary and consultant salary. In 2006, those executives included L. Kevin Kelly (until September 12, 2006), Michael Franzino, Kelvin J.R. Bolli-Thompson and Bonnie Gwin (until September 30, 2006). A management salary is paid to dual-role executives in consideration for their management and policy-making roles within the Company, while a consultant salary is paid in consideration for their consulting presence in the marketplace. A consultant salary is referred to as a Fee and Source of Business (“FSOB”) salary and is applied against any annual incentive compensation earned under the Company’s FSOB Bonus Plan. The Company does not reduce the consultant salary if the FSOB incentive earned for a fiscal year is less than the FSOB salary in place.

See the Summary Compensation Table on page 19 for more details on base salary levels approved by the Committee in 2006 for the executives.

Annual Incentives

Management Incentive Plan.    The Committee approved annual incentives for the named executive officers that were provided pursuant to the Management Incentive Plan (“MIP”) under the Company’s 1998 GlobalShare Program. The MIP is designed to link an executive’s performance to the attainment of specific Company and individual goals.

On February 17, 2006 the Committee approved target bonus dollar amounts for each individual executive (ranging from 66% to 100% of the management salary) and a matrix of threshold, target and maximum financial goals and related payouts under the MIP for the Company. See the Grants of Plan-Based Awards table on page 22 for more details on non-equity incentive plan levels approved by the Committee in 2006 for the

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executives. The Committee approved 2006 Company performance goals of consolidated revenue and operating income margin, paying particular attention to the budget set for the year, stockholder expectations and probability of achievement. The table below outlines the significant improvement in revenues and operating margin growth that was required for executives to receive a payout under the MIP in 2006. Payouts were interpolated for performance between levels.

The Company’s revenue and operating income margin performance based on a weighting of 33% and 67% respectively, generated a payout of 97%. On February 21, 2007, the Committee approved a payout of 95%. The Company’s performance was reviewed against the performance goals, excluding the impact of the Highland Partners acquisition in September 2006 (see results in table above) and as such, no adjustments were made by the Committee to the performance goals approved in February 2006. The Committee made no other downward adjustments to the payout of the annual incentive for the Chief Executive Officer (both current and former) and, based on the CEO’s recommendations for his direct reports, for other executives based on individual performance.

On February 21, 2007, the Committee approved MIP goals for 2007 based on year-over-year revenue growth and operating income margin improvement.

Fee and Source of Business Bonus Plan.    Executives who have dual roles (management and consultant) participate in the Company’s Fee and Source of Business (“FSOB”) Bonus Plan in addition to the MIP. The purpose of this incentive plan is to reward revenue generation for the Company. The FSOB Bonus Plan is reviewed and amended by the Committee from time to time.

The FSOB incentive is calculated according to the total annual revenue attributed to an individual consultant’s service to Company clients. Revenue credits are earned (as a percentage of revenues based on a four tier structure) for both origination (source of business) and execution (fee) services. The greater the amount of FSOB credits earned, the greater the percentage of the FSOB that counts towards calculating the total incentive for the year. The incentive is net of the FSOB salary. The Committee approved financial goals for each region as it relates to payouts under the FSOB Bonus Plan on February 17, 2006. Final incentives were adjusted according to actual regional performance and then approved by the Committee. Please see the Summary Compensation Table on page 19 for more details on FSOB incentive payments for the executives.

Other Bonuses.    In 2006, the Committee approved special merger-related bonuses for two executives (Eileen A. Kamerick and Kelvin J.R. Bolli-Thompson) for the successful completion and integration of the Highland Partners acquisition.

Payment of Annual Incentives.    To further align executives’ interests with those of the Company’s stockholders and to ensure that the achievement of short-term goals leads to the Company’s long-term success, annual incentives for the executives generally were paid 80% in cash and 20% in restricted stock units. These

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restricted stock units vest in equal installments over a three-year period beginning on the first anniversary of the date of grant. This vesting schedule reflects the impact that annual performance has on future financial results. On February 17, 2007, the Committee approved the payment of the cash incentives on March 15, 2007 and the payment of the incentives in restricted stock units on March 9, 2007 which reflects the Company’s next scheduled equity grant date (see below for a discussion of the Company’s pre-scheduled equity grant dates). The total number of restricted stock units granted was calculated using the percentage of the annual incentive to be paid in restricted stock units plus a 10% premium divided by the closing stock price on the grant date of $46.86. This premium is to reflect the added forfeiture risk of restricted stock units versus cash payable immediately following the fiscal year end.

Long-Term Incentives

The Committee has approved long-term incentives for the named executive officers that are provided under the Company’s 1998 GlobalShare Program. The Company’s long-term incentive program is designed to:

To accomplish this, the equity program for executives consists of annual grants of nonqualified stock options and restricted stock units based on an equity mix of two stock options for every one restricted stock unit granted. On February 17, 2006, the Committee reviewed and approved a fixed number of stock options and restricted stock units to be granted to each executive officer on March 3, 2006. The Committee approved the awards based on competitive market data prepared by Mercer, the Chief Executive Officer’s recommendations for his direct reports, and other considerations. Please see the Grants of Plan-Based Awards table on page 22 for more details on equity grants that the Committee approved.

Consistent with emerging best practices, the Committee approved in December 2006 six specific equity grant dates in 2007 for all employees. No awards of equity are to be made on any other day than those six dates approved. Those dates are as follows:

All grants need to be approved by the Committee in advance of the predetermined grant dates.

Nonqualified Stock Options.    Stock options constitute a key element of the long-term incentive strategy in that they deliver value to the executive only when the value of the Company’s stock increases. The stock options have a five-year term and vest in equal installments over a three-year period beginning on the first anniversary of the date of grant. The terms and vesting conditions have been the same since 2003 and provide executives the ability to exercise the stock options and hold the after-tax proceeds in stocks more quickly.

On February 17, 2006, the Committee approved a fixed number of stock options for each executive to be granted on March 3, 2006. The exercise price of those options was $32.96, the closing price of the stock on March 3, 2006. To determine the annual value of the long-term incentive for each executive, the value of the stock options was estimated using a Black-Scholes valuation model and specific assumptions including a term of

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five years, a five-year risk-free interest rate of 4.7%, a three-year monthly stock price volatility of 31% and a dividend yield of 0%.

Restricted Stock Units.    Restricted stock units constitute a key element of the long-term incentive strategy in that they facilitate stock ownership and the achievement of the stock ownership guidelines and help to retain and motivate the executives. The restricted stock units generally vest in equal installments over a three-year period starting on the first anniversary of the date of grant and, upon vesting convert into shares of Company stock on a one-for-one basis.

On February 17, 2006, the Committee approved a fixed number of restricted stock units for each executive to be granted on March 3, 2006.

To determine the annual value of the long-term incentive for each executive, the value of the restricted stock units is calculated using the closing price on the date of grant.

From time to time, the Company approves additional grants of equity for specific purposes. For example, a retention award has been made to every executive in either 2005 or 2006 in the form of restricted stock units vesting in full on the third anniversary of the grant date. Please see the Outstanding Equity Awards table on page 24 for more details on stock awards approved by the Committee for executives.

Perquisites and Other Personal Benefits

The Company provides executives the same benefits that are provided to all employees including medical, dental and vision benefits, group term life insurance, and participation in the Company’s 401(k) plan. Executives are also reimbursed for expenses incurred for an annual physical examination and for financial planning services (maximum reimbursement for financial planning is $1,080 per year or $3,150 if expenses are incurred for the first time). Other benefits and allowances may be provided to executives on expatriate assignments. Please see the All Other Compensation table on page 21 for more details.

Nonqualified Deferred Compensation Plan

Pursuant to the Company’s U.S. Employee Deferred Compensation (“EDC”) Plan, the named executive officers may defer up to 25% of his or her base salary not to exceed $500,000 per year and/or up to 25% of his or her cash incentive compensation not to exceed $500,000 per year.

A participant completes an election form at the time he or she enrolls in the Company’s EDC Plan and chooses from investment funds offered by Vanguard (EDC Plan administrator). A participant is not allowed to invest directly in the Company stock fund. Vanguard calculates the earnings for the funds selected for each participant’s account. A participant makes distribution elections on the enrollment form and can elect to receive his or her distributions on either a date specified in the future (as long as it is at least three years from the effective date that contributions begin) or upon termination. A participant can also elect to receive his or her distributions in either a lump sum or in installments (over five, ten or fifteen years) paid quarterly and/or on a declining balance approach. L. Kevin Kelly is the only named executive officer who participates in the EDC Plan.

The purpose of the EDC Plan is to facilitate future wealth creation and individual financial planning by deferring payments earned today in the future. The Company does not contribute any amounts to the EDC Plan.

Other Executive Compensation Arrangements

The Company also has adopted other executive compensation arrangements to further align executives with the interests of stockholders. Such arrangements include the Company’s Change in Control Severance Plan designed to retain executives in a period of uncertainty, the Company’s Severance Pay Plan designed to provide

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financial assistance to executives following termination, and employment agreements with each named executive officer. The Company also has entered into separation agreements with certain of the named executive officers (Messrs. Perro and Scherb) and intends to enter into a retirement agreement with one of the named executive officers (Mr. Friel). The material terms and conditions of these agreements are summarized below.

Change in Control Severance Plan.    The Company maintains a Change in Control Severance Plan (“CIC Plan”) that covers executives who are selected each year by the Board to participate. All named executive officers participated in the CIC Plan during 2006. The CIC Plan provides severance benefits to the executive if he or she is terminated by the Company without cause, or if he or she terminates employment with the Company for good reason (as defined in the Plan), within two years of a change in control of the Company (or within six months prior to a change in control of the Company if such termination is effected prior to, but in anticipation of, the change in control). The severance benefits payable to the named executive officers under the CIC Plan for 2006, as well as other material terms and conditions, are described in detail under the section of the proxy statement entitled “Potential Payments Upon Termination or Change in Control of the Company.”

The Company believes that the protection and benefits provided by the CIC Plan to its executives are a valuable incentive for attracting and retaining top management, and that in the event of an extraordinary corporate transaction, the CIC Plan could prove crucial to the Company’s ability to retain top management through the transaction process. Change in control protection for executives is prevalent in the competitive environment in which the Company operates. The CIC Plan also contains restrictive covenants that prohibit the executives from competing and soliciting clients and employees for a certain period of time following termination of employment.

Severance Pay Plan.    The Company maintains a Severance Pay Plan (the “Severance Plan”) that provides severance benefits to eligible full-time or part-time employees, including the named executive officers. Benefits are paid to an employee who is involuntarily terminated by the Company for other than cause (as defined in the Plan) and is not offered employment with the Company or a successor to the Company. Each named executive officer is entitled to severance benefits equal to one year of base salary and an amount equal to the executive’s target bonus amount. Severance benefits are not available to an employee who has a written severance agreement with the Company or who receives benefits under the CIC Plan. The severance benefits payable to the named executive officers under the Severance Plan, as well as other material terms and conditions, are described in detail under the section of the proxy statement entitled “Potential Payments Upon Termination or Change in Control of the Company.”

Employment, Separation and Retirement Agreements

The Company had employment agreements with each named executive officer during 2006. The Company has also entered into separation agreements with certain of the named executive officers (Messrs. Scherb and Mr. Perro) and intends to enter into a retirement agreement with Mr. Friel. The material terms and conditions of these agreements are summarized below.

L. Kevin Kelly.    In connection with his appointment to President, Europe, Middle East and Africa, the Company entered into an employment agreement with Mr. Kelly, dated November 1, 2005. The agreement provided for an annual FSOB salary of $300,000 (subject to periodic review), an annual management salary of $425,000, a FSOB bonus opportunity of $550,000, a target management bonus of $425,000 and participation in the Company’s equity programs, CIC Plan at Tier I and the Severance Plan as Top Management. The agreement guaranteed Mr. Kelly a minimum combined salary and bonus compensation for 2006 of $1,500,000. As an expatriate, the agreement also provided for tax equalization as well as certain expatriate benefits including reimbursement of relocation, housing, and children educational expenses. The agreement contained six-month post-termination non-solicitation and non-competition restrictions.

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In connection with his appointment to Chief Executive Officer on September 13, 2006, the Company entered into an employment agreement with Mr. Kelly, dated March 29, 2007. The agreement provides for an annual management salary of $800,000 effective as of the date of appointment, subject to annual increase (but no decrease), a target management bonus of $800,000 as of the date of appointment (and for subsequent years, participation in bonus plans as determined by the Board), a grant of 15,625 restricted stock units and 31,250 stock options on March 30, 2007, participation in the Company’s benefit plans at the same level as other senior executives and reimbursement of relocation expenses. The agreement includes one-year post-termination non-solicitation and non-competition restrictions.

The arrangement also provides the following termination benefits:

The termination benefits described in the second and third bullet points above are in lieu of benefits under any Company severance plan, except that if such plan benefits are greater, Mr. Kelly will receive those severance benefits in lieu of the severance benefits under his agreement. Termination benefits are conditioned on Mr. Kelly’s execution of a release of claims in favor of the Company.

Eileen A. Kamerick.    In connection with her commencement of employment, the Company entered into an employment agreement with Ms. Kamerick, dated June 1, 2004. The agreement provides for an annual salary of $400,000 (subject to periodic review), a target management bonus of $300,000 and participation in the Company’s equity programs, the CIC Plan at Tier I, the Severance Plan as Top Management and the Company’s benefit plans at the same level as other senior executives. The agreement contains six-month post-termination non-solicitation and non-competition restrictions.

Michael Franzino.    In connection with his commencement of employment, the Company entered into an employment agreement with Mr. Franzino, dated June 11, 1999 and amended October 7, 1999. The agreement provides for an annual salary of $200,000 (subject to annual review).

Kelvin J.R. Bolli-Thompson.    In connection with his commencement of employment, the Company entered into an employment agreement with Mr. Bolli-Thompson dated December 29, 1999, which was amended on May 31, 2000 and December 19, 2006. The agreement, as amended, provides an annual FSOB salary of $350,000, an annual management salary of $150,000, a target management bonus of $150,000 and participation in the Company’s FSOB Bonus Plan. The agreement guaranteed Mr. Bolli-Thompson a minimum combined salary and bonus compensation for 2006 of $1,500,000. The bonuses will be adjusted up or down based on the fiscal year end corporate performance factor. All bonuses will be paid 80% in cash and 20% in restricted stock units.

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Vincent C. Perro.    In connection with his commencement of employment, the Company entered into an employment agreement with Mr. Perro, dated June 21, 2004. The agreement provided for an annual management salary of $250,000 (subject to periodic review), an annual FSOB salary of $200,000 (subject to review in 2005), a target management bonus of $250,000, a grant of 30,000 stock options on July 1, 2004 and participation in the Company’s equity programs, CIC Plan at Tier I, the Severance Plan as Top Management (including severance for termination for good reason) and the Company’s benefit plans at the same level as other senior executives. The agreement contained six-month post-termination non-solicitation and non-competition restrictions.

Mr. Perro’s employment was terminated on March 31, 2007. The separation agreement between the Company and Mr. Perro dated as of February 16, 2007 provides a 2006 bonus payment of $427,500 (paid on March 15, 2007) and a severance payment of $900,000 (equal to salary of $450,000 plus target bonus of $450,000), to be made six months after termination. The non-solicitation and non-competition restrictions set forth in Mr. Perro’s letter agreement or other agreements with the Company will continue to apply. Benefits are conditioned on Mr. Perro’s execution of a release of claims in favor of the Company (which has been executed).

Thomas J. Friel.    In connection with his appointment to Chief Executive Officer, the Company entered into an employment agreement with Mr. Friel, effective June 24, 2003. The agreement provided for an annual salary of $600,000 (subject to periodic review), a target management bonus of 100% of salary (subject to periodic review) and participation in the Company’s equity programs, the CIC Plan at Tier I and the Severance Plan as Top Management and the Company’s benefit plans at the same level as other senior executives. The agreement contained six-month post-termination non-solicitation and non-competition restrictions.

Mr. Friel resigned as Chief Executive Officer of the Company effective as of September 13, 2006, but will continue as Chairman of the Board through the Annual Meeting on May 24, 2007. Mr. Friel will retire and resign as an employee, effective June 30, 2007. The Company intends to enter into a retirement agreement with Mr. Friel.

Jeffrey R. Scherb.    In connection with his appointment to Chief Technology and Operations Officer and temporary relocation to the Company’s London, England office, the Company entered into an employment agreement with Mr. Scherb, dated September 15, 2005. The agreement provided for an annual salary of $400,000 (subject to periodic review), a target management bonus of $262,500 (subject to periodic review) and participation in the Company’s equity programs, the CIC Plan at Tier I, the Severance Plan as Top Management, and the Company’s benefit plans at the same level as other senior executives. As an expatriate, the agreement also provided for tax equalization as well as certain expatriate benefits including reimbursement of relocation, housing, and children educational expenses. The agreement contained six-month post-termination non-solicitation and non-competition restrictions.

Mr. Scherb’s employment terminated on December 31, 2006. The separation agreement between the Company and Mr. Scherb dated as of December 12, 2006 provides for a 2006 bonus payment of $210,000 (paid on March 15, 2007), a severance payment of $662,500 (equal to salary of $400,000 and target bonus of $262,500), to be made six months after termination, expatriate benefits and moving expenses not to exceed $219,530, and a payment to be made six months after the termination date equal to the value of the forfeited equity awards that would have vested on December 31, 2006 if the awards had vested pro rata on a daily basis, with the payment for restricted stock units to be based on a closing stock price on December 29, 2006 of $42.36, and the payment for the stock options to be based on the difference between the option exercise price and $42.36. The non-solicitation and non-competition restrictions set forth in Mr. Scherb’s letter agreement or other agreements with the Company will continue to apply. Benefits are conditioned on Mr. Scherb’s execution of a release of claims in favor of the Company (which has been executed).

Bonnie W. Gwin.    In connection with her appointment to President, Americas, the Company entered into an employment agreement with Ms. Gwin, effective June 9, 2003. The agreement provided for an annual management salary of $350,000, an annual FSOB salary of $150,000, a target management bonus of $200,000, a

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grant of 50,000 stock options on March 6, 2003 and participation in the FSOB Bonus Plan, the Company’s equity programs, the CIC Plan at Tier I, the Severance Plan as Top Management and the Company’s benefit plans at the same level as other senior executives.

In connection with her return to full-time consulting in a Partner capacity (a non-executive position) on October 1, 2006, the Company entered into a new employment agreement with Ms. Gwin, dated September 26, 2006. The agreement provides for an annual FSOB salary of $500,000, a target management bonus of $375,000 for 2006, a guaranteed FSOB bonus of $50,000 for 2006, a guaranteed FSOB bonus of $200,000 for 2007 and participation in the FSOB Bonus Plan and the Company’s benefit plans at the same level as other senior executives. Ms. Gwin is no longer eligible to participate in the CIC Plan or the Severance Plan. Bonuses earned in 2006 were payable 85% in cash and 15% in restricted stock units. If Ms. Gwin terminates her employment for good reason, or the Company terminates her employment without cause, the agreement provides for a severance payment equal to two times the sum of the annual FSOB salary and 2007 guaranteed FSOB bonus (if termination occurs on or before March 31, 2007) or three times the sum of the annual FSOB salary and 2007 guaranteed FSOB bonus (if termination occurs between April 1, 2007 and March 9, 2008). The agreement contains six-month post-termination non-solicitation and non-competition restrictions. Severance benefits are conditioned on Ms. Gwin’s execution of a release of claims in favor of the Company.

Deductibility of Executive Compensation

Section 162(m) of the Internal Revenue Code limits the deduction a publicly held corporation is allowed for compensation paid to the chief executive officer and the other four most highly compensated executive officers. Amounts in excess of $1 million paid to a covered executive, other than performance-based compensation, cannot be deducted. The Company considers ways to maximize the deductibility of executive compensation but reserves the right to compensate executive officers in a manner commensurate with performance and the competitive environment for executive talent. As a result, some portion of executive compensation paid to an executive officer whose compensation is subject to the deduction limits described above may not be deductible in the United States. The Company has taken appropriate steps, including obtaining stockholder approval, to ensure performance-based awards made pursuant to the GlobalShare Program and Incentive Plan will be fully deductible.

HUMAN RESOURCES AND COMPENSATION COMMITTEE REPORT

The Human Resources and Compensation Committee of the Company has reviewed and discussed the Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K with management and, based on such review and discussions, the Human Resources and Compensation Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this Proxy Statement.

THE HUMAN RESOURCES AND COMPENSATION COMMITTEE

Jill Kanin-Lovers (Chair)

Richard I. Beattie

Robert E. Knowling, Jr.

Douglas C. Yearley

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SUMMARY COMPENSATION TABLE

The table below summarizes the total compensation paid or earned by each of the named executive officers for the fiscal year ended December 31, 2006.

Summary Compensation Table

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All Other Compensation

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GRANTS OF PLAN-BASED AWARDS IN 2006

The table below sets forth certain information with respect to non-equity incentive plan awards that could be earned and equity granted during the fiscal year ended December 31, 2006 for each named executive officer.

Grants of Plan-Based Awards in 2006

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OUTSTANDING EQUITY AWARDS AT DECEMBER 31, 2006

The table below includes certain information with respect to stock options and restricted stock units previously awarded to the named executive officers that were outstanding at the fiscal year ended December 31, 2006.

Outstanding Equity Award at December 31, 2006

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OPTION EXERCISES AND STOCK VESTED IN 2006

The table below includes certain information with respect to the exercise of stock options and the vesting of restricted stock units for the named executive officers during the fiscal year ended December 31, 2006.

Option Exercises and Stock Vested in 2006

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PENSION BENEFITS

Pension benefits were not provided to any of the named executive officers during or prior to the fiscal year ended December 31, 2006.

NONQUALIFIED DEFERRED COMPENSATION PLAN

The table below provides information with respect to participation in the Company’s U.S. Employee Deferred Compensation (“EDC”) Plan by the named executive officers for the fiscal year ended December 31, 2006. L. Kevin Kelly is the only named executive officer to have participated in the plan during or prior to 2006. For more information about the terms and conditions of the EDC Plan, please refer to the Compensation Discussion and Analysis section of the proxy statement.

POTENTIAL PAYMENTS UPON TERMINATION OR A CHANGE IN CONTROL

The Company provides certain benefits to eligible employees upon certain types of termination of employment, including a termination of employment following a change in control of the Company. These benefits are in addition to the benefits to which the employee would be entitled upon a termination of employment generally (i.e., vested retirement benefits accrued as of the date of termination, equity-based awards that are vested as of the date of termination, and the right to continue medical coverage pursuant to COBRA). These incremental benefits as they pertain to the named executive officers are described below.

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Change in Control Severance Plan

The Company maintains a Change in Control Severance Plan (“CIC Plan”) that covers executives who are selected each year by the Board to participate. All named executive officers participated in the CIC Plan in 2006. The CIC Plan provides severance benefits to the executive if he or she is terminated by the Company without cause, or if the executive terminates his or her employment with the Company for good reason, within two years of a change in control of the Company (or within six months prior to a change in control of the Company if such termination is effected prior to, but in anticipation of, the change in control).

For 2006, the Board approved the following benefits to be provided under the CIC Plan to a participating named executive officer upon a qualifying termination of employment:

On February 17, 2006 the Board selected the executives eligible to participate in the CIC Plan and also determined the particular benefits to be provided to each named executive officer during fiscal year 2006, including the severance multiplier to be applied to the executive’s base salary and bonus amount and whether the executive’s severance benefits would include a “gross-up payment” to cover any excise and related income tax liability arising under Section 280G of the Internal Revenue Code as a result of any payment or benefit paid under the CIC Plan or whether the executive’s benefits would be limited under the CIC Plan to ensure Section 280G does not apply. No gross-up payment or limitation was approved by the Board for any of the named executive officers.

The CIC Plan contains restrictive covenants that prohibit the executive, for a period of time, from working on the accounts of certain clients, with respect to which he or she had significant involvement, providing services to competitors, or soliciting or hiring employees or employee candidates of the Company. In order to receive benefits under the CIC Plan, the executive must waive his or her right to receive any severance benefits he or she is entitled to receive under any other Company severance plan or employment agreement to which the Company is a party.

For purposes of the CIC Plan:

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Severance Pay Plan

The Company maintains the Severance Pay Plan (the “Severance Plan”) that provides severance benefits to full-time or part-time employees who are not covered by a collective bargaining agreement, who do not have written severance agreements with the Company and who do not receive benefits under the CIC Plan. Benefits are available to an eligible employee who is involuntarily terminated by the Company for other than cause (as defined in the Plan) and is not offered employment with the Company. Benefits are not available if the termination is due to voluntary resignation, leave of absence, retirement, death or disability. If the termination is due to the employee’s transfer to an unaffiliated business, the sale of the stock or assets of the Company or the outsourcing of a division, department, business unit or function, severance benefits will be provided only if the employee has not been offered employment with the successor entity. An employee’s receipt of severance benefits in excess of two weeks of pay is conditioned on his or her execution of a release. Each named executive officer is entitled to severance benefits equal to one year of base salary and an amount equal to the executive’s target bonus amount. However Department of Labor regulations limit such severance payments to an amount equal to two times the executive’s “annual compensation” as defined in those regulations. The severance benefits will be paid to the named executive officer in a lump sum six months after termination. In addition, employees who elect continued health care pursuant to COBRA will pay premiums at active employee rates.

Policy for Treatment of RSUs upon Retirement

In 2006, the Company adopted the Policy for Treatment of RSUs upon Retirement (the “Retirement Policy”) that allows for the continued vesting of RSUs granted on or after 2006 for an employee that qualifies for retirement by meeting all of the following criteria:

Mr. Friel was the only named executive officer that qualified for retirement under this policy on December 31, 2006.

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GlobalShare Program

All employees are eligible to receive awards under the Company’s 1998 GlobalShare Program.

Upon the occurrence of a change in control, the Plan provides the following benefits to employees who have received awards under the Plan:

For purposes of the Program, the definition of change in control is the same as included in the Company’s Change in Control Severance Plan (see page 30 for more details).

All agreements with respect to awards of stock options and restricted stock units granted under the 1998 GlobalShare Program provide for immediate vesting of all outstanding awards in the event of a termination by reason of death or disability as defined under the Program.

All 2005 agreements with respect to awards of stock options and restricted stock units (except retention related RSUs) granted on March 10, 2005 under the 1998 GlobalShare Program provide for vesting continuation for an employee who qualifies for retirement if he or she is age 65 or his or her combined age and years of service add up to at least 70 on the date of retirement.

L. Kevin Kelly.    The table below shows the additional benefits and payments to be made in the event of a termination by the Company without cause, termination by reason of death or long-term disability, retirement and termination following a change in control of the Company on December 31, 2006.

Contingent Payments (000s)

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Eileen A. Kamerick.    The table below shows the additional benefits and payments to be made in the event of a termination by the Company without cause, termination by reason of death or long-term disability, retirement and termination following a change in control of the Company on December 31, 2006.

Contingent Payments (000s)

Michael Franzino.    The table below shows the additional benefits and payments to be made in the event of a termination by the Company without cause, termination by reason of death or long-term disability, retirement and termination following a change in control of the Company on December 31, 2006.

Contingent Payments (000s)

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Kelvin J.R. Bolli-Thompson.    The table below shows the additional benefits and payments to be made in the event of a termination by the Company without cause, termination by reason of death or long-term disability, retirement and termination following a change in control of the Company on December 31, 2006.

Contingent Payments (000s)