Exhibit 10.1

 

 

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PURCHASE AGREEMENT

by and among

HUDSON HIGHLAND GROUP, INC.,

HIGHLAND PARTNERS CO (CANADA),

HIGHLAND PARTNERS (AUST) PTY LTD, and

HIGHLAND PARTNERS LIMITED

and

HEIDRICK & STRUGGLES INTERNATIONAL, INC.,

HEIDRICK & STRUGGLES CANADA, INC., and

HEIDRICK & STRUGGLES AUSTRALIA, LTD.

Dated as of September 18, 2006

 

 

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TABLE OF CONTENTS

 

ARTICLE I     PURCHASE AND SALE OF ASSETS    1   Section 1.1   Purchased Assets
   1   Section 1.2   Excluded Assets    2   Section 1.3   Assumed Liabilities   
3   Section 1.4   Excluded Liabilities    4 ARTICLE II    PURCHASE PRICE    5  
Section 2.1   Amount and Form of Purchase Price    5   Section 2.2   Payment of
Closing Payment    5   Section 2.3   Adjustment of Purchase Price    5   Section
2.4   Earnout    8   Section 2.5   Collection of Receivables    11   Section 2.6
  Allocation of Purchase Price    12 ARTICLE III     CLOSING    12   Section 3.1
  Closing Date    12   Section 3.2   Closing Deliveries    12   Section 3.3  
Third-Party Consents    13 ARTICLE IV     REPRESENTATIONS AND WARRANTIES OF
SELLER    13   Section 4.1   Organization and Good Standing    13   Section 4.2
  Authorization, Validity and Execution    14   Section 4.3   Consents and
Approvals    14   Section 4.4   No Violations    14   Section 4.5   Financial
Statements    14   Section 4.6   Receivables    15   Section 4.7   No
Undisclosed Liabilities    15   Section 4.8   Absence of Certain Changes or
Events    15   Section 4.9   Real Property.    15   Section 4.10   Intellectual
Property    16   Section 4.11   Contracts    18   Section 4.12   Title,
Sufficiency and Condition of Assets    20   Section 4.13   Litigation    20  
Section 4.14   No Default; Compliance with Laws; Permits    20

 

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  Section 4.15   Taxes    21   Section 4.16   Employee Benefit Plans    22  
Section 4.17   Employee and Labor Matters    24   Section 4.18   Customers and
Suppliers    25   Section 4.19   Environmental Matters    25   Section 4.20  
Related Party Transactions    26   Section 4.21   Insurance    26   Section 4.22
  Brokers and Finders    26   Section 4.23   Full Disclosure    26   Section
4.24   No Other Representations and Warranties    26 ARTICLE V    
REPRESENTATIONS AND WARRANTIES OF PURCHASER    26   Section 5.1   Organization
and Standing    26   Section 5.2   Authorization, Validity and Execution    26  
Section 5.3   Consents and Approvals    27   Section 5.4   No Violation    27  
Section 5.5   Availability of Funds    27   Section 5.6   Litigation    27  
Section 5.7   Brokers    27 ARTICLE VI     COVENANTS    28   Section 6.1  
Conduct of Business Pending the Closing    28   Section 6.2   Consents    29  
Section 6.3   Implementing Agreement; Further Assurances; Cooperation    30  
Section 6.4   Notification    30   Section 6.5   Purchaser’s Inspection Rights
   30   Section 6.6   Confidentiality; Publicity    31   Section 6.7  
Noncompetition and Nonsolicitation    32   Section 6.8   Employee Matters    32
  Section 6.9   Continued Use of “Highland” Name    35   Section 6.10   Transfer
Taxes    35   Section 6.11   No Solicitation    36   Section 6.12   Additional
Financial Statements    36   Section 6.13   Termination of Related Party
Arrangements    36   Section 6.14   Termination of All Encumbrances    36

 

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    Section 6.15   Releases from Letters of Credit and Guarantees    36  
Section 6.16   Bulk Sales Law    37   Section 6.17   New York Lease Cancellation
   37 ARTICLE VII    CONDITIONS TO CLOSING    37   Section 7.1   Conditions to
Obligations of Purchaser    37   Section 7.2   Conditions to Obligations of
Seller and the Selling Subsidiaries    39 ARTICLE VIII    INDEMNIFICATION    40
  Section 8.1   Indemnification by Seller    40   Section 8.2   Indemnification
by Purchaser    41   Section 8.3   Survival of Representations, Warranties and
Covenants    41   Section 8.4   Limitations on Indemnification Obligations    41
  Section 8.5   Exclusive Remedy    44 ARTICLE IX     TAX MATTERS    44  
Section 9.1   Canadian Tax Election    44   Section 9.2   UK Value Added Tax   
45   Section 9.3   UK Capital Allowances    45 ARTICLE X    TERMINATION    45  
Section 10.1   Termination    45   Section 10.2   Procedure and Effect of
Termination    46 ARTICLE XI    MISCELLANEOUS    47   Section 11.1   Expenses   
47   Section 11.2   Governing Law; Consent to Jurisdiction; Waiver of Jury Trial
   47   Section 11.3   Notices    47   Section 11.4   Entire Agreement;
Amendment    48   Section 11.5   Assignment    48   Section 11.6  
Interpretation    49   Section 11.7   Certain Definitions    49   Section 11.8  
Third Party Beneficiaries    50   Section 11.9   Waiver    50   Section 11.10  
Severability    50   Section 11.11   Counterparts; Delivery    50   Section
11.12   Specific Performance    50   Section 11.13   Headings    50   Section
11.14   Schedules and Exhibits    50

 

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DEFINED TERMS

 

2007 Earnout Amount    9 2007 Earnout Payment Date    9 2007 Revenue    8 2008
Earnout Amount    9 2008 Earnout Payment Date    9 2008 Revenue    8 Acquisition
Proposal    36 Affiliate    49 Agreement    1 Allocation Schedule    12
Applicable Law    14 Arbitrator    7 Assumed Liabilities    3 Australian License
   17 Benefit Plans    22 Business    1 Business Day    49 Business IP    16
Business Records    2 CAA    45 Capital Stock    49 Closing    12 Closing Date
   12 Closing Payment    5 Code    12 Computer Software    18 Confidential
Information    31 Confidentiality Agreement    31 Contracts    1 Desktop
Software    18 Earnout Amounts    9 Encumbrances    14 Environmental Law    25
Equipment    1 ERISA    22 ERISA Affiliate    22 Excluded Assets    2 Excluded
Liabilities    4 Final Net Working Capital    5 Final Statement    5 Financial
Statements    15 GAAP    5 Governmental Authority    14 Hazardous Substance   
25 Heidrick Australia    1 Heidrick Canada    1 Highland Australia    1 Highland
Canada    1

 

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Highland UK    1 HMRC    45 Indemnified Party    42 Indemnifying Party    42
Intellectual Property    16 IRS    21 ITA    23 Key Employee Agreement    38 Key
Employees    38 knowledge    49 Leased Real Property    15 Letter Agreement   
17 Liability    3 Losses    40 Material Adverse Effect    49 Maximum Purchase
Price Amount    5 Negative Purchase Price Adjustment    5 Net Working Capital   
6 Non-UK Transferring Employees    33 Order    21 Ordinary Course of Business   
15 Parties    1 Party    1 Permits    21 Permitted Encumbrances    20 Person   
50 Positive Purchase Price Adjustment    5 Preferred Provider Arrangement    38
Preliminary Net Working Capital    5 Preliminary Statement    5 Purchase Price
   5 Purchase Price Adjustment    5 Purchased Assets    1 Purchaser    1
Purchaser Companies    1 Purchaser Documents    27 Purchaser Indemnified Parties
   40 Purchaser’s Letter    6 Receivables    2 Representatives    31 Restrictive
Covenants    34 Revenue    8 Revenue Notice    9 Revenue Notice of Disagreement
   9 Seller    1 Seller Companies    1 Seller Documents    14 Seller Indemnified
Parties    41 Selling Subsidiaries    1 Subsidiary    50 Tax Returns    22

 

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Taxes    22 Transfer Regulations    4 Transfer Taxes    35 Transferring
Employees    34 Transition Services Agreement    38 UK Leased Real Property   
45 UK Transferring Employees    33 Uncollected Receivables    11 VAT    45 VAT
Election    45 VATA    45

SCHEDULES

 

Schedule 1.1(a)    Equipment Schedule 1.1(b)    Purchased Contracts Schedule
1.2(c)    Excluded Contracts Schedule 1.3(f)    Other Assumed Liabilities
Schedule 4.1    Qualifications Schedule 4.3    Seller Consents and Approvals
Schedule 4.4    Violations Schedule 4.5    Financial Statements Schedule 4.6   
Receivables Schedule 4.7    Disclosed Liabilities Schedule 4.8    Certain
Changes or Events Schedule 4.9(b)    Leased Real Property Schedule 4.10(b)   
Business IP Schedule 4.10(c)    IP Related Contracts Schedule 4.10(d)    IP
Ownership Claims Schedule 4.10(f)    Computer Software Schedule 4.11(a)   
Contracts Schedule 4.11(c)    Contracts Requiring Consent Schedule 4.11(d)   
Off-Limits Arrangements Schedule 4.12    Encumbrances Schedule 4.13   
Litigation Schedule 4.14(a)    Defaults and Violations Schedule 4.14(b)   
Permits Schedule 4.15    Taxes Schedule 4.16(a)    Benefit Plans Schedule
4.16(d)    Severance Benefits Schedule 4.14(f)    Employees Schedule 4.16(g)   
Commission Arrangements Schedule 4.17(e)    Employment Matters Schedule 4.17(g)
   Obligations under Employment Laws Schedule 4.18    Customers and Suppliers
Schedule 4.19    Environmental Matters Schedule 4.20    Related Party
Transactions Schedule 4.21    Insurance Schedule 5.3    Purchaser Consents and
Approvals Schedule 6.1    Conduct Pending Closing Schedule 6.8(a)    Non-UK
Transferring Employees Schedule 6.8(b)    UK Transferring Employees

 

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Schedule 6.8(b)(i)    Highland UK Obligations – Transfer Regulations Schedule
6.8(d)    Partners Not Offered Employment Schedule 6.8(g)    Pro Rata Bonuses
Schedule 6.8(i)    Seller Separation Policy Schedule 6.8(j)    Certain Employee
Schedule 6.13    Continuing Related Party Arrangements Schedule 6.15    Letters
of Credit and Guarantees Schedule 6.17    Lease Termination Payment Formula
Schedule 7.1(e)    Key Employees Schedule 7.1(h)(ix)    Delivered Consents

EXHIBITS

 

Exhibit A    Source of Business Guidelines Exhibit B    Forms of Key Employee
Agreement Exhibit C    Form of Transition Services Agreement Exhibit D    Form
of Seller’s Counsel Opinion Exhibit E    Form of Purchaser’s Counsel Opinion
Exhibit F    Seller’s Knowledge Exhibit G    Purchaser’s Knowledge

 

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PURCHASE AGREEMENT

This PURCHASE AGREEMENT (this “Agreement”), dated as of September 18, 2006, is
made by and among HUDSON HIGHLAND GROUP, INC., a Delaware corporation
(“Seller”), HIGHLAND PARTNERS CO (CANADA), a Nova Scotia unlimited liability
company (“Highland Canada”), HIGHLAND PARTNERS (AUST) PTY LTD, a corporation
organized under the laws of New South Wales, Australia (“Highland Australia”),
and HIGHLAND PARTNERS LIMITED, a company incorporated under the laws of England
and Wales (“Highland UK” and together with Highland Canada and Highland
Australia, the “Selling Subsidiaries”), HEIDRICK & STRUGGLES INTERNATIONAL,
INC., a Delaware corporation (“Purchaser”), HEIDRICK & STRUGGLES CANADA, INC.,
an Ontario corporation (“Heidrick Canada”), and HEIDRICK & STRUGGLES AUSTRALIA,
LTD., an Illinois corporation (“Heidrick Australia” and together with Purchaser
and Heidrick Canada, the “Purchaser Companies”), (each, a “Party” and
collectively, the “Parties”).

RECITALS

WHEREAS, Seller and the Selling Subsidiaries (collectively, the “Seller
Companies”) are engaged, among other things, in the business of retained
executive search and placement under the name “Highland Partners” (the
“Business”); and

WHEREAS, the Seller Companies desire to sell to the Purchaser Companies, and the
Purchaser Companies desire to purchase from the Seller Companies, the Business
through the sale, assignment, transfer and delivery to the Purchaser Companies
of certain assets of the Seller Companies.

NOW, THEREFORE, in consideration of the premises and the mutual representations,
warranties, covenants and agreements herein contained, and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Parties hereto agree as follows:

ARTICLE I

PURCHASE AND SALE OF ASSETS

Section 1.1 Purchased Assets. On the terms and subject to the conditions set
forth in this Agreement, except as set forth in Section 1.2, at the Closing (as
defined in Section 3.1), Seller and Highland UK will sell, assign, transfer and
deliver to Purchaser, Highland Canada will sell, assign, transfer and deliver to
Heidrick Canada, and Highland Australia will sell, assign, transfer and deliver
to Heidrick Australia, and Purchaser will purchase, acquire and accept from
Seller and Highland UK, Heidrick Canada will purchase, acquire and accept from
Highland Canada, and Heidrick Australia will purchase, acquire and accept from
Highland Australia, all of the right, title and interest of the applicable
Seller Company in and to the assets, properties, rights, contracts, claims and
other assets used, held for use or intended to be used primarily in the
operation or conduct of the Business (collectively, the “Purchased Assets”), in
each case free and clear of all Encumbrances other than Permitted Encumbrances,
including the following:

(a) All equipment, furniture, furnishings, fixtures and other tangible personal
property (“Equipment”) primarily related to the Business, including the
Equipment listed on Schedule 1.1(a);

(b) All contracts, agreements, commitments, leases, licenses and arrangements,
whether written or oral (collectively, “Contracts”), (A) listed on Schedule
1.1(b) or (B) to which any

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Seller Company is a party or by which any Seller Company is bound that on the
Closing Date (as defined in Section 3.1) are used, held for use or intended to
be used primarily in, or that arise primarily out of, the operation or conduct
of the Business;

(c) All accounts receivable, contract receivables and other claims for money or
other obligations due to each Seller Company on the Closing Date arising out of
the operation or conduct of the Business (collectively, the “Receivables”);

(d) All Business IP (as defined in Section 4.10(a)), including the Intellectual
Property (as defined in Section 4.10(a)) listed on Schedule 4.10(b);

(e) All books and records, including all books of account, ledgers, financial
and accounting records, files, invoices and billing records, research material,
tangible data, documents, personnel records with respect to Transferring
Employees (as defined in Section 6.8(c)), invoices, customer lists, vendor
lists, service provider lists, candidate records, search databases, customer and
vendor correspondence, sales and promotional literature, catalogs and
advertising material used for the marketing of products or services
(collectively, “Business Records”), in each case that on the Closing Date are
used, held for use or intended to be used primarily in, or that arise primarily
out of, the conduct or operation of the Business and, in each case, however
evidenced (including by computer disk or tape);

(f) All Permits (as defined in Section 4.14(b)) of each Seller Company that on
the Closing Date are used, held for use or intended to be used primarily in the
operation or conduct of the Business and are transferable;

(g) All rights, claims and credits related to any Purchased Asset or any Assumed
Liability (as defined in Section 1.3), including any prepaid claims, prepaid
taxes and other prepaid expense items primarily related to any Purchased Asset
or any Assumed Liability, all guarantees, warranties, indemnities, rights to
receive payment for goods and services rendered and to receive goods and
services, and similar rights in favor of any Seller Company in respect of any
Purchased Asset or any Assumed Liability;

(h) All other assets reflected on the Final Statement (as defined in
Section 2.3(b)(i)); and

(i) All goodwill generated by, and associated with, the Business.

Section 1.2 Excluded Assets. The Seller Companies will not sell, assign,
transfer or deliver to the Purchaser Companies the following assets
(collectively, the “Excluded Assets”):

(a) Any assets, properties, rights, contracts and claims, wherever located,
whether tangible or intangible, real or personal, of any Seller Company that are
not used, held for use or intended to be used primarily in the operation or
conduct of the Business;

(b) Except as set forth in Section 1.1(h), all cash, cash equivalents, bank
accounts, lockboxes and deposits, and any rights or interests in, to or with the
cash management system of any Seller Company and its Affiliates (as defined in
Section 11.7(a));

(c) All rights of the Seller Companies under the Contracts set forth on
Schedule 1.2(c) and any other Contract not included in the Purchased Assets and
all Equipment identified on Exhibit A to Schedule 1.1(a) as “Remains with
Seller” located at facilities leased pursuant to such Contracts;

 

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(d) All Intellectual Property that is not included in the Purchased Assets,
including all rights of the Seller and its Subsidiaries to use the “Hudson” and
“Hudson Highland Group” trade names or trademarks, or any part or derivation
thereof, together with all goodwill associated therewith, represented thereby or
pertaining thereto;

(e) Except as expressly set forth in Section 6.8, all Benefit Plans (as defined
in Section 4.16(a)) of the Seller Companies and any trusts, insurance
arrangements or other assets held pursuant to, or set aside to fund the
obligations of Seller or its Subsidiaries under, any such Benefit Plans;

(f) All insurance policies and all rights of the Seller Companies of every
nature and description under or arising out of such insurance policies;

(g) All financial and accounting Business Records that form part of Seller’s and
its Affiliates’ general ledgers, all Tax Returns of any Seller Company and all
Business Records of any Seller Company that do not relate primarily to any
Purchased Asset or any Assumed Liability;

(h) All intercompany receivables owed by any Affiliate of a Seller Company to
such Seller Company;

(i) Any refunds or credits with respect to any Taxes, plus any related interest
received or due from the relevant taxing authority;

(j) Any equity interest in any Seller Company;

(k) All equity securities and warrants to acquire equity securities of a current
or former client of the Business;

(l) The Seller Companies’ minute books, stock records and corporate seals;

(m) All rights of the Seller Companies under this Agreement, the Purchaser
Documents and the Seller Documents; and

(n) All rights, claims and credits of any Seller Company to the extent related
to any other Excluded Asset or any of the Excluded Liabilities (as defined in
Section 1.4), including any such items arising under insurance policies and all
guarantees, warranties, indemnities and similar rights in favor of any Seller
Company in respect of any other Excluded Asset or any of the Excluded
Liabilities.

Section 1.3 Assumed Liabilities. At the Closing, the Purchaser Companies will
assume and be liable for, and will pay, perform and discharge as and when due,
the following debts, claims, liabilities, obligations, damages or expenses
(whether known or unknown, vested or unvested, asserted or unasserted, absolute
or contingent, accrued or unaccrued, assessed or unassessed, liquidated or
unliquidated, actual or potential, and due to or become due) (each, a
“Liability”) of the respective Seller Companies from which the Purchaser
Companies are purchasing Purchased Assets, as and to the extent not satisfied or
extinguished as of the Closing Date (collectively, the “Assumed Liabilities”):

(a) All Liabilities to the extent reflected or reserved against on the Final
Statement;

(b) All obligations arising with respect to the performance after the Closing
Date of the Contracts and Permits included in the Purchased Assets, excluding
any Liability resulting from any breach thereof or hereof by any Seller Company
or any Affiliate thereof on or prior to the Closing Date;

 

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(c) Except as expressly set forth in Section 6.8(b)(i), all Liabilities arising
from or connected with the employment of any employee of Highland UK with
respect to the operation of the Transfer of Undertakings (Protection of
Employment) Regulations 2006 (as amended) (the “Transfer Regulations”) and
Purchaser’s operation of the Business following the Closing Date, excluding any
Liability resulting from any breach of any employment Contract or Benefit Plan
or any breach of Applicable Law by any Seller Company or any Affiliate thereof
on or prior to the Closing Date;

(d) All Liabilities arising as a result of a failure on the part of Purchaser to
provide Highland UK with such information as is necessary concerning any
measures (within the meaning of Regulation 13 of the Transfer Regulations) that
the Purchaser intends to take in relation to any UK Transferring Employee (as
defined in Section 6.8(b)) to enable Highland UK to discharge its obligations
under Regulations 13 and 14 of the Transfer Regulations and/or as a result of
any failure on the part of Purchaser to provide accurate information concerning
any such measures;

(e) All Liabilities arising as a result of any substantial change by Purchaser
in the working conditions (including the terms and conditions of employment) of
any UK Transferring Employee, to his/her material detriment, which is intended
to take effect after the Closing Date; and

(f) All other Liabilities listed on Schedule 1.3(f).

Section 1.4 Excluded Liabilities. Except for the Assumed Liabilities, no
Purchaser Company will assume or be liable for any Liabilities of any Seller
Company (collectively, the “Excluded Liabilities”), including:

(a) All Liabilities in respect of borrowed money or evidenced by debt
instruments, loan agreements, indentures, debentures, notes, guarantees or
similar instruments;

(b) All obligations under interest rate exchange, currency exchange, swaps,
futures or similar agreements;

(c) All guarantees, direct or indirect, in any manner (including reimbursement
agreements in respect of letters of credit), of all or any part of any
indebtedness of any third party;

(d) All intercompany payables owed by any Seller Company to any Affiliates of
such Seller Company;

(e) Except as expressly set forth in Section 6.8, all Liabilities under Benefit
Plans of Highland UK up to and including the Closing Date, and all Liabilities
under Benefit Plans of Seller, Highland Canada and Highland Australia;

(f) Any Liabilities for claims arising from or connected with the employment of
any employee, including workers compensation or similar claims and claims by an
eligible spouse or dependent and, in the case of a UK Transferring Employee, any
trade union, staff council or similar body or elected employee representative,
arising or related to the operation of the Business on or prior to the Closing
Date;

(g) All Liabilities relating to obligations to, or claims of, Transferring
Employees with respect to equity securities or warrants to acquire equity
securities of a current or former client of the Business;

 

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(h) All Liabilities for Taxes; and

(i) All other Liabilities of the Seller Companies relating to the operation or
conduct of the Business arising prior to the Closing unless specifically
included in the Assumed Liabilities.

ARTICLE II

PURCHASE PRICE

Section 2.1 Amount and Form of Purchase Price. The aggregate consideration to be
paid by the Purchaser Companies to the Seller Companies in consideration of the
Purchased Assets (the “Purchase Price”) will consist of:

(a) $36,600,000 (the “Closing Payment”), subject to the adjustments set forth in
Section 2.3, to be paid in the manner and at the time set forth in Section 2.2;
and

(b) the Earnout Amounts, to be paid in the manner and at the times set forth in
Section 2.4;

provided that, under no circumstances, other than an adjustment of the Purchase
Price pursuant to Section 2.3, shall the total Purchase Price exceed an
aggregate amount of $51,600,000 (the “Maximum Purchase Price Amount”).

Section 2.2 Payment of Closing Payment. At the Closing, Purchaser will pay to
Seller, by wire transfer of immediately available funds to an account designated
by Seller on or before the second Business Day prior to the Closing Date, an
amount equal to the Closing Payment.

Section 2.3 Adjustment of Purchase Price.

(a) Purchase Price Adjustment. Subject to the provisions of clauses (b) through
(e) of this Section 2.3, the Purchase Price will be adjusted following the
Closing Date to the extent that the Net Working Capital as of the Closing Date
(before giving effect to the transactions contemplated by Article I) (the “Final
Net Working Capital ”), is more or less, as the case may be, than $0 (such
adjustment is referred to herein as the “Purchase Price Adjustment”). A
“Positive Purchase Price Adjustment” means the amount by which the Final Net
Working Capital is more than $0, and a “Negative Purchase Price Adjustment”
means the amount by which the Final Net Working Capital is less than $0.

(b) Preliminary Statement.

(i) As promptly as practicable, but in no event later than 30 calendar days,
following the Closing Date, Seller will prepare and deliver to Purchaser a
preliminary statement (the “Preliminary Statement”) setting forth in reasonable
detail Seller’s calculation of the Final Net Working Capital (the “Preliminary
Net Working Capital”). The Preliminary Statement will be prepared in accordance
with United States generally accepted accounting principles (“GAAP”). The
Preliminary Statement will be accompanied by a certificate of an officer of
Seller to the effect that, in the opinion of Seller’s management, the
Preliminary Statement was prepared in accordance with the requirements of this
Section 2.3(b). The Preliminary Statement as finally modified pursuant to
clauses (c) through (e) of this Section 2.3 to become the final statement of
Final Net Working Capital is referred to herein as the “Final Statement.” All
disputes with respect to the Preliminary Statement and the Final Statement will
be resolved in accordance with clauses (c) through (e) of this Section 2.3.

 

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(ii) From the Closing to the finalization of the Final Statement, Purchaser will
assist, in good faith, Seller and its independent accountants in the preparation
of the Preliminary Statement and will provide Seller and Seller’s independent
accountants access at all reasonable times to the personnel and Business Records
of the Business for such purpose.

(iii) From the Closing to the finalization of the Final Statement, Purchaser
will not take any actions with respect to the accounting records of the Business
that are not consistent with the past practices of the Business.

(iv) “Net Working Capital”, as used herein, means

(x) the sum of the current assets included in the Purchased Assets, minus

(y) the sum of the current liabilities included in the Assumed Liabilities,

calculated (A) as if the financial position of the Business, in whichever entity
or entities then conducted, was being presented as a single separate and
independent entity, (B) in accordance with GAAP and (C) based on the information
relating to the content of the Final Statement that is known to Purchaser or
Seller on the Closing Date or becomes known by Purchaser or Seller after the
Closing Date if such information relates to an event that occurred prior to the
Closing Date. For purposes of this Agreement, GAAP is to be applied on a basis
consistent with those accounting principles, policies, methods and practices (in
each case, to the extent consistent with GAAP) reflected by Seller in the
preparation of the Financial Statements and the Estimated Statement.

(c) Purchaser’s Review of Preliminary Statement.

(i) Purchaser will have 30 calendar days following Seller’s delivery of the
Preliminary Statement to Purchaser to review and respond to the Preliminary
Statement, during which period Seller will grant Purchaser and Purchaser’s
independent accountants reasonable access during normal business hours to the
books and records of Seller and the Business relevant to the Preliminary
Statement.

(ii) Unless Purchaser has delivered to Seller a written letter of its
disagreement with the Preliminary Statement (the “Purchaser’s Letter”) on or
prior to 5:00 p.m. (Central Time) on the 30th calendar day following Seller’s
delivery of the Preliminary Statement to Purchaser, the Preliminary Statement
will become the Final Statement. If Purchaser’s Letter is delivered in a timely
manner, then (A) any amount set forth in the Preliminary Statement as to which
Purchaser has not objected and properly proposed an adjustment in Purchaser’s
Letter will be deemed to be accepted and will become part of the Final
Statement, and (B) the Preliminary Statement will become the Final Statement on
the earlier of (1) the date that Seller and Purchaser resolve in writing all
remaining disputed matters properly specified in Purchaser’s Letter or (2) the
date that the Arbitrator (as defined in Section 2.3(e)(i)) delivers to Seller
and Purchaser a copy of the Final Statement and the Purchase Price Adjustment
pursuant to Section 2.3(e)(v).

(iii) Purchaser’s Letter will (A) set forth in reasonable detail any proposed
adjustment to the Preliminary Statement and the basis for such adjustment
(including a specific dollar amount and accompanied by a reasonably detailed
explanation), (B) only include disagreements based on mathematical errors or
based on the Preliminary Statement not being calculated in accordance with
Section 2.3(b), and (C) be accompanied by a certificate of Purchaser that it has
complied with the covenant set forth in Section 2.3(b)(iii).

 

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(d) Meeting to Resolve Proposed Adjustments. As soon as reasonably practicable,
but in any event no later than 25 calendar days after Purchaser’s delivery of
the Purchaser’s Letter to Seller, Purchaser and Seller will meet and endeavor to
resolve the unaccepted adjustments described in Purchaser’s Letter. If Purchaser
and Seller reach agreement in writing on such adjustments, the Final Statement
will be the Preliminary Statement modified to reflect the adjustments accepted
pursuant to Section 2.3(c)(ii)(A) and those otherwise agreed to in writing by
the parties pursuant to this Section 2.3(d).

(e) Resolution by Arbitration.

(i) If Purchaser and Seller do not resolve to their mutual satisfaction all
disputed adjustments in the Purchaser’s Letter within 25 calendar days following
the meeting provided for in Section 2.3(d), any remaining disputed adjustments
that were properly included in Purchaser’s Letter will be settled by the
Chicago, Illinois office of Grant Thornton LLP (or, if such firm will decline to
act or is, at the time of submission thereto, a principal independent auditor of
Purchaser or Seller, to another independent accounting firm of national
reputation acceptable to Purchaser and Seller) (either Grant Thornton LLP or
such other accounting firm being the “Arbitrator”) in accordance with the
following provisions of this Section 2.3(e). If based solely on the undisputed
adjustments in the Preliminary Statement, Purchaser and Seller are able to agree
on a provisional calculation of Final Net Working Capital, then within 30
calendar days following the meeting provided for in Section 2.3(d), Seller will
pay Purchaser an amount equal to the Negative Purchase Price Adjustment, or
Purchaser will pay Seller an amount equal to the Positive Purchase Price
Adjustment, as applicable, which would be due under Section 2.3(f) based on such
provisional calculation.

(ii) On or prior to the 30th calendar day following the meeting provided for in
Section 2.3(d), Purchaser and Seller will furnish the Arbitrator with a copy of
the Agreement, the Financial Statements, the Preliminary Statement and
Purchaser’s Letter. Purchaser and Seller will also give the Arbitrator access to
the Business Records of the Business, as well as any accounting work papers or
other schedules relating to the preparation of the Preliminary Statement and
Purchaser’s Letter.

(iii) Within 25 calendar days of submitting the disputed adjustments to the
Arbitrator pursuant to Section 2.3(e)(ii), Purchaser and Seller will provide to
the Arbitrator and to each other a copy of a written submission setting forth
their respective positions with respect to each remaining disputed adjustment
that was properly included in Purchaser’s Letter. Within 25 calendar days
thereafter, Purchaser and Seller may provide to the Arbitrator and to each other
a written rebuttal, which will be limited to addressing the points raised in the
opposing party’s initial written submission. No additional written submissions
will be made to the Arbitrator unless specifically requested by the Arbitrator.

(iv) The Arbitrator’s engagement will be limited to (A) reviewing the
Preliminary Statement and the amounts properly placed in dispute by Purchaser’s
Letter pursuant to Section 2.3(c); (B) reviewing the parties’ written
submissions provided pursuant to Section 2.3(e)(iii); (C) acting as an expert
and not as an arbitrator, to determine (1) whether Seller’s proposed amount for
an item in the Preliminary Statement or Purchaser’s proposed adjustment thereto
in Purchaser’s Letter is calculated more nearly in accordance with
Section 2.3(b) and (2) whether there were mathematical errors in the Preliminary
Statement, provided that in each case the Arbitrator may only make
determinations with respect to the items properly placed in dispute by
Purchaser’s Letter pursuant to Section 2.3(c) and, with respect to each such
item, may not assign a value greater than the greatest value, or less than the
smallest value, for such item claimed by any Party, as presented to the
Arbitrator pursuant hereto; (D) preparing the Final Statement, which will
include those amounts in the Preliminary Statement accepted by Purchaser
pursuant to Section 2.3(c)(ii)(A), those adjustments otherwise agreed to in

 

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writing by the parties pursuant to Section 2.3(d), and those amounts determined
by the Arbitrator to be calculated more nearly in accordance with Section 2.3(b)
pursuant to its determinations in clause (C) above; and (E) calculating the
Purchase Price Adjustment. Seller and Purchaser shall each pay one-half of the
fees and expenses of the Arbitrator.

(v) The Arbitrator will complete its preparation of the Final Statement and the
Purchase Price Adjustment within 25 calendar days after receiving the written
submissions, rebuttal responses, if any, and any other written information
pursuant to Section 2.3(e)(iii), and will deliver a copy of the Final Statement
and the Purchase Price Adjustment to Seller and Purchaser and, together with a
report setting forth each disputed adjustment, the Arbitrator’s determination
with respect thereto, and a statement of the Arbitrator’s reasons for such
determination. The Arbitrator’s determination will be conclusive and binding
upon the parties and may be entered and enforced in any court of competent
jurisdiction.

(f) Payment of Purchase Price Adjustment. If the Final Net Working Capital is
(A) less than $0, Seller will pay Purchaser an amount equal to the Negative
Purchase Price Adjustment, or (B) greater than $0, Purchaser will pay Seller an
amount equal to the Positive Purchase Price Adjustment; provided that any
payment made pursuant to the foregoing clause (A) or clause (B) shall be
adjusted to take into account any payment previously made pursuant to Section
2.3(e)(i). The Purchase Price Adjustment will be paid within five Business Days
following the date on which the Preliminary Statement becomes the Final
Statement (as determined in accordance with Section 2.3(c)(ii)). The Purchase
Price Adjustment, together with interest thereon at an annual rate equal to the
U.S. prime interest rate of lending as set forth in The Wall Street Journal as
of the Closing Date calculated on the basis of the number of days elapsed from
and including the Closing Date to and excluding the date of payment, will be
paid in immediately available funds by wire transfer pursuant to instructions
provided in writing by the recipient of the funds.

Section 2.4 Earnout.

(a) Defined Terms. As used in this Section 2.4, the following terms will have
the following meanings:

(i) “2007 Revenue“ means the Revenue for the period beginning January 1, 2007
and ending December 31, 2007, (A) as set forth in the Revenue Notice for such
period pursuant to Section 2.4(b), or (B) if such amount is disputed pursuant to
a Revenue Notice of Disagreement delivered pursuant to Section 2.4(c), as agreed
to by Purchaser and Seller pursuant to Section 2.4(d) if all disputed items in
the Revenue Notice of Disagreement are resolved pursuant to Section 2.4(d), or
(C) if Purchaser and Seller fail to resolve all disputed items in the Revenue
Notice of Disagreement pursuant to Section 2.4(d), as reflected in the revised
Revenue Notice delivered by the Arbitrator pursuant to Section 2.4(e)(vi).

(ii) “2008 Revenue” means the Revenue for the period beginning January 1, 2008
and ending December 31, 2008, (A) as set forth in the Revenue Notice for such
period pursuant to Section 2.4(b), or (B) if such amount is disputed pursuant to
a Revenue Notice of Disagreement delivered pursuant to Section 2.4(c), as agreed
to by Purchaser and Seller pursuant to Section 2.4(d) if all disputed items in
the Revenue Notice of Disagreement are resolved pursuant to Section 2.4(d), or
(C) if Purchaser and Seller fail to resolve all disputed items in the Revenue
Notice of Disagreement pursuant to Section 2.4(d), as reflected in the revised
Revenue Notice delivered by the Arbitrator pursuant to Section 2.4(e)(vi).

(iii) “Revenue” means, for any period, the fees invoiced by the Purchaser
Companies that are allocated to the Transferring Employees for purposes of
Purchaser’s “source of business” calculation, as calculated in accordance with
the guidelines set forth in Exhibit A.

 

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(iv) “2007 Earnout Payment Date” means 10 Business Days after the date the
Revenue Notice for the 12-month period ending December 31, 2007 is delivered to
Seller.

(v) “2008 Earnout Payment Date” means 10 Business Days after the date the
Revenue Notice for the 12-month period ending December 31, 2008 is delivered to
Seller.

(vi) “2007 Earnout Amount” means an amount equal to 0.70 times 107% of the
amount of 2007 Revenue minus (A) $36,000,000 and (B) the amount, if any, by
which the sum of the 2007 Earnout Amount and the Closing Payment exceeds the
Maximum Purchase Price Amount. For the avoidance of doubt, it is agreed and
acknowledged that the aggregate of the 2007 Earnout Amount and the Closing
Payment will not exceed the Maximum Purchase Price Amount under any
circumstances.

(vii) “2008 Earnout Amount” means an amount equal to 107% of the average of the
2007 Revenue and the 2008 Revenue minus (A) the sum of the 2007 Earnout Amount
and $36,000,000 and (B) the amount, if any, by which the sum of the 2007 Earnout
Amount, the 2008 Earnout Amount and the Closing Payment exceeds the Maximum
Purchase Price Amount. For the avoidance of doubt, it is agreed and acknowledged
that the aggregate of the 2007 Earnout Amount, the 2008 Earnout Amount and the
Closing Payment will not exceed the Maximum Purchase Price Amount under any
circumstances.

(viii) “Earnout Amounts” means the 2007 Earnout Amount and the 2008 Earnout
Amount, collectively.

(b) As promptly as practicable, and in any event within 30 calendar days of
Purchaser’s public release of its consolidated earnings for each of the 12-month
periods ending December 31, 2007, and December 31, 2008, Purchaser will deliver
to Seller a notice (each, a “Revenue Notice”) setting forth in reasonable detail
Purchaser’s calculation of the 2007 Revenue and 2008 Revenue, as applicable.
Each Revenue Notice will be accompanied by a certificate of an officer of
Purchaser stating that the Revenue Notice was prepared in accordance with the
requirements of Section 2.4(a).

(c) Review of Revenue Notice; Disputes.

(i) Seller will have 30 calendar days following Purchaser’s delivery of a
Revenue Notice to Seller to complete its review of such Revenue Notice, during
which period (and for so long thereafter as such Revenue Notice is unresolved)
Purchaser will grant Seller and its representatives reasonable access during
normal business hours to the books and records of Purchaser and the Business
relevant to the calculation of the 2007 Revenue or the 2008 Revenue, as the case
may be.

(ii) Unless Seller has delivered to Purchaser a written letter of its
disagreement with a Revenue Notice (the “Revenue Notice of Disagreement”) on or
prior to 5:00 p.m. (Central Time) on the 30th calendar day following Purchaser’s
delivery of such Revenue Notice to Seller, Seller will be deemed to have
accepted and agreed to such Revenue Notice. The Revenue Notice of Disagreement
with respect to each Revenue Notice will set forth in reasonable detail any
proposed adjustment to such Revenue Notice and the basis for such adjustment
(including a specific dollar amount and accompanied by a reasonably detailed
explanation).

(iii) If a Revenue Notice of Disagreement is delivered pursuant to
Section 2.4(c)(ii), then any amount set forth in the related Revenue Notice as
to which Seller has not objected in the Revenue Notice of Disagreement in
accordance with Section 2.4(c)(ii) will be deemed to be accepted.

 

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(d) Meeting to Resolve Proposed Adjustments. As soon as reasonably practicable,
but in any event no later than 25 calendar days, after Seller’s delivery of a
Revenue Notice of Disagreement to Purchaser, Purchaser and Seller will meet and
endeavor to resolve the proposed adjustments in such Revenue Notice of
Disagreement. If Purchaser and Seller reach agreement in writing on such
adjustments, the related Revenue Notice will be modified to reflect the
adjustments accepted pursuant to this Section 2.4(d).

(e) Resolution by Arbitration.

(i) If Purchaser and Seller do not resolve to their mutual satisfaction all
disputed adjustments in a Revenue Notice of Disagreement within 25 days
following the meeting provided for in Section 2.4(d), any remaining disputed
adjustments that were included in a Revenue Notice of Disagreement will be
settled by the Arbitrator in accordance with the following provisions of this
Section 2.4(e).

(ii) On or prior to the 30th calendar day following the meeting provided for in
Section 2.4(d), Purchaser and Seller will furnish the Arbitrator with a copy of
this Agreement, the related Revenue Notice and the Revenue Notice of
Disagreement. Purchaser and Seller will also give the Arbitrator access to the
books and records of the Business, any accounting work papers or other schedules
relating to the preparation of the related Revenue Notice and the Revenue Notice
of Disagreement and all other items reasonably requested by the Arbitrator.

(iii) Within 25 calendar days of submitting the disputed adjustments to the
Arbitrator pursuant to Section 2.4(e)(ii), Purchaser and Seller will provide to
the Arbitrator and to each other a copy of a written submission setting forth
their respective positions with respect to each remaining disputed adjustment
that was properly included in the Revenue Notice of Disagreement. Within 25
calendar days thereafter, Purchaser and Seller may provide to the Arbitrator and
to each other a written rebuttal, which will be limited to addressing the points
raised in the opposing party’s initial written submission. No additional written
submissions will be made to the Arbitrator unless specifically requested by the
Arbitrator.

(iv) The Arbitrator’s engagement will be limited to (A) reviewing the related
Revenue Notice and the amounts properly placed in dispute by the Revenue Notice
of Disagreement; (B) reviewing the parties’ written submissions provided
pursuant to Section 2.4(e)(iii); (C) acting as an expert and not as an
arbitrator, to determine (1) whether Purchaser’s proposed amount for each
disputed element of the 2007 Revenue or the 2008 Revenue, as applicable, in the
related Revenue Notice or Seller’s proposed adjustment thereto in the Revenue
Notice of Disagreement is calculated more nearly in accordance with
Section 2.4(a) and (2) whether there were mathematical errors in the related
Revenue Notice, provided that in each case the Arbitrator may only make
determinations with respect to the items properly placed in dispute by the
Revenue Notice of Disagreement and, with respect to each such item, may not
assign a value greater than the greatest value, or less than the smallest value,
for such item claimed by any Party, as presented to the Arbitrator pursuant
hereto; and (D) preparing a revised Revenue Notice, which will include those
amounts in the related Revenue Notice accepted by Seller pursuant to
Section 2.4(c)(iii), those adjustments otherwise agreed to in writing by the
parties pursuant to Section 2.4(d), and those amounts determined by the
Arbitrator to be calculated more nearly in accordance with Section 2.4(a)
pursuant to its determination in clause (C) above.

 

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(v) Purchaser and Seller shall each pay one-half of the fees and expenses of the
Arbitrator.

(vi) The Arbitrator will complete its preparation of the revised Revenue Notice
within 25 calendar days after receiving the written submissions, rebuttal
responses, if any, and any other written information pursuant to
Section 2.4(e)(iii) and will deliver a copy of the revised Revenue Notice to
Purchaser and Seller, together with a report setting forth each disputed
adjustment, the Arbitrator’s determination with respect thereto and a statement
of the Arbitrator’s reasons for such determination. The Arbitrator’s
determination will be conclusive and binding upon the parties and may be entered
and enforced in any court of competent jurisdiction.

(f) Payment of 2007 Earnout Amount and 2008 Earnout Amount. On the 2007 Earnout
Payment Date, Purchaser will pay to Seller the 2007 Earnout Amount set forth in
the Revenue Notice relating to the 2007 Revenue. On the 2008 Earnout Payment
Date, Purchaser will pay to Seller the 2008 Earnout Amount set forth in the
Revenue Notice relating to the 2008 Revenue. If Seller delivers a Revenue Notice
of Disagreement to Purchaser pursuant to Section 2.4(c) with respect to either
the 2007 Revenue or the 2008 Revenue, on the fifth Business Day after (1) the
date on which the last disputed item in the applicable Revenue Notice of
Disagreement is resolved in writing, if all disputed items in such Revenue
Notice of Disagreement are resolved pursuant to Section 2.4(d), or (2) the date
on which the Arbitrator delivers its report and the revised Revenue Notice to
Purchaser and Seller pursuant to Section 2.4(e)(vi), if any disputed items in
the applicable Revenue Notice of Disagreement are submitted to the Arbitrator
for resolution pursuant to Section 2.4(e), Purchaser will pay to Seller the
additional Earnout Amount determined to be due and owed to Seller in accordance
with Sections 2.4(d) or Section 2.4(e), together with interest thereon at an
annual rate equal to the U.S. prime interest rate of lending as set forth in The
Wall Street Journal as of the 2007 Earnout Payment Date (with respect to
disputes regarding the 2007 Earnout Amount) and as of the 2008 Earnout Payment
Date (with respect to disputes regarding the 2008 Earnout Amount) calculated on
the basis of the number of days elapsed from and including the applicable
Earnout Payment Date to and excluding the date of payment. Each payment pursuant
to this Section 2.4(f) will be made in immediately available funds by wire
transfer pursuant to instructions provided in writing by Seller.

(g) Conduct of Business During the Earnout Period. During the period from the
Closing Date through December 31, 2008, Purchaser shall track Revenue in such a
manner as to allow for the calculation of the Earnout Amounts and shall provide
the Key Employees and their leverage personnel with financial and administrative
support no less favorable than such support provided to similarly situated
employees of Purchaser.

Section 2.5 Collection of Receivables. Purchaser shall use commercially
reasonable efforts to collect the Receivables included in the Purchased Assets.
Within 10 days following the six month anniversary of the Closing Date,
Purchaser shall deliver to Seller a written notice setting forth in reasonable
detail the Receivables included in the Purchased Assets for which Purchaser
shall have failed to receive payment by the six month anniversary of the Closing
Date (the “Uncollected Receivables”). For purposes of determining whether a
Receivable has been paid, Purchaser shall apply all payments received after the
Closing to the Receivables included in the Purchased Assets to the oldest
Receivable first, based upon the date such Receivable was due, unless otherwise
specified by the payor. Within 10 days following delivery to Seller by Purchaser
of such written notice, (a) if the aggregate amount of Uncollected Receivables
exceeds the sum of (x)

 

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the amount of the reserve for doubtful accounts reflected on the Final Statement
and (y) the amount accrued on the Final Statement for commissions with respect
to the Uncollected Receivables, which commissions are not payable until such
Uncollected Receivables are collected, (i) Seller shall pay to Purchaser an
amount equal to such excess, and (ii) Purchaser shall reassign to Seller
Purchaser’s rights with respect to the Uncollected Receivables, and (b) if the
sum of (x) the amount of the reserve for doubtful accounts reflected on the
Final Statement and (y) the amount accrued on the Final Statement for
commissions with respect to the Uncollected Receivables, which commissions are
not payable until such Uncollected Receivables are collected, exceeds the
aggregate amount of the Uncollected Receivables, Purchaser shall pay to Seller
an amount equal to such excess. In the event the Seller subsequently collects
any Uncollected Receivable that is reassigned to it, Seller shall pay to
Purchaser an amount equal to the commissions that are payable by Purchaser with
respect to the collection of such Uncollected Receivable (provided that such
payments shall not exceed the amount accrued for such commissions on the Final
Statement). Any payment pursuant to this Section 2.5 shall constitute a
reduction (if made by Seller) or an increase (if made by Purchaser) to the
Purchase Price equal to the amount paid.

Section 2.6 Allocation of Purchase Price. As soon as practicable after each of
the Closing, the Purchase Price Adjustment, the 2007 Earnout Payment Date and
the 2008 Earnout Payment Date, Purchaser and Seller will negotiate in good faith
to agree upon a schedule (the “Allocation Schedule”) allocating the Closing
Payment, the Purchase Price Adjustment, the 2007 Earnout Amount and the 2008
Earnout Amount, as the case may be, among the Purchased Assets. Any adjustment
to the Purchase Price contemplated by Section 2.5 shall be allocated to the
Receivables. Except as otherwise required by law or pursuant to a
“determination” under Section 1313(a) of the Internal Revenue Code of 1986, as
amended (the “Code”), Purchaser and Seller agree to act, and will cause their
Affiliates to act, in accordance with the allocations contained in the
Allocation Schedule for purposes of all income Taxes (as defined in
Section 4.15(i)), and neither Purchaser nor Seller will take any position
inconsistent therewith in any income Tax Returns (as defined in Section 4.15(j))
or similar filings (including IRS Form 8594), any refund claim, any litigation,
or otherwise. In the event that Purchaser and Seller are unable to reach an
agreement within 30 calendar days after the latest of (a) the date of payment of
the Purchase Price Adjustment, (b) the 2007 Earnout Payment Date and (c) the
2008 Earnout Payment Date, then any disputed items will be resolved within the
next 30 calendar days by the Arbitrator, the fees and costs of which will be
borne equally by Purchaser and Seller. The Allocation Schedule and IRS Form 8594
will be revised to reflect the resolution of the Arbitrator and, once revised,
will be final and binding on all parties without further adjustment.

ARTICLE III

CLOSING

Section 3.1 Closing Date. The closing of the transactions contemplated hereby
(the “Closing”) will take place at 8:00 a.m., Central Time, at the offices of
Schiff Hardin LLP, 6600 Sears Tower, Chicago, Illinois, on October 2, 2006,
subject to the satisfaction or waiver of the last of the conditions set forth in
Article VII hereof, or such other date or time as the Parties shall mutually
agree in writing. The date on which the Closing occurs is referred to herein as
the “Closing Date.” The Parties agree that, if the Closing occurs on October 2,
2006, for all purposes of this Agreement the Closing shall thereafter be deemed
to have occurred at 12:01 a.m., Central Time, on October 1, 2006, and the
Closing Date shall thereafter be deemed to be October 1, 2006.

Section 3.2 Closing Deliveries.

(a) By Seller. At or prior to the Closing, Seller will deliver to Purchaser each
of the documents and other items described in Section 7.1(h).

(b) By Purchaser. At the Closing, Purchaser will deliver to Seller:

(i) the Closing Payment, as provided in Section 2.2; and

(ii) the documents and other items described in Section 7.2(g).

 

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Section 3.3 Third-Party Consents.

(a) Notwithstanding anything in this Agreement to the contrary, to the extent
that any Contract included in the Purchased Assets may not be properly assigned
or transferred without the consent of a third party, or if the assignment or
attempted assignment of any such Contract would constitute a violation or breach
thereof or a violation of any law, nothing in this Agreement will constitute an
assignment or an attempted assignment thereof and, except as provided for in
Section 3.3(c), Purchaser will not be deemed to assume any liabilities or
obligations thereunder until properly assigned. The Seller Companies and the
Purchaser Companies will use commercially reasonable efforts to obtain any such
consents; provided, however, that commercially reasonable efforts shall not
include any requirement of any Party to commence any litigation or offer or
grant any accommodation (financial or otherwise) to any other Person.

(b) To the extent that the consents described in Section 3.3(a) are not obtained
prior to Closing, each of the Seller Companies will use commercially reasonable
efforts to (i) provide the applicable Purchaser Company with the economic
benefits of any such Contract until its termination date, (ii) cooperate in any
lawful arrangement designed to provide such benefits to the applicable Purchaser
Company and (iii) enforce, at the request of and for the account of the
applicable Purchaser Company at its expense, any rights of such Seller Company
arising from any such Contract against any third party, including the right to
elect to terminate such Contract in accordance with the terms thereof upon the
advice of Purchaser. The failure or inability to obtain any consent subject to
this Section 3.3(b) will not be a breach of this Agreement so long as the Seller
Companies have carried out their obligations under this Section 3.3(b).

(c) To the extent that a Purchaser Company is provided the benefits of any
Contract pursuant to Section 3.3(b), Purchaser will perform or cause its
Affiliates to perform the obligations of the applicable Seller Company
thereunder or in connection therewith, at no cost to such Seller Company,
including reimbursing the applicable Seller Company for rent and other costs for
any such Contract for Leased Real Property, but only to the extent (i) that such
action by Purchaser would not result in any default thereunder or in connection
therewith and (ii) such performance pertains to the benefits provided to a
Purchaser Company. The Purchaser Companies will indemnify the Seller Companies
against any and all Losses (as defined in Section 8.1) arising out of any
default by a Purchaser Company in the performance of such obligations. The
indemnification of the Seller Companies under this Section 3.3 will be governed
by the indemnification provisions set forth in Article VIII hereto.

ARTICLE IV

REPRESENTATIONS AND WARRANTIES OF SELLER

Seller hereby represents and warrants to Purchaser as set forth below:

Section 4.1 Organization and Good Standing. Each of the Seller Companies is a
corporation, limited liability company or other business entity duly organized,
validly existing and in good standing under the laws of its jurisdiction of
organization, and each has all necessary power and authority to own, lease and
operate its properties and to carry on its business as currently being
conducted. Each of the Seller Companies is duly qualified or licensed to do
business as a foreign corporation and is in good standing in each jurisdiction
in which its right, title or interest in or to any of its assets or the conduct
of the Business by it makes such qualification necessary, except where the
failure to be so qualified or in good standing would not have a Material Adverse
Effect (as defined in Section 11.7(e)). Schedule 4.1 lists all jurisdictions in
which each of the Seller Companies is qualified to do business. True

 

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and correct copies of the certificate of incorporation, articles of association,
bylaws or other similar organizational instruments, as amended to date, of each
of the Seller Companies, have been made available to Purchaser.

Section 4.2 Authorization, Validity and Execution. Each Seller Company has all
necessary power and authority (a) to execute and deliver this Agreement and the
other agreements, documents and instruments to be executed by such Seller
Company in connection with the transactions contemplated hereby (such other
agreements, documents and instruments, the “Seller Documents”), (b) to perform
(or cause to be performed) its obligations hereunder and thereunder and (c) to
consummate the transactions contemplated hereby and thereby. The execution,
delivery and performance of this Agreement and the Seller Documents, and
consummation of the transactions contemplated hereby and thereby, has been duly
authorized by the Board of Directors of each of the Seller Companies and, to the
extent required by Applicable Law or the organizational documents of any Seller
Company, the stockholder of any Seller Company, and no other corporate or
stockholder action is necessary to authorize the execution and delivery by
Seller and the Selling Subsidiaries of this Agreement and the Seller Documents
and the consummation by each of them of the transactions contemplated hereby and
thereby. This Agreement has been, and each of the Seller Documents will be on or
prior to the Closing Date, duly executed and delivered by Seller and the Selling
Subsidiaries, as applicable, and, assuming the due execution of this Agreement
by the Purchaser Companies, is a legal, valid and binding obligation of Seller
and each of the Selling Subsidiaries, enforceable against each in accordance
with its terms, except to the extent that its enforceability may be subject to
applicable bankruptcy, insolvency, reorganization, moratorium, receivership and
similar laws affecting the enforcement of creditors’ rights generally and to
general equitable principles.

Section 4.3 Consents and Approvals. Except as set forth in Schedule 4.3, the
execution, performance and delivery of this Agreement and the consummation of
the transactions contemplated hereby do not require any of the Seller Companies
to file any material notice, registration or filing with, or obtain any material
consent, approval, authorization, exemption or Permit from (a) any foreign,
federal, state, provincial or local governmental, regulatory or administrative
body, agency or authority (“Governmental Authority”) or (b) any third party
other than with respect to a Contract that is not required to be listed or
disclosed under this Article IV.

Section 4.4 No Violations. Except as set forth in Schedule 4.4, the execution
and delivery of this Agreement by the Seller Companies, the consummation of the
transactions contemplated hereby and the compliance by the Seller Companies with
the provisions hereof (a) will not violate the provisions of the certificate of
incorporation, the bylaws or any other similar organizational instrument of any
Seller Company; (b) will not violate any statute, law, ordinance, rule or
regulation of any jurisdiction applicable to any Seller Company, the Purchased
Assets or the Business, including those applicable to the employment and
employee benefits of any employees of the Business (each, an “Applicable Law”);
(c) will not violate any Order of any Governmental Authority applicable to any
Seller Company, the Purchased Assets or the Business; and (d) will not result in
a violation or breach of, conflict with, constitute (with or without due notice
or lapse of time or both) a default (or give rise to any right of termination,
cancellation, payment or acceleration) under any Contract, or result in the
creation of any mortgage, lien, pledge, security interest, charge or other
encumbrance of any kind and character (“Encumbrances”) upon any of the Purchased
Assets, except in the case of clauses (b), (c) and (d) as would not have a
Material Adverse Effect.

Section 4.5 Financial Statements.

(a) Seller has delivered to Purchaser (i) unaudited combined balance sheets and
income statements relating to the Business for the fiscal years ended
December 31, 2003, 2004 and 2005

 

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and for the six months ended June 30, 2006, (ii) audited balance sheets and
income statements relating to each of Highland Australia and Highland UK for the
fiscal years ended December 31, 2003 and 2004 and (iii) unaudited balance sheets
and income statements relating to each of Highland Australia and Highland UK for
the fiscal year ended December 31, 2005 and for the six months ended June 30,
2006 (collectively, the “Financial Statements”), a copy of each of which is
included on Schedule 4.5.

(b) The Financial Statements (including the footnotes thereto) present fairly
the financial condition and results of operations and cash flows of the Business
at the respective dates indicated and for the respective periods then ended.
Each of the Financial Statements described in clause (i) of Section 4.5(a) has
been prepared in accordance with GAAP, and each of the Financial Statements
described in clauses (ii) and (iii) of Section 4.5(a) has been prepared in
accordance with generally accepted accounting principles in Australia or the
United Kingdom, as applicable, in each case applied on a consistent basis,
except in the case of unaudited financial statements for the absence of
footnotes. The Business Records accurately and fairly reflect, in reasonable
detail, all transactions and all items of income and expense, assets and
liabilities and accruals relating to the Business.

Section 4.6 Receivables. Except as set forth on Schedule 4.6, all Receivables,
whether reflected on the balance sheet of the Business included in the Financial
Statements or otherwise, represent bona fide arm’s length transactions in the
ordinary course of business consistent with past practices (“Ordinary Course of
Business”) and are free and clear of all Encumbrances other than Permitted
Encumbrances. Since June 30, 2006, (a) there have not been any write-offs as
uncollectible of any Receivables, except for write-offs in the Ordinary Course
of Business, and (b) there has not been a material change in the aggregate
amount of such Receivables and other amounts owing to any Seller Company in
connection with the Business or the aging thereof.

Section 4.7 No Undisclosed Liabilities. None of the Seller Companies has any
Liabilities of any nature relating to the Business that would be required under
GAAP, to be reflected on a balance sheet or in the footnotes thereto, other than
(a) Liabilities that are reflected or reserved against in the most recent
balance sheet included in the Financial Statements or disclosed in the footnotes
thereto, (b) Liabilities incurred since the date of such balance sheet in the
Ordinary Course of Business, none of which has had or would have a Material
Adverse Effect, and (c) Liabilities described on Schedule 4.7.

Section 4.8 Absence of Certain Changes or Events. Except as set forth on
Schedule 4.8, since June 30, 2006, the Seller Companies have conducted the
Business only in the Ordinary Course of Business, and the Business has not
experienced any change which individually or in the aggregate has had or would
have a Material Adverse Effect. Except as set forth on Schedule 4.8 and except
as has had or would have a Material Adverse Effect, since that date, none of the
Seller Companies has taken any of the actions or permitted to occur any of the
events prohibited by Section 6.1 or committed to do any of the foregoing in
connection with the operation or conduct of the Business.

Section 4.9 Real Property.

(a) Owned Real Property. None of the Seller Companies owns any real property
used, held for use or intended to be used in connection with the Business.

(b) Leased Real Property. Schedule 4.9(b) sets forth a true and correct list of
all real property and interests in real property that are leased or subleased by
any Seller Company (the “Leased Real Property”) and that are used, held for use
or intended to be used in connection with the Business. Seller has made
available to Purchaser true and correct copies of all such leases and subleases,
each as amended to date. Except for the Leased Real Property, there are no other
leases, subleases, licenses or other agreements under which any Seller Company
uses or occupies or has the right to use or occupy, now or in the future, any
real property in connection with the Business. Except as set forth on
Schedule 4.9(b):

 

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(i) All of the land, buildings, structures and other improvements used by the
Seller Companies in the conduct of the Business are included in the Leased Real
Property. None of the Seller Companies is a lessor or sublessor of, or makes
available for use to any Person (other than the Selling Subsidiaries), (i) any
Leased Real Property or (ii) any portion of any premises otherwise occupied by
the Seller Companies in connection with the Business.

(ii) Except in each case as would not have a Material Adverse Effect, the Seller
Companies have obtained all appropriate Permits, certificates of occupancy,
licenses, easements and rights of way, including proofs of dedication, required
to use and operate the Leased Real Property in the manner in which the Leased
Real Property is currently being used and operated; and no such Permits,
certificates of occupancy, licenses, easements and rights of way will be
required as a result of the transactions contemplated hereby to be issued after
the date hereof in order to permit the Purchaser Companies, following the
Closing, to continue to own or operate the Leased Real Property in the same
manner as currently owned or operated.

(iii) To the knowledge of Seller, the buildings, structures, fixtures,
equipment, building mechanical systems (including electrical, heating and air
conditioning systems), and other improvements in, on or within the Leased Real
Property, are in adequate operating condition and repair for the purposes for
which they are currently used by the Business, subject to reasonable wear and
tear and continued repair and replacement in accordance with reasonable and
customary business practice, and there are no deferred maintenance, repairs or
unrepaired defects in the structural components comprising such buildings and
building mechanical systems located thereon or therein that would have a
Material Adverse Effect.

(iv) None of the Seller Companies has received written notice of and, to the
knowledge of Seller, there is not any pending, threatened or contemplated
condemnation proceeding affecting the Leased Real Property or any part thereof,
or any sale or other disposition of the Leased Real Property or any part thereof
in lieu of condemnation. The Leased Real Property has not suffered any material
damage by fire or other casualty which has not heretofore been substantially
repaired and restored.

Section 4.10 Intellectual Property.

(a) “Intellectual Property” means any (i) patents, (ii) trademarks, service
marks, trade names, brand names, trade dress, slogans, logos and internet domain
names, (iii) inventions, improvements, discoveries, ideas, processes, formulae,
designs, models, industrial designs, know-how, proprietary information, trade
secrets, and confidential information, whether or not patented or patentable,
(iv) copyrights, writings and other copyrightable works and works in progress,
databases and software, (v) other intellectual property rights and foreign
equivalent or counterpart rights and forms of protection of a similar or
analogous nature or having similar effect in any jurisdiction throughout the
world, (vi) registrations and applications for registration of any of the
foregoing, and (vii) renewals, extensions, continuations, divisionals,
reexaminations or reissues or equivalent or counterpart of any of the foregoing
in any jurisdiction throughout the world. The term “Business IP” means any
Intellectual Property owned by any Seller Company that is currently used, held
for use or intended to be used primarily in the operation or conduct of the
Business.

(b) Schedule 4.10(b) sets forth a true and correct list of the following
Business IP included in the Purchased Assets: (i) utility patents and
applications therefor; (ii) design patents and

 

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applications therefor; (iii) utility models and applications therefor;
(iv) trademarks, trade names, brand names, logos, service marks (whether
registered or unregistered), and all applications therefor; (v) registered
copyrights and applications therefor; and (vi) domain names and domain name
registrations. Schedule 4.10(b) identifies the owner of each item listed thereon
and, in the case of registrations and applications, the jurisdiction,
application or registration number and date. The applicable Seller Company has
properly executed and recorded all documents necessary to perfect its title,
subject to the rights of third parties set forth in Schedule 4.10(c) to all such
Business IP set forth on Schedule 4.10(b), has filed all documents and paid all
Taxes, fees and other financial obligations required to be filed or paid through
the date hereof to maintain in force and effect all Business IP set forth on
Schedule 4.10(b), and, except for fees and costs required to prosecute and
maintain such Business IP in effect, none of the Seller Companies is obligated
to make any payments of any kind in respect thereof.

(c) Schedule 4.10(c) sets forth a correct and complete list of all Contracts
with respect to any Intellectual Property (excluding computer software
licenses). Except pursuant to the Contracts listed on Schedule 4.10(c), none of
the Seller Companies has granted any options, licenses or agreements of any kind
relating to the Business IP or the marketing or distribution thereof or has
granted access or rights of use to any other Person other than its respective
employees with respect to any Business IP. The Letter Agreement by and among
Seller, Lelliott Robinson Consulting Pty Ltd. and Perigo Investments Pty Limited
dated May 17, 2005 (the “Letter Agreement”) and the trademark license set forth
therein (the “Australian License”) was terminated effective July 21, 2006 by
agreement of the parties thereto and the Seller Companies have no continuing
obligation or liability of any nature with respect to the Letter Agreement or
the arrangements described therein, including the Australian License.
Documentation evidencing the termination of the Letter Agreement and the
Australian License has been delivered to Purchaser. Except pursuant to the
Contracts listed on Schedule 4.10(c), none of the Seller Companies is bound by
or a party to any options, licenses or agreements of any kind relating to the
Intellectual Property (excluding computer software licenses) of any other
Person. Subject to the rights of third parties set forth in Schedule 4.10(c),
all Business IP is owned by the Seller Companies, free and clear of all
Encumbrances other than Permitted Encumbrances.

(d) The conduct of the Business by the Seller Companies as presently conducted
and the services provided by the Seller Companies in connection therewith does
not violate, conflict with or infringe the intellectual property rights of any
other Person. To the knowledge of Seller, neither the conduct of any other
Person’s business, nor the nature of any of the services it provides, infringes
upon any Business IP. Except as set forth on Schedule 4.10(d), no claims are
pending, or to the knowledge of Seller, threatened, against any of the Seller
Companies by any Person with respect to the ownership, validity, enforceability,
effectiveness or use of any Business IP, and since January 1, 2003, neither
Seller nor any of the Selling Subsidiaries has received any written
communication alleging that Seller or any of the Selling Subsidiaries has
violated any rights relating to the intellectual property of any Person in the
operation or conduct of the Business.

(e) The Seller Companies have taken all reasonable steps in accordance with
customary business practice to establish policies and procedures requiring
employees and agents to maintain the confidentiality of non-public information
relating to the Business IP, including the inventions, trade secrets, know how
and other proprietary rights of the Seller Companies, and to appropriately
restrict the use thereof. To the knowledge of Seller, none of the Seller
Companies is making unauthorized use of any confidential information or trade
secrets of any Person in connection with the Business. To the knowledge of
Seller, there has been no misappropriation of any material trade secrets or
other material confidential or proprietary Business IP by any Person.

(f) The Seller Companies own, or have sufficient license to use, all computer
software, including source code, operating systems, data, databases, files,
documentation and other

 

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materials related thereto, that is used primarily in or necessary for the
conduct of the Business as currently conducted (“Computer Software”), and,
except as set forth on Schedule 4.10(f), the consummation of the transactions
contemplated hereby will not conflict with, alter or impair any such rights or
require the payment of any additional fees or amounts. Schedule 4.10(f) sets
forth a list of all material Computer Software (excluding Desktop Software). The
Company has made available to Purchaser true and complete copies of all
Contracts under which the Seller or any of the Selling Subsidiaries has the
right to use Computer Software (other than Desktop Software) in connection with
the Business. “Desktop Software” means any third party office productivity
Computer Software that is licensed for use on desktop or laptop “PC-class”
computers or related local area network servers other than by a written
agreement executed by the licensee. Desktop Software includes software licensed
by shrink wrap or click wrap licenses, the Microsoft Windows class of operating
system software and Microsoft Office or similar office productivity software
(including individual programs contained therein).

Section 4.11 Contracts.

(a) Schedule 4.11(a) sets forth a true and correct list, as of the date hereof,
of all of the following Contracts (other than the Contracts and agreements
listed in Schedules 4.9(b), 4.10(c), 4.16, 4.20 and 4.21) that primarily relate
to the Business, true and correct copies of which have been made available to
Purchaser:

(i) Consulting, independent contractor or employment agreements;

(ii) employee collective bargaining agreements or other similar Contracts with
any labor union, organization, association or any related award of a
Governmental Authority;

(iii) covenants of any Seller Company not to compete or other covenants
materially restricting the development, marketing or provision of any services
of the Business;

(iv) master agreements or preferred provider agreements for the provision of
executive search services to any customers of the Seller Companies and Contracts
governing search projects of the Seller Companies that are in-process as of the
date hereof;

(v) lease or similar Contracts with any Person under which (A) any Seller
Company is lessee of, or holds or uses, any equipment, vehicle or other tangible
personal property owned by any Person in connection with the Business or (B) any
Seller Company is a lessor or sublessor of, or makes available for use by any
Person, any tangible personal property, that, in each case, has an aggregate
future liability or receivable, as the case may be, in excess of $150,000 or is
not terminable by the applicable Seller Company by notice of not more than 60
days without payment or penalty;

(vi) Contracts under which any Seller Company has borrowed any money from,
established a line of credit with, or issued any note, bond, debenture or other
evidence of indebtedness to, any Person, in each case that individually is in
excess of $150,000;

(vii) Contracts under which (A) any Person has directly or indirectly guaranteed
indebtedness, liabilities or obligations of the Seller Companies in connection
with the Business or (B) any of the Seller Companies has directly or indirectly
guaranteed indebtedness, liabilities or obligations of any Person, in each case
that individually is in excess of $150,000;

(viii) Contracts for any joint venture, partnership or similar agreement;

 

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(ix) Contracts granting an Encumbrance other than a Permitted Encumbrance upon
any assets or properties used, held for use or intended for use in connection
with the Business;

(x) Contracts providing for indemnification of any Person with respect to
liabilities relating to the Business (other than Contracts entered into in the
Ordinary Course of Business that do not relate primarily to indemnification
obligations, but contain customary provisions incidental to such Contracts);

(xi) powers of attorney (other than a power of attorney given in the Ordinary
Course of Business with respect to routine Tax matters);

(xii) confidentiality agreements (other than (A) Contracts that do not relate
primarily to confidentiality or non-disclosure obligations, but contain
customary provisions incidental to such Contracts and (B) customary Contracts
entered into in the Ordinary Course of Business that impose confidentiality and
non-disclosure obligations on parties to any such Contracts other than the
Seller Companies);

(xiii) Contracts providing for the provision of products and services by or to
any Seller Company in connection with the Business involving payment to or by,
as the case may be, the applicable Seller Company of more than $150,000 or
extending for a term more than 180 days from the date of this Agreement (unless
terminable by the applicable Seller Company without payment or penalty upon no
more than 60 days’ notice);

(xiv) Contracts with or Permits by or from any Governmental Authority;

(xv) currency exchange, interest rate exchange, commodity exchange or similar
Contracts; and

(xvi) any other Contracts to which any Seller Company is a party or by or to
which such Seller Company or any of its assets or business is bound or subject
to in connection with operation or conduct of the Business that has an aggregate
future liability to any Person in excess of $150,000 or is not terminable by the
applicable Seller Company by notice of not more than 60 days without payment or
penalty.

(b) All Contracts required to be listed in the Schedules hereto (which, for
purposes of this entire Section 4.11, includes all such Contracts required to be
listed or disclosed under this Section 4.11 and all such other Contracts
required to be listed or disclosed under any other Section of this Article IV)
are valid, binding and in full force and effect and are enforceable by the
applicable Seller Company, in accordance with their respective terms, except to
the extent that enforceability may be subject to applicable bankruptcy,
insolvency, reorganization, moratorium, receivership and similar laws affecting
the enforcement of creditors’ rights generally and to general equitable
principles. The Seller Companies have performed in all material respects all
obligations required to be performed by them to date under all such Contracts,
and none of the Seller Companies is (with or without the lapse of time or the
giving of notice, or both) in breach or default in any material respect
thereunder and, to the knowledge of Seller, no other party to any of such
Contracts is (with or without the lapse of time or the giving of notice, or
both) in breach or default in any material respect thereunder. To the knowledge
of Seller, none of the Seller Companies has received oral or written notice of
the intention of any party to terminate any such Contract. Complete and correct
copies of all such Contracts, together with all modifications and amendments
thereto, have been made available to Purchaser.

 

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(c) Schedule 4.11(c) sets forth each Contract to which any Seller Company is a
party or by or to which any of such Seller Company’s assets or business is bound
or subject in connection with the operation or conduct of the Business (required
to be listed or disclosed under this Section 4.11 or under any other Section of
this Article IV) with respect to which consent of the other party or parties
thereto must be obtained by virtue of the execution and delivery of this
Agreement or the consummation of the transactions contemplated hereby to avoid
the termination of such Contract, a breach, violation, default or penalty
payment thereunder or any other change or modification to the terms thereof.

(d) Schedule 4.11(d) sets forth a true and complete list of all “off-limits”
arrangements of the Seller Companies that restrict the Seller Companies’
solicitation of any Persons with respect to the Seller Companies’ search
projects.

Section 4.12 Title, Sufficiency and Condition of Assets. The Seller Companies
have good and valid title to, or a valid leasehold interest in, all material
tangible and intangible assets used, held for use or intended for use in the
conduct of the Business, free and clear of all Encumbrances, except (i) such
Encumbrances as are set forth in Schedule 4.12 (all of which shall be discharged
prior to or at the Closing), (ii) mechanics’, carriers’, workmen’s, repairmen’s
or other like liens or retention of title provisions arising or incurred in the
Ordinary Course of Business and Encumbrances arising under (and only with
respect to the equipment leased under) equipment leases with third parties
entered into in the Ordinary Course of Business, (iii) Encumbrances for Taxes
not yet due or which are being contested in good faith and (iv) other
imperfections of title or encumbrances that do not, individually or in the
aggregate, materially impair the continued use and operation of the assets to
which they relate in the conduct of the Business as presently conducted (the
Encumbrances described in clauses (i), (ii), (iii) and (iv) are hereinafter
referred to collectively as “Permitted Encumbrances”). Except for services and
assets to be provided through the Transition Services Agreement and except as
set forth on Schedule 4.12, the assets of the Seller Companies that the
Purchaser Companies will acquire as a result of their acquisition of the
Purchased Assets on the Closing Date represent all the assets necessary to
conduct the Business in substantially the same manner as presently conducted and
represent all the assets used, held for use or intended for use primarily in the
conduct of the Business. All Equipment used regularly in the conduct of the
Business is in adequate operating condition, normal wear and tear excepted, for
the purpose for which it is currently being used by the Business.

Section 4.13 Litigation. Schedule 4.13 sets forth each instance in which any
Seller Company or any of their respective directors or officers (in their
capacity as such) is, or within the past three years, has been, in connection
with the Business, (a) subject to any outstanding injunction, judgment,
temporary restraining order, preliminary or permanent injunction or other order,
decree, ruling or charge (“Order”), or (b) a party to, or to the knowledge of
Seller, threatened to be made a party to, any action, suit, claim, proceeding,
hearing or investigation before any Governmental Authority, or by any third
party, that, in the case of this clause (b), (i) seeks or sought, as applicable,
equitable relief, or a payment in excess of $250,000, or (ii) questions or
challenges the validity of this Agreement or any action taken or to be taken by
any Seller Company pursuant to this Agreement or in connection with the
transactions contemplated hereby. The items listed on Schedule 4.13 are not
reasonably expected, either individually or in the aggregate, to have a Material
Adverse Effect.

Section 4.14 No Default; Compliance with Laws; Permits.

(a) Except as set forth on Schedule 4.14(a), none of the Seller Companies is
(i) in default or violation of any term, condition or provision of its
certificate of incorporation, by-laws or other governing instrument or (ii) in
default or violation of any term, condition or provision of any Applicable Law,
Order, arbitration award, concession or grant, except in the case of clause
(ii) for defaults or violations that would not, either individually or in the
aggregate, have a Material Adverse Effect.

 

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(b) The Seller Companies have all licenses, permits, exemptions, consents,
waivers, authorizations, rights, certificates of occupancy, franchises, orders
or approvals of, and have made all required registrations with, any Governmental
Authority that are material to the conduct of the Business as presently
conducted (collectively, “Permits”). All of the Permits are valid and in full
force and effect in all material respects and, except as set forth on Schedule
4.14(b), are transferable to the applicable Purchaser Company. No violations are
or have been recorded in respect of any Permit, no event has occurred that would
allow revocation or termination or that would result in the impairment of any
rights with respect to any such Permit, and no proceeding is pending or, to the
knowledge of Seller, threatened, to revoke, limit or enforce any Permit, except
for any of the foregoing would not, either individually or in the aggregate,
have a Material Adverse Effect.

(c) Except with respect to matters set forth on Schedule 4.13, none of the
Seller Companies has received any written communication since January 1, 2003
from a Governmental Authority that alleges that any of the Seller Companies is
not in compliance with any Applicable Law, except for instances of noncompliance
that would not, either individually or in the aggregate, have a Material Adverse
Effect. This Section 4.14 does not relate to, and Seller makes no
representations in this Section 4.14 with respect to, Taxes, which are the
subject of Section 4.15; Benefit Plans, which are the subject of Section 4.16;
employee and labor matters, which are the subject of Section 4.17; and
environmental matters, which are the subject of Section 4.19.

Section 4.15 Taxes.

(a) Complete and correct copies of all Tax Returns and all amendments or
modifications thereto filed or caused to be filed by any Seller Company in
connection with the Business for the period beginning January 1, 2003 up to and
including the quarter ended March 31, 2006 have been made available to
Purchaser. Each such return reflects accurately all Liability for Taxes of the
Business for the periods covered thereby and is complete and correct in all
material respects. Except as set forth on Schedule 4.15, the Seller Companies
have filed all returns for Taxes required to be filed in connection with the
Business and have paid all Taxes due with respect to such returns.

(b) There are no Encumbrances on any of the property or assets of the Business
that arose in connection with any failure (or alleged failure) to pay any Taxes
in connection with the Business, except for Encumbrances related to Taxes not
yet due or for Taxes that a Seller Company is contesting in good faith through
appropriate proceedings and for which appropriate reserves have been
established.

(c) None of the Seller Companies is currently under examination by the Internal
Revenue Service (the “IRS”) or any other Governmental Authority with respect to
Taxes. Except as set forth on Schedule 4.15, none of the Seller Companies has
been contacted by or is currently corresponding with any Governmental Authority
with respect to the requirement to file Tax Returns and/or pay any Taxes. Except
as indicated on Schedule 4.15, no waivers of the statute of limitations have
been given to or requested by any Governmental Authority.

(d) All Taxes which the Seller Companies have been required by any Governmental
Authority to collect or withhold have been duly collected or withheld (including
any Taxes required by any Governmental Authority to be withheld by a Seller
Company in respect of any amount paid or credited or deemed to be paid or
credited by it to or for the account of or benefit of any Person, including any
employees, officers or directors) and, to the extent required when due, have
been or will be duly and timely paid or remitted to the appropriate Governmental
Authority.

 

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(e) No claim has been made in writing by any Governmental Authority in any
jurisdiction where the Seller Companies do not file Tax Returns that the Seller
Companies are or may be subject to Taxes in that jurisdiction.

(f) The Seller Companies have duly and timely collected all amounts on account
of any Transfer Taxes (other than Transfer Taxes contemplated by Section 6.10)
required by Applicable Law to be collected by it and have duly and timely
remitted to the appropriate Governmental Authority any such amounts required by
Applicable Law to be remitted by them.

(g) The assets, properties, rights, contracts, claims and other assets being
acquired by Heidrick Canada from Highland Canada represent all or substantially
all of the assets used by Highland Canada in the operation or conduct of the
Business.

(h) Highland Australia will continue to operate the Business in Australia
through the Closing Date.

(i) Except as set forth on Schedule 4.15, none of the Seller Companies is a
party to any Tax allocation or sharing agreement.

(j) For purposes of this Agreement, “Taxes” means all taxes, charges, fees,
levies or other assessments, including all net income, gross income, alternative
or add-on minimum, environmental, gross receipts, sales, use, goods and
services, ad valorem, transfer, toll-gate, capital stock, franchise, profits,
license, withholding, payroll, single business, employment, health insurance,
Canada pension plan premiums or contributions, excise, severance, documentary,
stamp, occupation, property, unemployment or other taxes, customs, duties, fees,
assessments or charges of any kind whatsoever, and any installments with respect
thereto, together with any interest penalties, additions to tax or additional
amounts imposed by any taxing authority (domestic or foreign).

(k) For purposes of this Agreement, “Tax Returns” means all returns,
declarations, reports, estimates, information returns, elections, consents,
notices, forms, documents and statements (including all schedules, exhibits and
other attachments thereto and any amendments thereto) relating to Taxes.

Section 4.16 Employee Benefit Plans.

(a) Schedule 4.16(a) sets forth a list of all employee benefit plans and
arrangements maintained or contributed to or required to be contributed to by
any Seller Company or an ERISA Affiliate, including employee pension benefit
plans, as defined in Section 3(2) of the Employee Retirement Income Security Act
of 1974, as amended (“ERISA”), any registered pension plan, as defined in
subsection 248(1) of the Income Tax Act (Canada) (the “ITA”), employee welfare
benefit plans, as defined in Section 3(1) of ERISA, deferred compensation plans,
supplemental retirement plans, superannuation plans and complying superannuation
funds, stock option plans, bonus or profit sharing plans, stock appreciation
rights plans, stock purchase plans, medical, hospitalization, life, disability
and other insurance plans, severance or termination pay plans and policies,
vacation policies, life insurance arrangements, employment agreements, retention
agreements, severance agreements and change in control agreements, applicable
to, or for the benefit of, any employee of the Business (collectively, the
“Benefit Plans”). An “ERISA Affiliate” shall mean any entity under “common
control” with Seller or any Selling Subsidiary within the meaning of
Section 4001(14) of ERISA. Seller has delivered or otherwise made available to
Purchaser copies of all Benefit Plans, including plan documents and all
amendments thereto, plan agreements, trust agreements, recordkeeping or service
agreements, insurance contracts, summary plan descriptions or summaries thereof
if no written plan document or summary plan description is available, IRS
determination letters, actuarial reports, audit reports and annual reports on
Form 5500 or annual information returns for the most recent plan year.

 

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(b) With respect to each Benefit Plan: (i) if intended to qualify under
Section 401(a) of the Code, such plan has received a determination letter from
the Internal Revenue Service stating that the plan as amended for GUST (as
defined in Internal Revenue Service Revenue Procedures – 2002-6 and 2000-27) so
qualifies and that its trust is exempt from taxation under Section 501(a) of the
Code, and nothing has occurred since the date of such determination that would
materially adversely affect such qualification or exempt status (or if intended
to be registered under the ITA, such plan is duly registered and nothing has
occurred that would affect its registered or tax-exempt status); (ii) such
Benefit Plan has been timely amended to reflect the Economic Growth and Tax
Relief Reconciliation Act of 2001; (iii) such Benefit Plan has been administered
in accordance with its terms and all Applicable Laws, including ERISA and the
Code, except for instances of noncompliance that would not, either individually
or in the aggregate, have a Material Adverse Effect; (iv) to the knowledge of
Seller, no breaches of fiduciary duty have occurred which are reasonably
expected to give rise to liability on the part of any Seller Company; (v) no
actions, suit, claims or disputes are pending, or, to the knowledge of Seller,
threatened, that could give rise to material liability on the part of any Seller
Company other than routine claims for benefits; (vi) no audits, inquiries,
reviews, proceedings, claims or demands are pending with any Governmental
Authority; (vii) all material reports, returns and similar documents required to
be filed with any Governmental Authority or distributed to any Benefit Plan
participant have been duly and timely filed or distributed; (viii) no prohibited
transaction (within the meaning of Section 406 of ERISA or Section 4975 of the
Code) has occurred that would give rise to material liability on the part of any
Seller Company; (ix) all contributions to such Benefit Plan, all payments under
the Benefit Plans (except those to be made from a trust qualified under
Section 401(a) of the Code) and all payments with respect to the Benefit Plans
for any period ending before the Closing Date have been paid, and to the extent
unpaid, are reflected in the Financial Statements; and (x) no Benefit Plan is
(A) a “Multiemployer Plan” within the meaning of Section 3(37) of ERISA or a
multi-employer pension plan as defined under Applicable Law in Canada, (B) a
“Multiple Employer Plan” within the meaning of Section 413(c) of the Code, or
(C) a pension plan subject to Title IV of ERISA or the minimum funding
requirements of Section 302 of ERISA or Section 412 of the Code.

(c) With respect to each Benefit Plan that is a “welfare benefit plan” (as
defined in Section 3(1) of ERISA) or similar plan in Canada, no such plan
provides medical or death benefits with respect to current or former employees
of the Business or any of its ERISA Affiliates (or their dependents) beyond
their termination of employment (other than to the extent required by Applicable
Law, including Sections 601-609 of ERISA and Section 4980B of the Code).

(d) Except as set forth on Schedule 4.16(d), none of the Benefit Plans obligates
any Seller Company to pay retention, separation, severance, termination or
similar benefits as a result of any transaction contemplated by this Agreement
or as a result of a “change in control” (as such term is defined in Section 280G
of the Code) and will not accelerate the time of paying or vesting, or increase
the amount of compensation, due to any individual, and none of the Benefit Plans
otherwise limits or restricts any Purchaser Company’s ability to terminate the
employment of any employee for any reason with no liability.

(e) Seller or one of its Affiliates maintains and is considered the sponsor of
all Benefit Plans.

(f) Schedule 4.16(f) contains a complete list of the employees of the Business
as of the date hereof, specifying their position, the employer entity, age (ages
of Highland Canada employees are estimates only), salary, length of service,
business location, commission, bonus and incentive

 

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entitlements, and bonus and incentive payments for the past two (2) years and
identifying which employees are currently receiving long-term or short-term
disability benefits or are absent from active employment on pregnancy, parental,
adoption or any Family Medical Leave Act or similar leaves and their anticipated
dates of return to active employment. Except as set forth on Schedule 4.16(f),
Highland UK has not made any outstanding offers of employment or engagement.

(g) Schedule 4.16(g) sets forth a summary of the standard arrangement by which
commission payments are made to employees of the Business, as in effect on the
date hereof. Except as set forth on Schedule 4.16(g), no employee of the
Business is entitled, by virtue of Contract or otherwise, to commission payments
that deviate from the standard arrangement set forth in Schedule 4.16(g).

Section 4.17 Employee and Labor Matters.

(a) None of the Seller Companies is bound by a collective bargaining agreement
or similar agreement with any labor or trade union, organization or association
or any related award of a Governmental Authority, and no Seller Company has
received any application or demand for recognition by any such labor or trade
union, organization or association during the three years preceding the date
hereof. None of the employees of the Business is represented by any union or
similar trade organization or association of employees.

(b) There is, and since January 1, 2003, there has been, no labor strike,
slowdown, work stoppage or lockout, pending against or otherwise affecting the
Business (and, to the knowledge of Seller, no such labor strike, slow down, work
stoppage or lockout is threatened).

(c) To the knowledge of Seller, none of the Seller Companies nor any of their
representatives or employees has committed any unfair labor practice in
connection with the operation of the Business. There is no unfair labor practice
charge or complaint against any of the Seller Companies, or, to the knowledge of
Seller, threatened, before the National Labor Relations Board, the Ontario
Labour Relations Board, the Industrial Relations Commission of New South Wales,
the Australian Industrial Relations Commission or any comparable Governmental
Authority or court of competent jurisdiction.

(d) To the knowledge of Seller, there is no event or circumstance which is
reasonably likely to give rise to the filing of any unfair labor practice charge
or complaint against any Seller Company in connection with the operation or
conduct of the Business; there are no pending, or, to the knowledge of Seller,
threatened, individual or union grievances or arbitration proceedings against
any Seller Company in connection with the operation or conduct of the Business,
and there are no outstanding or unremedied union settlements or arbitration
awards against any Seller Company in connection with the operation or conduct of
the Business.

(e) Except as set forth on Schedule 4.17(e), there is no charge or complaint
against any Seller Company pending before the United States Department of Labor,
the Ontario Labour Relations Board, any provincial Ministry of Labour, any state
department of labor, the Equal Employment Opportunity Commission, the Ontario
Human Rights Commission, the Industrial Relations Commission of New South Wales,
the Australian Industrial Relations Commission, the Human Rights and Equal
Opportunity Commission, the Equal Opportunity Commission of Victoria, the
Anti-Discrimination Board of New South Wales, any Governmental Authority or
tribunal in the United Kingdom or any comparable federal, state, local or
foreign human/civil rights organization or other Governmental Authority or court
of competent jurisdiction, or, to the knowledge of Seller, threatened, relating
to the employment or termination of employment of any current, prospective or
former employee of the Business.

 

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(f) Highland Canada has materially complied with all requirements under the Pay
Equity Act of Ontario or any other similar provincial pay equity legislation.
Highland Canada is not required to prepare or post any pay equity plan pursuant
to the Pay Equity Act of Ontario or any other similar provincial pay equity
legislation.

(g) Except as set forth on Schedule 4.17(g), the Seller Companies have
discharged in all material respects their respective obligations and have
complied in all material respects with all Applicable Laws, with respect to
salary, wages, commissions, bonuses, overtime pay, holiday pay, sick pay,
vacation pay and all other benefits for the employees of the Business for all
periods through the Closing.

Section 4.18 Customers and Suppliers. Schedule 4.18 sets forth a list of the
thirty largest customers and a list of the ten largest suppliers (measured by
dollar volume) of the Business during each of the last two fiscal years. Since
January 1, 2006 and as of the date hereof, none of the thirty largest customers
during 2005 has (a) materially altered its pattern of payments in a manner
inconsistent with past practices or (b) to the knowledge of Seller, made any
material complaint regarding pricing or the quality of services of the Business,
or demanded any price adjustment material to the Business. Since January 1, 2006
and as of the date hereof, to the knowledge of Seller, none of the thirty
largest customers during 2005 has terminated or materially reduced, or has
provided notice that it will terminate or materially reduce, its future use of
the services of any of the Seller Companies with respect to executive searches
and placement for reasons primarily relating to pricing or quality of services
provided by such Seller Company.

Section 4.19 Environmental Matters. Except as set forth in Schedule 4.19,
(a) the Seller Companies have been and are in compliance with all applicable
Environmental Laws, except for instances of noncompliance that would not, either
individually or in the aggregate, have a Material Adverse Effect; (b) to the
knowledge of Seller, none of the Leased Property is contaminated with any
Hazardous Substance which could reasonably be expected to result in material
liability relating to or require any remediation under any Environmental Law;
(c) to the knowledge of Seller, no property formerly owned or operated by Seller
or any Selling Subsidiary has been contaminated with any Hazardous Substance
during or prior to such period of ownership or operation which could reasonably
be expected to result in liability relating to or require any remediation under
any Environmental Law; (d) there are no pending, or to the knowledge of Seller,
threatened, actions, suits, claims, investigations or other proceedings under or
pursuant to any Environmental Law in connection with the operation or conduct of
the Business; and (e) neither Seller nor any Selling Subsidiary would reasonably
be expected to incur material liability for any Hazardous Substance disposal or
contamination of any third party property or for release of any Hazardous
Substance.

As used herein, the term “Environmental Law” means any federal, state,
provincial, local or foreign statute, law, regulation, treaty, agreement, order,
decree, permit, authorization, common law or agency requirement relating to:
(A) the protection, investigation or restoration of the environment, health,
safety or natural resources, (B) the handling, use, presence, disposal, release
or threatened release of any Hazardous Substance, or (C) noise, odor, indoor
air, employee exposure, wetlands, pollution, contamination or any injury or
threat of injury to persons or property relating to any Hazardous Substance.

As used herein, the term “Hazardous Substance” means any substance that is:
(A) listed, classified or regulated pursuant to any Environmental Law; (B) any
petroleum, natural gas, natural gas liquids or coal product or by-product
(including coal tar), any combustion waste, ash, sludge, asbestos-containing
material, polychlorinated biphenyls, radioactive material, radon or any wastes
related to exploration and production; and (C) any other substance which could
reasonably be expected to be the subject of regulatory action by any
Governmental Authority in connection with any Environmental Law.

 

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Section 4.20 Related Party Transactions. Except as set forth on Schedule 4.20,
no officer or, to the knowledge of Seller, employee of Seller or any of its
Affiliates: (a) is a director, officer, more than 10% stockholder or employee
of, or consultant to, any competitor, supplier or customer of the Business;
(b) owns, directly or indirectly, in whole or in part, any portion or rights in
the Purchased Assets; or (c) has any contractual relationship with the Business
not otherwise disclosed in Section 4.11 or Section 4.16.

Section 4.21 Insurance. Schedule 4.21 contains a true and correct list of all
insurance policies owned and maintained by the Seller Companies covering the
properties, assets, employees and operations of the Business. All such policies
are in full force and effect, all premiums due and payable thereon have been
paid in full, and no default or other circumstance exists which would create the
substantial likelihood of the cancellation or non-renewal of any such policy
prior to the Closing Date.

Section 4.22 Brokers and Finders. Except for BMO Capital Markets Corp. (formerly
known as Harris Nesbitt Corp.), no broker, finder or investment banker is
entitled to any brokerage, finder’s or other fee or commission in connection
with the transactions contemplated by this Agreement based upon arrangements
made by or on behalf of Seller or any of its Affiliates.

Section 4.23 Full Disclosure. No representation or warranty made by a Seller
Company in this Agreement (including those contained in the Schedules hereto)
and no statement made by a Seller Company in any document or certificate
delivered pursuant to Section 7.1(h), considered as a whole with all other
representations, warranties and statements made by a Seller Company in this
Agreement (including those contained in the Schedules hereto) and such documents
and certificates, contains or will contain any untrue statement of material fact
or omits or will omit to state any material fact necessary, in light of the
circumstances under which it was made, in order to make the statements herein or
therein not misleading.

Section 4.24 No Other Representations and Warranties. Except as set forth in
this Article IV or the documents and certificates executed and delivered by a
Seller Company pursuant to Section 7.1(h), none of the Seller Companies or any
of their Affiliates or respective officers, directors, employees or
representatives makes or has made any other representation or warranty, express
or implied, at law or in equity, in respect of the Seller Companies, the
Business or the Purchased Assets. Any such representations or warranties are
hereby expressly disclaimed.

ARTICLE V

REPRESENTATIONS AND WARRANTIES OF PURCHASER

Purchaser hereby represents and warrants to Seller as set forth below:

Section 5.1 Organization and Standing. Each of the Purchaser Companies is a
corporation duly organized, validly existing and in good standing under the laws
of its jurisdiction of organization and has all necessary power and authority to
own, lease and operate its properties and to carry on its business as currently
being conducted.

Section 5.2 Authorization, Validity and Execution. Each Purchaser Company has
all necessary power and authority (a) to execute and deliver this Agreement and
the other agreements, documents and instruments to be executed by such Purchaser
Company in connection with the transactions contemplated hereby (such other
agreements, documents and instruments, the “Purchaser

 

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Documents”), (b) to perform (or cause to be performed) its obligations hereunder
and thereunder and (c) to consummate the transactions contemplated hereby and
thereby. The execution, delivery and performance by each of the Purchaser
Companies of this Agreement and the Purchaser Documents, and the consummation of
the transactions contemplated hereby and thereby, have been duly authorized by
the Board of Directors of each of the Purchaser Companies, and no other
corporate or stockholder action on the part of the Purchaser Companies is
necessary to authorize the execution and delivery by each of the Purchaser
Companies of this Agreement and the Purchaser Documents and the consummation by
it of the transactions contemplated hereby and thereby. This Agreement has been,
and each of the Purchaser Documents will be on or prior to the Closing Date,
duly executed and delivered by the Purchaser Companies, as applicable, and,
assuming the due execution of this Agreement by the Seller Companies, is a
legal, valid and binding obligation of each of the Purchaser Companies,
enforceable against each in accordance with its terms, except to the extent that
its enforceability may be subject to applicable bankruptcy, insolvency,
reorganization, moratorium, receivership and similar laws affecting the
enforcement of creditors’ rights generally and to general equitable principles.

Section 5.3 Consents and Approvals. Except as set forth in Schedule 5.3, the
execution, performance and delivery of this Agreement and the consummation of
the transactions contemplated hereby do not require any of the Purchaser
Companies to file any material notice, registration or filing with, or obtain
any consent, approval, authorization, exemption or Permit from, any third party
or from any Governmental Authority.

Section 5.4 No Violation. The execution and delivery by the Purchaser Companies
of this Agreement, the consummation by the Purchaser Companies of the
transactions contemplated hereby and the compliance by the Purchaser Companies
with the provisions hereof (a) will not violate the provisions of the
certificate of incorporation or the bylaws of any Purchaser Company; (b) will
not violate any statute, law, ordinance, rule or regulation applicable to any
Purchaser Company; (c) will not violate any Order of any Governmental Authority
applicable to any Purchaser Company; and (d) will not result in a violation or
breach of, conflict with, constitute (with or without due notice or lapse of
time or both) a default (or give rise to any right of termination, cancellation,
payment or acceleration) under any Contract to which any Purchaser Company is a
party or by which any Purchaser Company is bound except in the case of clauses
(b), (c) and (d) as would not have a material adverse effect on the Purchaser
Companies, taken as a whole.

Section 5.5 Availability of Funds. Purchaser has sufficient funds available
(through existing credit facilities or otherwise) to enable the Purchaser
Companies to consummate the transactions contemplated hereby and to permit the
Purchaser Companies to perform all of their obligations under this Agreement.

Section 5.6 Litigation. There is no action, suit or proceeding at law or in
equity against any Purchaser Company pending or, to the knowledge of Purchaser,
threatened which would, if decided adversely to any Purchaser Company, prohibit
the transactions contemplated by this Agreement or which is reasonably likely to
have a material adverse effect on any Purchaser Company’s ability to consummate
the transactions contemplated by this Agreement.

Section 5.7 Brokers. No broker, finder or investment banker is entitled to any
brokerage, finder’s or other fee or commission in connection with the
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of any Purchaser Company.

 

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ARTICLE VI

COVENANTS

Section 6.1 Conduct of Business Pending the Closing. During the period from the
date of this Agreement to the Closing, the Seller Companies will each:
(i) conduct the Business only in the Ordinary Course of Business and (ii) use
commercially reasonable efforts to (A) preserve intact each of the Seller
Companies, (B) keep available the services of the current officers of the Seller
Companies and employees of the Business, (C) preserve the goodwill of those
having business relationships with the Business, (D) preserve its relationships
with customers, creditors and suppliers of the Business, (E) maintain the books,
accounts and records of the Business in the Ordinary Course of Business, and
(F) comply in all material respects with all Applicable Laws. Without limiting
the generality of the foregoing, except as set forth in Schedule 6.1, the Seller
Companies will not, without the prior written consent of Purchaser:

(a) except in the Ordinary Course of Business, sell, transfer or otherwise
dispose of any of the Purchased Assets;

(b) (i) increase the compensation of any employees or independent contractors of
the Business, except pursuant to the terms of agreements or plans currently in
effect and listed in the Schedules hereto, (ii) pay or agree to pay to any
employees or independent contractors of the Business, any pension, retirement
allowance, severance or other employee benefit not already required or provided
for under any existing plan, agreement or arrangement listed in the Schedules
hereto (iii) commit itself to any additional pension, profit-sharing, bonus,
extra compensation, incentive, deferred compensation, stock option, stock
appreciation right, group insurance, severance, retirement or other employee
benefit plan, agreement or arrangement, or to any employment, retention or
consulting agreement with or for the benefit of any employee or independent
contractor of the Business, (iv) except as required by Applicable Law, amend in
any respect any such plan, agreement or arrangement, (v) assume, enter into,
amend, alter or terminate any labor or collective bargaining agreement by which
the Business or its employees are affected, or (vi) hire any officer, director,
employee, agent or other similar representative for or on behalf of the
Business;

(c) (i) issue any debt securities of the Selling Subsidiaries or (ii) pledge or
otherwise encumber the Purchased Assets;

(d) (i) acquire (by merger, consolidation or acquisition of stock or assets) any
corporation, partnership or other business organization or division thereof or
any equity interest therein, or (ii) otherwise acquire any assets other than in
the Ordinary Course of Business;

(e) adopt a plan of complete or partial liquidation or authorize or undertake a
dissolution, merger, consolidation, restructuring, recapitalization or other
reorganization;

(f) (i) make or change any Tax election, adopt or change any Tax accounting
method, enter into any closing agreement, settle any Tax claim or assessment,
surrender any right to claim a Tax refund or credit or take or fail to take any
other action if such action or failure to take such action would increase in any
material respect the Tax liability of the Seller Companies or the Business, or
(ii) file any income Tax Return other than those listed on Schedule 6.1,
including any amended Tax Returns;

(g) change any of the accounting methods or accounting practices unless required
by GAAP or Applicable Law;

 

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(h) offer discounts on the provision of services of the Business, except in the
Ordinary Course of Business;

(i) account for, manage or treat Receivables in any manner other than in the
Ordinary Course of Business, or (without limiting the generality of the
foregoing) write off as uncollectible any Receivable other than in immaterial
amounts or in the Ordinary Course of Business;

(j) neglect to make any expenditures to the extent budgeted in the most recent
capital budget for the Business or consistent with the past practice of the
Business;

(k) (i) enter into new Contracts or modify, amend, terminate or renew any
Contract, relating to the Business, in each case, which is material to the
Business, except in the Ordinary Course of Business where (A) the term of any
new Contract or any such modification, amendment or renewal does not exceed
twelve months and (B) no loans or advances are made or extended to any customers
in connection with any such Contract, modification, amendment or renewal, and no
material rights or claims therein are waived, released or assigned, or
(ii) enter into, modify, amend, or renew any Contract relating to the Business
outside the Ordinary Course of Business or on a basis not consistent with past
practice if the dollar value of such Contract is or would be in excess of
$150,000 or the Contract would have an initial term, or renewal or extension of
terms, of greater than twelve months;

(l) settle any claims, actions, arbitrations, disputes or other proceedings
(i) that would result in the Business being enjoined in any respect or (ii) for
an amount which, in the aggregate, is in excess of $150,000;

(m) waive any right, debt or claim of material value to the Business;

(n) sell, assign, transfer, license, convey or permit to lapse any rights in any
of the Business IP, or disclose to any Person (other than in the Ordinary Course
of Business) or otherwise dispose of any trade secret, process or know-how not
heretofore a matter of public knowledge, except pursuant to judicial Order or
process;

(o) permit any of the insurance policies of the Seller Companies covering the
operations or conduct of the Business to be canceled or terminated or any of the
coverage thereunder to lapse, without simultaneously securing replacement
insurance policies which are in full force and effect and provide coverage
substantially similar to or greater than under the prior insurance policies; or

(p) authorize or enter into a Contract to do any of the foregoing.

Section 6.2 Consents. Prior to the Closing, Seller and Purchaser shall use
commercially reasonable efforts to make or cause to be made promptly all
registrations, filings and applications, to give all notices and to obtain all
governmental and third party consents, Orders, qualifications and waivers
necessary for the consummation of the transactions contemplated by this
Agreement or that thereafter might be necessary to effectuate the transfer of
any Permit or authorization, provided, however, that commercially reasonable
efforts shall not include any requirement of any Party to commence any
litigation or offer or grant any accommodation (financial or otherwise) to any
other Person.

 

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Section 6.3 Implementing Agreement; Further Assurances; Cooperation.

(a) Subject to the terms and conditions hereof, each Party shall take all action
required to fulfill its obligations hereunder and shall otherwise use all
commercially reasonable efforts to facilitate the consummation of the
transactions contemplated hereby.

(b) The Parties agree to execute and deliver all such other instruments and take
all such other action as any Party may reasonably request from time to time,
before or after Closing and without payment of further consideration, in order
to effectuate the transactions provided for herein. The Parties shall cooperate
fully with each other and with their respective counsel and accountants in
connection with any steps required to be taken as part of their respective
obligations under this Agreement, including the preparation of financial
statements and Tax Returns.

(c) For a period of seven (7) years after the Closing Date, each Party shall
provide, and shall cause its appropriate personnel to provide, when reasonably
requested to do so by another Party, access to all Tax, financial and accounting
records and any other records transferred to Purchaser or retained by Seller, as
applicable, in accordance with this Agreement and the right to make copies or
extracts therefrom at its expense. Neither Party shall, nor shall it permit its
Affiliates to, intentionally dispose of, alter or destroy any such records
without giving thirty (30) days’ prior written notice to the other Party and
permitting the other Parties hereto, at their expense, to examine, duplicate or
repossess such records. Each Party agrees to cooperate with the other party in
the preparation for and prosecution of the defense of any claim, action or cause
of action arising out of or relating to any Liability relating to the Business
that arose prior to the Closing and that, in the case of Purchaser, has been
assumed by Purchaser, or, in the case of Seller, has been retained by Seller,
including by making available evidence within the cooperating Party’s control
and persons needed as witnesses employed by the cooperating Party, as reasonably
needed for such defense. The requesting Party shall reimburse the cooperating
Party for its actual out-of-pocket costs relating to its cooperation under this
Section 6.3(c) and for a pro rata portion of the salary (including fringe
benefits, with such pro rata portion determined based upon the time spent in
connection with such cooperation) and for travel and subsistence expenses
directly relating to the cooperation of any of the cooperating Party’s employees
who assist the requesting Party. Notwithstanding the provisions of this
Section 6.3(c), while the existence of an adversarial proceeding between the
Parties will not abrogate or suspend the provisions of this Section 6.3(c), as
to records or other information directly pertinent to such dispute, the Parties
may not utilize this Section 6.3(c) but rather, absent agreement, must utilize
the available rules of discovery.

Section 6.4 Notification. During the period prior to the Closing Date, each of
the Parties shall, promptly after obtaining knowledge of the occurrence or the
impending occurrence of any fact or event which would cause or constitute a
Material Adverse Effect with respect to Seller, or a material breach of any of
the representations and warranties in this Agreement made by the Seller
Companies or the Purchaser Companies, as of the Closing Date, give detailed
written notice thereof to the other Parties hereto; and such notifying Party
shall use its commercially reasonable efforts to prevent or promptly to remedy
such breach. No disclosure by any Party pursuant to this Section 6.4 shall be
deemed to amend or supplement the Schedules hereto or to cure or waive any
misrepresentation or breach of warranty.

Section 6.5 Purchaser’s Inspection Rights. Seller shall give to Purchaser and
its designated employees or representatives prompt and full access, during
regular business hours of Seller to all facilities, properties, assets, books,
documents, Contracts, Tax Returns, employees and records of the Seller Companies
relating to the Business, and shall furnish promptly to Purchaser and its
representatives any information concerning the Seller Companies relating to the
Business as Purchaser may reasonably request; provided, however, that such
access does not unreasonably disrupt the normal operations of Seller.

 

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Section 6.6 Confidentiality; Publicity.

(a) Prior to the Closing, each of the Purchaser Companies agrees that any
information contained in the Schedules hereto or otherwise provided to the
Purchaser Companies pursuant to this Agreement shall be held by the Purchaser
Companies as confidential information in accordance with, and shall be subject
to the terms of, that certain Non-Disclosure Agreement between Seller and
Purchaser dated as of March 27, 2006 entered into in connection with the
transactions contemplated hereby (the “Confidentiality Agreement”). Effective
upon the Closing, the Confidentiality Agreement shall terminate with respect to
information relating solely to the Business; provided, however, that each of the
Purchaser Companies acknowledges that any and all other information provided to
it by Seller concerning Seller’s operations other than the Business shall remain
subject to the terms and conditions of the Confidentiality Agreement after the
Closing Date.

(b) The Parties acknowledge that this Agreement and the transactions
contemplated hereby are of a confidential nature and shall not be disclosed
prior to the Closing except to those employees, consultants and advisors with a
need to know such information or as required by Applicable Law. None of the
Parties hereto shall make or cause to be made any public disclosure prior to the
Closing with respect to the transactions contemplated hereby or this Agreement
without the prior agreement of the other Parties, except as required by
Applicable Law or any listing agreement with a national securities exchange. The
Parties shall use commercially reasonable efforts to provide the other Party
with a reasonable opportunity to review and make reasonable comments on any
press release or other public disclosure prior to the Closing. Subject to such
prior consultation, the Parties agree that each of Seller and Purchaser may
issue a press release and file a Form 8-K with the Securities and Exchange
Commission in connection with the execution of this Agreement.

(c) For a period of five years after the Closing Date, Seller will not, and will
not permit its accountants, counsel, consultants, advisors and agents
(collectively, “Representatives”) and its Affiliates to, directly or indirectly,
disclose or use or authorize, license or otherwise permit other Persons to use
in any way that is detrimental to the Purchaser Companies or the Business any
trade secrets or other information which is confidential, proprietary or
otherwise not publicly available, including any confidential data, know-how or
information relating to the business practices, products, customers, prospects,
suppliers, research and development, ideas, designs, discoveries, inventions,
techniques, equipment, marketing, sales, methods, manuals, strategies or
financial affairs (collectively, the “Confidential Information”) about the
Purchaser Companies, the Purchased Assets and the Business. The obligation of
Seller, its Affiliates and its Representatives to hold any such information in
confidence will be satisfied if each exercises the same degree of care with
respect to such information as it would take to preserve the confidentiality of
its own similar information. In the event of a breach of the obligations
hereunder by Seller, its Affiliates or its Representatives, the Parties agree
that, in addition to all other available remedies, Purchaser will be entitled to
injunctive relief to enforce such obligations in any court of competent
jurisdiction. Notwithstanding the foregoing, Confidential Information will not
include such information which: (A) at the time of disclosure is publicly
available or becomes publicly available through no act or omission of Seller,
its Affiliates or its Representatives; (B) is disclosed or furnished to Seller
after the Closing by a third Person that did not acquire the information under
an obligation of confidentiality; or (C) is disclosed by Seller under compulsion
of Applicable Law.

 

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Section 6.7 Noncompetition and Nonsolicitation.

(a) During the period beginning on the Closing Date and ending on the third
anniversary of the Closing Date, Seller shall not, and shall not permit its
Affiliates to, either alone or in conjunction with any other Person (including
any Affiliate), directly or indirectly (including as a member, agent,
shareholder or investor of any Person or in any other capacity), engage in, or
own, manage, operate, join, control, or participate in the ownership,
management, operation, or control of, or provide services to or for, or provide
financial or other assistance to, any Person in, the selling, marketing or
provision of any services that are the same or substantially similar to, or
fulfill the same function as those provided, sold or marketed by the Business at
any time prior to the Closing Date; provided, however, that nothing in this
Section shall preclude Seller or its Affiliates from (i) owning not more than 1%
of the outstanding Capital Stock of any Person if such stock is listed on a
national securities exchange or is regularly traded in the over-the-counter
market by a member of a national securities exchange or (ii) owning or operating
the business which it currently conducts other than the Business conducted under
the name “Highland Partners.” The geographic territory to which this Section
extends is any country in which the Business has been conducted within the past
three years.

(b) Seller agrees that, from the date hereof through the third anniversary of
the Closing Date, Seller shall not, and shall not permit its Affiliates to,
directly or indirectly employ or solicit, receive or accept the performance of
services by, any employee of the Seller Companies currently employed in the
operation of the Business (excluding secretarial and clerical employees), that
as of or after the Closing Date is employed by Purchaser or any of its
Subsidiaries or Affiliates (other than those employees who have been terminated
by Purchaser or any of its Subsidiaries or Affiliates and are not under
contractual non-competition obligations to Purchaser or any of its Subsidiaries
or Affiliates that would prohibit their employment by, or performance of
services for, Seller or its Affiliates); provided, however, that the foregoing
shall not prohibit solicitations to the public in general.

(c) If any provision contained in this Section 6.7 is for any reason held
invalid, illegal or unenforceable in any respect, such invalidity, illegality or
unenforceability will not affect any other provisions of this Section 6.7, but
this Section 6.7 will be construed as if such invalid, illegal or unenforceable
provision had never been contained herein. It is the intention of the Parties
that if any of the restrictions or covenants contained in this Section 6.7 is
held to cover a geographic area or to be of a length of time which is not
permitted by Applicable Law, or in any way construed to be too broad or to any
extent invalid, such provision will not be construed to be null, void and of no
effect. Instead, the Parties agree that a court of competent jurisdiction will
construe, interpret, reform or judicially modify this Section 6.7 to provide for
a covenant having the maximum enforceable geographic area, time period and other
provisions (not greater than those contained herein) as will be valid and
enforceable under such Applicable Law.

(d) Seller agrees that a violation of this Section 6.7 will cause irreparable
injury to Purchaser, and Purchaser will be entitled, in addition to any other
rights and remedies it may have at law or in equity, to apply for an injunction
enjoining and restraining Seller and its Subsidiaries from doing or continuing
to do any such act and any other violations or threatened violations of this
Section 6.7, and Seller consents to the entry thereof. In the event that Seller
is found to have breached any covenant in this Section 6.7, the time period
provided for in that covenant shall be tolled for so long as Seller is in
violation of that covenant.

Section 6.8 Employee Matters.

(a) At or prior to the Closing Date, Purchaser, Heidrick Canada or Heidrick
Australia, as the case may be, shall extend offers of employment to each of
those employees of the

 

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Business set forth on Schedule 6.8(a) effective upon the Closing Date. Such
offers shall be upon terms and conditions to be determined by the applicable
Purchaser Company, subject to the final sentence of this Section 6.8(a),
provided that those employees listed on Schedule 6.8(a) as being offered a Key
Employee Agreement shall receive offers of employment on the terms and
conditions set forth in the Key Employee Agreement (all such employees who
accept the applicable Purchaser Company’s offer of employment are referred to as
the “Non-UK Transferring Employees“). The Seller Companies shall terminate the
employment of all the Non-UK Transferring Employees immediately prior to the
Closing and shall cooperate with and use their reasonable best efforts to assist
the Purchaser Companies in their efforts to secure satisfactory employment
arrangements with such employees. On and after the Closing Date, the Purchaser
Companies shall provide the Non-UK Transferring Employees with employee benefits
comparable to those that are provided to similarly situated employees of the
Purchaser Companies at such time, except as specifically provided in this
Section 6.8 or the applicable Key Employee Agreement.

(b) Seller and Purchaser acknowledge and agree that, subject to the right of any
Highland UK employee to object to the transfer, the contracts of employment of
those individuals listed in Schedule 6.8(b) (or as may otherwise be agreed in
writing by the parties) shall be transferred to Purchaser as of the Closing Date
in accordance with the Transfer Regulations, and, subject to Section 1.4,
Purchaser will assume the obligations and liabilities of Highland UK with
respect to such employees as of the Closing Date. All such employees who do not
object to the transfer are referred to as the “UK Transferring Employees” .

(i) Subject to Schedule 6.8(b)(i), Highland UK and Purchaser shall comply with
their respective obligations under the Transfer Regulations. Each of Highland UK
and Purchaser shall indemnify the other and shall keep it fully indemnified
against all and any liabilities arising from or connected with its own failure
to comply with the Transfer Regulations, provided, however, that if Highland UK
complies with the program set forth in Schedule 6.8(b)(i), which the Parties
believe to be in compliance with the Transfer Regulations, then Purchaser shall
indemnify Highland UK against all and any Liabilities arising from or connected
with any breach of Regulations 13 and 14 of the Transfer Regulations.

(ii) Purchaser confirms that it has provided, or will provide prior to the
Closing, Highland UK with details of any measures it envisages taking in respect
of the UK Transferring Employees in accordance with its obligation under
Regulation 13(4) of the Transfer Regulations.

(iii) Highland UK confirms that it has provided, or will provide prior to the
Closing, to Purchaser employee liability information in accordance with its
obligation under Regulation 11 of the Transfer Regulations.

(iv) Highland UK shall not, in connection with the consultation process carried
out in accordance with Regulation 13 of the Transfer Regulations, give any
undertaking, guarantee or other commitment in respect of any UK Transferring
Employee without the prior written consent of Purchaser.

(c) With respect to any employee benefits that are provided to any Non-UK
Transferring Employee or UK Transferring Employee (together the “Transferring
Employees”) under any employee benefit plan, program, arrangement or agreement
maintained by Purchaser or its Affiliates after the Closing, Purchaser shall
cause service accrued by such Transferring Employees during employment with
Seller or its Affiliates prior to the Closing (to the extent recognized by
Seller and its Affiliates) to be recognized by Purchaser and its Affiliates for
purposes of eligibility, participation and vesting with respect to such employee
benefits.

 

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(d) Seller shall pay all severance benefits that may be payable under any
Benefit Plan associated with any employees of the Seller Companies that do not
become Transferring Employees; provided, however, that Purchaser shall reimburse
Seller for the amount of the severance benefit paid to the employees set forth
on Schedule 6.8(d) within five Business Days of written notice from Seller that
Seller has made such severance payments to such employees, and Seller shall not
be required to accrue a liability on the Preliminary Statement or the Final
Statement with respect to such severance benefit.

(e) To the extent that any Transferring Employees, or any employees of the
Seller Companies, are parties to Contracts with Seller or any of its
Subsidiaries or Affiliates that contain confidentiality, invention assignment
and non-solicitation provisions relating to the Business IP (“Restrictive
Covenants”), Seller agrees that it will not, and will not permit any of its
Subsidiaries or Affiliates to enforce or attempt to enforce such Restrictive
Covenants against such employees as they relate to the Business IP after the
Closing.

(f) Seller shall comply with the requirements of the WARN Act or any similar
state, provincial or local law of the United States or any other jurisdiction
with respect to any “plant closing” or “mass layoff,” as those terms are defined
in the WARN Act or such other applicable law, which may result from Seller’s
termination of the employment of any of its employees who are not Transferring
Employees in connection with the transactions contemplated hereby through the
Closing Date. Purchaser shall comply with the requirements of the WARN Act or
any similar state, provincial or local law of the United States or any other
jurisdiction with respect to any “plant closing” or “mass layoff,” as those
terms are defined in the WARN Act or such other applicable law, which may result
from Purchaser’s termination of the employment of any Transferring Employees
after the Closing.

(g) Except as specifically provided in this Section 6.8, Section 1.3(d) or
Section 1.3(e): (i) none of the Purchaser Companies shall adopt, become a
sponsoring employer of, or have any obligations under or with respect to the
Benefit Plans, and the Seller Companies shall be solely responsible for any and
all liabilities and obligations that have been incurred under or in connection
with any Benefit Plan; (ii) the Seller Companies shall remain solely responsible
for any and all liabilities arising out of or relating to the employment or
termination of employment of any employees of the Business who do not become
Non-UK Transferring Employees or who are not UK Transferring Employees, whether
such liabilities arise before, on or after the Closing Date; and (iii) the
Seller Companies shall be solely responsible for, and shall pay when due, any
and all liabilities arising out of or relating to the employment by any of the
Seller Companies, or termination of employment by any of the Seller Companies,
of any Transferring Employee. In addition, the Seller Companies (A) shall pay
any bonuses and similar amounts payable to Transferring Employees that are due
prior to or on the Closing Date, or due after the Closing Date as a result of
the consummation of the Closing, in each case according to the Benefit Plans
applicable to such Transferring Employees and (B) shall accrue on the
Preliminary Statement and the Final Statement untaken entitlements to vacation,
annual leave and long service leave for the Transferring Employees, and the
amount set forth on Schedule 6.8(g), representing the portion of bonuses and
similar amounts that would be payable to the Transferring Employees at a later
date for the current compensation year attributable to actual performance
through the Closing Date. Purchaser shall pay to each Transferring Employee his
or her share of such aggregate bonus amount for the current compensation year on
the date on which such bonus amounts would have become due under Seller’s bonus
plan so long as such Transferring Employee is still then employed by Purchaser
or its Affiliates.

(h) Nothing contained in this Agreement shall create any third party beneficiary
rights in any Transferring Employee or any beneficiary or dependents thereof,
with respect to the compensation, terms and conditions of employment and
benefits that may be provided to any Transferring Employee by Purchaser.

 

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(i) Except to the extent set forth in any written Contract with such employee
executed in connection with the consummation of the transactions contemplated
hereby or which is assumed by Purchaser pursuant to Section 6.8(b), nothing
contained in this Agreement shall confer upon any Transferring Employee any
right with respect to continued employment by any of the Purchaser Companies,
nor shall anything herein interfere with the right of the Purchaser Companies to
terminate the employment of any Transferring Employee at any time, with or
without cause, following the effective date of his or her employment with the
Purchaser Companies, or restrict the Purchaser Companies in the exercise of
their independent business judgment in modifying any of the terms and conditions
of the employment of the Transferring Employees. Notwithstanding the foregoing,
if any of the Purchaser Companies terminates any Transferring Employee within
twelve months after the Closing, then Purchaser shall pay a separation benefit
to such Transferring Employee at least equal to the amount set forth on Schedule
6.8(i) for such Transferring Employee, provided, however, that Seller shall be
responsible for the separation benefit payable to any Transferring Employee who
is leverage personnel assigned to a partner of the Business, if (A) such partner
does not enter into a Key Employee Agreement (or, in the case of a partner who
is a UK Transferring Employee, does not deliver a letter advising that such
partner does not object to the transfer of his or her employment to Purchaser)
and Purchaser terminates the leverage personnel assigned to such partner within
30 days after the Closing or (B) such partner enters into a Key Employee
Agreement (or delivers a letter of non-objection), but voluntarily terminates
his or her employment with Purchaser within three months after the Closing and
Purchaser terminates the leverage personnel assigned to that partner within 30
days thereafter.

(j) At the Closing, Purchaser shall reimburse Seller for $50,000 of the bonus to
be paid by Seller to the employee set forth on Schedule 6.8(j) if such employee
accepts employment with Heidrick Australia.

Section 6.9 Continued Use of “Highland” Name. Notwithstanding anything to the
contrary stated herein, Purchaser grants Seller a limited, non-exclusive,
perpetual, worldwide, non-transferable, royalty-free right to use the tradename
“Highland” solely and strictly as part of the name “Hudson Highland” for use
strictly in Seller’s corporate name and in the names of Seller’s Subsidiaries
and Affiliates.

Section 6.10 Transfer Taxes.

(a) Notwithstanding anything to the contrary contained herein, but subject to
Section 9.2, Purchaser and Seller shall each be liable for and shall pay 50% of
all sales, use, value added, goods and services, documentary, stamp, gross
receipts, registration, transfer, capital, conveyance, excise, recording,
license and other similar Taxes and fees (“Transfer Taxes”), if any, arising out
of or in connection with or attributable to the transactions effected pursuant
to this Agreement, and Purchaser and Seller shall cooperate in timely making all
filings, returns, reports and forms as may be required to comply with the
provisions of such Tax Laws.

(b) Purchaser and Seller shall cooperate with each other in attempting to
minimize Transfer Taxes, if any.

(c) Purchaser shall provide to Seller, and Seller shall provide to Purchaser,
all exemption certificates with respect to Transfer Taxes that may be provided
for under Applicable Law. Such certificates shall be in the form, and shall be
signed by the proper Party, as provided under Applicable Law. Without limiting
the foregoing, at the Closing, Heidrick Canada and Highland Canada

 

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shall execute jointly an election under Section 167 of the Excise Tax Act
(Canada) to have the sale of the assets of Highland Canada take place on a
GST-free basis under Part IX of the Excise Tax Act (Canada). Heidrick Canada and
Highland Canada shall make such election in prescribed form containing the
prescribed information and Heidrick Canada shall file such election with its GST
return for the reporting period in which the sale of the assets of Highland
Canada takes place. Heidrick Canada represents that it is a “registrant” under
Part IX of the Excise Tax Act (Canada).

(d) The Parties agree that the supply of the Purchased Assets owned by Highland
Australia is a supply of a GST-free going concern for the purposes of the A New
Tax System (Goods and Services Tax) Act 1999 (Cth).

Section 6.11 No Solicitation. From the date hereof through the Closing, neither
Seller nor any of the Selling Subsidiaries, will, nor will Seller authorize or
permit any Affiliate of Seller or any officer, director or employee of Seller or
any Affiliate thereof, or any investment banker or other Representative retained
by Seller or an Affiliate of Seller, to (a) directly or indirectly, solicit,
initiate, encourage or participate in any way (including by way of furnishing
information) in any discussion or negotiations with any Person or other entity
or group (other than Purchaser or an Affiliate of Purchaser) concerning any
merger, consolidation, sale of assets, sale of Capital Stock or similar
transactions relating to the Purchased Assets or the Business (each, an
“Acquisition Proposal”), (b) disclose, directly or indirectly, to any Person
considering an Acquisition Proposal any information concerning the Purchased
Assets or the Business, or (c) enter into any understanding, agreement or
commitment with any third party concerning any merger, consolidation, sale of
assets, sale of Capital Stock or similar transaction relating to the Purchased
Assets or the Business. Seller will promptly notify Purchaser of any Acquisition
Proposal and will promptly provide Purchaser with such information regarding the
Acquisition Proposal as Purchaser may request.

Section 6.12 Additional Financial Statements. Seller will furnish Purchaser with
an unaudited balance sheet and an unaudited consolidated income statement for
the Business for each full quarterly period prior to the Closing Date as soon as
they become available. Seller will prepare each of the additional unaudited
consolidated financial statements (i) on a basis consistent with the Financial
Statements and (ii) in compliance with the representations and warranties set
forth in Section 4.5 with respect to the Financial Statements.

Section 6.13 Termination of Related Party Arrangements. Seller and the Selling
Subsidiaries shall cause all Contracts described in Schedule 4.20, other than
those listed in Schedule 6.13, to be terminated immediately prior to the Closing
with no further liability or obligation on the part of any party thereto.

Section 6.14 Termination of All Encumbrances. Seller shall, at its own expense,
procure and deliver to Purchaser at or prior to the Closing executed termination
statements or releases sufficient to terminate all Encumbrances other than
Permitted Encumbrances on the Purchased Assets, including under that certain
Amended and Restated Loan and Security Agreement by and among Seller and certain
of its Affiliates and Wells Fargo Foothill, Inc., dated as of June 25, 2003, as
subsequently amended.

Section 6.15 Releases from Letters of Credit and Guarantees. Purchaser shall use
commercially reasonable efforts to obtain from the respective beneficiary, in
form and substance reasonably satisfactory to Seller, on or before the Closing,
valid and binding written complete and unconditional releases of Seller and its
Affiliates from any Liability arising on or after the Closing Date under the
letters of credit and guarantees set forth on Schedule 6.15. To secure such
complete and unconditional releases, Purchaser shall provide substitute letters
of credit, guarantees or other credit

 

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support with terms that are acceptable to the counterparty or make other
arrangements as the counterparty and Purchaser may mutually agree. To the extent
Purchaser does not obtain such complete and unconditional releases, in form and
substance reasonably satisfactory to Seller prior to Closing, Purchaser shall
indemnify, defend and hold harmless Seller and its Affiliates for any Losses
arising out of or relating to such letters of credit and guarantees from and
after the Closing until such time as Purchaser obtains such complete and
unconditional releases.

Section 6.16 Bulk Sales Law. The Parties each agree to waive compliance by the
other with the provisions of the bulk sales law of any jurisdiction.

Section 6.17 New York Lease Cancellation. Purchaser agrees to vacate the office
located at 622 Third Avenue, New York, New York, no later than February 28,
2007, unless Seller agrees to a later date. Within 30 days after Purchaser
vacates such office, Purchaser shall pay to Seller a lease cancellation fee
calculated in accordance with the formula set forth in Schedule 6.17.

ARTICLE VII

CONDITIONS TO CLOSING

Section 7.1 Conditions to Obligations of Purchaser. The obligations of the
Purchaser Companies to consummate the transactions contemplated by this
Agreement are conditioned upon the satisfaction or waiver, at or prior to the
Closing, of the following conditions:

(a) Representations and Warranties. The representations and warranties made by
Seller in this Agreement, as of the date hereof and as of the Closing Date shall
be true and correct as though made as of such time or, to the extent that such
representations and warranties expressly relate to a specific date, as of such
specific date, except where the failure of such representations and warranties,
individually or in the aggregate, to be so true and correct (without giving
effect to any materiality or Material Adverse Effect qualifiers set forth
therein) would not have a Material Adverse Effect;

(b) Covenants. The Seller Companies shall have performed or complied in all
material respects with all obligations and covenants hereunder required to be
performed or complied with by the Seller Companies at or prior to the Closing
Date;

(c) No Prohibitions. No Applicable Law or Order shall have been enacted,
entered, promulgated, enforced or issued by any Governmental Authority, and no
litigation, proceeding or other legal restraint or prohibition shall be pending,
threatened or in effect, that could reasonably be expected to (i) prevent
consummation of any of the transactions contemplated by this Agreement,
(ii) cause any of the transactions contemplated by this Agreement to be
rescinded following consummation or (iii) affect materially and adversely the
right of the Purchaser Companies to own the Purchased Assets or to operate the
Business;

(d) Governmental Approvals. All material approvals, consents or authorizations
under Applicable Laws required to be obtained prior to the Closing from any
Governmental Authority in order to consummate the transactions contemplated
hereby shall have been obtained;

(e) Key Employees. Partners of the Business representing both (i) at least
twenty-five of the thirty-five billing partners of the Business listed on
Schedule 7.1(e) and (ii) no less than 80% of the revenue of the Business for the
six-month period ended June 30, 2006 (calculated excluding revenue of the
Business attributable to the employees of the Business set forth on Schedule
6.8(d)) (collectively, the “Key Employees”) shall have accepted employment with
the Purchaser Companies and shall have duly executed employment agreements in
the form attached hereto as Exhibit B (the “Key Employee Agreement”) or, in the
case of Key Employees who are UK Transferring Employees, shall have delivered a
letter advising that they do not object to the transfer of their employment to
Purchaser;

 

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(f) Transition Services Agreement. Seller shall have executed a Transition
Services Agreement with Purchaser substantially in the form attached hereto as
Exhibit C (the “Transition Services Agreement”);

(g) Preferred Provider Arrangement. Seller and Purchaser shall have entered into
an arrangement by which each agrees to refer to the other certain assignments
that the referring Party does not wish to accept and which require services that
are within expertise of the other Party (the “Preferred Provider Agreement”);
and

(h) Deliveries. Seller or the Selling Subsidiaries, as the case may be, shall
have delivered to Purchaser each of the following:

(i) a certificate executed by a vice president or other executive officer of
Seller, dated as of the Closing Date, to the effect that the conditions set
forth in Section 7.1(a) and Section 7.1(b) have been satisfied;

(ii) a certificate executed by the corporate secretary or an assistant secretary
of Seller certifying as of the Closing Date (A) a true and complete copy of the
resolutions of the board of directors of Seller authorizing the execution,
delivery and performance by Seller of this Agreement and the consummation of the
transactions contemplated hereby and (B) incumbency matters;

(iii) certificates executed by an executive officer of each of the Selling
Subsidiaries certifying as of the Closing Date (A) a true and complete copy of
the resolutions of the board of directors of such Selling Subsidiary authorizing
the execution, delivery and performance by such Selling Subsidiary of this
Agreement and the consummation of the transactions contemplated hereby and
(B) incumbency matters;

(iv) a certificate of the Secretary of State or other applicable Governmental
Authority certifying the good standing of each Seller Company in its
jurisdiction of organization (to the extent such a certificate is issuable in
such jurisdiction) as of a date within seven days of the Closing Date;

(v) bills of sale, general assignments of trademarks and other instruments of
assignment and transfer as may be reasonably necessary to vest in Purchaser all
of the Seller Companies’ right, title and interest in and to the Purchased
Assets, in each case, in form and substance reasonably satisfactory to
Purchaser, duly executed by Seller Companies;

(vi) a copy of the Transition Services Agreement, duly executed by each
applicable Seller Company;

(vii) copies of the Key Employee Agreements, duly executed by the Key Employees;

(viii) opinions of counsel from counsel to Seller in the forms attached hereto
as Exhibit D;

 

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(ix) copies reasonably acceptable to Purchaser of each of the Consents set forth
in Schedule 7.1(h)(ix);

(x) discharges, releases and UCC-3 termination statements adequate to discharge
all Encumbrances on the Purchased Assets, other than Permitted Encumbrances,
including an executed ASIC Form 312 to evidence the discharge of all
Encumbrances on the Purchased Assets of Highland Australia; and

(xi) with respect to the Business conducted by Highland Canada, a purchase
certificate in each jurisdiction where such a certificate is contemplated by
Canadian law, and/or a clearance certificate from the relevant Worker’s
Compensation Board, Workplace Safety Insurance Board, or other similar entity.

Section 7.2 Conditions to Obligations of Seller and the Selling Subsidiaries.
The obligations of Seller and the Selling Subsidiaries to consummate the
transactions contemplated hereby are subject to the satisfaction or waiver, at
or prior to the Closing, of the following further conditions:

(a) Representations and Warranties. The representations and warranties made by
Purchaser in this Agreement qualified as to materiality shall be true and
correct, and those not so qualified shall be true and correct in all material
respects, as of the date hereof and as of the Closing Date as though made as of
such time, or to the extent such representations and warranties expressly relate
to a specific date, as of such specific date;

(b) Covenants. The Purchaser Companies shall have performed or complied in all
material respects with all obligations and covenants hereunder required to be
performed or complied with by the Purchaser Companies at or prior to the Closing
Date;

(c) No Prohibitions. No Applicable Law or Order enacted, entered, promulgated,
enforced or issued by any Governmental Authority or other legal restraint or
prohibition preventing the purchase and sale of the Purchased Assets shall be in
effect;

(d) Governmental Approvals. All material approvals, consents or authorizations
under Applicable Laws required to be obtained prior to the Closing from any
Governmental Authority in order to consummate the transactions contemplated
hereby shall have been obtained;

(e) Transition Services Agreement. Purchaser shall have executed the Transition
Services Agreement with Seller;

(f) Preferred Provider Arrangement. Purchaser and Seller shall have entered into
the Preferred Provider Arrangement; and

(g) Deliveries. Purchaser shall have delivered to Seller each of the following:

(i) a certificate executed by a vice president or other executive officer of
Purchaser, dated as of the Closing Date, to the effect that the conditions set
forth in Section 7.2(a) and Section 7.2(b) have been satisfied;

(ii) certificates executed by the corporate secretary or an assistant secretary
of each of the Purchaser Companies certifying as of the Closing Date (A) a true
and complete copy of the resolutions of the board of directors of such Purchaser
Company authorizing the execution, delivery and performance by such Purchaser
Company of this Agreement and the consummation of the transactions contemplated
by this Agreement; and (B) incumbency matters;

 

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(iii) a certificate of the Secretary of State or other applicable Governmental
Authority certifying the good standing of each Purchaser Company in its
jurisdiction of organization as of a date within seven days of the Closing Date;

(iv) instruments evidencing the assumption by the Purchaser Companies of the
Assumed Liabilities, in form and substance reasonably acceptable to Seller, duly
executed by the Purchaser Companies;

(v) counterparts to the Key Employee Agreements duly executed by the applicable
Purchaser Company;

(vi) a counterpart to the Transition Services Agreement duly executed by each
applicable Purchaser Company; and

(vii) opinions of counsel from counsel to Purchaser in the forms attached hereto
as Exhibit E.

ARTICLE VIII

INDEMNIFICATION

Section 8.1 Indemnification by Seller. Subject to the limits set forth in
Section 8.4(a), Seller hereby agrees to indemnify, defend and hold Purchaser,
its Subsidiaries and Affiliates and their respective officers and directors (all
of such Persons are collectively referred to herein as the “Purchaser
Indemnified Parties”) harmless from and in respect of any and all losses,
damages, claims, liabilities, obligations, suits, actions, fees, Taxes,
penalties, costs and expenses of any nature whatsoever (including reasonable
legal fees and expenses), but excluding in each case, consequential, incidental,
special or punitive damages (other than lost profits and any such damages
resulting from fraud, and other than those actually paid by an Indemnified Party
to a Person other than an Indemnified Party) (collectively, “Losses”), that any
of them may incur arising out of, in connection with, relating to or caused by:

(a) any inaccuracy or breach, or alleged inaccuracy or breach, of:

(i) any representation or warranty of Seller contained in this Agreement
(including all representations and warranties included in Article IV of this
Agreement) or in any agreement or certificate executed and delivered by any
Seller Company pursuant to Section 7.1(h); or

(ii) any covenant, undertaking or other agreement of Seller contained in this
Agreement or in any agreement or certificate delivered and executed by any
Seller Company pursuant to Section 7.1(h);

(b) except as provided in the penultimate sentence of Section 3.3(c), the
failure to obtain any consent with respect to any Contract which provides for or
requires the consent of the other party thereto to be obtained in connection
with, or as a result of, the consummation of any of the transactions
contemplated by this Agreement; or

(c) any Excluded Liability.

 

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Section 8.2 Indemnification by Purchaser. Subject to the limits set forth in
Section 8.4(b), Purchaser agrees to indemnify, defend and hold Seller, its
Subsidiaries and Affiliates and their respective officers and directors (“Seller
Indemnified Parties”) harmless from and in respect of any and all Losses that
any of them may incur arising out of, in connection with, relating to or caused
by:

(a) any inaccuracy or breach, or alleged inaccuracy or breach, of:

(i) any representation or warranty of Purchaser contained in this Agreement or
in any agreement or certificate delivered by Purchaser pursuant to this
Agreement or in any agreement or certificate executed and delivered by any
Purchaser Company pursuant to Section 7.2(g); or

(ii) any covenant, undertaking or other agreement of Purchaser contained in this
Agreement or in any agreement or certificate delivered by Purchaser pursuant to
this Agreement or in any agreement or certificate delivered and executed by any
Purchaser Company pursuant to Section 7.2(g);

(b) any Assumed Liability; or

(c) the operation or ownership by the Purchaser Companies of the Business
following the Closing, other than any Losses (i) for which Seller has an
indemnification obligation pursuant to Section 8.1 or (ii) resulting from the
Business not achieving Revenue levels for purposes of the Earnout Amounts.

Section 8.3 Survival of Representations, Warranties and Covenants. The
representations and warranties of the Parties contained in this Agreement or in
any instrument delivered pursuant to Section 7.1(h) or Section 7.2(g) will
survive the Closing Date and will remain in full force and effect (i) in the
case of the representations and warranties contained in the first sentence of
Section 4.1, Section 4.2 the first sentence of Section 4.12, Section 5.1 and
Section 5.2, at all times from and after the Closing; (ii) in the case of the
representations and warranties contained in Section 4.10, until the date that is
four years after the Closing; (iii) in the case of the representations and
warranties contained in Section 4.15, until 60 days after the expiration of the
applicable statute of limitations with respect to the matter to which the claim
relates, as such limitation period may be extended from time to time (provided
that in the case of such representations and warranties relating to Highland UK,
until the date that is seven years after the Closing); and (iv) in the case of
all other representations and warranties, until the date which is two years
following the Closing Date; provided, however, that, in each case, such
representations and warranties shall survive beyond their respective periods
with respect to any inaccuracy therein or breach thereof, notice of which shall
have been duly given within such applicable period in accordance with
Section 8.4(c). The covenants and agreements of the Parties contained in this
Agreement or in any instrument delivered pursuant to Section 7.1(h) or
Section 7.2(g) will survive the Closing and will remain in full force and effect
at all times after the Closing, except any covenant or agreement to be performed
by its terms prior to the Closing shall expire two years after the Closing. No
claim for indemnification under this Article VIII may be brought for a breach of
a representation, warranty or covenant after such representation, warranty or
covenant has expired pursuant to the foregoing.

Section 8.4 Limitations on Indemnification Obligations. Notwithstanding anything
to the contrary contained herein:

(a) Seller shall not be obligated to indemnify the Purchaser Indemnified Parties
under Section 8.1(a)(i), (x) unless the aggregate of all Losses for which Seller
would, but for this clause (x), be liable under Section 8.1(a)(i) exceeds on a
cumulative basis $350,000, at which point the

 

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Purchaser Indemnified Parties shall be entitled to all indemnification amounts
from Seller under Section 8.1(a)(i) in excess of the first $350,000 of Losses,
provided, however that Seller shall be required to indemnify the Purchaser
Indemnified Parties with respect to a breach of a representation or warranty
only if the losses arising therefrom exceed $1,000 and such Losses shall be
applied against the cumulative $350,000 amount only if such Losses exceed
$1,000, or (y) for any Losses in excess of an amount equal to $7,800,000;
provided, however, that the limitations in this Section 8.4(a) shall not apply
to any indemnification obligations arising from the representations and
warranties set forth in the first sentence of Section 4.1, Section 4.3 and the
first sentence of Section 4.12; and

(b) Purchaser shall not be obligated to indemnify the Seller Indemnified Parties
under Section 8.2(a)(i), (x) unless the aggregate of all Losses for which
Purchaser would, but for this clause (x), be liable under Section 8.2(a) exceeds
on a cumulative basis $350,000, at which point Seller shall be entitled to all
indemnification amounts under Section 8.2(a) in excess of the first $350,000 of
Losses, provided, however that Purchaser shall be required to indemnify the
Seller Indemnified Parties with respect to a breach of a representation or
warranty only if the losses arising therefrom exceed $1,000 and such Losses
shall be applied against the cumulative $350,000 amount only if such Losses
exceed $1,000, or (y) for any Losses in excess of an amount equal to $7,800,000;
provided, however, that the limitations in this Section 8.4(b) shall not apply
to any indemnification obligations arising from the representations and
warranties set forth in Sections 5.1 and 5.2.

(c) Notice and Opportunity to Defend.

(i) If there occurs an event which a Party (an “Indemnified Party”) asserts is
an indemnifiable event pursuant to Section 8.1 or Section 8.2, the Indemnified
Party shall notify the Party from which it is seeking indemnification (an
“Indemnifying Party”) promptly. If such event involves (A) any claim or (B) the
commencement of any action or proceeding by a third Person, the Indemnified
Party will give the Indemnifying Party prompt written notice of such claim or
the commencement of such action or proceeding. Such notice shall be a condition
precedent to any liability of the Indemnifying Party hereunder; provided,
however, that the failure to provide prompt notice as provided herein will
relieve the Indemnifying Party of its obligations hereunder only to the extent
that such failure materially prejudices the Indemnifying Party hereunder. In
case any such action shall be brought against any Indemnified Party and the
Indemnified Party shall notify the Indemnifying Party in writing of the
commencement thereof, the Indemnifying Party shall be entitled to participate
therein and, to the extent that it shall wish, to assume the defense thereof,
with counsel selected by the Indemnified Party and reasonably satisfactory to
the Indemnifying Party and, after written notice from the Indemnifying Party to
the Indemnified Party of such election so to assume the defense thereof, the
Indemnifying Party shall not be liable to the Indemnified Party for any legal
expenses of other counsel or any other expenses subsequently incurred by such
Party in connection with the defense thereof. The Indemnifying Party shall be
liable for the fees and expenses of counsel employed by the Indemnified Party
for any period during which the Indemnifying Party has not assumed the defense
thereof. The Indemnified Party agrees to reasonably cooperate with the
Indemnifying Party and its counsel in the defense against any such asserted
liability. Such cooperation shall include the retention and (upon the
Indemnifying Party’s request) the provision to the Indemnifying Party of records
that are reasonably relevant to such third party claim, and making employees
available at the Indemnifying Party’s expense (which shall include only
reasonable out-of-pocket expenses actually incurred) on a mutually convenient
basis to provide additional information and explanation of any material provided
hereunder. The Indemnified Party shall have the right to participate at its own
expense in the defense of such asserted liability, it being understood, however,
that the Indemnifying Party shall control such defense.

 

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(ii) No Indemnifying Party shall consent to the entry of any judgment or enter
into any settlement without the consent of the Indemnified Party, which consent
shall not be unreasonably withheld or delayed; provided, however, that the
Indemnified Party may refuse its consent to a bona fide offer of judgment or
settlement that the Indemnifying Party wishes to accept if such proposed
judgment or settlement (A) does not include as an unconditional term thereof the
giving by each claimant or plaintiff to each Indemnified Party of a release from
all liability in respect to such claim, or (B) would result in the finding or
admission of any violation of Applicable Law, or (C) would impose injunctive or
other equitable relief against the Indemnified Party or could interfere with or
adversely affect the business, operations or assets of the Indemnified Party. In
such event, the Indemnified Party shall assume the defense of such matter at the
sole expense of the Indemnified Party and the obligation of the Indemnifying
Party to the Indemnified Party shall be equal to the lesser of (i) the amount of
the bona fide offer of judgment or settlement that the Indemnified Party refused
to accept plus the costs and expenses of the Indemnified Party prior to the date
the Indemnifying Party notified the Indemnified Party of the offer of judgment
or settlement and (ii) the actual Losses incurred by the Indemnified Party with
respect to such matter.

(iii) Notwithstanding the foregoing, no Indemnifying Party shall be entitled to
assume or control the defense of any third party claim (and the Indemnifying
Party shall be liable for the fees and expenses of counsel incurred by the
Indemnified Party in defending such third party claim) if (A) the third party
claim seeks an Order, injunction or other equitable relief or relief for other
than money damages against the Indemnified Party that the Indemnified Party
reasonably determines, after conferring with its outside counsel, cannot be
separated from any related claim for money damages; or (B) the Indemnifying
Party shall not have taken any action to defend such third-party claim within
thirty (30) days of written notice of the claim. If the equitable relief or
other relief portion of the third party claim can be so separated from that for
money damages, the Indemnifying Party shall be entitled to assume the defense of
the portion relating to money damages. In the case of each of (A) through
(C) above, the Indemnified Party shall have the right, but not the obligation,
to conduct and control the defense thereof for the account of, and at the risk
of, the Indemnifying Party, and the reasonable fees and disbursements of such
Indemnified Party’s counsel shall be at the expense of the Indemnifying Party.
Notwithstanding anything in this Agreement to the contrary, the Indemnified
Party, at the expense of the Indemnifying Party (which shall include only
reasonable out-of-pocket expenses actually incurred), shall cooperate with the
Indemnifying Party and keep the Indemnifying Party fully informed of the defense
of such third-party claim conducted by such Indemnified Party. The Indemnifying
Party shall have the right to participate in the defense of any third-party
claim conducted by the Indemnified Party with counsel employed at its own
expense. The Indemnifying Party shall have no indemnification obligations with
respect to any Third-Party Claim that shall be settled by the Indemnified Party
without the prior written consent of the Indemnifying Party, which consent shall
not be unreasonably withheld, delayed or conditioned.

(iv) The Parties shall, and shall cause their Affiliates to, reasonably
cooperate with each other in connection with the prosecution, defense,
settlement or performance of their agreements in this Article VIII. Without
limiting the generality of the foregoing, as to all matters with respect to
which a Party controls pursuant to Section 8.4(c), upon such Party’s request,
the other Party shall, and shall cause its Affiliates to, (i) use its reasonable
best efforts to waive all professional conflicts and take other reasonable steps
necessary to allow any counsel representing the other Party with respect to such
matters to represent the controlling Party (or its designee) with respect to
such matters, (ii) make available to the controlling Party evidence within the
other Party’s control and persons needed as witnesses employed by the other
Party or its Affiliates, as reasonably requested by the controlling Party for
such prosecution, defense, settlement or performance and (iii) sign such
documents, assign such rights, and take such actions as the controlling Party
may reasonably request attendant to the defense or resolution of the matter.

 

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(d) Notwithstanding anything herein to the contrary, Seller shall not have any
liability for Losses for any breach of any representation or warranty of Seller
contained in this Agreement or in any agreement or certificate delivered and
executed by any Seller Company pursuant to Section 7.1(h) if, at the time of the
Closing, Purchaser had knowledge of such breach, Seller did not have knowledge
of such breach, and Purchaser failed to notify Seller of such breach in
accordance with Section 6.4. If a reserve (in the form of an accrued liability
or an offset to an asset or similar item) was reflected on the Final Statement
relating to any matter for which a Purchaser Indemnified Party would otherwise
be entitled to indemnification under this Article VIII for breach of a
representation or warranty, the obligation of the Indemnifying Party to
indemnify for any Loss resulting from such matter shall be reduced by the full
amount of the reserve as reflected on the Final Statement.

(e) The obligation of any Indemnifying Party to indemnify the Indemnified Party
against any Loss arising under this Article VIII shall be reduced (i) by the
amount of any insurance proceeds actually received from third party insurers by
the Indemnified Party with respect to such Loss or the underlying factors with
respect thereto under any applicable policy (except to the extent that such
insurance proceeds are received pursuant to a retrospective premium based
policy) and (ii) to take into account any net Tax benefits realized by the
Indemnified Party in the year of the Loss as a result of Loss or the underlying
reasons therefor and taking into account (without duplication) the effect of
receiving indemnification hereunder.

(f) Purchaser and Seller agree to treat all indemnification payments made by
Seller pursuant to this Agreement as adjustments to the Purchase Price for all
income Tax purposes and to take no position contrary thereto in any Tax Return
or proceeding before any tax Governmental Authority, except as otherwise
required by Applicable Law or any applicable Order.

Section 8.5 Exclusive Remedy. Except for rights expressly provided in Sections
2.5, 6.6(c), 6.7 and 11.12, the indemnification provisions of this Article VIII
shall be the sole and exclusive remedy with respect to any and all claims
arising out of or relating to breaches of representations and warranties
contained in this Agreement and in certificates and instruments delivered
pursuant to Section 7.1(h) and Section 7.2(g) or any covenant, undertaking or
other agreement contained in this Agreement or in any certificate delivered
pursuant to this Agreement.

ARTICLE IX

TAX MATTERS

Section 9.1 Canadian Tax Election. In accordance with the requirements of the
ITA, the regulations thereunder, the administrative practice and policy of the
Canada Revenue Agency and any applicable equivalent or corresponding provincial
or territorial legislative, regulatory and administrative requirements, Heidrick
Canada and Highland Canada shall make, in a timely manner, a joint election to
have the rules in section 22 of the ITA, and any equivalent or corresponding
provision under applicable provincial or territorial tax legislation, apply in
respect of the Receivables of Highland Canada, and shall designate therein that
portion of the Closing Payment allocated to the Receivables that are the subject
of such election in accordance with the procedures set out in Section 2.6 as the
consideration paid by Purchaser to Seller. Highland Canada shall file such
election with its Canadian Tax Return for the taxation year that includes the
Closing Date.

 

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Section 9.2 UK Value Added Tax.

(a) The Parties agree that the sale of the Purchased Assets by Highland UK to
Purchaser pursuant to this Agreement does not constitute a supply for VAT
purposes, being a sale together with the transfer of the portion of the Business
owned by Highland UK to Purchaser as a going concern for the purposes of
Section 49 of the Value Added Tax Act 1994 (“VATA”) and Article 5 of the Value
Added Tax (Special Provisions) Order 1995 SI 1995/1268, and that such portion of
the Business being transferred to Purchaser is capable of separate operation.
The Parties agree to cooperate with each other to use all reasonable efforts to
secure that such Article 5 shall apply to the sale and, if appropriate, to agree
the same in writing with Her Majesty’s Revenue and Customs (“HMRC”). Seller
shall (unless HMRC permits Highland UK (or any associated company) to retain
such records) deliver to Purchaser all records relating to the portion of the
Business owned by Highland UK referred to in Section 49 of VATA within 30 days
of HMRC finally refusing (taking account of any appeal or objection) Highland UK
(or any associated company) permission to retain such records. The Parties agree
that the Purchase Price is exclusive of Value Added Tax (“VAT“) such that if VAT
is due in respect of any part of the Purchase Price, Purchaser shall pay to
Highland UK the amount of VAT (together with any interest and penalties) due
against the issue of a VAT invoice in respect thereof. Purchaser represents that
it is registered for VAT.

(b) Highland UK represents that it has exercised an election to waive exemption
in respect of the Leased Real Property listed in Item 3 of Schedule 4.9(b) (the
“UK Leased Real Property”) pursuant to the provisions of paragraph 2 of Schedule
10 of VATA (“VAT Election”). Purchaser (i) represents it has made a VAT Election
under paragraph 2 of Schedule 10 of VATA in respect of the UK Leased Real
Property which has effect and written notification of which has been provided to
HMRC as required by paragraph 3(6) of Schedule 10 of VATA, (ii) agrees not to
revoke its VAT Election referred to in clause (i) on or before Closing,
(iii) agrees to provide to Seller a copy of the VAT Election and written
notification referred to in clause (i) above, together with any acknowledgement
or acceptance thereof received from HMRC, and (iv) hereby provides formal notice
to Seller pursuant to Article 5(2A)(b) of the Value Added Tax (Special
Provisions) Order 1995 that Article 5(2B) of such Order does not apply to
Purchaser.

Section 9.3 UK Capital Allowances. Purchaser and Seller agree that the amount of
the Purchase Price attributable to fixtures and fittings at the UK Leased Real
Property for all purposes, including without limitation for the purposes of Part
2 of the Capital Allowances Act 2001 (“CAA”), is £112,627. Purchaser and Seller
agree that they will, or will cause Highland UK and the applicable Purchasing
Company, respectively, to, jointly make an irrevocable election under
Section 198 of the CAA and fix the amount attributable to such fixtures and
fittings at £112,627, and such election shall be made in accordance with
Sections 200 and 201 of the CAA. The election referred to in this Section 9.3
shall be made within two years of the date of this Agreement and Purchaser and
Seller shall, or shall cause Highland UK to, comply with their respective
obligations under Section 201 of the CAA.

ARTICLE X

TERMINATION

Section 10.1 Termination. Anything herein or elsewhere to the contrary
notwithstanding, this Agreement may be terminated and the transactions
contemplated herein may be abandoned at any time prior to the Closing:

(a) By the mutual consent of Seller and Purchaser;

(b) By either Seller or Purchaser:

 

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(i) If the Closing shall not have occurred on or prior to October 31, 2006, or

(ii) If any Governmental Authority shall have issued an Order or ruling or taken
any other action, in each case permanently restraining, enjoining or otherwise
prohibiting the material transactions contemplated by this Agreement and such
Order, ruling or other action shall have become final and non-appealable;

(c) by Seller if (i) Purchaser breaches or fails to perform or comply with any
of its covenants or agreements contained herein and such breaches or failures
would result in the failure of a condition set forth in Section 7.2(b) to be
satisfied, or breaches any of the representations and warranties made by
Purchaser which would result in the failure of the condition set forth in
Section 7.2(a) to be satisfied, (ii) Seller has notified Purchaser in writing of
the breach, and (iii) the breach is incapable of being cured or has continued
without cure for a period of ten days after the notice of breach; or

(d) by Purchaser if (i) Seller breaches or fails to perform or comply with any
of its covenants or agreements contained herein and such breaches or failures
would result in the failure of a condition set forth in Section 7.1(b) to be
satisfied, or breaches any of the representations and warranties made by Seller
which would result in the failure of the condition set forth in Section 7.1(a)
to be satisfied, (ii) Purchaser has notified Seller in writing of the breach and
(iii) the breach is incapable of being cured or has continued without cure for a
period of ten days after the notice of breach;

provided, however, that the Party seeking termination pursuant to clause (b),
(c) or (d) is not in breach in any material respect of any of its material
representations, warranties, covenants or agreements contained in this
Agreement.

Section 10.2 Procedure and Effect of Termination.

(a) In the event of the termination and abandonment of this Agreement by Seller
or Purchaser pursuant to Section 10.1(b), Section 10.1(c) or Section 10.1(d)
hereof, written notice thereof shall forthwith be given to the other Party
specifying the provision hereof pursuant to which such termination is made. If
the transactions contemplated by this Agreement are terminated as provided
herein:

(i) each Party will redeliver all documents, work papers and other material of
any other Party relating to the transactions contemplated hereby, whether so
obtained before or after the execution hereof, to the Party furnishing the same;
and

(ii) all confidential information received by any Party hereto with respect to
the business of any other Party or its subsidiaries or affiliates shall be
treated in accordance with the provisions of the Confidentiality Agreement,
which shall survive the termination of this Agreement.

(b) If this Agreement is terminated and the transactions contemplated hereby are
abandoned as described in this Section 10.2, this Agreement shall become void
and of no further force or effect, except for the provisions of Article XI and
this Section 10.2. Nothing in this Section 10.2 shall be deemed to release any
Party from any liability for any breach by such Party of the terms and
provisions of this Agreement prior to termination.

 

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ARTICLE XI

MISCELLANEOUS

Section 11.1 Expenses. Whether or not the transactions contemplated hereby are
consummated, and except as otherwise expressly provided herein, each Party will
pay all of its own costs and expenses relating to the transactions contemplated
by this Agreement, including the costs and expenses of its respective counsel,
financial advisors and accountants.

Section 11.2 Governing Law; Consent to Jurisdiction; Waiver of Jury Trial.

(a) The interpretation and construction of this Agreement, and all matters
relating hereto, will be governed by the laws of the State of Illinois
applicable to contracts made and to be performed entirely within the State of
Illinois without giving effect to any conflict of law provisions thereof, except
that, notwithstanding clause (b) below, the Federal Arbitration Act, 9 U.S.C.
Section 1-16, will govern all issues relating to the arbitrability and
arbitration of any claim or dispute relating to, and any interpretation of,
Section 2.3 or 2.4 and the enforcement of any determination pursuant thereto.

(b) Each of the Parties agrees that any legal action or proceeding with respect
to this Agreement may be brought in the federal and state courts located in the
State of Illinois, and, by execution and delivery of this Agreement, each Party
hereby irrevocably submits itself in respect of its property, generally and
unconditionally, to the exclusive jurisdiction of the aforesaid courts in any
legal action or proceeding arising out of this Agreement. Each of the Parties
hereto hereby irrevocably waives any objection which it may now or hereafter
have to the laying of venue of any of the aforesaid actions or proceedings
arising out of or in connection with this Agreement brought in the courts
referred to in the preceding sentence. Each Party hereby consents to process
being served in any such action or proceeding by the mailing of a copy thereof
to the address set forth in Section 11.3 below its name and agrees that such
service upon receipt will constitute good and sufficient service of process or
notice thereof. Nothing in this paragraph will affect or eliminate any right to
serve process in any other manner permitted by law.

(c) Each of the Parties hereby waives its rights to a trial by jury of any legal
action or proceeding arising out of this Agreement, the Purchaser Documents or
the Seller Documents or any transaction contemplated hereby or thereby in an
legal action or proceeding brought by one Party against another.

Section 11.3 Notices. Any notice or other communications required or permitted
hereunder will be in writing and will be deemed to have been duly given if
delivered in person, transmitted via facsimile (but only if followed by
transmittal by recognized overnight courier or hand delivery), or sent by
registered or certified mail, postage prepaid, or recognized overnight courier
service addressed as follows:

 

  (a)    If to Purchaser:    Heidrick & Struggles International, Inc.        
4200 Sears Tower, 233 South Wacker Drive         Chicago, Illinois 60606        
Attention: General Counsel         Tel: (312) 496-1612         Fax: (312)
496-1297

 

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   with a copy to:    Schiff Hardin LLP       6600 Sears Tower       Chicago,
Illinois 60606       Attention: Robert J. Minkus       Tel: (312) 258-5500      
Fax: (312) 258-5600    If to Seller:    Hudson Highland Group, Inc.       10
South Wacker Drive, Suite 2600       Chicago, Illinois 60606       Attention:
Latham Williams       Tel: (312) 795-4216       Fax: (312) 795-4299    with a
copy to:    Foley & Lardner LLP       777 East Wisconsin Avenue       Milwaukee,
Wisconsin 53202       Attention: Benjamin F. Garmer, III       Tel: (414)
271-2400       Fax: (414) 297-4900

or such other address or number as will be furnished in writing by any such
person, and such notice or communication will be deemed to have been given
(a) as of the date so personally delivered or transmitted via facsimile, (b) on
the third Business Day after the mailing thereof or (c) on the first Business
Day after delivery by recognized overnight courier service.

Section 11.4 Entire Agreement; Amendment. This Agreement, including the
Exhibits, Schedules and other documents referred to herein, and the
Confidentiality Agreement, constitutes the entire agreement of the Parties with
respect to the subject matter contained herein and therein. This Agreement
supersedes all prior agreements and understandings between the Parties with
respect to such subject matter, other than the Confidentiality Agreement. This
Agreement may not be amended except by a written instrument executed by the
Parties.

Section 11.5 Assignment. This Agreement may not be transferred, assigned,
pledged or hypothecated by any Party (whether by operation of law or otherwise)
without the prior written consent of the other Parties, except that Purchaser
may assign all or a portion of its rights and obligations under this Agreement
to one or more of its Subsidiaries; provided, however, that in the event
Purchaser assigns all or a portion of its rights and obligations under this
Agreement, Purchaser hereby unconditionally and irrevocably guarantees to Seller
and the Selling Subsidiaries the prompt and full discharge by such other
Subsidiaries of Purchaser of all of Purchaser’s obligations under this Agreement
in accordance with the terms hereof. Purchaser also hereby agrees that, if such
Subsidiaries of Purchaser fail to perform and discharge promptly all such
obligations and liabilities in accordance with such terms, Purchaser will,
forthwith, upon demand, perform and discharge the same, and Seller need not
pursue any claims against any such Subsidiaries prior to proceeding directly
against Purchaser. The unconditional obligation of Purchaser hereunder will not
be affected, impaired or released by any extension, waiver or amendment (other
than such Subsidiaries’ performance). This Agreement will be binding upon and
will inure to the benefit of the Parties and their respective successors and
permitted assigns.

 

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Section 11.6 Interpretation.

(a) The words “hereof,” “herein” and “herewith” and words of similar import
will, unless otherwise stated, be construed to refer to this Agreement as a
whole and not to any particular provision of this Agreement, and Article,
Section, Paragraph, Exhibits and Schedule references are to the Articles,
Sections, Paragraphs, Exhibits and Schedules of this Agreement unless otherwise
specified. Whenever the words “include,” “includes,” “including” or similar
expressions are used in this Agreement, they will be deemed to be followed by
the words “without limitation.” The words describing the singular number will
include the plural and vice versa, and words denoting any gender will include
all genders and words denoting natural persons will include corporations and
partnerships and vice versa. The phrase “made available” in this Agreement will
mean that the information referred to has been made available if requested by
the party to whom such information is to be made available.

(b) The Parties have participated jointly in the negotiation and drafting of
this Agreement. In the event of an ambiguity or question of intent or
interpretation arises, this Agreement will be construed as if drafted jointly by
the Parties and no presumption or burden of proof will arise favoring or
disfavoring any party by virtue of the authorship of any provisions of this
Agreement.

(c) Any reference herein to any legislation or to any provision of any
legislation shall include any amendment to, and any modification or re-enactment
of, any legislative provision substituted therefor and all regulations and
statutory instruments issued thereunder or pursuant thereto.

(d) All references to dollar(s) or use of the $ symbol in this Agreement refer
to U.S. dollars.

Section 11.7 Certain Definitions. For purposes of this Agreement:

(a) “Affiliate” shall have the meaning set forth in rule 12b-2 of the Securities
Exchange Act of 1934, as amended;

(b) “Business Day” means any day, other than Saturday or Sunday, on which
banking institutions in the City of Chicago, Illinois are required to be open;

(c) “Capital Stock” means any capital stock, partnership, membership, joint
venture or other ownership or equity interest, participation or securities
(whether voting or non-voting, whether preferred, common or otherwise, and
including stock appreciation, contingent interest or similar rights) of a
Person;

(d) “knowledge” and words of similar import mean, with respect to Seller, the
actual knowledge of the persons listed on Exhibit F hereto, and with respect to
Purchaser, the actual knowledge of the persons listed on Exhibit G hereto;

(e) “Material Adverse Effect” means any change, effect, event, occurrence or
state of facts that (i) is materially adverse to, or has a materially adverse
effect on, the business, condition (financial or otherwise), assets, liabilities
or results of operations of the Business, taken as a whole, or (ii) materially
adversely affects the ability of Seller and Purchaser to consummate the
transactions contemplated by this Agreement in a timely manner, other than any
change, effect, event, occurrence or state of facts (A) resulting from general
economic, financial, regulatory or market conditions in any country in which the
Business is operated or conducted, or (B) resulting from any action that is
specifically required to be taken by, or from the failure to take any action
that is specifically prohibited by, this Agreement;

 

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(f) “Person” means any individual, corporation, partnership, limited liability
company, association, joint stock company, joint venture, bank, Government
Authority, trust or other organization or entity; and

(g) “Subsidiary” means any corporation or other entity (including partnerships
and other business associations and joint ventures) with respect to which a
Person directly or indirectly owns at least a majority of the voting power
represented by the outstanding Capital Stock or other voting securities or
interests having voting power under ordinary circumstances to elect a majority
of the directors or similar members of the governing body, or otherwise to
direct the management and policies, of such corporation or other entity.

Section 11.8 Third Party Beneficiaries. This Agreement will not benefit or
create any rights, remedies or causes of action in or on behalf of any Person
other than the Parties.

Section 11.9 Waiver. Except as otherwise provided in this Agreement, any failure
of any of the Parties to comply with any obligation, covenant, agreement or
condition herein may be waived by the Party entitled to the benefits thereof
only by a written instrument signed by the Party granting such waiver, but such
waiver or failure to insist upon strict compliance with such obligation,
covenant, agreement or condition will not operate as a waiver of, or estoppel
with respect to, any subsequent or other failure.

Section 11.10 Severability. If any term, provision, covenant or restriction of
this Agreement (or any portion thereof) or the application thereof (or any
portion thereof) is held by a Governmental Authority to be invalid, illegal or
unenforceable in any respect, the remainder of the terms, provisions, covenants
and restrictions of this Agreement shall remain in full force and effect and
shall in no way be affected, impaired or invalidated.

Section 11.11 Counterparts; Delivery. This Agreement may be executed in
counterparts and multiple originals, each of which shall be deemed an original,
and all of which taken together shall be considered one and the same agreement.
Each executed signature page to this Agreement and to each agreement and
certificate delivered by a Party pursuant to this Agreement may be delivered by
any of the methods described in Section 11.3, including via telecopier or
e-mail, provided that such delivery is effected in accordance with the notice
information provided for in Section 11.3.

Section 11.12 Specific Performance. The Parties acknowledge and agree that in
the event of any breach of this Agreement, the non-breaching Party would be
irreparably and immediately harmed and could not be made whole by monetary
damages. It is accordingly agreed that (a) the breaching Party will waive, in
any action for specific performance, the defense of adequacy of a remedy at law
and (b) the non-breaching Party shall be entitled, in addition to any other
remedy to which the non-breaching Party may be entitled at law or in equity, to
compel specific performance of this Agreement in any action instituted in
accordance with Section 11.2 hereof.

Section 11.13 Headings. Headings of the Articles and Sections of this Agreement,
the Table of Contents, the Index of Exhibits, the Exhibits, the Index of Defined
Terms, and the Schedules hereto are for convenience of the Parties only, and
shall be given no substantive or interpretative effect whatsoever.

Section 11.14 Schedules and Exhibits. The Schedules and all Exhibits attached
hereto are hereby incorporated by reference into, and made a part of, this
Agreement. Any fact or item disclosed on any Schedule attached hereto shall be
deemed disclosed on all Schedules to which such fact or item may reasonably
apply so long as such disclosure is in sufficient detail to enable a Party to
identify the facts or items to which it applies.

*        *        *

 

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IN WITNESS WHEREOF, each of the parties has caused this Agreement to be duly
executed, all as of the date first above written.

 

HUDSON HIGHLAND GROUP, INC. By:  

/S/    JON CHAIT

Name:   Jon Chait Title:   Chairman and Chief Executive Officer HIGHLAND
PARTNERS CO (CANADA) By:  

/S/    LATHAM WILLIAMS

Name:   Latham Williams Title:   Secretary HIGHLAND PARTNERS (AUST) PTY LTD By:
 

/S/    LATHAM WILLIAMS

Name:   Latham Williams Title:   Attorney HIGHLAND PARTNERS LIMITED By:  

/S/    LATHAM WILLIAMS

Name:   Latham Williams Title:   Attorney HEIDRICK & STRUGGLES INTERNATIONAL,
INC. By:  

/S/    EILEEN A. KAMERICK

Name:   Eileen A. Kamerick Title:   Chief Financial Officer HEIDRICK & STRUGGLES
CANADA, INC. By:  

/S/    KENNETH J. ASHLEY

Name:   Kenneth J. Ashley Title:   Treasurer HEIDRICK & STRUGGLES AUSTRALIA,
LTD. By:  

/S/    KENNETH J. ASHLEY

Name:   Kenneth J. Ashley Title:   Treasurer

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