LEADERSONLINE INC, S-1, 2000-04-10

LEADERSONLINE INC
S-1, 2000-04-10

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As filed with the Securities and Exchange Commission on April 7, 2000
Registration No. 333-
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

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FORM S-1
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933

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LEADERSONLINE, INC.
(Exact name of registrant as specified in its charter)

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<TABLE>
<S> <C> <C>
Delaware 7361 36-4319361
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
Incorporation or organization) Classification Code Number) Identification Number)
</TABLE>

18401 Von Karman, Suite 500
Irvine, California 92612
949.752.1000
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)

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Carole F. Owen
Chief Financial Officer
18401 Von Karman, Suite 500
Irvine, California 92612
949.752.1000
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
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Copies to:
<TABLE>
<S> <C>
Ronald S. Beard, Esq. John B. Ayer, Esq.
John M. Williams, Esq. Christopher J. Austin, Esq.
Gibson, Dunn & Crutcher LLP Ropes & Gray
4 Park Plaza One International Place
Irvine, California 92614 Boston, Massachusetts 02110
949.451.3800 617.951.7000
(Facsimile) 949.451.4220 (Facsimile) 617.951.7050
</TABLE>

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Approximate date of commencement of proposed sale to the public:
As soon as practicable after this Registration Statement is declared
effective.

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If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
CALCULATION OF REGISTRATION FEE
<TABLE>
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<CAPTION>
Proposed Maximum
Title of Each Class of Securities Aggregate Offering Amount of
to be Registered Price(1) Registration Fee
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<S> <C> <C>
Class A common stock, par value $0.001 per
share................................... $75,000,000 $19,800
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</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee in
accordance with Rule 457(o) under the Securities Act of 1933.

The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this
Registration Statement shall thereafter become effective in accordance with
Section 8(a) of the Securities Act of 1933 or until this Registration
Statement shall become effective on such date as the Commission, acting
pursuant to said Section 8(a), may determine.
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<PAGE>

++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+The information in this preliminary prospectus is not complete and may be +
+changed. These securities may not be sold until the registration statement +
+filed with the Securities and Exchange Commission is effective. This +
+preliminary prospectus is not an offer to sell nor does it seek an offer to +
+buy these securities in any jurisdiction where the offer or sale is not +
+permitted. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
Subject to Completion, Dated April 7, 2000

[LOGO OF LEADERS!ONLINE(TM)]

Class A Common Stock

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This is an initial public offering of shares of Class A common stock of
LeadersOnline, Inc. All of the shares of Class A common stock are being sold by
LeadersOnline.

Prior to this offering, there has been no public market for the Class A
common stock. It is currently estimated that the initial public offering price
per share will be between $ and $ . LeadersOnline has applied for
quotation of the Class A common stock on the Nasdaq National Market under the
symbol "LDRS".

See "Risk Factors" beginning on page 8 to read about factors you should
consider before buying shares of the Class A common stock.

-----------

Neither the Securities and Exchange Commission nor any other regulatory body
has approved or disapproved of these securities or passed upon the accuracy or
adequacy of this prospectus. Any representation to the contrary is a criminal
offense.

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<TABLE>
<CAPTION>
Per Share Total
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<S> <C> <C>
Initial public offering price................................ $ $
Underwriting discount........................................ $ $
Proceeds, before expenses, to LeadersOnline.................. $ $
</TABLE>

To the extent that the underwriters sell more than shares of Class A
common stock, the underwriters have the option to purchase up to an additional
shares from LeadersOnline at the initial public offering price less the
underwriting discount.

-----------

The underwriters expect to deliver shares in New York, New York on
, 2000.

Goldman, Sachs & Co.
Lehman Brothers
Wit SoundView

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Prospectus dated , 2000.
<PAGE>

[ARTWORK: to be filed by amendment]

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PROSPECTUS SUMMARY

You should carefully consider the risks and uncertainties described below
and the other information in this prospectus before deciding whether to invest
in shares of our Class A common stock. The following is only a summary that
generally discusses our business, the offering of Class A common stock and
financial information. It does not contain all the information that you should
consider before making a decision to purchase shares of the Class A common
stock. You should read this entire prospectus carefully, including the section
captioned "Risk Factors".

LeadersOnline, Inc.

We are a leading business-to-business Internet marketplace that enables
efficient and effective aggregation, matching and fulfillment of employer
demand with candidate supply in the recruitment market for mid-level executives
and professionals. Our marketplace and our value-added Internet-based services
enable companies to fulfill their increasing demand for mid-level executives
and professionals. In addition, through our LeadersOnline.com web site, we
provide community and career- and leadership-focused content for our mid-level
executives, professionals and employer participants.

Our Internet-based services are focused on the highly fragmented and
underserved recruitment market for mid-level executives and professionals. We
combine our Internet-based technology infrastructure, our in-depth knowledge of
the human capital market and our expertise in the recruiting industry to
provide end-to-end Internet-based services for employers and candidates. Our
services enable employers to efficiently review information on candidates and
access a high quality candidate pool, while enabling candidates to review
information on employers and to access career opportunities. Our technology
infrastructure is augmented by the recruiting expertise of our e!Cruiting and
e!Search professionals to create a streamlined recruitment and fulfillment
process. We believe that our Internet-based solution offers employers more
efficiency than traditional recruiting methods currently utilized by regional
boutique recruiting firms. In addition, we believe that we provide more value-
added services to employers and candidates than existing online recruiting
services and job boards that focus on lower level job listings.

Our strategic relationship with Heidrick & Struggles, the world's leading
executive search firm, provides us with access to its extensive network of
leading employers and high quality candidates. In addition, we have entered
into strategic agreements with key technology and media companies, such as
VerticalNet and Business Week, to build our marketplace and to provide content
on our web site. Our existing client base represents a wide variety of
industries, including technology, financial services, industrial, consumer,
professional services, telecommunications and health care. Our clients include
Hartford Computing Group, GartnerGroup, E*Trade, Andersen Consulting and
CollegeClub.com. Since introducing LeadersOnline.com to the market, we have
provided our Internet-based recruiting services to over 110 companies located
throughout the United States and in Europe, and have matched and recruited
candidates for a broad range of employment positions, including business
development, finance, information technology and sales and marketing.

Our objective is to become the world's leading business-to-business
Internet marketplace for employers seeking mid-level executives and
professionals. We intend to establish this leadership position by implementing
the following key strategies:

. continue to expand our strategic relationships;

. establish LeadersOnline as a trusted, global brand;

. continue to secure significant multi-year, multi-engagement projects;

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. establish LeadersOnline.com as the leading Internet career management
destination;

. continue to build our candidate community;

. expand operations globally;

. establish leadership and expand our presence in targeted industries; and

. continue to improve our Internet-based technology infrastructure.

The Offering

<TABLE>
<S> <C>
Shares of Class A common stock offered
by LeadersOnline...................... shares

Shares of common stock outstanding after this offering:

Class A common stock................. shares

Class B common stock................. 16,140,000 shares

Use of proceeds........................ To accelerate our global marketing
campaign, to continue to enhance our
Internet-based technology platform, to
continue to introduce and expand our
solution and for other general
corporate purposes. See "Use of
Proceeds".

Proposed Nasdaq National Market
symbol................................ "LDRS"
</TABLE>

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The shares of common stock to be outstanding immediately after this
offering are stated as of March 31, 2000. The shares of common stock to be
outstanding exclude 5,380,000 shares of Class A common stock reserved for
issuance under our 2000 Stock Option Plan, of which 4,245,150 shares at a
weighted average exercise price of $1.90 per share were subject to outstanding
options as of March 31, 2000.

Holders of our Class A common stock generally have the same rights as
holders of our Class B common stock, except that holders of Class A common
stock have one vote per share while holders of Class B common stock have ten
votes per share. Holders of Class A common stock and Class B common stock
generally vote together as a single class on all matters presented to the
stockholders for their vote or approval, except as may be required by law.
Class B common stock may be converted into Class A common stock at any time on
a one-for-one basis. The Class A common stock and the Class B common stock are
referred to together as the common stock. Following this offering, Heidrick &
Struggles will own 16,140,000 shares of Class B common stock or % of the
combined voting power of our common stock.

Except as otherwise specified in this prospectus, all information in this
prospectus:

. gives effect to the automatic conversion of all outstanding shares of our
Series A preferred stock into 600,000 shares of our Class A common stock,
which will occur upon completion of this offering;

. gives effect to the 1,614-for-one split of our common stock in February
2000; and

. assumes that the underwriters do not exercise the over-allotment option
that we have granted to them to purchase additional shares in the
offering. See "Underwriting".

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Corporate Information

We were organized as a division of Heidrick & Struggles in 1998 and
incorporated in Delaware in January 1999. Our principal executive offices are
located at 18401 Von Karman Avenue, Suite 500, Irvine, California 92612, and
our telephone number is 949.752.1000. Our address on the World Wide Web is
www.leadersonline.com. References in this prospectus to our web site do not
incorporate by reference the information contained on our web site.

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SUMMARY FINANCIAL DATA

The following table sets forth summary financial data of LeadersOnline
which have been derived from, and are qualified by reference to, the financial
statements. Additionally, the following table sets forth certain unaudited pro
forma condensed financial data that assumes certain events had occurred on
January 1, 1999 for the statement of operations and on December 31, 1999 for
the statement of financial position. The unaudited pro forma data does not
reflect, except as indicated in the notes thereto, the effects of any
anticipated changes to be made by us in our operations from the historical
operations and are presented for informational purposes only. The following
tables should be read in conjunction with "Management's Discussion and Analysis
of Financial Condition and Results of Operations," our financial statements and
the related notes appearing elsewhere in this prospectus.

<TABLE>
<CAPTION>
Year Ended December 31,
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1998 1999
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<S> <C> <C>
Statement of Operations Data:
Revenue............................................ $ -- $ 2,616,762
Cost of revenue.................................... -- 1,188,623
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Gross profit....................................... -- 1,428,139
Operating expenses................................. 1,538,589 6,585,413
------------ ------------
Net loss........................................... $ (1,538,589) $ (5,157,274)
============ ============
Pro forma net loss (unaudited)(1).................. $ (5,247,027)
============
Net loss per share:
Basic and diluted.................................. $ (0.10) $ (0.32)
Pro forma basic and diluted (unaudited)(2)......... $ (0.31)
Shares used in computing net loss per share:
Basic and diluted.................................. 16,140,000 16,140,000
Pro forma basic and diluted (unaudited)(3)......... 16,740,000
</TABLE>

<TABLE>
<CAPTION>
December 31, 1999
----------------------------------------
Pro forma
Pro forma (4) as Adjusted (5)
Actual (unaudited) (unaudited)
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<S> <C> <C> <C>
Balance Sheet Data:
Cash................................... $ -- $1,500,000
Total assets........................... 4,149,749 7,149,749
Total stockholders' equity............. 2,257,251 5,257,251
</TABLE>
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(1) The unaudited pro forma net loss includes the provisions of the
Intercompany Agreement with Heidrick & Struggles, dated April 4, 2000,
which would have increased general and administrative expenses by $11,250
and sales and marketing expenses by $78,503.

(2) The pro forma earnings per share have been adjusted to reflect the increase
in pro forma net loss from (1) above and the dilutive effect of conversion
of shares discussed in (3) below.

(3) The pro forma basic and diluted shares have been adjusted to reflect the
automatic conversion of the 600,000 shares of Series A preferred stock
discussed in (4) below.

(4) Reflects the issuance of 600,000 shares of our Series A preferred stock for
cash and future services to be received in connection with our strategic
arrangements with Business Week and VerticalNet.

(5) As adjusted to reflect our sale of shares of Class A common stock in
this offering at an assumed initial public offering price of $ per share,
after deducting the estimated underwriting discount and offering expenses.

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RISK FACTORS

An investment in our Class A common stock involves a number of risks.
Before making an investment decision, you should carefully consider all of the
risks described in this prospectus. If any of the risks discussed in this
prospectus actually occurs, our business, financial condition and results of
operations could be materially and adversely affected. If this were to happen,
the trading price of our Class A common stock could decline significantly and
you could lose all or a substantial part of your investment. You should also
refer to the other information appearing elsewhere in this prospectus,
including our financial statements and the related notes.

Risks Related to Our Business

We have a limited operating history against which prospective investors can
evaluate our business and prospects

We began operations as a separate division of Heidrick & Struggles in
January 1998 and were incorporated on January 29, 1999. Accordingly, we have
only a limited operating history against which prospective investors can
evaluate our business and prospects. In addition, our business must be
considered in light of the uncertainties encountered by companies in the early
stages of development in new and rapidly evolving markets. Some of the
uncertainties faced by us in the online recruiting market include:

. whether we will successfully attract and retain a sufficient number of
employers to recruit online using our network instead of other online
recruitment providers and traditional offline recruiting methods; and

. whether we will successfully attract a sufficient number of quality
candidates to become members of our community.

Because of our limited operating history and the developing nature of our
markets and services, our historical financial information is not a reliable
indicator of future performance. Therefore it is difficult to evaluate our
business and prospects.

We have never been profitable and may not be profitable in the future

We have never been profitable. As of December 31, 1999, we had an
accumulated deficit of $5.2 million. We are not certain when we will become
profitable, if at all. We expect to continue to incur losses in the foreseeable
future because we anticipate incurring significant expenses in connection with
building global awareness of LeadersOnline, improving our products and services
and expanding internationally. We will need to generate significantly higher
revenues in order to achieve and maintain profitability. If our revenues do not
grow or grow at a slower rate than we anticipate, or if our spending levels
exceed our expectations or cannot be adjusted to reflect slower revenue growth,
we may not generate sufficient revenues to achieve or sustain profitability.
For example, we may find it necessary to accelerate expenditures relating to
our sales and marketing efforts or otherwise increase our financial commitment
to create and maintain brand awareness among potential candidates and
employers. Moreover, these efforts may not result in a sufficient increase in
revenues to ultimately achieve profitability. If we do not achieve and maintain
profitability, the price of our Class A common stock will likely decline
substantially.

Our business model is unproven and relies on the success of the Internet as a
recruiting medium

Our product is new and our business model and profit potential are
unproven. To be successful, we must develop and market an online recruitment
offering that achieves broad market acceptance

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by both candidates and employers and captures the efficiencies generally
associated with the Internet. In particular, our future success is highly
dependent on a significant increase in the use of the Internet as a recruiting
medium.

The online recruitment market, however, is new and rapidly evolving and we
cannot yet gauge its effectiveness as compared to traditional recruiting
methods. As a result, demand for, and market acceptance of, online recruitment
offerings are uncertain. Most of our current and potential clients have little
or no experience using the Internet for recruiting purposes and have allocated
only a limited portion of their recruiting budgets to online recruiting. In
order for our business to be successful, our clients must be able to process
candidates more quickly than they have in the past with traditional recruiting
methods. We must also realize the efficiencies available through the Internet,
which may be limited by our dependence on the use of search professionals to
assist in our recruitment process. To the extent that online recruiting is not
as effective as traditional recruiting methods or to the extent that we are
unable to successfully capture the efficiencies generally associated with the
Internet, our business will be substantially harmed.

We may be unable to secure multi-year, multi-engagement projects

The success of our current business model depends on our ability to secure
multi-year, multi-engagement projects in order to achieve scalability and
efficiency. Although we have recently initiated efforts to secure these multi-
year, multi-engagement projects, we cannot be certain that we will be
successful in doing so. Even if we are successful in securing these projects,
we cannot be certain that the nature of these projects will allow us to achieve
the economies of scale that we expect. To the extent that we are unable to
secure the number and type of multi-year, multi-engagement projects that we
expect, our revenue may not reach our expectations or our costs may exceed our
expectations. These results could substantially harm our business.

The unpredictability of our quarterly revenues may negatively affect the
trading price of our Class A common stock

As a result of our limited operating history and the developing nature of
the markets in which we compete, we may be unable to accurately forecast our
revenue. If our revenue for a quarter falls below our expectations and we are
not able to respond by quickly reducing our spending, our operating results for
that quarter would be harmed. We currently intend to substantially increase our
operating expenses to develop new service offerings, fund increased marketing
activities, enter into and implement strategic relationships and further
develop our technology. To the extent these expenses precede or are not
subsequently followed by increased revenue, our operating results will be
significantly below expectations. As a result, our annual or quarterly
operating results may be below the expectations of securities analysts and
investors, which would adversely affect the trading price of our Class A common
stock.

The success of our business model depends on our ability to develop awareness
of the LeadersOnline brand name

Gaining widespread awareness of our brand name is critical to achieving
acceptance of our services and integral to the success of our business model.
We may incur brand name development costs that we are not able to recover
through increased revenues. A critical component of developing brand name
awareness is developing a reputation for quality service. In order to achieve a
reputation

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for quality service, we must be successful in completing searches for our
initial clients. If, among other matters, we are not able to fill positions as
quickly or successfully as our clients expect, our reputation and brand name
could be harmed and our opportunities to succeed could be significantly harmed.

Our business is heavily dependent on our relationship with Heidrick & Struggles
and its referral of clients and candidates to us

We are heavily dependent on our relationship with Heidrick & Struggles. To
date, we have obtained our clients almost exclusively through the Heidrick &
Struggles network and we heavily utilize the Heidrick & Struggles database of
candidates. We recently entered into an intercompany agreement with Heidrick &
Struggles that sets forth the terms of our relationship, and a summary of this
agreement is contained under "Related Party Transactions". We anticipate that
our relationship with Heidrick & Struggles will continue to be a significant
source of business for us in the foreseeable future and a critical component of
our growth strategy. If the professionals at Heidrick & Struggles fail to
provide us with adequate client referrals, for any reason, our business will be
significantly harmed.

We will not be able to attract employers or candidates if we do not continually
enhance and develop the content and features of our services

To remain competitive, we must continually improve the responsiveness,
functionality and features of our services and develop other services that are
attractive to employers and candidates. Our failure to do so could result in
the loss of employers and candidates that currently use our web site to our
competitors and cause us to fail to attract new ones. Also, any new or enhanced
service that is not favorably received by employers and candidates could impair
our reputation and significantly harm our business.

If we are unable to manage our growth, our revenues may be reduced

Rapid expansion strains our infrastructure, management, internal controls
and financial systems. We may not be able to effectively manage our present
growth or any future expansion. To support our growth, we have hired the
majority of our employees within the last year. This rapid growth has also
strained our ability to integrate and properly train our new employees.
Inadequate integration and training of our employees may result in
underutilization of our employees and may reduce our revenues and hinder our
ability to achieve or maintain profitability. We expect to continue to hire a
significant number of new employees to support our business. Our current
information systems, procedures and controls may not continue to support our
operations and may hinder our ability to successfully implement our Internet
marketplace for the recruiting industry. In addition, if we are unable to
undertake new business due to a shortage of staff or technology resources, our
growth will be impeded. If we cannot manage our growth effectively, it is
likely that our revenue and results of operations will not meet expectations.

We rely on the services of our senior management and other key personnel, and
their knowledge of our business and technology would be difficult to replace

We believe that our success depends on the continued employment of our
senior management team and other key personnel. Currently, our key executives
are Michael Christy, our Chief Executive Officer; James Quandt, our Chief
Operating Officer and Carole Owen, our Chief Financial Officer. The success of
our business is also highly dependent on our ability to attract and retain
e!Cruiters and e!Search associates who possess the skills and experience
necessary to fulfill our clients' recruitment needs. In order for our business
to be successful, our e!Cruiters must complete many more placements each year
than recruiters at a traditional recruitment firm.

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Any of our officers, e!Cruiters, e!Search associates or other employees can
terminate his or her employment relationship with us at any time. The loss of
any member of our senior management team or a significant number of our
e!Cruiters and e!Search associates or our inability to attract or retain
qualified employees to meet the growing demands of our clients could
significantly harm our business and our prospects of achieving or sustaining
profitability.

If we are not successful at building our candidate community, we may have
difficulty completing our recruitment engagements and our revenues may not grow
as projected

Our business depends on having access to a broad range of qualified
candidates. We are building our candidate community by accessing various online
candidate sources and by soliciting potential candidates to post their skills
and experience on our web site. We may not be able to attract and retain a
sufficient number of high quality candidates to successfully complete our
recruitment engagements for various clients. If we fail to successfully
complete recruitment engagements for clients, our reputation will suffer and we
will likely have difficulty obtaining future recruitment engagements, which
will significantly reduce the likelihood of generating enough revenue to
achieve and maintain profitability.

We face the risk of liability in performing recruitment searches

We are exposed to potential claims with respect to the recruitment search
process. Clients could assert claims for breaches of confidentiality agreements
or malpractice. In addition, a candidate could assert an action against us.
Possible claims include failure to maintain the confidentiality of the
candidate's employment search or for discrimination or other violations of the
employment laws. We maintain professional liability insurance in amounts and
coverages as we believe are adequate. We cannot guarantee, however, that our
insurance will cover all claims and that the coverage will be available at
reasonable rates. The assertion of one or more claims against us could, among
other matters, significantly damage our reputation and significantly harm our
business.

Our business could be adversely affected if we fail to successfully develop our
international operations

We intend to develop our international operations as an integral part of
our business plan. To date, we have limited experience in marketing, selling
and distributing our solution internationally. Our success in international
markets is directly dependent on the success of Heidrick & Struggles and their
dedication of sufficient resources to our relationship.

Our international operations are subject to other inherent risks,
including:

.the impact of recessions in economies outside the United States;

.changes in regulatory requirements;

.more restrictive privacy regulation;

. reduced protection for intellectual property rights in some countries;

. potentially adverse tax consequences;

. difficulties and costs of staffing and managing foreign operations;

. political and economic instability; and

. fluctuations in currency exchange rates.

Our business may not grow as quickly as expected if we fail to successfully
develop our international operations.

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If we acquire new businesses or technologies, we may be unable to integrate
them with our business or we may incur significant expenses in connection with
such acquisitions, which may restrict our business or impair our financial
performance

If appropriate opportunities present themselves, we may acquire businesses,
technologies, services or products that we believe are beneficial to our
business. We do not currently have any understandings, commitments or
agreements with respect to any significant acquisition, nor are we currently
pursuing any acquisition. We may not be able to identify, negotiate or finance
any future acquisition successfully. Even if we do succeed in acquiring a
business, technology, service or product, we have little experience in
integrating an acquisition into our business; the process of integration may
produce unforeseen operating difficulties and expenditures and may absorb
significant attention of our management that would otherwise be available for
the ongoing development of our business. Moreover, we have not made any
significant acquisitions, and we may never achieve any of the benefits that we
might anticipate from a future acquisition. If we make future acquisitions, we
may issue shares of stock that dilute other stockholders, incur debt, assume
contingent liabilities or create additional expenses relating to amortizing
goodwill and other intangible assets, any of which might harm our financial
results and cause the trading price of our Class A common stock to decline. Any
financing that we might need for future acquisitions may only be available to
us on terms that restrict our business or that impose on us other costs.

Intense competition may cause us to lose market share or reduce our gross
profit

The market for recruiting services is intensely competitive, highly
fragmented and quickly evolving. We face competition from a number of sources,
including:

. Internet-based recruiting firms, such as FutureStep and TMP Worldwide;

. traditional, regional and specialized executive search firms;

. alternative recruiting services, such as Internet job boards and print
advertising;

. internal resources of employers; and

. large Internet information hubs or portals.

We believe the principal competitive factors in our market are quality,
breadth and integration of service offerings, quality of candidate selection,
reputation and brand name recognition. Many of our competitors have indicated
that they may expand their service offerings, including those who may provide
online services designed to be substantially equivalent to the service we
offer. In addition, current and potential competitors may make strategic
acquisitions or establish cooperative relationships to expand their businesses
or to offer better or more comprehensive solutions (including solutions which
make effective use of the Internet), allowing them to rapidly acquire
significant market share. Intense competition could also impact the manner in
which we price our services. Therefore, the entry of new competitors or the
expansion of the service offerings of our existing competitors will likely harm
our business and reduce our gross profit.

We may not be able to obtain sufficient funds to grow our business and enhance
our services

We may need additional financing to continue to grow our business and
enhance our services. If additional financing is not available as we require it
or is not available on acceptable terms, we may be unable to fund our growth
strategy. Our failure to accomplish our growth strategy would significantly
impair our ability to increase revenue and achieve or sustain profitability. In
the event that we are able to raise additional funds, we may do so by issuing
additional equity or debt securities. If we issue additional equity or debt
securities, you may experience substantial dilution in the value of your
ownership interest. The terms of these securities could restrict or prevent us
from

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paying dividends and could limit our flexibility in making business decisions.
In any of these cases, the price of our Class A common stock could decline
substantially.

Risks Related to the Internet and Our Technology Infrastructure

Our competitors could reproduce or develop similar or superior technology

Our efforts to protect our technology and functionality may be inadequate
in light of the limited protection offered by existing trade secret, copyright
and trademark laws. For example, we may be unable to adequately protect our
Internet-based technology infrastructure and other companies may reproduce or
independently develop similar or superior technology without infringing our
intellectual property. The unauthorized reproduction or other misappropriation
of our intellectual property could also enable third-parties to benefit from
our technology, brand name and resources without paying us for them and could
cause us to lose business to our competitors. If we resort to legal proceedings
to protect our intellectual property, the proceedings could be burdensome and
expensive. Any of the foregoing events would likely result in significant harm
to our business that could limit the growth of our revenues or add expenses and
result in a decline in the trading price of our Class A common stock.

We are vulnerable to intellectual property infringement claims brought against
us by others, and could be forced to spend substantial sums to defend against
such suits

Successful intellectual property infringement claims against us could
result in monetary liability or a material disruption in the conduct of our
business. We cannot be certain that our services, content and brand names do
not or will not infringe valid patents, copyrights or other intellectual
property rights held by third parties. We expect that infringement claims in
our market will increase in number as more participants enter the market. We
may incur substantial expenses in defending against these third-party
infringement claims, regardless of their merit.

If others use domain names that are similar to ours, traffic to our web site
could decrease

We currently hold the rights to the Internet domain name
"LeadersOnline.com" and several other variations on that domain name. Domain
names generally are regulated by Internet regulatory bodies. The regulation of
domain names in the United States and in foreign countries is subject to
change. Regulatory bodies could establish additional top-level domains, appoint
additional domain name registrars or modify the requirements for holding domain
names. As a result, we may not acquire or maintain the "LeadersOnline.com" or
the other similar domain names in all of the countries in which we conduct
business. The relationships among regulations governing domain names and laws
protecting trademarks and similar proprietary names are unclear. Therefore, we
could be unable to prevent third-parties from acquiring domain names that are
similar to ours, or that infringe or otherwise decrease the value of our
trademarks and other propriety rights. Also, there are risks that in the future
third-parties could prevent us from continuing to use one or more of our domain
names. Any of these risks could result in decreased traffic to our web site by
our market participants.

Substantially all of our technology requirements have been outsourced

We have outsourced substantially all of our technology requirements to
third-parties, such as Exodus Communications and NetBase Corporation. In the
case of NetBase, we believe that we provide more than 50% of its current
revenues. If any of these third-parties were to cease operations

12
<PAGE>

or otherwise be unable to fulfill our technology requirements on a timely
basis, we may be unable to perform our operations in the manner in which we
expect. To the extent that we are not able to effectively perform our
operations, our reputation and business could be significantly harmed.

Others may refuse to license important technology to us or may increase the
fees they charge us for this technology, which may increase our costs or harm
our growth

We rely on third parties to provide us with some software and hardware, for
which we pay fees. This software and hardware has been readily available, and
to date we have not paid significant fees for their use. These third parties
may increase their fees significantly or refuse to license their software or
provide their hardware to us. While other vendors may provide the same or
similar technology, we cannot be certain that we can obtain the required
technology on favorable terms, if at all. If we are unable to obtain required
technology at a reasonable cost, our growth prospects and operating results may
be harmed through impairment of our ability to conduct business or through
increased cost.

We also intend to continue to license certain content for our web site from
third parties, including content which is integrated with internally-developed
content and used on our web site to provide important services. We cannot
ensure that third-parties will continue to license this content to us on
commercially reasonable terms or that we will be able to successfully integrate
third party content. Licensing content from third parties exposes us to risks
associated with the assimilation of new content, the diversion of resources
from the development of our content, the inability to generate revenue from new
content sufficient to offset associated acquisition costs and the maintenance
of uniform, appealing content. Our inability to obtain any of these licenses
could delay site development or services until we can identify, license and
integrate equivalent content. Any delays in site development or services could
cause our participants to decrease their use of our marketplace.

Disruption of our services due to unanticipated problems or failures could harm
our business

Our web site resides on a computer system hosted by Exodus Communications.
This system's continuing and uninterrupted performance is critical to our
success. Interruptions in performance may arise from computer viruses, "hacker"
attacks, telecommunications failures, fire, power loss, water damage, vandalism
and other similar unexpected adverse events. Candidates and employers may
become dissatisfied by any system failure that interrupts our ability to
provide our services to them. Sustained or repeated system failures would
reduce the attractiveness of our services to candidates and employers. Slower
response time or system failures may also result from straining the capacity of
our deployed software or hardware due to an increase in the volume of pages
viewed through our servers. To the extent that we do not effectively address
any capacity constraints or system failures, our business would be
substantially harmed.

If rapidly developing technology, including the Internet, does not enable us to
improve our services as projected, we may not attract new clients and our brand
could become less valuable

The market for Internet services is characterized by rapid technological
developments, frequent new service introductions and evolving industry
standards. The developing character of these services and their rapid evolution
will require our continuous improvement in performance, features and
reliability of our Internet content, particularly in response to competitive
offerings. We cannot assure you that we will be successful in responding
quickly, cost effectively and sufficiently to meet these developments. In
addition, the widespread adoption of new Internet technologies or standards
could require us to make substantial expenditures to modify or adapt our web
sites and services. This could affect our business and financial condition. New
Internet services or enhancements which

13
<PAGE>

we have offered or may offer in the future may contain design flaws or other
defects that could require expensive modifications or result in a loss of
client confidence. Any disruption in Internet access or in the Internet
generally could cause the value of our brand name and reputation to be severely
impaired and result in a significant decline in the trading price of our Class
A common stock.

If the Internet does not continue to grow as a medium for commerce, our
business plan will fail

Our long-term viability is substantially dependent upon the development of
the Internet as an effective medium of commerce, especially for the recruitment
of mid-level executives and professionals. This development depends upon a
number of factors including continued growth in the number of users, concerns
about transaction security, continued development of the necessary
technological infrastructure, development of enabling technologies, uncertain
and increasing government regulation and the development of complementary
services and products.

Use of the Internet as a means of effecting business transactions is at an
early stage of development. For us to be successful, businesses must accept and
utilize new ways of conducting business and exchanging information. Convincing
businesses to recruit mid-level executives and professionals online may be
particularly difficult, as these businesses have historically relied on
traditional off-line recruitment methods which depend on personal relationships
and contact. We cannot assure you that acceptance and use of the Internet will
continue to develop or that a sufficiently broad base of businesses will adopt,
and continue to use, the Internet and commercial online services as a medium of
commerce.

Growth in the demand for our Internet marketplace depends on the adoption
of e-commerce and Internet solutions by both potential employers and job
candidates, who must accept a new way of recruiting. Our business could suffer
significantly if e-commerce and Internet solutions are not accepted or not
perceived to be effective by businesses or job candidates. The Internet may not
prove to be a viable commercial marketplace for a number of reasons, including:

. inadequate development of the necessary infrastructure for Internet-
based communications by employers and candidates;

. security and confidentiality concerns of candidates;

. lack of development of complementary products, such as high-speed modems
and high-speed communication lines; and

. governmental regulation.

Changes in government regulation of the Internet could adversely affect our
business

Laws and regulations directly applicable to Internet communications and
commerce are becoming more prevalent, and new laws and regulations are under
consideration by both domestic and foreign governments. Any legislation enacted
or restrictions arising from current or future government investigations or
policy could dampen the growth in use of the Internet generally and decrease
the acceptance of the Internet as a communications and commercial medium. For
example, the U.S. federal and various state governments have recently proposed
limitations on the fair collection and use of information regarding Internet
users. In October 1998, the European Union adopted a directive that limits the
way in which we may collect and use information regarding Internet users in
Europe.

The laws governing the Internet, however, remain largely unsettled, even in
areas where there has been some legislative action. It may take years to
determine whether and how existing laws such as those governing intellectual
property, privacy, libel and taxation apply to the Internet and Internet

14
<PAGE>

advertising. In addition, the growth and development of the market for Internet
commerce may prompt calls for more stringent consumer protection laws, both in
the United States and abroad, that may impose additional burdens and costs on
companies conducting business over the Internet. Our business could be
materially and adversely affected by the adoption or modification of laws or
regulations relating to the Internet.

Risks Related to this Offering

The net proceeds from this offering may be allocated in ways with which you
disagree

Our management has significant flexibility in applying the net proceeds we
receive from this offering. Because the net proceeds are not required to be
allocated to any specific investment or transaction or in any specific manner,
our management may apply the proceeds in ways with which you may disagree.
Further, management's failure to effectively apply the proceeds could
substantially harm our business and result in a substantial decline in our
stock price. See "Use of Proceeds".

Heidrick & Struggles will control stockholder action after this offering and it
may vote its shares in ways with which other investors disagree

Immediately after this offering, Heidrick & Struggles will beneficially own
all of the outstanding shares of our Class B common stock, representing %
of the voting power of our voting capital stock. As a result, Heidrick &
Struggles will possess the ability to elect all of the directors to our board
of directors and to approve significant corporate transactions. Heidrick &
Struggles may also decide to transfer all or some of its shares of Class B
common stock to one or more third-parties without the consent of the Class A
common stockholders. This control by Heidrick & Struggles gives it the ability
to cause or prevent a change in control of LeadersOnline or to otherwise affect
our business in ways with which you may disagree.

It may be difficult and expensive to acquire us

Immediately after this offering, Heidrick & Struggles will have the ability
to impede or prevent a change in control of LeadersOnline as a result of its
beneficial ownership of % of our voting capital stock. In addition,
antitakeover provisions in our Amended and Restated Certificate of
Incorporation, our Bylaws and the Delaware laws may make the acquisition of
LeadersOnline in a transaction not approved by our board of directors more
difficult and expensive. Some of the provisions in our Amended and Restated
Certificate of Incorporation and Bylaws include:

. limitations on stockholder actions;

. advance notification procedures for director nominations and actions to
be taken at stockholder meetings; and

. the authorization to issue one or more series of preferred stock with
voting rights and other powers.

These provisions could discourage an acquisition attempt or transactions in
which the Class A common stockholders receive a premium over the prevailing
market price for the Class A common stock.

We do not anticipate paying dividends

Even if we become profitable, we intend to retain all of our earnings for
the future operation and expansion of our business. We do not anticipate paying
cash dividends on our Class A common stock at any time in the foreseeable
future. See "Dividend Policy".

15
<PAGE>

There is no prior existing market for our Class A common stock and the price of
our Class A common stock may be volatile, which may lead to substantial
investment losses

There is currently no public market for our Class A common stock. The
initial public offering price of our Class A common stock will be determined
through negotiations between representatives of the underwriters and us and may
not be representative of the price that will prevail in the open market. You
may not be able to resell your shares at or above the initial public offering
price. See "Underwriting" for a description of the factors evaluated in
determining the initial public offering price and the arrangement between the
underwriters and us.

We have filed an application for the quotation of our Class A common stock
on the Nasdaq National Market. We do not know the extent to which investor
interest will lead to the development of a trading market or how liquid it will
be. The market price for the Class A common stock could be highly volatile and
could be subject to wide fluctuations in response to the following and other
factors:

. quarterly variations in our operating results;

. announcements by us regarding recruitment activity through our site;

. investor and analyst perception about us and the online recruiting
industry in general;

. announcements of new services by our competitors and other factors that
may affect the demand for our services; and

. changes in financial estimates for our industry or us by securities
analysts.

In addition, securities traded in the stock market have recently
experienced extreme price and volume fluctuations that sometimes have been
unrelated or disproportionate to the companies' operating performance. This has
been especially true with Internet companies. It is possible that our Class A
common stock will experience extreme price and volume fluctuations, potentially
leading to substantial losses in your investment in our Class A common stock.
Declines in the trading price of our Class A common stock could also materially
and adversely affect our ability to retain qualified employees and to access
the capital markets, among other matters.

Shares eligible for future sale may adversely affect the market price of our
Class A common stock

Sales of a substantial number of shares of Class A common stock in the
public market following this offering could cause the market price of our Class
A common stock to decline. Upon completion of this offering, there will be
outstanding shares of Class A common stock and 16,140,000 outstanding
shares of Class B common stock that are convertible into shares of Class A
common stock. Of the outstanding shares of Class A common stock, the
shares sold in this offering and the shares issued upon exercise of
the underwriters' over-allotment option will be immediately available for sale.
In addition, there are currently shares of Class A common stock
issuable under options which have been granted under our stock option plan. See
"Shares Eligible for Future Sale".

16
<PAGE>

NOTE REGARDING FORWARD-LOOKING STATEMENTS

We make forward-looking statements in this prospectus that are subject to
risks and uncertainties. These forward-looking statements include information
about possible or assumed future results of our financial condition,
operations, plans, objectives and performance. They also include statements
concerning projections of revenue and expenses, income and loss, capital
expenditures, dividends, capital structure and other financial terms.
Statements on the following subjects are forward-looking in nature:

. our strategy;

. our understanding of our competition;

. market trends;

. projected capital expenditures;

. the impact of the Internet on our products, operations and business; and

. use of the proceeds of this offering.

The forward-looking statements are based on our management's beliefs,
assumptions and expectations of our future performance, taking into account the
information currently available to them. These beliefs, assumptions and
expectations can change as a result of many possible events or factors, many of
which are not known to us. If there is a change, our financial results or
performance may vary materially from those expressed in our forward-looking
statements. You should carefully consider this risk when you make an investment
decision in the Class A common stock, along with the following factors that
could cause our forward-looking statements to vary:

. general volatility of the capital markets and the market price of our
Class A common stock;

. degree and nature of our competition;

. other factors referenced in this prospectus, including those set forth
under "Risk Factors", "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and "Business".

When we use the words "believe", "expect", "anticipate", "estimate" or
similar expressions, we are intending to identify forward-looking statements.
You should not place undue reliance on these forward looking statements.

INFORMATION

You should rely only on the information contained in this prospectus. We
have not authorized anyone to provide you with information different from that
contained in this prospectus. The information contained in this prospectus is
accurate only as of the date of this prospectus, regardless of the time of
delivery of this prospectus or of any sale of shares of Class A common stock.
We are offering to sell, and seeking offers to buy, shares of Class A common
stock only in jurisdictions where offers and sales are permitted.

17
<PAGE>

USE OF PROCEEDS

The net proceeds to us from the sale of the shares of Class A
common stock, after deducting underwriting discounts and commissions and
estimated offering expenses and based upon an assumed initial public offering
price of $ per share of Class A common stock, are estimated to be
$ . We currently intend to use the net proceeds from this offering:

. to implement an accelerated global marketing campaign that will target
mid-level executives and professionals and leading global employers;

. to continue to enhance our Internet-based technology platform;

. to continue to introduce and expand the LeadersOnline solution; and

. for other general corporate purposes, including working capital and
capital expenditures.

We may, if appropriate opportunities arise, use an undetermined portion of
the net proceeds to acquire or invest in complementary companies, service
offerings or technologies. We do not have any agreements or commitments with
respect to any acquisition or investment, and we are not involved in any
negotiations with respect to any transaction. Pending these uses, we intend to
invest the funds in short-term, interest-bearing, investment-grade securities.

DIVIDEND POLICY

We have never paid any cash dividends and do not expect to pay any cash
dividends for the foreseeable future. We currently intend to retain any future
earnings to finance our operations and growth. Any future determination to pay
cash dividends will be at the discretion of our board of directors and will be
dependent upon earnings, financial condition, operating results, capital
requirements, any contractual restrictions and other factors that our board of
directors deems relevant.

18
<PAGE>

CAPITALIZATION

The following table sets forth our capitalization at December 31, 1999:

. on an actual basis;

. on an as adjusted basis to reflect the receipt by us of the net proceeds
from our sale of shares of Class A common stock offered in this
offering, assuming an initial public offering price of $ per share,
after deducting underwriting discounts, commissions and estimated
offering expenses, and the application of the net proceeds from the
Class A common stock offered in this offering as described under "Use of
Proceeds". This table should be read in conjunction with our financial
statements and the related notes appearing elsewhere in this prospectus.

<TABLE>
<CAPTION>
At December 31, 1999
-------------------------
Actual As Adjusted
----------- ------------
<S> <C> <C>
Cash............................................. $ -- $
=========== ============
Total debt....................................... $ -- $
----------- ------------
Stockholders' equity
Common stock $0.01 par value, 16,140,000 shares
authorized, issued, and outstanding at
December 31, 1999............................. 161,400
Preferred stock................................ --
Additional paid in capital..................... 7,253,125
Accumulated deficit............................ (5,157,274)
----------- ------------
Total stockholders' equity................... 2,257,251
----------- ------------
Total capitalization....................... $ 2,257,251 $
=========== ============
</TABLE>

19
<PAGE>

DILUTION

Our net tangible book value as of March 31, 2000 was approximately
$ , or $ per share of common stock, based on
shares of common stock outstanding. Net tangible book value per share
represents the amount of our total tangible assets less total liabilities,
divided by the number of shares of common stock outstanding as of ,
2000.

Our pro forma net tangible book value as of , 2000 would have
been $ million, or $ per share after giving effect to:

. the sale of shares of Class A common stock at an assumed initial
public offering price of $ per share (the midpoint of the range set
forth on the cover page of this prospectus); and

. the application of the remaining estimated net proceeds as described
under "Use of Proceeds".

This represents an immediate increase in pro forma net tangible book value
of $ per share to our existing stockholders and an immediate dilution of
$ per share to new investors purchasing Class A common stock in this
offering. The following table illustrates this per share dilution:

<TABLE>
<S> <C>
Assumed initial public offering price per share........................
Pro forma net tangible book value per share before this offering.....
Increase per share attributable to new investors.....................
Pro forma net tangible book value per share after this offering........
Dilution per share to new investors....................................
</TABLE>

The following table summarizes, on a pro forma as adjusted basis after
giving effect to this offering, the differences between the existing
stockholder and new investors with respect to the number of shares of common
stock purchased from us, the total consideration paid to us and the average
price per share paid at an assumed initial public offering price of $ per
share, after deducting the underwriting discounts and commissions and estimated
offering expenses:

<TABLE>
<CAPTION>
Shares Purchased Total Consideration Average
------------------- ---------------------- Price Per
Number Percent Amount Percent Share
--------- -------- ----------- ---------- ---------
<S> <C> <C> <C> <C> <C>
Existing stockholders... % $ % $
New investors........... % $ % $
--------- ------- ----------- -------- ------
Total................... 100% 100%
========= ======= =========== ======== ======
</TABLE>

20
<PAGE>

SELECTED FINANCIAL DATA

The selected financial data presented below for each of the two years in
the period ended December 31, 1999 have been derived from the respective
audited financial statements of LeadersOnline which were audited by Arthur
Andersen LLP, independent public accountants. The data set forth are qualified
in their entirety by, and should be read in conjunction with, "Management's
Discussion and Analysis of Financial Condition and Results of Operations", our
audited financial statements and the related notes and the other financial data
and statistical information appearing elsewhere in this prospectus.

<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------
1998 1999
------------ -----------
<S> <C> <C>
Statement of Operations Data:
Revenue............................................ $ -- $ 2,616,762
Cost of revenue.................................... -- 1,188,623
------------ -----------
Gross profit....................................... -- 1,428,139
------------ -----------
Operating expenses:
Sales and marketing.............................. 397,718 2,680,853
Product development.............................. 599,155 1,779,529
General and administrative....................... 541,716 2,125,031
------------ -----------
Total operating expenses....................... 1,538,589 6,585,413
------------ -----------
Net loss .......................................... $ (1,538,589) $(5,157,274)
============ ===========
Basic and diluted loss per common share............ $ (0.10) $ (0.32)
============ ===========
Basic and diluted weighted average common shares
outstanding....................................... 16,140,000 16,140,000
============ ===========

Balance Sheet Data (at end of period):
Working capital.................................... $ (468,000) $ (238,678)
Total assets....................................... 471,848 4,149,749
Accumulated deficit................................ -- (5,157,274)
Total division and stockholder's equity............ 3,848 2,257,251
</TABLE>

21
<PAGE>

MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion of our financial condition and results of
operations should be read in conjunction with the selected financial data and
the audited financial statements and related notes appearing elsewhere in this
prospectus.

Overview

LeadersOnline provides an efficient business-to-business Internet
marketplace focused on aggregating, screening and matching a high quality
candidate supply with employer demand for mid-level executives and
professionals. Through our Internet-based technology infrastructure, we offer
end-to-end services that enable our marketplace participants to efficiently
review information on candidates, career opportunities and the recruitment
process. Our technology infrastructure is augmented by the recruiting expertise
of our skilled search professionals at critical phases of the recruitment
process. We have a diversified client base, including companies in the
technology, financial services, industrial, consumer, professional services,
telecommunications, and health care.

We are a majority-owned subsidiary of Heidrick & Struggles International,
Inc., the leading global executive search firm focused on senior-level
executive recruitment. Effective January 1, 1998, we began operations as a
separate division of Heidrick & Struggles; we were incorporated in Delaware in
January 1999. As of April 5, 2000, Heidrick & Struggles owned approximately 96%
of the outstanding stock of LeadersOnline.

We have incurred significant costs to develop our corporate infrastructure,
including costs to develop technology and recruit and hire personnel. As a
result, we had an accumulated deficit of $5.2 million at December 31, 1999. We
expect to incur operating losses for the foreseeable future as we invest in
sales and marketing and product development.

We have only a limited operating history upon which you can evaluate our
business and prospects. Our limited operating history and the rapidly changing
nature of our business makes predicting our future operating results difficult.
As a result, at this time we believe that period-to-period comparisons of our
operating results may not be good indications of our future performance, nor
would our results for any particular period be indicative of future operating
results.

Revenue

We generate revenue by providing online recruiting services to our clients.
Revenue consists of project fees from clients seeking to recruit mid-level
executives and professionals. As of March 31, 2000, we had 80 clients in
various industries. We charge our clients a fee for recruiting employees which
is generally based on a percentage of first year compensation of a successfully
placed candidate. As of March 31, 2000, fees as a percentage of total annual
compensation of candidates placed were, on average, 32% for single search
engagements and 25% for multiple search engagements. For the year ended
December 31, 1999, one of our clients, E*Trade, accounted for more than 10% of
our revenue.

We generally provide three types of services for clients. The first is a
standard retained search for a single engagement. For the retained search, the
revenue from client services is recognized as clients are billed, generally
over a three-month period commencing on the date of the initial acceptance of
the search, which approximates the average period of a search. Payment of our
fee is not contingent on the successful placement of a candidate. If a search
is cancelled within the first 90 days, the fee is pro-rated up to the date of
cancellation. If the search is completed before the 90 days have passed, the
billing period is accelerated to the date of completion.

22
<PAGE>

The second type of service provided is a multiple engagement performance-
based search. Fees for these searches are made up of a commencement fee that is
billed when the search contract is signed and performance fees, which are
billed upon placement of candidates. The revenue related to the commencement
fee is deferred when billed and recognized ratably over the life of the
contract. The revenue for the placement of candidates is recognized when
billed. For some multiple engagement searches, there is also a service fee
which is billed and recognized monthly over the life of the contract.

The third type of service provided is a multiple engagement search that is
made up of two distinct components. The first component is providing
consultation and other services including needs assessment, position
evaluation, qualifications/skills assessment, development of client content on
our web site, and development of opportunity pages. A specific fee is billed
for these consultative services upon completion of services. The second
component is a performance-based fee which is billed when an offer is extended
by the client to a candidate. Revenue is recognized when fees are billed.

Cost of Revenue

Cost of revenue represents costs incurred to search for and place
candidates with our clients and consists primarily of compensation and benefits
paid to e!Cruiters and e!Search Associates and amounts paid to third-party
consultants for search and recruiting services. In addition, it includes
certain costs related to our web site, including a portion of depreciation,
hosting and other related costs. Because we expect to derive more revenue per
e!Cruiter and e!Search Associate over time, we expect our cost of generating
revenues to decrease as a percentage of revenue over time.

Operating Expenses

Our operating expenses are divided into three categories: sales and
marketing, product development, and general and administrative expenses.

Sales and marketing

The key components of sales and marketing are compensation and benefits
paid to Client Development Executives and amounts paid to Heidrick & Struggles
and other third-party consultants. These expenses also include advertising and
public relations. We believe that the continued enhancement of the
LeadersOnline brand will be critical to our success. Accordingly, we expect to
increase our sales and marketing expenditures significantly in future periods
to accomplish this goal.

Product development

The key components of product development include costs to develop and
assess alternatives for upgrades of our software and web site. These expenses
include third-party contract development costs. We expect to significantly
increase our spending on product development costs in future periods to
strengthen our ability to continue to provide quality service to our clients
and candidates.

General and administrative

The key components of general and administrative expenses include
compensation and benefits for executive and administrative staff, corporate
expense charges from Heidrick & Struggles, professional fees, travel,
depreciation, and other general office expenses. We expect our general and
administrative expenses to increase in the foreseeable future as we continue to
incur expenses to support the growth of our business and operations as a public
company.

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<PAGE>

Results of Operations

The following table sets forth for 1999, our selected statement of
operations data as a percentage of revenue. As there was no revenue in 1998,
information for that year would not be meaningful and has been excluded. The
historical results are not necessarily indicative of results to be expected in
future periods.

<TABLE>
<CAPTION>
Year Ended
December 31,
1999
------------
<S> <C>
Revenue..................................................... 100.0%
------
Cost of revenue............................................. 45.4%
------
Gross profit................................................ 54.6%
------
Operating expenses:
Sales and marketing....................................... 102.5%
Product development....................................... 68.0%
General and administrative................................ 81.2%
------
Total operating expenses................................ 251.7%
------
Net loss.................................................... (197.1)%
======
</TABLE>

Year Ended December 31, 1999 Compared to the Year Ended December 31, 1998

Revenue

Revenue was $2.6 million in 1999. We had no revenue during 1998 because the
business was still in the development stage. In 1999, revenue consisted of
project fees. In 1999, 65% of our revenue was from retained searches and 35%
was from multiple engagement searches.

Cost of revenue

Cost of revenue was $1.2 million in 1999. We had no cost of revenue during
1998.

Sales and marketing

Sales and marketing increased $2.3 million to $2.7 million in 1999, from
$0.4 million in 1998. The increase in sales and marketing was due primarily to
an increase in the number of Client Development Executives and the amount of
client referral fees paid to Heidrick & Struggles.

Product development

Product development increased $1.2 million to $1.8 million in 1999, from
$0.6 million in 1998. The increase in product development was due primarily to
increases in third-party contract development costs for product refinements and
costs to assess alternatives for upgrades of our software and web site.

General and administrative

General and administrative expenses increased $1.6 million to $2.1 million
in 1999, from $0.5 million in 1998. The increase in general and administrative
expenses was due primarily to increased executive and administrative personnel
and related overhead to support our growth.

Liquidity and Capital Resources

Since inception, we have financed our activities primarily through capital
contributions from Heidrick & Struggles and internally generated funds.

24
<PAGE>

We expect our operating expenses to grow significantly as we enhance our
brand, expand and enhance our services and develop additional revenue sources.
We believe that the net proceeds of this offering will be sufficient to meet
our anticipated cash requirements to fund operating losses and our other
working capital needs for the next 18 months. Heidrick & Struggles intends to
provide the necessary financial support to ensure our continued operations
until at least January 2, 2001. We cannot assure you that additional funding,
if required, will be available to us in amounts or on terms acceptable to us.
If sufficient funds are not available or are not available on acceptable terms,
our ability to fund our expansion, develop new products and services or
otherwise respond to competitive pressures would be significantly limited.
These limitations would materially and adversely affect our business, financial
condition and results of operations.

Cash flows used in operating activities were $6.8 million in 1999, due
primarily to the net loss from operations and increases in working capital. In
1998, cash flows used in operating activities were $1.1 million, due primarily
to the net loss from operations, partially offset by decreases in working
capital.

Cash flows from financing activities were $7.4 million and $1.5 million in
1999 and 1998, respectively. Our financing activities include contributions to
capital from Heidrick & Struggles.

Capital expenditures totaled $0.6 million and $0.5 million in 1999 and
1998, respectively. These expenditures consisted primarily of purchases of
computer equipment and software, system development costs and office furniture
and fixtures.

We have entered into a two-year agreement to be the exclusive online
recruiting provider on select web sites of ITworld.com, Inc. to increase our
candidate base, enhance our value for our clients and increase our brand
recognition. As part of this agreement, we have committed to pay an advertising
fee during each twelve-month period beginning on March 1, 2000. In addition, we
have entered into a five-year agreement to establish a co-branded online career
center and magazine with the Business Week operating unit of The McGraw-Hill
Companies to augment our access to quality candidates and enhance our brand. As
part of this agreement, we have committed to pay the greater of a royalty fee
equal to a percentage of LeadersOnline revenue generated during the term of
this agreement or a minimum fee. We also recently entered into a fifteen-month
agreement to form a strategic relationship with VerticalNet to provide us with
a significant source of both quality candidates and leading employers. As part
of this agreement, we have committed to pay slotting fees, advertising
sponsorship fees and a license fee. We also recently entered into an
Intercompany Agreement with Heidrick & Struggles which requires that we pay
Heidrick & Struggles 3% of our total revenue as a royalty for as long as we use
the LeadersOnline name.

As a result of a number of equity transactions subsequent to year end, more
fully described in the notes to the financial statements, we may be required to
record expense in fiscal year 2000 for the difference, if any, between the fair
market value and the assigned value of the securities on the date of issuance.
The charge could be material.

Quantitative and Qualitative Disclosures About Market Risk

Currently, none of our monetary assets and liabilities and operating
expenses are denominated in foreign currencies. Therefore, our financial
exposure due to the effect of fluctuations in foreign currency rates is not
material. We do not have any significant financial instruments outstanding and,
thus, our exposure to interest rate fluctuations is not significant. In
addition, we do not utilize any derivative security instruments.

Recently Issued Accounting Pronouncements

During 1999, the Securities and Exchange Commission staff issued Staff
Accounting Bulletin No. 101, "Revenue Recognition in Financial Statements". SAB
No. 101 summarizes certain of the staff's views in applying generally accepted
accounting principles to revenue recognition in financial statements. The
financial statements presented are in compliance with SAB No. 101.

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During 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and for Hedging Activities", which establishes new standards for reporting
information about derivatives and hedging. FASB issued SFAS No. 137,
"Accounting for Derivative Instruments and Hedging Activities--Deferral of the
Effective Date of FASB Statement No. 133", in 1999, which deferred the
effective date of SFAS No. 133 for one year. The statement is effective for
periods beginning after June 15, 2000, and will be adopted by us as of January
1, 2001. We expect that the adoption of this statement will have no material
effect on our financial position or results of operations.

Taxes

For 1998, the Company was an operating division of Heidrick & Struggles and
its losses were included in Heidrick & Struggles' tax return. As the financial
statements are presented on a standalone basis, there is no tax benefit
recorded in 1998 because as an operating division, the Company is not a tax-
paying entity. For 1999, the Company is included in the consolidated federal
income tax return of Heidrick & Struggles. As such, the Company's net operating
loss for 1999 has been utilized by Heidrick & Struggles. Under the Company's
tax sharing agreement with Heidrick & Struggles, the Company is not reimbursed
by Heidrick & Struggles for the tax benefit of losses utilized in Heidrick &
Struggles' consolidated federal income tax return. As a result, a deferred tax
asset has not been recorded on the accompanying balance sheet. On a separate
return basis, the Company would have recorded a tax benefit for its 1999 net
operating losses with a corresponding valuation allowance as the realization of
the benefit cannot be assured. It is expected that the Company will not be
included in the consolidated federal tax return of Heidrick & Struggles after
the initial public offering due to the anticipated dilution of Heidrick &
Struggles' ownership interest in the Company below 80%.

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BUSINESS

Overview

Our Internet-based services are focused on the highly fragmented and
underserved recruitment market for mid-level executives and professionals. We
combine our Internet-based technology infrastructure, our in-depth knowledge of
the human capital market and our expertise in the recruiting industry, to
provide end-to-end Internet-based services for employees and candidates. Our
services enable employers to efficiently review information on candidates and
access a high quality candidate pool, while enabling candidates to efficiently
review information on employers and to access career opportunities. Our
technology infrastructure is augmented by the recruiting expertise of our
e!Cruiting and e!Search professionals to create a streamlined recruitment and
fulfillment process. We believe that our Internet-based solution offers
employers more efficiency than traditional recruiting methods currently
utilized by regional boutique recruiting firms. In addition, we believe that we
provide more value-added services to employers and candidates than existing
online recruiting services and job boards that focus on lower level job
listings.

We intend to establish LeadersOnline.com as the premier Internet
destination and community site for career management and leadership resources.
We also intend to build LeadersOnline as the leading global brand and the
premier end-to-end Internet-based marketplace for mid-level executives and
professionals. Our strategic relationship with Heidrick & Struggles, the
world's leading executive search firm, provides us with access to its extensive
base of leading companies and the expertise of experienced leadership
consultants. In addition, we have entered into other strategic agreements with
key technology and media companies, such as VerticalNet and Business Week, to
rapidly build our marketplace of leading employers and high quality candidates.

We believe, based on industry sources, that the potential annual recruiting
market for mid-level executives and professionals ranges from approximately $8
billion to $13 billion of a total estimated recruitment market of $30 billion
in 1999. Our existing client base represents a wide variety of industries,
including technology, financial services, industrial, consumer, professional
services, telecommunications and health care. Our clients include Hartford
Computing Group, GartnerGroup, E*Trade, Andersen Consulting and
CollegeClub.com. Since introducing LeadersOnline.com to the market, we have
provided our Internet-based recruiting services to over 110 companies located
throughout the United States and in Europe, and have matched and recruited
candidates for a broad range of functions, including business development,
finance, information technology and sales and marketing.

Industry Background

Growth of Business-to-Business e-Commerce on the Internet

The Internet has emerged as the fastest growing communications medium in
history and is dramatically changing how businesses and individuals
communicate, share information and conduct commerce. Initially, the growth of
the Internet created opportunities for conducting business-to-consumer and
consumer-to-consumer e-commerce. More recently, the widespread adoption of
intranets, the acceptance of the Internet as a communications platform, and
increased and secure bandwidth have created a foundation for business-to-
business e-commerce. This offers the potential for organizations to increase
revenue, streamline complex business processes, lower costs and

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improve productivity. According to Forrester Research, Internet-based business-
to-business e-commerce is expected to grow from $109 billion in 1999 to $2.7
trillion in 2004, accounting for more than 90% of the dollar value of e-
commerce in the United States by 2004.

Business-to-business e-commerce solutions frequently affect workflows that
are vital to business operations by replacing various one-to-one human- or
paper-based transactions with Internet marketplaces. These marketplaces bring
together market participants and information and provide efficient and scalable
solutions to business processes. We believe business-to-business Internet
marketplaces are most likely to be successful in industries characterized by:

. large numbers of fragmented and geographically dispersed market
participants;

. cumbersome and inefficient business processes;

. lack of access to centralized and up-to-date information; and

. large transaction volume.

The Recruitment Industry and the Supply of Human Capital

In recent years, millions of new positions for executive, administrative,
technical, managerial and professional personnel have been created. The rapidly
growing number of open positions for these professionals has outpaced the
growth in the number of qualified candidates. In addition to the scarcity of
available talent, employee mobility has risen. These factors together have
combined to make the growing number of positions difficult to fill. The key
trends driving the scarcity and mobility of talent are as follows:

. Tightening Labor Pool. According to the U.S. Bureau of Labor Statistics,
the U.S. unemployment rate has dropped from approximately 7.8% in 1992
to approximately 4.1% in 1999, making it more difficult to find
available candidates.

. Shrinking Population of 25 to 34 Year-Olds. According to the U.S. Census
Bureau, the population of 25 to 34 year-olds in the United States is
expected to decline by approximately 4.9% between 1998 and 2003,
reflecting lower birth rates in the 1960s and 1970s.

. Change in Relationship Between Employer and Employee. Whereas in the
past, employees typically remained with one employer for very long
periods of time, current trends indicate that employees are frequently
changing jobs. Based on data from the U.S. Bureau of Labor Statistics,
the average person entering the workforce today will work for between
eight and ten different employers, which increases the likelihood that
positions will need to be filled and refilled frequently.

. Lack of Centralized Information as a Result of a Fragmented Recruitment
Market. According to data from Kennedy Research Associates, there are
an estimated 5,000 executive search firms worldwide, with the ten
largest firms in the United States controlling less than 20% of the
market. As a result, employers and candidates are divided by a lack of
efficient access to centralized information on the global recruitment
market.

As human capital determines a significant part of a company's competitive
advantage, companies suffering from a scarcity of talent and from increasing
employee turnover face the urgent need to reduce time to hire the talent needed
to grow and operate their business. As open positions have become more
difficult to fill, more companies have turned to recruiting firms to gain
access to qualified candidates and to accelerate the hiring process. We
believe, based on industry sources, that overall recruiting expenditures by
businesses in the United States increased from approximately $24 billion in
1997 to approximately $30 billion in 1999.

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Limitations of Traditional Recruitment Services

Services offered by recruiters are generally divided into two distinct
categories: engagements for senior executives and searches for lower-level
workers. Engagements to recruit senior executives require a significant amount
of human contact and coordination in order to identify and place candidates
that meet detailed specifications. On the other hand, recruiting services for
entry-level, lower compensation positions are typically focused on maximizing
the quantity of candidates and providing minimal value-added services.

In between these two extremes is a significant underserved market for
comprehensive recruiting services which target mid-level executives and
professionals. Currently, this market is predominantly served by thousands of
regional, contingency-based and boutique retainer search firms with no single
participant holding a significant market share. This environment creates
substantial inefficiencies both for employers seeking to fill mid-level
executive and professional positions and for candidates seeking high quality
career opportunities.

The traditional connection between an employer and a candidate occurs
through a match-making process dependent on personal relationships, broadcast
advertising and a multitude of one-to-one dialogues through telephone calls,
faxes and mailings. Traditional recruiting methods can be inefficient and
ineffective for recruiting mid-level executives and professionals, because they
are typically characterized by one or more of the following limitations:

. Labor Intensive. Traditional methods require a significant amount of
manual identification of appropriate candidates and intensive human
coordination of the recruitment process.

. Ineffective Broadcast Advertising. The broadcast advertising methods
traditionally used to solicit individuals for specific employment
opportunities, such as newspaper classified advertisements, do not
specifically target qualified and interested job candidates.

. Geographically Focused. Traditional methods tend to focus on a
geographically limited pool of potential candidates, making it difficult
and expensive for employers to recruit beyond their particular regions.

. Inconvenient for Candidates. Job candidates are required to search,
identify, compare, evaluate and apply for individual employment
opportunities.

. Time Consuming. Traditional methods are process-intensive and time-
consuming and, thus, frequently inefficient and ineffective for both
employers and candidates.

Emergence of Online Recruitment Services

The Internet has recently emerged as a recruiting tool due to its ability
to reach millions of individuals worldwide and to provide and exchange
information efficiently. The Internet, therefore, has the capability to connect
job candidates with employers more effectively than traditional recruiting
methods at a lower cost. For employers, online recruiting can potentially
provide shorter time-to-hire, access to a larger pool of candidates, 24-hour
accessibility to information via the Internet, global reach and more effective
candidate targeting. For job candidates, online recruiting can provide the
ability to more efficiently conduct job searches and gather information about
employers on a confidential basis. For example, the Internet allows individuals
to access information from many different sources and view opportunities
available in many different regions and industries.

Limitations of Existing Online Recruitment Services

While many of today's online recruitment offerings, such as online job
boards, provide efficiencies for entry-level, lower compensation positions,
most suffer from a number of limitations

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that reduce their effectiveness for the mid-level executive and professional
recruitment segment. These limitations include:

. Unscreened Candidate Databases. The candidate databases compiled by most
online recruiters are typically large and unscreened. As a result, these
databases frequently contain duplicative or outdated resumes and
unqualified candidates. This makes it difficult and time-consuming for
employers to effectively identify and select qualified candidates.

. Ineffective Screening and Matching Process. Most online recruiters do
not offer expertise and assistance in identifying and assessing
qualified candidates and verifying candidate backgrounds. Moreover,
these services generally do not target passive candidates or individuals
who are not actively seeking new opportunities, but who might consider
changing employers under favorable conditions.

. Lack of Privacy and Control. Many online recruiters do not enable job
candidates to restrict access to their resumes. Many mid-level
executives and professionals will not post their resumes on an online
job site unless they are able to control the dissemination of their
personal information.

. Limited Service Offering. Most online recruitment offerings do not offer
comprehensive, end-to-end services that assist employers with multiple
aspects of the recruitment process, including positioning employer
opportunities and tracking, interviewing, assessing and hiring
candidates.

. Lack of Trusted Brand. We believe that most online recruiters have been
unable to cultivate a brand trusted both by employers, to meet their
mission critical recruitment requirements, and by candidates, to protect
and promote their careers.

Opportunity for a Business-to-Business Internet Solution in the Recruitment
Industry

The limitations of current recruitment service offerings, the need for
customization, the importance of quality, and the fragmentation of the
recruitment industry create the opportunity for a business-to-business Internet
marketplace that improves access to both employer and candidate information and
streamlines the recruitment process. Employers could benefit from a solution
that provides them with access to a global community of quality candidates,
efficient recruiting through the Internet and recruiting expertise from a
skilled team of search professionals. Candidates could benefit from a solution
that provides them with access to a vast global network of leading employers
while maintaining their privacy and control over the recruitment process. We
believe, based on industry sources, that the potential annual recruiting market
for mid-level executives and professionals ranges from approximately $8 billion
to $13 billion of a total estimated recruitment market of $30 billion in 1999.

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The LeadersOnline Solution: A Business-to-Business Internet Marketplace for
Mid-level Executives and Professionals

We provide an efficient business-to-business Internet marketplace focused
on aggregating, screening and matching a high quality candidate supply with
employer demand for mid-level executives and professionals. Through
LeadersOnline.com, we offer end-to-end services that enable our marketplace
participants to efficiently review and manage information on candidates, career
opportunities and the recruitment process. Our technology infrastructure is
augmented by the recruiting expertise of our skilled search professionals at
critical phases of the recruitment process.

[FLOWCHART OF LEADERSONLINE MARKETPLACE APPEARS HERE]

We believe that the LeadersOnline.com marketplace will be a premier
recruitment and career destination for employers and mid-level executives and
professionals worldwide. In general, we target employers and candidates
interested in opportunities with annual compensation ranging between $75,000
and $150,000, although from time to time the annual compensation may be outside
of this range. Our strategic relationships with Heidrick & Struggles, Business
Week and VerticalNet give us unique access to a global network of leading
employers, hundreds of thousands of additional potential candidates and career
content of interest to employers and candidates. Our solution features the
following key benefits to both employers and candidates:

Benefits to Employers

Access to High Quality Candidates. We have access to hundreds of thousands of
candidates from all over the world through:

. our Leaders! Candidate Community, which consists of the candidates who
have joined our LeadersOnline.com marketplace through invitations from
us and through our multiple strategic partners;

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. our access to a variety of candidate databases, including those
available through Heidrick & Struggles, Business Week, VerticalNet and
ITworld.com; and

. focused Internet searches conducted by our e!Search associates.

These sources generate both candidates who are actively seeking new employment
opportunities as well as passive candidates who would consider new employment
on an opportunistic basis. Passive candidates are highly sought after by
recruiters of mid-level executives and professionals because they often possess
skills that are in demand. While passive candidates represent a large and
attractive pool of potential candidates, they are often difficult to access
because they are not actively seeking to change employers.

Reduced Time-to-Hire. Our sophisticated search engine rapidly and
accurately matches candidates from our Leaders! Candidate Community with the
position requirements of employers. Our system automatically notifies qualified
candidates by e-mail of open positions for which they have been matched. This
automated process facilitates the communication between matched and interested
candidates and employers. We believe that through the potential efficiencies of
online recruiting, employers' time-to-hire can be significantly reduced.

24-Hour Recruitment Process Tracking Capabilities. Our recruiting
management and tracking capabilities offer employers access to the current
status of each recruitment project and candidate. These capabilities provide
employers with global, 24-hour access to up-to-date information on the
recruitment process, including a detailed list of current candidate matches,
candidate backgrounds and released resumes.

Expertise from Our Team of Search Professionals. We combine the
efficiencies of online recruiting with an overlay of recruiting expertise that
has been the basis of Heidrick & Struggles' reputation for quality executive
search for nearly five decades. Our growing team of skilled e!Cruiters advises
our clients on recruiting strategies and assists them in defining candidate
requirements. Once our sophisticated skills-matching technology identifies
potential candidates, our team assesses candidates' competencies and cultural
fit. Our e!Cruiters are supported by a team of e!Search associates who utilize
the Internet to source potential candidates who are not yet members of the
Leaders! Candidate Community. Each of our e!Cruiters typically has at least two
to three years of recruiting experience and is trained by Heidrick & Struggles
in candidate assessment and client management.

Benefits to Candidates

Access to Leading Global Employers and Career Opportunities. We have access
to a vast global network of leading employers and career opportunities through
our strategic relationships with Heidrick & Struggles, Business Week and
VerticalNet. Heidrick & Struggles is the world's leading executive search firm,
with nearly five decades of experience in senior-level executive search
services and strong relationships with the senior management of leading global
employers. To date, approximately 98% of our employers have been referred to us
through Heidrick & Struggles. Typically, our engagements with employers are
exclusive recruitment engagements, which helps ensure that the opportunities
are available only to LeadersOnline candidates.

Maintenance of Privacy and Control Over the Recruitment Process. Unlike
many online recruiters, we give our candidates privacy during, as well as
control over, the recruitment process. When we match a candidate to a
particular employment opportunity, the candidate is notified of the opportunity
and is invited to review it on our web site. We release the candidate's resume
to the employer only if the candidate gives us his or her express consent.

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Access to Leadership and Career Development Experts. We intend to feature
interactive sessions, chat rooms and message boards on LeadersOnline.com where
members of our candidate community have the opportunity to communicate and
exchange ideas with our experienced e!Cruiters, senior executive search
professionals from Heidrick & Struggles and selected industry leaders.

Benefits to All Our Marketplace Participants

We are developing on our web site, LeadersOnline.com, informative content
on subjects of interest to all participants in our marketplace. These topics
may range from career management, leadership, workplace relations and
organizational dynamics to relocation logistics and daily work relations. The
content will be designed to provide participants with a comprehensive suite of
vertically-focused resources on leadership, management, recruiting, and
industry-specific human capital trends. In addition, through LeadersOnline.com,
participants will benefit from having a forum to exchange ideas and information
on best practices, industry knowledge and career management. Our goal is to
make LeadersOnline.com the leading career destination for the mid-level
executive search market.

Strategy

Continue to Expand Our Strategic Relationships

We currently have a number of strategic relationships that we utilize to
expand our online candidate community, build a critical mass of employers and
candidates and significantly enhance our global brand:

. Heidrick & Struggles. Heidrick & Struggles has elected not to serve the
significant mid-level executive and professional recruitment needs of
their clients and, instead, has agreed to refer those recruiting
engagements to us. This relationship gives us access to many leading
global employers while enabling Heidrick & Struggles to deepen its
client relationships.

. Business Week. Business Week, an operating unit of The McGraw-Hill
Companies, Inc., circulated its magazine to approximately 1.1 million
subscribers worldwide in 1999, of which approximately 40% were mid-level
executives and professionals. We have agreed to establish a co-branded
online career center and magazine with Business Week. We expect that our
relationship with Business Week will add substantial value to our
reputation for quality career services by providing us with quality
career content and augmenting our access to quality candidates.

. VerticalNet. VerticalNet operates approximately 56 online communities
that serve as a source of information and dialogue for nearly 500,000
professionals in various industries and markets. We expect that the
VerticalNet relationship will provide us with a significant source of
both quality candidates and leading employers.

We plan to establish additional strategic relationships to accomplish our
objectives.

Establish LeadersOnline as a Trusted, Global Brand

Employers consider the successful recruitment of high quality mid-level
executives and professionals to be critical to the success of their
organizations. We believe that there is an

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opportunity to increase our market share if we are able to clearly distinguish
ourselves from our competitors as a trusted, global brand. In order to
facilitate branding of the LeadersOnline name, we intend to:

. increase online and offline advertising;

. augment our presence at high-profile industry events;

. continue to establish Internet marketing alliances and partnerships; and

. continue to enhance our reputation by delivering quality services to
both candidates and employers.

Continue to Secure Significant Multi-Year, Multi-Engagement Projects

We believe that obtaining significant multi-year, multi-engagement projects
will enable us to rapidly and efficiently scale our products and services. As
of March 31, 2000, approximately 76% of the engagements that we expect to
complete in the year 2000 are multiple engagement projects in which we conduct
more than one search for a single employer. We believe that continuing to
secure long-term, in-depth assignments will also allow us to deepen our
relationships with employers and provide us with economies of scale in the
recruitment process.

Establish LeadersOnline.com as the Leading Internet Career Management
Destination

We are continuing to enhance our web site in an effort to create the
leading Internet destination and career site for mid-level executives and
professionals. At LeadersOnline.com, members of the Leaders! Candidate
Community will be able to obtain updates on career opportunities, read news,
access career management resources and interact with other community members.
These features are designed to expand and enhance the community experience of
members of the candidate community. We anticipate adding the following new
features to our web site:

Career Content

. career management resources, such as Business Week career management
articles;

. online interactive series featuring industry leaders and Heidrick &
Struggles consultants discussing the elements of leadership; and

. online career assessment instruments.

Participant Communications

. online newsletters and updates that keep employers and candidates
informed of industry developments;

. online, interactive chat sessions with Heidrick & Struggles consultants;
and

. online "neighborhoods" that include message boards and interactive chat
sessions among participants.

Continue to Build Our Candidate Community

In order to establish a critical mass of high quality candidates and to
facilitate the execution of our recruitment engagements, we intend to continue
to build our Leaders! Candidate Community. Some of our current plans for
developing the Leaders! Candidate Community include the following:

. build brand awareness through online and offline advertising campaigns,
such as print media advertisements in Business Week magazine and The
Wall Street Journal;

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. establish additional Internet marketing alliances and partnerships that
give us access to candidates, similar to our arrangements with the
Business Week Online Career Channel, VerticalNet, ITworld.com and the
Community of Science; and

. utilize the approximately 100,000 resumes of mid-level executives and
professionals that Heidrick & Struggles receives each year that are more
appropriate for us.

Expand Operations Globally

We intend to capitalize on the demand for mid-level executives and
professionals worldwide. Through our relationship with Heidrick & Struggles,
which has a worldwide network of nearly 900 professionals in 70 locations, we
are able to establish our operations internationally in Heidrick & Struggles'
foreign offices. This arrangement will allow us to rapidly and cost-effectively
deploy our solution abroad. We have currently positioned our e!Cruiters in
Heidrick & Struggles' offices in such international locations as London,
Frankfurt and Paris.

Establish Leadership and Expand Presence in Targeted Industries

We intend to establish market leadership and expand our presence in
targeted industries, specifically technology, financial services, industrial,
consumer, professional services, telecommunications and healthcare. We intend
to take advantage of Heidrick & Struggles' expertise in selected industries,
particularly its strength in the technology sector. We also intend to leverage
our strategic partnerships with leading web-based industry sites, such as
VerticalNet, to foster a network of general and industry-focused career
communities. We expect that these vertical career communities will enable our
market participants to exchange ideas, career-focused information and best
practices.

Continue to Improve our Internet-Based Technology Infrastructure

We intend to continually enhance and expand our technology infrastructure
and online capabilities in order to provide employers and candidates with the
premier end-to-end online solution for recruiting mid-level executives and
professionals.

We intend to maintain a close alliance with Heidrick & Struggles to
develop, research and test new technologies. We also intend to pursue strategic
technology relationships with selected technology firms that are developing new
kinds of human capital databases, knowledge bases and related search and
reasoning engines that will help align the appropriate human competencies,
skills and talent with our employer requirements.

The LeadersOnline.com Marketplace

LeadersOnline.com functions as the hub of our business-to-business Internet
marketplace, where we bring members of our candidate community together with
exclusive career opportunities. Our marketplace enables employers and
candidates to navigate through the recruitment process in a secure and neutral
environment. Both employers and candidates access the LeadersOnline.com
marketplace using standard Internet connections and browsers. We also provide
comprehensive, value-added services to both employers and candidates that help
our marketplace participants take full advantage of the recruitment
opportunities that are available to them to encourage both employers and
candidates to visit our marketplace on an ongoing basis.

Marketplace Services for Our Leading Global Employers

At LeadersOnline.com, employers have access to our high quality community
of mid-level executives and professionals. The marketplace services available
through LeadersOnline.com enable

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employers to access and monitor the updated status of their online recruiting
projects, at any time of the day and from anywhere in the world. We further
augment our marketplace services to employers by providing the recruiting
expertise of our skilled professionals.

Promptly after we are engaged by an employer to locate a candidate, we
assign an e!Cruiter to the project to personally consult with the employer. The
e!Cruiter, together with the employer, plans, develops and focuses the
particular position specifications and the e!Cruiting search strategy to be
employed on the Internet. Utilizing our matching engine, our e!Cruiters
identify candidates in our community who conform to the position specification.
To the extent that qualified candidates are not identified through our Leaders!
Candidate Community, our e!Search associates use our Internet-based technology
platform to initiate Internet-wide candidate searches. These searches include
the mining of other databases to which we have access, including the Business
Week Online Career Channel, the VerticalNet communities, ITworld.com, the
Community of Science and other Internet-based resources.

Once we have identified qualified candidates, our e!Cruiters continue to
assist the employer in the recruitment process by coordinating interviews with
candidates and providing support in the selection process. Through the
Internet, we also seek to obtain resume and background verification for each
candidate and to continue to assist the employer until a final hiring decision
is made and executed.

Marketplace Services for Our Community of Candidates

Members of our candidate community can use the LeadersOnline.com web site
to access updates on career opportunities and to manage available opportunities
to which they have been matched. Our web site also offers a series of
integrated tools, community resources, recruiting industry experts and
editorial content from our various partners to help our candidates achieve
their career objectives.

In order to become a member of the Leaders! Candidate Community, a
prospective candidate completes a registration application on our web site that
includes background information on the candidate's education, experience and
career objectives, a process that is usually completed in ten to fifteen
minutes. The candidate may elect to maintain the confidentiality of his or her
identity and specific background information from prospective employers. Once
these candidates are members of our community, our matching engine can
automatically match them with appropriate career opportunities based on the
desired and required skills of the position and the candidate skill set. We
automatically notify the matched candidates by e-mail and invite them to view
the company-specific "Opportunity Page" for the position on our web site. The
Opportunity Page allows prospective candidates to review the detailed position
description and decide whether they are interested in proceeding with the
recruitment process. If the candidate indicates that he or she is interested in
the position, the candidate's identity and specific background information will
automatically be released to the prospective employer.

36
<PAGE>

Participants in Our Marketplace

Employers. The employers that participate in our marketplace range from
Global 1000 companies to rapidly growing Internet companies. As of March 31,
2000 we were conducting searches for approximately 80 employers of which
approximately 53% are in the Internet sector. Our remaining employers span a
diverse range of industries, including the technology, financial services,
industrial, consumer professional services, telecommunications, and health care
sectors. We expect to leverage our Heidrick & Struggles relationship to
generate additional employer engagements. The following is a list of employers
that we believe is representative of the employers that participate in our
marketplace:

Technology Consumer
---------- --------
Hartford Computing Group CollegeClub.com
Yesmail.com Mother Parker's Tea & Coffee
RealNetworks GAP, Inc.
First Data Systems Autobytel
Automated Securities Clearance Chick-fil-A
Kimberly Clark Corp.

Financial Services Professional Services
------------------ ---------------------
E*TRADE GartnerGroup
VISA International Andersen Consulting
Washington Mutual
Brinks
Starwood Financial Telecommunications
------------------
Earthlink
Industrial SBA Communications
---------- Cox Interactive Media
Fluor Daniel
Bowman Distribution
HealthCare
----------
BioSpace
Metabolex
Physician Surgical Care

Candidates. We have a rapidly growing community of candidates who
participate in our marketplace. The Leaders! Candidate Community consists of
high quality mid-level executives and professionals who have been acquired
through a combination of ongoing referrals from Heidrick & Struggles and our
other strategic partners, and our own direct marketing and research efforts. As
of April 6, 2000, approximately 40,000 candidates were members of the Leaders!
Candidate Community, and we have access to approximately 700,000 additional
candidates in the databases of our strategic partners.

Content and Community

Our marketplace will feature a broad array of career-related information,
including feature articles focused on career management and leadership skills
development. This exclusive content will be derived from three main sources:
our e!Cruiting team, Heidrick & Struggles' executive search consultants and the
editors of Business Week. We also will offer several interactive features that
help create a community atmosphere among our participants. We believe that
developing a sense of community among our participants increases our brand
awareness, increases the frequency and duration of visits and increases the
value of membership in the LeadersOnline community to passive job candidates.

37
<PAGE>

Our Efficient Solution

Our comprehensive, online recruitment services encompass the entire
recruitment process. We are able to deliver these services with both quality
and efficiency by leveraging our Internet-based technology platform in each
phase of the hiring process. We utilize a human overlay of service and
coordination only in the critical phases of initial planning and final
selection. As shown below, our services combine the scalability and
efficiencies of the Internet with the expertise and involvement of our
e!Cruiters to make the recruitment process faster and more efficient than
traditional recruiting methods without sacrificing quality:

The LeadersOnline
Process Traditional Recruiting Model Web-Enabled Solution
--------------- ---------------------------- --------------------------

Position Recruiter: e!Cruiter:
specifications
are defined
. creates 4-7 page position . creates Internet-based
specification document Opportunity Page

Candidates are Recruiter: LeadersOnline technology,
identified with guidance from
. creates strategy to e!Cruiter and e!Search
identify candidates associates:

. assembles long-list of . identifies and matches
potential candidates appropriate candidates
through series of cold
calls, database research
and print advertising

. screens potential
candidates through
preliminary one-on-one
interviews

. creates short-list of
candidates which is
presented to employer at
progress meeting

Employers and Human resources/hiring manager: LeadersOnline technology:
candidates
interact . initiates candidate . notifies matched
interview process via candidates by e-mail and
telephone, fax and in- allows them to view
person meetings position information
anonymously
. conducts in-person
interviews with select . allows employers to view
group of candidates matched candidate
information
. finalizes candidate list
for further assessment
and interviews

Employers hire Recruiter and human Employer, with assistance
candidates resources/hiring manager: from e!Cruiter:

. interview candidates . interview candidates

. make offer and hire . makes offer and hires
employee employee

Strategic Relationships

Heidrick & Struggles

Through Heidrick & Struggles' worldwide network of nearly 900 professionals
in 70 locations, Heidrick & Struggles provides senior executive search services
to a broad range of public and private companies. Since 1995, Heidrick &
Struggles has performed more than 5,200 searches for board members, Chief
Executive Officers and Chief Operating Officers. Heidrick & Struggles and its
professionals, because of their investments in, and other arrangements with, us
are incentivized to refer to us:

. employers searching for mid-level executives and professionals with
annual compensation ranging between $75,000 and $150,000, although from
time to time the annual compensation may be outside of this range; and

. candidates who fall below the category of highly-compensated senior
executives whom Heidrick & Struggles traditionally places.

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<PAGE>

Because our target recruitment market of mid-level executives and professionals
complements that of Heidrick & Struggles' senior executive recruitment market,
we expect that, as the compensation range of the average Heidrick & Struggles
executive candidate increases, so will the compensation range of our average
candidate.

In addition, under an Intercompany Agreement that we entered into in April
2000, Heidrick & Struggles has agreed to provide us with access to part of the
Heidrick & Struggles database of candidates. Heidrick & Struggles will also
allow us to use a portion of their worldwide facilities and will provide
various other services for which we will reimburse them. We have agreed to pay
to Heidrick & Struggles referral fees for prospective employers that are
referred to us through their database, as well as royalty and other fees. See
"Related Party Transactions--Heidrick & Struggles". The initial term of the
Intercompany Agreement is for seven years. After the completion of this
offering, Heidrick & Struggles will own approximately % of our outstanding
capital stock (but with % of the voting power) and Heidrick & Struggles
professionals collectively will own approximately % of our outstanding
capital stock.

Business Week

In April 2000, we entered into a strategic alliance with Business Week, an
operating unit of The McGraw-Hill Companies, Inc. Our strategic alliance with
Business Week provides that Business Week will, at its expense:

. supply editorial content for LeadersOnline.com, which will be co-branded
by Business Week and will be linked to Business Week Online and replace
the existing Business Week Online Career Channel;

. launch a new career services magazine to be distributed to qualified
segments of the Business Week subscriber base;

. produce and distribute a weekly electronic newsletter that will be used
to complement and promote the LeadersOnline.com web site; and

. provide us with free advertising in the North American edition of
Business Week magazine and the new career magazine.

In addition, Business Week has agreed to manage all our advertising
activity related to, and will pay us a percentage of all advertising revenue
generated by, the LeadersOnline.com web site, the new career magazine and the
electronic newsletter. We will pay Business Week an annual royalty for the term
of the alliance, as well as referral fees for engaged employers or placed
candidates that are referred to us through Business Week's marketing efforts.
We have also issued to Business Week 300,000 shares of our Series A preferred
stock which, upon completion of this offering, will automatically convert into
an equal number of shares of Class A common stock. Business Week also will be
entitled to receive additional shares of our Class A common stock in order to
maintain an ownership of 1.33% of our outstanding common stock. Following this
offering, they will be subject to dilution from future issuances of common
stock. The initial term of this strategic alliance is for five years and will
be automatically extended for additional one-year periods unless terminated by
either party by 60 days prior written notice prior to the end of the current
term.

VerticalNet

In March 2000, we entered into a strategic relationship with VerticalNet, a
company which operates a network of vertical communities that serve as a
comprehensive source of information and dialogue for a number of industries and
markets. Our relationship with VerticalNet provides that it will:

. establish a link on LeadersOnline.com and each of VerticalNet's 56
vertical communities which will enable visitors to our respective web
sites to switch easily to the other's web site;

39
<PAGE>

. give us access to all the individuals that have posted resumes on
VerticalNet's career center, so that we can offer them an opportunity to
join the Leaders! Candidate Community; and

. provide us with guaranteed revenue over the next year from new clients
which are generated by the links from, and advertisements on,
VerticalNet web sites.

In return, we have agreed to purchase a predetermined amount of VerticalNet
advertisements and to pay referral fees for placed candidates and engaged
employers that are referred to us through VerticalNet marketing efforts. The
initial term of this relationship expires June 15, 2001 and may be extended for
an additional twelve months at the option of LeadersOnline unless terminated by
either party upon a material breach. As part of our strategic relationship with
VerticalNet, VerticalNet has also purchased 300,000 shares of our Series A
preferred stock which, upon completion of this offering, will automatically
convert into an equal number of shares of Class A common stock.

Other Strategic Relationships

Our alliance with IDG provides us with a presence on its print media and
online networks, specifically CIO.com, ComputerWorld, InfoWorld.com, JavaWorld,
LinuxWorld, NetworkWorld and ITcareers.com. We have an exclusive partnership
with ITcareers.com and CIO.com, potentially placing us in front of nearly one
million Internet users per week. We believe these strategic relationships will
help enhance our access to specialists and senior management candidates in the
emerging growth company sector.

Other partners in our community development efforts include
careers.wsj.com, CCPrep.com, Community of Science, e-retailing.World,
fatbrain.com, SalesRepsOnline, Teckchek, vault.com, WetFeet.com, the Wall
Street Journal and YouDecide.com.

Sales & Marketing

To date, we have targeted our sales and marketing efforts on the Global
1000 and large private and emerging technology companies. We currently generate
the majority of our employer leads from Heidrick & Struggles and employ a sales
force of direct sales professionals located in Heidrick & Struggles' offices
throughout the world. As of April 4, 2000, we had six Client Development
Executives. Over time we intend to generate leads from a number of different
sources, including our strategic partners such as Business Week and
VerticalNet. Our marketing activities include seminar programs, trade shows,
web site programs, public relations events and direct mailings. We are also
engaged in an ongoing effort to maintain relationships with key industry
analysts.

Competition

The market for recruiting services is intensely competitive, highly
fragmented and quickly evolving. We face competition from a number of sources,
including:

. Internet-based recruiting firms, such as FutureStep and TMP Worldwide;

. traditional, regional and specialized executive search firms;

. alternative recruiting services, such as Internet job boards and print
advertising;

. internal resources of current or potential employers; and

. large Internet information hubs or portals.

40
<PAGE>

competitors have indicated that they may expand their service offerings. In
addition, current and potential competitors may make strategic acquisitions or
establish cooperative relationships to expand their businesses or to offer more
comprehensive solutions, allowing them to rapidly acquire significant market
share. Therefore, the entry of new competitors or the expansion of the service
offerings of our existing competitors will likely harm our business and
financial condition.

Technology

We have developed a scalable online Internet-based technology platform
through which we conduct our operations. Our technology platform performs
automated functions that enable and facilitate efficient candidate
identification, matching and contact, while providing employers with
recruitment process tracking and notification. The functions of our technology
platform include candidate resume indexing, candidate skills extraction,
results comparisons to employer requirements, automated e-mail notifications to
candidates, recruitment process tracking for employers and continuous access
and matching to career opportunities. We own the license to a Verity software
engine which enables us to perform the matching and identification functions.
We have customized and refined this software engine to produce efficient and
productive results for our Internet marketplace, and to provide an easy-to-use
experience for both employers and candidates.

We have partnered with NetBase Corporation in Virginia to provide
technology services. NetBase provides maintenance and development services for
our applications with a team of 22 professionals assigned primarily to our
projects, as well as support for technology planning and validation of new
technology applications. NetBase maintains and upgrades our technology systems
and platforms. Our systems reside on multiple Windows NT servers in an Exodus
Communications hosting facility in Virginia. Our technology infrastructure
features a reliable, three-tiered architecture with an HTML front-end, web-
based middleware and Oracle 8 relational database. Our infrastructure also
features appropriate back-up and disaster recovery and security features.

We will continue to invest in refining and enhancing our Internet-based
technology platform and infrastructure. The next series of enhancements will
include enhanced administration modules; upgrades to our searching and matching
engine to include multiple selection choices, which will allow our e!Cruiters
to more effectively match and pair appropriate clients and candidates; and more
refined system capabilities to measure and report on key events in the
recruiting process.

Intellectual Property

We rely on a combination of copyright, trademark and trade secret laws and
our contractual obligations with employees and third parties to protect our
proprietary rights. We do not currently own any issued patents and other
protection of our intellectual property is limited. Despite our efforts to
protect our proprietary rights, it may be possible for a third party to copy or
obtain and use our intellectual property without our authorization. In
addition, other parties may breach confidentiality agreements or other
protective contracts we have entered into, and we may not be able to enforce
our rights in the event of these breaches.

We have entered into confidentiality and invention assignment agreements
with our employees and consultants, and nondisclosure agreements with our
vendors and strategic partners to limit access to and disclosure of our
proprietary information. We cannot be certain that these contractual
arrangements or the other steps taken by us to protect our intellectual
property will prevent misappropriation of our technology.

41
<PAGE>

We also rely on technologies that we license from third parties, such as
Microsoft, the suppliers of key database technology, the operating system and
specific hardware components for our service. We cannot be certain that these
third-party technology licenses will continue to be available to us on
commercially reasonable terms. The loss of such technology could require us to
obtain substitute technology of lower quality or performance standards or at
greater cost, which could harm our business.

We have filed applications for the registration of some of our trademarks
and service marks in the United States, including "e!Cruiting" and "e!Search".
We may be unable to secure these registered marks. The trademark and service
mark "LeadersOnline" and "Leaders!" have been applied for in the United States
by Heidrick & Struggles and have been assigned to us, although Heidrick &
Struggles may be unable to secure these registered marks. For so long as we
continue to use these marks, we will pay Heidrick & Struggles a royalty fee
equal to 3% of our gross revenue. It is also possible that our competitors or
others will use marks similar to those that we use, which could impede our
ability to build brand identity and lead to customer confusion. In addition,
there could be potential trade name or trademark infringement claims brought by
owners of other registered trademarks or trademarks that incorporate variations
of the term "Leaders!" or of the other terms above. Any claims or confusion
related to the trademarks that we use, or our failure to obtain trademark
registration, would negatively affect our business.

Employees and Facilities

Employees

As of April 4, 2000, we had 59 full-time employees, including 6 in client
development, 34 in e!Cruiting, e!Search and candidate community, 10 in
administration and 9 in corporate management. Of these employees, approximately
55 were located in North America and approximately 4 were located outside North
America. None of our employees is represented by a collective bargaining
agreement and we consider our relations with our employees to be good.

We recognize that our employees are key to our future success. We believe
that this future success will be based on the following factors:

.an effective recruiting program that attracts bright, creative and
entrepreneurial people;

.a strong corporate culture;

.ongoing training and development; and

.equity ownership by our employees.

Facilities

Our headquarters are located at 18401 Von Karman Avenue, Suite 500, Irvine,
California, where we occupy approximately 8,835 square feet of office space.
Our lease for this space expires on May 2, 2002. In addition, we have employees
in a number of Heidrick & Struggles offices.

Legal Proceedings

From time to time we may be involved in lawsuits incidental to our
business. We are not aware of any pending or threatened claims against us that
might materially and adversely affect our business, results of operations or
financial condition.

42
<PAGE>

MANAGEMENT

Directors, Executive Officers and Key Employees

Upon completion of this offering, our directors, executive officers and key
employees will be as set forth in the following table:

<TABLE>
<CAPTION>
Name Age Title
- - ---- --- -----
<S> <C> <C>
Michael T. Christy...... 58 Chief Executive Officer and Director
Patrick S. Pittard...... 54 Chairman and Director
James R. Quandt......... 50 President and Chief Operating Officer
Carole F. Owen.......... 35 Vice President, Chief Financial Officer, Treasurer and Secretary
Richard H. Gantzler..... 55 Vice President--Technology
Anthony F. Harling...... 40 Vice President and General Manager--LeadersOnline Europe
Bruce J. Lachenauer..... 40 Vice President--e!Cruiting
Linwood L. Little....... 46 Vice President--Client Development
Katherine J. Moody...... 53 Vice President--Candidate Community
</TABLE>

Michael T. Christy is the Chief Executive Officer and a Director of
LeadersOnline. Prior to joining LeadersOnline, Mr. Christy was a managing
partner with Heidrick & Struggles. Mr. Christy joined Heidrick & Struggles in
1988 and founded Heidrick & Struggles' Irvine, California and Tysons Corner,
Virginia offices.

Patrick S. Pittard is the Chairman and a Director of LeadersOnline. Mr.
Pittard has been the President and Chief Executive Officer of Heidrick &
Struggles since 1997, and has been a member of the board of directors of
Heidrick & Struggles since 1986. Mr. Pittard has been with Heidrick & Struggles
since 1983, and has held the positions of Office Managing Partner for the
Atlanta and Jacksonville offices and North America Managing Partner. Mr.
Pittard is also a member of the board of directors of Jefferson Pilot
Corporation.

James R. Quandt is the President and Chief Operating Officer of
LeadersOnline. Prior to joining LeadersOnline, Mr. Quandt was the Chief
Operating Officer of FutureStep and the Managing Director of the Orange County
region for Korn/Ferry from 1998 until 1999. From 1996 until 1998, he was the
President and Chief Executive Officer of National Telephone & Communications,
Inc. From 1995 until 1996, he was the Chairman and Chief Executive Officer of
Bridge Financial Information. Mr. Quandt was also the President of Standard &
Poor's Financial Information Group from 1991 until 1994.

Carole F. Owen is the Vice President and Chief Financial Officer of
LeadersOnline. Prior to joining LeadersOnline, Ms. Owen was the Controller of
Heidrick & Struggles in 1999. From 1994 to 1998, Ms. Owen held various
positions with Mid-America Apartment Communities, most recent of which was Vice
President of Management Information Systems.

Richard H. Gantzler is the Vice President, Technology of LeadersOnline.
Prior to joining LeadersOnline, Mr. Gantzler was the Program Manager of
Heidrick & Struggles' International Global Information System from 1997 until
1999. From 1991 to 1997, Mr. Gantzler was a Senior Associate at Heidrick &
Struggles.

Anthony F. Harling is the Vice President and General Manager, LeadersOnline
Europe. Prior to joining LeadersOnline, Mr. Harling was a partner with Heidrick
& Struggles in London, England from 1997 to 2000. From 1995 to 1997, Mr.
Harling was a principal with Heidrick & Struggles.

Bruce J. Lachenauer is the Vice President, e!Cruiting of LeadersOnline.
Prior to joining LeadersOnline, Mr. Lachenauer was a partner with Heidrick &
Struggles from 1985 until 1999.

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<PAGE>

Linwood L. Little is the Vice President, Client Development of
LeadersOnline. Prior to joining LeadersOnline, Mr. Little was the Vice
President and General Manager of Resumix from 1996 until 1998. From 1995 to
1996, Mr. Little was the Vice President of Sales and Marketing of Subscribers
Computing Incorporated.

Katherine J. Moody is the Vice President, Candidate Community of
LeadersOnline. Prior to joining LeadersOnline, Ms. Moody was the Director of
Recruiting for the Western Region for Deloitte & Touche, LLP from 1996 until
1999. From 1995 to 1996, Ms. Moody was a recruiter for a boutique executive
search firm in Newport Beach, California.

The Board of Directors

Prior to the completion of this offering, we intend to appoint three
independent directors to our board of directors and to increase the total
number of our directors to five.

Board Committees

Audit Committee

Our board of directors will establish an Audit Committee consisting solely
of three independent directors. The Audit Committee, among other matters, will:

. make recommendations to the board of directors concerning the
engagement of independent public accountants;

. monitor and review the quality and activities of our internal audit
function and those of our independent public accountants; and

. monitor the adequacy of our operating and internal controls as reported
by management and the independent or internal auditors.

Compensation Committee

Our board of directors will establish a Compensation Committee. The
Compensation Committee, will perform various functions, including:

. review the salaries, benefits and other compensation of our directors,
officers and employees;

. administer equity-based compensation under the LeadersOnline 2000 Stock
Option Plan; and

. make recommendations to our board of directors regarding the salaries,
benefits and other compensation of our directors, officers and
employees.

Compensation Committee Interlocks and Insider Participation

Our board of directors will establish the Compensation Committee prior to
the completion of this offering. We expect that none of our executive officers
will serve on the compensation or similar committee of any other entity.

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<PAGE>

Compensation

Non-Employee Director Compensation

We intend to pay our non-employee directors the following fees:

<TABLE>
<S> <C>
. Annual retainer................................................. $10,000
. Annual retainer for committee chairs............................ $ 500
. Fee for each board or committee meeting......................... $ 1,000
. Fee for each committee meeting attended on the date of a board
meeting......................................................... $ 500
</TABLE>

We will reimburse all directors for expenses incurred to attend meetings of
the board of directors or committees. In addition, each non-employee director
will receive a stock option to purchase shares of our Class A common
stock at an exercise price equal to the initial offering price. The terms and
conditions of these stock options will be governed by the LeadersOnline 2000
Stock Option Plan described below. We also anticipate that each non-employee
director will receive additional grants of stock options on an annual basis
under our stock option plan.

Executive Compensation

The following table sets forth the total compensation paid or accrued by us
during 1999 to our Chief Executive Officer and our four other most highly
compensated executive officers who served in those capacities during 1999:

Summary Compensation Table

<TABLE>
<CAPTION>
Annual
Compensation
----------------- All other annual
Name and Title Year Salary Bonus compensation(1)
- - -------------- ---- -------- -------- ---------------- ---
<S> <C> <C> <C> <C> <C>
Michael T. Christy................. 1999 $122,000 $ -- $2,038
Chief Executive Officer
James R. Quandt.................... 1999 53,205 125,000 540
President and Chief Operating
Officer
Carole F. Owen..................... 1999 39,583 25,000 864
Vice President, Chief Financial
Officer, Treasurer and Secretary
Linwood L. Little ................. 1999 88,718 125,000 864
Vice President, Client Development
Katherine J. Moody................. 1999 118,045 25,000 994
Vice President, Candidate
Community
</TABLE>
- - --------
(1) Consists of life insurance premiums that we paid with respect to term life
insurance for the benefit of the named executive officers and the amount of
our matching contributions under our 401(k) plan for Mr. Christy.

45
<PAGE>

Option Grants

We did not grant any stock options during the year ended December 31, 1999.
The following table presents information concerning grants of stock options to
each of our named executive officers as of March 31, 2000:

Option Grants
<TABLE>
<CAPTION>

Individual Grants
--------------------------------------------------- Potential Realizable Value
Number of Percent of Total at Assumed Annual Rate of
Securities Options Granted Stock Price Appreciation for
Underlying to Employees as Exercise or Option Term(2)
Options of March 31, Base Price Expiration -----------------------------
Name Granted 2000 Per Share(1) Date 5% 10%
---- ---------- ---------------- ------------ ---------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Michael T. Christy...... 1,210,510 28.5% $1.90 1/25/2010
James R. Quandt......... 672,500 15.8% 1.90 1/25/2010
Carole F. Owen.......... 201,750 4.8% 1.90 1/25/2010
Linwood L. Little....... 161,200 3.8% 1.90 1/25/2010
Katherine J. Moody...... 20,000 .5% 1.90 1/25/2010
</TABLE>
- - --------
(1) In general, options become exercisable 50% after eighteen months and the
remainder ratably over the next twenty-eight months. Options terminate at
the earlier of one month following termination of the executive officer's
employment or ten years after the date of grant.

(2) The amounts reported in these columns represent amounts that may be
realized upon exercise of the options immediately prior to the expiration
of their term assuming the specified compound rates of appreciation (5% and
10%) in the assumed initial public offering price of our Class A common
stock of $ over the term of the options. These numbers are calculated
based on rules promulgated by the SEC and do not reflect our estimate of
future stock price growth. The gains shown are net of the option exercise
price, but do not include deductions for taxes or other expenses associated
with the exercise of the option or the sale of the underlying shares. The
actual gains, if any, on the exercises of stock options will depend on the
future performance of our common stock, the optionholder's continued
employment through the option period and the date on which the options are
exercised.

Option Values

The following table presents information concerning the unexercised options
held by each of our named executive officers on March 31, 2000. None of our
named executive officers have exercised any stock options during the period
ended March 31, 2000.

Aggregate Option Exercises and Option Values

<TABLE>
<CAPTION>
Number of Shares
Underlying Unexercised Value of Unexercised
Options In-The-Money Options
------------------------- -----------------------------
Exercisable Unexercisable Exercisable Unexercisable (1)
----------- ------------- ----------- -----------------
<S> <C> <C> <C> <C>
Michael T. Christy...... -- 1,210,510 --
James R. Quandt......... -- 672,500 --
Carole F. Owen.......... -- 201,750 --
Linwood L. Little....... -- 161,200 --
Katherine J. Moody...... -- 20,000 --
</TABLE>
- - --------
(1) There was no public trading market for our Class A common stock as of March
31, 2000. Accordingly, these values have been calculated on the basis of an
assumed initial public offering price of $ per share, less the
applicable exercise price.

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<PAGE>

Employment Agreements

Michael Christy. We entered into an at-will employment letter with Michael
Christy, our Chief Executive Officer, on July 7, 1999. Under the employment
letter with Mr. Christy, we have agreed to pay him an annual salary of $250,000
plus an annual discretionary bonus.

James Quandt. We entered into an at-will employment letter with James
Quandt, our President and Chief Operating Officer, on October 12, 1999. Under
the employment letter with Mr. Quandt, we have agreed to pay him an annual
salary of $250,000 plus an annual discretionary target bonus of 80% of base
salary. We may pay Mr. Quandt a discretionary target bonus that may exceed 80%
of his base salary if his goals and objectives are significantly overachieved.
In addition to the annual discretionary target bonus, Mr. Quandt will be
eligible to receive the following bonuses:

. a $250,000 signing and two-year commitment bonus that Mr. Quandt must
repay if he resigns his employment during the first two years;

. a $350,000 minimum bonus payable in the year 2000; and

. a $350,000 minimum bonus payable in the year 2001.

Other Officers. We entered into at-will employment letters with each of the
following other officers:

. Carole Owen, our Vice President, Chief Financial Officer, Treasurer and
Secretary;

. Richard Gantzler, our Vice President, Technology;

. Anthony Harling, our Vice President and General Manager, LeadersOnline
Europe;

. Bruce Lachenauer, our Vice President, e!Cruiting;

. Linwood Little, our Vice President, Client Development; and

. Katherine Moody, our Vice President, Candidate Community.

Under the employment letters, we have agreed to pay these officers annual
salaries of $200,000, $150,000, $226,620, $225,000, $200,000 and $140,000,
respectively, plus annual discretionary bonuses.

LeadersOnline 2000 Stock Option Plan

Purpose and Eligibility

On January 26, 2000, we established our 2000 Stock Option Plan to enable
directors, officers, employees, consultants and advisors to participate in the
ownership of our Class A common stock. We believe that these investment
interests will encourage employees and others to contribute to our performance
and align their interests with the interests of our stockholders. The persons
eligible to receive awards under the plan include our directors, officers,
employees, consultants and advisors and our affiliated entities, including
Heidrick & Struggles. The plan will terminate on the tenth anniversary of the
date of its initial adoption by our board of directors.

The plan will not affect any other incentive compensation plan that we
adopt and will not preclude us from establishing any other incentive
compensation plans in the future.

Administration, Amendment and Termination of the Plan

The Compensation Committee of our board of directors will administer the
plan. As long as we have a class of equity securities registered under Section
12 of the Securities Exchange Act of 1934, the Compensation Committee will be
composed solely of "non-employee directors". The meaning of "non-employee
directors" is defined under Rule 16b-3 of the Securities Exchange Act.

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<PAGE>

The Compensation Committee will select the recipients of awards granted
under the plan and will determine the dates, amounts, exercise prices, vesting
periods and other relevant terms of the awards. The Compensation Committee will
also have the power to interpret the plan and the rights of award recipients,
including the power to:

. discontinue, suspend or amend the plan; and

. modify, extend, renew or exchange outstanding awards.

The Compensation Committee, however, will not have the power to increase
the number of shares available under the plan or to materially enhance the
benefits that will accrue to participants. Although the Compensation Committee
may decide to apply the terms of the plan, as amended, to awards granted prior
to the amendment, it may not impair or terminate a previously outstanding award
without the consent of the award recipient.

Securities Available Under the Plan

The plan allows the Compensation Committee to grant incentive stock options
and nonqualified stock options. Incentive stock options are intended to qualify
under the provisions of Section 422 of the Internal Revenue Code whereas
nonqualified stock options are not. The plan covers an aggregate of 5,380,000
shares of Class A common stock. The number of shares of Class A common stock
reserved for issuance will be automatically increased each year beginning in
2001 in an amount equal to 3% of the number of shares of Class A common stock
outstanding on the prior December 31. The number of reserved shares will also
be subject to proportionate adjustment in the event of a stock split, stock
dividend or other change in our capital structure. If any award granted under
the plan expires, terminates or is cancelled before it can be exercised, the
shares covered by the unexercised portion will become available again for new
grants under the plan.

The maximum number of shares of Class A common stock with respect to which
awards may be granted to any eligible person in any one calendar year may not
exceed 1,250,000 shares, subject to appropriate adjustment. As of March 31,
2000, options for 4,245,150 shares of Class A common stock had been granted
under the option plan at an exercise price of $1.90 per share. These options
will expire ten years after the grant date. Although the board granted those
options on its good faith estimation of fair market value, it is expected that
there will be a compensation expense charge recorded in the first quarter of
2000 equal to the difference between the fair market value of the option on the
day of grant and the option's exercise price, as determined with reference to
this offering.

The Compensation Committee must make an appropriate and proportionate
adjustment to the number, type and price of options available or previously
granted under the plan, if

. we increase, decrease or exchange the outstanding shares of our Class A
common stock for a different number or type of securities;

. we distribute additional shares or new or different securities for
shares of our Class A common stock as a result of a merger,
consolidation, sale or exchange of all or substantially all of our
properties, stock split, or other recapitalization or reorganization; or

. we declare an extraordinary cash dividend that reduces the value of the
outstanding shares of our Class A common stock.

At the effective time of any change in control of LeadersOnline, the plan
and any then outstanding awards will automatically terminate, unless

. as part of the transaction, the acquiror has agreed to continue the plan
and to assume the awards;

48
<PAGE>

. as part of the transaction, the acquiror has agreed to replace the
awards with new awards of the acquiror; or

. our board of directors designates the manner of canceling the awards and
automatically converting them into the right to receive the
consideration paid to stockholders as a result of the transaction.

If, as a result of a change in control, the plan and the awards will
terminate without being assumed or converted, as described above, all award
recipients will have the right to fully exercise their vested and unvested
awards.

Terms and Conditions of Awards Under the Plan

Award Pricing. The Compensation Committee will determine the pricing of
awards granted under the plan as of the date the award is granted. In no event
will the exercise price of any award be less than the fair market value of the
underlying shares, as calculated under the terms of the plan on the grant date.

Award Vesting. The Compensation Committee will determine the vesting
schedule of awards granted under the plan. Recipients of awards may exercise
awards at any time after they vest and before they expire, except that no
awards may be exercised after ten years from the date of grant. Furthermore,
unless the recipient has entered into an agreement with us to the contrary,
stock option awards will generally expire and become unexercisable upon
termination of the recipient's employment with us for any reason upon the
earlier of the expiration date of such award and 30 days after the date of
termination. The Compensation Committee may accelerate the vesting of any stock
options and may also extend the period following termination of employment with
us during which stock options may vest, be exercised or both.

Award Payments. Award recipients may pay the exercise price of awards in
either cash or with any other consideration the Compensation Committee deems
acceptable. Other acceptable consideration may include securities surrendered
by the award recipient or withheld from the shares otherwise deliverable upon
exercise. The Compensation Committee may also

. approve the extension of credit to any award recipient for the purpose
of financing the award recipient's exercise price; or

. allow the recipient to exercise the award in a broker's transaction in
which the exercise price will not be received until after the exercise
and subsequent sale of the underlying shares of common stock.

Consideration that we receive as a result of award exercises will be used
for general working capital purposes.

Limited Transferability of Awards. Awards generally are not transferable by
the recipient during the recipient's life.

Award Documentation. Awards granted under the plan will be evidenced by
either an agreement that is signed by the recipient or a confirming memorandum
that we issue to the recipient setting forth the terms and conditions of the
awards.

Rights With Respect to Common Stock. Award recipients and beneficiaries of
award recipients have no right, title or interest in or to any shares of Class
A common stock subject to any award or to any rights as a stockholder, unless
and until shares of Class A common stock are actually issued to the recipient.

49
<PAGE>

Indemnification of Directors and Officers and Limitation on Liability

Our Amended and Restated Certificate of Incorporation includes provisions
that eliminate the personal liability of our directors for monetary damages
resulting from breaches of their fiduciary duty (except for liability for
breaches of the duty of loyalty, acts or omissions not in good faith or which
involve intentional misconduct or a knowing violation of law, violations under
Section 174 of the Delaware General Corporation Law or for any transaction from
which the director derived an improper personal benefit). We believe that these
provisions are necessary to attract and retain qualified persons as independent
directors.

Section 145 of the Delaware General Corporation Law permits a corporation
to indemnify certain of its officers, directors, employees and agents. Our
Amended and Restated Certificate of Incorporation provides that we are
authorized to indemnify, to the fullest extent permitted under law, each of our
directors and officers with respect to all liability and loss suffered and
expenses incurred by such person in any action, suit or proceeding in which
such person was or is made or threatened to be made a party or is otherwise
involved by reason of the fact that such person is or was one of our directors
or officers. We are also obligated to pay the expenses of the directors and
officers incurred in defending such proceedings, subject to reimbursement if it
is subsequently determined that such person is not entitled to indemnification.

For as long as Heidrick & Struggles beneficially owns at least a majority
of our outstanding common stock or voting power, our directors and officers
will be insured under the Heidrick & Struggles executive liability and
indemnification policy against losses arising from claims made against such
directors and officers by reason of acts or omissions covered under such policy
in their respective capacities as directors or officers, including liabilities
under the Securities Act of 1933. To the extent that indemnification for
liabilities arising under the Securities Act of 1933 may be permitted to our
directors, officers and controlling persons pursuant to the foregoing
provisions, or otherwise, we have been advised that, in the opinion of the SEC,
such indemnification is against public policy as expressed in the Securities
Act of 1933 and is, therefore, unenforceable.

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<PAGE>

RELATED PARTY TRANSACTIONS

The following are brief descriptions of transactions between us and any of
our directors, executive officers or stockholders known to us to beneficially
own more than 5% of our shares of common stock, or any member of the immediate
family of any of those persons, where the amount involved exceeded $60,000.

Heidrick & Struggles

Ownership of Class B Common Stock

Immediately after this offering, Heidrick & Struggles will continue to own
100% of our Class B common stock. As a holder of Class B common stock, Heidrick
& Struggles will be entitled to ten votes per share. Holders of Class A common
stock will be entitled to only one vote per share. As a result, Heidrick &
Struggles will possess the ability to elect all of our directors and to approve
significant corporate transactions. Therefore, immediately after this offering
and for the foreseeable future, Heidrick & Struggles will be in a position to
exercise effective control over LeadersOnline.

Intercompany Agreement

In April 2000, we entered into an Intercompany Agreement with Heidrick &
Struggles pursuant to which they have transferred to us the "LeadersOnline"
name and other related intellectual property for a royalty equal to 3% of our
gross revenues. In addition, each of Heidrick & Struggles and LeadersOnline
will grant to the other access to its respective marketing resources,
including, without limitation, employer lists and candidate databases. To the
extent that the access to one party's information results in a new recruiting
engagement to the other party, Heidrick & Struggles and LeadersOnline will pay
each other referral fees. Heidrick & Struggles will establish minimum fee
amounts for each country, area or office in which search assignments are
conducted. LeadersOnline has agreed not to accept any search assignment for
which the expected search fee is greater than the established minimum fee
amount without the consent of Heidrick & Struggles. In turn, Heidrick &
Struggles has agreed to use its reasonable commercial efforts to refer to
LeadersOnline any search assignment where the reasonably expected search fee is
less than the established minimum fee amount. The minimum fee amounts will be
reviewed at least annually with a view to adjusting them to be in line with the
current market conditions. The minimum fee amount for the United States has
initially been set at $50,000, which would be the anticipated fee for a
placement of a candidate earning $150,000 per year.

Heidrick & Struggles has granted us the right to use certain portions of
their worldwide facilities. We will reimburse Heidrick & Struggles for any and
all costs and expenses attributable to our use and occupancy of the facilities.
In addition, Heidrick & Struggles will provide us with corporate overhead and
other administrative and technology support for a fee equal to 115% of actual
costs. The initial term of the Intercompany Agreement is for seven years and
will be automatically extended on an annual basis unless either party gives the
other party written notice of termination at least six months prior to the
termination date. Termination of the Intercompany Agreement will not affect our
ownership of our name and other related intellectual property, although we will
continue to be obligated to pay the royalty for so long as we use them.

Heidrick & Struggles Partners and Directors

In order to align the interests of Heidrick & Struggles employees with
ours, we have issued equity interests to some Heidrick & Struggles partners and
directors. In March 2000, options for 539,000 shares of Class A common stock
were granted to selected Heidrick & Struggles partners and directors under our
option plan at an exercise price of $1.90 per share. These options will expire
ten years after the

51
<PAGE>

grant date. It is expected that there will be a compensation expense charge
recorded in the first quarter of 2000 related to the issuance of these options
equal to the difference between the fair market value of the option on the day
of grant and the option's exercise price. In addition, on April 4, 2000, we
privately sold 309,000 shares of our Class A common stock to Heidrick &
Struggles partners at a per share price of $5.00.

LeadersOnline Officers

During 1999, some of our officers were employed by our parent company,
Heidrick & Struggles. In 1999, Heidrick & Struggles paid:

. Michael Christy, our Chief Executive Officer, a salary of $128,000 and
a bonus of $700,000;

. Carole Owen, our Vice President, Chief Financial Officer, Treasurer and
Secretary, a salary of $79,167 and a bonus of $120,523;

. Richard Gantzler, our Vice President, Technology, a salary of $135,000
and a bonus of $180,000; and

. Bruce Lachenauer, our Vice President, e!Cruiting, a salary of $183,627
and a bonus of $63,000.

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<PAGE>

PRINCIPAL STOCKHOLDERS

The following table sets forth, as of the date of this prospectus, the
total number and percentage of our shares of common stock beneficially owned
by:

. each director;

. our Chief Executive Officer and each of our four other most highly
compensated executive officers;

. all executive officers and directors as a group; and

. each beneficial owner of more than 5% of the outstanding shares of
common stock who is known to us.

<TABLE>
<CAPTION>
Shares
beneficially owned
------------------
Name of Beneficial Owner Number Percent
- - ------------------------ ---------- -------
<S> <C> <C>
Heidrick & Struggles International, Inc.(1).................. 16,140,000 96%
All executive officers and directors as a group(2)........... -- --
</TABLE>
- - --------
(1) All shares of common stock beneficially owned by Heidrick & Struggles are
shares of Class B common stock, which are entitled to ten votes per share
and are convertible into shares of Class A common stock on a one-for-one
basis.
(2) Excludes options exercisable for 3,053,150 shares of our Class A common
stock which vest more than sixty days after the date of this prospectus.

53
<PAGE>

DESCRIPTION OF CAPITAL STOCK

As of the date of this prospectus, our authorized capital stock consists of
75,000,000 shares of Class A common stock, 25,000,000 shares of Class B common
stock and 10,000,000 shares of preferred stock. After completion of this
offering and assuming that the over-allotment option is not exercised, there
will be shares of Class A common stock, 16,140,000 shares of Class B
common stock outstanding and no shares of preferred stock outstanding. All of
the outstanding shares of Class B common stock are beneficially owned by
Heidrick & Struggles.

Common Stock

Voting Rights. Holders of Class A common stock are entitled to one vote per
share and holders of Class B common stock are entitled to ten votes per share.
The holders of Class A common stock and the holders of Class B common stock
vote together as a single class on all matters submitted to a vote of the
stockholders, including the election of directors by proxy, except:

. as required by law; and

. in the case of a proposed issuance of shares of Class B common stock,
which issuance will require only the affirmative vote of the holders of
at least a majority of the outstanding shares of Class B common stock.

Our common stockholders do not have cumulative voting rights with respect to
the election of directors.

Dividends. Holders of Class A common stock and Class B common stock are
entitled to receive dividends at the same rate, when, as and if declared by our
board of directors, out of legally available funds. In the case of a stock
dividend or other distribution payable in shares of common stock, only shares
of Class A common stock will be distributed with respect to Class A common
stock and only shares of Class B common stock will be distributed with respect
to Class B common stock; the number of shares of common stock payable per share
will be the same.

Conversion Rights. Shares of Class A common stock have no conversion rights.
Each share of Class B common stock is convertible at any time, at the option of
its holder, into one share of Class A common stock.

Liquidation. In the event of liquidation or dissolution of LeadersOnline,
our common stockholders are entitled to share ratably in all assets remaining
after payment of liabilities and liquidation preferences of any preferred
stock.

Other Provisions Our common stockholders do not have any preemptive rights or
rights to subscribe for additional LeadersOnline securities. Neither redemption
nor sinking fund provisions apply to our common stock. The rights of our common
stockholders are subject to the rights of holders of shares of any series of
preferred stock that we may designate and issue in the future.

Preferred Stock

Under our Amended and Restated Certificate of Incorporation, our board of
directors may issue up to 10,000,000 shares of preferred stock in one or more
series. Our board of directors will determine the designations, powers,
preferences and rights of any series of preferred stock. This means that the
board of directors may, without stockholder approval, issue preferred stock
with dividend, liquidation, conversion or voting rights that adversely affect
the rights of our common stockholders. The board of directors may also issue
preferred stock as a way of discouraging, delaying or preventing an acquisition
or change in control of LeadersOnline.

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<PAGE>

Trading

Application has been made for quotation of the shares of Class A common
stock on the Nasdaq National Market under the symbol "LDRS".

Delaware Antitakeover Law and Charter Provisions

Antitakeover Law

The provisions of Section 203 of the Delaware General Corporation Law apply
to us. In general, Section 203 prohibits a publicly-held Delaware corporation
from engaging in a business combination with an "interested stockholder" for a
period of three years after the date of the transaction in which the person
became an interested stockholder, unless the business combination is approved
in a prescribed manner or unless the interested stockholder acquired at least
85% of the corporation's voting stock (excluding shares held by designated
stockholders) in the transaction in which it became an interested stockholder.
For purposes of Section 203, a "business combination" includes a merger, asset
sale or other transaction resulting in financial benefit to the interested
stockholder. Other than persons who own shares in excess of 15% of the voting
stock of the corporation as a result of action taken solely by the corporation,
an "interested stockholder" is a person who, together with affiliates and
associates, owns, or within the previous three years did own, 15% or more of
the corporation's voting stock.

Charter and Bylaw Provisions

Upon completion of this offering, our Amended and Restated Certificate of
Incorporation will prevent any stockholder from taking any action, unless the
action has been previously approved by our board of directors or the action is
taken at an annual meeting or special meeting of stockholders called by our
board of directors. Any amendment or deletion of these provisions will require
the affirmative vote of or least 66 2/3% of our outstanding voting power. Our
Bylaws, however, will require stockholders to provide advance notice of any
stockholder nominations for directors and of any other business or proposal to
be brought before any meeting of stockholders. Because our common stockholders
are not entitled to cumulative voting with respect to the election of
directors, a person or group controlling a majority of our voting power will be
able to elect all the directors.

Transfer Agent and Registrar

The transfer agent and registrar for the shares of Class A common stock is
American Stock Transfer & Trust Company.

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<PAGE>

SHARES ELIGIBLE FOR FUTURE SALE

Shares Outstanding and Freely Tradable After this Offering

Future sales of substantial amounts of Class A common stock in the public
market could adversely affect the market prices for the Class A common stock
from time to time. Upon completion of the offering, we will have outstanding an
aggregate of shares of Class A common stock and 16,140,000 shares of
Class B common stock, assuming that the underwriters do not exercise their
over-allotment option. Shares of Class B common stock are convertible, at the
option of the holder, into an equal number of shares of Class A common stock.
The shares of Class A common stock sold by us in this offering
will be freely tradable without restriction or further registration under the
Securities Act of 1933, except for any shares purchased by our "affiliates", as
that term is defined in Rule 144 of the Securities Act of 1933. Shares of Class
A common stock held by our affiliates may be sold only if registered under the
Securities Act or sold in accordance with an applicable exemption from
registration, such as Rule 144.

Sale of Restricted Shares

The 16,140,000 shares of Class B common stock held by Heidrick & Struggles
and the 600,000 shares of Class A common stock issued upon conversion of the
Series A preferred stock are "restricted securities" under Rule 144. The number
of these restricted securities that is available for sale in the public market
is limited by restrictions under the Securities Act and a lock-up agreement.
Under the lock-up agreements, certain stockholders have agreed not to sell or
otherwise transfer any of its shares of common stock for a period of days
after the date of this prospectus (the "lock-up period") without the prior
written consent of Goldman, Sachs & Co.

In general, under Rule 144 as currently in effect, beginning 90 days after
the date of this prospectus, a person or persons who have beneficially owned
restricted shares for at least one year would be entitled to sell within any
three-month period a number of shares that does not exceed the greater of:

. one percent of the number of shares of common stock then outstanding; or

. the average weekly trading volume of the common stock on the Nasdaq
National Market during the four calendar weeks preceding the filing of a
notice on Form 144 with respect to such sale.

One percent of the number of shares of Class A common stock outstanding after
the offering equals approximately shares.

Sales must be made under manner of sale provisions and notice requirements
specified by Rule 144 and current public information about LeadersOnline must
also be available. Under Rule 144(k), a person who is not deemed to have been
an affiliate of ours at any time during the 90 days preceding the sale and who
has beneficially owned the shares proposed to be sold for at least two years is
entitled to sell the shares without complying with the manner of sale, public
information, volume limitations or notice provisions of Rule 144.

Following the expiration of the lock-up period, none of the restricted
shares will become available for sale in the public market until the expiration
of their respective holding periods. Approximately 16,140,000 restricted shares
will have been held for more than one year at the end of the lock-up period.

Options and Restricted Stock

We intend to file a registration statement under the Securities Act of 1933
covering shares of Class A common stock reserved for issuance under our stock
option plan. The registration statement

56
<PAGE>

is expected to be filed and become effective as soon as practicable after the
effective date of this offering. As a result, shares registered under the
registration statement will (subject to any Rule 144 limitations applicable to
affiliates or lock-up agreements) be available for sale in the public market
upon vesting and exercise. A total of 5,380,000 shares of Class A common stock
have been initially reserved for issuance under the stock option plan. As of
March 31, 2000, options covering 4,245,150 shares of Class A common stock have
been granted under the stock option plan.

In addition, under Rule 701 of the Securities Act of 1933 as currently in
effect, any employee, consultant or advisor of ours who is not an affiliate who
purchased shares from us under a compensatory stock or option plan or other
written agreement is eligible to resell the shares 90 days after the effective
date of this offering, governed by all provisions of Rule 144 except its
minimum holding period.

Lock-Up Agreements

We, Heidrick & Struggles and each of our existing stockholders have agreed
not to offer, pledge, sell, contract to sell, sell any option or contract to
purchase, purchase any option or contract to sell, grant any option, right or
warrant to purchase, or otherwise transfer or dispose of directly or
indirectly, any shares of our Class A common stock, or any securities
convertible into or exercisable or exchangeable for any of our Class A common
stock or any right to acquire our common stock, for a period of days from
the effective date of this offering. Goldman, Sachs & Co., at any time and
without notice, may release all or any portion of the Class A common stock
subject to the foregoing lock-up agreements.

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<PAGE>

UNDERWRITING

LeadersOnline and the underwriters named below have entered into an
underwriting agreement with respect to the shares being offered. Subject to
certain conditions, each underwriter has severally agreed to purchase the
number of shares indicated in the following table. Goldman, Sachs & Co., Lehman
Brothers Inc. and Wit SoundView Corporation are the representatives of the
underwriters.

<TABLE>
<CAPTION>
Underwriters Number of Shares
------------ ----------------
<S> <C>
Goldman, Sachs & Co. .......................................
Lehman Brothers Inc.........................................
Wit SoundView Corporation...................................
-------
Total.....................................................
=======
</TABLE>

If the underwriters sell more shares than the total number set forth in the
table above, the underwriters have an option to buy up to an additional
shares from us to cover such sales. They may exercise that option for
30 days. If any shares are purchased pursuant to this option, the underwriters
will severally purchase shares in approximately the same proportion as set
forth in the table above.

The following table shows the per share and total underwriting discounts
and commissions to be paid to the underwriters by us. Such amounts are shown
assuming both no exercise and full exercise of the underwriters' option to
purchase additional shares.

Paid by LeadersOnline

<TABLE>
<CAPTION>
No Exercise Full Exercise
----------- -------------
<S> <C> <C>
Per Share............................................. $ $
Total................................................. $ $
</TABLE>

Shares sold by the underwriters to the public will initially be offered at
the initial public offering price set forth on the cover of this prospectus.
Any shares sold by the underwriters to securities dealers may be sold at a
discount of up to $ per share from the initial public offering price. Any
such securities dealers may resell any shares purchased from the underwriters
to certain other brokers or dealers at a discount of up to $ per share from
the initial public offering price. If all the shares are not sold at the
initial public offering price, the representatives may change the offering
price and the other selling terms.

LeadersOnline and its stockholder, directors and officers have agreed not
to offer, sell, transfer or otherwise dispose of or hedge any of their Class A
common stock or securities convertible or exchangeable for shares of Class A
common stock during the period from the date of this prospectus through the
date days after the date of this prospectus, except with the prior written
consent of Goldman, Sachs & Co.

LeadersOnline currently anticipates that it will request the underwriters
to reserve up to shares of its Class A common stock for sale at the
initial public offering price to persons designated by us, through a directed
share program. The number of shares available for sale to the general public
will be reduced to the extent such persons purchase the reserved shares. Any
reserved shares not so purchased will be offered by the underwriters to the
general public at the initial public offering price.

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<PAGE>

Prior to this offering, there has been no public market for the shares. The
initial public offering price for the Class A common stock will be negotiated
among LeadersOnline and the representatives of the underwriters. Among the
factors to be considered in determining the initial public offering of the
shares, in addition to prevailing market conditions, are our historical
performance, estimates of our business potential and earnings prospects, an
assessment of our management and the consideration of the above factors in
relation to market valuation of companies in related businesses.

LeadersOnline has applied to have the shares of Class A common stock listed
on the Nasdaq National Market under the symbol "LDRS".

In connection with the offering, the underwriters may purchase and sell
shares of Class A common stock in the open market. These transactions may
include short sales, stabilizing transactions and purchases to cover positions
created by short sales. Short sales involve the sale by the underwriters of a
greater number of shares than they are required to purchase in this offering.
Stabilizing transactions consist of bids or purchases made for the purpose of
preventing or retarding a decline in the market price of the Class A common
stock while the offering is in progress.

The underwriters may also impose a penalty bid. This occurs when a
particular underwriter repays to the underwriters a portion of the underwriting
discount received by it because the representatives have repurchased shares
sold by or for the account of such underwriter in stabilizing or short covering
transactions.

These activities by the underwriters may stabilize, maintain or otherwise
affect the market price of the Class A common stock. As a result, the price of
the Class A common stock may be higher than the price that otherwise might
exist in the open market. If these activities are commenced, they may be
discontinued by the underwriters at any time. These transactions may be
effected on the Nasdaq National Market, in the over-the-counter market or
otherwise.

A prospectus in electronic format will be made available on the web sites
maintained by one or more of the lead managers of this offering and may also be
made available on web sites maintained by other underwriters. The underwriters
may agree to allocate a number of shares to underwriters for sale to their
online brokerage account holders. Internet distributions will be allocated by
the lead managers to underwriters that may make Internet distributions on the
same basis as other allocations.

Lehman Brothers Inc. acted as a placement agent for LeadersOnline in
connection with the private placement of 300,000 shares of our Series A
preferred stock in April 2000. We will pay customary placement fees to Lehman
Brothers Inc. in connection with such services.

The underwriters do not expect sales to discretionary accounts to exceed
five percent of the total number of shares offered.

LeadersOnline estimates that its share of the total expenses of this
offering, excluding underwriting discounts and commissions, will be
approximately $ million.

LeadersOnline has agreed to indemnify the several underwriters against
certain liabilities, including liabilities under the Securities Act of 1933.

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<PAGE>

LEGAL MATTERS

The validity of our Class A common stock offered for sale in this
prospectus will be passed upon for us by Gibson, Dunn & Crutcher LLP, Orange
County, California. Legal matters with respect to the offering of our Class A
common stock will be passed upon for the underwriters by Ropes & Gray, Boston,
Massachusetts.

EXPERTS

The financial statements and schedules included in this prospectus and
elsewhere in the registration statement have been audited by Arthur Andersen
LLP, independent public accountants, as indicated in their reports with respect
thereto, and are included herein in reliance upon the authority of said firm as
experts in accounting and auditing.

ADDITIONAL INFORMATION

We have filed with the SEC a registration statement on Form S-1 relating to
the Class A common stock offered in this prospectus. The registration statement
and the attached exhibits and schedules contain additional important
information about us, our agreements and our capital stock. Although this
prospectus contains all material information required to be disclosed by the
Securities Act of 1933, the rules and regulations of the SEC allow us to omit
from this prospectus some of the information included in the registration
statement. Therefore, we advise you to read the registration statement and the
attached exhibits and schedules for elaboration on our summaries in this
prospectus and for other information that may be important to you.

A copy of the registration statement may be inspected by anyone without
charge at the SEC's offices at:

<TABLE>
<S> <C> <C>
Washington,
D.C. New York, New York Chicago, Illinois

450 Fifth
Street,
N.W. 7 World Trade Center 500 West Madison Street
Room 1024 13th Floor Suite 1400
Washington,
D.C. 20549 New York, New York 10048 Chicago, Illinois 60661
</TABLE>

Copies of all or any part of the registration statement, including any exhibit,
may be obtained from the SEC's public reference rooms with the payment of the
fees prescribed by the SEC. You may obtain information on the SEC's public
reference rooms by calling the SEC at 1.800.SEC.0330.

The SEC also maintains an Internet web site that contains reports, proxy
and information statements and the information regarding registrants that file
electronically with the SEC. The address of the SEC's Internet web site is
http://www.sec.gov.

As a result of this offering, we will become subject to the information and
reporting requirements of the Securities Exchange Act of 1934 and will file
periodic reports, proxy statements and other information with the SEC. Upon
approval of the Class A common stock for quotation on the Nasdaq National
Market, our reports, proxy and information statements and other information may
also be inspected at the National Association of Securities Dealers, Inc., 1735
K Street, N.W., Washington, DC 20006.

We intend to furnish our stockholders with annual reports containing
audited financial statements. We also intend to make available to our
stockholders quarterly reports for the first three quarters of each year
containing unaudited interim financial information.

60
<PAGE>

INDEX TO FINANCIAL STATEMENTS

<TABLE>
<S> <C>
Report of Arthur Andersen LLP, Independent Public Accountants............. F-2

Balance Sheets as of December 31, 1998 and 1999........................... F-3

Statements of Operations For the Years Ended December 31, 1998 and 1999... F-4

Statements of Division and Stockholder's Equity For the Years Ended
December 31, 1998 and 1999............................................... F-5

Statements of Cash Flows For the Years Ended December 31, 1998 and 1999... F-6

Notes to Financial Statements............................................. F-7
</TABLE>

F-1
<PAGE>

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Stockholder of LeadersOnline, Inc.:

We have audited the accompanying balance sheets of LeadersOnline, Inc. as
of December 31, 1999 and 1998, and the related statements of operations,
division and stockholder's equity and cash flows for the years then ended.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.

We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of LeadersOnline as of
December 31,1999 and 1998, and the results of its operations and its cash flows
for the years then ended in conformity with accounting principles generally
accepted in the United States.

Arthur Andersen LLP

Chicago, Illinois
April 4, 2000

F-2
<PAGE>

LEADERSONLINE, INC.

BALANCE SHEETS

<TABLE>
<CAPTION>
December 31,
----------------------
1998 1999
--------- -----------
Assets

<S> <C> <C>
Current Assets:
Cash................................................... $ -- $ --
Accounts receivable, less allowance for doubtful
accounts of $75,000 at December 31, 1999.............. -- 1,559,359
Prepaid expenses....................................... -- 94,461
--------- -----------
Total current assets............................... -- 1,653,820
--------- -----------
Property and Equipment:
Office furniture and fixtures.......................... 2,463 43,134
Computer equipment and software........................ 1,890 489,087
System development costs............................... 467,685 578,625
--------- -----------
472,038 1,110,846
Less--Accumulated depreciation......................... (190) (82,676)
--------- -----------
Property and equipment, net........................ 471,848 1,028,170
Other assets............................................. -- 1,467,759
--------- -----------
Total assets....................................... $ 471,848 $ 4,149,749
========= ===========

<CAPTION>
Liabilities and Division and Stockholder's Equity

<S> <C> <C>
Current Liabilities:
Accounts payable....................................... $ 370,000 $ 473,425
Deferred revenue....................................... -- 237,000
Accrued expenses.......................................
Bonuses.............................................. -- 708,789
Retirement plan...................................... -- 39,458
Other................................................ 98,000 433,826
--------- -----------
Total current liabilities.......................... 468,000 1,892,498
--------- -----------

Commitments and Contingencies (note 5)

Division and Stockholder's Equity:
Parent equity in division.............................. 3,848 --
Common stock, $0.01 par value, 16,140,000 shares
authorized, issued, and outstanding at December 31,
1999.................................................. -- 161,400
Additional paid-in capital............................. -- 7,253,125
Accumulated deficit.................................... -- (5,157,274)
--------- -----------
Total division and stockholder's equity............ 3,848 2,257,251
--------- -----------
Total liabilities and division and stockholder's
equity............................................ $ 471,848 $ 4,149,749
========= ===========
</TABLE>

The accompanying notes to financial statements are an integral part of these
statements.

F-3
<PAGE>

LEADERSONLINE, INC.

STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------
1998 1999
------------ ------------
<S> <C> <C>
Revenue............................................ $ -- $ 2,616,762
Cost of revenue.................................... -- 1,188,623
------------ ------------
Gross profit................................... -- 1,428,139
------------ ------------
Operating expenses:
Sales and marketing.............................. 397,718 2,680,853
Product development.............................. 599,155 1,779,529
General and administrative....................... 541,716 2,125,031
------------ ------------
Total operating expenses....................... 1,538,589 6,585,413
------------ ------------
Loss before income taxes........................... (1,538,589) (5,157,274)
------------ ------------
Benefit for income taxes........................... -- --
------------ ------------
Net loss........................................... $ (1,538,589) $ (5,157,274)
============ ============

Basic and diluted loss per common share............ $ (0.10) $ (0.32)
============ ============
Weighted average common shares outstanding......... 16,140,000 16,140,000
============ ============
</TABLE>

The accompanying notes to financial statements are an integral part of these
statements.

F-4
<PAGE>

LEADERSONLINE, INC.

STATEMENTS OF DIVISION AND STOCKHOLDER'S EQUITY

<TABLE>
<CAPTION>
Parent Common Stock
Equity in -------------------- Paid-in Accumulated
Division Shares Amount capital Deficit Total
----------- ---------- --------- ----------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
Balance at January 1,
1998................... $ -- -- $ -- $ -- $ -- $ --
Net loss.............. (1,538,589) -- -- -- -- (1,538,589)
Capital contribution
from parent.......... 1,542,437 -- -- -- -- 1,542,437
----------- ---------- --------- ----------- ------------ -----------
Balance at December 31,
1998................... 3,848 -- -- -- -- 3,848
Incorporation of
company.............. (3,848) -- -- 3,848 -- --
Net loss.............. -- -- -- -- (5,157,274) (5,157,274)
Capital contribution
from parent.......... -- -- -- 7,249,277 -- 7,249,277
Issuance of common
stock................ -- 16,140,000 161,400 -- -- 161,400
----------- ---------- --------- ----------- ------------ -----------
Balance at December 31,
1999................... $ -- 16,140,000 $ 161,400 $ 7,253,125 $ (5,157,274) $ 2,257,251
=========== ========== ========= =========== ============ ===========
</TABLE>

The accompanying notes to financial statements are an integral part of these
statements.

F-5
<PAGE>

LEADERSONLINE, INC.

STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------
1998 1999
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Net loss.......................................... $ (1,538,589) $ (5,157,274)
Adjustments to reconcile net loss to net cash used
in operating activities:
Depreciation.................................... 190 82,486
Changes in assets and liabilities:
Accounts receivable........................... -- (1,559,359)
Prepaid expenses.............................. -- (94,461)
Other assets.................................. -- (1,467,759)
Accounts payable.............................. 370,000 103,425
Deferred revenue.............................. -- 237,000
Accrued expenses.............................. 98,000 1,084,073
------------ ------------
Net cash used in operating activities....... (1,070,399) (6,771,869)
------------ ------------

Cash flows from investing activities:
Purchases of property and equipment........... (472,038) (638,808)
------------ ------------
Net cash used in investing activities....... (472,038) (638,808)
------------ ------------

Cash flows from financing activities:
Capital contribution from parent.............. 1,542,437 7,410,677
------------ ------------
Net cash provided by financing activities... 1,542,437 7,410,677
------------ ------------

Net increase (decrease) in cash................... -- --
Cash
Beginning of period........................... -- --
------------ ------------
End of period................................. $ -- $ --
============ ============

Supplemental disclosures of cash flow information:
Cash paid for--
Interest...................................... $ -- $ --
Income taxes.................................. $ -- $ --
</TABLE>

The accompanying notes to financial statements are an integral part of
these statements.

F-6
<PAGE>

LEADERSONLINE, INC.

NOTES TO FINANCIAL STATEMENTS

1. NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of Business

Effective January 1, 1998, LeadersOnline, Inc. (the "Company") began
operations as a separate division of Heidrick & Struggles International, Inc.
("Heidrick & Struggles"). The Company was incorporated in the State of Delaware
on January 29, 1999 and is a wholly owned subsidiary of Heidrick & Struggles.
The Company provides end-to-end Internet-based executive search services for
employers and candidates, aimed primarily at mid-level executives and
professionals. The Company's solution enables employers to review information
on candidates and access a candidate pool, while enabling candidates to review
information on employers and to access career opportunities. The Internet-based
technology infrastructure is augmented by recruiting professionals of the
Company.

Accounting Estimates

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.

Recently Issued Accounting Pronouncements

During 1999, the Securities and Exchange Commission staff issued Staff
Accounting Bulletin ("SAB") No. 101, "Revenue Recognition in Financial
Statements." SAB No. 101 summarizes certain of the staff's views in applying
generally accepted accounting principles to revenue recognition in financial
statements. The financial statements presented are in compliance with SAB No.
101.

During 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting for
Derivative Instruments and for Hedging Activities," which establishes new
standards for reporting information about derivatives and hedging. The FASB
issued SFAS No. 137, "Accounting for Derivative Instruments and Hedging
Activities--Deferral of the Effective Date of FASB Statement No. 133", in 1999,
which deferred the effective date of SFAS No. 133 for one year. The statement
is effective for interim periods of fiscal years beginning after June 15, 2000,
and will be adopted by the Company as of January 1, 2001. The Company expects
that the adoption of this statement will have no material effect on the
Company's financial position or results of operations.

Concentration of Credit Risk

Financial instruments that potentially expose the Company to concentration
of credit risk consist primarily of accounts receivable. Concentrations of
credit risk with respect to accounts receivable are limited due to the
Company's large number of customers and their dispersion across many different
industries. At December 31, 1999, the Company had one customer who represented
approximately 13.4% of total revenues in 1999 and 21.4% of the gross
outstanding accounts receivable balance at December 31, 1999.

Property and Equipment

Property and equipment are stated at cost. Depreciation is computed using
the straight-line method over the estimated useful lives of the assets as
follows:

<TABLE>
<S> <C>
Office furniture and fixtures.................................. 10 years
Computer equipment and software................................ 3 - 5 years
</TABLE>

F-7
<PAGE>

LEADERSONLINE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Depreciation expense for the years ended December 31, 1998 and 1999 totaled
$190 and $82,486, respectively.

In accordance with Statement of Position No. 98-1, "Accounting for the
Costs of Computer Software Developed or Obtained for Internal Use", costs
incurred in the application development stage are capitalized as system
development costs. Once the software is placed in service, the costs will be
transferred to computer equipment and software and depreciated over a three to
five year period using the straight-line method.

Fair Value of Financial Instruments

The Company's financial instruments consist of short-term trade receivables
and payables for which current carrying amounts are equal to or approximate
fair market values.

Revenue Recognition

The Company generally provides three types of services for clients. The
first is a standard retained search for a single engagement. For the retained
search, the revenue from client services is recognized as clients are billed,
generally over a three month period commencing on the date of the initial
acceptance of the search, which approximates the average period of a search. If
a search is cancelled within the first 90 days, the fee is pro-rated up to the
date of cancellation. If the search is completed before the 90 days have
passed, the billing period is accelerated to the date of completion.

The second type of service provided is a multiple engagement, performance
based search. Fees for these searches are made up of a commencement fee that is
billed when the search contract is signed and performance fees, which are
billed upon placement of candidates. The revenue related to the commencement
fee is deferred when billed and recognized ratably over the life of the
contract. The revenue for the placement of candidates is recognized when
billed. For some multiple engagement searches, there is also a service fee
which is billed and recognized monthly over the life of the contract.

The third type of service provided is a multiple engagement search that is
made up of two distinct components. The first component is providing
consultation and other services including needs assessment, position
evaluation, qualifications/skills assessment, development of client content on
the Company's web site, and development of opportunity pages. A specific fee is
billed for these consultative services upon completion of services. The second
component is a performance based fee which is billed when an offer is extended
by the client to a candidate. Revenue is recognized when fees are billed.

Advertising Expense

The Company expenses the cost of advertising as incurred. Advertising
expenses included in sales & marketing expenses were $0 and $282,638 for the
years ended December 31, 1998 and 1999, respectively.

Income Taxes

For 1998, the Company was an operating division of Heidrick & Struggles and
its losses were included in Heidrick & Struggles' federal income tax return.
For 1999, the Company is included in the consolidated federal income tax return
of Heidrick & Struggles. The tax provision and deferred tax accounts are
presented as if the Company filed separate tax returns for the periods
presented.

F-8
<PAGE>

LEADERSONLINE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Deferred tax assets and liabilities are determined based on the difference
between the financial statement and tax bases of assets and liabilities,
applying enacted statutory tax rates in effect for the year in which the tax
differences are expected to reverse. Deferred tax assets are reduced by a
valuation allowance when, in the opinion of management, it is more likely than
not that some portion or all of the deferred tax assets will not be realized.
Deferred tax assets and liabilities are adjusted for the effects of changes in
tax laws and rates on the date of enactment.

Loss Per Common Share

Basic loss per common share is computed by dividing net loss by weighted
average common shares outstanding for the year. Diluted loss per share reflects
the potential dilution that could occur if securities or other contracts to
issue common stock were exercised or converted. As the Company had no options
or other potentially dilutive outstanding securities at December 31, 1998 or
1999, basic and diluted loss per share are the same. For purposes of computing
weighted average common shares outstanding, the shares issued in October 1999
were treated as outstanding for all periods presented. Loss per common share
was $0.10 and $0.32 for the years ended December 31, 1998 and 1999,
respectively.

Segments

The Company adopted the provisions of SFAS No. 131, "Disclosures about
Segments of an Enterprise and Related Information", in 1998. This statement
establishes standards for the way companies report information about operating
segments in annual financial statements. It also establishes standards for
related disclosures about products and services, geographic areas and major
customers. The Company has determined that it has only one reportable business
segment as of December 31, 1999.

2. OTHER ASSETS

During 1999, the Company paid $2.0 million to an information technology
supplier for development and enhancement of the Company's software search
tools. At December 31, 1999, $578,625 of the $2.0 million was capitalized in
system development costs and the balance is recorded in other assets. During
2000, when the balance of costs are incurred, the majority will be capitalized
as system development costs.

3. RELATED PARTY TRANSACTIONS

Retirement Plan

The Company participates in a defined contribution retirement plan for all
eligible employees which is sponsored by Heidrick & Struggles. The plan
contains a 401(k) provision that provides for employee tax deferred
contributions. Heidrick & Struggles matched employee contributions on a two-
for-one basis up to a maximum Company contribution of $2,000 for 1999. Heidrick
& Struggles has the option of making discretionary contributions. For the year
ended December 31, 1999, Heidrick & Struggles elected to contribute to each
eligible participant a sum equal to 3.03% of the participant's total
compensation (as defined) and an additional 3.03% of the participant's
compensation above the Social Security taxable wage base. The Company
reimburses Heidrick & Struggles for the contributions made to the plan related
to the Company's employees. The cost to the Company for the years ended
December 31, 1998 and 1999 was $0 and $9,833, respectively.

F-9
<PAGE>

LEADERSONLINE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Corporate Services

Heidrick & Struggles provides certain support services to the Company
including management advisory, financial analysis, payroll and accounting. The
allocation of these corporate expenses recorded by the Company for the year
ended December 31, 1999 was $75,000 and is based on estimates of actual costs
incurred by Heidrick & Struggles on behalf of the Company. In addition, the
Company paid Heidrick & Struggles for the rental of facilities used by the
Company. The amounts recorded are not necessarily indicative of the actual
costs which may have been incurred had the Company operated as an entity
unaffiliated with Heidrick & Struggles. However, the Company believes that the
allocation is reasonable and in accordance with the Securities and Exchange
Commission's Staff Accounting Bulletin No. 55.

Impact of Intercompany Agreement with Heidrick & Struggles

As stated in the Subsequent Event note, during fiscal year 2000, the
Company entered into an Intercompany Agreement with Heidrick & Struggles. The
pro forma impact of the Intercompany Agreement would have increased the net
loss by approximately $89,753 for the year ended December 31, 1999 had the
agreement been in place during 1999.

Capital Contribution from Parent

The Company has funded its operations for the years ended December 31, 1998
and 1999 using funds contributed from Heidrick & Struggles. Total capital
contributions from Heidrick & Struggles were $1,542,437 and $7,410,677, for the
years ended December 31, 1998 and 1999, respectively. Heidrick & Struggles
intends to provide the necessary financial support to ensure the Company's
continued operations through at least January 2, 2001.

4. INCOME TAXES

The deferred tax assets consist of the following components as of December
31, 1999:

<TABLE>
<CAPTION>
1999
---------
<S> <C>
Deferred tax assets
Accounts receivable allowances..................................... $ 30,000
Accrued vacations.................................................. 14,883
Other accrued expenses............................................. 158,400
---------
Gross deferred tax assets........................................ 203,283
Valuation allowance................................................ (203,283)
---------
Net deferred tax assets.......................................... $ --
=========
</TABLE>

The Company has recorded a 100% valuation allowance against the deferred
tax asset balance because the realization of future taxable income cannot be
assured. To the extent any of these deferred tax assets reverse prior to the
deconsolidation of the Company from Heidrick & Struggles' consolidated federal
income tax return, these deductions will be utilized by Heidrick & Struggles,
not by the Company.

F-10
<PAGE>

LEADERSONLINE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

For 1998, the Company was an operating division of Heidrick & Struggles and
its losses were included in Heidrick & Struggles' tax return. As the financial
statements are presented on a standalone basis, there is no tax benefit
recorded in 1998 because as an operating division, the Company was not a tax-
paying entity. For 1999, the Company is included in the consolidated federal
income tax return of Heidrick & Struggles. As such, the Company's net operating
loss for 1999 has been utilized by Heidrick & Struggles. Under the Company's
tax sharing agreement with Heidrick & Struggles, the Company is not reimbursed
by Heidrick & Struggles for the tax benefit of losses utilized in Heidrick &
Struggles' consolidated federal income tax return. As a result, a deferred tax
asset for the net operating loss has not been recorded on the accompanying
balance sheet. On a separate return basis, the Company would have recorded a
tax benefit for its 1999 net operating losses with a corresponding valuation
allowance as the realization of the benefit cannot be assured. It is expected
that the Company will not be included in the consolidated federal tax return of
Heidrick & Struggles after the initial public offering due to the anticipated
dilution of Heidrick & Struggles' ownership interest in the Company below 80%.

5. COMMITMENTS AND CONTINGENCIES

Operating Leases

Beginning on December 31, 1999, the Company leased office space for its own
use in Irvine, California. The terms of this lease provide that the Company
pays base rent. The lease expires in May 2002. As part of the Intercompany
Agreement with Heidrick & Struggles, Heidrick & Struggles has granted the
Company the right to use certain portions of Heidrick & Struggles' facilities
for a pre-determined rental fee. Under this agreement, the Company is obligated
to Heidrick & Struggles for their portion of the rent under the term of each
individual underlying lease at each location.

Minimum future lease payments are as follows:

<TABLE>
<CAPTION>
Operating
Year Ending December 31, Leases
------------------------ ----------
<S> <C>
2000....................................................... $ 588,507
2001....................................................... 567,882
2002....................................................... 422,523
2003....................................................... 358,110
2004 and thereafter........................................ 1,555,791
----------
Total minimum lease payments............................... $3,492,813
==========
</TABLE>

Litigation

In the normal course of business, the Company is a party to various matters
involving disputes and litigation. While it is not possible at this time to
determine the ultimate outcome of these matters, management believes that the
ultimate liability, if any, will not be material to the results of operations,
financial condition or liquidity of the Company.

6. EQUITY

In October 1999, the Company issued 16,140,000 shares of common stock to
Heidrick & Struggles. For the years ended December 31, 1998 and 1999, Heidrick
& Struggles made contributions of capital to the Company in the amounts of
$1,542,437 and $7,410,677, respectively.

F-11
<PAGE>

LEADERSONLINE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

7. SUBSEQUENT EVENTS (UNAUDITED)

In January 2000, the Company adopted a stock option plan (the "Plan")
pursuant to which the Company's board of directors may grant stock options to
the Company's and Heidrick & Struggles' employees. The Plan authorizes grants
of options to purchase up to 5,380,000 Class A common shares subject to an
automatic increase of 3% per year for the term of the Plan which is ten years.
The vesting period will be determined at the time the options are granted. On
January 26, 2000, the Company granted 3,498,150 options under the Plan, on
March 5, 2000, the Company granted 230,000 options under the Plan and on
March 15, 2000, the Company granted 585,000 under the Plan. All options granted
have an exercise price of $1.90 per share and a term of ten years. All granted
options vest over a period of approximately four years.

On February 2, 2000, the Company amended its Certificate of Incorporation
such that each outstanding share of common stock was divided into 1,614 shares
of Class B common stock. The financial statements have been retroactively
restated to reflect this stock split. In addition, the Company authorized
75,000,000 shares of Class A common stock, 25,000,000 shares of Class B common
stock, and 5,000,000 shares of preferred stock. All shares have a designated
par value of $0.001. Holders of Class A common stock generally have the same
rights as holders of Class B common stock, except that holders of Class A
common stock have one vote per share while holders of Class B common stock have
ten votes per share. Class B common stock may be converted into Class A common
stock at any time on a one-for-one basis. On March 31, 2000, the Company
amended its Certificate of Incorporation such that the authorized number of
shares of preferred stock has been increased to 10,000,000. Also, as part of
this amendment, the preferred shares are redeemable at the option of the holder
at any time after March 29, 2005.

On March 1, 2000, the Company entered into a two year exclusive sales and
marketing agreement with ITworld.com, Inc. ("ITworld"). As part of this
alliance, ITworld will provide the Company premier placement on the ITcareers
pages of ITworld, grant the Company the right to be the exclusive ITcareers.com
online provider of full-time employees to hiring corporations, grant the
Company a royalty free, non-exclusive right to use and reproduce ITworld
trademarks, offer discounted advertising rates to the Company on the ITcareers
Network, and pay a commission to the Company for all qualifying leads given in
writing to ITworld by the Company that result in sales for ITworld. The Company
will provide to ITworld a royalty free, non-exclusive right to use and
reproduce LeadersOnline, Inc. trademarks and will pay advertising fees and
referral fees for prospective employers and candidates to ITworld.

On March 15, 2000, the Company entered into a 15-month strategic alliance
with VerticalNet. As part of this alliance, VerticalNet will establish a co-
branded link with the Company which will enable visitors to conveniently switch
between the Company's website and VerticalNet's website, provide access to all
of the individuals that have posted their resumes on its career center, and

F-12
<PAGE>

LEADERSONLINE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

provide the Company with an amount of guaranteed revenue over the term of the
contract. The Company has committed to purchase a predetermined amount of
VerticalNet advertisements at a discounted price and to pay referral fees for
placed candidates and engaged employers that are referred to the Company
through VerticalNet marketing efforts. Additionally, the Company has granted a
right for VerticalNet to purchase a predetermined amount of the Company's
capital stock. On April 5, 2000, VerticalNet purchased 300,000 Series A
preferred stock.

On April 1, 2000, the Company entered into a five year strategic
partnership agreement with the Business Week operating unit of The McGraw-Hill
Companies. As part of this alliance, Business Week will provide editorial
content for the Company's web site, publish a new career services magazine, and
produce and distribute a weekly electronic newsletter that will be used to
complement and promote the LeadersOnline.com web site. Business Week will pay
the Company a percentage of all advertising revenue generated through the
Company's web site, the career services magazine and the electronic newsletter,
as well as provide a certain amount of free advertising to the Company. The
Company will pay a royalty of a certain percentage of the Company's revenue (or
the greater of the percent of revenue or the minimum annual royalty per the
agreement) for each of the five years of the contract and will pay referral
fees for placed candidates and engaged employers. Additionally, the Company
will issue shares of Series A Preferred Stock which, upon completion of an
initial public offering, will convert automatically into an equal number of
shares of Class A common stock. Business Week also will be entitled to receive
additional shares of our Class A common stock in order to maintain an ownership
percentage of 1.33% of the Company's outstanding common stock. The shares of
preferred stock issued will be recorded at the fair market value of the shares
at the date of issuance. A corresponding asset will be recorded at the same
amount which will be amortized evenly over the term of the agreement. If the
Company completes an initial public offering within nine months of the date of
the agreement, Business Week will be entitled to receive additional shares of
Class A common stock in order to maintain an ownership of 1.33% of the
outstanding common stock of the Company. Any additional shares issued under
this anti-dilution provision will be recorded as a dividend.

As a result of the ITworld, VerticalNet and McGraw-Hill agreements
discussed above, the Company will have commitments of $15.3 million to purchase
certain advertising and pay royalty fees which will be funded over the term of
the agreements. Accordingly, the Company will record a liability at the net
present value of the amounts to be funded with a corresponding asset which will
be recognized over the term of the agreements. As a result of the VerticalNet
and McGraw-HIll transactions discussed above, as of April 5, 2000, HSI's
ownership of the Company was diluted to 96%.

On April 4, 2000, the Company entered into an Intercompany Agreement with
Heidrick & Struggles (the "Agreement"). The Agreement provides that Heidrick &
Struggles and the Company would pay referral fees to each other for referred
clients. The Company will also pay Heidrick & Struggles for use and occupancy
of shared facilities. In addition, the Company will pay Heidrick & Struggles 3%
of total revenues as a royalty for the transfer of the name LeadersOnline.
Finally, Heidrick & Struggles will charge the Company a support fee equal to
115% of all actual costs and expenses incurred by Heidrick & Struggles in
providing support services to the Company, including human resources,
accounting, and other services agreed upon by the parties from time to time.

In April 2000, the Company filed a registration statement with the
Securities and Exchange Commission for an initial public offering of the
Company's Class A common stock.

F-13
<PAGE>

- - -------------------------------------------------------------------------------
- - -------------------------------------------------------------------------------

No dealer, salesperson or other person is authorized to give any
information or represent anything not contained in this prospectus. You must
not rely on any unauthorized information or representations. This prospectus
is an offer to sell only the shares of Class A common stock offered hereby,
but only under circumstances where it is lawful to do so. The information
contained in this prospectus is current only as of its date.

----------------

TABLE OF CONTENTS

<TABLE>
<CAPTION>
Page
----
<S> <C>
Prospectus Summary....................................................... 3
Risk Factors............................................................. 7
Use of Proceeds.......................................................... 18
Dividend Policy.......................................................... 18
Capitalization........................................................... 19
Dilution................................................................. 20
Selected Financial Data.................................................. 21
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 22
Business................................................................. 27
Management............................................................... 43
Related Party Transactions............................................... 51
Principal Stockholders................................................... 53
Description of Capital Stock............................................. 54
Shares Eligible for Future Sale.......................................... 54
Underwriting............................................................. 56
Legal Matters............................................................ 60
Experts.................................................................. 60
Additional Information................................................... 60
Index to Financial Statements............................................ F-1
</TABLE>

----------------

Through and including , 2000 (the 25th day after the date of this
prospectus), all dealers effecting transactions in these securities, whether
or not participating in this offering, may be required to deliver a
prospectus. This is in addition to a dealer's obligation to deliver a
prospectus when acting as an underwriter and with respect to an unsold
allotment or subscription.

- - -------------------------------------------------------------------------------
- - -------------------------------------------------------------------------------

LeadersOnline, Inc.

Class A Common Stock

----------------

[LOGO OF LEADERS!ONLINE]

----------------

Goldman, Sachs & Co.

Lehman Brothers

Wit SoundView

Representatives of the Underwriters

- - -------------------------------------------------------------------------------
- - -------------------------------------------------------------------------------
<PAGE>

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

Item 13. Other Expenses of Issuance and Distribution.

LeadersOnline estimates that expenses in connection with the offering
described in the registration statement will be as follows:

<TABLE>
<S> <C>
SEC registration fee................................................... $19,800
NASD filing fee........................................................ 8,000
Nasdaq National Market listing fee..................................... *
Printing and engraving................................................. *
Accounting fees and expenses........................................... *
Legal fees and expenses................................................ *
Transfer agent's fees and expenses..................................... *
Miscellaneous.......................................................... *
-------
Total................................................................ $ *
=======
</TABLE>
- - -------
* To be provided by amendment.

Item 14. Indemnification of Directors and Officers.

Section 145(a) of the Delaware General Corporation Law (the "GCL") provides
that a Delaware corporation may indemnify any person who was or is a party or
is threatened to be made a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the corporation) by
reason of the fact that such person is or was a director, officer, employee or
agent of the corporation, or is or was serving at the request of the
corporation as a director, officer, employee or agent of another corporation or
enterprise, against expenses, judgments, fines and amounts paid in settlement
actually and reasonably incurred by such person in connection with such action,
suit or proceeding if he or she acted in good faith and in a manner he or she
reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, had no
cause to believe his or her conduct was unlawful.

Section 145(b) of the GCL provides that a Delaware corporation may indemnify
any person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action or suit by or in the right of the
corporation to procure a judgment in its favor by reason of the fact that such
person acted in any of the capacities set forth above, against expenses
actually and reasonably incurred by such person in connection with the defense
or settlement of such action or suit if he or she acted under similar
standards, except that no indemnification may be made in respect of any claim,
issue or matter as to which such person shall have been adjudged to be liable
for negligence or misconduct in the performance of his or her duty to the
corporation unless and only to the extent that the court in which such action
or suit was brought shall determine that, despite the adjudication of liability
but in view of all the circumstances of the case, such person is fairly and
reasonably entitled to be indemnified for such expenses which the court shall
deem proper.

Section 145 of the GCL further provides that to the extent a director or
officer of a corporation has been successful in the defense of any action, suit
or proceeding referred to in subsections (a) and (b) or in the defense of any
claim, issue or matter therein, such officer or director shall be indemnified
against expenses actually and reasonably incurred by him or her in connection
therewith; that indemnification provided for by Section 145 shall not be deemed
exclusive of any other rights to which the indemnified party may be entitled;
and that the corporation may purchase and maintain insurance on behalf of a
director or officer of the corporation against any liability asserted against
such officer or director and incurred by him or her in any such capacity or
arising out of his or her status as such, whether or not the corporation would
have the power to indemnify him or her against such liabilities under Section
145.

II-1
<PAGE>

As permitted by Section 102(b)(7) of the GCL, our Amended and Restated
Certificate of Incorporation and Bylaws each provide that a director shall not
be liable to LeadersOnline or its stockholders for monetary damages for breach
of fiduciary duty as a director. However, such provision does not eliminate or
limit the liability of a director for acts or omissions not in good faith or
for breaching his or her duty of loyalty, engaging in intentional misconduct or
knowingly violating a law, paying a dividend or approving a stock repurchase
which was illegal, or obtaining an improper personal benefit. A provision of
this type has no effect on the availability of equitable remedies, such as
injunction or rescission, for breach of fiduciary duty.

Our amended and Restated Certificate of Incorporation requires us to
indemnify any person (or the estate of any person) who was or is a party to or
is threatened to be made a party to any threatened, pending or completed
action, suit or proceeding, whether or not by or in the right of LeadersOnline
and whether civil, criminal, administrative or investigative or otherwise by
reason of the fact that such person is or was a director or officer of
LeadersOnline, or is or was serving at the request of LeadersOnline as a
director or officer of another corporation, partnership, joint venture, trust
or other enterprise, against expenses incurred (including attorneys' fees),
judgments, fines and amounts paid in settlement. Any such expenses shall be
paid by LeadersOnline in advance of the final disposition of such action, suit
or proceeding upon receipt of an undertaking by or on behalf of the person
seeking indemnification to repay such amounts if it is ultimately determined
that he or she is not entitled to be indemnified.

Notwithstanding the foregoing, we will not make such an advance if a
determination is reasonably and promptly made by the board of directors by a
majority vote of a quorum of disinterested directors, or (if such a quorum is
not obtainable or, even if obtainable, a quorum of disinterested directors so
directs) by independent legal counsel to LeadersOnline, that, based upon the
facts known to the board of directors or such counsel at the time such
determination is made, (a) the party seeking an advance acted in bad faith or
deliberately breached his or her duty to LeadersOnline or its stockholders, and
(b) as a result of such actions by the party seeking an advance, it is more
likely than not that it will ultimately be determined that such party is not
entitled to indemnification pursuant to the provisions of the Amended and
Restated Certificate of Incorporation or Bylaws, as applicable.

We may, to the fullest extent permitted by the GCL, purchase and maintain
insurance on behalf of any such person against any liability which may be
asserted against such person. We may create a trust fund, grant a security
interest or use other means (including without limitation a letter of credit)
to ensure the payment of such sums as may become necessary or desirable to
effect the indemnification as provided in the Amended and Restated Certificate
of Incorporation.

We may, but only to the extent that the board of directors may authorize
from time to time, grant rights to indemnification and to the advancement of
expenses to any employee or agent of LeadersOnline to the fullest extent of the
provisions described above as it applies to the indemnification and advancement
of expenses of directors and officers of LeadersOnline.

We anticipate obtaining a policy of directors' and officers' liability
insurance prior to the completion of the offering.

The form of Underwriting Agreement filed as Exhibit 1.1 to this
Registration Statement provides for indemnification by the underwriters of
LeadersOnline, its directors, officers and controlling persons against certain
liabilities.

Insofar as indemnification for liabilities arising under the Securities Act
of 1933 (the "Securities Act") may be permitted to directors, officers or
persons controlling LeadersOnline pursuant to the foregoing provisions, the
registrant has been informed that in the opinion of the SEC such
indemnification is against public policy as expressed in the Securities Act and
is therefore unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by LeadersOnline of expenses
incurred or paid by a director, officer or controlling person of LeadersOnline
in the successful defense of any action, suit or proceeding) is asserted by
such

II-2
<PAGE>

director, officer or controlling person in connection with the securities being
registered, we will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public policy as
expressed in the Securities Act and will be governed by the final adjudication
of such issue.

Item 15. Recent Sales of Unregistered Securities.

In October 1999, in connection with our initial capitalization, we sold
10,000 shares of common stock to Heidrick & Struggles for $10,000 in cash. The
shares were not registered in reliance on the exemption provided for in Section
4(2) of the Securities Act of 1933 because the shares were not publicly
offered.

In April 2000, we sold 300,000 shares of Series A preferred stock to
VerticalNet, Inc. at a per share price of $5.00. The shares were not registered
in reliance on the exemption provided for in Section 4(2) of the Securities Act
of 1933 because the shares were not publicly offered.

In April 2000, we sold 300,000 shares of Series A preferred stock to The
McGraw-Hill Companies, Inc. In return for these shares, Business Week will
provide us with certain marketing and advertising services, the value of which,
as determined by the board of directors, fully compensates us for such shares.
The shares were not registered in reliance on the exemption provided for in
Section 4(2) of the Securities Act of 1933 because the shares were not publicly
offered.

In April 2000, we sold 309,000 shares of Class A common stock to a limited
number of partners of Heidrick & Struggles at a per share price of $5.00. The
shares were not registered in reliance on the exemption provided for in Section
4(2) of the Securities Act of 1933 because the shares were not publicly
offered.

Item 16. Exhibits and Financial Statement Schedules.

<TABLE>
<CAPTION>
Exhibit
No. Description
------- -----------
<C> <S>
1.1 Form of Underwriting Agreement*

3.1 Form of Amended and Restated Certificate of Incorporation of
LeadersOnline*

3.2 Form of Bylaws of LeadersOnline*

4.1 Specimen Certificate for LeadersOnline Class A Common Stock*

5.1 Opinion of Gibson, Dunn & Crutcher LLP, counsel to LeadersOnline*

10.1 LeadersOnline 2000 Stock Option Plan

10.2 Intercompany Agreement, dated April 4, 2000, between Heidrick &
Struggles and LeadersOnline*

10.3 Agreement, dated April 1, 2000, between LeadersOnline and The McGraw-
Hill Companies, Inc.*

10.4 Exclusive Sales & Marketing Agreement, dated March 1, 2000, between
LeadersOnline and ITworld.com, Inc.*

10.5 Sublease Agreement, dated November 9, 1999, between Hershey
Communications, Inc. and LeadersOnline as amended by Amendment No. 1
thereto

10.6 Employment Letter, dated October 12, 1999, between LeadersOnline and
James R. Quandt
</TABLE>

II-3
<PAGE>

<TABLE>
<C> <S>
23.1 Consent of Arthur Andersen LLP

23.2 Consent of Gibson, Dunn & Crutcher LLP (included in Exhibit 5.1)*

24.1 Power of Attorney (included on signature page)

27.1 Financial Data Schedule
</TABLE>
- - --------
*To be filed by amendment.

Item 17. Undertakings.

(a) LeadersOnline hereby undertakes to provide to the underwriters at the
closing specified in the underwriting agreement certificates in such
denominations and registered in such names as required by the underwriters to
permit prompt delivery to each purchaser.

(b) Insofar as indemnification for liabilities under the Securities Act may
be permitted to directors, officers and controlling persons of LeadersOnline,
LeadersOnline has been advised that in the opinion of the SEC such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by LeadersOnline of expenses
incurred or paid by a director, officer or controlling person of LeadersOnline
in the successful defense of any action, suit or proceeding) is asserted by
such director, officer or controlling person in connection with the securities
being registered, LeadersOnline will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed
by the final adjudication of such issue.

(1) For the purpose of determining any liability under the Securities
Act, the information omitted from the form of prospectus filed as part of
this registration statement in reliance upon Rule 430A and contained in a
form of prospectus filed by LeadersOnline pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.

(2) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus
shall be decreed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.

II-4
<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, LeadersOnline,
Inc. has duly caused this registration statement to be signed on its behalf by
the undersigned, thereunto duly authorized, in the City of Irvine, State of
California, on April 7, 2000.

LEADERSONLINE, INC.,
a Delaware corporation

/s/ Michael T. Christy
By: _________________________________
Michael T. Christy
Chief Executive Officer

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Michael T. Christy, James R. Quandt and Carole
Owen and each of them, his or her true and lawful attorneys-in-fact and agents,
with full power and substitution and resubstitution for him and in his name,
place and stead, in any and all capacities to sign any and all amendments
(including post-effective amendments) to this registration statement, and to
file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite or necessary to be done in
and about the premises, as fully to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that each said
attorneys-in-fact and agents or any of them or their or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the date indicated.

<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Michael T. Christy Chief Executive Officer and April 7, 2000
____________________________________ Director (Principal Executive
Michael T. Christy Officer)

/s/ Carole F. Owen Vice President and Chief April 7, 2000
____________________________________ Financial Officer (Principal
Carole F. Owen Financial and Accounting
Officer)

/s/ Patrick S. Pittard Chairman April 7, 2000
____________________________________
Patrick S. Pittard
</TABLE>

II-5
<PAGE>

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Stockholder of LeadersOnline, Inc.:

We have audited in accordance with auditing standards generally accepted in
the United States, the financial statements of LeadersOnline, Inc. included in
this registration statement and have issued our report thereon dated April 4,
2000. Our audits were made for the purpose of forming an opinion on the basic
financial statement taken as a whole. The Schedule II--LeadersOnline, Inc.
Allowance for Doubtful Accounts is the responsibility of the Company's
management and is presented for purposes of complying with the Securities and
Exchange Commission's rules and is not part of the basic financial statements.
This schedule has been subjected to the auditing procedures applied in the
audit of the basic financial statements and, in our opinion, fairly states in
all material respects the financial data required to be set forth therein in
relation to the basic financial statements taken as a whole.

Arthur Andersen LLP

Chicago, Illinois
April 4, 2000
<PAGE>

LEADERSONLINE, INC.

SCHEDULE II

<TABLE>
<CAPTION>
Balance at Charged to Costs Balance at
Beginning of Year and Expenses Deductions End of Year
----------------- ---------------- ---------- -----------
<S> <C> <C> <C> <C>
Year Ended December 31:
Allowance for doubtful
accounts
1999.................. -- $75,000 -- $75,000
----- ------- ----- -------
1998.................. -- -- -- --
----- ------- ----- -------
</TABLE>
<PAGE>

EXHIBIT INDEX

<TABLE>
<CAPTION>
Exhibit
No. Description
------- -----------
<C> <S>
1.1 Form of Underwriting Agreement*

3.1 Form of Amended and Restated Certificate of Incorporation of
LeadersOnline*

3.2 Form of Bylaws of LeadersOnline*

4.1 Specimen Certificate for LeadersOnline Class A Common Stock*

5.1 Opinion of Gibson, Dunn & Crutcher LLP, counsel to LeadersOnline*

10.1 LeadersOnline 2000 Stock Option Plan

10.2 Intercompany Agreement, dated April 4, 2000, between Heidrick &
Struggles and LeadersOnline*

10.3 Agreement, dated April 1, 2000, between LeadersOnline and The McGraw-
Hill Companies, Inc.*

10.4 Exclusive Sales & Marketing Agreement, dated March 1, 2000, between
LeadersOnline and ITworld.com, Inc.*

10.5 Sublease Agreement, dated November 9, 1999, between Hershey
Communications, Inc. and LeadersOnline as amended by Amendment No. 1
thereto

10.6 Employment Letter, dated October 12, 1999, between LeadersOnline and
James R. Quandt

23.1 Consent of Arthur Andersen LLP

23.2 Consent of Gibson, Dunn & Crutcher LLP (included in Exhibit 5.1)*

24.1 Power of Attorney (included on signature page)

27.1 Financial Data Schedule
</TABLE>
- - --------
*To be filed by amendment.

<PAGE>
EXHIBIT 10.1

LeadersOnline, Inc.

2000 STOCK OPTION PLAN
<PAGE>

TABLE OF CONTENTS
-----------------

ARTICLE I PURPOSE OF PLAN............................................ 1

ARTICLE II EFFECTIVE DATE AND TERM OF PLAN............................ 1
2.1 Term of Plan............................................... 1
2.2 Effect on Awards........................................... 1
2.3 Stockholder Approval....................................... 1

ARTICLE III SHARES SUBJECT TO PLAN..................................... 1
3.1 Number of Shares........................................... 1
3.2 Source of Shares........................................... 1
3.3 Availability of Unused Shares.............................. 1
3.4 Adjustment Provisions...................................... 2
3.5 Reservation of Shares...................................... 2

ARTICLE IV ADMINISTRATION OF PLAN..................................... 2
4.1 Administering Body......................................... 2
4.2 Authority of Administering Body............................ 3
4.3 No Liability............................................... 3
4.4 Amendments................................................. 3
4.5 Other Compensation Plans................................... 4
4.6 Plan Binding on Successors................................. 4
4.7 References to Successor Statutes, Regulations and Rules.... 4
4.8 Issuances for Compensation Purposes Only................... 4
4.9 Invalid Provisions......................................... 4
4.10 Governing Law.............................................. 4

ARTICLE V GENERAL AWARD PROVISIONS................................... 4
5.1 Participation in the Plan.................................. 4
5.2 Award Documents............................................ 4
5.3 Exercise of Award.......................................... 5
5.4 Payment For Awards......................................... 5
5.5 No Employment Rights....................................... 6
5.6 Restrictions Under Applicable Laws and Regulations......... 6
5.7 No Privileges of Stock Ownership........................... 7
5.8 Nonassignability........................................... 7
5.9 Information to Recipients.................................. 7
5.10 Withholding Taxes.......................................... 8
5.11 Legends on Awards and Stock Certificates................... 8
5.12 Effect of Termination of Employment on Awards.............. 8
(a) Termination of Employment................................... 8
(b) Alteration of Vesting and Exercise Periods.................. 8
(c) Leave of Absence............................................ 9
5.13 Lock-Up Agreements......................................... 9

ARTICLE VI STOCK OPTION AWARDS........................................ 9
6.1 Nature of Stock Option Awards.............................. 9
6.2 Option Exercise Price...................................... 9
6.3 Option Period and Vesting.................................. 9
6.4 Special Provisions Regarding Incentive Stock Options....... 9

i
<PAGE>

ARTICLE VII RECAPITALIZATIONS AND REORGANIZATIONS...................... 10
7.1 Corporate Transactions Not Involving a Change in Control... 10
7.2 Corporate Transactions Involving a Change in Control....... 10
(a) Acceleration of Awards..................................... 10
(b) Employment Termination..................................... 10
7.3 Provision for Awards Upon Change in Control................ 11

ARTICLE VIII PUT AND CALL OPTIONS........................................ 11
8.1 Put and Call Options....................................... 11
8.2 Option Events.............................................. 12
8.3 Adjustments for Changes in Capital Structure............... 12
8.4 Termination of Article VIII................................ 12

ARTICLE IX DEFINITIONS................................................ 12

ii
<PAGE>

LeadersOnline, Inc.

2000 STOCK OPTION PLAN

ARTICLE I
PURPOSE OF PLAN

The Company has adopted this Plan to promote the interests of the Company
and its stockholders by using Awards of Incentive Stock Options and Nonqualified
Stock Options to purchase shares of the Company's Common Stock to attract,
retain and motivate employees, officers and directors of, and consultants and
advisors to, the Company to encourage and reward their contributions to the
performance of the Company and to align their interests with the interests of
the Company's stockholders. Capitalized terms not otherwise defined herein
shall have the meanings ascribed to them in Article IX.
----------

ARTICLE II
EFFECTIVE DATE AND TERM OF PLAN

2.1 Term of Plan. This Plan became effective as of the Effective Date
------------
and shall continue in effect until the Expiration Date, at which time this Plan
shall automatically terminate.

2.2 Effect on Awards. Awards may be granted only during the Plan Term,
----------------
but each Award granted during the Plan Term shall remain in effect after the
Expiration Date until such Award has been exercised, terminated or expired in
accordance with its terms and the terms of this Plan.

2.3 Stockholder Approval. This Plan shall be approved by the Company's
--------------------
stockholders within 12 months after the Effective Date.

ARTICLE III
SHARES SUBJECT TO PLAN

3.1 Number of Shares. The maximum number of shares of Common Stock that
----------------
may be issued pursuant to Awards shall be 5,380,000, subject to an automatic
increase on each anniversary of the Effective Date equal to three percent (3%)
of the shares of Common Stock outstanding on the immediately preceding December
31, and further subject to adjustment as set forth in Section 3.4. The maximum
-----------
number of shares of Common Stock for which Awards may be granted to any Eligible
Person in any one calendar year shall be 1,250,000, subject to adjustment as set
forth in Section 3.4.
-----------

3.2 Source of Shares. The Common Stock to be issued under this Plan
----------------
will be made available, at the discretion of the Board, either from authorized
but unissued shares of Common Stock or from previously issued shares of Common
Stock reacquired by the Company.

3.3 Availability of Unused Shares. Shares of Common Stock subject to
-----------------------------
unexercised portions of any Award that expire, terminate or are canceled, and
shares of Common Stock issued pursuant to an Award that are reacquired by the
Company pursuant to the terms of the Award under which such shares were issued,
will again become available for the grant of further Awards under this Plan.
<PAGE>

3.4 Adjustment Provisions.
---------------------

(a) (i) If the outstanding shares of Common Stock are increased,
decreased or exchanged for a different number or kind of shares or other
securities, or if additional shares or new or different shares or other
securities are distributed in respect of such shares of Common Stock (or any
stock or securities received with respect to such Common Stock), including
without limitation through merger, consolidation, sale or exchange of all or
substantially all of the assets of the Company, reorganization,
recapitalization, reclassification, stock dividend, stock split, reverse stock
split, spin-off or other distribution or event with respect to such shares of
Common Stock (or any stock or securities received with respect to such Common
Stock), or (ii) the value of the outstanding shares of Common Stock of the
Company is reduced by reason of an extraordinary cash dividend, an appropriate
and proportionate adjustment may be made in (1) the maximum number and kind of
shares subject to this Plan as provided in Section 3.1, (2) any limitations on
-----------
the number of shares with respect to which Awards may be granted to any Eligible
Person, (3) the number and kind of shares or other securities subject to then
outstanding Awards, and/or (4) the price for each share or other unit of any
other securities subject to, or measurement criteria applicable to, then
outstanding Awards.

(b) No fractional interests will be issued under this Plan resulting
from any adjustments.

(c) To the extent any adjustments relate to stock or securities of the
Company, such adjustments shall be made by the Administering Body, whose
determination in that respect shall be final, binding and conclusive.

(d) The grant of an Award pursuant to this Plan shall not affect in
any way the right or power of the Company to make adjustments,
reclassifications, reorganizations or changes of its capital or business
structure or to merge or to consolidate or to dissolve, liquidate or sell, or
transfer all or any part of its business or assets.

(e) No adjustment to the terms of an Incentive Stock Option shall be
made unless such adjustment either (i) would not cause such Option to lose its
status as an Incentive Stock Option or (ii) is agreed to in writing by the
Administering Body and the Recipient.

3.5 Reservation of Shares. The Company will at all times reserve and
---------------------
keep available shares of Common Stock equaling at least the total number of
shares of Common Stock issuable pursuant to outstanding Awards.

ARTICLE IV
ADMINISTRATION OF PLAN

4.1 Administering Body.
------------------

(a) This Plan shall be administered by the Board or by a Committee of
the Board appointed pursuant to Section 4.1(b).
--------------

(b) The Board in its sole discretion may from time to time appoint a
Committee (which may be a subcommittee of an existing committee of the Board)
consisting solely of at least two Board members who are intended to qualify as
Non-Employee Directors to

2
<PAGE>

administer this Plan and, subject to applicable law, to exercise all of the
powers, authority and discretion of the Board under this Plan. The Board may
from time to time increase or decrease (but not below two) the number of members
of the Committee, remove from membership on the Committee all or any portion of
its members, and/or appoint such person or persons as it desires to fill any
vacancy existing on the Committee, whether caused by removal, resignation or
otherwise. The Board may disband the Committee at any time and revest in the
Board the administration of this Plan. The Committee shall report to the Board
the names of Eligible Persons granted Awards, the number of shares of Common
Stock covered by each Award, and the terms and conditions of each such Award.

4.2 Authority of Administering Body.
-------------------------------

(a) Subject to the express provisions of this Plan, the Administering
Body shall have the power to implement (including the power to delegate such
implementation to appropriate officers of the Company), interpret and construe
this Plan and any Awards and Award Documents or other documents defining the
rights and obligations of the Company and Recipients hereunder and thereunder,
to determine all questions arising hereunder and thereunder, and to adopt and
amend such rules and regulations for the administration hereof and thereof as it
may deem desirable. The interpretation and construction by the Administering
Body of any provisions of this Plan or of any Award or Award Document shall be
conclusive and binding. Any action taken by, or inaction of, the Administering
Body relating to this Plan or any Award or Award Document shall be within the
absolute discretion of the Administering Body and shall be conclusive and
binding upon all persons. Subject only to compliance with the express
provisions hereof, the Administering Body may act in its absolute discretion in
matters related to this Plan and any and all Awards and Award Documents.

(b) Subject to the express provisions of this Plan, the Administering
Body may from time to time in its discretion select the Eligible Persons to
whom, and the time or times at which, Awards shall be granted, the nature of
each Award, the number of shares of Common Stock that underlie each Award, the
exercise price and period for the exercise of each Award, and such other terms
and conditions applicable to each individual Award as the Administering Body
shall determine. The Administering Body may grant at any time new Awards to an
Eligible Person who has previously received Awards regardless of whether such
prior Awards are still outstanding, have previously been exercised as a whole or
in part, or are canceled in connection with the issuance of new Awards. The
Administering Body may grant Awards singly or in combination with other Awards,
as it determines in its discretion. The exercise price, and any other terms and
conditions of the Awards may be established by the Administering Body without
regard to existing Awards or other grants.

4.3 No Liability. No member of the Board or the Committee or any
------------
designee thereof will be liable for any action or inaction with respect to this
Plan or any Award or any transaction arising under this Plan or any Award,
except in circumstances constituting bad faith of such member.

4.4 Amendments.
----------

(a) The Administering Body may, insofar as permitted by applicable
law, rule or regulation, and subject to Section 4.4(b), from time to time
--------------
suspend or discontinue this Plan or

3
<PAGE>

revise or amend it in any respect whatsoever, and this Plan as so revised or
amended will govern all Awards hereunder, including those granted before such
revision or amendment.

(b) Except as otherwise provided in this Plan or in the applicable
Award Document, no amendment, revision, suspension or termination of this Plan
or any outstanding Award may diminish any rights of the Recipient under any
Award previously granted without the written consent of such Recipient.

4.5 Other Compensation Plans. The adoption of this Plan shall not affect
------------------------
any other stock option, incentive or other compensation plans in effect from
time-to-time for the Company, and this Plan shall not preclude the Company from
establishing any other forms of incentive or other compensation for employees,
officers or directors of, or advisors or consultants to, the Company, whether or
not approved by stockholders.

4.6 Plan Binding on Successors. This Plan shall be binding upon the
--------------------------
successors and assigns of the Company.

4.7 References to Successor Statutes, Regulations and Rules. Any
-------------------------------------------------------
reference in this Plan to a particular statute, regulation or rule shall also
Statutes, Regulations and refer to any successor provision of such statute,
regulation or rule.

4.8 Issuances for Compensation Purposes Only. This Plan is intended to
----------------------------------------
constitute an "employee benefit plan," as defined in Rule 405 promulgated under
the Securities Act, and shall be administered accordingly.

4.9 Invalid Provisions. In the event that any provision of this Plan is
------------------
found to be invalid or otherwise unenforceable under any applicable law, such
invalidity or unenforceability shall not be construed as rendering any other
provisions contained herein invalid or unenforceable, and all such other
provisions shall be given full force and effect to the same extent as though the
invalid and unenforceable provision were not contained herein.

4.10 Governing Law. This Agreement shall be governed by and interpreted
-------------
in accordance with the internal laws of the State of Delaware, without giving
effect to the principles of the conflicts of laws thereof.

ARTICLE V
GENERAL AWARD PROVISIONS

5.1 Participation in the Plan.
-------------------------

(a) A person shall be eligible to receive grants of Awards under this
Plan if, at the time of the grant of the Award, such person is an Eligible
Person.

(b) Incentive Stock Options may be granted only to Eligible Persons
meeting the employment requirements of Section 422 of the IRC.

5.2 Award Documents. Each Award granted under this Plan shall be
---------------
evidenced by an agreement duly executed on behalf of the Company and by the
Recipient, or by a confirming memorandum issued by the Company to the Recipient,
setting forth such terms and conditions

4
<PAGE>

applicable to the Award as the Administering Body may in its discretion
determine. Awards will not be binding upon the Company, and Recipients will have
no rights thereto, until such an agreement is entered into between the Company
and the Recipient or such a memorandum is delivered by the Company to the
Recipient, but an Award may have an effective date on or after the date of grant
but prior to the date of such an agreement or memorandum. Award Documents may
but need not be identical and shall comply with and be subject to the terms and
conditions of this Plan, a copy of which shall be provided to each Recipient and
incorporated by reference into each Award Document. In case of any conflict
between this Plan and any Award Document, this Plan shall control.

5.3 Exercise of Award. No Award shall be exercisable except in respect
-----------------
of whole shares, and fractional share interests shall be disregarded. An Award
shall be deemed to be exercised when the Secretary or other designated official
of the Company receives written notice of such exercise from the Recipient,
together with payment of the exercise price made in accordance with Section 5.4
-----------
and any amounts required under Section 5.10. Notwithstanding any other provision
------------
of this Plan, the Company and/or the Administering Body may impose, by rule
and/or in Award Documents, such conditions upon the exercise of the Award
(including without limitation conditions limiting the time of exercise to
specified periods) as may be required to satisfy applicable regulatory
requirements.

5.4 Payment For Awards.
------------------

(a) The exercise price for an Award shall be payable upon the exercise
of an Award granted hereunder by delivery of cash payment or such other
consideration as the Administering Body may from time to time deem acceptable in
any particular instance.

(b) The Company may assist any Recipient in the payment of the
exercise price of an Award by lending such amounts to such person on such terms
and at such rates of interest and upon such security (if any) as shall be
approved by the Administering Body; provided, however, that any such loan must
be full recourse to the Recipient.

(c) The exercise price for Awards may be paid by delivery to the
Company by or on behalf of the person exercising the Award of Common Stock held
by such person for at least six months, duly endorsed in blank or accompanied by
stock powers duly endorsed in blank, with signatures guaranteed in accordance
with the Exchange Act if required by the Company, or retained by the Company
from the stock otherwise issuable upon exercise or surrender of vested and/or
exercisable Awards previously granted to the Recipient and being exercised (if
applicable) (in either case valued at Fair Market Value as of the exercise
date); provided, however, that (i) the Company and/or the Administering Body may
allow exercise of an Award in a broker-assisted or similar transaction in which
the exercise price is not received by the Company until promptly after exercise,
and/or (ii) the Administering Body may allow the Company to loan the exercise
price to the person entitled to exercise the Award, if the exercise will be
followed by a prompt sale of some or all of the underlying shares and a portion
of the sale proceeds is dedicated to full payment of the exercise price and
amounts required pursuant to Section 5.10.
------------

(d) Recipients will have no rights to the assistance described in

Section 5.4(b) or to the exercise techniques described in Section 5.4(c), and
- - -------------- --------------
the Company may offer or permit

5
<PAGE>

such assistance or techniques on an ad hoc basis to any Recipient without
incurring any obligation to offer or permit such assistance or techniques on
other occasions or to other Recipients.

5.5 No Employment Rights. Nothing contained in this Plan (or in Award
--------------------
Documents or in any other documents related to this Plan or to Awards granted
hereunder) shall confer upon any Eligible Person or Recipient any right to
continue in the employ of the Company or any Affiliated Entity or constitute any
contract or agreement of employment or engagement, or interfere in any way with
the right of the Company or any Affiliated Entity to reduce such person's
compensation or other benefits or to terminate the employment or engagement of
such Eligible Person or Recipient, with or without cause. Except as expressly
provided in this Plan or in any document evidencing the grant of an Award
pursuant to this Plan, the Company shall have the right to deal with each
Recipient in the same manner as if this Plan and any such document evidencing
the grant of an Award pursuant to this Plan did not exist, including without
limitation with respect to all matters related to the hiring, discharge,
compensation and conditions of the employment or engagement of the Recipient.
Any questions as to whether and when there has been a termination of a
Recipient's employment or engagement, the reason (if any) for such termination,
and/or the consequences thereof under the terms of this Plan or any document
evidencing the grant of an Award pursuant to this Plan shall be determined by
the Administering Body and the Administering Body's determination thereof shall
be final and binding.

5.6 Restrictions Under Applicable Laws and Regulations.
--------------------------------------------------

(a) All Awards granted under this Plan shall be subject to the
requirement that, if at any time the Company shall determine, in its discretion,
that the listing, registration or qualification of the shares subject to Awards
granted under this Plan upon any securities exchange or interdealer quotation
system or under any federal, state or foreign law, or the consent or approval of
any government or regulatory body, is necessary or desirable as a condition of,
or in connection with, the granting of such an Award or the issuance, if any, or
purchase of shares in connection therewith, such Award may not be exercised as a
whole or in part unless and until such listing, registration, qualification,
consent or approval shall have been effected or obtained free of any conditions
not acceptable to the Company. During the term of this Plan, the Company will
use its reasonable efforts to seek to obtain from the appropriate governmental
and regulatory agencies any requisite qualifications, consents, approvals or
authorizations in order to issue and sell such number of shares of its Common
Stock as shall be sufficient to satisfy the requirements of this Plan. The
inability of the Company to obtain any such qualifications, consents, approvals
or authorizations shall relieve the Company of any liability in respect of the
nonissuance or sale of such stock as to which such qualifications, consents,
approvals or authorizations pertain.

(b) The Company shall be under no obligation to register or qualify
the issuance of Awards or underlying securities under the Securities Act or
applicable state securities laws. Unless the issuance of Awards and underlying
securities have been registered under the Securities Act and qualified or
registered under applicable state securities laws, the Company shall be under no
obligation to issue any Awards or underlying securities unless the Awards and
underlying securities may be issued pursuant to applicable exemptions from such
registration or qualification requirements. In connection with any such exempt
issuance, the Company may

6
<PAGE>

require the Recipient to provide a written representation and undertaking to the
Company, satisfactory in form and scope to the Company and upon which the
Company may reasonably rely, that such Recipient is acquiring such Awards and
underlying shares for such Recipient's own account as an investment and not with
a view to, or for sale in connection with, the distribution of any such
securities, and that such person will make no transfer of the same except in
compliance with any rules and regulations in force at the time of such transfer
under the Securities Act and other applicable law, and that if shares of stock
are issued without such registration, a legend to this effect (together with any
other legends deemed appropriate by the Company) may be endorsed upon the
securities so issued. The Company may also order its transfer agent to stop
transfers of such securities. The Company may also require the Recipient to
provide the Company such information and other documents as it may request in
order to satisfy the Company as to the investment sophistication and experience
of the Recipient and as to any other conditions for compliance with any such
exemptions from registration or qualification.

5.7 No Privileges of Stock Ownership. Except as otherwise set forth
--------------------------------
herein, a Recipient of an Award shall have no rights as a stockholder with
respect to any shares issuable or issued in connection with the Award until the
date of the receipt by the Company of all amounts payable by the Recipient in
connection with the exercise of the Award. Status as an Eligible Person shall
not be construed as a commitment that any Award will be granted under this Plan
to an Eligible Person or to Eligible Persons generally. No person shall have any
right, title or interest in any fund or in any specific asset (including shares
of capital stock) of the Company by reason of any Award granted hereunder.
Neither this Plan (or any documents related hereto) nor any action taken
pursuant hereto shall be construed to create a trust of any kind or a fiduciary
relationship between the Company and any person. To the extent that any person
acquires a right to receive an Award hereunder, such right shall be no greater
than the right of any unsecured general creditor of the Company.

5.8 Nonassignability. Unless the Administering Body shall otherwise
----------------
determine on a case-by-case basis, no Award granted under this Plan shall be
assignable or transferable except (i) by will or by the laws of descent and
distribution, or (ii) subject to the final sentence of this Section 5.8, upon
-----------
dissolution of marriage pursuant to a qualified domestic relations order. Unless
the Administering Body shall otherwise determine on a case-by-case basis, during
the lifetime of a Recipient, an Award granted to such person shall be
exercisable only by the Recipient (or the Recipient's permitted transferee) or
such person's guardian or legal representative. Notwithstanding the foregoing,
(i) no Award owned by a Recipient subject to Section 16 of the Exchange Act may
be assigned or transferred in any manner inconsistent with Rule 16b-3
promulgated under the Exchange Act, and (ii) Incentive Stock Options may not be
assigned or transferred in violation of Section 422(b)(5) of the IRC (or any
comparable or successor provision) or the regulations thereunder, and nothing
herein is intended to allow such assignment or transfer.

5.9 Information to Recipients.
-------------------------

(a) The Company shall determine what, if any, financial and other
information shall be provided to Recipients and when such financial and other
information shall be provided after giving consideration to applicable federal
and state laws, rules and regulations, including without limitation applicable
federal and state securities laws, rules and regulations.

7
<PAGE>

(b) The furnishing of financial and other information that is
confidential to the Company shall be subject to the Recipient's agreement that
the Recipient shall maintain the confidentiality of such financial and other
information, shall not disclose such information to third parties, and shall not
use the information for any purpose other than evaluating an investment in the
Company's securities under this Plan.

5.10 Withholding Taxes. Whenever the granting, vesting or exercise of
-----------------
any Award, or the issuance of any shares upon exercise of any Award or transfer
thereof, gives rise to tax or tax withholding liabilities or obligations, the
Company shall have the right to require the Recipient to remit to the Company an
amount sufficient to satisfy any federal, state and local withholding tax
requirements arising in connection therewith. The Company may, in the exercise
of its discretion, allow satisfaction of tax withholding requirements by
accepting delivery of stock of the Company or by withholding a portion of the
stock otherwise issuable in connection with an Award, in each case valued at
Fair Market Value as of the date of such delivery or withholding.

5.11 Legends on Awards and Stock Certificates. Each Award Document and
----------------------------------------
each certificate representing shares acquired upon vesting or exercise of an
Award shall be endorsed with all legends, if any, required by applicable federal
and state securities and other laws to be placed on the Award Document and/or
the certificate. The Award Documents and share certificates shall also contain
legends reflecting the restrictions and rights contained in Article VIII as long
as such restrictions and rights are applicable. The determination of which
legends, if any, shall be placed upon Award Documents or the certificates shall
be made by the Administering Body and such decision shall be final and binding.

5.12 Effect of Termination of Employment on Awards.
---------------------------------------------

(a) Termination of Employment. Subject to Section 5.12(b) and except
------------------------- ---------------
as otherwise provided in a written agreement between the Company and the
Recipient (which may be entered into at any time before or after termination of
employment), in the event of a Recipient's termination of employment for any
reason whatsoever (with or without cause), including death, Permanent Disability
or retirement, Awards (whether or not vested) shall expire and become
unexercisable as of the earlier of (i) the date such Award would expire in
accordance with its terms had the Recipient remained employed and (ii) 30 days
after the date of termination. The provisions of this Section 5.12(a) may be
modified to the extent deemed advisable by the Administering Body in Award
Documents pertaining to directors or other non-employees providing consulting,
advisory or other services to the Company or an Affiliated Entity.

(b) Alteration of Vesting and Exercise Periods. Notwithstanding
------------------------------------------
anything to the contrary in Section 5.12(a), the Administering Body may in its
---------------
discretion (i) elect to accelerate the vesting of all or any portion of any
Awards that had not become exercisable on or prior to the date of a Recipient's
termination and/or (ii) designate shorter or longer periods in which an Award
may be exercised following such termination; provided, however, that any shorter
exercise periods determined by the Administering Body shall be effective only if
provided for in the Award Document that evidences the grant to the Recipient or
if such shorter exercise period is agreed to in writing by the Recipient.

8
<PAGE>

(c) Leave of Absence. In the case of any employee on an approved
----------------
leave of absence, the Administering Body may make such provision respecting
continuance of Awards as the Administering Body in its discretion deems
appropriate, except that in no event shall an Award be exercisable after the
date such Award would expire in accordance with its terms had the Recipient
remained continuously employed.

5.13 Lock-Up Agreements. Each Recipient agrees as a condition to receipt
------------------
of an Award that, in connection with an Initial Public Offering and upon the
request of the Company and the principal underwriter in such Initial Public
Offering, any shares of Common Stock acquired or that may be acquired upon
exercise or vesting of an Award may not be sold, offered for sale or otherwise
disposed of without the prior written consent of the Company or such
underwriter, as the case may be, for a period of not more than 180 days after
the effective date of the registration statement with respect to such Initial
Public Offering.

ARTICLE VI

STOCK OPTION AWARDS

6.1 Nature of Stock Option Awards. Stock Option Awards may be Incentive
-----------------------------
Stock Options or Nonqualified Stock Options and shall be so designated in the
Award Document.

6.2 Option Exercise Price. The exercise price for each Stock Option
---------------------
shall be determined by the Administering Body as of the date such Stock Option
is granted. The exercise price shall be no less than the Fair Market Value of
the Common Stock subject to the Stock Option as of the date of grant, provided
that in no event shall the exercise price be less than the par value of the
Common Stock. The Administering Body may, with the consent of the Recipient and
subject to compliance with statutory or administrative requirements applicable
to Incentive Stock Options, amend the terms of any Stock Option to provide that
the exercise price of the shares remaining subject to the Stock Option shall be
reestablished at a price not less than 100% of the Fair Market Value of the
Common Stock on the effective date of the amendment.

6.3 Option Period and Vesting. Stock Options granted hereunder shall
-------------------------
vest and may be exercised as determined by the Administering Body, except that
exercise of such Stock Options after termination of the Recipient's employment
shall be subject to Section 5.12. Each Stock Option granted hereunder and all
------------
rights or obligations thereunder shall expire on such date as shall be
determined by the Administering Body, but not later than 10 years after the date
the Stock Option is granted and shall be subject to earlier termination as
provided herein or in the Award Document.

6.4 Special Provisions Regarding Incentive Stock Options.
----------------------------------------------------

(a) Notwithstanding anything in this Article VI to the contrary, the
----------
exercise price and vesting period of any Stock Option intended to qualify as an
Incentive Stock Option shall comply with the provisions of Section 422 of the
IRC and the regulations thereunder. As of the Effective Date, such provisions
require, among other matters, that (i) the exercise price must not be less than
the Fair Market Value of the underlying stock as of the date the Incentive Stock
Option is granted, and not less than 110% of the Fair Market Value as of such
date in the case of a grant to a Significant Stockholder; and (ii) the Incentive
Stock Option not be exercisable after the expiration of ten years from the date
of grant of such Incentive Stock Option, or five years

9
<PAGE>

from the date of grant in the case of an Incentive Stock Option granted to a
Significant Stockholder.

(b) The aggregate Fair Market Value (determined as of the respective
date or dates of grant) of the Common Stock for which one or more Stock Options
granted to any Recipient under this Plan (or any other option plan of the
Company or any Affiliated Entity) may for the first time become exercisable as
Incentive Stock Options under the federal tax laws during any one calendar year
shall not exceed $100,000.

(c) Any Options granted as Incentive Stock Options pursuant to this
Plan that for any reason fail or cease to qualify as such shall be treated as
Nonqualified Stock Options.

ARTICLE VII

RECAPITALIZATIONS AND REORGANIZATIONS

7.1 Corporate Transactions Not Involving a Change in Control. Subject to
--------------------------------------------------------
the provisions of Article VIII, if the Company shall consummate any
Reorganization not involving a Change in Control in which holders of shares of
Common Stock are entitled to receive in respect of such shares any securities,
cash or other consideration (including without limitation a different number of
shares of Common Stock), each Award outstanding under this Plan shall thereafter
be exercisable, in accordance with this Plan, only for the kind and amount of
securities, cash and/or other consideration receivable upon such Reorganization
by a holder of the same number of shares of Common Stock as are subject to that
Award immediately prior to such Reorganization, and any adjustments will be made
to the terms of the Award in the sole discretion of the Administering Body as it
may deem appropriate to give effect to the Reorganization.

7.2 Corporate Transactions Involving a Change in Control.
----------------------------------------------------

(a) Acceleration of Awards. If a Change in Control occurs and in
----------------------
connection with such Change in Control any Recipient's employment with the
Company is terminated, then, subject to the terms of any written employment
agreement between the Company and the Recipient and the specific terms of any
Award, such Recipient shall have the right to exercise or receive the full
benefit of the Recipient's Awards granted under this Plan as a whole or in part
during the applicable time period provided in Section 5.12, without regard to
------------
any vesting requirements or other milestones.

(b) Employment Termination. For purposes of this Section, but
----------------------
without limitation, a Recipient's employment with the Company will be deemed to
have been terminated in connection with a Change in Control if (i) the Recipient
is removed from the Recipient's employment with the Company by, or resigns the
Recipient's employment upon the request of, a Person exercising practical voting
control over the Company following the Change in Control or a person acting upon
authority or at the instruction of such Person (other than a Recipient's
termination for cause); (ii) the Recipient's position is eliminated as a result
of a reduction in force made to reduce over-capacity or unnecessary duplication
of personnel within one year after the consummation of the Change in Control; or
(iii) the Recipient resigns for "good reason" which means any of the following
(without the Recipient's consent):

(A) the assignment to the Recipient of duties substantially
inconsistent with the Recipient's position (including offices, titles,
reporting requirements or

10
<PAGE>

responsibilities), authority or duties as in effect prior to the Change in
Control, or any other action by the Company which results in a diminution
or other material adverse change in such position, authority or duties;

(B) the Company requiring the Recipient to be based at any
location more than thirty (30) miles from the Recipient's location prior to
the Change in Control; or

(C) any other material adverse change to the terms and
conditions (including compensation and benefits) of the Recipient's
employment (except changes which apply to all employees on an equal or pro
rata basis).

7.3 Provision for Awards Upon Change in Control.
-------------------------------------------

As of the effective time and date of any Change in Control, this Plan and
any then outstanding Awards (whether or not vested) shall automatically
terminate unless (a) provision is made in writing in connection with such
transaction for the continuance of this Plan and for the assumption of such
Awards, or for the substitution for such Awards of new awards covering the
securities of a successor entity or an affiliate thereof, with appropriate
adjustments as to the number and kind of securities and exercise prices, in
which event this Plan and such outstanding Awards shall continue or be replaced,
as the case may be, in the manner and under the terms so provided; or (b) the
Board otherwise shall provide in writing for such adjustments as it deems
appropriate in the terms and conditions of the then-outstanding Awards (whether
or not vested), including without limitation (i) accelerating the vesting of
outstanding Awards and/or (ii) providing for the cancellation of Awards and
their automatic conversion into the right to receive the securities, cash or
other consideration that a holder of the shares underlying such Awards would
have been entitled to receive upon consummation of such Change in Control had
such shares been issued and outstanding immediately prior to the effective date
and time of the Change in Control (net of the appropriate option exercise
prices). If, pursuant to the foregoing provisions of this Section 7.3, this
-----------
Plan and the Awards shall terminate by reason of the occurrence of a Change in
Control without provision for any of the actions described in clause (a) or (b)
hereof, then any Recipient holding outstanding Awards shall have the right, at
any time within thirty (30) days prior to the consummation of the Change in
Control, to exercise the Recipient's Awards to the full extent not theretofore
exercised, including any installments which have not yet become vested.

ARTICLE VIII

PUT AND CALL OPTIONS

8.1 Put and Call Options. The Company shall have the right to purchase
--------------------
from a Recipient (the "Call Option") and a Recipient shall have the right to
cause the Company to purchase from such Recipient (or such Recipient's permitted
transferee pursuant to Section 5.8) (the "Put Option") all of the shares of
Common Stock acquired pursuant to Awards granted under this Plan and then owned
by such Recipient or acquired by such Recipient within thirty (30) days
thereafter pursuant to the exercise of Awards in accordance with Section
-------
5.12(a), upon the occurrence of any Option Event (as defined in Section 8.2).
- - ------- -----------
The Call Option or the Put Option shall be exercised by the Company or a
Recipient, as the case may be, within ninety (90) days following the date of an
Option Event (the "Purchase Period"). The Call Option or the Put

11
<PAGE>

Option shall be exercised by the Company or a Recipient, as the case may be,
giving the other written notice on or before the last day of the Purchase Period
of the intent to consummate either the Put Option or the Call Option. The
purchase price shall be equal to the Fair Market Value of such shares as of the
date of the Option Event. Upon exercise of either the Put Option or the Call
Option, the Recipient shall deliver to the Company the share certificate or
certificates representing the shares being purchased, duly endorsed and free and
clear of any and all liens, charges, encumbrances and other adverse interests,
and the Company shall deliver or cause to be delivered to the Recipient (or the
Recipient's permitted transferee) a check in the amount of the purchase price.

8.2 Option Events. The following events are each an "Option Event":
-------------

(i) Termination of an employee-Recipient's employment with the
Company or any Affiliated Entity, voluntarily or involuntarily, for any reason
whatsoever (with or without cause), including death, Permanent Disability or
retirement;

(ii) Cessation of a director-Recipient's service to the Company
as a member of the Board for any reason whatsoever, including death,
resignation, removal or failure to be reelected; provided, however, that if such
director continues in service as an employee of the Company or any Affiliated
Entity, then no Option Event shall be deemed to have occurred; and

(iii) Specifically with respect to, but not limited to, non-
employees of the Company or any Affiliated Entity, the occurrence of any other
event designated as an Option Event in the Award Document.

8.3 Adjustments for Changes in Capital Structure. If there shall be any
--------------------------------------------
change in the Common Stock of the Company through merger, consolidation,
reorganization, recapitalization, share dividend, share split, combination or
exchange of shares, or the like, the restrictions contained in this Article
shall apply with equal force to additional and/or substitute securities, if any,
received by a Recipient in exchange for, or by virtue of the Recipient's
ownership of, shares of Common Stock acquired in connection with an Award under
this Plan.

8.4 Termination of Article VIII. This Article, and the rights and
---------------------------
obligations of the Company and Recipients hereunder, shall terminate upon the
earliest of (a) the Company becoming an Exchange Act Registered Company; (b) the
consummation of the Company's Initial Public Offering; or (c) immediately prior
to the consummation of a Change in Control (unless the Incumbent Board at such
time determines that this Article shall not terminate by reason of such Change
in Control).

ARTICLE IX

DEFINITIONS

Capitalized terms used in this Plan and not otherwise defined shall have
the meanings set forth below:

"Administering Body" means the Board as long as no Committee has been
appointed and is in effect and shall mean the Committee as long as the Committee
is appointed and in effect.

12
<PAGE>

"Affiliated Entity" means any Parent Corporation or Subsidiary Corporation.

"Award" means any Stock Option granted or sold to an Eligible Person under
this Plan.

"Award Document" means the agreement or confirming memorandum setting forth
the terms and conditions of an Award.

"Board" means the Board of Directors of the Company.

"Change in Control" means the following and shall be deemed to occur if any
of the following events occur after the Effective Date:

(a) Any Person (other than the Current Parent Corporation) becomes
the beneficial owner (within the meaning of Rule 13d-3 promulgated under the
Exchange Act) of fifty percent (50%) or more of either the then outstanding
shares of Common Stock or the combined voting power of the Company's then
outstanding securities entitled to vote generally in the election of directors;
or

(b) Individuals who, as of the consummation of the Initial Public
Offering, constitute the Board of Directors of the Company (the "Incumbent
Board") cease for any reason to constitute at least a majority of the Board of
Directors of the Company, provided that any individual who becomes a director
after the effective date hereof whose election, or nomination for election by
the Company's stockholders, is approved by a vote of at least a majority of the
directors then comprising the Incumbent Board shall be considered to be a member
of the Incumbent Board unless that individual was nominated or elected by any
Person (other than the Current Parent Corporation) having the power to exercise,
through beneficial ownership, voting agreement and/or proxy, twenty percent
(20%) or more of either the outstanding shares of Common Stock or the combined
voting power of the Company's then outstanding voting securities entitled to
vote generally in the election of directors, in which case that individual shall
not be considered to be a member of the Incumbent Board unless such individual's
election or nomination for election by the Company's stockholders is approved by
a vote of at least two-thirds of the directors then comprising the Incumbent
Board; or

(c) Consummation by the Company of the sale or other disposition by
the Company of all or substantially all of the Company's assets or a
Reorganization of the Company with any other Person other than a Reorganization
that would result in the voting securities of the Company held by stockholders
of the Company immediately prior thereto (or, in the case of a Reorganization
that is preceded or accomplished by an acquisition or series of related
acquisitions by any Person, by tender or exchange offer or otherwise, of voting
securities representing five percent (5%) or more of the combined voting power
of all securities of the Company, immediately prior to such acquisition or the
first acquisition in such series of acquisitions) continuing to represent,
either by remaining outstanding or by being converted into voting securities of
another entity, more than fifty percent (50%) of the combined voting power of
the voting securities of the Company or such other entity outstanding
immediately after such Reorganization (or series of related transactions
involving such a Reorganization) in the same proportion such stockholders held
the voting securities of the Company immediately prior to the Reorganization; or

13
<PAGE>

(d) Approval by the stockholders of the Company or any order by a
court of competent jurisdiction of a plan of liquidation of the Company.

"Committee" means the committee appointed by the Board to administer this
Plan pursuant to Section 4.1.
-----------

"Common Stock" means the Class A Common Stock of the Company, as
constituted on the Effective Date of this Plan, and as thereafter adjusted as a
result of any one or more events requiring adjustment of outstanding Awards
under Section 3.4 above.
-----------

"Company" means LeadersOnline, Inc, a Delaware corporation.

"Current Parent Corporation" means Heidrick & Struggles International, Inc.
and any of its Subsidiary Corporations.

"Effective Date" means January __, 2000, which is the date this Plan was
adopted by the Board.

"Eligible Person" shall include directors, officers and employees of, and
consultants and advisors to, the Company or any Affiliated Entity.

"Exchange Act" means the Securities Exchange Act of 1934, as amended.

"Exchange Act Registered Company" means that the Company has any class of
any equity security registered pursuant to Section 12 of the Exchange Act.

"Expiration Date" means the 10th anniversary of the Effective Date.

"Fair Market Value" of a share of the Company's capital stock as of a
particular date shall be: (i) if the stock is listed on an established stock
exchange or exchanges (including the Nasdaq National Market), the average of the
highest and lowest sale prices of the stock quoted for such date as reported in
the Transactions Index of each such exchange, as published in The Wall Street
Journal and determined by the Administering Body, or, if no sale price was
quoted in any such Index for such date, then as of the next preceding date on
which such a sale price was quoted; or (ii) if the stock is not then listed on
an exchange or the Nasdaq National Market, the average of the closing bid and
asked prices per share for the stock in the over-the-counter market as quoted on
The Nasdaq Small Cap Market on such date (in the case of (i) or (ii), subject to
adjustment as and if necessary and appropriate to set an exercise price not less
than 100% of the fair market value of the stock on the date an option is
granted); or (iii) if the stock is not then listed on an exchange or quoted in
the over-the-counter market, an amount determined in good faith by the
Administering Body; provided, however, that (A) when appropriate, the
Administering Body, in determining Fair Market Value of capital stock of the
Company, may take into account such other factors as it may deem appropriate
under the circumstances and (B) if the stock is traded on the Nasdaq Small Cap
Market and both sales prices and bid and asked prices are quoted or available,
the Administering Body may elect to determine Fair Market Value under either
clause (i) or (ii) above. Notwithstanding the foregoing, the Fair Market Value
of capital stock for purposes of grants of Incentive Stock Options shall be
determined in compliance with applicable provisions of the IRC. The Fair Market
Value of rights or property other than

14
<PAGE>

capital stock of the Company means the fair market value thereof as determined
by the Administering Body on the basis of such factors as it may deem
appropriate.

"Incentive Stock Option" means a Stock Option that qualifies as an
incentive stock option under Section 422 of the IRC, or any successor statute
thereto.

"Initial Public Offering" means the Company's first public distribution of
Common Stock pursuant to an underwritten offering under a registration statement
declared effective under the Securities Act.

"IRC" means the Internal Revenue Code of 1986, as amended.

"Non-Employee Director" means any director of the Company who qualifies as
(i) a "non-employee director" within the meaning of Rule 16b-3 promulgated under
the Exchange Act, and (ii) an "outside director" within the meaning of Section
162(m) of the IRC.

"Nonqualified Stock Option" means a Stock Option that is not an Incentive
Stock Option.

"Parent Corporation" means any Parent Corporation as defined in Section
424(e) of the IRC.

"Permanent Disability" shall mean that the Recipient becomes physically or
mentally incapacitated or disabled so that the Recipient is unable to perform
substantially the same services as the Recipient performed prior to incurring
such incapacity or disability (the Company, at its option and expense, being
entitled to retain a physician to confirm the existence of such incapacity or
disability, and the determination of such physician to be binding upon the
Company and the Recipient), and such incapacity or disability continues for a
period of three consecutive months or six months in any 12-month period or such
other period(s) as may be determined by the Administering Body with respect to
any Award, provided that for purposes of determining the period during which an
Incentive Stock Option may be exercised pursuant to Section 5.12 hereof,
------------
Permanent Disability shall mean "permanent and total disability" as defined in
Section 22(e) of the IRC.

"Person" means any person, entity or group, within the meaning of Section
13(d) or 14(d) of the Exchange Act, but excluding (i) the Company and any
Affiliated Entity, (ii) any employee stock ownership or other employee benefit
plan maintained by the Company that is qualified under the Employee Retirement
Income Security Act of 1974, as amended, and (iii) an underwriter or
underwriting syndicate that has acquired the Company's securities solely in
connection with a public offering thereof.

"Plan" means this 2000 Stock Option Plan of the Company.

"Plan Term" means the period during which this Plan remains in effect
(commencing the Effective Date and ending on the Expiration Date).

"Recipient" means an Eligible Person who has received an Award under this
Plan.

"Reorganization" means any merger, consolidation or other reorganization.

15
<PAGE>

"Securities Act" means the Securities Act of 1933, as amended.

"Significant Stockholder" is an individual who, at the time a Stock Option
is granted to such individual under this Plan, owns more than ten percent (10%)
of the combined voting power of all classes of stock of the Company or of any
Parent Corporation or Subsidiary Corporation (after application of the
attribution rules set forth in Section 424(d) of the IRC).

"Stock Option" means a right to purchase stock of the Company granted under
Section 6.1 of this Plan.
- - -----------

"Subsidiary Corporation" means any Subsidiary Corporation as defined in
Section 424(f) of the IRC.

<PAGE>

EXHIBIT 10.5
SUBLEASE AGREEMENT
------------------

This SUBLEASE AGREEMENT ("Sublease") is made this 19th day of November,
---------------------
1999, by and between Hershey Communications, Inc., a California corporation
- - ---- ------------------------------------------------------
("Tenant") and LeadersOnline, a Delaware Corporation ("Subtenant").
--------------------------------------

RECITALS:
- - --------

A. World Trade Center Building, Inc., a corporation ("Landlord"), as
------------------------------------------------
landlord, and Tenant, as tenant previously entered into that certain Office
Building Lease dated February 27, 1992 (the "Original Lease"), as amended by
that certain Amendment No. 1 thereto dated February 2, 1993, and Amendment No. 2
thereto dated April 4, 1997 (as amended, the "Master Lease"), whereby Tenant
leases from Landlord those certain premises (the "Premises") commonly known as
Suite 500, consisting of 8,835 rentable square feet, located on the fifth (5th)
floor of that certain building located at 18401 Von Karman Avenue, Irvine,
California (the "Building").

B. Tenant desires to sublease to Subtenant the Premises and Subtenant
desires to lease the Premises from Tenant.

THEREFORE, Tenant and Subtenant agree as follows:

1. Assumption. Subtenant hereby expressly assumes and agrees to perform
----------
and be bound by all covenants, conditions and obligations binding upon Tenant
and the Premises under the Master Lease with regard to the Premises, except for
the payment of operating expenses and additional rent if any, which shall be and
remain the obligation of Tenant. This Sublease is expressly subject and
subordinate to the Lease and all amendments thereto and any mortgages or deeds
of trust which encumber Landlord's interest in the Premises.

2. Rent. Subtenant will pay to Tenant as rent for the Premises, in advance
----
on the first day of each calendar month of the term of this Sublease, without
deduction, offset, prior notice or demand, in lawful money of the United States,
the sum of Fifteen Thousand Four Hundred Sixty One & 25/100 Dollars
($15,461.25). Receipt of Fifteen Thousand Four Hundred Sixty One & 25/100
Dollars ($15,461.25) is hereby acknowledged by Tenant as rent for the first
month. Tenant will be responsible for the payment to Landlord of all Operating
Expenses and all other items of additional rent accruing under the Master Lease.
(Tenant will abate all rent from December 31, 1999 to January 15, 2000.)
/s/ EMH
-------
3. Term. The term of this Sublease will be for a period of twenty-eight
----
(28) months, and three (3) days commencing on December 31, 1999 and
ending on May 2, 2002.
/s/ EMH
-------

4. Use. Subtenant will use the Premises for general office purposes which
---
is a permitted use described in the Master Lease, and Subtenant will otherwise
use the Premises in compliance with all of the terms of the Master Lease and for
no other purpose.

5. No Release. This Sublease will in no way release Tenant from any
----------
obligation or covenant of Tenant as tenant under the Master Lease.

6. Security Deposit. Subtenant will deposit with Tenant upon execution
----------------
hereof Forty Six Thousand, Three Hundred Eighty Three & 25/100 Dollars
($46,386.75) as security for Subtenant's faithful performance of Subtenant's
obligations hereunder. Tenant may deal with the Security Deposit in accordance
with the unmodified terms and provisions of the Master Lease which relate to a
security deposit. At anytime that Subtenant's or Subtenant's Guarantor verifies
-------------------------------------------------------------
a net worth exceeding Ten Million Dollars ($10,000,000.00), the Security Deposit
- - --------------------------------------------------------------------------------
will be reduced to an amount equal to one (1) month's rent ($15,481.25).
- - ----------------------------------------------------------------------

7. Condition of Premises. Subtenant accepts the Premises in its condition
---------------------
existing as of the date of the execution of this Sublease, subject to the Master
Lease and all applicable zoning, municipal, county and state laws, ordinances
and regulations governing and regulating the use of the Premises. Subtenant
acknowledges that neither Tenant nor Landlord nor any of their agents or
employees have made any representations or warranties as to the suitability of
the Premises for the conduct of Subtenant's business. (Tenant will remove all
office furniture cubicles and/or workstation furniture "systems" prior to the
commencement of the Sublease.)

8. Construction. The terms, conditions and respective obligations of
------------
Tenant and Subtenant to each other under this Sublease will be the terms,
conditions and obligations contained in the Master Lease, except for those
provisions of the Master Lease which are directly contradicted by the provisions
of this Sublease, in which event, the terms of this Sublease will control over
the terms of the Master Lease as between Tenant and Subtenant only. In all other
respects, the terms of the Master Lease will control. Accordingly, for the
purposes of this Sublease, wherever in the Master Lease the term "Landlord" is
used, it will be deemed to mean the Tenant herein, and wherever in the Master
Lease the term "Tenant" is used, it will be deemed to mean the Subtenant herein.
<PAGE>

9. Attornment. If Tenant defaults in its obligations under the Master
----------
Lease or the Master Lease terminates for any reason including, without
limitation, a voluntary surrender by Tenant or any reentry or repossession of
the Premises by Landlord, Landlord may terminate this Sublease or, at Landlord's
option and without being obligated to do so, Landlord may require Subtenant to
attorn to Landlord and, in the event Landlord exercises such option, Subtenant
does hereby attorn to Landlord and agrees to perform its obligations under this
Sublease directly to Landlord, in which event Landlord will take over all right,
title and interest of Tenant under this Sublease from the time of the exercise
of such option through the expiration or earlier termination of the term of this
Sublease. In the event of any such assumption of this Sublease by Landlord and
attornment by Subtenant, Landlord will not (i) be liable for any prepaid rents
or security deposit paid by Subtenant to Tenant more than one month in advance,
(ii) be liable for any previous acts, omissions or defaults of Tenant under this
Sublease; (iii) be subject to any defense or offset previously accrued in favor
of Subtenant against Tenant; or (iv) be bound by any modification of this
Sublease made without Landlord's written consent.

10. Parking. Provided Subtenant is not in default hereunder, and provided
-------
further that Tenant is not in default under the Master Lease, Subtenant will
have a license to use up to twenty eight (28) of the unreserved parking spaces
and four (4) of the reserved parking spaces which Tenant is licensed to use,
pursuant to and in accordance with the terms of the Master Lease relative to
parking; provided, however, Subtenant will pay directly to Landlord or
Landlord's parking operator $35.00 per unreserved parking space and $75.00 per
reserved parking space, as set forth in the Master Lease as a condition to
Subtenant's continued use of such parking spaces.

11. Further Assignment. Subtenant will not further sublease the Premises
------------------
or any portion thereof or assign any of its rights or delegate any of its duties
under this Sublease, without first obtaining the prior written consent of Tenant
and Landlord, which consent shall not be unreasonably withheld.

12. Insurance. Subtenant will, during the entire term of this Sublease,
---------
carry all insurance policies required to be carried by Tenant under the Master
Lease in accordance with the terms of the Master Lease. Subtenant will name
Tenant, Landlord and its Mortgagees as additional insured under all insurance
policies. Subtenant will supply Tenant with a Certificate of Insurance
identifying the above.

13. Brokers. Tenant and Subtenant each warrant that they have dealt with
-------
no other real estate brokers in connection with this transaction except CB
Richard Ellis, Inc. who represents the Tenant and Cushman Realty who represents
the Subtenant.

IN WITNESS WHEREOF, Tenant and Subtenant have executed this Sublease as of
the date first written above.

Tenant: Subtenant:

HERSHEY COMMUNICATIONS, INC., LEADERSONLINE, INC.,
a California Corporation a Delaware Corporation

By: /s/ EDWIN HERSHEY /s/ MICHAEL T. CHRISTY
-------------------- ---------------------------
Print Name: Edwin Hershey Print Name: Michael T. Christy
---------------- ------------------
Print Title: President Print Title: President
---------------- ------------------

The undersigned Landlord under the Master Lease attached hereto as Exhibit "A"
hereby consents to the subletting of the Premises described herein on the ter
and conditions contained in this Sublease. This consent applies only to this
Sublease and is not to be deemed to be a consent to any other sublease or
assignment.

LANDLORD:

WORLD TRADE CENTER BUILDING, INC.,
a corporation

By: CB Richard Ellis, Inc.,
a Delaware corporation,
Its Authorized Agent

By: /s/ BARRY A. KATZ
--------------------------
Print Name: Barry A. Katz
--------------------------
Print Title: Managing Director
--------------------------

<PAGE>

CONSENT OF LANDLORD TO SUBLEASE

WORLD TRADE CENTER BUILDING, INC., a Corporation ("Landlord"), the landlord
- - ------------------------------------------------
under that certain Lease ("Master Lease") dated February 27, 1992, entered into
by and between Landlord and Hershey Communications Inc., a California
-----------------------------------------
Corporation ("Tenant"), whereby Tenant, as the tenant, leased suite 500 in that
- - -----------
certain building located at 18401 Von Karman in Irvine, California
(the "Premises"), hereby consents to the sublease of the Premises by Tenant to
LeadersOnline, a Delaware Corporation ("Subtenant"). Landlord's consent is not
- - -------------------------------------
intended, and shall not be construed (i) to modify or otherwise affect any of
the provisions of the Master Lease, or to release Tenant from any of its
obligations and duties under the Master Lease, (ii) as a waiver of any of
Landlord's rights under the Master Lease, (iii) as an authorization or a consent
by Landlord to any assignment of the interest of Tenant in the Master Lease or
to the further subleasing of the Premises, and (iv) as binding or obligating
Landlord in any manner whatsoever with respect to any of the covenants,
undertakings, representations, warranties or agreements contained in the
sublease agreement (the "Sublease Agreement"), if any, between Tenant and
Subtenant.

Notwithstanding the foregoing, it is a condition to Landlord's consent to
the Sublease that Subtenant's occupancy of the Premises and any Sublease
Agreement are subject to the following: (i) Subtenant's occupancy of the
Premises and any Sublease Agreement will be subject and subordinate to the
Master Lease and to all mortgages are secured, in whole or in part, by the
Premises; (ii) Landlord may enforce the provisions of the Sublease Agreement, if
any, including collection of rent directly from Subtenant; (iii) in the event of
termination of the Master Lease for any reason whatsoever, including, without
limitation, a voluntary surrender by Tenant, or any default by Tenant, or in the
event of any re-entry or repossession of the Premises by Landlord, Landlord may,
at its option, either (a) terminate the Sublease agreement and Subtenants
occupancy of the Premises, or (b) take over all of the right, title and interest
of Tenant, as sublandlord, under the Sublease Agreement, in which case the
Subtenant will attorn to Landlord, but that nevertheless Landlord will not (1)
be liable for any previous act or omission of Tenant under the Sublease, (2) be
subject to any defense or offset previously accrued in favor of the Subtenant
against Tenant, or (3) be bound by any previous prepayment by Subtenant of more
than one month's rent.

This Consent of Landlord has been executed this 3rd day of December, 1999.

LANDLORD:

WORLD TRADE CENTER BUILDING, INC.,
a Corporation

By: CB Richard Ellis, Inc.,
a Delaware corporation
Its Authorized Agent

By: /s/ BARRY A. KATZ
------------------------------
Print Name: Barry Katz
----------------------
Print Title: Managing Director
----------------------

The undersigned Tenant and Subtenant referred to hereinabove hereby acknowledge
and accept the conditions of Landlord's consent to the Sublease as described
hereinabove.

Tenant: Subtenant:

Hershey Communications, Inc. Leaders Online, Inc.
a California Corporation a Delaware Corporation

By: /s/ EDWIN M. HERSHEY By: /s/ MICHAEL T. CHRISTY
------------------------ ----------------------------
Print Name: Edwin M. Hershey Print Name: Michael T. Christy
----------------- ---------------------
Title: President Title: President
--------------------- ------------------------

<PAGE>

Amendment to Sublease Agreement Dated November 19, 1999
by and between, Hershey Communications, Inc. as "Tenant"
and Leaders Online as "Subtenant" and
World Trade Center Building, Inc. as "Landlord"

Security Deposit Distribution Agreement:
- - ---------------------------------------

The Security Deposit, as detailed in paragraph six (6), totaling Forty Six
Thousand three Hundred Eighty three & 75/100 ($46,383.75) shall be distributed
as follows:

a. Fifteen Thousand Dollars ($15,000.00) shall be paid by Subtenant
(LeadersOnline) directly to Landlord (World Trade Center Building, Inc.) to
be credited to the account of the Tenant (Hershey Communications, Inc.).

b. Upon Landlord's verification that Subtenant has a net worth in excess of Ten
Million Dollars ($10,000,000.00) or Landlord has received a written and fully
executed sublease guaranty by an entity that Landlord has verified to have a
net worth in excess of Ten Million Dollars ($10,000,000.00) and no default
exists under the lease or sublease, Landlord will refunded to the Subtenant
(Leaders Online) the Fifteen Thousand Dollars ($15,000.00) deposit.

c. Thirty One Thousand three Hundred Eighty three & 75/100 ($31,383.75) shall be
paid by Subtenant (Leaders Online) directly to Tenant (Hershey
Communications, Inc.).

d. Upon Tenant's verification that Subtenant has a net worth in excess of Ten
Million Dollars ($10,000,000.00) or Tenant has received a written and fully
executed sublease guaranty by an entity that Tenant has verified to have a
net worth in excess of Ten Million Dollars ($10,000,000.00) and no default
exists under the sublease, Fifteen Thousand Nine Hundred Twenty Two Dollars &
25/100 ($15,922.25) of the deposit will be refunded to the Subtenant
(Leaders Online) by the Tenant (Hershey Communications, Inc.).

Tenant: Subtenant:

HERSHEY COMMUNICATIONS, INC., LEADERSONLINE, INC.,
a California Corporation a Delaware Corporation

By: /s/ E. M. HERSHEY II By: /s/ MICHAEL T. CHRISTY
________________________________ ____________________________________

Print Name: E. M. Hershey II Print Name: Michael T. Christy
________________________ ____________________________

Print Title: President Print Title: President
_______________________ ___________________________

Landlord:

WORLD TRADE CENTER BUILDING, INC.,
a corporation

By: CB Richard Ellis, Inc.,
a Delaware corporation,
Its Authorized Agent

By: /s/ BARRY A KATZ
________________________________

Print Name: Barry A. Katz
________________________

Print Title: Managing Director
_______________________

<PAGE>
EXHIBIT 10.6

[LETTERHEAD OF LEADERSONLINE]

October 12, 1999

Mr. James R. Quandt
17 Cherry Hills Drive
Coto de Caza, CA 92679

Dear Jim:

I am pleased to confirm LeadersOnline, Inc.'s offer of employment to you.

We are looking forward to your arrival and want to set forth our understanding:

1. You will join our Irvine, California office as Chief Operating Officer at
a monthly base salary of $20,833.33 (which is $250,000.00 annually),
commencing on your first day of employment, which shall be October 14,
1999, unless otherwise mutually agreed in writing. You will report to the
President, LeadersOnline. Currently salaries are reviewed annually in
November/December, so that your first salary review will be in
November/December 2000.

2. You will be eligible for a discretionary target bonus of up to 80% of your
base salary. This bonus may exceed 80% of your base salary if your goals
and objectives are significantly overachieved. Currently all bonuses are
paid in December and the following March. You understand that except for
the signing and minimum bonuses referred to below, all bonuses are
discretionary and not earned until declared by the Board of Directors or
appropriate committee of the Board of Directors, and that all bonuses,
including the signing and minimum bonuses referred to below, are payable
only if you are in our employ on the bonus payment dates.

As we discussed, you will be eligible to receive the following bonuses:

A. Signing and Two-Year Commitment Bonus. You will receive a signing and
-------------------------------------
two-year commitment bonus of $250,000.00 to be paid as follows:

(i) $125,000.00 to be paid on your regular payroll date within 30
days of your hire date; and

(ii) $125,000.00 to be paid on your regular payroll date in October
2000.

These payments to you are made subject to the condition that you not
resign your employment during the first two years. If you should
resign from our firm within two years from your employment start
date, you will repay the entire $250,000.00 signing and two-year
commitment bonus within five (5) business days following your notice
of resignation. You will be entitled to retain all interest or
investment return realized from such payments. If you voluntarily
resign within the first two years, you authorize us to deduct and/or
offset the amount referred to in the foregoing sentence from any
compensation or other sums that may be due to you at that time, and
you will repay the balance, if any, after such deduction/offset of
the $250,000.00 remaining due to us.

<PAGE>

Mr. James R. Quandt
October 12, 1999
Page Two

B. Bonus Year 2000 Minimum Bonus. You will receive a $350,000.00
-----------------------------
minimum bonus payable quarterly beginning with the first payment due
February 1, 2000, provided that you are in our employ on the bonus
payment date(s).

C. Bonus Year 2001 Minimum Bonus. You will receive a $350,000.00
-----------------------------
minimum bonus for the bonus year ending in December 31, 2001,
payable when bonuses are paid for the bonus year ending in December
31, 2001, provided that you are in our employ on the bonus payment
date(s).

3. You have agreed to purchase by November 30, 1999, $100,000.00 of Heidrick
& Struggles, Inc. common stock on the market, and to send us a copy of
your stockbrokers purchase confirmation evidencing such purchase. You
have also agreed not to sell such shares during the term of this
agreement.

4. You will be eligible to participate in our benefit programs in accordance
with the programs' written terms as set forth in plan documents. Copies
of the booklets and Summary Plan Descriptions describing our group
health, life/AD&D and long-term disability insurance, time-off benefits
such as vacation, paid holidays, paid sick time, or short-term disability
salary continuation, and Flexible Spending Account will be provided at a
later date.

LeadersOnline, Inc. intends to establish a 401(k) profit sharing plan
sometime during the next year and possibly as early as January 2000. The
specifics of the LeadersOnline plan, such as investment options, level of
company contributions, etc., are yet to be determined.

5. Our benefit programs, bonus programs, and policies are reviewed from time
to time by the company's management, and our programs and policies may be
modified, amended or completely terminated at any time.

6. We will be requesting the Board of Directors of LeadersOnline, Inc. to
establish a stock option program for LeadersOnline management and
employees. You would participate in that program as a member of the
senior management team. We will specifically request the Board to grant
you stock options to purchase 2.5 percent of the company's common stock
as of the date of the grant. Such options will be subject to vesting and
forfeiture as determined by the Board.

7. Pursuant to the Immigration and Nationality Act, our company is required
to verify the identity and employment authorization of all new hires. In
order to comply with this legal obligation, we must complete an
Employment Eligibility Verification Form I-9 within three days of hire.
We have enclosed a Form I-9 for your review. Please note that you will
need to provide either (i) one document from "List A" or (ii) one
document from "List B" and one document from "List C" of the form (see
page two of the enclosed I-9 Form). Your initial and continuing
employment will be subject to your having the ability to work legally in
the United States. If you anticipate having difficulty completing the
Form I-9 or producing the required documents, please advise me as soon as
possible.
<PAGE>

Mr. James R. Quandt
October 12, 1999
Page Three

8. If you accept our offer of employment, you will become an "employee at
will" unless or until we may otherwise agree in writing. This gives both of
us maximum flexibility and permits either of us to terminate employment and
compensation at any time with or without cause or notice except for such
period of notice as may be expressly provided in writing under written
company employment policies in effect at the time of such termination.

If your employment with our company is terminated by us for any reason
other than cause, we intend to request that Heidrick & Struggles, Inc.
provide you with an opportunity to join Heidrick & Struggles, Inc. as an
executive search consultant, if you and Heidrick & Struggles, Inc. mutually
agree.

9. Two copies of an agreement relating to trade secrets, confidential
information, clients, etc., are enclosed. We ask that all employees sign
this agreement. Please review and sign both copies and return one to me for
processing. Of course, please call me if you have any questions about this
agreement.

10. You hereby confirm that you have advised us that you have not signed any
agreement that will, in any way, affect your joining our firm or the
performance of your work for us. You agree that in performing your job
duties hereunder, you will not utilize, rely upon or disclose any trade
secrets or proprietary information belonging to others. You represent that
you will be able to accomplish the anticipated duties of your job without
the use of any such trade secrets or proprietary information.

11. This letter of agreement, which sets forth our entire understanding, can be
amended only in a writing, which is signed by you, the President of
LeadersOnline, Inc., together with either the Treasurer or Secretary of the
company. You specifically acknowledge that no promises or commitments have
been made to you that are not set forth in this letter.

To acknowledge your acceptance of our offer of employment, please sign and
return to me one copy of this letter together with the agreement referred to in
Item 9 above.

Sincerely yours,

/s/ MICHAEL T. CHRISTY
____________________________________
Michael T. Christy
President - LeadersOnline, Inc.

Enclosure

cc: Patrick S. Pittard
A. Larry Elliott
Donald M. Kilinski
Richard D. Nelson

ACCEPTED:

/s/ JAMES R. QUANDT 10-14-99
________________________ _____________________________
James R. Quandt Date

<PAGE>

EXHIBIT 23.1

Consent of Independent Public Accountants

As independent public accountants, we hereby consent to the use of our
reports (and to all references to our Firm) included in or made part of this
registration statement.

Arthur Andersen LLP

Chicago, Illinois
April 6, 2000

<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
LEADERSONLINE, INC. BALANCE SHEETS & STATEMENTS OF OPERATIONS AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>

<S> <C> <C>
<PERIOD-TYPE> YEAR YEAR
<FISCAL-YEAR-END> DEC-31-1998 DEC-31-1999
<PERIOD-START> JAN-01-1998 JAN-01-1999
<PERIOD-END> DEC-31-1998 DEC-31-1999
<CASH> 0 0
<SECURITIES> 0 0
<RECEIVABLES> 0 1,559,359
<ALLOWANCES> 0 75,000
<INVENTORY> 0 0
<CURRENT-ASSETS> 0 1,653,820
<PP&E> 471,848 1,028,170
<DEPRECIATION> 190 82,676
<TOTAL-ASSETS> 471,848 4,149,749
<CURRENT-LIABILITIES> 468,000 1,892,498
<BONDS> 0 0
0 0
0 0
<COMMON> 0 161,400
<OTHER-SE> 0 2,095,851
<TOTAL-LIABILITY-AND-EQUITY> 471,848 4,149,749
<SALES> 0 2,616,762
<TOTAL-REVENUES> 0 2,616,762
<CGS> 0 1,188,623
<TOTAL-COSTS> 1,538,589 7,774,036
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 0 0
<INCOME-PRETAX> (1,538,589) (5,157,274)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (1,538,589) (5,157,274)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (1,538,589) (5,157,274)
<EPS-BASIC> (0.10) (0.32)
<EPS-DILUTED> (0.10) (0.32)

</TABLE>