<PAGE>
 
   
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 24, 1998     
                                                     REGISTRATION NO. 333-61697
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
 
                      SECURITIES AND EXCHANGE COMMISSION
                            WASHINGTON, D.C. 20549
                                
                             AMENDMENT NO. 3     
                                      TO
                                   FORM S-1
                            REGISTRATION STATEMENT
                                     UNDER
                          THE SECURITIES ACT OF 1933
 
                                ---------------
 
                           KORN/FERRY INTERNATIONAL
              (EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
 

<TABLE>
<S>                                <C>                                <C>
           CALIFORNIA                             7361                            95-2623879
 (STATE OR OTHER JURISDICTION OF      (PRIMARY STANDARD INDUSTRIAL             (I.R.S. EMPLOYER
 INCORPORATION OR ORGANIZATION)        CLASSIFICATION CODE NUMBER)            IDENTIFICATION NO.)
</TABLE>

 
                       1800 CENTURY PARK EAST, SUITE 900
                         LOS ANGELES, CALIFORNIA 90067
                                (310) 552-1834
  (ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
                   REGISTRANT'S PRINCIPAL EXECUTIVE OFFICE)
 
                                 PETER L. DUNN
                       1800 CENTURY PARK EAST, SUITE 900
                         LOS ANGELES, CALIFORNIA 90067
                                (310) 843-4100
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
                             OF AGENT FOR SERVICE)
 
                                  COPIES TO:

<TABLE>
<S>                                                <C>
             JAMES R. UKROPINA, ESQ.                            ALISON S. RESSLER, ESQ.
              O'MELVENY & MYERS LLP                               SULLIVAN & CROMWELL
        400 SOUTH HOPE STREET, SUITE 1500                        1888 CENTURY PARK EAST
          LOS ANGELES, CALIFORNIA 90071                      LOS ANGELES, CALIFORNIA 90067
                  (213) 430-6000                                     (310) 712-6600
</TABLE>

 
                                ---------------
 
       APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
  As soon as practicable after this Registration Statement becomes effective.
 
                                ---------------
 
  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, please 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 delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box: [_]
 
                                ---------------
 
  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 THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(a), MAY DETERMINE.
 
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------

<PAGE>
 
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A         +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE   +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY  +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT        +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR   +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE      +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE    +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF  +
+ANY SUCH STATE.                                                               +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
                 
              SUBJECT TO COMPLETION, DATED DECEMBER 24, 1998     
                                
                             12,500,000 Shares     
 
                           [LOGO OF KORN/FERRY INTL.]
 
                                  Common Stock
                                 (no par value)
 
                                    --------
   
Of the shares of Common Stock ("Common Stock") offered hereby, 9,920,000 shares
are  being  sold  by Korn/Ferry  International  (the "Company")  and  2,580,000
 shares  are  being  sold  by  the Selling  Shareholders  named  herein  under
 "Principal  and Selling  Shareholders" (the "Selling  Shareholders"). Of  the
  12,500,000 shares  of  Common Stock  being offered,  10,000,000  shares are
  initially  being  offered  in  the  United States  and  Canada  (the  "U.S.
   Shares") by  the U.S.  Underwriters (the  "U.S. Offering")  and 2,500,000
   shares  are  initially  being  concurrently offered  outside  the  United
    States and  Canada (the  "International Shares")  by the  Managers (the
    "International  Offering" and,  together  with the  U.S. Offering,  the
     "Offering").  The  offering  price  and  underwriting  discounts  and
     commissions of  the U.S. Offering and the  International Offering are
      identical.     
    
 Prior to the Offering, there has been  no public market for the Common Stock.
  It is  anticipated that the initial  public offering price will  be between
   $13.00 and  $15.00 per share. For information relating to  the factors to
     be considered  in  determining  the  initial  offering  price  to  the
      public, see  "Underwriting." Application will  be made  to list the
       Common  Stock on  the New  York Stock  Exchange under  the symbol
        "KFY."     
 
FOR A DISCUSSION OF MATERIAL RISKS THAT SHOULD BE CONSIDERED IN CONNECTION WITH
    AN INVESTMENT IN THE COMMON STOCK, SEE "RISK FACTORS" ON PAGE 9 HEREIN.
 
THESE  SECURITIES HAVE NOT BEEN APPROVED  OR DISAPPROVED BY THE SECURITIES  AND
 EXCHANGE  COMMISSION   OR  ANY  STATE  SECURITIES  COMMISSION  NOR   HAS  THE
  SECURITIES  AND  EXCHANGE COMMISSION  OR  ANY  STATE SECURITIES  COMMISSION
   PASSED   UPON  THE   ACCURACY   OR   ADEQUACY   OF  THIS   PROSPECTUS.ANY
    REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
 

<TABLE>
<CAPTION>
                                                        UNDERWRITING   PROCEEDS  PROCEEDS TO
                                             PRICE TO  DISCOUNTS AND      TO       SELLING
                                              PUBLIC   COMMISSIONS(1) COMPANY(2) SHAREHOLDERS
                                            ---------  -------------- ---------- ------------
<S>                                         <C>        <C>            <C>        <C>
Per Share..................................  $            $            $           $
Total (3)..................................  $            $            $           $
</TABLE>

(1) The Company has agreed to indemnify the U.S. Underwriters and the Managers
    against certain liabilities, including liabilities under the Securities Act
    of 1933. See "Underwriting."
(2) Before deduction of expenses payable by the Company estimated at $   .
   
(3) The Company has granted the U.S. Underwriters and the Managers an option,
    exercisable by Credit Suisse First Boston Corporation for 30 days from the
    date of this Prospectus, to purchase a maximum of 1,875,000 additional
    shares to cover over-allotments of shares. If the option is exercised in
    full, the total Price to Public will be $    , Underwriting Discounts and
    Commissions will be $    and Proceeds to Company will be $    .     
   
  The U.S. Shares are offered by the several U.S. Underwriters when, as and if
delivered to and accepted by the U.S. Underwriters and subject to their right
to reject orders in whole or in part. It is expected that the U.S. Shares will
be ready for delivery on or about     , 1999, against payment in immediately
available funds.     
 
CREDIT SUISSE FIRST BOSTON
                          DONALDSON, LUFKIN & JENRETTE
                                                        PAINEWEBBER INCORPORATED
                         
                      Prospectus dated       , 1999.     

<PAGE>
 
   
  [Inset: Graphics with a stylized globe and text overlay reading "A Tradition
of Leadership," "A Future of Innovation," and "A World of Opportunity."     
   
  Gatefold: Header reading "A Tradition of Leadership." Text below the header
reads "Korn/Ferry International's premier global reputation, strong client
relationships, senior level search expertise, innovation, and technological
leadership provide a distinct competitive advantage. Statistical Highlights at
a glance." Korn/Ferry logo and graphics highlighting certain statistics
follow.     
   
  Facing Gatefold: Header reading "A Future of Innovation" above graphics with
Futurestep, Korn/Ferry International and The Wall Street Journal logos. Text
follows reading "Advanced technology, the Internet, and increasing demand for
middle-management recruitment services are transforming the marketplace.
Korn/Ferry International is anticipating these changes with Futurestep, its
Internet-based search service." Graphics with selected Futurestep computer
screens follow.     
   
  Inside Backcover: Graphics with globe and a list of the offices of
Korn/Ferry International in each of the cities in which it operates, plus
selected Futurestep screens.]     
 
 
 
  The Company holds a number of U.S. registered and common law trademarks, as
well as non-U.S. registered trademarks, which are used throughout this
Prospectus. The Company has registered the following marks, among others, with
the U.S. Patent and Trademark Office: "KF" and "Korn/Ferry International."
Korn/Ferry International Futurestep, Inc., a subsidiary of Korn/Ferry
International, has a pending trademark application with the U.S. Patent and
Trademark Office for "Futurestep." In addition, a number of federally
registered trademarks are used throughout this Prospectus that are not owned
by the Company.
 
  CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE SECURITIES
OFFERED HEREBY, INCLUDING OVER-ALLOTMENT, STABILIZING TRANSACTIONS, SYNDICATE
SHORT COVERING TRANSACTIONS AND PENALTY BIDS. FOR A DESCRIPTION OF THESE
ACTIVITIES, SEE "UNDERWRITING."
 
                                       2

<PAGE>
 

                               PROSPECTUS SUMMARY
   
  The following summary information is qualified in its entirety by the more
detailed information, including "Risk Factors" and the Company's Consolidated
Financial Statements and Notes thereto, appearing elsewhere in this Prospectus.
Unless otherwise indicated, the information in this Prospectus (i) gives effect
to the filing of an amendment of the Company's existing Articles of
Incorporation that increases the Company's authorized capital stock and
implements the four-to-one split of the Company's outstanding Common Stock that
will occur prior to the consummation of the Offering, (ii) assumes no exercise
of the over-allotment option granted to the U.S. Underwriters and the Managers
as described in "Underwriting" and (iii) assumes an initial public offering
price of $14.00 per share of Common Stock, the mid-point of the range set forth
on the cover of this Prospectus. Unless the context otherwise requires, all
references to the "Company" and "Korn/Ferry" refer to Korn/Ferry International
and its consolidated subsidiaries and affiliates. All references to
"Futurestep" refer to Korn/Ferry International Futurestep, Inc., a subsidiary
of the Company, or the Internet-based search service offered by the Company
through that subsidiary. The Company's fiscal year ends on April 30 of each
calendar year.     
 

                                  THE COMPANY
 
OVERVIEW
 
  Korn/Ferry International is the world's largest executive search firm and has
the broadest global presence in the industry with 384 consultants based in 71
offices across 41 countries. The Company's premier global reputation, strong
client relationships, senior-level search expertise, innovation and
technological leadership provide Korn/Ferry with distinct competitive
advantages. According to Kennedy Information, a leading information provider on
the executive search industry, the Company has ranked first in revenues in the
executive search industry for the last 19 years. Since fiscal 1993, the Company
has generated compound annual revenue growth of 23%. In fiscal 1998, the
Company had total revenues of $315.0 million and performed over 5,870
assignments for more than 3,750 clients, including approximately 43% of the
Fortune 500. Korn/Ferry's clients are many of the world's largest and most
prestigious public and private companies, middle-market and emerging growth
companies as well as governmental and not-for-profit organizations. Almost half
of the searches performed by the Company in fiscal 1998 were for board level,
chief executive and other senior executive officer positions. The Company has
established strong client loyalty; more than 80% of the search assignments it
performed in fiscal 1998 were on behalf of clients for whom it had conducted
multiple assignments over the last three fiscal years.
   
  The Company believes it is an innovator in the executive search industry and
forward-thinking in addressing the fundamental transformation of the
marketplace caused by the combined impact of advanced technology and the
Internet. In anticipation of these changing industry dynamics, and in response
to clients' demand for middle-management recruitment services, the Company
recently established Futurestep, its Internet-based search service. Futurestep
combines Korn/Ferry's search expertise with exclusive candidate assessment
tools and the reach of the Internet to accelerate recruitment of candidates for
middle-management positions. Following Futurestep's introduction in southern
California and selected North American markets beginning in May 1998,
approximately 110,900 candidates worldwide have completed a detailed on-line
profile with Futurestep. The Company and Futurestep have an exclusive alliance
with The Wall Street Journal, the first of its kind in the industry. This
alliance provides preferred print and on-line access to The Wall Street
Journal's readers, advertisers and on-line users. The Company believes its
investments in technology-based recruitment will enable it to expand its share
of the middle-management recruitment market and to strengthen its leading
industry position as new methodologies begin to be utilized in senior-level
search.     
 
  Korn/Ferry is also an established and respected source of management
research. For example, the Company's Annual Board of Directors Survey of the
Fortune 1000, now in its 25th year, reports on the structure,
 
                                       3

<PAGE>
 
policy and trends in America's corporate boardrooms and is recognized as one of
the most comprehensive, long-term studies of boards available.
 
INDUSTRY
 
  According to Kennedy Information, worldwide executive search revenue grew at
a 20% compound annual growth rate, from approximately $3.5 billion in 1993 to
$7.3 billion in 1997. The Company believes that a number of favorable trends
will contribute to the continued growth of the executive search industry,
including: (i) the globalization of business; (ii) the demand for managers with
broader skills; (iii) the increasing outsourcing of recruitment functions; and
(iv) the use of advanced technology to accelerate the identification and
assessment of candidates.
 
GROWTH STRATEGY
 
  Korn/Ferry's objective is to expand its leadership position as a preferred
global executive search firm by offering a broad range of solutions to address
its clients' management recruitment needs. The principal elements of the
Company's strategy include:
 
  Leverage leadership in senior-level search--The Company's leadership in
senior-level search enables it to grow its business by increasing the number of
search assignments it handles for existing clients. The Company also believes
that there are significant opportunities to develop new clients by aggressively
marketing its proven global search expertise. The Company has adopted a
structured approach to develop and build relationships with new and existing
clients. Through its ten specialty practice groups and broad global presence,
the Company maintains an in-depth understanding of the market conditions and
strategic and management issues facing clients. Annually, the Company's
regions, offices, individual consultants and specialty practice groups identify
existing and prospective clients with substantial recurring needs for executive
search services. The Company assembles teams of search consultants based on
geographic, industry and functional expertise to focus on these accounts. The
Company has developed a number of key relationships with prestigious
multinational companies and, in fiscal 1998, completed an average of 34 search
assignments each for 20 major long-standing accounts.
 
  Expand into the middle-management market--In response to the growing client
demand for middle-management recruitment, the Company is expanding its services
to address this market. With its strong senior-level client relationships,
advertised recruitment services and Futurestep, Korn/Ferry is well positioned
to meet its clients' middle-management recruitment needs effectively and
efficiently. By moving aggressively into this segment of the market, the
Company believes it can strengthen its relationships with its existing clients,
develop new clients and gain a competitive advantage in marketing complementary
services.
 
  Pursue strategic acquisitions--The Company will continue to make selected
acquisitions that support its growth strategy, enhance its presence in key
markets or otherwise complement its competitive strengths. The executive search
industry is highly fragmented and consists of approximately 4,000 firms, the
ten largest of which accounted for only 11% of the global executive search
industry revenues in 1997. As the largest global executive search firm, the
Company believes it has the resources to lead consolidation within the highly
fragmented search industry. Since fiscal 1993, the Company has completed six
acquisitions, including recent acquisitions in France and Switzerland.
 
  Reinforce technological leadership--The Company has invested more than $25
million over the past two fiscal years in the development of an advanced global
technology infrastructure to increase the speed and quality of service to its
clients. The Company's worldwide databases contain profiles of over 1,000,000
executives and over 310,000 companies. The Company's systems represent a strong
competitive advantage, allowing its consultants to access information and
communicate effectively with each other. As the executive search industry
continues to grow and as more clients seek the assistance of search firms to
fill middle-management positions, an advanced technology infrastructure has
become an indispensable element of the search business.
 
                                       4

<PAGE>
 
 
  Add new complementary services--The Company seeks to add new complementary
services in response to specific client needs. For example, the Company
developed Futurestep and has expanded its advertised recruitment services to
address its clients' growing demand for effective middle-management
recruitment. In addition, the Company is exploring complementary business
opportunities, which could include recruitment outsourcing and human resources
consulting. As attractive business opportunities are identified, the Company
may capitalize on these opportunities through internal development, joint
ventures or selected acquisitions.
 
  The Company believes the high caliber and motivation of its professionals are
critical factors to its success. The Company further believes it has been able
to attract and retain some of the most productive search consultants (vice
presidents and principals) as a result of its premier reputation, history of
consultant equity ownership and performance-based compensation program. As of
April 30, 1998, the Company's 263 vice presidents had an average of seven
years' experience with the Company, 12 years in the search industry and 13
years in other industries. On average, each of the Company's consultants
completed 16 search assignments in fiscal 1998. In each of the last five fiscal
years, no individual consultant has accounted for any material portion of the
Company's revenues.
   
  Upon the consummation of the Offering, the Company's employee-shareholders
will continue to own approximately 65% of the Company. The employee-
shareholders have agreed to limit their ability to sell more than half of the
Common Stock owned by them immediately prior to the Offering until on or after
the fourth anniversary of the Offering. To align further the interests of
Korn/Ferry's consultants and shareholders, the Company has revised its
compensation program for consultants. In contemplation of the Offering, the
revised compensation program reduces the amount of consultants' annual cash
performance bonus payments and provides for the issuance of stock options
pursuant to the Company's newly adopted Performance Award Plan. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Overview" and "Management--Liquidity Schedule."     
 
CORPORATE INFORMATION
 
  The Company was incorporated in November 1969 under the laws of the State of
California. The Company's principal executive offices are located at 1800
Century Park East, Suite 900, Los Angeles, California 90067, and its telephone
number is (310) 552-1834. The Company's website address is www.kornferry.com
and Futurestep's website address is www.futurestep.com. Neither the information
contained in the websites of the Company and Futurestep nor the websites linked
to the websites of the Company and Futurestep shall be deemed to be a part of
this Prospectus.
 
                                       5

<PAGE>
 
                                  THE OFFERING
 
Common Stock offered by:
 
  The Company.....................      
                                      9,920,000 shares     
 
  The Selling Shareholders........      
                                      2,580,000 shares     
 
     Total.......................    12,500,000 shares
 
Common Stock offered in:
 
  U.S. Offering...................      
                                     10,000,000 shares     
 
  International Offering..........      
                                      2,500,000 shares     
 
     Total.......................       
                                     12,500,000 shares     
 
Common Stock outstanding after the      
 Offering........................... 35,711,260 shares(1)     
 
Use of proceeds.....................    
                                     Of the estimated net proceeds to the
                                     Company of $126.7 million, the Company
                                     intends (i) to use approximately
                                     $27.1 million to complete the redemption
                                     by the Company of certain shares of its
                                     capital stock, including $0.1 million to
                                     redeem the outstanding shares of Series A
                                     Preferred Stock and $1.4 million to
                                     redeem the outstanding shares of Series B
                                     Preferred Stock, (ii) to apply
                                     approximately $4.5 million to pay
                                     existing obligations of the Company to
                                     former holders of phantom units and stock
                                     appreciation rights and (iii) to retain
                                     approximately $95.1 million for possible
                                     future acquisitions, working capital and
                                     general corporate purposes, including the
                                     expansion of Futurestep and continued
                                     development of technology, information
                                     systems and infrastructure. See "Use of
                                     Proceeds" and "Certain Transactions--
                                     Additional Redemption Amounts." While the
                                     Company will not receive any proceeds
                                     from the sale of shares of Common Stock
                                     in the Offering by the Selling
                                     Shareholders, it will receive
                                     approximately $6.4 million from the
                                     repayment by certain Selling Shareholders
                                     of loans from the Company to those
                                     Selling Shareholders.     
 
Proposed New York Stock Exchange     KFY
 symbol.............................
- --------
   
(1) Includes (i) the redemption of 397,640 shares of Common Stock subsequent to
    October 31, 1998, (ii) the issuance of 364,300 shares to new vice
    presidents promoted effective December 31, 1998 and (iii) the anticipated
    redemption of 1,200,000 shares of Common Stock prior to the consummation of
    the Offering. Excludes an aggregate of 7,000,000 shares of Common Stock
    comprised of (i)           shares of Common Stock issuable upon the
    exercise of stock options that will be granted upon consummation of the
    Offering and (ii)          shares of Common Stock reserved for future
    issuance under the Company's Performance Award Plan (the "Performance Award
    Plan"). See "Management--Benefit Plans--Performance Award Plan."     
 
                                       6

<PAGE>
 
                        SUMMARY FINANCIAL AND OTHER DATA
            (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS AND OTHER DATA)
 
  The following table sets forth certain summary financial and other operating
data for the Company. This information should be read in conjunction with the
Company's Consolidated Financial Statements and Notes thereto, "Selected
Financial and Other Data" and "Management's Discussion and Analysis of
Financial Condition and Results of Operations" appearing elsewhere in this
Prospectus.
 

<TABLE>   
<CAPTION>
                                 FISCAL YEAR ENDED APRIL 30,                     SIX MONTHS ENDED OCTOBER 31,
                   --------------------------------------------------------   -------------------------------------
                                                                 PRO FORMA                               PRO FORMA
                     1994     1995     1996     1997     1998     1998(1)        1997        1998         1998(1)
                   -------- -------- -------- -------- -------- -----------   ----------- -----------   -----------
                                                                (UNAUDITED)   (UNAUDITED) (UNAUDITED)   (UNAUDITED)
<S>                <C>      <C>      <C>      <C>      <C>      <C>           <C>         <C>           <C>           
STATEMENT OF
 OPERATIONS DATA:
Total revenues...  $143,608 $187,888 $230,217 $272,561 $315,025  $315,025      $147,135    $183,762      $183,762
 Less reimbursed
  candidate
  expenses.......     4,440    6,627    8,731   12,137   14,470    14,470         6,804       8,073         8,073
                   -------- -------- -------- -------- --------  --------      --------    --------      --------
Net revenues.....   139,168  181,261  221,486  260,424  300,555   300,555       140,331     175,689       175,689
Compensation and
 benefits........    86,745  116,363  140,721  166,854  197,790   177,590        96,135     116,380       105,803
General and
 administrative
 expenses........    39,362   48,630   64,419   73,005   84,575    84,575        35,872      51,961        51,961
                   -------- -------- -------- -------- --------  --------      --------    --------      --------
Operating profit.    13,061   16,268   16,346   20,565   18,190    38,390         8,324       7,348(2)     17,925(2)
Interest expense.     1,991    2,323    3,683    3,320    4,234     4,234         1,740       2,582         2,582
                   -------- -------- -------- -------- --------  --------      --------    --------      --------
Income before
 provision for
 income taxes and
 non-controlling
 shareholders'
 interests.......    11,070   13,945   12,663   17,245   13,956    34,156         6,584       4,766        15,343
Provision for
 income taxes....     4,224    5,322    3,288    6,658    6,687    16,363         3,131       2,069         6,662
Non-controlling
 shareholders'
 interests(3)....     1,788    2,139    1,579    1,588    2,025     2,025         1,015       1,324         1,324
                   -------- -------- -------- -------- --------  --------      --------    --------      --------
Net income.......  $  5,058 $  6,484 $  7,796 $  8,999 $  5,244  $ 15,768(4)   $  2,438    $  1,373      $  7,357(4)
                   ======== ======== ======== ======== ========  ========      ========    ========      ========
Net income per
 share
 Basic...........  $   0.24 $   0.30 $   0.38 $   0.42 $   0.24  $   0.72      $   0.11    $   0.05      $   0.28
 Diluted.........      0.21     0.27     0.36     0.40     0.23      0.66          0.10        0.05          0.27
Weighted average
 common shares
 outstanding
 Basic...........    21,139   21,874   20,390   21,382   21,885    21,885        21,403      26,007        26,007
 Diluted.........    26,255   25,607   23,019   23,481   23,839    23,839        23,280      27,242        27,242(5)
<CAPTION>
                                                                                    SIX MONTHS
                           FISCAL YEAR ENDED APRIL 30,                           ENDED OCTOBER 31,
                   --------------------------------------------               -----------------------
                     1994     1995     1996     1997     1998                    1997        1998
                   -------- -------- -------- -------- --------               ----------- -----------
                                                                              (UNAUDITED) (UNAUDITED)
<S>                <C>      <C>      <C>      <C>      <C>                   <C>         <C>        
OTHER DATA:
Total revenues by
 region:
 North America...  $ 75,770 $ 97,950 $111,513 $135,192 $162,618                $ 72,426    $ 96,982
 Europe..........    37,913   49,769   68,890   77,505   86,180                  39,869      52,699
 Asia/Pacific....    13,876   21,227   29,921   34,532   34,811                  19,041      16,789
 Latin America...    16,049   18,942   19,893   25,332   31,416                  15,799      17,292
Number of offices
 (at period end).        54       59       62       66       71                      66          71
Average number of
 consultants.....       221      252      274      311      357                     339         382
Number of
 assignments.....     3,449    3,570    4,113    4,774    5,879                   2,614       3,283
</TABLE>
    
 

<TABLE>   
<CAPTION>
                                                              OCTOBER 31, 1998
                                                            --------------------
                                                                         AS
                                                             ACTUAL  ADJUSTED(6)
                                                            -------- -----------
                                                                (UNAUDITED)
<S>                                                         <C>      <C>
BALANCE SHEET DATA:
Cash and cash equivalents.................................. $ 23,277  $127,103
Working capital............................................   24,557   128,383
Total assets...............................................  187,439   288,890
Total long-term debt.......................................    7,102     7,102
Total mandatorily redeemable stock, net....................   63,185       --
Shareholders' equity.......................................    2,656   167,292
</TABLE>
    
 
                                       7

<PAGE>
 
- --------
   
(1) The unaudited pro forma statement of operations data for the fiscal year
    ended April 30, 1998 and the six months ended October 31, 1998 has been
    computed by eliminating from compensation and benefits that portion of
    consultant compensation that exceeds the amount which would have been paid
    had the Company's revised compensation program, which will be effective as
    of May 1, 1998 upon consummation of the Offering, been in effect for all of
    these periods. A pro forma adjustment also was made to reflect the
    increased income tax liability resulting from the corresponding increase in
    income before provision for income taxes, using the Company's effective tax
    rate of 48% in fiscal 1998 and 43% in the six months ended October 31,
    1998. Under the revised compensation program, consultants and others will
    receive options to purchase shares of Common Stock at the market value at
    the time of grant. Such options will vest in equal installments over five
    years. See "Management's Discussion and Analysis of Financial Condition and
    Results of Operations--Overview."     
   
(2) For the six months ended October 31, 1998, operating profit excluding
    Futurestep on an actual and pro forma basis was $14,410 and $24,987,
    respectively.     
   
(3) Represents the non-controlling majority shareholders' interests in the
    Company's Mexican subsidiaries.     
   
(4) Upon consummation of the Offering, the Company expects to incur non-
    recurring compensation and benefits expenses of (i) approximately $46.8
    million from the difference between the issuance price of the shares issued
    by the Company in the period beginning twelve months before the initial
    filing date of the Offering and the fair market value of the shares at the
    date of grant, (ii) approximately $27.1 million from the completion of the
    redemption by the Company of certain shares of its capital stock, including
    the payment of additional redemption amounts to certain shareholders under
    the terms of a 1994 stock redemption agreement and (iii) approximately $4.5
    million from the payment of existing obligations to former holders of
    phantom units and stock appreciation rights. These non-recurring
    compensation and benefits expenses are not reflected in the pro forma
    fiscal year 1998 or the pro forma six months ended October 31, 1998
    statements of operations data and will be reflected in the Company's
    financial statements for the quarter in which the Offering is consummated.
        
   
(5) The number of options to be granted pursuant to the Company's revised
    compensation program has not yet been determined and therefore these
    options have not been included in calculating diluted net income per share.
        
   
(6) Adjusted for the Offering and application of the estimated net proceeds
    therefrom, including completion of the redemption by the Company of certain
    shares of its capital stock (including Series A Preferred Stock),
    redemption of the outstanding shares of Series B Preferred Stock and
    payment of existing obligations of the Company to former holders of phantom
    units and stock appreciation rights. See "Use of Proceeds,"
    "Capitalization" and "Certain Transactions--Additional Redemption Amounts."
        
                                       8

<PAGE>
 

                                 RISK FACTORS
 
  In addition to the other information in this Prospectus, the following
factors should be considered carefully in evaluating the Company and its
business before purchasing shares of Common Stock. This Prospectus contains
forward-looking statements that are based on the beliefs of the Company's
management, as well as assumptions made by, and information currently
available to, the Company's management. Because such statements involve risks
and uncertainties, actual actions and strategies, the Company's future
results, performance or achievements could differ materially from those
expressed in, or implied by, any such forward-looking statements. Factors that
could cause or contribute to such material differences include, but are not
limited to, those discussed below.
 
COMPETITION
 
  The global executive search industry is highly competitive and fragmented.
In certain markets, the Company's competitors may possess greater resources,
greater name recognition and longer operating histories than the Company,
which may afford these firms advantages in obtaining future clients and
attracting qualified professionals in these markets. Historically, there have
been few barriers to entry into the executive search industry and new
executive search firms continue to enter the market. In addition, the Company
believes that with the continuing development and increased availability of
information technology, the executive search industry may attract new
competitors. Specifically, the advent and increased use of the Internet may
attract technology-oriented companies to the executive search industry. See
"Business--Competition." There can be no assurance that the Company will be
able to continue to compete effectively against existing or potential
competitors. In addition, increased competition may lead to increased pricing
pressures, requiring the Company to execute more searches or execute searches
more efficiently in order to remain competitive. There can be no assurance
that such pricing pressures will not have a material adverse effect on the
Company's business, financial condition and results of operations.
 
DEPENDENCE ON ATTRACTING AND RETAINING QUALIFIED EXECUTIVE SEARCH CONSULTANTS
 
  The Company's success depends upon its ability to attract and retain
qualified consultants who possess the skills and experience necessary to
satisfy its clients' executive search needs. The Company competes with other
executive search firms for qualified consultants. The failure of the Company
to identify and hire consultants with the requisite experience, skills and
established client relationships could have a material adverse effect on the
Company's business, financial condition and results of operations. Although
executive search firms strive to provide benefits and incentives to retain
their search consultants, many firms have experienced consultant turnover.
Consultants are paid salaries with the potential to earn substantially greater
performance-based bonuses. A majority of the Company's revenues have been and
will continue to be utilized to pay consultant compensation. Any diminution in
the Company's reputation, reduction in the Company's compensation levels or
restructuring of the Company's compensation system, whether as a result of
insufficient revenues, a decline in the market price of the Common Stock after
the Offering or for any other reason, could impair the Company's ability to
retain existing or attract additional qualified consultants. In connection
with the Offering, the Company has adopted a revised compensation program
featuring equity-based incentives, which were not previously a part of its
compensation structure. There can be no assurance that these changes to the
Company's compensation programs will not adversely affect the Company's
ability to attract and retain consultants. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Overview" and
"Management--Executive Participation Programs--Executive Participation
Program."
 
PORTABILITY OF CLIENT RELATIONSHIPS
 
  The Company's success depends upon the ability of its executive search
consultants to develop and maintain relationships with its clients. When a
consultant leaves one search firm and joins another, clients that have
established relationships with the departing consultant may move their
business to the consultant's new employer. The loss of one or more clients is
more likely to occur if the departing consultant enjoys widespread
 
                                       9

<PAGE>
 
name recognition or has developed a reputation as a specialist in executing
searches in a particular industry. The Company's failure to retain its most
productive consultants or maintain the quality of service to which its clients
are accustomed, and the ability of a departing consultant to move business to
his or her new employer, could have a material adverse effect on the Company's
business, financial condition and results of operations. See "--Dependence on
Attracting and Retaining Qualified Executive Search Consultants."
 
EFFECT OF GLOBAL ECONOMIC FLUCTUATIONS
 
  Demand for the Company's services is significantly affected by the general
level of economic activity in the regions and industries in which the Company
operates. When economic activity slows, many companies hire fewer permanent
employees. Therefore, a significant economic downturn, especially in regions
or industries where the Company's operations are heavily concentrated, such as
the financial services industry, could have a material adverse effect on the
Company's business, results of operations and financial condition. In fiscal
1998, approximately 11% of the Company's total revenues, and 4% of its
operating profits, were derived from the Asia/Pacific region and approximately
10% of the Company's total revenues, and 35% of its operating profits, were
derived from the Latin America region. In the recent past, the global
financial markets, especially in Asia and Latin America, have experienced
significant turmoil, negatively impacting the revenues and operating profits
of the Company's operations. There can be no assurance that such turmoil in
the Asian and Latin American financial markets will not negatively affect the
Company in those regions. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
 
RISKS ASSOCIATED WITH GLOBAL OPERATIONS
 
  The Company has 71 offices in 41 countries and generates approximately half
its total revenues from operations outside of North America. There are certain
risks inherent in transacting business worldwide, such as changes in
applicable laws and regulatory requirements, tariffs and other trade barriers,
difficulties in staffing and managing global operations, problems in
collecting accounts receivable, political instability, fluctuations in
currency exchange rates, repatriation controls and potential adverse tax
consequences. The Company has no hedging or similar foreign currency contracts
and therefore fluctuations in the value of foreign currencies could adversely
impact the profitability of the Company's global operations. There can be no
assurance that one or more of such factors will not have a material adverse
effect on the Company's business, financial condition or results of
operations.
 
RESTRICTIONS IMPOSED BY OFF-LIMITS AGREEMENTS
 
  Either by agreement with clients, or for client relations or marketing
purposes, executive search firms frequently refrain, for a specified period of
time, from recruiting employees of a client, and possibly other entities
affiliated with such client, when conducting searches on behalf of other
clients (an "off-limits agreement"). Off-limits agreements generally remain in
effect for one or two years following completion of an assignment. The
duration and scope of the off-limits agreement, including whether it covers
all operations of the client and its affiliates or only certain divisions of a
client, generally are subject to negotiation or internal policies and may
depend on such factors as the length of the client relationship, the frequency
with which the executive search firm has been engaged to perform executive
searches for the client and the amount of revenue the executive search firm
has generated or expects to generate from the client. Some of the Company's
clients are recognized as industry leaders and employ a significant number of
qualified executives who are potential recruitment candidates for other
companies. The Company's inability to recruit employees of such a client may
make it difficult for the Company to obtain search assignments from, or to
fulfill search assignments for, other companies in that client's industry.
There can be no assurance that off-limits agreements will not impede the
Company's growth or its ability to attract and serve new clients, or otherwise
have a material adverse effect on the Company's business, results of
operations and financial condition.
 
                                      10

<PAGE>
 
IMPLEMENTATION OF ACQUISITION STRATEGY
 
  The Company's ability to grow and remain competitive may depend on its
ability to consummate strategic acquisitions of other executive search firms.
Although the Company frequently evaluates possible acquisitions, there can be
no assurance that the Company will be successful in identifying, financing and
completing such acquisitions. An acquired business may not achieve desired
levels of revenue, profitability or productivity or otherwise perform as
expected. In addition, growth through acquisition of existing firms involves
risks such as diversion of management's attention, difficulties in the
integration of acquired operations, difficulties in retaining personnel,
increased off-limits conflicts, assumption of liabilities not known at the
time of acquisition and tax and accounting issues, some or all of which could
have a material adverse effect on the Company's business, results of
operations and financial condition. The Company may finance future
acquisitions in whole or in part with Common Stock, indebtedness or cash.
 
ABILITY TO MANAGE GROWTH
 
  The future growth of the Company will result in new and increased
responsibilities for the Company's management personnel as well as increased
demands on the Company's internal systems, procedures and controls, and its
managerial, administrative, financial, marketing, information and other
resources. These new responsibilities and demands may adversely affect the
Company's performance. Moreover, the Company intends to continue to open new
offices and to develop new practice areas or lines of business complementary
to its core services, which may entail certain start-up and maintenance costs
that could be substantial. The failure of the Company to continue to improve
its internal systems, procedures and controls, to open new offices, to develop
new practice areas or otherwise to manage growth successfully could have a
material adverse effect on the Company's business, results of operations and
financial condition.
 
RISKS RELATED TO THE DEVELOPMENT AND GROWTH OF FUTURESTEP
 
  The acceptance of Futurestep is dependent on the use of the Internet by
candidates, the ability of the Company to attract candidates to Futurestep's
website and client acceptance of Futurestep's recruitment services. In
addition, the Company believes Futurestep's alliance with The Wall Street
Journal is important for attracting candidates and clients to Futurestep. The
initial term of the alliance extends through June 2001. Any loss of such
alliance could have a material adverse effect on the growth of Futurestep's
business. In addition, the development of Futurestep will involve substantial
expenditures and the Company believes Futurestep will generate operating
losses through at least the end of fiscal 2000. The limited operating history
of Futurestep makes the prediction of future results of operations difficult
and there can be no assurance that Futurestep's operating losses will not
increase in the future or that Futurestep will ever achieve or sustain
profitability.
 
RELIANCE ON INFORMATION SYSTEMS
   
  The Company's success depends in large part upon its ability to store,
retrieve, process and manage substantial amounts of information. To achieve
its strategic objectives and to remain competitive, the Company must continue
to develop and enhance its information systems, which may require the
acquisition of equipment and software and the development, either internally
or through independent consultants, of new proprietary software. The Company's
inability to design, develop, implement and utilize, in a cost-effective
manner, information systems that provide the capabilities necessary for the
Company to compete effectively, or any interruption or loss of the Company's
information processing capabilities, for any reason, including but not limited
to unanticipated Year 2000 issues, could have a material adverse effect on the
Company's business, results of operations and financial condition. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Impact of Year 2000."     
       
EMPLOYMENT LIABILITY RISK
 
  Executive search firms are exposed to potential claims with respect to the
executive search process. A client could assert a claim for such matters as
breach of an off-limits agreement or recommending a candidate who
 
                                      11

<PAGE>
 
subsequently proves to be unsuitable for the position filled. In addition, a
candidate could assert an action against the Company for failure to maintain
the confidentiality of the candidate's employment search or for alleged
discrimination or other violations of employment law by a client of the
Company. The Company maintains professional liability insurance in such
amounts and with such coverages and deductibles as it believes are adequate to
cover such claims. There can be no assurance, however, that the Company's
insurance will cover all such claims or that its insurance coverage will
continue to be available at economically feasible rates. See "Business--
Insurance."
 
VOTING CONTROL BY CURRENT SHAREHOLDERS
   
  Immediately after the Offering, the current shareholders of the Company will
be the beneficial owners of 23,211,260 shares of Common Stock, representing
approximately 65.0% of the then issued and outstanding shares of Common Stock
(61.8% if the over-allotment option is exercised in full). Immediately after
the Offering, such shareholders will continue to have sufficient voting power
to elect the entire Board of Directors of the Company and, in general, to
determine (without the consent of the Company's other shareholders) the
outcome of any corporate transaction or other matter submitted to the
shareholders for approval, including mergers, consolidations and the sale of
all or substantially all of the Company's assets, and also the power to
prevent or cause a change in control of the Company. See "Management" and
"Principal and Selling Shareholders."     
 
MANAGEMENT DISCRETION CONCERNING USE OF PROCEEDS
 
  Most of the net proceeds of the Offering to the Company have not been
designated for specific uses, and management will have substantial discretion
in using the proceeds of the Offering. The failure of management to apply the
proceeds effectively could have a material adverse effect on the Company's
business, financial condition and results of operations. See "Use of
Proceeds."
 
POSSIBLE VOLATILITY OF STOCK PRICE
 
  There can be no assurance that an active trading market for the Common Stock
will develop as a result of the Offering or, if a trading market does develop,
that it will be sustained or that the shares of Common Stock could be resold
at or above the initial public offering price. The initial public offering
price of the Common Stock offered hereby will be determined through
negotiations among the Company, the Selling Shareholders and the
representatives of the Underwriters and may not be indicative of the price at
which the Common Stock will actually trade after the Offering. In determining
such price, consideration will be given to various factors, including market
conditions for the initial public offering, the past history of and prospects
for the Company's business, operations, earnings and financial position, an
assessment of the Company's management, the market for securities of companies
in businesses similar to those of the Company, the general condition of the
securities markets and other relevant factors. After completion of the
Offering, the market price of the Common Stock could be subject to significant
variation due to fluctuations in the Company's operating results, changes in
earnings estimates by securities analysts, the degree of success the Company
achieves in implementing its business strategy, changes in business conditions
affecting the Company, its customers or its competitors, and other factors. In
addition, the stock market may experience volatility that affects the market
prices of companies in ways unrelated to the operating performance of such
companies, and such volatility may adversely affect the market price of the
Common Stock.
 
SHARES ELIGIBLE FOR FUTURE SALE
   
  Upon consummation of the Offering, the Company will have outstanding an
aggregate of 35,711,260 shares of Common Stock (37,586,260 shares if the over-
allotment option is exercised in full). Of these shares, all of the 12,500,000
shares sold in the Offering will be freely tradable without restriction or
further registration under the Securities Act of 1933, as amended (the
"Securities Act"), unless such shares are purchased by affiliates of the
Company as that term is defined in Rule 144 under the Securities Act
("Affiliates"). The remaining 23,211,260 shares of Common Stock held by
existing shareholders are "restricted securities" as that term is     
 
                                      12

<PAGE>
 
   
defined in Rule 144 under the Securities Act ("Restricted Shares"). Restricted
Shares may be sold to the public only if registered or if they qualify for an
exemption from registration under Rule 144 promulgated under the Securities
Act. Beginning 90 days after the date of this Prospectus, 22,214,686 shares
will be eligible for sale pursuant to Rule 144, provided the conditions of
Rule 144 are met, subject to the lock-up agreements described below. Future
sales of substantial amounts of Common Stock after the Offering, or the
perception that such sales could occur, could adversely affect the market
price of the Common Stock and could impair the Company's future ability to
raise capital through the sale of its equity securities. No prediction can be
made as to the effect, if any, that future sales of shares, or the
availability of shares for future sale, will have on the market price of the
Common Stock. In addition, the Company has the authority to issue additional
shares of Common Stock and shares of one or more series of preferred stock.
The issuance of such shares could result in the dilution of the voting power
of the shares of Common Stock purchased in the Offering and could have a
dilutive effect on earnings per share.     
 
  Each of the Company and the existing shareholders of the Company has agreed
that it will not offer, sell, contract to sell, announce its intention to
sell, pledge or otherwise dispose of, directly or indirectly, or file with the
Securities and Exchange Commission a registration statement under the
Securities Act relating to, any shares of Common Stock or securities
convertible into or exchangeable or exercisable for any shares of the Company
without the prior written consent of Credit Suisse First Boston Corporation
for a period of 180 days after the date of this Prospectus, except, in the
case of the Company, for the grant of options and sale of shares under the
Company's stock benefit plans. Thereafter, certain parties may also sell
shares under Rule 144 of the Securities Act. See "Description of Capital
Stock," "Shares Eligible for Future Sale" and "Underwriting."
 
  Substantially all of the Company's existing shareholders have agreed to be
subject to a liquidity schedule that limits their ability to sell their
current Common Stock holdings. See "Management--Liquidity Schedule."
 
ANTI-TAKEOVER PROVISIONS; POSSIBLE ISSUANCE OF PREFERRED STOCK
 
  The Company's Amended and Restated Articles of Incorporation (the
"Articles") and Amended and Restated Bylaws (the "Bylaws") and applicable law
contain provisions that could have the effect of inhibiting a non-negotiated
merger or other business combination. In particular, the Articles provide for
a staggered Board of Directors and do not permit cumulative voting. In
addition, the Articles authorizes the Board of Directors to issue shares of
preferred stock, and fix the rights and preferences thereof, without a vote of
its shareholders. Although no shares of preferred stock will be outstanding
upon consummation of the Offering, and the Company has no present plans to
issue any shares of preferred stock, the rights of the holders of Common Stock
will be subject to, and may be adversely affected by, the rights of holders of
any preferred stock that may be issued in the future. Certain of these
provisions may have anti-takeover effects and may delay, deter or prevent a
change in control of the Company that shareholders might otherwise consider in
their best interests. Moreover, the existence of these provisions may depress
the market price of the Common Stock. The Company's Bylaws also limit the
ability of shareholders to raise certain matters at a meeting of shareholders
without giving advance notice. See "Description of Capital Stock--Preferred
Stock" and "--Certain Anti-Takeover Effects."
 
SUBSTANTIAL AND IMMEDIATE DILUTION
   
  The initial public offering price of the Common Stock offered in the
Offering will be substantially higher than the net tangible book value per
share of the currently outstanding Common Stock. Therefore, purchasers of
Common Stock in the Offering will experience immediate and substantial
dilution of $9.64 per share. See "Dilution."     
 
ABSENCE OF DIVIDENDS
 
  The Company does not anticipate declaring or paying any cash dividends on
its Common Stock in the foreseeable future. Future dividend policy will depend
on the Company's earnings, capital requirements, financial condition and other
factors considered relevant by the Board of Directors. See "Dividend Policy."
 
                                      13

<PAGE>
 

                                USE OF PROCEEDS
   
  The net proceeds to the Company from the sale of the 9,920,000 shares of
Common Stock offered by it, after deducting the offering expenses and the
estimated underwriting discounts and commissions payable by the Company, are
estimated to be $126.7 million ($151.3 million if the over-allotment option is
exercised in full), assuming an initial public offering price of $14.00 per
share (the mid-point of the offering range set forth on the cover page of this
Prospectus). The Company will not receive any proceeds from the sale of shares
of Common Stock in the Offering by the Selling Shareholders. However,
approximately $6.4 million of the proceeds from the sale of shares of Common
Stock in the Offering by certain Selling Shareholders will be paid to the
Company to reduce the amount of loans outstanding from the Company to them
incurred in connection with their original purchase of shares of Common Stock.
As of October 31, 1998, the Company had $12.8 million of notes receivable from
shareholders.     
   
  The Company intends (i) to use approximately $27.1 million of the net
proceeds from the Offering to complete the redemption by the Company of
certain shares of its capital stock, including $0.1 million to redeem the
outstanding shares of Series A Preferred Stock and $1.4 million to redeem the
outstanding shares of Series B Preferred Stock, (ii) to apply approximately
$4.5 million to pay existing obligations of the Company to former holders of
phantom units and stock appreciation rights and (iii) to retain approximately
$95.1 million for possible future acquisitions, working capital and general
corporate purposes, including the expansion of Futurestep and continued
development of technology, information systems and infrastructure. See
"Certain Transactions--Additional Redemption Amounts." Pending such uses, the
Company intends to invest such funds in interest-bearing, short-term,
investment grade securities, certificates of deposit, bank deposits,
commercial paper or other short-term debt instruments. See Note 3 to the
Consolidated Financial Statements for interest rates and maturity of the
Company's credit facility being repaid.     
 

                                DIVIDEND POLICY
 
  Since April 30, 1996, the Company has not paid any dividends. Future
dividend policy will depend on the Company's earnings, capital requirements,
financial condition and other factors considered relevant by the Board of
Directors. The Company intends to retain future earnings to finance its
operations and growth and does not anticipate declaring or paying any cash
dividends on its Common Stock in the foreseeable future. See "Risk Factors--
Absence of Dividends" and "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Liquidity and Capital Resources."
 
                                      14

<PAGE>
 

                                CAPITALIZATION
   
  The following table sets forth the cash and cash equivalents, long-term debt
and capitalization of the Company as of October 31, 1998, on (i) an actual
basis and (ii) an as adjusted basis to give effect to the Offering and the
application of the estimated net proceeds therefrom (including approximately
$6.4 million to be received by the Company from the Selling Shareholders). The
capitalization of the Company should be read in conjunction with "Use of
Proceeds," "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and the Company's Consolidated Financial Statements and
Notes thereto included elsewhere in this Prospectus.     
 

<TABLE>   
<CAPTION>
                                                        AS OF OCTOBER 31, 1998
                                                        -----------------------
                                                          ACTUAL    AS ADJUSTED
                                                        (UNAUDITED) (UNAUDITED)
                                                        ----------- -----------
                                                        (DOLLARS IN THOUSANDS)
<S>                                                     <C>         <C>
Cash and cash equivalents..............................  $ 23,277    $127,103
                                                         ========    ========
Current portion of long-term debt......................  $  2,696    $  2,696
Long-term debt, less current portion...................     7,102       7,102
                                                         --------    --------
Mandatorily redeemable common and preferred stock (1)
  Series A preferred stock, no par value; 10,000 shares
   authorized, 8,600 shares issued and outstanding and
   no shares authorized, issued and outstanding on an
   as adjusted basis...................................        63         --
  Series B preferred stock, no par value; 150,000
   shares authorized, 121,000 shares issued and
   outstanding and no shares authorized, issued and
   outstanding on an as adjusted basis.................     1,389         --
  Common stock, no par value; 26,102,000 shares issued
   and outstanding and no shares outstanding on an as
   adjusted basis .....................................    74,563         --
  Notes receivable from shareholders and other unpaid
   shares..............................................   (12,830)        --
                                                         --------    --------
    Total mandatorily redeemable common and preferred
     stock.............................................    63,185         --
                                                         --------    --------
Shareholders' equity
  Preferred stock, no par value; 50,000,000 shares
   authorized, no shares issued and outstanding on an
   as adjusted basis...................................       --          --
  Common stock, no par value; 150,000,000 shares
   authorized, 920,000 shares issued and outstanding
   and 36,942,000 shares issued and outstanding on an
   as adjusted basis (2)...............................       --      201,263
  Additional paid in capital (3).......................       --       46,760
  Retained earnings (deficit) (4)......................     2,656     (74,301)
  Notes receivable from shareholders and other unpaid
   shares..............................................       --       (6,430)
                                                         --------    --------
    Total shareholders' equity.........................     2,656     167,292
                                                         --------    --------
    Total capitalization...............................  $ 75,639    $177,090
                                                         ========    ========
</TABLE>
    
- --------
(1) The common stock and preferred stock of the Company outstanding prior to
    the consummation of the Offering are subject to mandatory repurchase
    agreements which require the classification of such capital stock as
    mandatorily redeemable common and preferred stock.
   
(2) Excludes (i) the redemption of 397,640 shares of Common Stock subsequent
    to October 31, 1998, (ii) the anticipated issuance of 364,300 shares of
    Common Stock to new vice presidents promoted effective December 31, 1998
    and (iii) the anticipated redemption of 1,200,000 shares of Common Stock
    prior to the consummation of the Offering. Also excludes an aggregate of
    7,000,000 shares of Common Stock comprised of (i)       shares issuable
    upon the exercise of stock options that will be granted upon consummation
    of the Offering and (ii)      shares of Common Stock reserved for issuance
    under the Performance Award Plan. See "Management--Benefit Plans--
    Performance Award Plan."     
 
                                      15

<PAGE>
 
   
(3) Reflects the difference between the issuance price of the shares issued by
    the Company in the twelve months preceding the initial filing date of the
    Offering and the fair market value of the shares at the date of grant.
           
(4) Reflects the effect of the non-recurring compensation and benefits expense
    related to (i) the difference between the issuance price of the shares
    issued by the Company in the period beginning twelve months before the
    initial filing date of the Offering and the fair market value of the
    shares at the date of grant, (ii) completion of the redemption by the
    Company of certain shares of its capital stock, including the payment of
    additional redemption amounts to certain shareholders under the terms of a
    1994 stock redemption agreement and (iii) the payment of existing
    obligations to former holders of phantom units and stock appreciation
    rights.     
 
                                      16

<PAGE>
 
                                   DILUTION
   
  As of October 31, 1998, the Company had a net tangible book value of $59.7
million or $2.21 per share of Common Stock based upon 27,022,080 shares of
Common Stock outstanding. Net tangible book value per share is determined by
dividing the net tangible book value of the Company (total tangible assets
less total liabilities, excluding mandatorily redeemable Common Stock and
preferred stock of the Company) as of such date by the number of shares of
Common Stock outstanding as of such date. Without giving effect to any changes
in the net tangible book value other than (i) the receipt and application by
the Company of estimated net proceeds from the sale of the 9,920,000 shares of
Common Stock sold by the Company in the Offering at an assumed initial public
offering price of $14.00 per share (the midpoint of the range set forth on the
cover page of this Prospectus) and (ii) the reduction in shareholders' equity
of $31.6 million resulting from the completion of the redemption by the
Company of certain shares of its capital stock (including Series A Preferred
Stock), redemption of the outstanding shares of Series B Preferred Stock and
payment of existing obligations of the Company to former holders of phantom
units and stock appreciation rights (the "Stock Redemption Transaction"), the
Company's pro forma net tangible book value as of October 31, 1998 would have
been $161.1 million, or $4.36 per share of Common Stock. This represents an
immediate increase in pro forma net tangible book value of $2.15 per share to
the existing shareholders and an immediate dilution of $9.64 per share to new
investors purchasing shares in the Offering. The following table illustrates
this per share dilution to new investors:     
 

<TABLE>   
   <S>                                                            <C>    <C>
   Initial public offering price per share.......................        $14.00
     Net tangible book value per share as of October 31, 1998
      before the Offering........................................ $2.21
     Increase in net tangible book value per share attributable
      to new investors in the Offering...........................  3.01
     Effect of Stock Redemption Transaction...................... (0.86)
                                                                  -----
   Pro forma net tangible book value per share as of October 31,
    1998 after giving effect to the Offering and the Stock
    Redemption Transaction.......................................          4.36
                                                                         ------
   Dilution per share to new investors...........................        $ 9.64
                                                                         ======
</TABLE>
    
   
  The following table sets forth, on a pro forma basis as of October 31, 1998
after giving effect to the Offering and the Stock Redemption Transaction
described above, the number of shares purchased from the Company, the total
consideration paid and the average price per share paid by existing
shareholders and the new investors purchasing shares of Common Stock from the
Company in the Offering.     
 

<TABLE>   
<CAPTION>
                             SHARES OF COMMON
                             STOCK PURCHASED   TOTAL CONSIDERATION   AVERAGE
                            ------------------ --------------------   PRICE
                              NUMBER   PERCENT    AMOUNT    PERCENT PER SHARE
                            ---------- ------- ------------ ------- ---------
   <S>                      <C>        <C>     <C>          <C>     <C>
   Existing
    shareholders(1)........ 27,022,080   73.1% $ 74,563,000   34.9%  $ 2.76
   New investors(1)........  9,920,000   26.9   138,880,000   65.1    14.00
                            ----------  -----  ------------  -----
   Total................... 36,942,080  100.0%  213,443,000  100.0%
                            ==========  =====  ============  =====
</TABLE>
    
   
  The foregoing table excludes share issuances and redemptions subsequent to
October 31, 1998 and an aggregate of 7,000,000 shares of Common Stock
comprised of (i)     shares of Common Stock issuable upon the exercise of
stock options that will be granted upon consummation of the Offering and
(ii)         shares of Common Stock reserved for future issuance under the
Performance Award Plan. See "Management--Benefit Plans--Performance Award
Plan." To the extent these options are exercised, there will be further
dilution to new investors.     
- --------
   
(1) Sales by Selling Shareholders in the Offering will reduce the number of
    shares of Common Stock held by existing shareholders to 23,211,260 shares
    or approximately 65.0% (approximately 61.8% if the over-allotment option
    is exercised in full) and will increase the number of shares held by new
    investors to 12,500,000 shares or approximately 35.0% (14,375,000 shares
    or approximately 38.2% if the over-allotment option is exercised in full)
    of the total number of shares of Common Stock outstanding after the
    Offering. See "Principal and Selling Shareholders."     
 
                                      17

<PAGE>
 
                       SELECTED FINANCIAL AND OTHER DATA
                    (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
   
  The following selected financial data are qualified by reference to, and
should be read in conjunction with, the Company's Consolidated Financial
Statements and Notes thereto and "Management's Discussion and Analysis of
Financial Condition and Results of Operations" appearing elsewhere in this
Prospectus. The selected statement of operations data set forth below for the
Company for the fiscal years ended April 30, 1996, 1997 and 1998 and the
balance sheet data as of April 30, 1997 and 1998 are derived from the Company's
Consolidated Financial Statements and Notes thereto, audited by Arthur Andersen
LLP, appearing elsewhere in this Prospectus. The selected statement of
operations data set forth below for the Company for the fiscal years ended
April 30, 1994 and 1995 and the balance sheet data as of April 30, 1994, 1995
and 1996 are derived from consolidated financial statements and notes thereto,
audited by Arthur Andersen LLP, which are not included in this Prospectus. The
pro forma statement of operations data for the fiscal year ended April 30, 1998
and the six months ended October 31, 1998, together with the selected statement
of operations data set forth below for the six months ended October 31, 1997
and 1998 and the balance sheet data at October 31, 1998, are unaudited.     
 
 

<TABLE>   
<CAPTION>
                                                                                             SIX MONTHS ENDED
                                       FISCAL YEAR ENDED APRIL 30,                              OCTOBER 31,
                         --------------------------------------------------------   -------------------------------------
                                                                       PRO FORMA                               PRO FORMA
                           1994     1995     1996     1997     1998     1998(1)        1997        1998         1998(1)
                         -------- -------- -------- -------- -------- -----------   ----------- -----------   -----------
                                                                      (UNAUDITED)   (UNAUDITED) (UNAUDITED)   (UNAUDITED)
<S>                      <C>      <C>      <C>      <C>      <C>      <C>           <C>         <C>           <C>
STATEMENT OF OPERATIONS
 DATA:
Total revenues.........  $143,608 $187,888 $230,217 $272,561 $315,025  $315,025      $147,135    $183,762      $183,762
 Less reimbursed
  candidate expenses...     4,440    6,627    8,731   12,137   14,470    14,470         6,804       8,073         8,073
                         -------- -------- -------- -------- --------  --------      --------    --------      --------
Net revenues...........   139,168  181,261  221,486  260,424  300,555   300,555       140,331     175,689       175,689
Compensation and
 benefits..............    86,745  116,363  140,721  166,854  197,790   177,590        96,135     116,380       105,803
General and
 administrative
 expenses..............    39,362   48,630   64,419   73,005   84,575    84,575        35,872      51,961        51,961
                         -------- -------- -------- -------- --------  --------      --------    --------      --------
Operating profit.......    13,061   16,268   16,346   20,565   18,190    38,390         8,324       7,348(2)     17,925(2)
Interest expense.......     1,991    2,323    3,683    3,320    4,234     4,234         1,740       2,582         2,582
                         -------- -------- -------- -------- --------  --------      --------    --------      --------
Income before provision
 for income taxes and
 non-controlling
 shareholders'
 interests.............    11,070   13,945   12,663   17,245   13,956    34,156         6,584       4,766        15,343
Provision for income
 taxes.................     4,224    5,322    3,288    6,658    6,687    16,363         3,131       2,069         6,662
Non-controlling
 shareholders'
 interests(3)..........     1,788    2,139    1,579    1,588    2,025     2,025         1,015       1,324         1,324
                         -------- -------- -------- -------- --------  --------      --------    --------      --------
Net income.............  $  5,058 $  6,484 $  7,796 $  8,999 $  5,244  $ 15,768(4)   $  2,438    $  1,373      $  7,357(4)
                         ======== ======== ======== ======== ========  ========      ========    ========      ========
Net income per share
 Basic.................  $   0.24 $   0.30 $   0.38 $   0.42 $   0.24  $   0.72      $   0.11    $   0.05      $   0.28
 Diluted...............      0.21     0.27     0.36     0.40     0.23      0.66          0.11        0.05          0.27(5)
Weighted average common
 shares outstanding
 Basic.................    21,139   21,874   20,390   21,382   21,885    21,885        21,403      26,007        26,007
 Diluted...............    26,255   25,607   23,019   23,481   23,839    23,839        23,280      27,242        27,242(5)
<CAPTION>
                                          APRIL 30,
                         --------------------------------------------                           OCTOBER 31,
                           1994     1995     1996     1997     1998                                1998
                         -------- -------- -------- -------- --------                           -----------
                                                                                                (UNAUDITED)
<S>                      <C>      <C>      <C>      <C>      <C>      <C>           <C>         <C>           <C>
BALANCE SHEET DATA:
Cash and cash
 equivalents...........  $ 16,737 $ 28,244 $ 26,640 $ 25,298 $ 32,358                            $ 23,277
Working capital........    18,288   22,735   22,006   20,051   26,573                              24,557
Total assets...........    85,606  110,003  126,341  148,405  176,371                             187,439
Total long-term debt...     3,687    6,004    3,922    3,206    6,151                               7,102
Total mandatorily
 redeemable stock and
 shareholders' equity..    29,375   34,149   43,075   50,812   58,754                              65,841
</TABLE>
    
 
                                       18

<PAGE>
 
- --------
   
(1) The unaudited pro forma statement of operations data for the fiscal year
    ended April 30, 1998 and the six months ended October 31, 1998 has been
    computed by eliminating from compensation and benefits that portion of
    consultant compensation that exceeds the amount which would have been paid
    had the Company's revised compensation program, which will be effective as
    of May 1, 1998 upon consummation of the Offering, been in effect for all
    of these periods. A pro forma adjustment also was made to reflect the
    increased income tax liability resulting from the corresponding increase
    in income before provision for income taxes, using the Company's effective
    tax rate of 48% in fiscal 1998 and 43% in the six months ended October 31,
    1998. Under the revised compensation program, consultants and others will
    receive options to purchase shares of Common Stock at the market value at
    the time of grant. Such options will vest in equal installments over five
    years. See "Management's Discussion and Analysis of Financial Condition
    and Results of Operations--Overview."     
   
(2) For the six months ended October 31, 1998, operating profit excluding
    Futurestep on an actual and pro forma basis was $14,410 and $24,987,
    respectively.     
   
(3) Represents the non-controlling majority shareholders' interests in the
    Company's Mexican subsidiaries.     
   
(4) Upon consummation of the Offering, the Company expects to incur non-
    recurring compensation and benefits expenses of (i) approximately $46.8
    million from the difference between the issuance price of the shares
    issued by the Company in the period beginning twelve months before the
    initial filing date of the Offering and the fair market value of the
    shares at the date of grant, (ii) approximately $27.1 million from the
    completion of the redemption by the Company of certain shares of its
    capital stock, including the payment of additional redemption amounts to
    certain shareholders under the terms of a 1994 stock redemption agreement
    and (iii) approximately $4.5 million from the payment of existing
    obligations to former holders of phantom units and stock appreciation
    rights. These non-recurring compensation and benefits expenses are not
    reflected in the pro forma fiscal year 1998 or the pro forma six months
    ended October 31, 1998 statements of operations data and will be reflected
    in the Company's financial statements for the quarter in which the
    Offering is consummated. See "Certain Transactions--Additional Redemption
    Amounts" and Notes 5, 6 and 14 of notes to Consolidated Financial
    Statements.     
   
(5) The number of options to be granted pursuant to the Company's revised
    compensation program has not yet been determined and therefore these
    options have not been included in calculating diluted net income per
    share.     
 
                                      19

<PAGE>
 

        MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
                             RESULTS OF OPERATIONS
 
  The Company's objective is to maximize shareholder value by executing a
strategy that focuses on expanding its leadership position as a preferred
global executive search firm by offering a broad range of solutions to address
its clients' management recruitment needs. The following presentation of
management's discussion and analysis of the Company's financial condition and
results of operations should be read in conjunction with the Company's
Consolidated Financial Statements and the Notes thereto and other financial
information included herein.
 
OVERVIEW
 
  Korn/Ferry International is the world's largest executive search firm with
71 offices across 41 countries. In fiscal 1998, the Company had $315.0 million
in total revenues and performed approximately 5,870 assignments for more than
3,750 clients. The Company derives substantially all of its revenues from fees
for professional services, which are billed exclusively on a retained basis.
Fees are typically equal to one third of the first year annual cash
compensation for the positions being filled. The Company recognizes fee
revenues as services are substantially rendered, generally over a three month
period commencing in the month of initial acceptance of the search engagement.
The Company generally bills its clients in three monthly installments over
this period. In addition, clients typically are required to reimburse the
Company for candidate travel and any other out-of pocket expenses incurred in
the search process. Expenses that are billed to clients are included in total
revenues. That portion of the expense attributable to candidate expenses is
included in reimbursable candidate expenses and is deducted from total
revenues to arrive at net revenues.
 
  The Company's total revenues have grown at a compound annual growth rate of
approximately 22% to $315.0 million in fiscal 1998 from $143.6 million in
fiscal 1994. The principal drivers of this growth in total revenues are an
increase in the number of assignments, geographic expansion and selected
acquisitions. The number of searches increased 23% to 5,879 in fiscal 1998
from 4,774 in fiscal 1997, and 16% in fiscal 1997 from 4,113 in fiscal 1996.
The average number of consultants grew 15% to 357 in fiscal 1998 from 311 in
fiscal 1997, and 14% in fiscal 1997 from 274 in fiscal 1996.
 
  Operating profit as a percentage of net revenues declined from 9% in fiscal
1994 to 6% in fiscal 1998. This decline resulted primarily from an increase in
compensation and benefits expense as a percentage of net revenues from 62% in
fiscal 1994 to 66% in fiscal 1998. The largest component of the Company's
expenses consists of compensation and benefits paid to its consultants,
executive officers and administrative and support personnel. The Company
believes it has been able to attract and retain some of the most productive
executive search consultants in the industry as a result of its premium
reputation, history of consultant equity ownership and its performance-based
compensation program. Currently, most of the Company's consultants are paid
annual compensation consisting of a base salary and a cash performance bonus,
which has historically represented a significant portion of total cash
compensation.
   
  Upon the consummation of the Offering, the Company's employee-shareholders
will continue to own approximately 65% of the Company. The employee-
shareholders have agreed to limit their ability to sell more than half of the
Common Stock owned by them immediately prior to the Offering until the fourth
anniversary of the Offering. See "Management--Liquidity Schedule." To align
further the interests of Korn/Ferry's consultants and shareholders, the
Company has revised its compensation programs. The revised compensation
program, which will be effective as of May 1, 1998 upon consummation of the
Offering, will reduce the amount of consultants' annual cash performance bonus
payments and provide for the issuance of stock options pursuant to the
Company's newly adopted Performance Award Plan. Under the revised compensation
program, consultants and others will receive options to purchase shares of
Common Stock at the market value at the time of grant. Such options will vest
in equal installments over five years. See "Management--Benefit Plans--
Performance Award Plan." Had the revised compensation program been in effect
for all of fiscal 1998, compensation and benefits expenses reflected in the
Company's Consolidated Financial Statements would have been reduced by
approximately $20.2 million and operating profit as a percentage of net
revenues would have increased to 13% in fiscal 1998 from 9% in fiscal 1994.
    
                                      20

<PAGE>
 
   
  Upon consummation of the Offering, the Company expects to incur non-
recurring compensation charges of (i) $46.8 million representing the
difference between the book value issuance price of shares issued by the
Company in the period beginning twelve months before the initial filing date
of the Offering and the fair market value of the shares at the date of grant,
(ii) approximately $27.1 million from the completion of the redemption by the
Company of certain shares of its capital stock, including payment of
additional redemption amounts to certain shareholders under the terms of a
1994 stock redemption agreement and (iii) approximately $4.5 million from the
payment of existing obligations to former holders of phantom units and stock
appreciation rights. These charges will be reflected in the Company's
Consolidated Financial Statements in the quarter in which the Offering is
consummated.     
   
  In May 1998, the Company introduced its Internet-based service, Futurestep.
Futurestep's losses approximated $0.8 million for fiscal 1998 and $7.1 million
for the six months ended October 31, 1998 and are primarily related to
marketing and other start-up costs. The Company believes Futurestep will
generate operating losses through at least the end of fiscal 2000. Futurestep
plans to expand in the United States throughout fiscal 1999 and in other
selected markets thereafter.     
 
RESULTS OF OPERATIONS
   
  The following table summarizes the results of the Company's operations for
each of the past three fiscal years and for the first six months of fiscal
1998 and 1999 as a percentage of net revenues.     
 

<TABLE>   
<CAPTION>
                                   FISCAL YEAR ENDED APRIL      SIX MONTHS ENDED
                                             30,                   OCTOBER 31,
                                   --------------------------- ---------------------
                                                                   (UNAUDITED)
                                                     PRO FORMA             PRO FORMA
                                   1996  1997  1998   1998(1)  1997  1998   1998(1)
                                   ----  ----  ----  --------- ----  ----  ---------
<S>                                <C>   <C>   <C>   <C>       <C>   <C>   <C>
Net revenues...................... 100%  100%  100%     100%   100%  100%     100%
Compensation and benefits.........  64    64    66       59     68    66       60
General and administrative
 expenses.........................  29    28    28       28     26    30       30
Operating profit(2)...............   7     8     6       13      6     4       10
Net income........................   4     3     2        5      2     1        4
</TABLE>
    
- --------
   
(1) Assumes the Company's revised compensation program for consultants had
    been in effect for all of fiscal 1998 and the first six months of fiscal
    1999. See "Selected Financial and Other Data."     
   
(2) For the six months ended October 31, 1997 and 1998 operating profit as a
    percentage of net revenues excluding Futurestep on an actual and pro forma
    basis is 8% and 13%, respectively.     
   
  The Company experienced growth in total revenues in all geographic regions
from fiscal 1996 through 1998. For the first six months of fiscal 1999,
revenues increased in all geographic regions except for Asia/Pacific. The
following table summarizes the Company's total revenues by geographic region
for each of the past three fiscal years and the six months ended October 31,
1997 and 1998. The Company includes revenues generated from its Mexican
operations with its operations in Latin America. Futurestep revenues of $0.7
million for the six month period ended October 31, 1998 are included in North
America.     
 

<TABLE>   
<CAPTION>
                               FISCAL YEAR ENDED APRIL 30,            SIX MONTHS ENDED OCTOBER 31,
                         ------------------------------------------  --------------------------------
                             1996          1997           1998            1997             1998
                         ------------  ------------  --------------  ---------------  ---------------
                         DOLLARS   %   DOLLARS   %    DOLLARS   %      DOLLARS    %     DOLLARS    %
                         -------- ---  -------- ---  --------------  ----------- ---  ----------- ---
                                                     (IN THOUSANDS)  (UNAUDITED)      (UNAUDITED)
<S>                      <C>      <C>  <C>      <C>  <C>       <C>   <C>         <C>  <C>         <C>
North America........... $111,513  48% $135,192  50% $ 162,618   52%  $ 72,426    49%  $ 96,982    53%
Europe..................   68,890  30    77,505  28     86,180   27     39,869    27     52,699    29
Asia/Pacific............   29,921  13    34,532  13     34,811   11     19,041    13     16,789     9
Latin America...........   19,893   9    25,332   9     31,416   10     15,799    11     17,292     9
                         -------- ---  -------- ---  --------- ----   --------   ---   --------   ---
  Total revenues........ $230,217 100% $272,561 100% $ 315,025  100%  $147,135   100%  $183,762   100%
                         ======== ===  ======== ===  ========= ====   ========   ===   ========   ===
</TABLE>
    
 
                                      21

<PAGE>
 
   
SIX MONTHS ENDED OCTOBER 31, 1998 COMPARED TO SIX MONTHS ENDED OCTOBER 31,
1997     
 
 Total Revenues
   
  Total revenues increased $36.7 million, or 25%, to $183.8 million for the
six months ended October 31, 1998 from $147.1 million for the six months ended
October 31, 1997. The increase in total revenues was primarily attributable to
a 13% increase in the average number of consultants and an 11% increase in
average revenue per consultant in the current period.     
   
  In North America, total revenues increased $24.6 million, or 34%, to $97.0
million for the six months ended October 31, 1998 from $72.4 million for the
three months ended October 31, 1997. In Europe, total revenues increased $12.8
million, or 32%, to $52.7 million for the six months ended October 31, 1998
from $39.9 million for the comparable period ended October 31, 1997. In Asia-
Pacific, total revenues declined $2.2 million, or 13%, to $16.8 million for
the six months ended October 31, 1998 from $19.0 million for the six months
ended October 31, 1997 and in Latin America, total revenues increased $1.5
million, or 9%, to $17.3 million for the six months ended October 31, 1998
from $15.8 million for the comparable period ended October 31, 1997.     
   
  Total revenue growth in North America, Europe and Latin America was
attributable primarily to a 14%, 12% and 16% increase, respectively, in the
average number of consultants in the respective regions and an increase in the
number of assignments in North America and Europe. The growth in total
revenues also reflects the addition of revenues generated from two offices in
North America and one office in Latin America that were opened in fiscal 1998.
The growth in total revenues in Europe for the six months ended October 31,
1998 reflects the additional revenues generated from two offices that were
opened in fiscal 1998 and the acquisition of subsidiaries in France and
Switzerland in the first quarter of fiscal 1999. The decline in total revenues
for Asia/Pacific for the six months ended October 31, 1998 as compared to the
six months ended October 31, 1997 of $2.2 million was attributable to
continued economic uncertainty in the region offset by a 6% increase in the
average number of consultants for the six months ended October 31, 1998 from
the year earlier period. The Company believes Asia/Pacific total revenues in
fiscal 1999 may continue to decline from fiscal 1998 total revenues but the
impact on total revenues is not expected to be significant.     
   
  Interest income and other income increased $0.8 million to $1.9 million for
the six months ended October 31, 1998 from $1.1 million for the six months
ended October 31, 1997. The increase was due primarily to interest earned on
notes receivable from shareholders.     
 
 Compensation and Benefits
   
  Compensation and benefits increased $20.3 million, or 21%, to $116.4 million
for the six months ended October 31, 1998 from $96.1 million for the six
months ended October 31, 1997. This increase primarily reflects a 13% increase
in the average number of consultants for the six months ended October 31, 1998
over the comparable period in 1997 and Futurestep compensation and benefits
expense of $1.9 million in the six months ended October 31, 1998. Compensation
and benefits as a percentage of net revenues in the six months ended October
31, 1998 decreased to 66% from 68% in the six months ended October 31, 1997
reflecting the larger percentage increase in net revenues in the current six
month period offset by expenses related to Futurestep and the French and Swiss
acquisitions. See Note 15 to the Company's Consolidated Financial Statements.
Had the Company's revised compensation program been in effect from May 1,
1998, compensation and benefit expenses for the six months ended October 31,
1998 would have been reduced by $10.6 million.     
 
 General and Administrative Expenses
   
  General and administrative expenses consist of occupancy expense associated
with the Company's leased premises, investments in information and technology
infrastructure, marketing and other general office expenses. General and
administrative expenses increased $16.1 million, or 45%, to $52.0 million in
the six months ended October 31, 1998 from $35.9 million for the six months
ended October 31, 1997. This increase primarily related to an increase from
the year earlier period in occupancy and office expenses, including
depreciation and leasehold     
 
                                      22

<PAGE>
 
   
amortization expense, attributable to the operation of five offices that were
opened in fiscal 1998 and the recognition of $5.0 million of Futurestep
expenses primarily related to business development. As a percentage of net
revenues, general and administrative expenses, excluding Futurestep related
expenses remained relatively flat at 26% for the six months ended October 31,
1998 and the comparable period in 1997.     
 
 Operating Profit
   
  Operating profit includes interest income, other income and the Futurestep
loss for the six months ended October 31, 1998. The Futurestep loss of $7.1
million is included in the North American region. Operating profit decreased
$1.0 million from $8.3 million for the six months ended October 31, 1997 to
$7.3 million for the six months ended October 31, 1998. Operating profit as a
percentage of net revenues decreased to 4% for the six months ended October
31, 1998 from 6% for the comparable period ended October 31, 1997, reflecting
a 4% decrease related to Futurestep expenses for the six months ended October
31, 1998 offset by the 3% decrease in compensation and benefits as a
percentage of net revenues. Had the Company's revised compensation program
been in effect for the six months ended October 31, 1998 operating profit
would have been $17.9 million or 10% of net revenues.     
   
  Operating profit as a percentage of net revenues, excluding Futurestep,
increased across all regions for the six months ended October 31, 1998
compared to the same period of the prior fiscal year. The North American
region, excluding Futurestep, contributed approximately 55% of the Company's
operating profit for six months ended October 31, 1998 compared to 50% in the
same period of the prior fiscal year. The European region contributed
approximately 10% to the Company's operating profit for the six months ended
October 31, 1998 compared to 2% in the same period of the prior fiscal year.
Operating profit contributed by Asia/Pacific declined from 7% to 4% while the
Latin American contribution decreased from 40% to 30% for the six months ended
October 31, 1998 compared to the same period in 1997. The employee
shareholders of certain of the Company's Latin American subsidiaries receive a
portion of their bonus in the form of dividends, which are not included in
determining operating profit for the Latin American region.     
 
 Interest Expense
   
  Interest expense increased $0.9 million to $2.6 million for the six months
ended October 31, 1998 from $1.7 million for the six months ended October 31,
1997. Interest expense for these two periods reflected the Company's increased
borrowings under Company-owned life insurance ("COLI") policies and a higher
average outstanding long-term debt balance.     
 
 Provision for Income Taxes
   
  The provision for income taxes decreased $1.0 million to $2.1 million for
the six months ended October 31, 1998 from $3.1 million for the six months
ended October 31, 1997. The effective tax rate was 43% for the six months
ended October 31, 1998 as compared to 48% for the comparable period in 1997.
The reduction in the effective tax rate resulted primarily from a decrease in
foreign cash remittances which are treated as taxable income in the United
States when received.     
 
 Non-controlling Shareholders Interests
   
  Non-controlling shareholder's interests are comprised of the non-controlling
shareholders' majority interests in the Company's Mexican subsidiaries. Non-
controlling shareholders' interests increased $0.3 million to $1.3 million in
the six months ended October 31, 1998 from $1.0 million for the six months
ended October 31, 1997. This increase is attributable to a 30% increase in net
income generated by the Mexican subsidiaries during this period.     
 
                                      23

<PAGE>
 
FISCAL 1998 COMPARED TO FISCAL 1997
 
 Total Revenues
   
  Total revenues increased $42.4 million, or 16%, to $315.0 million for fiscal
1998 from $272.6 million for fiscal 1997. The increase in total revenues was
primarily the result of a 15% increase in the average number of consultants
and a 23% increase in the number of assignments in fiscal 1998.     
 
  In North America, total revenues increased $27.4 million, or 20%, to $162.6
million for fiscal 1998 from $135.2 million for fiscal 1997. In Europe, total
revenues increased $8.7 million, or 11%, to $86.2 million in fiscal 1998 from
$77.5 million in fiscal 1997. In Asia/Pacific, total revenues remained
relatively flat in fiscal 1998 as compared to fiscal 1997 and in Latin
America, total revenues increased $6.1 million, or 24%, to $31.4 million in
fiscal 1998 from $25.3 million in fiscal 1997.
 
  The average number of consultants grew in each region, reflecting the
addition of two offices in North America, two offices in Europe and one office
in Latin America. In addition, the Company experienced strong growth in the
number of assignments in each region except Asia/Pacific and increased total
revenue per assignment in North America. The relatively constant total
revenues and assignments for Asia/Pacific from fiscal 1997 to fiscal 1998 was
attributable to economic uncertainties in Asia. The Company believes
Asia/Pacific total revenues in fiscal 1999 may decline from fiscal 1998 but
the impact on total revenues is not expected to be significant.
 
  Interest income and other income increased $1.1 million to $4.0 million in
fiscal 1998 from $2.9 million in fiscal 1997. The increase was due primarily
to other search related services.
 
 Compensation and Benefits
 
  Compensation and benefits increased $30.9 million, or 19%, to $197.8 million
in fiscal 1998 from $166.9 million in fiscal 1997. This increase was
attributable to a 15% increase in the average number of consultants to 357 in
fiscal 1998 from 311 in fiscal 1997 and an overall increase in compensation
and benefits as a percentage of net revenues. Compensation and benefits as a
percentage of net revenues in fiscal 1998 was 66% as compared to 64% in fiscal
1997. In addition, the Company has incurred an increase in sign-on bonuses
granted to newly hired consultants in fiscal 1998 prior to their generation of
revenues and guaranteed bonuses. This type of compensation is viewed by the
Company as a necessary investment in attracting and hiring the most productive
consultants in the industry.
 
 General and Administrative Expenses
 
  General and administrative expenses increased $11.6 million, or 16%, to
$84.6 million in fiscal 1998 from $73.0 million in fiscal 1997. This increase
was primarily related to an increase in occupancy and office expenses,
including depreciation and leasehold amortization expense attributable to the
opening of five new offices in fiscal 1998 as well as the full year of
operation of the net four offices opened in fiscal 1997. As a percentage of
net revenues, general and administrative expenses remained constant at 28% for
both fiscal 1998 and fiscal 1997. Technology expenses amounted to $8.4 million
in fiscal 1998 as compared to $7.2 million in fiscal 1997. The Company intends
to continue investing in information systems, other technology infrastructure
and in research activities to support its growth.
 
 Operating Profit
 
  Operating profit decreased $2.4 million to $18.2 million in fiscal 1998 from
$20.6 million in fiscal 1997. As a percentage of net revenues, operating
profit decreased to 6% in fiscal 1998 from 8% in fiscal 1997. This decrease
was attributable to the increase in compensation and benefits in fiscal 1998
from fiscal 1997 as discussed above.
 
  The percentage of the Company's operating profit contributed by the North
American and Asia/Pacific regions decreased to approximately 59% and 4%,
respectively, in fiscal 1998 compared to 67% and 17%,
 
                                      24

<PAGE>
 
respectively in the prior fiscal year. The percentage of the Company's
operating profit contributed by the European region increased to approximately
2% in fiscal 1998 from a negative contribution of 4% in fiscal 1997, and the
percentage of the Company's operating profit contributed by the Latin American
region increased to approximately 35% of the Company's operating profit in
fiscal 1998 from 20% in fiscal 1997.
 
 Interest Expense
 
  Interest expense increased $0.9 million to $4.2 million in fiscal 1998 from
$3.3 million in fiscal 1997. Interest expense for this two year period
reflected the Company's increased borrowings under life insurance policies and
the Company's credit facility.
 
 Provision for Income Taxes
 
  The provision for income taxes in both fiscal 1998 and fiscal 1997 was $6.7
million. The effective tax rate was 48% for fiscal 1998 compared to 39% in
fiscal 1997. The increase was due to the increase in cash remittances from
foreign operations that was treated as taxable income in the United States.
The Company has implemented a global cash management strategy to optimize the
timing and extent of future foreign cash remittances.
 
 Non-controlling Shareholders' Interests
   
  Non-controlling shareholders' interests are comprised of the non-controlling
shareholders' majority interests in the Company's Mexican subsidiaries. Non-
controlling shareholders' interests increased $0.4 million to $2.0 million in
fiscal 1998 from $1.6 million in fiscal 1997. This change was primarily due to
an increase in net income generated by the Mexican subsidiaries of
approximately $1.0 million in fiscal 1998.     
 
FISCAL 1997 COMPARED TO FISCAL 1996
 
 Total Revenues
 
  Total revenues increased $42.3 million, or 18%, to $272.6 million for fiscal
1997 from $230.2 million for fiscal 1996. The increase in total revenues was
primarily the result of a 14% increase in the average number of consultants
and a 16% increase in the number of assignments in fiscal 1997.
 
  North American total revenues increased $23.7 million, or 21%, to $135.2
million for fiscal 1997 from $111.5 million for fiscal 1996. In the European
region, total revenues grew 13% to $77.5 million in fiscal 1997 from $68.9
million in fiscal 1996. Asia/Pacific total revenues increased $4.6 million, or
15%, to $34.5 million in fiscal 1997 from $29.9 million in fiscal 1996. Latin
America total revenues increased $5.4 million, or 27%, to $25.3 million in
fiscal 1997 from $19.9 million in fiscal 1996. The average number of
consultants grew in each region, particularly in Asia/Pacific where the
Company opened five new offices in fiscal 1997. In addition, the Company
experienced strong growth in the number of assignments in each region except
for Europe. Revenue growth in Europe and Latin America was also positively
impacted by increases in total revenues per assignment for fiscal 1997 as
compared to fiscal 1996.
 
  Interest income and other income decreased $1.8 million to $2.9 million in
fiscal 1997 from $4.8 million in fiscal 1996. This decrease was primarily
attributable to additional income associated with the earnings and gain on
sale of an interest in an affiliate in fiscal 1996. See "Certain
Transactions--Strategic Compensation Associates."
 
 Compensation and Benefits
 
  Compensation and benefits increased $26.1 million, or 19%, to $166.9 million
in fiscal 1997 from $140.7 million in fiscal 1996. This increase was primarily
attributable to a 14% increase in the average number
 
                                      25

<PAGE>
 
of consultants of 274 in fiscal 1996 to 311 in fiscal 1997. As a percentage of
net revenues, fiscal 1997 and fiscal 1996 compensation and benefits were
constant at 64%.
 
 General and Administrative Expenses
 
  General and administrative expenses increased $8.6 million, or 13%, to $73.0
million in fiscal 1997 from $64.4 million in fiscal 1996. This increase was
primarily related to an increase in occupancy and office expenses, including
depreciation and leasehold amortization expense, attributable to the opening
of net four new offices in fiscal 1997. As a percentage of net revenues,
general and administrative expenses decreased from 29% in fiscal 1996 to 28%
in fiscal 1997.
 
 Operating Profit
 
  Operating profit increased $4.2 million to $20.6 million in fiscal 1997 from
$16.3 million in fiscal 1996. As a percentage of net revenues, operating
margin increased to 8% in fiscal 1997 from 7% in fiscal 1996. This increase
was primarily attributable to the decrease in general and administrative
expenses as a percent of net revenues in fiscal 1997 as compared to fiscal
1996. Operating profit contributed by North America increased to 67% from 48%
in fiscal 1996 while the contributions of the other regions declined. The
European region experienced the largest decrease from 8% in fiscal 1996 to a
negative contribution of 4% in fiscal 1997. Operating profit contributed by
the Asia/Pacific and Latin American regions during fiscal 1997 declined from
19% to 17% and from 25% to 20%, respectively, compared to the same period of
the prior year.
 
 Interest Expense
 
  Interest expense decreased $0.4 million to $3.3 million in fiscal 1997 from
$3.7 million in fiscal 1996. This decrease was primarily attributable to lower
average outstanding principal amounts on notes payable to shareholders that
more than offset the effect of higher borrowings under COLI policies.
 
 Provision for Income Taxes
 
  The provision for income taxes increased $3.4 million to $6.7 million in
fiscal 1997 from $3.3 million in fiscal 1996. The effective tax rate was 39%
for fiscal 1997 as compared to 26% in fiscal 1996. The lower effective tax
rate in fiscal 1996 was due primarily to an increase in foreign tax credits
that resulted in a reduction in the income tax provision of $1.5 million.
 
 Non-controlling Shareholders' Interests
 
  Non-controlling shareholder interests remained unchanged at $1.6 million in
fiscal 1997 and fiscal 1996.
 
LIQUIDITY AND CAPITAL RESOURCES
   
  The following table presents selected financial information as of the end of
the past three fiscal years and as of October 31, 1998:     
 

<TABLE>   
<CAPTION>
                                                AS OF APRIL 30,
                                            ----------------------- OCTOBER 31,
                                             1996    1997    1998      1998
                                            ------- ------- ------- -----------
                                                (IN THOUSANDS)      (UNAUDITED)
   <S>                                      <C>     <C>     <C>     <C>
   Working capital......................... $22,006 $20,051 $26,573   $24,557
   Line of credit..........................      --   3,000      --        --
   Total long-term debt, net of current
    maturities.............................   3,922   3,206   6,151     7,102
   Borrowings under life insurance
    policies...............................  30,305  32,278  37,638    39,837
</TABLE>
    
 
  The Company finances operating expenditures primarily through cash flows
from operations and maintains a line of credit to manage timing differences
between cash receipts and disbursements. During fiscal 1996, 1997 and 1998,
cash provided by operating activities was $8.3 million, $10.2 million and
$18.5 million, respectively.
 
                                      26

<PAGE>
 
   
During the six months ended October 31, 1997 and 1998, cash used in operating
activities was $3.1 million and $1.7 million, respectively. The use of cash
for operations in the first six months of fiscal 1998 and 1999 is due
primarily to payment of bonuses accrued at each prior fiscal year end. As of
October 31, 1998, the Company maintained a line of credit in the approximate
amount of $11 million. The Company is currently in the process of re-
evaluating its credit requirements, and banking arrangements. The Company had
no outstanding borrowings under the bank line of credit as of October 31,
1998.     
   
  Capital expenditures totaled approximately $8.1 million, $8.5 million, $9.9
million for fiscal 1996, 1997 and 1998, respectively, and $5.4 million and
$4.9 million for the six months ended October 31, 1997 and 1998, respectively.
These expenditures consisted primarily of upgrades to information systems,
purchases of office equipment and leasehold improvements. The Company expects
to maintain capital expenditures in fiscal 1999 at the fiscal 1998 level to
support office expansion and technology investments. In addition, the Company
plans to install a new financial system in fiscal 1999 with an expected
installation cost of approximately $10 million over the next two fiscal years.
       
  Included in cash flows from investing activities are premiums paid on COLI
contracts. The Company purchases COLI contracts to provide a funding vehicle
for anticipated payments due under its deferred executive compensation
programs. Premiums on these COLI contracts were $8.6 million, $7.9 million,
$12.4 million in fiscal 1996, 1997 and 1998, respectively, and $3.5 million
and $3.8 million for the six months ended October 31, 1997 and 1998,
respectively. Generally, the Company borrows against the cash surrender value
of the COLI contracts to fund the COLI premium payments. In fiscal 1996, the
Company invested $5.3 million of cash proceeds from borrowings against COLI
contracts in excess of premium payments in guaranteed investment contracts. In
fiscal 1997 and 1998, net redemptions of guaranteed investment contracts were
$1.8 million and $1.9 million respectively and there were no net redemptions
in the six months ended October 31, 1997 and 1998.     
 
  On May 1, 1998, the Company acquired the assets and liabilities of Didier
Vuchot & Associates in France for approximately $6 million in cash, notes and
mandatorily redeemable stock of a subsidiary of the Company. On June 1, 1998,
the Company acquired all of the outstanding shares of two firms in Switzerland
in a combined transaction for $3.6 million payable in cash, notes and
mandatorily redeemable common stock of the Company. The acquisitions resulted
in a net cash outflow of $1.3 million, comprised of a $2.5 million cash
payment offset by $1.2 million of cash acquired.
   
  Cash provided by financing activities was approximately $7.7 million, and
$2.9 million during the six months October 31, 1997 and 1998, which included
repayments and borrowings under COLI contracts of $0.1 million and $2.2
million in the six months ended October 31, 1997 and 1998, respectively, and
proceeds from sales of common stock of the Company to newly hired and promoted
consultants and payments on the related promissory notes of $2.6 million and
$3.7 million, respectively. Additionally, the Company paid $1.9 million and
$2.2 million to repurchase common stock of the Company in the six months ended
October 31, 1997 and 1998, respectively.     
   
  During fiscal 1998, cash provided by financing activities was approximately
$9.2 million, which included borrowings under COLI contracts of $5.4 million,
proceeds from sales of Common Stock to newly hired and promoted consultants
and payments on the related promissory notes of $6.6 million. Additionally, in
fiscal 1998 the Company paid $2.8 million to repurchase Common Stock. During
fiscal 1997, cash provided by financing activities was approximately $4.4
million, consisting primarily of proceeds from sales of Common Stock to newly
hired and promoted consultants and payments on the related promissory notes of
$5.6 million, repurchases of Common Stock and payments on the related notes
payable of $3.7 million and borrowings against COLI contracts of $2.0 million.
During fiscal 1996, cash of $13.6 million was provided by financing activities
consisting principally of proceeds from borrowings under COLI contracts of
$12.9 million. In fiscal 1996, issuances and purchases of Common Stock and
payments on the related notes receivable and notes payable were $5.7 million
and $2.5 million, respectively.     
   
  Total outstanding borrowings under life insurance policies were
$30.3 million, $32.3 million, $37.6 million and $39.8 million as of April 30,
1996, 1997, 1998 and October 31, 1998, respectively. Such borrowings are     
 
                                      27

<PAGE>
 
secured by the cash surrender value of the life insurance policies, do not
require principal payments and bear interest at various variable rates.
   
IMPACT OF YEAR 2000     
   
  The Year 2000 issue is the result of computer programs being written to use
two digits to define year dates. Computer programs running date-sensitive
software may recognize a date using "00" as the year 1900 rather than the year
2000. This defect could result in systems failure or miscalculations causing
disruptions of operations. The Company utilizes information technology to
facilitate (i) its internal search processes and inter-office communications,
(ii) communications with candidates and clients and (iii) its financial
management systems and other support systems.     
   
  In fiscal 1998, the Company commenced an inventory and Year 2000 assessment
of its principal computer systems, network elements, software applications and
other business systems. The Company intends to correct any Year 2000 issues
and to ensure compliance from its third party vendors. The Company has
determined that an information system used in its London office is not Year
2000 compliant, and the Company will replace the non-compliant system with a
Year 2000 compliant system in calendar year 1999.     
   
  The Company's primary business does not depend on material relationships
with third party vendors but utilizes third party vendors for a number of
functions, including its automated payroll functions, insurance and investment
of pension funds. The Company is initiating formal communications with third
party providers to determine the extent to which these third parties are
moving toward Year 2000 compliance. The Company also utilizes third party on-
line information services and the Internet to communicate and to retrieve
information about potential candidates and clients. Failure of these third
parties to have their systems Year 2000 compliant may have a material adverse
effect on the Company's operations.     
   
  The following scenarios with respect to the Company's systems could occur:
(i) its software may not be Year 2000 compliant, (ii) integration of upgrades
may not be complete by the year 2000 and (iii) replacement of its non-
compliant systems may be complete by the year 2000 but not fully tested or
monitored prior to the year 2000 such that testing and monitoring will uncover
problems that the Company cannot remedy in a timely manner.     
   
  Failure of search-related systems to be Year 2000 compliant might force the
Company to use different Year 2000 compliant systems to conduct searches and
might decrease productivity. Any failure of the Company's financial systems to
be Year 2000 compliant could hinder timely reporting of financial data and
processing of financial information as these functions would have to be
performed manually using non-networked computers. If any non-information
technology systems is not Year 2000 compliant, the Company will need to repair
or replace such systems. The Company believes that failure to be Year 2000
compliant will not have a significant impact on its human resource systems.
The Company's interruption or loss of information processing capabilities due
to Year 2000 issues could have a material adverse effect on the Company's
business, results of operations and financial conditions.     
   
  The Company expects to incur $500,000 in fiscal 1999 to resolve Year 2000
issues of which $30,000 was spent as of October 31, 1998. The Company has not
yet estimated all costs relating to the Year 2000 issues. The expenses to be
incurred on the Year 2000 issues are being funded through operating cash
flows. The costs relating to the Year 2000 issues and the date on which the
Company believes it will complete the Year 2000 modifications are based on
management's best estimates, which were derived utilizing numerous assumptions
of future events, including the continued availability of certain resources,
third-party modification plans and other factors. Actual results could differ
materially from those anticipated.     
   
RECENT EVENTS     
   
  The Company is currently evaluating its worldwide operations. The results of
this analysis could result in a one time charge to earnings of approximately
$6 million to $9 million in the third quarter of fiscal 1999     
 
                                      28

<PAGE>
 
   
comprised primarily of costs related to office closures and staff downsizing.
As a result of the resignation of Michael D. Boxberger, the Company's former
president and chief executive officer, in December 1998 the Company intends to
recognize a charge to earnings over the next twelve months of approximately
$1.3 million for compensation paid in accordance with a general release and
settlement agreement between the Company and Mr. Boxberger (the "Settlement
Agreement"). Upon consummation of this Offering, the Company will also
recognize a non-cash charge to earnings of approximately $1.4 million
representing the difference between the then current book value and appraised
fair market value of 165,168 common shares he retained subsequent to his
resignation. See "Management--Executive Compensation--Resignation of
Michael D. Boxberger." The effect on future earnings of modifications, if any,
to the existing stock repurchase agreements under the Company's equity
participation programs has not yet been determined. However, the effect of any
modifications to such agreement would be a non-cash charge.     
 
QUARTERLY RESULTS
 
  The following table sets forth certain unaudited statement of operations
data for the quarters in fiscal 1997, 1998 and 1999. The unaudited quarterly
information has been prepared on the same basis as the annual financial
statements and, in management's opinion, includes all adjustments necessary to
present fairly the information for the quarters presented. Results for any
previous fiscal quarter are not necessarily indicative of results for the full
fiscal year or for any future fiscal quarter.
 

<TABLE>   
<CAPTION>
                                                 FISCAL QUARTERS ENDED,
                                      1997                            1998                    1999
                         ------------------------------- ------------------------------- ------------------
                         JULY 31 OCT. 31 JAN. 31 APR. 30 JULY 31 OCT. 31 JAN. 31 APR. 30 JULY 31    OCT. 31
                         ------- ------- ------- ------- ------- ------- ------- ------- -------    -------
                                                 (IN THOUSANDS)
<S>                      <C>     <C>     <C>     <C>     <C>     <C>     <C>     <C>     <C>        <C>
Total revenues.......... $57,407 $68,331 $71,902 $74,921 $70,273 $76,862 $82,623 $85,267 $88,995    $94,767
Net income..............   1,495   2,343   2,354   2,807   1,112   1,326   1,587   1,219   1,519(1) $  (146)(1)
</TABLE>
    
- --------
   
(1) Net income excluding Futurestep for the fiscal quarters ended July 31,
    1998 and October 31, 1998 is $2,934 and $2,464, respectively.     
 
RECENTLY ISSUED ACCOUNTING STANDARDS
 
  During 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 131, "Disclosures
about Segments of an Enterprise and Related Information," which requires
companies to report financial and descriptive information about its reportable
operating segments in the interim and annual financial statements. It is
effective for annual periods beginning after December 15, 1997 and will be
adopted by the Company in fiscal 1999. It is not expected that the adoption of
this standard will have any impact on the consolidated financial statements
but may require additional footnote disclosure.
 
  During 1998, the FASB issued SFAS No. 132, "Employers' Disclosures about
Pensions and Other Postretirement Benefits an amendment to FASB Statements No.
87, 88 and 106," which revises employers' disclosure requirements for pension
and other postretirement plans. It does not change the measurement or
recognition of costs and benefits provided by those plans. The standard is
effective for fiscal years beginning after December 15, 1997, although earlier
application is encouraged. Disclosures for earlier periods have been restated
for comparative purposes. Adoption of this pronouncement is reflected in the
accompanying consolidated financial statements (See Note 8).
 
  During 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities," which establishes new standards for
reporting derivative and hedging information. The standard is effective for
periods beginning after June 15, 1999 and will be adopted by the Company as of
May 1, 2000. It is not expected that the adoption of this standard will have
any impact on the consolidated financial statements nor require additional
footnote disclosure since the Company does not currently utilize derivative
instruments or participate in structured hedging activities.
 
                                      29

<PAGE>
 

 
                                  BUSINESS
 
GENERAL
 
  Korn/Ferry International is the world's largest executive search firm and
has the broadest global presence in the industry with 384 consultants based in
71 offices across 41 countries. The Company's premier global reputation,
strong client relationships, senior-level search expertise, innovation and
technological leadership provide Korn/Ferry with distinct competitive
advantages. According to Kennedy Information, the Company has ranked first in
revenues in the executive search industry for the last 19 years. Since fiscal
1993, the Company has generated compound annual revenue growth of 23%. In
fiscal 1998, the Company had total revenues of $315.0 million and performed
over 5,870 assignments for more than 3,750 clients, including approximately
43% of the Fortune 500. Korn/Ferry's clients are many of the world's largest
and most prestigious public and private companies, middle-market and emerging
growth companies as well as governmental and not-for-profit organizations. The
Company's clients include Atlantic Richfield Company, Chase Manhattan
Corporation, Cemex, S.A., Diageo plc, Ford Motor Company, General Electric
Company, Lucent Technologies Incorporated, Monsanto Company and United
Technologies Corporation. Almost half of the searches performed by the Company
in fiscal 1998 were for board level, chief executive and other senior
executive officer positions. The Company has established strong client
loyalty; more than 80% of the search assignments it performed in fiscal 1998
were on behalf of clients for whom it had conducted multiple assignments over
the last three fiscal years.
   
  The Company believes it is an innovator in the executive search industry and
forward-thinking in addressing the fundamental transformation of the
marketplace caused by the combined impact of advanced technology and the
Internet. In anticipation of these changing industry dynamics, and in response
to clients' demand for middle-management recruitment services, the Company
recently established Futurestep, its Internet-based search service. Futurestep
combines Korn/Ferry's search expertise with exclusive candidate assessment
tools and the reach of the Internet to accelerate the recruitment of
candidates for middle-management positions. Following Futurestep's
introduction in southern California and selected North American markets
beginning in May 1998, approximately 110,900 candidates worldwide have
completed a detailed on-line profile with Futurestep and approximately 183,300
candidates have completed an initial registration. The Company and Futurestep
have an exclusive alliance with The Wall Street Journal, the first of its kind
in the industry. This alliance provides preferred print and on-line access to
The Wall Street Journal's readers, advertisers and on-line users. The Company
believes its investments in technology-based recruitment will enable it to
expand its share of the middle-management recruitment market and to strengthen
its leading industry position as new methodologies begin to be utilized in
senior-level search.     
 
  Korn/Ferry is also an established and respected source of management
research. For example, the Company's Annual Board of Directors Survey of the
Fortune 1000, now in its 25th year, reports on the structure, policy and
trends in America's corporate boardrooms and is recognized as one of the most
comprehensive, long-term studies of boards available. The Company publishes
similar surveys covering Australasia and Europe.
 
EXECUTIVE SEARCH INDUSTRY
 
 Overview
 
  According to Kennedy Information, worldwide executive search revenue grew at
a 20% compound annual growth rate, from approximately $3.5 billion in 1993 to
$7.3 billion in 1997. The executive search industry is separated into two
distinct markets: retained search firms and contingency search firms.
 
  Retained search firms generally concentrate on searches for positions with
annual compensation of $150,000 or more for large public and private
corporations, government agencies, educational organizations and high growth
start-up companies. Retained search firms also have the capability to provide
their clients with local and international knowledge of the managerial market
within their client's industry, as well as a sophisticated network of relevant
industry contacts. Retained search firms typically charge a fee for their
services equal to approximately one-third of the annual cash compensation for
the position being filled and bill for their services in three installments
irrespective of whether a position has been filled.
 
                                      30

<PAGE>
 
  Contingency search firms generally concentrate on searches for positions
with annual compensation of $150,000 or less. These firms are most commonly
hired to fill middle and lower management positions of small to medium-sized
companies. Unlike retained search firms, contingency search firms are
compensated only when a position is filled. Accordingly, revenues generated by
a contingency search firm typically are more volatile than revenues generated
by a retained search firm. For this reason, contingency search firms often
cannot invest as many resources as retained search firms in a search
assignment. Contingency search firms typically charge a fee for their services
equal to approximately one-third of the annual cash compensation for the
position being filled.
 
  The executive search industry is highly fragmented, consisting of
approximately 4,000 retained and contingency search firms in 1997. According
to Kennedy Information, the ten largest retained search firms accounted for
only 11% of the global search industry in 1997. In 1997, more than 80% of
retained search firms and approximately 90% of contingency search firms
generated less than $2 million each in annual revenues.
 
 Industry Trends
 
  The Company believes that a number of favorable trends will contribute to
the continued growth of the executive search industry, including: (i) the
globalization of business; (ii) the demand for managers with broader skills;
(iii) the increasing outsourcing of recruitment functions; and (iv) the use of
advanced technology to accelerate the identification and assessment of
candidates. The Company believes it is well positioned relative to these key
industry trends.
 
  GLOBALIZATION OF BUSINESS. As the world markets continue to integrate into
one global economy, more companies are required to supplement internal talent
with experienced senior executives who can operate effectively in a global
economy. The rapidly changing and competitive environment increasingly
challenges multinational and local companies to identify qualified executives
with the right combination of skills, experience and cultural compatibility.
This globalization of business, including the expansion in new markets, has
led companies to look beyond their particular region for management talent and
to identify local executives in the regions where they are doing business.
 
  Korn/Ferry's Position. With 71 offices in 41 countries, the Company is well
positioned to benefit from the growing management demands of companies
worldwide. To address its clients' global needs, the Company has opened 14 new
offices in the last three fiscal years, including those in Athens, Austin,
Copenhagen, Istanbul, Lima, Philadelphia, Rio de Janeiro, Seoul, Shanghai,
Tysons Corner (Virginia) and Wellington (New Zealand). By leveraging its
extensive knowledge of the growing pool of local talent in each of the regions
in which it operates, the Company is able to identify and place qualified
candidates capable of effectively adapting to the local culture and
successfully furthering the client's objectives. In addition, with the
geographic expansion of advertised recruitment and Futurestep, the Company is
leveraging its global network and search capabilities to meet the management
recruitment needs of existing and potential clients.
 
  DEMAND FOR MANAGERS WITH BROADER QUALIFICATIONS. The Company's recent global
study, Developing Leadership for the 21st Century, indicates that companies
are seeking broader qualifications for executive positions. In many instances,
these candidates cannot be found within a client's organization despite
training, rotation programs and succession planning. Thus, the Company expects
that the executive search business will continue to grow as companies
increasingly turn to executive search firms to identify qualified executives.
 
  Korn/Ferry's Position. To address client demand for managers with broader
qualifications, the Company employs an integrated team approach to complete
its searches. For each assignment, the Company is able to draw on its
consultants' expertise in specific regions, industries and functions. The
Company's specialty practice groups include advanced technology, consumer,
energy, entertainment, fashion/retail, financial services, healthcare,
industrial, not-for-profit/associations/education and professional services.
Certain consultants also have in-depth expertise in searches for functional
positions, such as members of boards of directors, chief executive officers,
chief financial officers and chief information officers.
 
                                      31

<PAGE>
 
  INCREASING OUTSOURCING OF RECRUITMENT FUNCTIONS. Recent economic factors are
requiring companies to focus on core competencies and to outsource recruitment
functions to providers, such as Korn/Ferry, who can efficiently provide high
quality recruitment services. Moreover, the trend towards globalization and
the current shortage of qualified management-level candidates have made
identifying and recruiting exceptional candidates more difficult. Companies
are increasingly relying on experienced global executive search firms to
address their management recruitment needs. By hiring executive search firms,
companies can expect to: (i) access a diverse and highly qualified field of
candidates on an as-needed basis; (ii) reduce the costs required to maintain
and train a recruiting department in a rapidly changing industry; (iii)
benefit from the most updated information on the industry and specific
geographic markets; (iv) access leading search technology and software; and
(v) maintain management focus on strategic business issues.
 
  Korn/Ferry's Position. The Company believes that its premier reputation,
leading global presence, strong client relationships, extensive senior-level
search expertise, innovation and technological leadership position the Company
well to benefit from the growth in outsourcing of recruitment functions. In
addition, by providing senior-level to middle-management search services, the
Company seeks to become a preferred provider of recruitment services for its
clients across all levels of management. This goal is consistent with many
clients' desire to reduce the number of vendors they have and to deepen
relations with their preferred vendors. In order to serve its clients' global
management search needs, the Company maintains one of the largest, most
diverse and technologically innovative global databases of highly qualified
candidates and provides geographic, industry and functional expertise.
 
  USE OF ADVANCED TECHNOLOGY. Technology is having an increasing impact on the
search industry. Global systems and the ability to create comprehensive
worldwide databases are fundamentally changing the search process and moving
the emphasis of the search business from candidate identification to candidate
assessment and placement. In addition, the Internet is creating efficient ways
to identify and recruit from the broad middle-management market, with Internet
technology expected to have applicability to senior-level searches in the near
future. At the same time, new barriers to entry into the executive search
industry are being created as these investments in information technology
become critical to serve clients' needs globally.
 
  Korn/Ferry's Position. Korn/Ferry has developed a state-of-the-art
technology infrastructure, including a worldwide networked system and its
proprietary software, Searcher, to increase the speed and quality of its
service to its clients around the world. The Company's worldwide databases
contain the profiles of over 1,000,000 executives and over 310,000 companies,
allowing consultants to access a wide range of potential candidates globally.
To capture the potential of the Internet, Korn/Ferry introduced Futurestep,
which combines the reach of the Internet with the Company's search expertise
and exclusive candidate assessment tools to evaluate and recruit executives
for middle-management positions. Through Futurestep, the Company seeks to pre-
build and update a large candidate inventory and thereby reduce the time
required to perform a search. In addition, Futurestep's assessment tools can
quickly and accurately evaluate a candidate's credentials and likelihood of
integrating into a client's culture. The Company believes that many of
Futurestep's assessment tools and Internet applications will have
applicability to its senior-level search services.
 
GROWTH STRATEGY
 
  Korn/Ferry's objective is to expand its leadership position as a preferred
global executive search firm by offering a broad range of solutions to address
its clients' management recruitment needs. The principal elements of the
Company's strategy include: (i) leverage leadership in senior-level search;
(ii) expand into the middle-management market; (iii) pursue strategic
acquisitions; (iv) reinforce technological leadership; and (v) add new
complementary services.
 
 Leverage Leadership in Senior-Level Search
 
  The Company's leadership in senior-level search enables it to grow its
business by increasing the number of search assignments it handles for
existing clients. The Company also believes that there are significant
opportunities to develop new clients by aggressively marketing its proven
global search expertise. The Company
 
                                      32

<PAGE>
 
has adopted a structured approach to develop and build relationships with new
and existing clients. Through its ten specialty practice groups and broad
global presence, the Company maintains an in-depth understanding of the market
conditions and strategic and management issues facing clients. Annually, the
Company's regions, offices, individual consultants and specialty practice
groups identify existing and prospective clients with substantial recurring
needs for executive search services. The Company assembles teams of search
consultants based on geographic, industry and functional expertise to focus on
these accounts. The Company has also developed a number of major relationships
with prestigious multinational companies and, in fiscal 1998, completed an
average of 34 search assignments each for 20 major long-standing accounts.
 
 Expand into the Middle-Management Market
 
  In response to the growing client demand for middle-management recruitment,
the Company is expanding its services to address this market. With its strong
senior-level client relationships, advertised recruitment services and
Futurestep, Korn/Ferry is well positioned to meet its clients' middle-
management recruitment needs effectively and efficiently. By moving
aggressively into this segment of the market, the Company believes it can
strengthen its relationships with its existing clients, develop new clients
and gain a competitive advantage in marketing complementary services.
 
 Pursue Strategic Acquisitions
 
  The Company will continue to make selected acquisitions that support its
growth strategy, enhance its presence in key markets or otherwise complement
its competitive strengths. According to Kennedy Information, the executive
search industry is highly fragmented and consists of approximately 4,000
firms, the ten largest of which accounted for only 11% of the global executive
search industry revenues in 1997. As the largest global executive search firm,
the Company believes it has the resources to lead consolidation within the
highly fragmented search industry. Since fiscal 1993, the Company has
completed six acquisitions, including recent acquisitions in France and
Switzerland.
 
 Reinforce Technological Leadership
 
  The Company has invested more than $25 million over the past two fiscal
years in the development of an advanced global technology infrastructure to
increase the speed and quality of service to its clients. The Company's
systems represent a strong competitive advantage, allowing its consultants to
access information and communicate effectively with each other. As the
executive search industry continues to grow and as more clients seek the
assistance of search firms to fill middle-management positions, an advanced
technology infrastructure has become an indispensable element of the search
business.
 
 Add New Complementary Services
 
  The Company seeks to add new complementary services in response to specific
client needs. For example, the Company developed Futurestep and has expanded
its advertised recruitment services to address its clients' growing demand for
effective middle-management recruitment. In addition, the Company is exploring
complementary business opportunities, which could include recruitment
outsourcing and human resources consulting. As attractive business
opportunities are identified, the Company may capitalize on these
opportunities through internal development, joint ventures or selected
acquisitions.
 
SERVICES
 
 Overview
 
  Korn/Ferry provides executive search services exclusively on a retained
basis and addresses the global recruitment needs of its clients at all levels
of management. The Company offers the following three primary services: (i)
senior-level search; (ii) advertised recruitment search; and (iii) Internet-
based search.
 
 
                                      33

<PAGE>
 
 Senior-Level Search Services
 
  The Company's search services are typically used to fill senior-level
positions, such as boards of directors, chief executive officers and other
senior executive officers. Once the Company is retained by a client to conduct
an executive search, the Company assembles a team comprised of consultants
with geographic, industry and functional expertise. Korn/Ferry's search
consultants serve as management advisors and work closely with the client in
identifying, assessing and placing a qualified candidate. In fiscal 1998, the
Company performed over 5,400 senior-level search assignments.
 
  The Company uses a search methodology that has been developed through many
years of experience in senior-level search. The Company emphasizes a close
working relationship with the client and a comprehensive understanding of the
client's business issues, strategy and culture, as well as an in-depth
knowledge of the skills necessary to succeed within a client's organization.
Initially, the search team consults with the client to better understand its
history, culture, structure, expectations, challenges, future directions and
operations. In these meetings, the team identifies the specific needs of the
client and develops a profile of an ideal candidate for the position. Early in
the process, the team also works with the client to develop the general
parameters of a compensation package that will attract high quality
candidates.
 
  Once the position is defined, the research team identifies, through the use
of the Company's proprietary databases and a number of key technology-based
information sources, companies that are in related industries facing similar
challenges and issues and that possess operating characteristics similar to
those of the client. In addition, the team consults with its established
network of sources to help identify individuals with the right backgrounds and
personal abilities. These sources are a critical element in assessing the
marketplace. The original list of candidates is carefully screened through
phone interviews, video conferences or in-person meetings with the candidates.
The client is then presented with four to five qualified candidates to
interview. The Company, sometimes with the assistance of an independent third
party, conducts reference checks throughout the process.
 
  Usually, the finalists meet with the client for a second and possibly a
third round of discussions. At this point, the compensation package for each
will have been discussed in detail so that there is confidence that offers
will be accepted. Generally, the search consultants will participate in the
negotiations until a final offer is made and accepted. Throughout the process,
ongoing communication with the client is critical to keep client management
apprised of progress.
 
  Every search that the Company performs is backed by a one-year guarantee. If
the executive who has been recruited does not perform satisfactorily and
ceases to be employed by the client within one year, the Company will repeat
the search for no additional fee.
 
 Advertised Recruitment Search Services
 
  The Company's advertised recruitment search service uses print advertising
in targeted publications to attract the most qualified candidates for
management positions at all levels. Advertised recruitment search is
appropriate when clients seek numerous qualified candidates from a broad
universe of industries. The Company introduced its advertised recruitment
search service in 1991, and currently offers it in 16 offices in Europe,
Asia/Pacific and Latin America. In fiscal 1998, advertised recruitment was
used for approximately 455 search assignments. The Company believes there are
opportunities to expand the use of advertised recruitment in the U.S. and
launched the service there in August 1998.
 
  At the beginning of each advertised recruitment search engagement, teams
comprised of consultants with specialized expertise in the appropriate
industry and function gather information on the client's business, culture and
the open position. The team creates the advertising campaign and advises the
client on the most appropriate media for the campaign. Once the advertisement
is finalized and published, the team reviews and screens all resumes received
by the client and interviews qualified candidates. Based on these interviews
and feedback from both the client and the candidates, the team produces a
short list of top candidates for the client and prepares and
 
                                      34

<PAGE>
 
assembles detailed profiles and evaluation reports on each candidate.
Consultants will advise and consult with clients throughout the negotiation
process and provide input on competitive salary packages. Finally, the
consultants will conduct final reference checks and follow up with both the
client and the candidate to ensure a smooth transition of the hired candidate
into the client's organization.
 
 Internet-Based Search Services
 
  Futurestep, operated through a subsidiary of the Company, combines the
Company's extensive senior-level search expertise with exclusive candidate
assessment tools and the reach of the Internet to recruit candidates for
middle-management positions. Futurestep is fundamentally different from other
Internet-based job placement services, which do not employ Futurestep's
sophisticated filtering process or permit search professionals to interact
with candidates and clients. One of the Company's passive minority investors
in Futurestep is bill gross' idealab!, which has purchased approximately 9% of
the outstanding capital stock of Futurestep.
 
  Futurestep recognizes that loss in productivity as a result of middle-
management vacancies is significant. By pre-building an inventory of qualified
candidates prior to receiving a client assignment and by keeping that
inventory current, Futurestep can quickly generate a select list of
candidates, which should significantly reduce search cycle time.
 
  To register with Futurestep, candidates complete an on-line assessment
profile that details their work history, management experience, preferred
career path and management style. The assessment tools, which Futurestep has
licensed on an exclusive basis for executive search, have been validated by a
cross-section of senior managers over ten years and give reliable feedback on
decision-making style, communication style, cultural preferences and career
and personal motivation. Futurestep clients complete a similar profile to
determine company culture and the type of manager who will succeed in the open
position. The Company believes that cultural compatibility is critical to the
successful placement of a candidate and that these proprietary tools may have
applicability to other areas of executive search. To encourage candidates to
register with Futurestep, Futurestep provides career management feedback on a
candidate's salary potential, leadership skills, the industries and functions
for which the candidate is most qualified and the most compatible corporate
culture.
 
  When Futurestep receives a search assignment from a client, a preliminary
list of candidates is selected from the Futurestep database and the most
qualified are called by a Futurestep search consultant for further evaluation.
The consultant schedules a 45-minute to one-hour video interview with selected
candidates. The consultant then identifies the top candidates and provides the
client with excerpts of the video-taped interviews and other background
information for comparison. The Futurestep consultant typically organizes the
client/candidate interviews, and advises and consults throughout the
negotiation process to structure the final offer package and position
responsibilities.
 
  Confidentiality for both candidates and clients is paramount. When
candidates register with Futurestep, they do not know who the Futurestep
clients are or which positions are available. Companies do not have access to
candidate information until a candidate gives explicit permission to release
the information to the client when contacted by a Futurestep consultant.
 
  The Company and Futurestep have an exclusive alliance with The Wall Street
Journal, the first of its kind in the industry. Companies that advertise
positions through The Wall Street Journal have the option of retaining
Futurestep for services ranging from resume evaluation to complete management
of the recruitment process. Futurestep candidates have access to career-
management advice through direct links with The Wall Street Journal's website,
and candidates applying for positions advertised through The Wall Street
Journal can register with Futurestep via direct links to Futurestep's website.
 
  The alliance, which has an initial term through June 2001 with options for
renewal, provides the Company with preferred advertising rates and requires
the purchase of a minimum amount of print and on-line advertising. For each
company and candidate referred to Futurestep by The Wall Street Journal,
Futurestep is obligated to pay to The Wall Street Journal a small percentage
of its fee. The Wall Street Journal, the Company and Futurestep have agreed
not to promote competing services during the term of the agreement.
 
                                      35

<PAGE>
 
ORGANIZATION
 
 Global Presence
 
  The Company has 71 offices across 41 countries, organized into the following
regions: North America, Europe, Asia/Pacific and Latin America. The Company's
offices are staffed with consultants who possess an understanding of the local
market, culture and management resources along with knowledge of the global
issues facing clients.
 
  The following table provides information relating to each region:
 

<TABLE>
<CAPTION>
                                                                     FISCAL 1998
                                        FISCAL 1998     NUMBER OF      AVERAGE
                                          REVENUES    OFFICES AS OF   NUMBER OF
   REGION                               (IN MILLIONS) APRIL 30, 1998 CONSULTANTS
   ------                               ------------  -------------- -----------
   <S>                                  <C>           <C>            <C>
   North America.......................    $162.6           20           175
   Europe..............................      86.2           28           108
   Asia/Pacific........................      34.8           14            46
   Latin America.......................      31.4            9            28
</TABLE>

 
  North America. The Company opened its first office in Los Angeles in 1969,
and currently has 20 offices throughout the U.S. and Canada. The North America
region has grown from $75.8 million in revenues in fiscal 1994 to $162.6
million in fiscal 1998. The Company has been ranked first among Hunt-Scanlon's
top North American executive search firms since the statistics were first
published in 1990. In fiscal 1998, the Company handled over 2,100 assignments
in this region, with an average number of 175 consultants, including 120 vice
presidents. In fiscal 1998, the firm opened new offices in Austin and Tysons
Corner to focus on the high-growth companies located in these areas.
 
  Europe. The Company opened its first European office in London in 1972 and
currently has 28 offices throughout 22 countries in the region. The region has
grown from $37.9 million in revenues in fiscal 1994 to $86.2 million in fiscal
1998. The Company handled over 2,000 assignments in fiscal 1998 in this
region, with an average number of 108 consultants, including 72 vice
presidents. In fiscal 1998, the region added new offices in Helsinki and
Copenhagen. In fiscal 1999, the Company acquired a French firm and two Swiss
firms, enhancing Korn/Ferry's market position in France and Switzerland,
respectively.
 
  Asia/Pacific. The Company opened its first Asia/Pacific office in Tokyo in
1973, and has built a 14-office network throughout 10 countries in the region,
including the opening in fiscal 1997 of five new offices. The region has grown
from $13.9 million in revenues in fiscal 1994 to $34.8 million in fiscal 1998.
The Company handled over 750 assignments in fiscal 1998 in this region, with
an average number of 46 consultants, including 30 vice presidents. The latest
Economist Intelligence Unit report on Executive Search in Asia and Australia
describes Korn/Ferry as the leading executive search firm in the region.
 
  Latin America. The Company entered Latin America through its 1977
acquisition of a 49% interest in Hazzard & Associates, and the Company
continues to conduct its operations in Mexico through three subsidiaries in
which the Company holds a controlling minority interest. As of April 30, 1998,
the Company operated a network of nine offices in seven countries covering the
entire region. The region has grown from $16.0 million in revenues in fiscal
1994 to $31.4 million in fiscal 1998. The Company handled over 930 assignments
in fiscal 1998 in this region, with an average number of 28 consultants,
including 17 vice presidents. In fiscal 1998, the Company opened a new office
in Rio de Janeiro. According to the Economist Intelligence Unit's latest
report on Executive Search in the Americas, Korn/Ferry dominates the executive
search market in Latin America.
 
 Industry Specialization
 
  In 1970, the Company was the first executive search firm to establish
specialty practices to serve specific industries and markets and has continued
to expand the range of its specialty practices. The specialty practices
 
                                      36

<PAGE>
 
consist of consultants throughout the regions with the knowledge and contacts
many have built during successful careers in the same industries and markets.
Consultants in the Company's ten specialty practice groups bring an in-depth
understanding of the market conditions and strategic and management issues
faced by clients within the specific industry. The Company plans to continue
to expand its specialized expertise through internal development, strategic
hiring in targeted growth areas and selected acquisitions.
 
       PERCENTAGE OF FISCAL 1998 ASSIGNMENTS BY INDUSTRY SPECIALIZATION
 

<TABLE>
       <S>                                                                   <C>
       Financial Services................................................... 21%
       Industrial........................................................... 15%
       Advanced Technology.................................................. 15%
       Consumer............................................................. 15%
       Healthcare........................................................... 11%
       Professional Services................................................  7%
       Fashion/Retail.......................................................  6%
       Not-for-Profit/Associations/Education................................  4%
       Energy...............................................................  3%
       Entertainment........................................................  3%
 
 Functional Expertise
 
  The Company has organized centers of functional expertise, made up of
consultants who have extensive backgrounds in placing executives in certain
functions, such as boards of directors, chief executive officers and other
senior executive and financial officers. The Company's board services
practice, for example, was first established in 1972 to help clients assemble
an effective, knowledgeable and cohesive board of directors to meet the
growing demands for accountability and more effective board performance. The
shortage of experienced directors, the tightening of governance policies and
the desire on the part of companies to broaden their board bases are making it
more difficult to identify and recruit directors with the needed skills. The
Company has established significant expertise in this area and has built a
proprietary database with the names and backgrounds of all the Fortune 1000
directors, plus a significant number of middle-market and high-growth company
board members, to help support board searches. Members of functional groups
are located throughout the Company's regions and across its specialty practice
groups.
 
         PERCENTAGE OF FISCAL 1998 ASSIGNMENTS BY FUNCTIONAL EXPERTISE
 
       Board Level/CEO/Senior Executive and Financial Management............ 44%
       Marketing and Sales.................................................. 25%
       Finance and Control.................................................. 11%
       Manufacturing/Engineering/Research and Development/Technology........  9%
       Human Resources and Administration...................................  7%
       Information Systems..................................................  4%
</TABLE>

 
MARKETING
 
  As the world's largest executive search firm, the Korn/Ferry International
brand name is widely recognized at the senior executive level. The Company has
traditionally marketed its services through its offices, regions and specialty
practices. Futurestep markets its services to existing and prospective
Korn/Ferry clients as well as through its alliance with The Wall Street
Journal. To support Futurestep, which requires extensive marketing to attract
qualified candidates to register in its database, the Company has launched a
major campaign in southern California, including print, radio, television and
on-line advertising and direct mail. The Company intends to replicate this
campaign in other locations as Futurestep expands geographically.
 
  The managers of the Company's offices, regions and specialty practices are
responsible for profitability, with their compensation tied to meeting
budgetary goals. Since one of the best marketing tools in a consultative
 
                                      37

<PAGE>
 
business like executive search is referral, these managers are also
accountable for maintaining the quality of the service to clients by making
sure that each assignment meets the standards and practices set by the
Company. Repeat business and referrals from satisfied clients and candidates
are one of the primary sources of new business.
 
  Consultants are also visible and active in their local communities and in
key trade and business associations. The Company has implemented an aggressive
global business development strategy. Specialty practice groups, regions,
offices and individual consultants identify existing and prospective clients
with substantial recurring search needs. Teams, representing local market,
industry and functional expertise, are charged with creating and implementing
strategies for developing business with targeted companies and organizations.
 
  The Company develops a large number of proprietary research reports in
conjunction with leading universities and prestigious research institutions.
These reports deal in-depth with a wide array of issues from corporate
governance to global leadership to provide clients with thoughtful,
provocative material that identifies current trends and permits clients to
benchmark their practices against those of other companies. The Company also
promotes its understanding of the industry, business and management challenges
facing companies today by sponsoring major conferences and forums, such as its
partnership with the World Economic Forum at Davos, speeches and presentations
before major industry and management groups, roundtable discussions that bring
senior executives together to focus on issues of interest, mailings of its
studies and reports to selected companies and interviews with the major
business and trade publications.
 
  Executive search firms frequently refrain from recruiting employees of a
client and possibly client divisions and affiliations for a specified period
of time, typically extending for one to two years following the last
assignment performed. The Company carefully manages the off-limits conditions
to which it may agree with any client, limits the number of off-limits global
agreements to a few major account relationships, and carefully defines the
scope of any such agreement. Over the past few years, the executive recruiting
profession as a whole has been narrowing the scope and shortening the
timeframe of these agreements. See "Risk Factors--Off-Limits Agreements."
 
PROFESSIONAL STAFF
 
  As of April 30, 1998, the Company had 263 vice presidents, 121 principals,
226 senior associates and associates and 195 researchers. The Company believes
the high caliber and motivation of its professionals are critical factors to
its success. The Company further believes it has been able to attract and
retain some of the most productive search consultants (vice presidents and
principals) as a result of its premier reputation, history of consultant
equity ownership and its performance-based compensation program. The Company's
vice presidents have an average of seven years' experience with the Company,
12 years in the search industry and 13 years in other industries. For a
discussion of ownership of Common Stock by, and compensation of, such
consultants, see "Management's Discussion and Analysis of Financial Condition
and Results of Operations--Overview" and "Management--Liquidity Schedule."
 
  Senior associates, associates and researchers support the efforts of the
vice presidents and principals with candidate sourcing and identification, but
do not generally lead an assignment. The Company has training and professional
development programs and a high rate of internal promotions. Over the past
three fiscal years, 55 associates have been promoted to principal and 68
principals have become vice presidents. Promotion to vice president is based
on a variety of factors, including demonstrated superior execution and
business development skills, the ability to identify solutions to complex
issues, personal and professional ethics, a thorough understanding of the
market, how to retain clients and how to develop repeat business, and the
ability to help build effective teams. In addition, the Company has a program
of recruiting experienced professionals into the Company. In fiscal 1998, the
Company hired 27 vice presidents and 38 principals, most with either previous
search backgrounds or strong specialty expertise.
 
  The Company has not been a party to a collective bargaining agreement and
considers relations with its employees to be good.
 
                                      38

<PAGE>
 
COMPETITION
 
  Korn/Ferry International is the largest executive search firm in the world.
Other large executive search firms include Heidrick & Struggles International,
Inc., SpencerStuart & Associates and Russell Reynolds Associates. These firms
are the Company's primary competitors, although the Company and each of these
firms also competes against smaller firms that specialize in specific
regional, industry or functional searches. The Company believes its brand
name, global network, prestigious client list, strong specialty practices and
quality of service are widely recognized worldwide.
 
  The executive search industry is comprised of approximately 4,000 retained
and contingency search firms. According to Kennedy Information, the top ten
search firms represent only 11% of the industry. To date there have been few
barriers to entry in the executive search business, which explains in part the
highly fragmented nature of the industry. However, the globalization of world
economies, combined with the increased availability and application of
sophisticated technologies and comprehensive databases, will likely raise the
barriers to entry. The Company believes that the industry will experience
consolidation. New competitors, such as technology-oriented companies, will be
drawn to the executive search business by the growing worldwide demand for
qualified management employees, the fragmentation of the industry and the
ability to leverage their existing technology and databases to enter the
market. For example, TMP Worldwide Inc., which operates the Monster Board,
recently acquired two executive search firms.
 
FACILITIES
 
  The Company leases all of its 71 office locations. The Company believes that
its facilities are adequate for its current needs and that it will not have
difficulty leasing additional space to accommodate its anticipated future
needs.
 
INSURANCE
 
  The Company maintains insurance in amounts and with such coverages and
deductibles as it believes are appropriate and adequate. The principal risks
that the Company insures against are professional liability, worker's
compensation, personal injury, bodily injury, property damage and fidelity
losses. There can be no assurance that the Company's insurance will adequately
protect it from potential losses and liabilities. See "Risk Factors--
Employment Liability Risk."
 
LEGAL PROCEEDINGS
 
  The Company is currently not a party to any litigation the adverse
resolution of which, in management's opinion, would be likely to have a
material adverse effect on the Company's business, financial position or
results of operations. However, from time to time the Company has been and is
involved in litigation incidental to its business.
 
                                      39

<PAGE>
 

                                  MANAGEMENT
 
EXECUTIVE OFFICERS AND DIRECTORS
 
  The following table sets forth the executive officers and directors of the
Company.
 

<TABLE>   
<CAPTION>
   NAME                        CLASS(1) AGE(2) POSITION
   ----                        -------- ------ --------
   <C>                         <C>      <C>    <S>
   Richard M. Ferry(3)........           61    Chair of the Board
   Windle B. Priem(3).........           61    Chief Executive Officer,
                                                President and Director
   Peter L. Dunn(3)...........           53    Vice Chair, Corporate Secretary,
                                                General Counsel and Director
   Elizabeth S.C.S. Murray(3).   n/a     42    Chief Financial Officer,
                                                Treasurer and Executive Vice
                                                President
   Man Jit Singh..............   n/a     41    Vice President and Chief
                                                Executive Officer of Korn/Ferry
                                                International Futurestep, Inc.
   Paul Buchanan-Barrow.......           53    Vice President and Director
   Timothy K. Friar...........           40    Vice President and Director
   Sakie Fukushima............           49    Vice President and Director
                                               Managing Director, Vice
   Hans Jorda.................           41     President and Director
                                               Managing Director, Vice
   Scott E. Kingdom...........           39     President and Director
                                               Managing Director, Vice
   Raimondo Nider.............           57     President and Director
   Manuel A. Papayanopulos....           53    Vice President and Director
                                               Managing Director, Vice
   Michael A. Wellman.........           45     President and Director
                                               Managing Director, Vice
   Young Kuan-Sing............           50     President and Director
</TABLE>
    
- --------
(1) Denotes Board class of which the Director is a member. See "Description of
    Capital Stock--Certain Anti-Takeover Effects."
   
(2) As of December 18, 1998.     
(3) Member of the Office of the Chief Executive.
 
  Richard M. Ferry is founder of the Company and has been Chair of the Board
since 1991 and a member of the Office of the Chief Executive since July 1998.
He also serves on the Board of Directors of Avery Dennison Corp., Dole Food
Company, Mellon 1st Business Bank, Mullin Consulting, Inc., Mrs. Fields'
Original Cookies and Pacific Life Insurance Company.
          
  Windle B. Priem has been Chief Executive Officer and President since
December 1998 and a member of the Office of the Chief Executive since July
1998. He has been a Director of the Company since 1993. From July 1998 to
December 1998, he was a Vice Chair and the Chief Operating Officer of the
Company. From 1996 to 1998 he was the President of the North America region.
Mr. Priem joined Korn/Ferry in 1976.     
 
  Peter L. Dunn has been a Vice Chair since 1997 and a member of the Office of
the Chief Executive since July 1998. He has been a Director of the Company
since 1992 and serves as the Company's General Counsel and Corporate
Secretary. Mr. Dunn joined Korn/Ferry in 1980.
   
  Elizabeth S.C.S. Murray has been the Executive Vice President, Chief
Financial Officer, Treasurer and a member of the Office of the Chief Executive
since July 1998. In January 1998, she joined the Company as Vice President and
Chief Financial Officer and Treasurer. Prior to that, Ms. Murray served as
Executive Vice President and Chief Financial Officer of Tycom Inc. from June
1997 to December 1997, and from 1994 to June 1997 she was the Chief Financial
Officer and Vice President of Hughes Communications, Inc., a subsidiary of
Hughes Electronics Corporation. Prior to 1994, Ms. Murray served in the
corporate offices of Hughes Electronics Corporation as Director of Planning.
    
  Man Jit Singh has been a Vice President of the Company and President and
Chief Executive Officer of Futurestep since December 1997. Previously, he was
a principal of Sibson & Co. from 1996 to 1997, the Chief
 
                                      40

<PAGE>
 
Executive Officer of Talent Tree Staffing Services and sector director of BET
plc from 1994 to 1996, and Chief Executive Officer of The Cast Group AG from
1991 to 1994.
 
  Paul Buchanan-Barrow has been a Vice President since 1992 and a member of
the Board of Directors since 1994. He is currently responsible for the firm's
Business Strategy Group throughout Europe. Mr. Buchanan-Barrow joined
Korn/Ferry in 1992 and has twelve years of executive search experience.
 
  Timothy K. Friar has been a Vice President since 1995 and a member of the
Board of Directors since May 1998. Mr. Friar joined Korn/Ferry in 1993 as a
senior associate and has seven years of executive search experience.
 
  Sakie Fukushima has been a Vice President since 1993 and a member of the
Board of Directors since 1995. Ms. Fukushima joined Korn/Ferry in 1991 as a
principal and has seven years of executive search experience.
 
  Hans Jorda has been a Vice President since 1994 and a member of the Board of
Directors since 1996. He currently is the Managing Director for the Company's
Middle European Region, including Austria, Germany and Switzerland, a role he
assumed in 1996. From 1992 to 1994 he owned and managed the New Europe
Consulting Group, an executive search company that the Company acquired in
1994, and has 14 years of executive search experience.
   
  Scott E. Kingdom has been a Vice President since 1993, and a member of the
Board of Directors since May 1998. He has been the Managing Director of the
Chicago and Minneapolis offices since 1995. Mr. Kingdom joined Korn/Ferry in
1988 and has 16 years of executive search experience.     
 
  Raimondo Nider has been a Vice President of the Company since 1989 and a
member of the Board of Directors since 1996. He has been the Managing Director
of Southern Europe since 1996. Mr. Nider joined Korn/Ferry in 1989 and has 23
years of executive search experience.
 
  Manuel A. Papayanopulos has been a Vice President since 1982 and a member of
the Board of Directors since 1997. Mr. Papayanopulos joined Korn/Ferry in 1982
and has 24 years of executive search experience.
 
  Michael A. Wellman has been a Vice President since 1992 and a member of the
Board of Directors since 1997. From 1995 to 1998 he was the Managing Director
of the New York office. Since July 1998, he has been Managing Director of the
Northeast Region of the Company (Toronto, Boston, Stamford, Princeton,
Philadelphia and New York). Mr. Wellman joined Korn/Ferry in 1992 and has 15
years of executive search experience.
 
  Young Kuan-Sing has been a Vice President since 1988 and a member of the
Board of Directors since 1996. He is currently the Managing Director for the
ASEAN sub-region within Asia/Pacific and a member of the newly-formed Asia-
Pacific Operating Group as well as the region's Business Strategy Group since
July 1998. From 1995 to 1998 he was responsible for East Asia including China,
Hong Kong, Thailand, Malaysia, Singapore and Indonesia. Prior to that he was
Office Manager for the Company's Singapore office. Mr. Young joined Korn/Ferry
in 1982.
 
  The executive officers of the Company serve at the discretion of its Board
of Directors. Each director of the Company serves until such director's
successor is elected and qualified or until the director's death, retirement,
resignation or removal.
 
BOARD OF DIRECTORS
 
  Upon consummation of the Offering, the Company will have thirteen Directors,
all of whom are employees of the Company, and one vacancy on the Board of
Directors. The Company intends to replace three employee-directors with four
independent directors within 30 days of the consummation of the Offering. The
Company's Board of Directors is divided into three classes serving staggered
terms of three years each, with approximately one-third of the Company's Board
of Directors being elected each year.
 
                                      41

<PAGE>
 
COMMITTEES OF THE BOARD OF DIRECTORS
 
  The Board of Directors (the "Board") has standing Audit, Compensation,
Executive and Nominating Committees.
 
  Audit Committee. After consummation of the Offering, the Board intends to
reconstitute its audit committee (the "Audit Committee") to be comprised of at
least two independent directors. The Audit Committee makes recommendations
concerning the engagement of independent public accountants, reviews the plans
and results of the audit engagement with the independent public accountants,
approves professional services provided by the independent public accountants,
reviews the independence of the independent public accountants, considers the
range of audit and non-audit fees and reviews the adequacy of the Company's
internal accounting controls. The Audit Committee is also available to receive
reports, suggestions, questions and recommendations from the independent
public accountants, the Chief Financial Officer and the General Counsel. It
also confers with those parties in order to assure the sufficiency and
effectiveness of the programs being followed by corporate officers in the area
of compliance with the law and conflicts of interest.
 
  Compensation Committee. After consummation of the Offering, the Board
intends to expand the membership of its compensation committee (the
"Compensation Committee") to be comprised of at least two independent
directors. The Compensation Committee determines the compensation of the
Company's executive officers and administers the Performance Award Plan. The
current executive officer salaries were set by the Board on May 1, 1998. The
Compensation Committee has the responsibility for the compensation of the
senior executives of the Company including salaries and benefits. The
Compensation Committee also reviews and makes recommendations to the Board
with respect to the Company's overall compensation program for directors and
officers, including salaries, employee benefit plans, stock options granted,
equity incentive plans and payment of bonuses. The composition of the current
Compensation Committee was established in May 1998.
 
  Executive Committee. The Executive Committee of the Board acts with all the
authority of the Board as to those decisions within the Board's purview, and
possesses all authority of the Board except as to those decisions requiring
approval also of the Company's shareholders.
 
  Nominating Committee. The nominating committee (the "Nominating Committee")
recommends criteria to the Board for the selection of candidates to serve on
the Board, evaluates all proposed candidates, recommends to the Board nominees
to fill vacancies on the Board, and prior to the annual meeting of
shareholders recommends to the Board a slate of nominees for election to the
Board by the shareholders of the Company at the annual meeting. The Nominating
Committee also seeks possible candidates for the Board and otherwise serves to
aid in attracting qualified candidates to the Board.
 
DIRECTOR COMPENSATION
 
  Following the Offering, the Company does not intend to pay additional
remuneration to employees who also serve as directors. The Company will
reimburse all directors for their out-of-pocket expenses incurred in
connection with their duties as directors. Non-employee directors will receive
an annual retainer of $          in cash and $          in cash for each
regular or special meeting attended as well as annual stock option grants
under the Performance Award Plan. See "--Benefit Plans--Performance Award
Plan."
 
OFFICE OF THE CHIEF EXECUTIVE
   
  In July 1998, the Company announced the formation of an Office of the Chief
Executive, which currently consists of Mr. Priem and three senior executive
officers, Messrs. Ferry and Dunn and Ms. Murray. Mr. Priem is Chief Executive
Officer and President of the Company. Mr. Ferry is Chair of the Board. Mr.
Dunn, Vice Chair, Corporate Secretary and General Counsel, is responsible for
the Company's Corporate Development Group including new business ventures,
such as Futurestep, and strategic planning, as well as having responsibility
for the Company's information technology and legal departments. Ms. Murray,
the Company's Chief Financial Officer and Treasurer, is also an Executive Vice
President and is responsible for the corporate treasury, corporate performance
standards, external reporting and information systems.     
 
                                      42

<PAGE>
 
COMPENSATION DECISIONS AND INSIDER PARTICIPATION
 
  In fiscal 1998, decisions concerning compensation of executive officers were
made by the Company's Senior Executive Compensation Committee, consisting of
Messrs. Buchanan-Barrow, as Chair, Edward Kelley, Nider, William Simon and
Priem, with Messrs. Ferry and Peter Mullin, a compensation consultant, serving
in advisory roles. The Senior Executive Compensation Committee will be
reorganized as the Compensation Committee upon consummation of the Offering,
review and approve the comprehensive compensation program for senior
executives of the Company and review the salaries of executive vice presidents
and senior vice presidents, subject to the ratification of the salary programs
established for the positions of Chair and the Chief Executive Officer by the
Board acting as a whole.
 

EXECUTIVE COMPENSATION
   
  The following table shows the compensation paid by the Company to the Chief
Executive Officer and each of the Company's other four most highly compensated
executive officers (collectively, the "Named Executive Officers"), all of whom
are members of the Office of the Chief Executive, with respect to the fiscal
year ended April 30, 1998.     
 
                          SUMMARY COMPENSATION TABLE
 

<TABLE>   
<CAPTION>
                                       ANNUAL COMPENSATION
                                 --------------------------------
 NAME AND PRINCIPAL POSITION AS                      OTHER ANNUAL  ALL OTHER
      OF DECEMBER 23, 1998        SALARY   BONUSES   COMPENSATION COMPENSATION
 ------------------------------  -------- ---------- ------------ ------------
<S>                              <C>      <C>        <C>          <C>
Richard M. Ferry................ $550,000 $1,375,000       --       $19,077(1)
 Chair of the Board
Michael D. Boxberger(2).........  525,000  1,312,500    30,112(3)    12,331(4)
 Former President and Chief
  Executive Officer
Windle B. Priem.................  410,000  1,150,000       --        12,331(4)
 Chief Executive Officer and
  President
Peter L. Dunn...................  375,000    937,500       --        12,331(4)
 Vice Chair, Corporate Secretary
  and General Counsel
Elizabeth S.C.S Murray(5).......   78,602    175,000       --           400(6)
 Chief Financial Officer,
 Treasurer and Executive Vice
 President
</TABLE>
    
- --------
          
(1) Represents contributions of $10,961 to the executive's 401(k) plan and
    $8,116 paid by the Company for insurance premiums.     
          
(2) Mr. Boxberger resigned his positions as President, Chief Executive
    Officer, Director and a member of the Office of the Chief Executive in
    December 1998. Mr. Priem was appointed the Chief Executive Officer and
    President in December 1998.     
   
(3) Represents amounts reimbursed by the Company for payment of income taxes.
           
(4) Represents contributions of $10,961 to the executive's 401(k) plan and
    $1,370 paid by the Company for insurance premiums.     
   
(5) Reflects compensation paid to Ms. Murray since she joined the Company in
    January 1998.     
   
(6) Represents $400 paid by the Company for insurance premiums.     
   
 Resignation of Michael D. Boxberger     
          
  In December 1998, Michael D. Boxberger resigned from his positions as
President, Chief Executive Officer, Director and a member of the Office of the
Chief Executive of the Company. Mr. Boxberger and the Company have entered
into the Settlement Agreement under which Mr. Boxberger will receive
$1.3 million payable over a 12-month period. In addition, he will remain on
the Company's payroll until the earlier to occur of December 3,     
 
                                      43

<PAGE>
 
   
1999 or commencement of new employment. While on the Company's payroll,
Mr. Boxberger will continue to receive reimbursement for reasonable expenses,
including office and secretarial support as well as medical and other
benefits.     
       
          
  At the time of his resignation, Mr. Boxberger owned 393,256 shares of Common
Stock. The Company will repurchase 228,088 of those shares at book value
pursuant to a Stock Repurchase Agreement between Mr. Boxberger and the
Company. Mr. Boxberger may retain the remaining 165,168 such shares with the
right to sell such shares in accordance with the Liquidity Schedule. (See Note
4). The excess of the fair market over the book value of $1.4 million will be
recognized as a charge to earnings in the third quarter of fiscal 1999.     
   
  Mr. Boxberger has loans outstanding with the Company which, as of December
3, 1998, amounted to an aggregate principal amount of $99,989. Such loans will
be repaid by Mr. Boxberger in full by October 31, 1999. In addition, Mr.
Boxberger and the Company are co-obligors on a bank loan in the principal
amount of $1 million. The bank loan is secured by shares of Common Stock owned
by Mr. Boxberger. The Company will reimburse Mr. Boxberger for interest on the
bank loan until the earlier of the sale of Mr. Boxberger's home or December 3,
1999. After December 3, 1999, Mr. Boxberger will pay all principal and
interest due under such bank loan and will repay or refinance the bank loan on
or prior to the earlier of the sale of his home or November 30, 2000.     
       
BENEFIT PLANS
 
 Performance Award Plan
 
  In July 1998, the Company adopted the Performance Award Plan to provide a
means to attract, motivate, reward and retain talented and experienced
officers, non-employee directors, other key employees and certain other
eligible persons (collectively, "Eligible Persons") who may be granted awards
from time to time by the Company's Board of Directors or, if authorized, the
Compensation Committee (such administrators, the "Committee"), or, for non-
employee directors, under a formula provided in the Performance Award Plan.
The maximum number of shares of Common Stock reserved for issuance is
7,000,000 subject to adjustment for certain changes in the Company's capital
structure and other extraordinary events. Shares subject to awards that are
not paid for or exercised before they expire or are terminated are available
for other grants under the Performance Award Plan to the extent permitted by
law. Shareholders of the Company approved the Performance Award Plan in August
1998.
   
  The Committee intends to grant ten-year stock options for approximately
         shares of Common Stock to eligible persons. The Named Executive
Officers will receive option grants for such shares in the following amounts:
Mr. Ferry (   shares); Mr. Priem (   shares); and Mr. Dunn (   shares). The
exercise price of each option granted will be at the fair market value per
share of Common Stock at the time of grant. Such options will vest in equal
installments over five years.     
 
  Awards under the Performance Award Plan may be in the form of nonqualified
stock options, incentive stock options, stock appreciation rights ("SARs"),
limited SARs, restricted stock, performance shares, stock bonuses, or cash
bonuses based on performance. Awards may be granted individually or in
combination with other awards. Any cash bonuses and other performance awards
under the Performance Award Plan will depend upon the extent to which
performance goals set by the Board of Directors or the Committee are met
during the performance period. Awards under the Performance Award Plan
generally will be nontransferable by the holder of the award (a "Holder")
(other than by will or the laws of descent and distribution). During the
Holder's lifetime, rights under the Performance Award Plan generally will be
exercisable only by the Holder, subject to such exceptions as may be
authorized by the Committee in accordance with the Performance Award Plan. No
incentive stock option may be granted at a price that is less than the fair
market value of the Common Stock (110% of fair market value of the Common
Stock for certain participants) on the date of grant. Nonqualified stock
options and other awards may be granted at prices below the fair market value
of the Common Stock on the date of grant. Restricted stock awards can be
issued for nominal or the minimum lawful consideration. Typically, the
participant may vote restricted stock, but any dividend on restricted shares
will be held in escrow
 
                                      44

<PAGE>
 
subject to forfeiture until the shares have vested. No more than 350,000
shares will be available for restricted stock awards, subject to exceptions
for restricted stock awards based on past service, deferred compensation and
performance awards.
 
  The maximum number of shares subject to awards (either performance or
otherwise) that may be granted to an individual in the aggregate in any one
calendar year is 1,050,000. A non-employee director may not receive awards in
respect of more than 50,000 shares in the aggregate in any one calendar year.
With respect to cash-based performance awards, no more than $2.5 million per
year, per performance cycle may be awarded to any one individual. No more than
one performance cycle may begin in any one year with respect to cash-based
performance awards.
 
  Section 162(m) Performance-Based Awards. In addition to options and SARs
granted under other provisions of the Performance Award Plan, performance-
based awards payable in cash or shares within the meaning of Section 162(m) of
the Internal Revenue Code of 1986, as amended ("Performance-Based Awards"),
which depend on the achievement of pre-established financial performance
goals, may be granted under the Performance Award Plan. The specific
performance goals will be set by a qualified committee of the Board created
for these purposes and the specific targets will be set by the Committee when
their attainment is substantially uncertain. The permitted performance goals
under the Performance Award Plan may include any one or more of the following:
revenue growth, net earnings (before or after taxes or before or after
interest, taxes, depreciation and amortization), cash flow, return on equity,
return on assets or return on net investment, or cost containment or
reduction. The applicable performance cycle may not be less than one nor more
than seven years (five years in respect of such awards payable only in cash).
 
  Administration. The Performance Award Plan will be administered by the Board
or the Committee. The Committee will have broad authority to (i) designate
recipients of discretionary awards, (ii) determine or modify (subject to any
required consent) the terms and provisions of awards, including the price,
vesting provisions, terms of exercise and expiration dates, (iii) approve the
form of award agreements, (iv) determine specific objectives and performance
criteria with respect to performance awards, and (v) construe and interpret
the Performance Award Plan. The Committee will have the discretion to
accelerate and extend the exercisability or term and establish the events of
termination or reversion of outstanding awards.
 
  Change in Control. Upon a Change in Control Event, each option and SAR will
become immediately exercisable; restricted stock will immediately vest free of
restrictions; and the number of shares, cash or other property covered by each
performance share award will be issued to the Holder, unless the Committee
determines to the contrary. A "Change in Control Event" is defined generally
to include (i) certain changes in a majority of the membership of the Board
over a period of two years or less, (ii) the acquisition of more than 30% of
the outstanding voting securities of the Company by any person other than the
Company, any Company benefit plan or one of their affiliates, successors,
heirs, relatives or certain donees or certain other affiliates, or (iii)
shareholder approval of a transfer of substantially all of the Company's
assets, the dissolution or liquidation of the Company, or a merger,
consolidation or reorganization (other than with an affiliate) whereby
shareholders hold or receive less than 70% of the outstanding voting
securities of the resulting entity after such event. In addition, if any
participant's employment is terminated by the Company for any reason other
than for cause either in express anticipation of, or within one year after a
Change in Control Event, then all awards held by that participant will vest in
full immediately before his or her termination date.
 
  The Committee may also provide for alternative settlements (including cash
payments), the assumption or substitution of awards or other adjustments in
the Change in Control context of any other reorganization of the Company.
 
  Plan Amendment, Termination and Term. The Company's Board has the authority
to amend, suspend or discontinue the Performance Award Plan at any time, but
no such action will affect any outstanding award in any manner materially
adverse to a participant without the consent of the participant. The
Performance Award Plan may be amended by the Board without shareholder
approval unless such approval is required by applicable law.
 
                                      45

<PAGE>
 
  The Performance Award Plan will remain in existence as to all outstanding
awards until such awards are exercised or terminated. The maximum term of
options, SARs and other rights to acquire Common Stock under the Performance
Award Plan is ten years after the initial date of award, subject to provisions
for further deferred payment in certain circumstances. No award can be made
after the tenth anniversary of the date of the consummation of the Offering.
Awards may remain exercisable for a period of time determined by the Committee
after termination of employment for certain reasons, after which, to the
extent not exercised, such awards terminate.
 
  Automatic Grants to Non-Employee Directors. Under the Performance Award
Plan, each director who is not an officer or employee (a "Non-Employee
Director") and who is or thereafter becomes a director of the Company after
the Offering will be automatically granted a nonqualified stock option to
purchase 1,500 shares of Common Stock when the person takes office, at an
exercise price equal to the market price of the Common Stock at the close of
trading on that date (or, with respect to the Company's current directors, on
the tenth trading day after completion of the Offering). In addition, on the
day of the annual shareholders meeting in each calendar year beginning in 1999
and continuing for each subsequent year during the term of the Performance
Award Plan, each then-continuing Non-Employee Director will be granted a
nonqualified stock option to purchase 1,500 shares of Common Stock at an
exercise price equal to the market price of the Common Stock at the close of
trading on that date. Non-Employee Directors may also be granted discretionary
awards. All automatically granted Non-Employee Director stock options will
have a ten-year term and will be immediately exercisable. If a Non-Employee
Director's services are terminated for any reason, any automatically granted
stock options held by such Non-Employee Director that are exercisable will
remain exercisable for twelve months after such termination of service or
until the expiration of the option term, whichever occurs first.
Automatically-granted options are subject to the same adjustment, change in
control, and acceleration provisions that apply to awards generally, except
that any changes or Board or Committee actions (1) will be effected through a
shareholder approved reorganization agreement or will be consistent with the
effect on Options held by other than executive officers and (2) will be
consistent in respect of the underlying shares with the effect on shareholders
generally. Any outstanding automatic option grant that is not exercised prior
to a Change in Control Event in which the Company is not to survive will
terminate, unless such option is assumed or replaced by the surviving
corporation.
 
  Payment for Shares. The exercise price of options and other awards may be
paid in cash, promissory note or (subject to certain restrictions) shares of
Common Stock. The Company may finance the exercise or purchase and (subject to
any applicable legal limits) offset shares to cover the exercise or purchase
price and withholding taxes.
 
  Federal Tax Consequences. The current federal income tax consequences of
awards authorized under the Performance Award Plan follow certain basic
patterns. Generally, awards under the Performance Award Plan that are
includable in income of the recipient at the time of award or exercise (such
as nonqualified stock options, SARs, restricted stock and performance awards)
are deductible by the Company, and awards that are not required to be included
in income of the recipient at such times (such as incentive stock options) are
not deductible by the Company.
 
  Non-Exclusive Plan. The Performance Award Plan is not exclusive. The Board,
under California law, may grant stock and performance incentives or other
compensation, in stock or cash, under other plans or authority.
 
 Employee Tax Deferred Savings Plan--401(k) Plan
 
  The Company adopted a defined contribution 401(k) plan in 1984. Under the
Company's 401(k) plan, U.S. employees who have been employed by the Company
for over six months are eligible to make employee contributions in the
following fiscal quarterly enrollment period, and become eligible for
contributions by the Company. Employees must have worked at least 1,000 hours
in a plan year (May 1 to April 30) to be eligible for the Company
contribution.
 
  The 401(k) plan allows employees to contribute a portion of their salary to
their personal plan account ("Participant Savings Contributions") of up to 20%
of their salary or the maximum employee contribution set
 
                                      46

<PAGE>
 
by the Internal Revenue Service each year, whichever is less. Participants are
always 100% vested in their own contributions, and any investment gains or
losses therefrom. The 401(k) plan allows participants over the age of 59 1/2
to make withdrawals from the Company's 401(k) plan without penalty.
 
  The 401(k) plan provides for discretionary employer contributions.
Discretionary contributions (if any) up to 2% of an employee's salary (to a
maximum of $1,000) are first allocated to employees below the category of vice
president. In addition, the Company may contribute any amount or it may decide
not to contribute in a given Plan Year ("Employer Matching Contribution"). The
Company's matching contribution vests over a period of six years in increments
of 20% after the one year anniversary. The Company also has the option of
making additional contributions to employees' accounts based upon a percentage
of total compensation, including bonuses. An employee is eligible for these
employer contributions for a plan year only if employed on the last day of the
plan year.
 
WORLDWIDE EXECUTIVE BENEFIT PLANS: RETIREMENT PLAN; LIFE INSURANCE PLAN; AND
DISABILITY PLAN
 
  The Company's Worldwide Executive Benefit Plans ("WEB Plans") cover vice
presidents of the Company. The benefits provided are intended to reward
eligible employees for long term service and contributions to the firm and
which are provided through a combination of local government benefits, local
benefits provided by the Company, and specific WEB Plan's benefits. To be
eligible to be a participant in a Company WEB Plan, an employee must be a vice
president or more senior officer and a shareholder of the Company working at
least 30 hours per week.
 
  Retirement Plan. The Company's WEB-Retirement Plan provides a monthly
benefit to eligible employees upon retirement from the Company. Each year, a
plan participant accrues and is fully vested in one-twentieth of the targeted
benefit, expressed as a percentage set by the Company for that year. Upon
retirement, a participant receives a monthly benefit payment equal to the sum
of the percentages accrued over such participant's term of employment, up to a
maximum of 20 years, multiplied by such participant's highest average monthly
salary during any 36 consecutive months of the final 72 months of active full-
time employment. The WEB-Retirement Plan provides targeted retirement benefits
through sources funded by the Company, government social security and
retirement benefits and Company retirement programs provided by the eligible
employee's local office.
 
  Life Insurance Plan. The Company's WEB-Life Insurance Plan provides
financial security for the survivors of an eligible employee in the event of
his or her death. The life insurance coverage provided is a targeted life
insurance benefit of three times an eligible employee's base salary in the
most tax efficient manner possible for participants. The WEB- Life Insurance
Plan administers the life insurance benefits through sources funded by the
Company, government provided survivor benefits and local life insurance
programs and coverage provided by local carriers within an eligible employee's
country.
 
  Disability Plan. The Company's WEB-Disability Plan provides income to
eligible employees and their families should an illness or injury cause an
extended period of disability for an eligible employee. The plan's disability
coverage provides a targeted disability benefit of 60% of an eligible
employee's base salary (up to the maximum limit allowed by the insurance
carrier). The WEB-Disability Plan provides the disability coverage through
Company funded sources, government sponsored disability benefits, local
disability programs available for the Company and particular disability
benefits under the plan.
 
ENHANCED WEALTH ACCUMULATION PLANS
 
  The Company maintains two Enhanced Wealth Accumulation Plans (the "EWAPS"),
one for its U.S. vice presidents and one for its non-U.S. vice presidents,
which are identical in their material provisions. The EWAPS replaced the
Company's earlier Wealth Accumulation Plans (the "WAPS") for vice presidents,
although those participants within the Company's original WAPS who did not
choose to roll their previous participation and deferrals or contributions
into the EWAPS continue to be covered under the earlier version. The EWAPS
offer a means for the Company to provide an additional future compensation
package for certain vice presidents of the Company in order to reward long
term service to the Company and retain key employees.
 
                                      47

<PAGE>
 
  The EWAPS allow participants to elect to participate by deferring
compensation initially or in some instances, making an after-tax contribution,
for an eight-year period. Each deferral or contribution unit is for an eight-
year period based on the calendar year, usually commencing on January 1.
Participants may commence an additional deferral or contribution unit every
five years during their participation in the EWAPS. Participants may elect to
accelerate their deferrals or contributions but not increase the total amount.
By choosing to participate in the EWAPS, a vice president opts by his or her
participation to defer a portion of their compensation earned, in return for
an annuity of a specified amount paid by the Company over a fifteen year
period, upon retirement at age 65.
 
  EWAP benefits begin to vest after five years; vested benefits increase for
each year of participation in excess of five years and vested benefits
maximize at 15 years or at age 65 with a minimum participation of eight years.
The payments for vested EWAP benefits generally commence when a participant is
age 65 or retires. If a participant chooses to retire from the Company's
service prior to reaching the age of 65, he or she is eligible for an "early
retirement benefit" as to which his or her normal monthly EWAPS benefits are
proportionately reduced in accordance with his or her early retirement, to be
adjusted for each month a participant retires prior to the age of 65. To be
eligible for an early retirement benefit, the participant must have completed
at least 15 years of service with the Company and also have completed eight
years of service with the Company while enrolled in that contribution unit. An
early retiree may also choose to delay payment of EWAPS benefits until age 65
and accordingly incur no reduction of benefits to be paid. EWAPS participants
who terminate their service with the Company after five or more years of
participation in a deferral or contribution unit and prior to a normal
retirement age of 65 or early retirement date are eligible for an "incentive
benefit" from the Company. However, if a participant becomes employed as an
executive search consultant or obtains employment in any capacity for any
other executive search firm within two years after termination of employment
with the Company, any early retirement or incentive benefit is forfeited.
Payment of the incentive benefit by the Company is in monthly installments,
commencing at age 65, of a payment amount equal to the normal benefit payment,
to be paid for the same number of years a participant participated within a
deferral or contribution unit up to a maximum of 15 years. An incentive
benefit recipient may also elect to receive a lump sum payment in lieu of
monthly payments, equal to their previous deferrals or contribution plus
interest.
 
  If a participant dies and is eligible for normal retirement benefits prior
to receiving his or her full benefits, his or her beneficiary is entitled to
receive such payments. Additionally, a deceased participant's spouse, if any,
may receive an additional survivor's benefit to be paid for a specified period
of time, following the termination of the normal EWAPS benefit payments.
Disability benefits payments are payable to a participant within the plan, but
only with respect to his or her first deferral or contribution unit completed.
There are no disability benefits associated with additional deferral or
contribution units completed by a participant. If a participant becomes
disabled, as defined in the EWAPS, the Company will pay monthly disability
benefits to the participant in an amount equal to one-twelfth of the amount
per annum specified as the disability benefit for the participant's initial
deferral or contribution unit, until the age of 65, or until the attainment of
a later age for persons whose disability begins after age 61. A participant
receiving disability benefit payments is still eligible for all normal
retirement benefits, early retirement benefits and survivor benefits under the
EWAPS.
 
SENIOR EXECUTIVE INCENTIVE PLANS
 
  The Company provides for its vice presidents two Senior Executive Incentive
Plans (the "SEIPS"), one for its U.S. executives and one for its non-U.S.
executives, which are identical in their material provisions. The Board of
Directors approves eligibility for senior executives' participation in the
SEIPS. Additionally, a senior executive must be participating in the Company's
EWAPS to be eligible to participate in the SEIPS, unless such requirement is
waived by the Board of Directors. The SEIPS provide additional future
compensation to the selected executives to promote the retention of valuable
employees of the Company.
 
  The SEIPS operate by allowing vice presidents of the Company to participate
in a "benefit unit" whereby a participant elects to reduce the amount of
compensation or in some instances make an after-tax contribution otherwise
earned and payable during a four year period. The interest credited on
deferrals ("benefit unit") upon
 
                                      48

<PAGE>
 
termination of employment vests over a ten-year period at which time the
participant receives monthly benefit payments made by the Company over a
fifteen-year period.
 
  A participant may choose to receive the SEIPS incentive benefit payments
prior to the normal benefit payment date, with a corresponding reduction in
the amount to be paid, upon (i) the retirement of a participant after
attaining age 65, (ii) the deferrals required for the benefit unit having been
completed and (iii) completion by a participant of at least four years of
service post enrollment in the benefit unit. If a participant dies prior to
receiving all incentive benefit payments, the beneficiary is entitled to
receive the remaining payments.
 
EXECUTIVE SALARY CONTINUATION PLAN
 
  The Company's Executive Salary Continuation Plan (the "ESCP") is no longer
an active plan, and as such there are a limited number of Company vice
presidents who remain participants within the plan. The ESCP provides vice
presidents of the Company with an additional salary payment of $7,000 per
annum for the five-year period following their retirement from service with
the Company. Additionally, in the event of death of a vice president prior to
retirement, the ESCP provides that the family of the deceased vice president
will receive an estate and family benefit of $10,000 per annum, to be paid for
a total of ten years to the vice president's surviving family. No benefits
under the plan are vested and should a vice president be terminated prior to
retirement, no benefits under the plan are payable. All plan benefits are
taxed as income to the recipients when received.
 
EXECUTIVE PARTICIPATION PROGRAMS
 
 Executive Participation Program
 
  Prior to the Offering and since 1991, the Company maintained two Executive
Participation Programs for executives located in the U.S. and one for
executives located outside of the U.S., also known as the Company's "Equity
Participation Program" (together, the "EPP"). The EPP historically provided
the opportunity for select executives of the Company to purchase shares of
Common Stock. However, in anticipation of the Offering, the Company has ceased
enrollment of executives in the EPP. Most of the Company's vice presidents are
participants in the EPP. The EPP permitted executives to purchase Common Stock
either for cash or a promissory note payable to the Company. Historically,
shares of Common Stock were sold at book value, subject to the execution by
EPP participants of an agreement which required the Company to purchase such
shares at book value upon termination of the participant's employment with the
Company.
 
 Supplemental Equity Participation Plan
   
  Persons promoted to vice president and other persons hired as vice
presidents of the Company between May 2, 1998 and the filing of the Company's
Registration Statement with the Securities and Exchange Commission in
connection with the Offering ordinarily would have become eligible to purchase
shares of Common Stock under the EPP, as described above. However, in
anticipation of the Offering, the Company adopted the Supplemental Equity
Participation Plan (the "Supplemental EPP") and issued shares of Common Stock
to these persons at fair market value, appraised as of June 30, 1998. The
Supplemental EPP also includes the Liquidity Schedule, as described below. The
Company ceased enrollment of executives in the Supplemental EPP as of August
17, 1998.     
   
 Interim Equity Participation Plan     
   
  In November 1998, the Company adopted the Interim Equity Participation Plan
(the "Interim EPP") in order to permit persons promoted to vice president and
other persons hired as vice presidents of the Company after August 17, 1998 to
purchase shares of Common Stock at fair market value as of December 30, 1998.
The Interim EPP is substantially identical to the Supplemental EPP and
includes the Liquidity Schedule.     

                                      49

<PAGE>
 
AMENDED STOCK REPURCHASE AGREEMENT
 
  Substantially all of the shareholders of the Company have entered into an
agreement (a "Stock Repurchase Agreement") with the Company that generally
requires the Company to repurchase the shares of Common Stock owned by the
shareholder at book value, typically upon termination of the shareholder's
employment with the Company. In connection with the Offering, each shareholder
of the Company who has entered into a Stock Repurchase Agreement will have the
opportunity to enter into an Amended Stock Repurchase Agreement (the "Amended
Repurchase Agreement"), whether their original Stock Purchase Agreement was
entered into outside of the EPP or in connection with the EPP. The Amended
Repurchase Agreements will become effective upon the consummation of the
Offering and will incrementally lift restrictions on sale of the shares of
Common Stock subject to the Amended Repurchase Agreement over time (the
"Liquidity Schedule"). See "--Liquidity Schedule." Each shareholder who
executes an Amended Repurchase Agreement will be permitted to sell shares of
Common Stock pursuant to the Liquidity Schedule; those shareholders who do not
sign an Amended Repurchase Agreement with the Company will continue to be
obligated to sell their shares of Common Stock back to the Company at book
value under the terms of their original Stock Repurchase Agreement.
 
  The Amended Repurchase Agreement will also permit the Company to call, on a
non-prorata basis, some or all of the shares of Common Stock, held both within
and outside the EPP, which remain restricted from sale pursuant to the
Liquidity Schedule at (i) the book value as of April 30, 1998, plus interest
at 8.5% per annum from that date, in the case of shares acquired at book
value, or (ii) the value appraised as of the most recent appraisal date
preceding the date of purchase, plus interest at 8.5% per annum from the
appraisal date, in the case of shares acquired at the appraised value. Shares
may be called by the Company if the individual shareholder engages in conduct
or acts detrimental to the Company, as determined by the Company, including,
without limitation, (i) affiliation with a competitor or development of, or
contribution to, a competing enterprise, (ii) the disclosure of confidential
Company information to an unauthorized third party, or (iii) conviction of a
felony or other crime involving fraud, dishonesty or acts of moral turpitude.
Each shareholder accused of such conduct and with respect to whom the Company
wishes to exercise its call rights may appeal to the Chair of the Board and to
a committee of the Board of Directors composed of three directors, at least
two of which are outside directors (the "Equity Committee"). Any such
shareholder who is found to have engaged in such conduct or act will be given
30 days to cure such conduct or acts, if a cure is possible.
 
  Additionally, the Company is permitted to call, on a non-prorata basis at
the call price described above, up to 10% of all outstanding shares of Common
Stock which would otherwise become transferable at a future date under the
Liquidity Schedule, with the proviso that such option may not be exercised
more than once during any two-year period, if the Equity Committee of the
Board of Directors, in its discretion, deems such repurchase to be appropriate
based on the existing market conditions for shares of Common Stock or on the
Company's recent financial performance. The Company's right to call shares of
Common Stock applies only to shares of Common Stock subject to the Liquidity
Schedule.
 
LIQUIDITY SCHEDULE
   
  Substantially all of the Company's existing shareholders have agreed to be
subject to the Liquidity Schedule. Following the Offering and prior to the
second anniversary of the Offering, all shareholders subject to the Liquidity
Schedule will be restricted from selling any of their current Common Stock
holdings. The Liquidity Schedule limits shareholders' ability to sell more
than 30% of their current aggregate Common Stock holdings until the second
anniversary of the Offering. The Liquidity Schedule also limits shareholders'
ability to sell an additional 20% of their current aggregate Common Stock
holdings until on or after the third anniversary of the Offering and limits
their ability to sell more than half of their shareholdings until on or after
the fourth anniversary of the Offering, when restrictions will cease. Upon the
death or permanent incapacity of the shareholder or a change in control in the
Company, the Liquidity Schedule will cease to apply and all of the
shareholder's Common Stock which were still subject to the Liquidity Schedule
will become transferable.     
 
                                      50

<PAGE>
 
EMPLOYMENT AGREEMENTS
 
  The Company has a policy of requiring all its vice presidents to enter into
a standard form of employment agreement that provides for an annual base
salary and discretionary and incentive bonus payment. The Company also
requires its vice presidents to agree in their employment contract not to
compete with the Company both during the term of their employment with the
Company, and also for a period of one to two years after their employment with
the Company.
 
INDEMNIFICATION AND LIMITATION OF LIABILITY OF DIRECTOR AND EXECUTIVE OFFICERS
 
  The Company's Articles contain provisions that eliminate the personal
liability of its directors for monetary damages arising from a breach of their
fiduciary duties in certain circumstances to the fullest extent permitted by
California law. Such limitation of liability does not affect the availability
of equitable remedies such as injunctive relief or rescission.
 
  The Company's Bylaws provide that the Company shall indemnify its directors
and officers and may indemnify its other employees and agents to the fullest
extent permitted by law. The Company's Bylaws also permit the Company to
secure insurance on behalf of any officer, director, employee or other agent
for any liability arising out of his or her actions in such capacity,
regardless of whether the Bylaws would permit indemnification.
 
  The Company has entered, or plans to enter, into agreements to indemnify its
directors and officers, in addition to the indemnification provided for in the
Company's Bylaws. These agreements, among other things, indemnify the
Company's directors and executive officers for certain expenses (including
attorneys' fees), judgments, fines and settlement amounts incurred by any such
person in any action or proceeding, including any action by or in the right of
the Company, arising out of such person's services as a director or executive
officer of the Company, any subsidiary of the Company or any other company or
enterprise to which the person provides services at the request of the
Company. The Company believes that these provisions and agreements are
necessary to attract and retain qualified directors and executive officers.
 
  At present, there is no pending litigation or proceeding involving any
director, officer, employee or agent of the Company where indemnification will
be required or permitted. The Company is not aware of any threatened
litigation or proceeding that might result in a claim for such
indemnification.
 
                                      51

<PAGE>
 

                             CERTAIN TRANSACTIONS
 
ADDITIONAL REDEMPTION AMOUNTS
 
  In fiscal 1995, certain shareholders of the Company (the "Sellers"), at the
request of the Company, agreed to have certain of their shares of Common Stock
redeemed by the Company in a fixed redemption plan initiated by the Company
(the "Redemption"). The Redemption required that any shareholder whose
aggregate ownership of Common Stock, phantom units or stock appreciation
rights exceeded a certain share level have a portion of his holdings redeemed.
The Sellers then agreed to the Redemption, which served as a benefit to the
Company in achieving a more widely held equity ownership as well as an
elimination of holdings by non-employee shareholders.
   
  The redemption price consisted of (i) a fixed amount of $1.82 per
share,which represented the book value of a share of Common Stock as of year
end fiscal 1994, plus 10% to reflect appreciation on the book value from the
end of fiscal 1994 to the date of the redemption (the "Fixed Redemption
Amount"), (ii) a contingent amount (the "Additional Redemption Amount") equal
to the difference between (a) the Fixed Redemption Amount plus 8.5% accrued
interest and (b) the public offering price per share of the Common Stock and
(iii) one share of Series A Preferred Stock for each 100 shares of Common
Stock redeemed. The Fixed Redemption Amount consisted of 16 2/3% cash, with
the balance in the form of a five-year promissory note. The aggregate
Additional Redemption Amount is determined by multiplying the difference
described under item (ii) above by the number of shares redeemed by the
Company from each holder of redeemed shares. The Additional Redemption Amount
is payable if the Company consummates an extraordinary transaction, including
a public offering of the Common Stock of the Company, at any time before
December 31, 2004 and the Seller has not voluntarily terminated or been
terminated for cause prior to the date of the extraordinary transaction.     
 
  The Series A Preferred Stock of the Company has a liquidation value of $7.29
per share plus cumulative unpaid dividends at 8.5% per annum until redemption.
Shares of Series A Preferred Stock have voting rights equivalent to 100 shares
of Common Stock for each share outstanding, except that holders of Series A
Preferred Stock must vote in favor of certain transactions approved by holders
of two-thirds or more of the shares of Common Stock of the Company. The Series
A Preferred Stock was designed to give the Sellers the voting power necessary
to protect their rights to receive payment on the promissory note issued in
the Redemption and the Additional Redemption Amounts. The Company may redeem
all or any part of the outstanding Preferred Stock at the earlier of either
(i) payment in full of all promissory notes of the Company issued in the
Redemption or (ii) the approval of the holders of a majority of the shares of
the Series A Preferred Stock.
 
  Simultaneously with the Redemption, certain holders of phantom units and
stock appreciation rights (the "Rights Holders") agreed to terminate their
phantom units and stock appreciation rights in return for payments
corresponding to the Fixed Redemption Amounts and the Additional Redemption
Amounts.
   
  Because some of the proceeds from the Offering would otherwise have to be
used to pay the aggregate Additional Redemption Amount payable upon an initial
public offering, each of the Sellers and the Rights Holders have agreed to a
negotiated discount (the "Negotiated Adjustment") from the Additional
Redemption Amount they were originally entitled to receive upon an initial
public offering. As a result, upon consummation of the Offering, if the
Offering price is $14.00 per share, the midpoint of the range set forth on the
cover of the Prospectus, the Sellers and the Rights Holders as a group will
receive in the aggregate a payment of $30.2 million and the Company's
shareholders' equity will be reduced by the same amount. Mr. Windle B. Priem,
Chief Executive Officer, President and Director of the Company will receive a
discounted payment of approximately $1.5 million. Mr. Richard Ferry, the Chair
of the Company's Board of Directors, will receive a discounted payment of
approximately $9.6 million.     
 
STRATEGIC COMPENSATION ASSOCIATES
 
  The Company owned 47% of Strategic Compensation Associates ("SCA") during
fiscal 1995 and 1996. During fiscal 1996, the Company paid approximately
$131,000 for services to SCA. In fiscal 1996, the Company
 
                                      52

<PAGE>
 
sold its entire membership interest in SCA and a portion of its capital
account interest in SCA, pursuant to purchase agreements executed with other
members of SCA. The purchase agreements, as amended, provide for the members
of SCA to purchase the Company's remaining capital account interest in five
annual installments, with the last interest transfer and payment to be on
December 31, 2001.
 
LOANS
 
  On January 28, 1998, the Company and Mr. Boxberger entered into an
agreement, whereby the Company agreed to be the co-obligor with Mr. Boxberger
on a promissory note in the amount of $1 million payable to Mellon 1st
Business Bank, entered into by Mr. Boxberger for home loan purposes. The
Company also agreed to pay all of the interest on the note for a four-year
period ending January 15, 2002. The interest rate is payable at a variable
rate at 0.5% below the bank's reference rate, which at the time of execution
of the note was 8.5% per annum, resulting in an effective interest rate
payable by the Company of 8% at the time of execution. Mr. Boxberger has
entered into an agreement with the Company to indemnify and hold the Company
harmless from any and all liability (except for the interest payment) that may
result from the Company being a co-obligor of the note. To secure any
indemnification repayment, Mr. Boxberger has pledged to the Company all shares
of Common Stock owned by him and provided the Company with a right to offset
any unpaid indemnification owed to the Company from amounts owed by the
Company to Mr. Boxberger.
 
TERMINATION OF STOCK RIGHT PLAN AND PHANTOM STOCK PLAN
   
  In contemplation of the Offering, each of the Stock Right Plan and Phantom
Stock Plan was terminated and each previous participant in either the Stock
Right Plan or Phantom Stock Plan (the "Participants") was offered the
opportunity to receive a cash payment of $11.15 per phantom unit or stock
appreciation right or receive shares of the Common Stock valued at the book
value of a share of Common Stock as of April 30, 1998, which was approximately
$2.79 per share after giving effect to the 4-to-1 stock split. The Company had
275,954 phantom units and 114,356 stock appreciation rights outstanding as of
June 30, 1998, the effective date of the surrender, termination and
cancellation of all the outstanding phantom units and stock appreciation
rights of the Company. With the exception of one, all Participants, including
Messrs. Dunn, Papayanopulos and Young, elected to receive shares of Common
Stock in the conversion program and 1,551,008 shares were issued as of June
30, 1998.     
   
RESIGNATION OF MICHAEL D. BOXBERGER     
   
  In December 1998, Michael D. Boxberger resigned from his positions as
President, Chief Executive Officer, Director and a member of the Office of the
Chief Executive of the Company. In connection with his resignation, Mr.
Boxberger entered into the Settlement Agreement with the Company. See
"Management--Executive Compensation--Resignation of Michael D. Boxberger."
    
FUTURE TRANSACTIONS
 
  The Company has implemented a policy requiring that any material transaction
with an affiliated party is subject to approval by a majority of the directors
not interested in such transaction, who must determine that the terms of any
such transaction are no less favorable to the Company than those that could be
obtained from an unaffiliated third party and that the transaction is in the
Company's best interest.
 
                                      53

<PAGE>
 

                      PRINCIPAL AND SELLING SHAREHOLDERS
   
  The following table sets forth certain information about the anticipated
beneficial ownership of the Common Stock immediately prior to the Offering,
and as adjusted to reflect the sale of the Common Stock offered in the
Offering, by (i) each director and each executive officer of the Company, (ii)
all directors and executive officers of the Company as a group, and (iii) each
person (or group of affiliated persons) known by the Company to own
beneficially more than five percent of the Company's outstanding voting
securities not otherwise listed. The address of each director and executive
officer listed is in care of Korn/Ferry International, 1800 Century Park East,
Suite 900, Los Angeles, California 90067.     
 

<TABLE>   
<CAPTION>
                             SHARES BENEFICIALLY            SHARES BENEFICIALLY
                                    OWNED                       OWNED AFTER
                            PRIOR TO THE OFFERING               THE OFFERING
                            -----------------------         --------------------
NAME AND ADDRESS              NUMBER                SHARES   NUMBER
OF BENEFICIAL OWNER         OF SHARES(1) PERCENTAGE OFFERED OF SHARES PERCENTAGE
- -------------------         -----------  ---------- ------- --------- ----------
<S>                         <C>          <C>        <C>     <C>       <C>
Richard M. Ferry(2)(3)(4).   1,031,456       4.0%                           %
Windle B. Priem(2)(4).....     626,364       2.4%
Peter L. Dunn(2)(4).......     437,144       1.7%
Elizabeth S.C.S.
 Murray(2)................      72,992       0.3%
Man Jit Singh.............      80,000       0.3%
Paul Buchanan-Barrow......     187,696       0.7%
Timothy K. Friar..........      50,188       0.2%
Sakie Fukushima...........      69,808       0.3%
Hans Jorda................     211,156       0.8%
Scott E. Kingdom..........      61,956       0.2%
Raimondo Nider............     198,120       0.8%
Manuel A. Papayanopulos...     200,628       0.8%
Michael A. Wellman........      71,188       0.3%
Young Kuan-Sing...........     128,544       0.5%
All directors and
 executive officers
 as a group
 (14 persons)(3)(4).......   3,427,240      13.3%
Other Selling
 Shareholders(4)(5).......
</TABLE>
    
- --------
 *Less than one percent
 
(1) Unless otherwise indicated, each person has sole voting and dispositive
    power with respect to the shares shown.
 
(2) Also an executive officer of the Company. See "Management--Executive
    Officers and Directors."
   
(3) Excludes 89,887 shares of Common Stock held by The Ferry Family Charitable
    Foundation. Mr. Ferry does not have a beneficial interest in the shares of
    Common Stock held by such trusts but does share voting power, as one of
    three trustees, of the shares held by The Ferry Family Charitable
    Foundation.     
 
(4) Holdings include shares of Common Stock held by the Trustees of the
    Korn/Ferry Employee Tax Deferred Savings Plan (401(k) Plan) for the
    benefit of the listed individual.
   
(5) Consists of    persons, of which    persons own more than 1% but less than
    2% and    persons own less than 1% of the outstanding shares of Common
    Stock prior to or after the Offering and of which a substantial percentage
    are employees of the Company.     
 
                                      54

<PAGE>
 

                         DESCRIPTION OF CAPITAL STOCK
   
  The authorized capital stock of the Company consists of 150,000,000 shares
of Common Stock, no par value per share, and 50,000,000 shares of Preferred
Stock, no par value per share, which can be issued in one or more series.
Immediately following the completion of the Offering, an aggregate of
35,711,260 shares of Common Stock will be issued and outstanding (assuming no
exercise of the over-allotment option), and no shares of Preferred Stock will
be issued and outstanding. As of December 23, 1998, the Common Stock was held
of record by approximately 260 persons.     
 
  The following description of the Company's capital stock is a summary of the
material terms of such stock. It does not purport to be complete and is
subject in all respects to applicable California law and to the provisions of
the Company's Articles and Bylaws, copies of which have been filed as exhibits
to the Registration Statement of which this Prospectus is a part.
 
COMMON STOCK
 
  Subject to the rights of the holders of any Preferred Stock which may be
outstanding, each holder of Common Stock on the applicable record date is
entitled to receive such dividends as may be declared by the Board of
Directors out of funds legally available therefor, and, in the event of
liquidation, to share pro rata in any distribution of the Company's assets
after payment or providing for the payment of liabilities and the liquidation
preference of any outstanding Preferred Stock. Each holder of Common Stock is
entitled to one vote for each share held of record on the applicable record
date on all matters presented to a vote of shareholders. Holders of Common
Stock have no preemptive rights to purchase or subscribe for any stock or
other securities and there are no conversion rights or redemption or sinking
fund provisions with respect to such Common Stock. All outstanding shares of
Common Stock are, and the shares of Common Stock offered hereby will be when
issued, fully paid and non-assessable.
 
PREFERRED STOCK
 
  The Company's Articles authorize 50,000,000 shares of Preferred Stock. The
Board of Directors has the authority to issue the Preferred Stock in one or
more series and to fix the rights, preferences, privileges and restrictions
thereof, including dividend rights, conversion rights, voting rights, terms of
redemption, redemption prices, liquidation preferences and the number of
shares constituting any series or the designation of such series, without
further vote or action by the shareholders. The issuance of Preferred Stock
may have the effect of delaying, deferring or preventing a change in control
of the Company without further action by the shareholders and may adversely
affect the voting and other rights of the holders of Common Stock. The
issuance of Preferred Stock with voting and conversion rights may adversely
affect the voting power of the holders of Common Stock, including the loss of
voting control to others. At present, the Company has no plans to issue any of
the Preferred Stock.
 
CERTAIN ANTI-TAKEOVER EFFECTS
 
  Certain provisions of the Company's Articles and Bylaws summarized below may
be deemed to have anti-takeover effects and may delay, defer or prevent a
tender offer or takeover attempt that a shareholder might consider to be in
such shareholder's best interest, including those attempts that might result
in a premium over the market price for the shares held by shareholders.
 
  The Company's Articles authorize issuance of up to 50,000,000 shares of
Preferred Stock, with such characteristics that may tend to discourage a
merger, tender offer or proxy contest, as described in "--Preferred Stock"
above. The Company's Bylaws also limit the ability of shareholders to raise
certain matters at a meeting of shareholders without giving advance notice. In
addition, so long as the Company is a "listed corporation" as defined in
Section 301.5(d) of the California Corporations Code, cumulative voting will
be eliminated and the Board of Directors will be divided into three classes
having staggered terms of three years each, with Classes I,
 
                                      55

<PAGE>
 
II and III having initial terms expiring at the annual general meeting of
shareholders in 1999, 2000 and 2001, respectively. See "Risk Factors--Anti-
Takeover Provisions; Possible Issuance of Preferred Stock" and "Management."
 
TRANSFER AGENT AND REGISTRAR
 
  The Transfer Agent and Registrar for the Common Stock is ChaseMellon
Shareholder Services LLC.
 
LISTING
   
  There is no public trading market for the Common Stock. Application has been
made to list the Common Stock on the New York Stock Exchange ("NYSE") under
the symbol "KFY."     
 
                                      56

<PAGE>
 
                        SHARES ELIGIBLE FOR FUTURE SALE
   
  Sales of substantial amounts of Common Stock after the Offering could
adversely affect the market price of the Common Stock and could impair the
Company's future ability to raise capital through the sale of its equity
securities. Upon the consummation of the Offering, the Company will have
outstanding 35,711,260 shares of Common Stock (37,586,260 shares if the U.S.
Underwriters' and Managers' over-allotment option is exercised in full). All
of the shares of Common Stock sold in the Offering will be freely tradable
under the Securities Act, unless purchased by "affiliates" of the Company as
that term is defined under the Securities Act. Upon the expiration of lock-up
agreements between the Company, its directors and officers, the existing
shareholders and the Underwriters, which will occur 180 days after the date of
this Prospectus (the "Effective Date"), all of the shares of Common Stock
owned by existing shareholders (the "Restricted Shares") will become eligible
for sale, subject to compliance with Rule 144 of the Securities Act and the
Liquidity Schedule as described below.     
   
  In general, under Rule 144 as currently in effect, a person (or persons
whose shares are aggregated), including an affiliate of the Company, who has
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: (i) 1% of the number of shares of Common Stock then
outstanding (approximately 357,113 shares immediately after this Offering) or
(ii) the average weekly trading volume of the Common Stock on the NYSE during
the four calendar weeks preceding the filing of a notice of Form 144 with
respect to such sale with the Securities and Exchange Commission (the
"Commission"). Sales pursuant to Rule 144 are subject to certain requirements
relating to manner of sale, notice and availability of current public
information about the Company. Under Rule 144(k), a person who is not, and has
not been at any time during the 90 days preceding a sale, an affiliate of the
Company and who has beneficially owned the Restricted Shares proposed to be
sold for at least two years (including the holding period of any prior owner
except an affiliate), is entitled to sell such shares without complying with
the manner of sale, public information, volume limitation or noticed
provisions of Rule 144.     
 
  Each of the Company and the existing shareholders of the Company has agreed
that it will not offer, sell, contract to sell, announce its intention to
sell, pledge or otherwise dispose of, directly or indirectly, and the Company
has agreed that it will not file with the Commission a registration statement
under the Securities Act relating to, any shares of Common Stock or securities
convertible into or exchangeable or exercisable for any shares of Common Stock
without the prior written consent of Credit Suisse First Boston Corporation
for a period of 180 days after the date of this Prospectus, except in the case
of the Company for the grant of options and sales of shares under the
Company's stock benefit plans. The lock-up agreements with Credit Suisse First
Boston Corporation and the Company may be released at any time as to all or a
portion of the shares subject to such agreements at the sole discretion of
Credit Suisse First Boston Corporation and the Company.
 
  Substantially all of the Company's existing shareholders have agreed to be
subject to the Liquidity Schedule that limits their ability to sell their
current Common Stock holdings. See "Management--Liquidity Schedule."
 
                                      57

<PAGE>
 

                                 UNDERWRITING
   
  Under the terms and subject to the conditions contained in an Underwriting
Agreement dated      , 1999 (the "U.S. Underwriting Agreement"), the
underwriters named below (the "U.S. Underwriters"), for whom Credit Suisse
First Boston Corporation, Donaldson, Lufkin & Jenrette Securities Corporation
and PaineWebber Incorporated are acting as representatives (the
"Representatives"), have severally but not jointly agreed to purchase from the
Company and the Selling Shareholders the following respective numbers of U.S.
Shares:     
 

<TABLE>   
<CAPTION>
                                                                      NUMBER OF
                                                                         U.S.
                              UNDERWRITER                               SHARES
                              -----------                             ----------
   <S>                                                                <C>
   Credit Suisse First Boston Corporation............................
   Donaldson, Lufkin & Jenrette Securities Corporation...............
   PaineWebber Incorporated..........................................
                                                                      ----------
     Total........................................................... 10,000,000
                                                                      ==========
</TABLE>
    
 
  The U.S. Underwriting Agreement provides that the obligations of the U.S.
Underwriters are subject to certain conditions precedent and that the U.S.
Underwriters will be obligated to purchase all of the U.S. Shares offered
hereby (other than those shares covered by the over-allotment option described
below) if any are purchased. The U.S. Underwriting Agreement provides that, in
the event of a default by a U.S. Underwriter, in certain circumstances the
purchase commitments of non-defaulting U.S. Underwriters may be increased or
the U.S. Underwriting Agreement may be terminated.
 
  The Company and the Selling Shareholders have entered into a Subscription
Agreement (the "Subscription Agreement") with the Managers of the
International Offering (the "Managers") providing for the concurrent offer and
sale of the International Shares outside the United States and Canada. The
closing of the U.S. Offering is a condition to the closing of the
International Offering and vice versa.
   
  The Company has granted to the U.S. Underwriters and the Managers an option,
exercisable by Credit Suisse First Boston Corporation, expiring at the close
of business on the 30th day after the date of this Prospectus, to purchase up
to 1,875,000 additional shares at the initial public offering price, less the
underwriting discounts and commissions, all as set forth on the cover page of
this Prospectus. Such option may be exercised only to cover over-allotments in
the sale of the shares of Common Stock offered hereby. To the extent such
option is exercised, each U.S. Underwriter and each Manager will become
obligated, subject to certain conditions, to purchase approximately the same
percentage of such additional shares being sold to the U.S. Underwriters and
the Managers as the number of U.S. Shares set forth next to such U.S.
Underwriter's name in the preceding table and as the number set forth next to
such Manager's name in the corresponding table in the prospectus relating to
the International Offering bears to the sum of the total number of shares of
Common Stock in such tables.     
 
  The Company and the Selling Shareholders have been advised by the
Representatives that the U.S. Underwriters propose to offer the U.S. Shares in
the United States and Canada to the public initially at the public offering
price set forth on the cover page of this Prospectus and, through the
Representatives, to certain dealers at such price less a concession of $
per share, and the U.S. Underwriters and such dealers may allow a discount of
$     per share on sales to certain other dealers. After the Offering, the
public offering price and concession and discount to dealers may be changed by
the Representatives.
 
                                      58

<PAGE>
 
  The public offering price, the aggregate underwriting discounts and
commissions per share and per share concession and discount to dealers for the
U.S. Offering and concurrent International Offering will be identical.
Pursuant to an Agreement between the U.S. Underwriters and Managers (the
"Intersyndicate Agreement") relating to the Offering, changes in the public
offering price, concession and discount to dealers will be made only upon the
mutual agreement of Credit Suisse First Boston Corporation, as representative
of the U.S. Underwriters, and Credit Suisse First Boston (Europe) Limited
("CSFBL"), on behalf of the Managers.
 
  Pursuant to the Intersyndicate Agreement, each of the U.S. Underwriters has
agreed that, as part of the distribution of the U.S. Shares and subject to
certain exceptions, it has not offered or sold, and will not offer or sell,
directly or indirectly, any shares of Common Stock or distribute any
prospectus relating to the Common Stock to any person outside the United
States or Canada or to any other dealer who does not so agree. Each of the
Managers has agreed or will agree that, as part of the distribution of the
International Shares and subject to certain exceptions, it has not offered or
sold, and will not offer or sell, directly or indirectly, any shares of Common
Stock or distribute any prospectus relating to the Common Stock in the United
States or Canada or to any other dealer who does not so agree. The foregoing
limitations do not apply to stabilization transactions or to transactions
between the U.S. Underwriters and the Managers pursuant to the Intersyndicate
Agreement. As used herein, "United States" means the United States of America
(including the States and the District of Columbia), its territories,
possessions and other areas subject to its jurisdiction, "Canada" means
Canada, its provinces, territories, possessions and other areas subject to its
jurisdiction, and an offer or sale shall be in the United States or Canada if
it is made to (i) any individual resident in the United States or Canada or
(ii) any corporation, partnership, pension, profit-sharing or other trust or
entity (including any such entity acting as an investment adviser with
discretionary authority) whose office most directly involved with the purchase
is located in the United States or Canada.
 
  Pursuant to the Intersyndicate Agreement, sales may be made between the U.S.
Underwriters and the Managers of such number of shares of Common Stock as may
be mutually agreed upon. The price of any shares so sold will be the public
offering price, less such amount as may be mutually agreed upon by Credit
Suisse First Boston Corporation, as representative of the U.S. Underwriters,
and CSFBL, on behalf of the Managers, but not exceeding the selling concession
applicable to such shares. To the extent there are sales between the U.S.
Underwriters and the Managers pursuant to the Intersyndicate Agreement, the
number of shares of Common Stock initially available for sale by the U.S.
Underwriters or by the Managers may be more or less than the amount appearing
on the cover page of the Prospectus. Neither the U.S. Underwriters nor the
Managers are obligated to purchase from the other any unsold shares of Common
Stock.
 
  This Prospectus may be used by underwriters and dealers in connection with
sales of International Shares to persons located in the United States, to the
extent such sales are permitted by the contractual limitations on sales
described above.
 
  The Representatives have informed the Company and the Selling Shareholders
that they do not expect discretionary sales by the Underwriters to exceed 5%
of the shares being offered hereby.
 
  Each of the Company and the existing shareholders of the Company has agreed
that it will not offer, sell, contract to sell, announce its intention to
sell, pledge or otherwise dispose of, directly or indirectly, or file with the
Commission a registration statement under the Securities Act relating to, any
shares of Common Stock or securities convertible into or exchangeable or
exercisable for any shares of the Company without the prior written consent of
Credit Suisse First Boston Corporation for a period of 180 days after the date
of this Prospectus, except in the case of the Company for the grant of options
and sale of shares under the Company's stock benefit plans.
 
  The U.S. Underwriters have reserved for sale, at the initial public offering
price, up to     shares of Common Stock for employees, directors and certain
other persons associated with the Company who have expressed an interest in
purchasing such shares of Common Stock in the Offering. The number of shares
available for sale to the general public in the Offering will be reduced to
the extent such persons purchase such
 
                                      59

<PAGE>
 
reserved shares. Any reserved shares not so purchased will be offered by the
U.S. Underwriters to the general public on the same terms as the other shares
offered hereby.
 
  The Company and Selling Shareholders have agreed to indemnify the U.S.
Underwriters and the Managers against certain liabilities, including civil
liabilities under the Securities Act, or contribute to payments that the U.S.
Underwriters and the Managers may be required to make in respect thereof.
   
  Application has been made to list the shares of Common Stock on the NYSE
under the symbol "KFY."     
 
  In connection with the listing of the Common Stock on the NYSE, the
Underwriters will undertake to sell round lots of 100 shares or more to a
minimum of 2,000 beneficial owners.
 
  The initial public offering price for the shares will be determined by
negotiation among the Company, the Selling Shareholders and the
Representatives. In determining such price, consideration will be given to
various factors, including market conditions for the initial public offering,
the past history of and prospects for the Company's business, operations,
earnings and financial position, an assessment of the Company's management,
the market for securities of companies in businesses similar to those of the
Company, the general condition of the securities markets and other relevant
factors. There can be no assurance, however, that the initial public offering
price will correspond to the price at which the Common Stock will trade in the
public market subsequent to the Offering or that an active trading market will
develop and continue after the Offering.
 
  The Representatives, on behalf of the U.S. Underwriters and the Managers,
may engage in over-allotment, stabilizing transactions, syndicate covering
transactions and penalty bids in accordance with Regulation M under the
Securities Exchange Act of 1934 (the "Exchange Act"). Over-allotment involves
syndicate sales in excess of the offering size, which creates a syndicate
short position. Stabilizing transactions permit bids to purchase the
underlying security so long as the stabilizing bids do not exceed a specified
maximum. Syndicate covering transactions involve purchases of the Common Stock
in the open market after the distribution has been completed in order to cover
syndicate short positions. Penalty bids permit the Representatives to reclaim
a selling concession from a syndicate member when the Common Stock originally
sold by such syndicate member is purchased in a syndicate covering transaction
to cover syndicate short positions. Such stabilizing transactions, syndicate
covering transactions and penalty bids may cause the price of the Common Stock
to be higher than it would otherwise be in the absence of such transactions.
These transactions may be effected on the NYSE or otherwise and, if commenced,
may be discontinued at any time.
 
                                      60

<PAGE>
 
                         NOTICE TO CANADIAN RESIDENTS
 
RESALE RESTRICTIONS
 
  The distribution of the Common Stock in Canada is being made only on a
private placement basis exempt from the requirement that the Company and
Selling Shareholders prepare and file a prospectus with the securities
regulatory authorities in each province where trades of Common Stock are
effected. Accordingly, any resale of the Common Stock in Canada must be made
in accordance with applicable securities laws which will vary depending on the
relevant jurisdiction, and which may require resales to be made in accordance
with available statutory exemptions or pursuant to a discretionary exemption
granted by the applicable Canadian securities regulatory authority. Purchasers
are advised to seek legal advice prior to any resale of the Common Stock.
 
REPRESENTATIONS OF PURCHASERS
 
  Each purchaser of Common Stock in Canada who receives a purchase
confirmation will be deemed to represent to the Company and Selling
Shareholders and the dealer from whom such purchase confirmation is received
that (i) such purchaser is entitled under applicable provincial securities
laws to purchase such Common Stock without the benefit of a prospectus
qualified under such securities laws, (ii) where required by law, that such
purchaser is purchasing as principal and not as agent, and (iii) such
purchaser has reviewed the text above under "--Resale Restrictions."
 
RIGHTS OF ACTION (ONTARIO PURCHASERS)
 
  The securities being offered are those of a foreign issuer and Ontario
purchasers will not receive the contractual right of action prescribed by
section 32 of the Regulation under the Securities Act (Ontario). As a result,
Ontario purchasers must rely on other remedies that may be available,
including common law rights of action for damages or rescission or rights of
action under the civil liability provisions of the U.S. federal securities
laws.
 
ENFORCEMENT OF LEGAL RIGHTS
 
  All of the issuer's directors and officers as well as the experts named
herein and the Selling Shareholders may be located outside of Canada and, as a
result, it may not be possible for Canadian purchasers to effect service of
process within Canada upon the issuer or such persons. All or a substantial
portion of the assets of the issuer and such persons may be located outside of
Canada and, as a result, it may not be possible to satisfy a judgment against
the issuer or such persons in Canada or to enforce a judgment obtained in
Canadian courts against such issuer or persons outside of Canada.
 
NOTICE TO BRITISH COLUMBIA RESIDENTS
 
  A purchaser of Common Stock to whom the Securities Act (British Columbia)
applies is advised that such purchaser is required to file with the British
Columbia Securities Commission a report within ten days of the sale of any
Common Stock acquired by such purchaser pursuant to this offering. Such report
must be in the form attached to British Columbia Securities Commission Blanket
Order BOR #95/17, a copy of which may be obtained from the Company. Only one
such report must be filed in respect of Common Stock acquired on the same date
and under the same prospectus exemption.
 
TAXATION AND ELIGIBILITY FOR INVESTMENT
 
  Canadian purchasers of Common Stock should consult their own legal and tax
advisors with respect to the tax consequences of an investment in the Common
Stock in their particular circumstances and with respect to the eligibility of
the Common Stock for investment by the purchaser under relevant Canadian
Legislation.
 
                                      61

<PAGE>
 

                                 LEGAL MATTERS
 
  The validity of the shares of the Common Stock offered hereby will be passed
upon for the Company by O'Melveny & Myers LLP, Los Angeles, California and for
the Underwriters by Sullivan & Cromwell, Los Angeles, California.
 

                                    EXPERTS
 
  The consolidated financial statements and schedule 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 giving said reports.
 
                             AVAILABLE INFORMATION
 
  The Company has filed with the Commission a Registration Statement on Form
S-1 (together with all amendments, exhibits, schedules and supplements
thereto, the "Registration Statement"), of which this Prospectus forms a part,
covering the Common Stock to be sold pursuant to the Offering. As permitted by
the rules and regulations of the Commission, this Prospectus omits certain
information, exhibits and undertakings contained in the Registration
Statement. Such additional information, exhibits and undertakings can be
inspected at and obtained from the Commission at prescribed rates at the
public reference facilities maintained by the Commission at Room 1024, 450
Fifth Street, N.W., Washington, D.C. 20549 and at certain regional offices of
the Commission located at Citicorp Center, 500 West Madison Street, Suite
1400, Chicago, Illinois 60661 and 13th Floor, 7 World Trade Center, New York,
New York, 10048. The Commission maintains a Web site at http://www.sec.gov
that contains reports, proxy and information statements and other information
regarding registrants that file electronically with the Commission. In
addition, application will be made to list the Common Stock on the NYSE, and
reports and other information concerning the Company may be inspected at the
offices of such exchange. For additional information with respect to the
Company, the Common Stock and related matters and documents, reference is made
to the Registration Statement. Statements contained herein concerning any such
document are not necessarily complete and, in each instance, reference is made
to the copy of such document filed as an exhibit to the Registration
Statement. Each such statement is qualified in its entirety by such reference.
 
  The Company will issue annual reports and unaudited quarterly reports to its
shareholders for the first three quarters of each fiscal year. Annual reports
will include audited consolidated financial statements prepared in accordance
with accounting principles generally accepted in the United States and a
report of its independent public accountants with respect to the examination
of such financial statements. In addition, the Company will issue such other
interim reports as it deems appropriate.
 
                                      62

<PAGE>
 
                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
 

<TABLE>   
<S>                                                                          <C>
Report of Independent Public Accountants...................................  F-2
Consolidated Balance Sheets as of April 30, 1997 and 1998 and as of October
 31, 1998 (unaudited)......................................................  F-3
Consolidated Statements of Income for the fiscal years ended April 30,
 1996, 1997 and 1998 and the six months ended October 31, 1997 and 1998
 (unaudited)...............................................................  F-5
Consolidated Statements of Shareholders' Equity for the fiscal years ended
 April 30, 1996, 1997 and 1998 and the six months ended October 31, 1998
 (unaudited)...............................................................  F-6
Consolidated Statements of Cash Flows for the fiscal years ended April 30,
 1996, 1997 and 1998 and the six months ended October 31, 1997 and 1998
 (unaudited)...............................................................  F-7
Notes to Consolidated Financial Statements.................................  F-8
</TABLE>
    
 
                                      F-1

<PAGE>
 
  After the stock split discussed in Note 14 to Korn/Ferry International's
consolidated financial statements is effective, we expect to be in a position
to render the following auditor's report.
 
Arthur Andersen LLP
 
Los Angeles, California
   
July 31, 1998     
 
                   REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
 
To the Shareholders and Board of Directors of
Korn/Ferry International and Subsidiaries:
 
  We have audited the accompanying consolidated balance sheets of KORN/FERRY
INTERNATIONAL AND SUBSIDIARIES (the "Company"), a California corporation, as
of April 30, 1998 and 1997, and the related consolidated statements of income,
shareholders' equity and cash flows for each of the three years in the period
ended April 30, 1998. 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 generally accepted auditing
standards. 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 KORN/FERRY INTERNATIONAL
AND SUBSIDIARIES as of April 30, 1998 and 1997, and the consolidated results
of their operations and their cash flows for each of the three years in the
period ended April 30, 1998, in conformity with generally accepted accounting
principles.
 
                                      F-2

<PAGE>
 
                   KORN/FERRY INTERNATIONAL AND SUBSIDIARIES
 
                          CONSOLIDATED BALANCE SHEETS
                                 (IN THOUSANDS)
 

<TABLE>   
<CAPTION>
                                                    APRIL 30,       OCTOBER 31,
                                                ------------------  -----------
                                                  1997      1998       1998
                                                --------  --------  -----------
                                                                    (UNAUDITED)
<S>                                             <C>       <C>       <C>
ASSETS
Cash and cash equivalents.....................  $ 25,298  $ 32,358   $ 23,277
Receivables due from clients, net of allowance
 for doubtful accounts of $3,846 and $5,390 as
 of April 30, 1997 and 1998 and $7,307 as of
 October  31, 1998, respectively..............    49,749    57,754     67,867
Other receivables.............................     3,937     3,501      3,125
Prepaid expenses..............................     5,758     6,265      6,947
                                                --------  --------   --------
    Total current assets......................    84,742    99,878    101,216
                                                --------  --------   --------
Property and equipment:
  Computer equipment and software.............    13,259    13,715     16,393
  Furniture and fixtures......................    10,673    13,573     14,415
  Leasehold improvements......................     7,596     9,713     11,157
  Automobiles.................................     1,580     1,679      1,893
                                                --------  --------   --------
                                                  33,108    38,680     43,858
Less: Accumulated depreciation and
 amortization.................................   (15,361)  (17,583)   (21,853)
                                                --------  --------   --------
    Property and equipment, net...............    17,747    21,097     22,005
                                                --------  --------   --------
Cash surrender value of company owned life
 insurance policies, net of loans.............    21,292    30,109     31,981
Guaranteed investment contracts...............     3,546     1,746      1,797
Notes receivable..............................     2,781     2,308      2,400
Deferred income taxes.........................    11,953    16,545     18,287
Goodwill and other intangibles, net of
 accumulated amortization of $3,332 and $4,182
 as of April 30, 1997 and 1998 and $4,726 as
 of October 31, 1998, respectively............     4,364     2,972      6,168
Other.........................................     1,980     1,716      3,585
                                                --------  --------   --------
    Total assets..............................  $148,405  $176,371   $187,439
                                                ========  ========   ========
</TABLE>
    
 
 
 
  The accompanying notes are an integral part of these consolidated financial
                                  statements.
 
                                      F-3

<PAGE>
 
                   KORN/FERRY INTERNATIONAL AND SUBSIDIARIES
 
                    CONSOLIDATED BALANCE SHEETS--(CONTINUED)
                                 (IN THOUSANDS)
 

<TABLE>   
<CAPTION>
                                                    APRIL 30,       OCTOBER 31,
                                                ------------------  -----------
                                                  1997      1998       1998
                                                --------  --------  -----------
                                                                    (UNAUDITED)
<S>                                             <C>       <C>       <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
Notes payable and current maturities of long-

 term debt..................................... $  5,072  $  2,559   $  2,696
Accounts payable...............................    4,938     3,651      7,667
Income taxes payable...........................    5,454     6,903      2,249
Accrued liabilities:
  Compensation.................................   24,164    26,100     40,664
  Payroll taxes................................    7,790    14,821      1,865
  Other accruals...............................   17,273    19,271     21,518
                                                --------  --------   --------
    Total current liabilities..................   64,691    73,305     76,659
Deferred compensation..........................   27,676    34,552     34,171
Long-term debt.................................    3,206     6,151      7,102
Other..........................................      933     1,582      1,846
                                                --------  --------   --------
    Total liabilities..........................   96,506   115,590    119,778
                                                --------  --------   --------
Non-controlling shareholders' interests........    1,087     2,027      1,820
                                                --------  --------   --------
Mandatorily redeemable common and preferred
 stock:
  Preferred stock, no par value
  Series A--Authorized 10 shares, outstanding 9
   shares as of April 30, 1997 and 1998 and as
   of October 31, 1998 at redemption value.....       63        63         63
  Series B--Authorized 150 shares, outstanding
   126 and 121 shares as of April 30, 1997 and
   1998 and as of October 31, 1998 at book
   value.......................................    1,306     1,353      1,389
  Common stock, no par value--outstanding
   20,062 and 22,282 shares as of April 30,
   1997 and 1998 and 26,102 shares as of
   October 31, 1998 at book value..............   52,159    62,110     74,563
  Less: Notes receivable from shareholders and
   other unpaid shares.........................   (5,339)   (7,365)   (12,830)
                                                --------  --------   --------
    Total mandatorily redeemable common and
     preferred stock...........................   48,189    56,161     63,185
                                                --------  --------   --------
Shareholders' equity:
  Common Stock, no par value--Authorized
   150,000 shares, outstanding 1,010 and 920
   shares as of April 30, 1997 and 1998 and 920
   shares as of October 31, 1998 at book value.      --        --         --
  Retained Earnings............................    2,623     2,593      2,656
                                                --------  --------   --------
    Total shareholders' equity.................    2,623     2,593      2,656
                                                --------  --------   --------
    Total liabilities and shareholders' equity. $148,405  $176,371   $187,439
                                                ========  ========   ========
</TABLE>
    
 
 
  The accompanying notes are an integral part of these consolidated financial
                                  statements.
 
                                      F-4

<PAGE>
 
                   KORN/FERRY INTERNATIONAL AND SUBSIDIARIES
 
                       CONSOLIDATED STATEMENTS OF INCOME
                    (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
 

<TABLE>   
<CAPTION>
                           FISCAL YEAR ENDED APRIL
                                     30,                SIX MONTHS ENDED OCTOBER 31,
                          ----------------------------  ----------------------------
                            1996      1997      1998         1997            1998
                          --------  --------  --------  --------------  --------------
                                                                 (UNAUDITED)
<S>                       <C>       <C>       <C>       <C>             <C>
Professional fees and
 reimbursable expenses..  $225,459  $269,624  $311,016  $      145,977  $      181,825
Other income including
 interest income........     4,758     2,937     4,009           1,158           1,937
                          --------  --------  --------  --------------  --------------
  Total revenues........   230,217   272,561   315,025         147,135         183,762
Less: Reimbursable
 candidate expenses.....    (8,731)  (12,137)  (14,470)         (6,804)         (8,073)
                          --------  --------  --------  --------------  --------------
  Net revenues..........   221,486   260,424   300,555         140,331         175,689
                          --------  --------  --------  --------------  --------------
Compensation and
 benefits...............   140,721   166,854   197,790          96,135         116,380
General and
 administrative
 expenses...............    64,419    73,005    84,575          35,872          51,961
Interest expense........     3,683     3,320     4,234           1,740           2,582
                          --------  --------  --------  --------------  --------------
  Income before
   provision for income
   taxes and
   non-controlling
   shareholders'
   interests............    12,663    17,245    13,956           6,584           4,766
Provision for income
 taxes..................     3,288     6,658     6,687           3,131           2,069
Non-controlling
 shareholders'
 interests..............     1,579     1,588     2,025           1,015           1,324
                          --------  --------  --------  --------------  --------------
  Net income............  $  7,796  $  8,999  $  5,244  $        2,438  $        1,373
                          ========  ========  ========  ==============  ==============
Basic earnings per
 common share...........  $    .38  $    .42  $    .24  $          .11  $          .05
                          ========  ========  ========  ==============  ==============
Basic weighted average
 common shares
 outstanding............    20,390    21,382    21,885          21,403          26,007
                          ========  ========  ========  ==============  ==============
Diluted earnings per
 common share...........  $    .36  $    .40  $    .23  $          .11  $          .05
                          ========  ========  ========  ==============  ==============
Diluted weighted average
 common shares
 outstanding............    23,019    23,481    23,839          23,280          27,242
                          ========  ========  ========  ==============  ==============
</TABLE>
    
 
 
  The accompanying notes are an integral part of these consolidated financial
                                  statements.
 
                                      F-5

<PAGE>
 
                   KORN/FERRY INTERNATIONAL AND SUBSIDIARIES
 
                CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
                                 (IN THOUSANDS)
 

<TABLE>   
<CAPTION>
                                                                           ALLOCATION OF
                                                                           SHAREHOLDERS'
                                                              ACCUMULATED    EQUITY TO
                          PREFERRED STOCK                        OTHER      MANDATORILY      TOTAL
                         ----------------- COMMON   RETAINED COMPREHENSIVE  REDEEMABLE   SHAREHOLDERS' COMPREHENSIVE
                         SERIES A SERIES B  STOCK   EARNINGS    INCOME         STOCK        EQUITY        INCOME
                         -------- -------- -------  -------- ------------- ------------- ------------- -------------
<S>                      <C>      <C>      <C>      <C>      <C>           <C>           <C>           <C>
Balance as of April 30,
 1995...................   $ 1      $14    $ 9,211  $31,976     $  (420)     $(38,763)      $2,019
 Purchase of stock......             (1)    (2,957)                             2,958
 Issuance of stock......                     4,402                             (4,402)
Comprehensive income:
 Net income.............                              7,796                    (7,456)         340        $ 7,796
 Foreign currency
  translation
  adjustments before
  tax...................                                         (2,564)        2,452         (112)        (2,564)
 Income tax benefit
  related to other
  comprehensive income..                                            666          (637)          29            666
                                                                                                          -------
Comprehensive income....                                                                                  $ 5,898
                           ---      ---    -------  -------     -------      --------       ------        =======
Balance as of April 30,
 1996...................     1       13     10,656   39,772      (2,318)      (45,848)       2,276
 Purchase of stock......             (1)    (5,051)                             5,052
 Issuance of stock......                     5,843                             (5,843)
Comprehensive income:
 Net income.............                              8,999                    (8,567)         432        $ 8,999
 Foreign currency
  translation
  adjustments before
  tax...................                                         (2,872)        2,734         (138)        (2,872)
 Income tax benefit
  related to other
  comprehensive income..                                          1,109        (1,056)          53          1,109
                                                                                                          -------
Comprehensive income....                                                                                  $ 7,236
                           ---      ---    -------  -------     -------      --------       ------        =======
Balance as of April 30,
 1997...................     1       12     11,448   48,771      (4,081)      (53,528)       2,623
 Purchase of stock......                    (3,150)                             2,916         (234)
 Issuance of stock......                     8,635                             (8,635)
Comprehensive income:
 Net income.............                              5,244                    (5,005)         239        $ 5,244
 Foreign currency
  translation
  adjustments before
  tax...................                                         (1,461)        1,394          (67)        (1,461)
 Income tax benefit
  related to other
  comprehensive income..                                            700          (668)          32            700
                                                                                                          -------
Comprehensive income....                                                                                  $ 4,483
                           ---      ---    -------  -------     -------      --------       ------        =======
Balance as of April 30,
 1998...................     1       12     16,933   54,015      (4,842)      (63,526)       2,593
 Purchase of stock
  (unaudited)...........                    (2,418)                             2,418
 Issuance of stock
  (unaudited)...........                    13,916                            (13,916)
Comprehensive income
 (unaudited):
 Net income.............                              1,373                    (1,291)          82        $ 1,373
 Foreign currency
  translation
  adjustments before
  tax...................                                           (564)          531          (34)          (564)
 Income tax benefit
  related to other
  comprehensive income..                                            245          (230)          15            245
                                                                                                          -------
Comprehensive income....                                                                                  $ 1,054
                           ---      ---    -------  -------     -------      --------       ------        =======
Balance as of
 October 31, 1998
 (unaudited)............   $ 1      $12    $28,431  $55,388     $(5,161)     $(76,014)      $2,656
                           ===      ===    =======  =======     =======      ========       ======
</TABLE>
    
 
  The accompanying notes are an integral part of these consolidated financial
                                  statements.
 
                                      F-6

<PAGE>
 
                   KORN/FERRY INTERNATIONAL AND SUBSIDIARIES
 
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)
 

<TABLE>   
<CAPTION>
                               FISCAL YEAR ENDED APRIL      SIX MONTHS ENDED
                                         30,                   OCTOBER 31,
                              ----------------------------  ------------------
                                1996      1997      1998      1997      1998
                              --------  --------  --------  --------  --------
                                                               (UNAUDITED)
<S>                           <C>       <C>       <C>       <C>       <C>
Cash from operating
 activities:
  Net income................. $  7,796  $  8,999  $  5,244  $  2,438  $  1,373
  Adjustments to reconcile
   net income to
   net cash provided by
   operating activities:
    Depreciation.............    3,599     5,087     6,552     3,304     3,989
    Amortization.............    1,541       424     1,165       583       544
    Provision for doubtful
     accounts................    1,590     2,196     2,427     1,010     3,307
    Cash surrender value in
     excess of premiums paid.   (1,142)   (1,601)   (1,767)     (840)     (256)
    Earnings from affiliate..      589       --        --        --        --
    Gain on sale of interest
     in affiliate............     (516)      --        --        --        --
  Change in other assets and
   liabilities net of
   acquisitions:
    Deferred compensation....    2,056     3,093     6,876     4,108     3,859
    Receivables due from
     clients.................   (8,769)  (12,630)   (9,996)  (12,605)  (11,603)
    Prepaid expenses.........     (988)   (1,174)     (507)   (1,260)     (682)
    Income taxes payable.....   (5,323)      276    (3,143)    1,390    (6,396)
    Accounts payable and
     accrued liabilities.....    8,344     6,036     9,678      (842)    7,872
    Non-controlling
     shareholders' interests
     and other, net..........     (431)     (550)    1,953      (388)   (3,676)
                              --------  --------  --------  --------  --------
      Net cash provided by
       (used in) operating
       activities............    8,346    10,156    18,482    (3,102)   (1,669)
                              --------  --------  --------  --------  --------
Cash from investing
 activities:
  Purchase of property and
   equipment.................   (8,084)   (8,483)   (9,903)   (5,419)   (4,898)
  Business acquisitions, net
   of cash acquired..........      --        --        --        --     (1,323)
  Premiums on life insurance.   (8,590)   (7,865)  (12,408)   (3,462)   (3,816)
  Redemption (purchase) of
   guaranteed investment
   contracts.................   (5,299)    1,753     1,949       --        --
  Sale of interest in
   affiliates................      357       434       473       --        --
                              --------  --------  --------  --------  --------
      Net cash used in
       investing activities..  (21,616)  (14,161)  (19,889)   (8,881)  (10,037)
                              --------  --------  --------  --------  --------
Cash from financing
 activities:
  Increase (decrease) in bank
   borrowings................   (1,000)    2,000     2,000     8,000       --
  Payment of debt............   (1,477)   (1,470)   (1,957)     (926)     (750)
  Borrowings (repayments)
   under life insurance
   policies..................   12,878     1,973     5,358       (60)    2,200
  Purchase of common and
   preferred stock...........   (2,532)   (3,674)   (2,761)   (1,859)   (2,160)
  Issuance of common and
   preferred stock...........    5,695     5,597     6,588     2,584     3,654
                              --------  --------  --------  --------  --------
      Net cash provided by
       financing activities..   13,564     4,426     9,228     7,739     2,944
                              --------  --------  --------  --------  --------
Effect of exchange rate
 changes on cash flows.......   (1,898)   (1,763)     (761)     (275)     (319)
                              --------  --------  --------  --------  --------
Net increase (decrease) in
 cash and cash equivalents...   (1,604)   (1,342)    7,060    (4,519)   (9,081)
Cash and cash equivalents at
 beginning of the period.....   28,244    26,640    25,298    25,298    32,358
                              --------  --------  --------  --------  --------
Cash and cash equivalents at
 end of the period........... $ 26,640  $ 25,298  $ 32,358  $ 20,779  $ 23,277
                              ========  ========  ========  ========  ========
</TABLE>
    
 
  The accompanying notes are an integral part of these consolidated financial
                                  statements.
 
                                      F-7

<PAGE>
 
                   KORN/FERRY INTERNATIONAL AND SUBSIDIARIES
 
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
 
                                APRIL 30, 1998
 
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
 Nature of Business
 
  Korn/Ferry International and Subsidiaries is engaged in the business of
providing executive search, consulting and related services globally on a
retained basis.
 
 Principles of Consolidation
 
  The consolidated financial statements include the accounts of Korn/Ferry
International, all of its wholly owned domestic and international
subsidiaries, and affiliated companies in which the Company has effective
control (collectively, the "Company"). All material intercompany accounts and
transactions have been eliminated.
 
 Interim Financial Information
   
  The accompanying balance sheet as of October 31, 1998 and the statements of
income and cash flows for the six months ended October 31, 1997 and 1998 and
the statements of shareholders' equity for the six months ended October 31,
1998 are unaudited. In the opinion of management, the statements have been
prepared on the same basis as the audited financial statements and include all
adjustments, consisting of normal recurring adjustments, necessary for the
fair presentation of the interim periods. The data for the interim periods
disclosed in these notes to the financial statements is also unaudited. The
results of operations and cash flows for the interim period are not
necessarily indicative of the results to be expected for any future interim
period.     
 
 Use of Estimates
 
  The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates. The most
significant estimates with regard to these financial statements relate to the
accounting for deferred compensation plans and deferred tax assets. (See Notes
8 and 9).
 
 Translation of Foreign Currencies
 
  The functional currency applicable to the Company's foreign subsidiaries,
except those in Argentina, Brazil, Colombia and Venezuela, is the local
currency. Due to high inflation, Argentina, Brazil, Colombia and Venezuela use
the U.S. dollar as the functional currency.
 
  Assets and liabilities of the Company's foreign subsidiaries are translated
into U.S. dollars at the rates of exchange in effect at the end of each year
and revenues and expenses are translated at average rates of exchange during
the year. Translation adjustments are reported as a component of comprehensive
income.
 
  For entities denominated in currencies other than their functional
currencies, gains and losses resulting from the effect of exchange rate
changes are included in determining net income and resulted in losses,
included in general and administrative expenses, of $97, $344 and $511 in
fiscal 1996, 1997 and 1998, respectively.
 
                                      F-8

<PAGE>
 
                   KORN/FERRY INTERNATIONAL AND SUBSIDIARIES
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
 
 
 Revenue Recognition
 
  Substantially all professional fee revenues are derived from fees for
professional services related to executive search, consulting and related
services. Fee revenues are recognized as services are substantially rendered,
generally over a ninety day period commencing in the month of initial
acceptance of a search engagement. The Company generally bills clients in
three monthly installments over this period. Reimbursable expenses include
specifically identified and allocated costs related to professional services
that are billed to clients.
 
 Cash Flows
 
  Cash equivalents consist of highly liquid investments purchased with
original maturities of three months or less.
   
  Net cash from operating activities includes cash payments for interest of
$3,233, $3,594, $4,381, $509 and $880 in fiscal 1996, 1997, 1998 and the six
months ended October 31, 1997 and 1998, respectively. Cash payments for income
taxes, net of refunds, amounted to $6,620, $6,770, $9,830, $1,676 and $8,431
in fiscal 1996, 1997 and 1998 and the six months ended October 31, 1997 and
1998, respectively.     
 
 Fair Value of Financial Instruments
 
  The carrying amount of cash, cash equivalents and accounts receivable
approximates fair value due to the short maturity of these instruments.
Guaranteed investment contracts, notes receivable, notes payable and long-term
debt bear interest at rates that approximate the current market interest rates
for similar instruments and, accordingly the carrying value approximates fair
value.
 
 Concentration of Credit Risk
 
  Financial instruments which potentially subject the Company to significant
concentrations of credit risk consist principally of receivables due from
clients. Concentrations of credit risk with respect to receivables are limited
due to the Company's large number of customers and their dispersion across
many different industries and countries worldwide.
 
 Earnings per Common Share
 
  The Company adopted Statement of Financial Accounting Standard ("SFAS") No.
128, "Earnings per Share," ("EPS") at April 30, 1998, which requires the
Company to report basic and diluted EPS. Basic EPS is computed by dividing net
income by the weighted average number of common shares outstanding for the
year. Diluted EPS reflects the potential dilution that could occur if the
Company's phantom stock units, stock rights and Common Stock purchase
commitments were converted or issued as of the earlier of the beginning of
each year or the date of issuance. (See Note 2).
 
 Property and Equipment
 
  Leasehold improvements are amortized over the useful life of the asset, or
the lease term, whichever is less, using the straight-line method. All other
property and equipment is depreciated or amortized over the estimated useful
lives of three to ten years, using the straight-line method.
 
 Cash Surrender Value of Life Insurance
 
  The increase in the cash surrender value ("CSV") of Company owned life
insurance ("COLI") contracts in excess of insurance premiums paid is reported
in compensation and benefits expense. (See Note 8).
 
                                      F-9

<PAGE>
 
                   KORN/FERRY INTERNATIONAL AND SUBSIDIARIES
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
 
 
 Goodwill and Other Intangibles
 
  Goodwill is amortized on a straight line basis generally over five to ten
years. Other intangibles arising from business acquisitions include
contractual obligations contingent upon future performance and are amortized
on a straight line basis over the contractual period.
 
 New Accounting Pronouncements
 
  During 1997, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 131, "Disclosures about Segments of an Enterprise and Related
Information," which requires companies to report financial and descriptive
information about its reportable operating segments in the interim and annual
financial statements. It is effective for annual periods beginning after
December 15, 1997 and will be adopted by the Company in fiscal 1999. It is not
expected that the adoption of this standard will have an impact on the
consolidated financial statements, however, it may require additional footnote
disclosure.
 
  During 1998, the FASB issued SFAS No. 132, "Employers' Disclosure about
Pensions and Other Postretirement Benefits an amendment to FASB Statements No.
87, 88 and 106," which revises employers' disclosure requirements for pension
and other postretirement plans. It does not change the measurement or
recognition of costs and benefits provided by those plans. The standard is
effective for fiscal years beginning after December 15, 1997, although earlier
application is encouraged. Adoption of this pronouncement is reflected in the
accompanying consolidated financial statements (See Note 8). Disclosures for
earlier periods have been restated for comparative purposes.
 
  During 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and for Hedging Activities," which establishes new standards for
reporting derivative and hedging information. The standard is effective for
periods beginning after June 15, 1999 and will be adopted by the Company as of
May 1, 2000. It is not expected that the adoption of this standard will have
an impact on the consolidated financial statements nor require additional
footnote disclosure since the Company does not currently utilize derivative
instruments or participate in structured hedging activities.
 
Reclassifications
 
  Certain prior year balances have been reclassified in order to conform to
the current year consolidated financial statement presentation.
 
                                     F-10

<PAGE>
 
                   KORN/FERRY INTERNATIONAL AND SUBSIDIARIES
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
 
 
2. BASIC AND DILUTED EARNINGS PER SHARE
 
  Following is a reconciliation of the numerator (income) and denominator
(shares) used in the computation of basic and diluted EPS:
 

<TABLE>   
<CAPTION>
                                   FISCAL YEAR ENDED APRIL 30,                         SIX MONTHS ENDED OCTOBER 31,
                  -------------------------------------------------------------- -----------------------------------------
                          1996                 1997                 1998                 1997                 1998
                  -------------------- -------------------- -------------------- -------------------- --------------------
                                 PER                  PER                  PER                  PER                  PER
                                SHARE                SHARE                SHARE                SHARE                SHARE
                  INCOME SHARES AMOUNT INCOME SHARES AMOUNT INCOME SHARES AMOUNT INCOME SHARES AMOUNT INCOME SHARES AMOUNT
                  ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
<S>               <C>    <C>    <C>    <C>    <C>    <C>    <C>    <C>    <C>    <C>    <C>    <C>    <C>    <C>    <C>
BASIC EPS
Income available
 to common
 shareholders...  $7,796 20,390 $0.38  $8,999 21,382 $0.42  $5,244 21,885 $0.24  $2,438 21,403 $0.11  $1,373 26,007 $0.05
                                =====                =====                =====                =====                =====
EFFECT OF
 DILUTIVE
 SECURITIES
Shareholder
 common stock
 purchase
 commitments....            894                  436                  318                  219                  700
Phantom stock
 units..........     299  1,272           246  1,242           161  1,219            81  1,241                  383
Stock
 appreciation
 rights.........     109    463            88    421            14    417             7    417                  152
                  ------ ------        ------ ------        ------ ------        ------ ------        ------ ------
DILUTED EPS
Income available
 to common
 shareholders
 plus assumed
 conversions....  $8,204 23,019 $0.36  $9,333 23,481 $0.40  $5,419 23,839 $0.23  $2,526 23,280 $0.11  $1,373 27,242 $0.05
                  ====== ====== =====  ====== ====== =====  ====== ====== =====  ====== ====== =====  ====== ====== =====
</TABLE>
    
 
 
  The share amounts in the table above reflect a 4 to 1 stock split approved
by the Board of Directors on July 24, 1998. (See Note 14).
 
                                     F-11

<PAGE>
 
                   KORN/FERRY INTERNATIONAL AND SUBSIDIARIES
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
 
 
3. NOTES PAYABLE AND LONG-TERM DEBT
   
  At April 30, 1998, the Company maintained an $11,000 unsecured bank
revolving line of credit facility. Borrowings on the line of credit bear
interest at the bank's prime rate less one-half percent, which was 8.0% at
April 30, 1998. There was no outstanding balance under the revolving line of
credit as of April 30, 1998.     
 
  The Company's long-term debt consists of the following:

<TABLE>
<CAPTION>
                                                                FISCAL YEAR
                                                              ENDED APRIL 30,
                                                              ----------------
                                                               1997     1998
                                                              -------  -------
<S>                                                           <C>      <C>
8% variable rate unsecured term loan due to bank, principal
 and interest payable quarterly.............................. $   --   $ 5,000
Unsecured subordinated notes payable to former shareholders
 due through October 2002, bearing interest at various rates
 up to 8.75%.................................................   5,278    3,710
                                                              -------  -------
  Total debt.................................................   5,278    8,710
Less: current maturities of long-term debt...................  (2,072)  (2,559)
                                                              -------  -------
  Long-term debt............................................. $ 3,206  $ 6,151
                                                              =======  =======
</TABLE>

 
  The Company issued notes payable to shareholders of $395, $1,708 and $389 in
fiscal 1996, 1997 and 1998, respectively, for the purchase of Common Stock.
 
  Annual maturities of long-term debt for the five fiscal years subsequent to
April 30, 1998 are: $2,559 in 1999, $2,488 in 2000, $1,336 in 2001, $1,254 in
2002 and $1,073 in 2003.
 
  The Company also has outstanding borrowings against the CSV of COLI
contracts of $32,278 and $37,638 at April 30, 1997 and 1998, respectively.
These borrowings are secured by the CSV, principal payments are not scheduled
and interest is payable at least annually, at various variable rates. (See
Note 8).
 
4. SHAREHOLDERS AGREEMENTS AND SUPPLEMENTAL INFORMATION REGARDING BOOK VALUE
PER SHARE
 
  Under existing stock purchase and repurchase agreements, collectively
referred to as the Equity Participation Program ("EPP"), eligible executives
of the Company have the opportunity to purchase shares of Common Stock at book
value and are required to sell their shares of Common Stock to the Company at
book value upon termination of their employment. For purposes of EPP purchases
and sales, book value per share, adjusted for the 4 to 1 stock split, was
$2.60 ($10.40 pre-stock split) and $2.79 ($11.15 pre-stock split) at April 30,
1997 and 1998, respectively. The EPP book value calculation excludes the
effect of the Series A Preferred Stock and shareholder notes related to Common
Stock purchases. The Company ceased issuing shares of Common Stock under the
EPP as of May 1, 1998. The Board of Directors approved the Supplemental Equity
Participation Program on July 24, 1998, effective May 2, 1998, that provides
for the issuance of common shares at fair value.
   
  Shares subject to book value repurchase agreements are classified as
mandatorily redeemable common stock in the accompanying consolidated balance
sheets. As of April 30, 1997 and 1998 notes receivable from shareholders for
Common Stock purchases were $4,566 and $6,612, respectively. The Company
issued Common Stock in exchange for notes receivable from shareholders of
$3,172, $4,305 and $6,184 in fiscal 1996, 1997 and 1998 respectively. Included
in shareholders' notes and other unpaid shares at October 31, 1998 is $500
related to Common Stock issued that vests over a three year period.     
 
  At April 30, 1998, the Company had commitments of $1,484 from vice
presidents to buy additional Common Stock at book value under the EPP.
Additionally, the Company had commitments to sell to vice
 
                                     F-12

<PAGE>
 
                   KORN/FERRY INTERNATIONAL AND SUBSIDIARIES
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
   
presidents Common Stock with an aggregate price at book value of $5,805, at
May 1, 1998. The difference between the fair market value of these shares and
the EPP book value purchase price, of approximately $16,000, will be recorded
as compensation and benefits expense when the book value repurchase agreements
are amended and replaced with the fair value repurchase agreements upon
consummation of the IPO. In addition the Company will recognize compensation
and benefits expense related to shares issued subsequent to July 1997, of
approximately $10,600, representing the difference between the fair market
value and the book value of the shares at the date of issuance.     
 
   The repurchase agreements under the EPP will be amended upon consummation
of an initial public offering ("IPO") to permit employee shareholders to sell
their shares in the public market, subject to a liquidity schedule that
provides for increases over a four year period in the number of shares that
can be sold. Subsequent to the consummation of an IPO, shares will no longer
be issued under the EPP or Supplemental Equity Participation Program.
 
5. PREFERRED STOCK
 
  In December 1994, the Company issued Series A Preferred Stock in conjunction
with the redemption of common stock from certain employee shareholders. These
shares have a redemption value of $7.29 per share plus cumulative unpaid
dividends at 8.5% per annum. The Company may redeem all or any part of the
outstanding Preferred Stock at the earlier of either (i) payment in full of
all promissory notes of the Company issued in the Redemption, or (ii) the
approval of the holders of a majority of the shares of the Series A Preferred
Stock. Shares of Series A Preferred Stock have voting rights equivalent to 100
shares of common stock for each share outstanding, except that holders of
Series A Preferred Stock must vote in favor of certain transactions approved
by holders of two-thirds or more of the shares of Common Stock of the Company.
 
  In a previous year, the Company also issued Series B Preferred Stock which
has voting and redemption rights, including the book value repurchase
requirements equivalent to Common Stock. All Series B Preferred Stock is held
in the Company's Employee Tax Deferred Savings Plan.
   
  Upon consummation of an IPO, all shares of Series A and B Preferred Stock
will be redeemed at their contractual amounts of approximately $1,400.     
 
6. PHANTOM STOCK PLAN AND STOCK RIGHT PLAN
 
  Effective May 1, 1988, the Company established a Phantom Stock Plan for key
employees. The plan allows for granting the rights to purchase up to 1,500
unit rights at the book value of the outstanding Common Stock at the date of
grant. On a pre-stock split basis as of April 30, 1997 and 1998, 310 and 297
units were outstanding, respectively. These units are fully vested and entitle
employees, upon termination of employment, to receive their interest in cash
based on the equivalent book value of the Common Stock.
 
  In fiscal 1992, the Company established a Stock Right Plan under which
rights are granted to employees selected by a committee of the Board of
Directors. These rights are fully vested after two years and entitle the
holder to rights substantially identical to the common shares, excluding
voting rights. As of April 30, 1997 and 1998, 104 units were outstanding on a
pre-stock split basis.
 
  Compensation expense is recognized based on the change, if any, in the book
value of the Common Stock since the date of the grant. Compensation expense
related to these plans amounted to $628, $514 and $270 in fiscal 1996, 1997
and 1998, respectively. Subsequent to year end, the Board of Directors and
shareholders approved the termination of these plans and the conversion of the
phantom stock units and stock rights to Common Stock.
 
                                     F-13

<PAGE>
 
                   KORN/FERRY INTERNATIONAL AND SUBSIDIARIES
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
 
 
  The Stock Right Plan and Phantom Stock Plan were terminated and each
participant within either the Stock Right Plan or Phantom Stock Plan was
offered the opportunity to receive $11.15 per phantom unit or stock
appreciation right or receive shares of the Common Stock at the book value of
a share of Common Stock as of April 30, 1998, which was valued at
approximately $2.79 per share after giving effect to the 4-to-1 stock split.
The Company had 275,954 phantom units and 114,356 stock appreciation rights
outstanding as of June 30, 1998, the effective date of the surrender,
termination and cancellation of all the outstanding phantom units and stock
appreciation rights of the Company. As a result of this transaction,
mandatorily redeemable common stock was increased by $4,240 with a
corresponding decrease in the deferred compensation liability.
 
  The Common Stock issued upon termination of these plans is subject to the
EPP book value repurchase agreements. These repurchase agreements will be
amended to adopt the liquidity schedule upon consummation of an IPO. At that
date, the Company will recognize compensation and benefits expense of
approximately $13,200 for the excess of the fair market value of the shares
over the book value price of the shares issued in the conversion.
 
7. EMPLOYEE PROFIT-SHARING AND BENEFIT PLANS
 
  The Company has an Employee Tax Deferred Savings Plan that covers eligible
employees in the United States. The Company's discretionary accrued
contribution to this plan was $1,230, $1,768 and $2,400 for fiscal 1996, 1997
and 1998, respectively. The Company's non-U.S. employees are covered by a
variety of pension plans that are applicable to the countries in which they
work. The contributions for these plans are determined in accordance with the
legal requirements in each country and generally are based on the employees'
annual compensation.
 
8. DEFERRED COMPENSATION AND LIFE INSURANCE CONTRACTS
 
  The Company has established several deferred compensation plans for
officer/shareholder employees that provide defined benefit payments to
participants based on the deferral of current compensation and subject to
vesting and retirement or termination provisions.
 
  The Enhanced Wealth Accumulation Plan (EWAP) was established in fiscal 1994.
Certain vice presidents elect to participate in a "deferral unit" that
requires the contribution of current compensation for an eight year period in
return for defined benefit payments from the Company over a fifteen year
period generally at retirement at age 65 or later. Participants may acquire
additional "deferral units" every five years.
 
  The Wealth Accumulation Plan (WAP) was replaced by the EWAP in fiscal 1994.
Executives who did not choose to roll over their WAP units into the EWAP
continue to be covered under the earlier version in which participants
generally vest and commence receipt of benefit payments at retirement at age
65.
 
  Participants in the Senior Executive Incentive Plan (SEIP) are elected for
participation by the Company's Board of Directors. Generally, to be eligible
the vice president must be participating in the EWAP. Participation in the
SEIP requires the vice president to contribute a portion of their compensation
during a four-year period, or in some cases make an after tax contribution, in
return for a defined benefit paid by the Company generally over a fifteen year
period at age 65, or retirement.
 
  The Company's Worldwide Executive Benefit Plans (WEB) are designed to
integrate with government sponsored benefits and provide a monthly benefit to
vice presidents and shareholders upon retirement from the Company. Each year a
plan participant accrues and is fully vested in one-twentieth of the targeted
benefits expressed as a percentage set by the Company for that year. Upon
retirement, a participant receives a monthly benefit payment equal to the sum
of the percentages accrued over such participant's term of employment, up to a
 
                                     F-14

<PAGE>
 
                   KORN/FERRY INTERNATIONAL AND SUBSIDIARIES
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
 
maximum of 20 years, multiplied by the participant's highest average monthly
salary during any 36 consecutive months in the final 72 months of active full-
time employment.
 
  Certain current and former employees also have individual deferred
compensation arrangements with the Company which provide for payment of
defined amounts over certain periods commencing at specified dates or events.
 
  In 1998, certain employees elected to defer a portion of their compensation,
amounting to approximately $2,500, into a new deferred compensation plan
established by the Company. If the Company terminates this plan before April
30, 1999, the employees will receive their deferred compensation plus interest
at the Company's bank borrowing rate, currently at 8%.
 
  For financial accounting purposes, the Company estimates the present value
of the future benefits payable as of the estimated payment commencement date.
The Company also estimates the remaining number of years a participant will be
employed by the Company. Then, each year during the period of estimated
employment, the Company accrues a liability and recognizes expense for a
portion of the future benefit using the "benefit/years of service" attribution
method for the SEIP and EWAP plans and the "projected unit credit" method for
the WEB plan.
 
  In calculating the accrual for future benefit payments, management has made
assumptions regarding employee turnover, participant vesting and the discount
rate. Management periodically reevaluates all assumptions. If assumptions
change in future reporting periods, the changes may impact the measurement and
recognition of benefit liabilities and related compensation expense.
 
  As of April 30, 1997 and 1998, the Company had unrecognized losses related
to these deferred compensation plans of $4,421 and $7,747 due to changes in
assumptions of the discount rate used for calculating the accruals for future
benefits. The Company amortizes unrecognized losses over the average remaining
service period of active participants. The discount rate used in 1997 and 1998
was 9.0% and 7.5%, respectively.
 
  Following is a reconciliation of the benefit obligation for the Company's
deferred compensation plans:
 

<TABLE>
<CAPTION>
                                                                 YEAR ENDED
                                                                  APRIL 30,
                                                                 ----------
                                                                1997     1998
                                                               -------  -------
   <S>                                                         <C>      <C>
   Benefit obligation at beginning of the year................ $26,705  $30,149
   Service cost...............................................   1,227    1,693
   Interest cost..............................................   1,320    1,622
   Plan participants' contributions...........................   3,030    5,981
   Recognized loss due to change in assumption................     305      624
   Benefits paid..............................................  (2,438)  (4,707)
                                                               -------  -------
   Benefit obligation at end of fiscal year................... $30,149  $35,362
   Less: current portion of benefit obligation................  (2,473)    (810)
                                                               -------  -------
   Long-term benefit obligation at end of year................ $27,676  $34,552
                                                               =======  =======
</TABLE>

 
  The Company has purchased COLI contracts insuring participants and former
participants. The gross CSV of these contracts of $53,570 and $67,747 is
offset by outstanding policy loans of $32,278 and $37,638, on the accompanying
consolidated balance sheets as of April 30, 1997 and 1998, respectively.
 
  Death benefits payable under COLI contracts were $244,418 and $285,495 at
April 30, 1997 and 1998, respectively. Management intends to use the future
death benefits from these insurance contracts to fund the
 
                                     F-15

<PAGE>
 
                   KORN/FERRY INTERNATIONAL AND SUBSIDIARIES
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
 
deferred compensation arrangements; however, there may not be a direct
correlation between the timing of the future cash receipts and disbursements
under these arrangements. In addition, certain future death benefits are
restricted for the purchase of certain shares of Common Stock, if any, upon
the death of a shareholder. As of April 30, 1998, COLI contracts with a net
cash surrender value of $24,500 and death benefits payable of $146,589 were
held in trust for these purposes.
 
9. INCOME TAXES
 
  The provision for income taxes is based on reported income before income
taxes. Deferred income tax assets and liabilities reflect the impact of
temporary differences between the amounts of assets and liabilities recognized
for financial reporting purposes and the amounts recognized for tax purposes,
as measured by applying the currently enacted tax laws.
 
  The provision (benefit) for domestic and foreign income taxes is comprised
of the following components:
 

<TABLE>
<CAPTION>
                                                      FISCAL YEAR ENDED APRIL
                                                                30,
                                                      -------------------------
                                                       1996     1997     1998
                                                      -------  -------  -------
   <S>                                                <C>      <C>      <C>
   Current taxes:
    Federal.......................................... $   921  $ 2,602  $ 2,953
    State............................................     381      991    1,022
                                                      -------  -------  -------
     Total...........................................   1,302    3,593    3,975
                                                      -------  -------  -------
   Deferred taxes:
    Federal..........................................  (3,766)  (2,133)  (3,458)
    State............................................    (996)    (713)  (1,154)
                                                      -------  -------  -------
     Total...........................................  (4,762)  (2,846)  (4,612)
                                                      -------  -------  -------
   Foreign taxes.....................................   6,748    5,911    7,324
                                                      -------  -------  -------
   Provision for income taxes........................ $ 3,288  $ 6,658  $ 6,687
                                                      =======  =======  =======
</TABLE>

 
  The domestic and foreign components of income (loss) from continuing
operations before domestic and foreign income and other taxes were as follows:
 

<TABLE>
<CAPTION>
                                                      FISCAL YEAR ENDED APRIL
                                                                30,
                                                      -------------------------
                                                       1996     1997     1998
                                                      -------  -------  -------
   <S>                                                <C>      <C>      <C>
   Domestic.......................................... $(9,163) $(2,534) $(4,635)
   Foreign...........................................  21,826   19,779   18,591
                                                      -------  -------  -------
   Total............................................. $12,663  $17,245  $13,956
                                                      =======  =======  =======
</TABLE>

 
                                     F-16

<PAGE>
 
                   KORN/FERRY INTERNATIONAL AND SUBSIDIARIES
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
 
 
  The income tax provision stated as a percentage of pretax income was
different than the amount computed using the U.S. statutory federal income tax
rate for the reasons set forth in the following table:

<TABLE>
 
<CAPTION>
                                                  FISCAL YEAR ENDED APRIL 30,
                                                  -----------------------------
                                                    1996      1997      1998
                                                  --------- --------- ---------
   <S>                                            <C>       <C>       <C>
   U.S. federal statutory tax rate...............     35.0%     35.0%     35.0%
   Foreign source dividend income................     20.1      12.7      30.6
   Foreign income tax credits utilized...........    (20.4)    (11.6)    (21.5)
   Income subject to higher (lower) Foreign tax
    rates........................................     (7.0)     (5.9)      5.9
   COLI CSV increase, net........................     (3.6)      0.8      (5.4)
   Other.........................................      1.9       7.6       3.3
                                                  --------- --------  --------
   Effective tax rate............................     26.0%     38.6%     47.9%
                                                  ========= ========  ========
</TABLE>

 
  The significant components of deferred tax assets and liabilities are as
follows:
 

<TABLE>
<CAPTION>
                                                               AS OF APRIL 30,
                                                               ----------------
                                                                1997     1998
                                                               -------  -------
   <S>                                                         <C>      <C>
   Deferred income tax assets (liabilities):
     Deferred compensation.................................... $11,597  $14,652
     Accrued operating expenses...............................   1,964    3,172
     Other accrued liabilities................................  (1,590)  (1,360)
     Property and equipment...................................     299      419
     Other....................................................    (317)    (338)
                                                               -------  -------
   Deferred income taxes...................................... $11,953  $16,545
                                                               =======  =======
</TABLE>

 
  Realization of the tax asset is dependent on the Company generating
sufficient taxable income in future years as the deferred tax items become
currently deductible for tax reporting purposes. Management believes that all
of the deferred tax asset will be realizable. However, the amount of the
deferred tax asset considered realizable could be reduced if the estimates of
amounts and/or timing of future taxable income are revised.
 
10. COMMITMENTS AND CONTINGENCIES
 
  The Company leases office premises and certain office equipment under leases
expiring at various dates through 2010. Total rental expense for fiscal years
1996, 1997 and 1998 amounted to $9,033, $11,686 and $12,948, respectively. At
April 30, 1998, minimum future commitments under noncancelable operating
leases with lease terms in excess of one year were payable as follows: $11,066
in 1999, $10,357 in 2000, $9,813 in 2001, $8,708 in 2002, $5,910 in 2003 and
$17,972 thereafter. As of April 30, 1998, the Company has outstanding standby
letters of credit of $945 in connection with office leases.
 
  The Company has a policy of requiring all its vice presidents to enter into
a standard form of employment agreement which provides for an annual base
salary and discretionary and incentive bonus payments. The Company also
requires its vice presidents to agree in their employment contracts not to
compete with the Company, both during the term of their employment with the
Company, and also for a period of one to two years after their employment with
the Company ends.
   
  In January 1998, the Company agreed to be co-obligor with an officer-
shareholder, on a $1,000 promissory note entered into for his home loan. The
officer-shareholder has pledged all of his Common Stock to the Company as
collateral. The Company also agreed to pay all of the interest on the note for
a four year period ending January 15, 2002. These interest payments are
included in compensation and benefits expense. (See Note 15).     
 
                                     F-17

<PAGE>
 
                   KORN/FERRY INTERNATIONAL AND SUBSIDIARIES
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
 
 
  In fiscal 1995, certain shareholders of the Company, at the request of the
Company, agreed to have certain of their shares of Common Stock redeemed by
the Company in a fixed redemption plan initiated by the Company. The
redemption price included a contingent amount equal to the difference between
a fixed amount plus 8.5% accrued interest and, in the event of an IPO, the
public offering price per share of the Common Stock. Simultaneously with the
redemption, certain holders of phantom units and stock appreciation rights
agreed to terminate their phantom units and stock appreciation rights in
return for payments corresponding to the fixed amount and an additional
contingent amount. The contingent amount is payable if the Company consummates
an extraordinary transaction, including a public offering of the Common Stock,
at any time before December 31, 2004 and the seller has not voluntarily
terminated or been terminated for cause prior to the date of the extraordinary
transaction.
   
  The Company intends to use a portion of the net proceeds from an IPO to
complete the redemption by the Company of certain shares of its mandatorily
redeemable common and preferred stock and to pay existing obligations of the
Company to former holders of phantom units and stock appreciation rights. Upon
consummation of an IPO, each of the sellers has agreed to a negotiated
discount from the contingent amount they were originally entitled to receive.
Based on the mid-point of the IPO price range of $14.00, the discounted
payment amounts will be approximately $4,500. These payments will result in
compensation and benefits expense, which will be recorded upon consummation of
the IPO.     
 
11. LITIGATION
 
  From time to time the Company has been and is involved in litigation
incidental to its business. The Company is currently not a party to any
litigation, which if resolved adversely against the Company, would in the
opinion of the Company have a material adverse effect on the Company's
business, financial position or results of operations.
 
12. DIVESTITURES
 
  Effective February 29, 1996, the Company divested its 47% interest in
Strategic Compensation Associates for a cash payment of $357 and notes
receivable of $3,215. The notes are receivable in six equal annual
installments with interest. Included in other income in fiscal 1996, is a gain
of $516 recognized on this transaction. The outstanding balance of notes
receivable at April 30, 1997 and 1998 was $2,781 and $2,308 respectively.
 
                                     F-18

<PAGE>
 
                   KORN/FERRY INTERNATIONAL AND SUBSIDIARIES
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
 
 
13. BUSINESS SEGMENT
   
  The Company operates in one industry segment, retained executive search, on
a global basis. For purposes of the geographic information below, Mexico is
included in Latin America. In January 1998 the Company formed Futurestep as an
80 percent owned subsidiary (which is included in North America), to provide
Internet-based retained recruitment services for middle management positions.
Operating expenses and identifiable assets of Futurestep are not material in
1998. For the six months ended October 31, 1998, Futurestep reported net
revenues and operating losses of $747 and $7,062, respectively. A summary of
the company's operations by geographic area is presented below:     
 

<TABLE>   
<CAPTION>
                               FISCAL YEAR ENDED APRIL      SIX MONTHS ENDED
                                         30,                   OCTOBER 31,
                              ----------------------------  ------------------
                                1996      1997      1998      1997      1998
                              --------  --------  --------  --------  --------
                                                               (UNAUDITED)
   <S>                        <C>       <C>       <C>       <C>       <C>
   NET REVENUES:
     North America........... $107,789  $130,437  $157,044  $ 69,851  $ 93,276
     Europe..................   65,034    72,314    79,731    36,852    49,546
     Asia/Pacific............   28,870    32,544    32,887    18,100    15,808
     Latin America...........   19,793    25,129    30,893    15,528    17,059
                              --------  --------  --------  --------  --------
       Total revenues........ $221,486  $260,424  $300,555  $140,331  $175,689
                              ========  ========  ========  ========  ========
   OPERATING PROFIT:
     North America...........    7,892    13,711    10,660     4,190       911
     Europe..................    1,246      (935)      382       186     1,510
     Asia/Pacific............    3,121     3,585       701       586       567
     Latin America...........    4,087     4,204     6,447     3,362     4,360
                              --------  --------  --------  --------  --------
       Total operating prof-
        it...................   16,346    20,565    18,190     8,324     7,348
     Interest expense........   (3,683)   (3,320)   (4,234)   (1,740)   (2,582)
                              --------  --------  --------  --------  --------
       Income before income
        taxes and non-
        controlling
        shareholders'
        interest............. $ 12,663  $ 17,245  $ 13,956  $  6,584  $  4,766
                              ========  ========  ========  ========  ========
</TABLE>
    
 

<TABLE>
<CAPTION>
                                                           AS OF APRIL 30,
                                                      --------------------------
                                                        1996     1997     1998
                                                      -------- -------- --------
   <S>                                                <C>      <C>      <C>
   IDENTIFIABLE ASSETS:
     North America................................... $ 42,770 $ 42,498 $ 66,680
     Europe..........................................   33,524   42,300   40,600
     Asia/Pacific....................................   22,955   25,444   18,529
     Latin America...................................    8,057   10,606   16,400
     Corporate.......................................   19,035   27,557   34,162
                                                      -------- -------- --------
       Total......................................... $126,341 $148,405 $176,371
                                                      ======== ======== ========
</TABLE>

   
  The Company's clients were not concentrated in any specific geographic
region and no single client accounted for a significant amount of the
Company's revenues during fiscal 1996, 1997 or 1998 or the six months ended
October 31, 1998.     
 
14. STOCK SPLIT
 
  Subsequent to April 30, 1998, the Company's Board of Directors authorized,
and the shareholders approved, the filing of an amendment of the Company's
existing Articles of Incorporation to increase the Company's
 
                                     F-19

<PAGE>
 
                   
                KORN/FERRY INTERNATIONAL AND SUBSIDIARIES     
            
         NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)     
 
authorized capital stock and effect a 4 to 1 split of the Common Stock. The
Company intends to file the amendment immediately after the registration
statement relating to the IPO is declared effective. The financial statements
have been retroactively restated for the effects of this transaction.
   
15. SUBSEQUENT EVENTS     
   
  In December 1998, Michael D. Boxberger resigned from his positions as
President, Chief Executive Officer, Director and a member of the Office of the
Chief Executive of the Company. Mr. Boxberger and the Company have entered
into a General Release and Settlement Agreement under which Mr. Boxberger will
receive approximately $1,300 payable over a 12-month period. In addition, he
will remain on the Company's payroll until the earlier to occur of December 3,
1999 or commencement of new employment. While on the Company's payroll,
Mr. Boxberger will continue to receive reimbursement for reasonable expenses,
including office and secretarial support as well as medical and other
benefits.     
       
       
   
  At the time of his resignation, Mr. Boxberger owned 393,256 shares of Common
Stock. The Company will repurchase 228,088 of those shares at book value
pursuant to a Stock Repurchase Agreement between Mr. Boxberger and the
Company. Mr. Boxberger may retain the remaining 165,168 shares with the right
to sell such shares in accordance with the Liquidity Schedule. (See Note 4).
The excess of the fair market over the book value of approximately $1,400 will
be recognized as a charge to earnings in the third quarter of fiscal 1999.
    
   
  Mr. Boxberger has loans outstanding with the Company which, as of December
3, 1998, amounted to an aggregate principal amount of $100. Such loans will be
repaid by Mr. Boxberger in full by October 31, 1999. In addition, Mr.
Boxberger and the Company are co-obligors on a bank loan in the principal
amount of $1,000. The bank loan is secured by shares of Common Stock owned by
Mr. Boxberger. The Company will reimburse Mr. Boxberger for interest on the
bank loan until the earlier of the sale of Mr. Boxberger's home or December 3,
1999. After December 3, 1999, Mr. Boxberger shall pay all principal and
interest due under such bank loan and shall repay or refinance the bank loan
on or prior to the earlier of the sale of his home or November 30, 2000.     
       
   
  The Company is currently evaluating its worldwide operations. The results of
this analysis could result in a one time charge to earnings of approximately
$6 million to $9 million in the third quarter of fiscal 1999 comprised
primarily of costs related to office closures and staff downsizing. The effect
on future earnings of modifications, if any, to the existing stock repurchase
agreements under the Company's executive participation programs has not yet
been determined. However, the effect of any modifications to such agreements
would be a non-cash charge. See "Management--Executive Participation
Programs--Executive Participation Program."     
 
  In July 1998, the Company's Board of Directors unanimously approved a
proposed IPO of its common stock. The completion of the IPO is subject to
filing an effective registration statement with the Securities and Exchange
Commission, the compliance by the Company with applicable state securities
laws and favorable market conditions for an offering of the Common Stock.
 
  In June 1998, the Company entered into a trademark license and promotion
agreement with Dow Jones & Company that established an alliance between
Futurestep and The Wall Street Journal. The alliance, which has an initial
term through June 2001 with options for renewal, provides the Company with
preferred advertising rates and requires the purchase of a minimum amount of
print and on-line advertising. For each company and candidate referred to
Futurestep by The Wall Street Journal, Futurestep is obligated to pay to Dow
Jones & Company a small percentage of its fee. Dow Jones & Company, the
Company and Futurestep have agreed not to promote competing services during
the term of the agreement.
 
  Effective May 1, 1998, the Company acquired Didier Vuchot & Associates in
France for approximately $6,000 in cash, notes and mandatorily redeemable
stock of a subsidiary of the Company. The stock of the
 
                                     F-20

<PAGE>
 
                   
                KORN/FERRY INTERNATIONAL AND SUBSIDIARIES     
            
         NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)     
   
subsidiary is exchangeable for Common Stock upon the achievement of certain
performance targets over a four year period from the acquisition date. The
difference between book value and fair market value has been recorded as a
deferred compensation offset against shareholders' equity that will be
amortized over the vesting period. All stock not so exchanged is mandatorily
redeemable for a nominal amount at the end of the period. The acquisition was
accounted for as a purchase. The fair market value of the net assets acquired
was approximately $1,500. The excess of the cash and notes over this amount is
related to employment contracts and is included in goodwill and other
intangibles. The amount of the purchase price related to mandatorily
redeemable stock of the subsidiary of $2,900 is contingent upon future
performance and will be recognized as compensation expense as earned.     
 
  Effective June 1, 1998, the Company acquired all of the outstanding shares
of two firms in Switzerland in a combined transaction for $3,600 payable in
cash, notes and mandatorily redeemable Common Stock of the Company. The
acquisition was accounted for as a purchase. The fair market value of the net
assets acquired was approximately $594. The excess of cash and notes over this
amount is related to employment contracts of approximately $1,400 that is
contingent upon future performance that will be recognized as compensation
expense as earned. The purchase price in excess of these amounts has been
allocated to goodwill.
 
                                     F- 21

<PAGE>
 
- --------------------------------------------------------------------------------
 
 NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS AND,
IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY THE COMPANY, ANY SELLING SHAREHOLDER OR ANY
UNDERWRITER. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A
SOLICITATION OF AN OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY IN ANY
JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER IN SUCH
JURISDICTION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE
INFORMATION HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF OR
THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE SUCH DATE.
 
                                 ------------
 
 
                              TABLE OF CONTENTS
 

<TABLE>   
<CAPTION>
                                                                            PAGE
                                                                            ----
<S>                                                                         <C>
Prospectus Summary........................................................    3
Risk Factors..............................................................    9
Use of Proceeds...........................................................   14
Dividend Policy...........................................................   14
Capitalization............................................................   15
Dilution..................................................................   17
Selected Financial and Other Data.........................................   18

Management's Discussion and Analysis of Financial Condition and Results of
 Operations...............................................................   20
Business..................................................................   30
Management................................................................   40
Certain Transactions......................................................   52
Principal and Selling Shareholders........................................   54
Description of Capital Stock..............................................   55
Shares Eligible for Future Sale...........................................   57
Underwriting..............................................................   58
Notice to Canadian Residents..............................................   61
Legal Matters.............................................................   62
Experts...................................................................   62
Available Information.....................................................   62
Index to Consolidated Financial Statements................................  F-1
</TABLE>
    
 
                                 ------------
   
 UNTIL         , 1999 (25 DAYS AFTER THE COMMENCEMENT OF THE OFFERING) ALL
DEALERS EFFECTING TRANSACTIONS IN THE REGISTERED SECURITIES, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN
ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.     
 
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
 
                      [LOGO OF KORN/FERRY INTERNATIONAL]
                                
                             12,500,000 Shares     
                                  Common Stock
                                 (no par value)
 
                                   PROSPECTUS
 
                           CREDIT SUISSE FIRST BOSTON
 
                          DONALDSON, LUFKIN & JENRETTE
 
                            PAINEWEBBER INCORPORATED
 
- --------------------------------------------------------------------------------

<PAGE>
 

                                    PART II
 
                    INFORMATION NOT REQUIRED IN PROSPECTUS
 

ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
 
  The following table sets forth the expenses, other than underwriting
discounts and commissions, payable by the Company in connection with the
issuance and distribution of the Common Stock being registered. All amounts
are estimates except the SEC registration fee, the NASD filing fee and the
NYSE listing fee.
 

<TABLE>
   <S>                                                                  <C>
   Securities and Exchange Commission registration fee................. $67,850
   NASD filing fee.....................................................  23,500
   NYSE listing fee....................................................      *
   Accounting fees and expenses........................................      *
   Legal fees and expenses.............................................      *
   Blue Sky qualification fees and expenses............................      *
   Printing and engraving expenses.....................................      *
   Transfer agent and registrar fees...................................      *
   Miscellaneous.......................................................      *
                                                                        -------
     Total............................................................. $    *
                                                                        =======
</TABLE>

- --------
* To be completed by amendment.
 

ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
 
  The Company has adopted provisions in its Amended and Restated Articles of
Incorporation that limit the liability of directors in certain instances. As
permitted by the California General Corporation Law ("CGCL"), directors will
not be liable to the Company for monetary damages arising from a breach of
their fiduciary duty as directors in certain circumstances. Such limitation
does not affect liability for any breach of a director's duty to the Company
or its shareholders (i) with respect to approval by the director of any
transaction from which he derives an improper personal benefit, (ii) with
respect to acts or omissions involving an absence of good faith, that he
believes to be contrary to the best interests of the Company or its
shareholders, that involve intentional misconduct or a knowing and culpable
violation of law, that constitute an unexcused pattern of inattention that
amounts to an abdication of his duty to the Company or its shareholders, or
that show a reckless disregard for his duty to the Company or its shareholders
in circumstances in which he was, or should have been, aware, in the ordinary
course of performing his duties, of a risk of serious injury to the Company or
its shareholders, or (iii) based on transactions between the Company and its
directors or another corporation with interrelated directors or on improper
distributions, loans or guarantees under applicable sections of the CGCL. Such
limitation of liability also does not affect the availability of equitable
remedies such as injunctive relief or rescission, although in certain
circumstances equitable relief may not be available as a practical matter. The
limitation may relieve the directors of monetary liability to the Company for
grossly negligent conduct. No claim or litigation is currently pending against
the Company's directors that would be affected by the limitations of
liability.
 
  The Company's Amended and Restated Bylaws (the "Bylaws"), as amended,
provide for the indemnification of directors and executive officers from any
threatened, pending or completed action, suit or proceeding, whether formal or
informal, by reason of their current or past service to the Company, and the
reimbursement of any and all costs incurred by any such director or executive
officer in regards thereto. The Bylaws also provide for the indemnification by
the Company of any director of the Company, for any monetary damages arising
from the imposition of joint and several liability upon such director for
actions taken by other directors of the Company, except as not permitted by
the CGCL.
 
                                     II-1

<PAGE>
 
  The Company has entered, or plans to enter, into agreements (the
"Indemnification Agreements") with each of the directors and executive
officers of the Company pursuant to which the Company has agreed to indemnify
such director or executive officer from claims, liabilities, damages,
expenses, losses, costs, penalties or amounts paid in settlement incurred by
such director or executive officer in or arising out of such person's capacity
as a director or executive officer of the Company or any other corporation of
which such person is a director at the request of the Company to the maximum
extent provided by applicable law. In addition, such director or executive
officer is entitled to an advance of expenses to the maximum extent authorized
or permitted by law.
 
  To the extent that the Board of Directors or the shareholders of the Company
may in the future wish to limit or repeal the ability of the Company to
provide indemnification as set forth in the Articles, such repeal or
limitation may not be effective as to directors and executive officers who are
parties to the Indemnification Agreements, because their rights to full
protection would be contractually assured by the Indemnification Agreements.
It is anticipated that similar contracts may be entered into, from time to
time, with future directors of the Company.
 
  The Form of Underwriting Agreement filed as Exhibit 1.1 to this Registration
Statement provides for indemnification by the Underwriters of the Company and
its directors and officers for certain liabilities arising under the
Securities Act of 1933 (the "Securities Act") or otherwise.
 

ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
 
  Set forth below is certain information concerning all sales of securities by
the Company during the past three years that were not registered under the
Securities Act.
 
  During the three years preceding the filing of this Registration Statement,
the Company sold shares of Common Stock to its officers without registration
under the Securities Act. Exemption from registration under the Securities Act
for these sales is claimed under Regulation D promulgated under Section 4(2)
of the Securities Act, Rule 701 promulgated under Section 3(b) of the
Securities Act and Regulation S under the Securities Act. Each recipient of
such securities represented in each transaction such recipient's intention to
acquire the securities for investment only and not with a view to or for sale
in connection with any distribution thereof and appropriate legends were
affixed to the share certificates issued in such transactions.
   
  Under the Company's Executive Participation Program (the "EPP"), the Company
offered shares of Common Stock from the EPP's inception through January 31,
1996 at a purchase price equal to the book value of such share as of the end
of the fiscal year immediately preceding such sale. During the three years
preceding the filing of this Registration Statement, the following sales were
made to officers pursuant to such annual offers for which exemption from
registration under the Securities Act is claimed under Regulation D
promulgated under Section 4(2) of the Securities Act: 60,216 shares on
September 1, 1995, November 15, 1995, January 15, 1996, each for an aggregate
of $119,980, respectively; 108,756 shares on May 1, 1996 for an aggregate of
$245,789; 35,396 shares on July 1, 1996 for an aggregate of $79,995; and
15,384 shares on May 1, 1997 for an aggregate of $39,998.     
   
  During the three years preceding the filing of this Registration Statement,
the following sales were made to officers pursuant to such annual offers for
which exemption from registration under the Securities Act is claimed under
Rule 701 promulgated under Section 3(b) of the Securities Act: 20,072 shares
on October 6, 1995 for an aggregate of $39,993; 18,372 shares on January 1,
1996 for an aggregate of $36,606, 35,392 shares on May 1, 1996 for an
aggregate of $79,986; 17,696 shares on April 1, 1997 for an aggregate of
$39,993; 46,152 shares on May 1, 1997 for an aggregate of $119,995; and 15,384
shares on April 30, 1998 for an aggregate of $39,998.     
   
  During the three years preceding the filing of this Registration Statement,
the following sales were made to officers pursuant to such annual offers for
which exemption from registration under the Securities Act is claimed under
Regulation S under the Securities Act: 99,840 shares on April 16, 1996 for an
aggregate of $198,931; 97,496 shares on May 1, 1996 for an aggregate of
$220,341; 61,940 shares on July 1, 1996 for an     
 
                                     II-2

<PAGE>
 
   
aggregate of $139,984; 60,224 shares on November 1, 1996 for an aggregate of
$119,996; 15,384 shares on May 1, 1997 for an aggregate of $39,998; 30,768
shares on June 1, 1997 for an aggregate of $79,997; 30,768 shares on July 1,
1997 for an aggregate of $79,997; 15,384 shares on August 1, 1997 for an
aggregate of $39,998; 15,384 shares on April 1, 1998 for an aggregate of
$39,998; and 62,524 shares on August 1, 1998 for an aggregate of $174,286.
       
  Since the beginning of the fiscal quarter ended January 31, 1996, the
Company has offered and sold shares of Common Stock quarterly to officers
under the EPP at a purchase price equal to the book value of such share
determined as a ratio of the book value as of the end of the fiscal year
immediately preceding such sale and the book value as of the end of the fiscal
year immediately following such sale, which ratio reflected the date during
the fiscal year on which such sale was made. The Company has made the
following quarterly offers and sales for which exemption from registration
under the Securities Act is claimed under Regulation D promulgated under
Section 4(2) of the Securities Act: For the fiscal quarter ended January 31,
1996, the Company sold an aggregate of 58,752 shares for an aggregate of
$124,995. For the fiscal quarter ended April 30, 1996, the Company sold an
aggregate of 57,012 shares for an aggregate of $124,999. For the fiscal
quarter ended July 31, 1996, the Company sold an aggregate of 1,155,912 shares
for an aggregate of $2,612,361. For the fiscal quarter ended October 31, 1996,
the Company sold an aggregate of 127,928 shares for an aggregate of $299,991.
       
  For the fiscal quarter ended January 1, 1997, the Company sold an aggregate
of 61,728 shares for an aggregate of $149,999. For the fiscal quarter ended
April 30, 1997, the Company sold an aggregate of 178,920 shares for an
aggregate of $449,984. For the fiscal quarter ended July 31, 1997, the Company
sold an aggregate of 423,072 shares for an aggregate of $1,099,987. For the
fiscal quarter ended October 31, 1997, the Company sold an aggregate of
245,508 shares for an aggregate of $649,982.     
   
  For the fiscal quarter ended January 1, 1998, the Company sold an aggregate
of 204,072 shares for an aggregate of $549,974. For the fiscal quarter ended
April 30, 1998, the Company sold an aggregate of 200,728 shares for an
aggregate of $549,995. For the fiscal quarter ended July 31, 1998, the Company
sold an aggregate of 645,696 shares for an aggregate of $1,799,878.     
   
  The Company has made the following quarterly offers and sales for which
exemption is claimed under Rule 701 promulgated under Section 3(b) of the
Securities Act: For the fiscal quarter ended July 31, 1997, the Company sold
an aggregate of 288,460 shares for an aggregate of $749,996. For the fiscal
quarter ended April 30, 1998, the Company sold an aggregate of 27,372 shares
for an aggregate of $74,999. For the fiscal quarter ended July 31, 1998, the
Company sold an aggregate of 295,944 shares for an aggregate of $824,944.     
   
  The Company has made the following quarterly sales and offers for which
exemption is claimed under Regulation S under the Securities Act: For the
fiscal quarter ended July 31, 1996, the Company sold an aggregate of 633,816
shares for an aggregate of $1,432,424. For the fiscal quarter ended October
31, 1996, the Company sold an aggregate of 223,872 shares for an aggregate of
$524,980.     
   
  For the fiscal quarter ended January 1, 1997, the Company sold an aggregate
of 49,776 shares for an aggregate of $120,956. For the fiscal quarter ended
April 30, 1997, the Company sold an aggregate of 208,816 shares for an
aggregate of $525,172. For the fiscal quarter ended July 31, 1997, the Company
sold an aggregate of 807,688 shares for an aggregate of $2,099,989. For the
fiscal quarter ended October 31, 1997, the Company sold an aggregate of 84,984
shares for an aggregate of $224,995.     
   
  For the fiscal quarter ended January 1, 1998, the Company sold an aggregate
of 166,968 shares for an aggregate of $449,979. For the fiscal quarter ended
April 30, 1998, the Company sold an aggregate of 538,316 shares for an
aggregate of $1,474,986. For the fiscal quarter ended July 31, 1998, the
Company sold an aggregate of 1,273,464 shares for an aggregate of $3,549,781.
    
  Under the Company's Supplemental Equity Participation Program, the Company
offered shares of Common Stock at a purchase price equal to the fair market
value, appraised as of June 30, 1998, to certain employees
 
                                     II-3

<PAGE>
 
   
promoted to vice president and other persons hired as vice presidents of the
Company between May 2, 1998 and the filing of this Registration Statement. On
August 14, 1998, the Company sold an aggregate of (i) 81,984 shares for an
aggregate of $899,979 for which exemption from registration under the
Securities Act is claimed under Regulation D promulgated under Section 4(2) of
the Securities Act and (ii) 27,328 shares for an aggregate of $299,993 for
which exemption from registration under the Securities Act is claimed under
Regulation S under the Securities Act.     
   
  Under the Company's Interim Equity Participation Plan, the Company intends
to offer shares of Common Stock at a purchase price equal to the fair market
value estimated by the Company as of December 31, 1998, to certain employees
promoted to vice president and other persons hired as vice presidents of the
Company after August 17, 1998. On December 31, 1998, the Company intends to
sell approximately 364,300 shares for an aggregate of $4,000,000 for which
exemption from registration under the Securities Act is claimed under Rule 701
promulgated under Section 3(b) of the Securities Act.     
   
  As of June 30, 1998, the Company issued 1,551,008 shares of Common Stock
upon conversion of 387,752 phantom stock units and stock appreciation rights
in connection with the termination of the Company's Phantom Stock Plan and
Amended and Restated Stock Right Plan. Exemption from registration under the
Securities Act for this issuance is claimed under Section 3(a)(9) of the
Securities Act.     
   
  On August 11, 1998, the Company sold 105,672 shares of its Common Stock for
an aggregate purchase price of $294,560 upon exercise by Didier Vuchot &
Associates executives of their put option received in connection with the
Company's acquisition of that firm in June 1998. Exemption from registration
under the Securities Act for this issuance is claimed under Section 4(2) of
the Securities Act.     
   
  On August 17, 1998, the Company sold 130,624 shares of its Common Stock to
certain executives of DRF-DR-MIRO (AG) and BGO AG for an aggregate purchase
price of $364,114 in connection with the Company's acquisition of such
executives' firms in August 1998. Exemption from registration under the
Securities Act for this issuance is claimed under Section 4(2) of the
Securities Act.     
       
                                     II-4

<PAGE>
 

ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
 
  (a) EXHIBITS.
 

<TABLE>   
<CAPTION>
 EXHIBIT
  NUMBER                          DESCRIPTION OF EXHIBIT
 -------                          ----------------------
 <C>      <S>
  1.1     Form of Underwriting Agreement
  3.1**   Amended and Restated Articles of Incorporation of the Company
  3.2**   Amended and Restated Bylaws of the Company
  4.1     Specimen Common Stock certificate
  5.1     Opinion of O'Melveny & Myers LLP
 10.1     Form of Indemnification Agreement between the Company and each of its
           executive officers and directors
 10.2**   Performance Award Plan
 10.3**   Form of U.S. and International Worldwide Executive Benefit Retirement
           Plan
 10.4**   Form of U.S. and International Worldwide Executive Benefit Life
           Insurance Plan
 10.5**   Worldwide Executive Benefit Disability Plan (in the form of Long-Term
           Disability Insurance Policy)
 10.6**   Form of U.S. and International Enhanced Executive Benefit and Wealth
           Accumulation Plan
 10.7**   Form of U.S. and International Senior Executive Incentive Plan
 10.8**   Executive Salary Continuation Plan
 10.9**   Form of Stock Repurchase Agreement
 10.10**  Form of Amended and Restated Stock Repurchase Agreement
 10.11**  Form of Standard Employment Agreement
 10.12**  Form of Deferred Compensation Election Form for Fiscal 1998
 10.13**  Stock Purchase Agreement between the Company, bill gross' idealab!,
           Mr. Singh and Korn/Ferry International Futurestep, Inc. dated
           December 1, 1997
 10.14**  Shareholders Agreement between the Company, bill gross' idealab!, Mr.
           Singh and Korn/Ferry International Futurestep, Inc. dated December
           1, 1997
 10.15**  Employment Agreement between Mr. Singh and Korn/Ferry International
           Futurestep, Inc. dated December 1, 1997
 10.16**  KFI/Singh Agreement between the Company and Mr. Singh dated December
           1, 1997
 10.17**  Stock Repurchase Agreement between the Company and Mr. Singh dated
           December 1, 1997
 10.18**  License Agreement between Self Discovery Dynamics LLC and Korn/Ferry
           International Futurestep, Inc. dated May 15, 1998
 10.19(1) Trademark License and Promotion Agreement between Dow Jones &
           Company, the Company and Korn/Ferry International Futurestep, Inc.
           dated June 8, 1998
 10.20**  Stock Purchase Agreement between the Company, Mr. Ferry, Henry B.
           Turner and Peter W. Mullin (as trustees of the Richard M. Ferry and
           Maude M. Ferry 1972 Children's Trust), the California Community
           Foundation and Richard M. Ferry Co-trustees, and the California
           Community Foundation dated June 2, 1995
 10.21**  Purchase Agreement dated December 31, 1994 between the Company and
           the parties named therein
 10.22**  Revolving Line Agreement dated January 31, 1997 between the Company
           and Mellon 1st Business Bank, as successor to 1st Business Bank, as
           amended June 19, 1998
 10.23**  Revolving Credit and Term Loan Agreement dated January 31, 1997
           between the Company and Mellon 1st Business Bank, as successor to
           1st Business Bank
</TABLE>
    
 
                                      II-5

<PAGE>
 

<TABLE>   
<CAPTION>
 EXHIBIT
 NUMBER                          DESCRIPTION OF EXHIBIT
 -------                         ----------------------
 <C>     <S>
 10.24** Promissory Note executed by the Company dated January 28, 1998 as co-
          obligor payable to Mellon 1st Business Bank, as successor to 1st
          Business Bank
 10.25   Form of Additional Redemption Agreement
 10.26** Amended and Restated Stock Right Plan
 10.27** Form of U.S. and Foreign Executive Participation Program
 10.28** Form of Supplemental Executive Equity Participation Program
 10.29** Phantom Stock Plan
 10.30** Form of Termination and Conversion Agreement for Stock Right Plan
 10.31** Form of Termination and Conversion Agreement for Phantom Stock Plan
 10.32   General Release and Settlement Agreement between the Company and Mr.
          Boxberger dated December 3, 1998
 21.1**  Subsidiaries of the Company
 23.1    Consent of Arthur Andersen LLP
 23.3    Consent of O'Melveny & Myers LLP (included in Exhibit 5.1)
 24.1    Power of Attorney
 27.1    Financial Data Schedule
</TABLE>
    
- --------
   
(1) Confidential treatment has been requested for a portion of this Exhibit.
        
       
**  Previously filed.
 
  (b) FINANCIAL STATEMENT SCHEDULES
 
  Schedule II--Korn/Ferry International Allowance for Doubtful Accounts
 

ITEM 17. UNDERTAKINGS
 
  (a) The undersigned Registrant 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 arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
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. If a claim for indemnification against such liabilities (other
than the payment by the Registrant of expenses incurred or paid by a director,
officer or controlling person of the Registrant 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, the
Registrant 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 of 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.
 
  (c) The undersigned Registrant hereby undertakes that:
 
    (1) For purposes of determining any liability under the Securities Act,
  the information omitted from the form of prospectus filed as part of a
  registration statement in reliance upon Rule 430A and contained in a form
  of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or
  497(h) under the Securities Act shall be deemed to be part of the
  registration statement as of the time it was declared effective.
 
    (2) For purposes of determining any liability under the Securities Act,
  each post-effective amendment that contains a form of prospectus shall be
  deemed 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-6

<PAGE>
 

                                  SIGNATURES
   
  Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Amendment No. 3 to the Registration Statement
to be signed on its behalf by the undersigned, thereunto duly authorized, in
the City of Los Angeles, State of California, on December 24, 1998.     
 
                                          KORN/FERRY INTERNATIONAL
 
                                          By:                 
                                                           *     
                                             ----------------------------------
                                                  Elizabeth S.C.S. Murray
                                                Chief Financial Officer and
                                                  Executive Vice President
   
  Pursuant to the requirements of the Securities Act of 1933, as amended, this
Amendment No. 3 to the Registration Statement has been signed by the following
persons in the capacities and on the dates indicated.     
 

<TABLE>   
<CAPTION>
             SIGNATURE                           TITLE                   DATE
             ---------                           -----                   ----
 
<S>                                  <C>                           <C>
                 *                   Chair of the Board            December 24, 1998
____________________________________
          Richard M. Ferry
 

                 *                   Chief Executive Officer,      December 24, 1998
____________________________________  President and Director
          Windle B. Priem
 

                 *                   Chief Financial Officer and   December 24, 1998
____________________________________  Executive Vice President
      Elizabeth S.C.S. Murray
 

                 *                   Vice President of Finance     December 24, 1998
____________________________________  (Principal Accounting
          Donald E. Jordan            Officer)
 

                 *                   Director                      December 24, 1998
____________________________________
        Paul Buchanan-Barrow
 

        /s/ Peter L. Dunn            Director                      December 24, 1998
____________________________________
           Peter L. Dunn
 

                 *                   Director                      December 24, 1998
____________________________________
          Timothy K. Friar
 

                 *                   Director                      December 24, 1998
____________________________________
         Sakie T. Fukushima
 

                 *                   Director                      December 24, 1998
____________________________________
             Hans Jorda

                 *                   Director                      December 24, 1998
____________________________________
          Scott E. Kingdom
</TABLE>
    
 
                                     II-7

<PAGE>
 

<TABLE>   
<CAPTION>
             SIGNATURE                           TITLE                   DATE
             ---------                           -----                   ----
 
<S>                                  <C>                           <C>
                 *                             Director             December 24, 1998
____________________________________
          Young Kuan-Sing
 

                 *                             Director             December 24, 1998
____________________________________
           Raimondo Nider
 

                 *                             Director             December 24, 1998
____________________________________
      Manuel A. Papayanopulos
 

                 *                             Director             December 24, 1998
____________________________________
         Michael A. Wellman
</TABLE>
    

   
*By: /s/ Peter L. Dunn 
    __________________________
         Peter L. Dunn
       Attorney-in-Fact      
 
                                      II-8

<PAGE>
 

                   REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
 
To the Shareholders and Board of Directors of
Korn/Ferry International and Subsidiaries:
 
  We have audited in accordance with generally accepted auditing standards,
the consolidated financial statements of Korn/Ferry International and
subsidiaries included in this registration statement and we expect to be in a
position to issue our report thereon dated July 31, 1998. Our audit was made
for the purpose of forming an opinion on the basic financial statements taken
as a whole. The Schedule II--Korn/Ferry International 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
 
Los Angeles, California
July 31, 1998

 
                                     II-9

<PAGE>
 
                                  SCHEDULE II
 
                   KORN/FERRY INTERNATIONAL AND SUBSIDIARIES
                                 (IN THOUSANDS)
 

<TABLE>
<CAPTION>
                                     BALANCE AT CHARGED TO           BALANCE AT
                                     BEGINNING  COSTS AND              END OF
                                      OF YEAR    EXPENSES  DEDUCTION    YEAR
                                     ---------- ---------- --------- ----------
<S>                                  <C>        <C>        <C>       <C>
YEAR ENDED APRIL 30:
Allowance for Doubtful Accounts
  1998..............................   $3,846     $2,427    $  (883)   $5,390
  1997..............................    3,341      2,196     (1,691)    3,846
  1996..............................    2,292      1,590       (541)    3,341
</TABLE>

 
 
 
 
 
  The accompanying notes to consolidated financial statements are in integral
                           part of these statements.
 
                                     II-10

<PAGE>
 

                               INDEX TO EXHIBITS
 

<TABLE>   
<CAPTION>
 EXHIBIT
  NUMBER                          DESCRIPTION OF EXHIBIT
 -------                          ----------------------
 <C>      <S>
  1.1     Form of Underwriting Agreement
  3.1**   Amended and Restated Articles of Incorporation of the Company
  3.2**   Amended and Restated Bylaws of the Company
  4.1     Specimen Common Stock certificate
  5.1     Opinion of O'Melveny & Myers LLP
 10.1     Form of Indemnification Agreement between the Company and each of its
           executive officers and directors
 10.2**   Performance Award Plan
 10.3**   Form of U.S. and International Worldwide Executive Benefit Retirement
           Plan
 10.4**   Form of U.S. and International Worldwide Executive Benefit Life
           Insurance Plan
 10.5**   Worldwide Executive Benefit Disability Plan (in the form of Long-Term
           Disability Insurance Policy)
 10.6**   Form of U.S. and International Enhanced Executive Benefit and Wealth
           Accumulation Plan
 10.7**   Form of U.S. and International Senior Executive Incentive Plan
 10.8**   Executive Salary Continuation Plan
 10.9**   Form of Stock Repurchase Agreement
 10.10**  Form of Amended and Restated Stock Repurchase Agreement
 10.11**  Form of Standard Employment Agreement
 10.12**  Form of Deferred Compensation Election Form for Fiscal 1998
 10.13**  Stock Purchase Agreement between the Company, bill gross' idealab!,
           Mr. Singh and Korn/Ferry International Futurestep, Inc. dated
           December 1, 1997
 10.14**  Shareholders Agreement between the Company, bill gross' idealab!, Mr.
           Singh and Korn/Ferry International Futurestep, Inc. dated December
           1, 1997
 10.15**  Employment Agreement between Mr. Singh and Korn/Ferry International
           Futurestep, Inc. dated December 1, 1997
 10.16**  KFI/Singh Agreement between the Company and Mr. Singh dated December
           1, 1997
 10.17**  Stock Repurchase Agreement between the Company and Mr. Singh dated
           December 1, 1997
 10.18**  License Agreement between Self Discovery Dynamics LLC and Korn/Ferry
           International Futurestep, Inc. dated May 15, 1998
 10.19(1) Trademark License and Promotion Agreement between Dow Jones &
           Company, the Company and Korn/Ferry International Futurestep, Inc.
           dated June 8, 1998
 10.20**  Stock Purchase Agreement between the Company, Mr. Ferry, Henry B.
           Turner and Peter W. Mullin (as trustees of the Richard M. Ferry and
           Maude M. Ferry 1972 Children's Trust), the California Community
           Foundation and Richard M. Ferry Co-trustees, and the California
           Community Foundation dated June 2, 1995
 10.21**  Purchase Agreement dated December 31, 1994 between the Company and
           the parties named therein
 10.22**  Revolving Line Agreement dated January 31, 1997 between the Company
           and Mellon 1st Business Bank, as successor to 1st Business Bank, as
           amended June 19, 1998
 10.23**  Revolving Credit and Term Loan Agreement dated January 31, 1997
           between the Company and Mellon 1st Business Bank, as successor to
           1st Business Bank
</TABLE>
    

<PAGE>
 

<TABLE>   
<CAPTION>
 EXHIBIT
 NUMBER                          DESCRIPTION OF EXHIBIT
 -------                         ----------------------
 <C>     <S>
 10.24** Promissory Note executed by the Company dated January 28, 1998 as co-
          obligor payable to Mellon 1st Business Bank, as successor to 1st
          Business Bank
 10.25   Form of Additional Redemption Agreement
 10.26** Amended and Restated Stock Right Plan
 10.27** Form of U.S. and Foreign Executive Participation Program
 10.28** Form of Supplemental Executive Equity Participation Program
 10.29** Phantom Stock Plan
 10.30** Form of Termination and Conversion Agreement for Stock Right Plan
 10.31** Form of Termination and Conversion Agreement for Phantom Stock Plan
 10.32   General Release and Settlement Agreement between the Company and Mr.
          Boxberger dated December 3, 1998
 21.1**  Subsidiaries of the Company
 23.1    Consent of Arthur Andersen LLP
 23.3    Consent of O'Melveny & Myers LLP (included in Exhibit 5.1)
 24.1    Power of Attorney
 27.1    Financial Data Schedule
</TABLE>
    
- --------
   
(1) Confidential treatment has been requested for a portion of this Exhibit.
        
       
**  Previously filed.





<PAGE>
 
                                                                     EXHIBIT 1.1

                                   ___ SHARES

                           KORN/FERRY INTERNATIONAL

                          COMMON STOCK, NO PAR VALUE

                            UNDERWRITING AGREEMENT
                            ----------------------


                                                              ____________, 1999

CREDIT SUISSE FIRST BOSTON CORPORATION
DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION
PAINEWEBBER INCORPORATED
As Representatives of the Several Underwriters,
    c/o Credit Suisse First Boston Corporation,
        Eleven Madison Avenue,
        New York, N.Y. 10010-3629.

Dear Sirs:

     1.  Introductory.  Korn/Ferry International, a California corporation
("Company"), proposes to issue and sell __________ shares of its Common Stock,
no par value ("Securities"), and the shareholders listed in Schedule A hereto
("Selling Shareholders") propose severally to sell an aggregate of ___________
outstanding shares of the Securities (such __________ shares of Securities being
hereinafter referred to as the "U.S. Firm Securities") to the several
Underwriters named in Schedule B hereto ("Underwriters").

     It is understood that the Company and the Selling Shareholders are
concurrently entering into a Subscription Agreement, dated the date hereof
("Subscription Agreement"), with Credit Suisse First Boston (Europe) Limited
("CSFBL"), and the other managers named therein ("Managers") relating to the
concurrent offering and sale of __________ shares of Securities ("International
Firm Securities")
 outside the United States and Canada ("International
Offering").

     In addition, as set forth below the Company proposes to issue and sell (i)
to the Underwriters, at the option of the Underwriters, an aggregate of not more
than __________ additional shares of Securities ("U.S. Optional Securities") and
(ii) to the Managers, at the option of the Managers, an aggregate of not more
than __________ additional shares of Securities ("International Optional
Securities").  The U.S. Firm Securities and the U.S. Optional Securities are
hereinafter called the "U.S. Securities"; the International Firm Securities and
the International Optional Securities are hereinafter called the "International
Securities"; the U.S. Firm Securities and the International Firm Securities are
hereinafter called the "Firm Securities"; the U.S. Optional Securities and the
International Optional Securities are hereinafter called the "Optional
Securities".  The U.S. Securities and the International Securities are
collectively referred to as the "Offered Securities".  To provide for the
coordination of their activities, the Underwriters and the Managers have entered
into an Agreement Between U.S. Underwriters and Managers which permits them,
among other things, to sell the Offered Securities to each other for purposes of
resale.

     The Company and the Selling Shareholders hereby agree with the several
Underwriters as follows:

     2.  Representations and Warranties of the Company and the Selling
Shareholders.  (a) The Company represents and warrants to, and agrees with, the
several Underwriters that:

<PAGE>
 
           (i) A registration statement (No. 333-61697) relating to the Offered
     Securities, including a form of prospectus relating to the U.S. Securities,
     has been filed with the Securities and Exchange Commission ("Commission")
     and either (i) has been declared effective under the Securities Act of 1933
     ("Act") and is not proposed to be amended or (ii) is proposed to be amended
     by amendment or post-effective amendment. If such registration statement
     (the "initial registration statement") has been declared effective, either
     (A) an additional registration statement (the "additional registration
     statement") relating to the Offered Securities may have been filed with the
     Commission pursuant to Rule 462(b) ("Rule 462(b)") under the Act and, if so
     filed, has become effective upon filing pursuant to such Rule and the
     Offered Securities all have been duly registered under the Act pursuant to
     the initial registration statement and, if applicable, the additional
     registration statement or (B) such an additional registration statement is
     proposed to be filed with the Commission pursuant to Rule 462(b) and will
     become effective upon filing pursuant to such Rule and upon such filing the
     Offered Securities will all have been duly registered under the Act
     pursuant to the initial registration statement and such additional
     registration statement. If the Company does not propose to amend the
     initial registration statement or if an additional registration statement
     has been filed and the Company does not propose to amend it, and if any
     post-effective amendment to either such registration statement has been
     filed with the Commission prior to the execution and delivery of this
     Agreement, the most recent amendment (if any) to each such registration
     statement has been declared effective by the Commission or has become
     effective upon filing pursuant to Rule 462(c) ("Rule 462(c)") under the Act
     or, in the case of the additional registration statement, Rule 462(b). For
     purposes of this Agreement, "Effective Time" with respect to the initial
     registration statement or, if filed prior to the execution and delivery of
     this Agreement, the additional registration statement means (i) if the
     Company has advised the Representatives that it does not propose to amend
     such registration statement, the date and time as of which such
     registration statement, or the most recent post-effective amendment thereto
     (if any) filed prior to the execution and delivery of this Agreement, was
     declared effective by the Commission or has become effective upon filing
     pursuant to Rule 462(c), or (ii) if the Company has advised the
     Representatives that it proposes to file an amendment or post-effective
     amendment to such registration statement, the date and time as of which
     such registration statement, as amended by such amendment or post-effective
     amendment, as the case may be, is declared effective by the Commission.  If
     an additional registration statement has not been filed prior to the
     execution and delivery of this Agreement but the Company has advised the
     Representatives that it proposes to file one, "Effective Time" with respect
     to such additional registration statement means the date and time as of
     which such registration statement is filed and becomes effective pursuant
     to Rule 462(b). "Effective Date" with respect to the initial registration
     statement or the additional registration statement (if any) means the date
     of the Effective Time thereof. The initial registration statement, as
     amended at its Effective Time, including all information contained in the
     additional registration statement (if any) and deemed to be a part of the
     initial registration statement as of the Effective Time of the additional
     registration statement pursuant to the General Instructions of the Form on
     which it is filed and including all information (if any) deemed to be a
     part of the initial registration statement as of its Effective Time
     pursuant to Rule 430A(b) ("Rule 430A(b)") under the Act, is hereinafter
     referred to as the "Initial Registration Statement". The additional
     registration statement, as amended at its Effective Time, including the
     contents of the initial registration statement incorporated by reference
     therein and including all information (if any) deemed to be a part of the
     additional registration statement as of its Effective Time pursuant to Rule
     430A(b), is hereinafter referred to as the "Additional Registration
     Statement". The Initial Registration Statement and the Additional
     Registration Statement are hereinafter referred to collectively as the
     "Registration Statements" and individually as a "Registration Statement".
     The form of prospectus relating to the U.S. Securities, as first filed with
     the Commission pursuant to and in accordance with Rule 424(b) ("Rule
     424(b)") under the Act or 

                                       2

<PAGE>
 
     (if no such filing is required) as included in the Registration Statement,
     is hereinafter referred to as the "U.S. Prospectus", and the form of
     prospectus relating to the International Securities, which is identical to
     the U.S. Prospectus except for the outside front cover page, the inside
     front cover page, the outside back cover page and the text under the
     captions "Underwriting" and "Subscription and Sale" in the prospectus
     relating to the International Securities (copies of such pages and text
     having been heretofore delivered to CSFBL on behalf of the Managers), is
     hereinafter referred to as the "International Prospectus"; and the U.S.
     Prospectus and the International Prospectus are hereinafter collectively
     referred to as the "Prospectuses". No document has been or will be prepared
     or distributed in reliance on Rule 434 under the Act;

           (ii)  If the Effective Time of the Initial Registration Statement is
     prior to the execution and delivery of this Agreement:  (i) on the
     Effective Date of the Initial Registration Statement, the Initial
     Registration Statement conformed in all material respects to the
     requirements of the Act and the rules and regulations of the Commission
     ("Rules and Regulations") and did not include any untrue statement of a
     material fact or omit to state any material fact required to be stated
     therein or necessary to make the statements therein not misleading, (ii) on
     the Effective Date of the Additional Registration Statement (if any), each
     Registration Statement conformed, or will conform, in all material respects
     to the requirements of the Act and the Rules and Regulations and did not
     include, or will not include, any untrue statement of a material fact and
     did not omit, or will not omit, to state any material fact required to be
     stated therein or necessary to make the statements therein not misleading,
     and (iii) on the date of this Agreement, the Initial Registration Statement
     and, if the Effective Time of the Additional Registration Statement is
     prior to the execution and delivery of this Agreement, the Additional
     Registration Statement each conforms, and at the time of filing of the U.S.
     Prospectus pursuant to Rule 424(b) or (if no such filing is required) at
     the Effective Date of the Additional Registration Statement in which the
     U.S. Prospectus is included, each Registration Statement and the U.S.
     Prospectus will conform, in all material respects to the requirements of
     the Act and the Rules and Regulations, and none of such documents, nor the
     International Prospectus, includes, or will include, any untrue statement
     of a material fact or omits, or will omit, to state any material fact
     required to be stated therein or necessary to make the statements therein
     not misleading. If the Effective Time of the Initial Registration Statement
     is subsequent to the execution and delivery of this Agreement: on the
     Effective Date of the Initial Registration Statement, the Initial
     Registration Statement and the U.S. Prospectus will conform in all material
     respects to the requirements of the Act and the Rules and Regulations, none
     of such documents, nor the International Prospectus, will include any
     untrue statement of a material fact or will omit to state any material fact
     required to be stated therein or necessary to make the statements therein
     not misleading, and no Additional Registration Statement has been or will
     be filed. The two preceding sentences do not apply to statements in or
     omissions from a Registration Statement or either of the Prospectuses based
     upon written information furnished to the Company by any Underwriter
     through the Representatives or by any Manager through CSFBL specifically
     for use therein, it being understood and agreed that the only such
     information is that described as such in Section 7(c) hereof;

           (iii) The Company has been duly incorporated and is an existing
     corporation in good standing under the laws of the State of California,
     with power and authority (corporate and other) to own its properties and
     conduct its business as described in the Prospectuses; and the Company is
     duly qualified to do business as a foreign corporation in good standing in
     all other jurisdictions in which its ownership or lease of property or the
     conduct of its business requires such qualification, except where the
     failure to be so qualified would not be reasonably expected to have a
     material adverse effect on the condition (financial or other), business,
     properties or results of operations of 

                                       3

<PAGE>
 
     the Company and the Subsidiaries (as defined below) taken as a whole or the
     transactions contemplated by this Agreement and the Subscription Agreement
     ("Material Adverse Effect");

           (iv)   Each significant subsidiary, as defined in Regulation S-X
     under the Act, of the Company, and Korn/Ferry International Futurestep,
     Inc. (collectively, the "Subsidiaries"), has been duly incorporated and is
     an existing corporation in good standing under the laws of the jurisdiction
     of its incorporation, with power and authority (corporate and other) to own
     its properties and conduct its business as described in the Prospectuses;
     Korn/Ferry International Futurestep, Inc. is duly qualified to do business
     as a foreign corporation in good standing in the State of California; and
     each Subsidiary of the Company is duly qualified to do business as a
     foreign corporation in good standing in all other jurisdictions in which
     its ownership or lease of property or the conduct of its business requires
     such qualification, except where the failure to be so qualified would not
     be reasonably expected to have a Material Adverse Effect; all of the issued
     and outstanding capital stock of each Subsidiary of the Company has been
     duly authorized and validly issued and is fully paid and nonassessable; and
     the capital stock of each Subsidiary owned by the Company, directly or
     through the Subsidiaries, is owned free from liens, encumbrances and
     defects;

           (v)    The Offered Securities and all other outstanding shares of
     capital stock of the Company have been duly authorized; all outstanding
     shares of capital stock of the Company are, and, when the Offered
     Securities have been delivered and paid for in accordance with this
     Agreement and the Subscription Agreement on each Closing Date (as defined
     below), such Offered Securities will have been validly issued, fully paid
     and nonassessable and will conform to the description thereof contained in
     the Prospectuses; and the shareholders of the Company have no preemptive
     rights with respect to the Securities;

           (vi)   Except as disclosed in the Prospectuses, there are no
     contracts, agreements or understandings between the Company and any person
     that would give rise to a valid claim against the Company or any
     Underwriter or Manager for a brokerage commission, finder's fee or other
     like payment in connection with this offering;

           (vii)  There are no contracts, agreements or understandings between
     the Company and any person granting such person the right to require the
     Company to file a registration statement under the Act with respect to any
     securities of the Company owned or to be owned by such person or to require
     the Company to include such securities in the securities registered
     pursuant to a Registration Statement or in any securities being registered
     pursuant to any other registration statement filed by the Company under the
     Act;

           (viii) The Offered Securities have been approved for listing on the
     New York Stock Exchange subject to notice of issuance;

           (ix)   No consent, approval, authorization, or order of, or filing
     with, any governmental agency or body or any court is required to be
     obtained or made by the Company for the consummation of the transactions
     contemplated by this Agreement in connection with the sale of the Offered
     Securities, except such as have been obtained and made under the Act and
     such as may be required under state securities laws;

           (x)    The execution, delivery and performance of this Agreement and
     the Subscription Agreement and the issuance and sale of the Offered
     Securities to be issued and sold by the Company will not result in a
     material breach or violation of any of the terms and provisions of, or
     constitute a default under, any statute, any rule, regulation or order of
     any governmental agency or body or

                                       4

<PAGE>
 
     any court, domestic or foreign, having jurisdiction over the Company or any
     Subsidiary of the Company or any of their properties, or any agreement or
     instrument to which the Company or any such Subsidiary is a party or by
     which the Company or any such Subsidiary is bound or to which any of the
     properties of the Company or any such Subsidiary is subject, or the charter
     or by-laws of the Company or any such Subsidiary, and the Company has full
     power and authority to authorize, issue and sell the Offered Securities as
     contemplated by this Agreement and the Subscription Agreement,
     respectively;

           (xi)   This Agreement and the Subscription Agreement have been duly
     authorized, executed and delivered by the Company;

           (xii)  The Company owns no real properties.  Except as disclosed in
     the Prospectuses, the Company and the Subsidiaries have good and marketable
     title to all properties and assets owned by them, in each case free from
     liens, encumbrances and defects that would materially affect the value
     thereof or materially interfere with the use made or to be made thereof by
     them; and except as disclosed in the Prospectuses, the Company and the
     Subsidiaries hold any leased real or personal property under valid and
     enforceable leases with no exceptions that would materially interfere with
     the use made or to be made thereof by them;

           (xiii) The Company and the Subsidiaries possess all material
     certificates, authorities or permits issued by appropriate governmental
     agencies or bodies necessary to conduct the business now operated by them
     and have not received any notice of proceedings relating to the absence,
     revocation or modification of any such certificate, authority or permit
     that, if determined adversely to the Company or any of the Subsidiaries,
     would individually or in the aggregate be reasonably expected to have a
     Material Adverse Effect;

           (xiv)  No labor dispute with the employees of the Company or any
     Subsidiary exists or, to the knowledge of the Company, is imminent that
     would reasonably be expected to have a Material Adverse Effect;

           (xv)   The Company and the Subsidiaries own, possess or can acquire
     on reasonable terms all material trademarks, trade names and other rights
     to inventions, know-how, patents, copyrights, confidential information and
     other intellectual property (collectively, "intellectual property rights")
     necessary to conduct the business now operated by them, or presently
     employed by them, and have not received any notice of infringement of or
     conflict with asserted rights of others with respect to any intellectual
     property rights that, if determined adversely to the Company or any of the
     Subsidiaries, would individually or in the aggregate be reasonably expected
     to have a Material Adverse Effect;

           (xvi)  Except as disclosed in the Prospectuses, there are no pending
     actions, suits or proceedings against or affecting the Company, any of the
     Subsidiaries or any of their respective properties that, if determined
     adversely to the Company or any of the Subsidiaries, would individually or
     in the aggregate have a Material Adverse Effect, or would materially and
     adversely affect the ability of the Company to perform its obligations
     under this Agreement, or which are otherwise material in the context of the
     sale of the Offered Securities; and no such actions, suits or proceedings
     are, to the Company's knowledge, threatened or contemplated;

           (xvii) The financial statements included in each Registration
     Statement and the Prospectuses present fairly the financial position of the
     Company and its consolidated Subsidiaries as of the dates shown and their
     results of operations and cash flows for the periods shown, and such
     financial 

                                       5

<PAGE>
 
     statements have been prepared in conformity with the generally accepted
     accounting principles in the United States applied on a consistent basis;
     and the assumptions used in preparing the pro forma financial statements
     included in each Registration Statement and the Prospectuses provide a
     reasonable basis for presenting the significant effects directly
     attributable to the transactions or events described therein, the related
     pro forma adjustments give appropriate effect to those assumptions, and the
     pro forma columns therein reflect the proper application of those
     adjustments to the corresponding historical financial statement amounts;

           (xviii) Except as disclosed in the Prospectuses, since the date of
     the latest audited financial statements included in the Prospectuses there
     has been no material adverse change, nor any development or event involving
     a prospective material adverse change, in the condition (financial or
     other), business, properties or results of operations of the Company and
     the Subsidiaries taken as a whole, and, except as disclosed in or
     contemplated by the Prospectuses, there has been no dividend or
     distribution of any kind declared, paid or made by the Company on any class
     of its capital stock; and

           (xix)   The Company is not and, after giving effect to the offering
     and sale of the Offered Securities and the application of the proceeds
     thereof as described in the Prospectuses, will not be an "investment
     company" as defined in the Investment Company Act of 1940.

     (b)  Each Selling Shareholder severally represents and warrants to, and
agrees with, the several Underwriters that:

           (i)    Such Selling Shareholder has and on the First Closing Date
     hereinafter mentioned will have full right, capacity, power and authority
     to enter into this Agreement, the Subscription Agreement and the Custody
     Agreement and to sell, assign, transfer and deliver the Offered Securities
     to be delivered by such Selling Shareholder on such Closing Date;

           (ii)   A Power of Attorney and a Custody Agreement have been duly
     executed and delivered by such Selling Shareholder and each constitutes  a
     valid and binding agreement of such Selling Shareholder in accordance with
     its terms;

           (iii)  Such Selling Shareholder is and on the First Closing Date
     hereinafter mentioned will be the owner of the Offered Securities to be
     delivered by or on behalf of such Selling Shareholder on such Closing Date,
     and upon delivery in the State of New York of such Offered Securities to
     the Underwriters and Managers, registration of certificates for the Offered
     Securities in the names of or for the accounts of the Underwriters and
     Managers, and payment therefor in accordance with the terms of this
     Agreement and the Subscription Agreement, the Underwriters and Managers
     will each become the owners of their respective percentages of such Offered
     Securities, free of any "adverse claim" (as defined in the New York UCC),
     assuming that the Underwriters or Managers do not have notice of any
     adverse claim to the Offered Securities;

           (iv)   The execution, delivery and performance of the Custody
     Agreement, this Agreement and the Subscription Agreement and the
     consummation of the transactions therein and herein contemplated will not
     result in a breach or violation of any of the terms and provisions of, or
     constitute a default under any law, rule or regulation or order of any
     governmental agency or body or any court having jurisdiction over such
     Selling Shareholder or any of his properties, or any agreement or
     instrument to which such Selling Shareholder is a party or by which such
     Selling Shareholder is bound or to which any of the properties of such
     Selling Shareholder is subject or, require any consent, approval or
     authorization to be obtained or filing, registration or declaration 

                                       6

<PAGE>
 
     to be made by or on behalf of such Selling Shareholder which has not been
     obtained or made, provided that no representation is made as to the Act or
     state securities laws; and

           (v)   At the Effective Time of the Initial Registration Statement and
     of any Additional Registration Statement, and on the date of this
     Agreement, to the best knowledge of such Selling Stockholder without
     independent investigation, each such Registration Statement, the U.S.
     prospectus, and the International Prospectus did not, do not and will not
     include any untrue statement of a material fact or omit to state any
     material fact required to be stated therein or necessary to make the
     statements therein not misleading.

     3.  Purchase, Sale and Delivery of Offered Securities.  On the basis of the
representations, warranties and agreements herein contained, but subject to the
terms and conditions herein set forth, the Company and each Selling Shareholder
agree, severally and not jointly, to sell to each Underwriter, and each
Underwriter agrees, severally and not jointly, to purchase from the Company and
each Selling Shareholder, at a purchase price of U.S.$________ per share, that
number of U.S. Firm Securities (rounded up or down, as determined by Credit
Suisse First Boston Corporation ("CSFBC") in its discretion, in order to avoid
fractions) obtained by multiplying _________ U.S. Firm Securities in the case of
the Company and the number of U.S. Firm Securities set forth opposite the name
of such Selling Shareholder in Schedule A hereto, in the case of a Selling
Shareholder, in each case by a fraction the numerator of which is the number of
U.S. Firm Securities set forth opposite the name of such Underwriter in Schedule
B hereto and the denominator of which is the total number of U.S. Firm
Securities.

     Certificates in negotiable form for the Offered Securities to be sold by
the Selling Shareholders hereunder have been placed in custody, for delivery
under this Agreement, under Custody Agreements made with the Company, as
custodian ("Custodian").  Each Selling Shareholder agrees that the shares
represented by the certificates held in custody for the Selling Shareholders
under such Custody Agreements are subject to the interests of the Underwriters
hereunder, that the arrangements made by the Selling Shareholders for such
custody are to that extent irrevocable, and that the obligations of the Selling
Shareholders hereunder shall not be terminated by operation of law, whether by
the death of any individual Selling Shareholder or the occurrence of any other
event, or in the case of a trust, by the death of any trustee or trustees or the
termination of such trust.  If any individual Selling Shareholder or any such
trustee or trustees should die, or if any other such event should occur, of if
any of such trusts should terminate, before the delivery of the Offered
Securities hereunder, certificates for such Offered Securities shall be
delivered by the Custodian in accordance with the terms and conditions of this
Agreement as if such death or other event of termination had not occurred,
regardless of whether or not the Custodian shall have received notice of such
death or other event or termination.

     The Company and the Custodian will deliver the U.S. Firm Securities to the
Representatives for the accounts of the Underwriters, against payment of the
purchase price in Federal (same day) funds by official bank check or checks or
wire transfer to an account at a bank acceptable to CSFBC drawn to the order of
CSFBC at the office of Sullivan & Cromwell, 1888 Century Park East, Los Angeles,
California, at 7:00 A.M., California time, on _____________, or at such other
time not later than seven full business days thereafter as CSFBC and the Company
determine, such time being herein referred to as the "First Closing Date".  For
purposes of Rule 15c6-1 under the Securities Exchange Act of 1934, the First
Closing Date (if later than the otherwise applicable settlement date) shall be
the settlement date for payment of funds and delivery of securities for all the
Offered Securities sold pursuant to the U.S. Offering and the International
Offering.  The certificates for the U.S. Firm Securities so to be delivered will
be in definitive form, in such denominations and registered in such names as
CSFBC requests and will be made available for checking and packaging at the
above office of Sullivan & Cromwell at least 24 hours prior to the First Closing
Date.

                                       7

<PAGE>
 
     In addition, upon written notice from CSFBC given to the Company from time
to time not more than 30 days subsequent to the date of the U.S. Prospectus, the
Underwriters may purchase all or less than all of the U.S. Optional Securities
at the purchase price per Security to be paid for the U.S. Firm Securities.  The
Company agrees to sell to the Underwriters the number of U.S. Optional
Securities specified in such notice and the Underwriters agree, severally and
not jointly, to purchase such U.S. Optional Securities.  The U.S. Optional
Securities to be purchased by the Underwriters on any Optional Closing Date
shall be in the same proportion to all the Optional Securities to be purchased
by the Underwriters and the Managers on such Optional Closing Date as the U.S.
Firm Securities bear to all the Firm Securities.  Such U.S. Optional Securities
shall be purchased from the Company for the account of each Underwriter in the
same proportion as the number of U.S. Firm Securities set forth opposite such
Underwriter's name bears to the total number of U.S. Firm Securities (subject to
adjustment by CSFBC to eliminate fractions) and may be purchased by the
Underwriters only for the purpose of covering over-allotments made in connection
with the sale of the U.S. Firm Securities.  No Optional Securities shall be sold
or delivered unless the U.S. Firm Securities and the International Firm
Securities previously have been, or simultaneously are, sold and delivered.  The
right to purchase the Optional Securities or any portion thereof may be
exercised from time to time and to the extent not previously exercised may be
surrendered and terminated at any time upon notice by CSFBC on behalf of
Underwriters and the Managers to the Company.

     Each time for the delivery of and payment for the U.S. Optional Securities,
being herein referred to as an "Optional Closing Date", which may be the First
Closing Date (the First Closing Date and each Optional Closing Date, if any,
being sometimes referred to as a "Closing Date"), shall be determined by CSFBC
but shall be not later than five full business days after written notice of
election to purchase Optional Securities is given. The Company will deliver the
U.S. Optional Securities being purchased on each Optional Closing Date to the
Representatives for the accounts of the several Underwriters, against payment of
the purchase price therefor in Federal (same day) funds by official bank check
or checks or wire transfer to an account at a bank acceptable to CSFBC drawn to
the order of CSFBC, at the office of Sullivan & Cromwell. The certificates for
the U.S. Optional Securities being purchased on each Optional Closing Date will
be in definitive form, in such denominations and registered in such names as
CSFBC requests upon reasonable notice prior to such Optional Closing Date and
will be made available for checking and packaging at the office of CSFBC at a
reasonable time in advance of such Optional Closing Date.

     4.  Offering by Underwriters.  It is understood that the several
Underwriters propose to offer the Offered Securities for sale to the public as
set forth in the U.S. Prospectus.

     5.  Certain Agreements of the Company and the Selling Shareholders. The
Company agrees with the several Underwriters and the Selling Shareholders that:

          (a)  If the Effective Time of the Initial Registration Statement is
     prior to the execution and delivery of this Agreement, the Company will
     file with the Commission pursuant to and in accordance with subparagraph
     (1) (or, if applicable and if consented to by CSFBC, subparagraph (4)) of
     Rule 424(b) not later than the earlier of (A) the second business day
     following the execution and delivery of this Agreement or (B) the fifteenth
     business day after the Effective Date of the Initial Registration
     Statement.

     The Company will advise CSFBC promptly of any such filing pursuant to Rule
     424(b). If the Effective Time of the Initial Registration Statement is
     prior to the execution and delivery of this Agreement and an additional
     registration statement is necessary to register a portion of the Offered
     Securities under the Act but the Effective Time thereof has not occurred as
     of such execution and delivery, the Company will file the additional
     registration statement or, if filed, will file a post-effective amendment
     thereto with the Commission pursuant to and in accordance with Rule 462(b)

                                       8

<PAGE>
 
     on or prior to 10:00 P.M., New York time, on the date of this Agreement or,
     if earlier, on or prior to the time the Prospectuses are printed and
     distributed to any Underwriter or Manager, or will make such filing at such
     later date as shall have been consented to by CSFBC.

          (b)  The Company will advise CSFBC promptly of any proposal to amend
     or supplement the initial or any additional registration statement as filed
     or the related prospectus or the Initial Registration Statement, the
     Additional Registration Statement (if any) or either of the Prospectuses
     and will not effect such amendment or supplementation without CSFBC's prior
     consent; and the Company will also advise CSFBC promptly of the
     effectiveness of each Registration Statement (if its Effective Time is
     subsequent to the execution and delivery of this Agreement) and of any
     amendment or supplementation of a Registration Statement or either of the
     Prospectuses and of the institution by the Commission of any stop order
     proceedings in respect of a Registration Statement and will use its best
     efforts to prevent the issuance of any such stop order and to obtain as
     soon as possible its lifting, if issued.

          (c)  If, at any time when a prospectus relating to the Offered
     Securities is required to be delivered under the Act in connection with
     sales by any Underwriter or dealer, any event occurs as a result of which
     either of both of the Prospectuses as then amended or supplemented would
     include an untrue statement of a material fact or omit to state any
     material fact necessary to make the statements therein, in the light of the
     circumstances under which they were made, not misleading, or if it is
     necessary at any time to amend either or both of the Prospectuses to comply
     with the Act, the Company will promptly notify CSFBC of such event and will
     promptly prepare and, in the case of the U.S. Prospectus, file with the
     Commission, at its own expense, an amendment or supplement which will
     correct such statement or omission or an amendment which will effect such
     compliance. Neither CSFBC's consent to, nor the Underwriters' delivery of,
     any such amendment or supplement shall constitute a waiver of any of the
     conditions set forth in Section 6.

          (d)  As soon as practicable, but not later than the Availability Date
     (as defined below), the Company will make generally available to its
     securityholders an earnings statement covering a period of at least 12
     months beginning after the Effective Date of the Initial Registration
     Statement (or, if later, the Effective Date of the Additional Registration
     Statement) which will satisfy the provisions of Section 11(a) of the Act.
     For the purpose of the preceding sentence, "Availability Date" means the
     45th day after the end of the fourth fiscal quarter following the fiscal
     quarter that includes such Effective Date, except that, if such fourth
     fiscal quarter is the last quarter of the Company's fiscal year,
     "Availability Date" means the 90th day after the end of such fourth fiscal
     quarter.

          (e)  The Company will furnish to the Representatives copies of each
     Registration Statement (one of which will be signed and will include all
     exhibits), each preliminary prospectus relating to the U.S. Securities,
     and, so long as a prospectus relating to the Offered Securities is required
     to be delivered under the Act in connection with sales by any Underwriter
     or dealer, the U.S. Prospectus and all amendments and supplements to such
     documents, in each case in such quantities as CSFBC requests. The U.S.
     Prospectus shall be so furnished on or prior to 3:00 P.M., New York time,
     on the business day following the later of the execution and delivery of
     this Agreement or the Effective Time of the Initial Registration Statement.
     All other such documents shall be so furnished as soon as available. The
     Company will pay the expenses of printing and distributing to the
     Underwriters all such documents.

                                       9

<PAGE>
 
          (f)  The Company will arrange for the qualification of the Offered
     Securities for sale under the laws of such jurisdictions in the United
     States as CSFBC designates and will continue such qualifications in effect
     so long as required for the distribution.

          (g)  During the period of five years hereafter, the Company will
     furnish to the Representatives and, upon request, to each of the other
     Underwriters, as soon as practicable after the end of each fiscal year, a
     copy of its annual report to shareholders for such year; and the Company
     will furnish to the Representatives (i) as soon as available, a copy of
     each report and any definitive proxy statement of the Company filed with
     the Commission under the Securities Exchange Act of 1934 or mailed to
     shareholders, and (ii) from time to time, such other information concerning
     the Company as CSFBC may reasonably request.

          (h)  For a period of 180 days after the date of the initial public
     offering of the Offered Securities, the Company will not offer, sell,
     contract to sell, pledge or otherwise dispose of, directly or indirectly,
     or file with the Commission a registration statement under the Act relating
     to, any additional shares of its Securities or securities convertible into
     or exchangeable or exercisable for any shares of its Securities, or
     publicly disclose the intention to make any such offer, sale, pledge,
     disposition or filing, without the prior written consent of CSFBC, except
     (i) grants of stock options pursuant to the terms of the Company's
     Performance Award Plan, and issuances of Securities pursuant to the
     exercise of such options or the exercise of any other employee stock
     options outstanding on the date hereof, and (ii) offers, sales or issuances
     of its Securities in connection with (a) acquisition transactions not
     involving a public offering, (b) conversion of the Company's outstanding
     phantom units and stock rights and (c) administration of the Company's
     401(k) plan and the Company's equity participation programs and
     supplemental equity participation programs.

          (i)  The Company agrees with the several Underwriters and the Selling
     Shareholders that the Company will pay all expenses incident to the
     performance of the obligations of the Company and the Selling Shareholders,
     as the case may be, under this Agreement, and will reimburse the
     Underwriters (if and to the extent incurred by them) for any filing fees
     and other expenses (including fees and disbursements of counsel) incurred
     by them in connection with qualification of the Offered Securities for sale
     under the laws of such jurisdictions in the United States as CSFBC
     designates and the printing of memoranda relating thereto, for the filing
     fee incidental to, and the reasonable fees and disbursements of counsel to
     the Underwriters in connection with, the review by the National Association
     of Securities Dealers, Inc. of the Offered Securities, for any travel
     expenses of the Company's officers and employees and any other expenses of
     the Company in connection with attending or hosting meetings with
     prospective purchasers of the Offered Securities, and for expenses incurred
     in distributing preliminary prospectuses and the Prospectuses (including
     any amendments and supplements thereto) to the Underwriters, provided that
     each Selling Shareholder severally agrees to pay any transfer taxes on the
     sale by such Selling Shareholder of Offered Securities to the Underwriters.

          (j)  Each Selling Shareholder agrees to deliver to CSFBC, attention:
     Transactions Advisory Group, on or prior to the First Closing Date a
     properly completed and executed United States Treasury Department Form W-9
     (or other applicable form or statement specified by Treasury Department
     regulations in lieu thereof).

          (k)  Each Selling Shareholder agrees, for a period of 180 days after
     the date of the initial public offering of the Offered Securities, not to
     offer, sell, contract to sell, pledge or otherwise dispose of, directly or
     indirectly, any additional shares of the Securities of the Company or
     securities convertible into or exchangeable or exercisable for any shares
     of Securities, other than 

                                       10

<PAGE>
 
     to the Company, or publicly disclose the intention to make any such offer,
     sale, pledge or disposition without the prior written consent of CSFBC.

     6.  Conditions of the Obligations of the Underwriters. The obligations of
the several Underwriters to purchase and pay for the U.S. Firm Securities on the
First Closing Date and the U.S. Optional Securities to be purchased on each
Optional Closing Date will be subject to the accuracy of the representations and
warranties on the part of the Company and the Selling Shareholders herein, to
the accuracy of the statements of Company officers made pursuant to the
provisions hereof, to the performance by the Company and the Selling
Shareholders of their obligations hereunder and to the following additional
conditions precedent:

          (a)  The Representatives shall have received a letter, dated the date
     of delivery thereof (which, if the Effective Time of the Initial
     Registration Statement is prior to the execution and delivery of this
     Agreement, shall be on or prior to the date of this Agreement or, if the
     Effective Time of the Initial Registration Statement is subsequent to the
     execution and delivery of this Agreement, shall be prior to the filing of
     the amendment or post-effective amendment to the registration statement to
     be filed shortly prior to such Effective Time), of Arthur Andersen LLP,
     confirming that they are independent public accountants within the meaning
     of the Act and the applicable published Rules and Regulations thereunder
     and stating to the effect that:

               (i)   in their opinion the financial statements and schedules
          examined by them and included in the Registration Statements comply as
          to form in all material respects with the applicable accounting
          requirements of the Act and the related published Rules and
          Regulations;

               (ii)  they have performed the procedures specified by the
          American Institute of Certified Public Accountants for a review of
          interim financial information as described in Statement of Auditing
          Standards No. 71, Interim Financial Information, on the unaudited
          financial statements included in the Registration Statements;

               (iii) on the basis of a reading of the latest available interim
          financial statements of  the Company, inquiries of officials of the
          Company who have responsibility for financial and accounting matters
          and other specified procedures, nothing came to their attention that
          caused them to believe that:

                    (A) the unaudited financial statements included in the
               Registration Statements do not comply as to form in all material
               respects with the applicable accounting requirements of the Act
               and the related published Rules and Regulations or any material
               modifications should be made to such unaudited financial
               statements for them to be in conformity with generally accepted
               accounting principles;

                    (B) at the date of the latest available balance sheet read
               by such accountants, or at a subsequent specified date not more
               than three business days prior to the date of this Agreement,
               there was any change in the capital stock or any increase in
               short-term indebtedness or long-term debt of the Company and the
               Subsidiaries or, at the date of the latest available balance
               sheet read by such accountants, there was any decrease in
               consolidated net assets, as compared with amounts shown on the
               latest balance sheet included the Prospectuses; or

                                       11

<PAGE>
 
                    (C)  for the period from the closing date of the latest
               income statement included in the Prospectuses to the closing date
               of the latest available income statement read by such accountants
               there were any decreases, as compared with the corresponding
               period of the previous year, in net fee revenue, operating income
               or in the total or per share amounts of consolidated net income;

          except in all cases set forth in clauses (A) and (B) above for
          changes, increases or decreases which the Prospectuses disclose have
          occurred or may occur or which are described in such letter;

               (iv)  they have compared specified dollar amounts (or percentages
          derived from such  dollar amounts) and other financial information
          contained in the Registration Statements (in each case to the extent
          that such dollar amounts, percentages and other financial information
          are derived from the general accounting records of the Company and the
          Subsidiaries subject to the internal controls of the Company's
          accounting system or are derived directly from such records by
          analysis or computation) with the results obtained from inquiries, a
          reading of such general accounting records and other procedures
          specified in such letter and have found such dollar amounts,
          percentages and other financial information to be in agreement with
          such results, except as otherwise specified in such letter;

               (v)   in their opinion, the Company's presentation of

          Management's Discussion and Analysis included in the Registration
          Statements includes, in all material respects, the required elements
          of the Rules and Regulations; the historical financial amounts
          included therein have been accurately derived, in all material
          respects, from the Company's financial statements; and the underlying
          information, determinations, estimates and assumptions of the Company
          provide a reasonable basis for the disclosures contained therein; and

               (vi)  nothing came to their attention as a result of the
          procedures specified in their  letter that caused them to believe that
          the unaudited pro forma condensed consolidated financial statements
          included in the Registration Statements do not comply as to form in
          all material respects with the applicable accounting requirements of
          rule 11-02 of Regulation S-X and that the pro forma adjustments have
          not been properly applied to the historical amounts in the compilation
          of those statements.

     For purposes of this subsection, (i) if the Effective Time of the Initial
     Registration Statement is subsequent to the execution and delivery of this
     Agreement, "Registration Statements" shall mean the initial registration
     statement as proposed to be amended by the amendment or post-effective
     amendment to be filed shortly prior to its Effective Time, (ii) if the
     Effective Time of the Initial Registration Statement is prior to the
     execution and delivery of this Agreement but the Effective Time of the
     Additional Registration Statement is subsequent to such execution and
     delivery, "Registration Statements" shall mean the Initial Registration
     Statement and the additional registration statement as proposed to be filed
     or as proposed to be amended by the post-effective amendment to be filed
     shortly prior to its Effective Time, and (iii) "Prospectuses" shall mean
     the prospectus relating to the U.S. Securities included in the Registration
     Statements and the corresponding form of prospectus relating to the
     International Securities.

          (b)  If the Effective Time of the Initial Registration Statement is
     not prior to the execution and delivery of this Agreement, such Effective
     Time shall have occurred not later than 10:00 P.M., New York time, on the
     date of this Agreement or such later date as shall have been consented to

                                       12

<PAGE>
 
     by CSFBC. If the Effective Time of the Additional Registration Statement
     (if any) is not prior to the execution and delivery of this Agreement, such
     Effective Time shall have occurred not later than 10:00 P.M., New York
     time, on the date of this Agreement or, if earlier, the time either
     Prospectus are printed and distributed to any Underwriter or Manager, or
     shall have occurred at such later date as shall have been consented to by
     CSFBC. If the Effective Time of the Initial Registration Statement is prior
     to the execution and delivery of this Agreement, the U.S. Prospectus shall
     have been filed with the Commission in accordance with the Rules and
     Regulations and Section 5(a) of this Agreement. Prior to such Closing Date,
     no stop order suspending the effectiveness of a Registration Statement
     shall have been issued and no proceedings for that purpose shall have been
     instituted or, to the knowledge of any Selling Shareholder, the Company or
     the Representatives, shall be contemplated by the Commission.

          (c)  Subsequent to the execution and delivery of this Agreement, there
     shall not have occurred (i) any change, or any development or event
     involving a prospective change, in the condition (financial or other),
     business, properties or results of operations of the Company or the
     Subsidiaries which, in the judgment of a majority in interest of the
     Underwriters including the Representatives, is material and adverse and
     makes it impractical or inadvisable to proceed with completion of the
     public offering or the sale of and payment for the U.S. Securities; (ii)
     any suspension or significant limitation of trading in securities generally
     on the New York Stock Exchange, or any setting of minimum prices for
     trading on such exchange, or any suspension of trading of any securities of
     the Company on any exchange or in the over-the-counter market; (iii) any
     banking moratorium declared by U.S. Federal or New York authorities; or
     (iv) any outbreak or escalation of major hostilities in which the United
     States is involved, any declaration of war by Congress or any other
     substantial national or international calamity or emergency if, in the
     judgment of a majority in interest of the Underwriters including the
     Representatives, the effect of any such outbreak, escalation, declaration,
     calamity or emergency makes it impractical or inadvisable to proceed with
     completion of the public offering or the sale of and payment for the U.S.
     Securities.

          (d)  The Representatives shall have received an opinion, dated such
     Closing Date, of O'Melveny & Myers, L.L.P.,  counsel for the Company, to
     the effect that:

               (i)   The Company has been duly incorporated and is validly
          existing in good standing under the laws of the State of California,
          with corporate power and corporate authority to own its properties and
          conduct its business as described in the Prospectuses;

               (ii)  The Company has qualified as a foreign corporation to do
          business in the states  identified by the Company in an Officer's
          Certificate, a copy of which will be delivered to the Representatives;

               (iii) The outstanding shares of the Common Stock of the Company
          have been duly authorized by all necessary corporate action on the
          part of the Company and are validly issued, fully paid and
          nonassessable; and the holders of the Common Stock of the Company are
          not entitled to any preemptive right to subscribe to any additional
          shares of the Common Stock of the Company under the Company's Articles
          of Incorporation or Bylaws;

               (iv)  The Offered Securities delivered on such Closing Date have
          been duly authorized by all necessary corporate action on the part of
          the Company and, upon payment for and delivery of the Offered
          Securities in accordance with this Agreement and the
                                       13

<PAGE>
 
          Subscription Agreement and the countersigning of the certificate or
          certificates representing the Offered Securities by a duly authorized
          signatory of the registrar for the Common Stock of the Company, the
          Offered Securities will be validly issued, fully paid and
          nonassessable;

               (v)    No order, consent, permit or approval of any California or
          Federal  governmental authority is required on the part of the Company
          for the execution and delivery by the Company of, or the issuance and
          sale of the Offered Securities by the Company pursuant to the terms
          of, this Agreement or the Subscription Agreement, except such as have
          been obtained under the Act and such as may be required under
          applicable Blue Sky or state securities laws;

               (vi)   The execution and delivery by the Company of, and the
          issuance and sale of  the Offered Securities by the Company pursuant
          to the terms of, this Agreement and the Subscription Agreement, do not
          violate any California or Federal statute, rule or regulation, except
          that such counsel need express no opinion regarding any federal
          securities laws or Blue Sky or state securities laws or Section 7 of
          this Agreement or Section 7 of the Subscription Agreement;

               (vii)  The execution and delivery by the Company of, and the
          issuance and sale of the  Offered Securities by the Company pursuant
          to the terms of, this Agreement and the Subscription Agreement, do not
          (1) violate the Articles of Incorporation or Bylaws of the Company, or
          (2) violate, breach, or result in a default under, any existing
          obligation of or restriction on the Company under any other agreement
          listed as an exhibit to the Registration Statement;

               (viii) The execution and delivery by the Company of this
          Agreement and the  Subscription Agreement have been duly authorized by
          all necessary corporate action on the part of the Company, and this
          Agreement and the Subscription Agreement have been duly executed and
          delivered by the Company;

               (ix)   The Initial Registration Statement and, if applicable, the
          Additional Registration Statement have been declared effective under
          the Act and, to such counsel's knowledge, no stop order suspending the
          effectiveness of the Initial Registration Statement or, if applicable,
          the Additional Registration Statement has been issued or threatened by
          the Commission;

               (x)    The Initial Registration Statement and, if applicable, the
          Additional Registration Statement, on their respective effective
          dates, appeared on their face to comply in all material respects with
          the requirements as to form for Registration Statements on Form S-1
          under the Act and the Rules and Regulations in effect on the date of
          effectiveness, except that such counsel need express no opinion
          concerning the financial statements and other financial information
          contained therein;

               (xi)   Such counsel does not know of any contract or other
          document of a character  required to be described in a Registration
          Statement or the Prospectuses or to be filed as an exhibit to the
          Initial Registration Statement or, if applicable, the Additional
          Registration Statement which was not described and filed as required;
          and

                                       14

<PAGE>
 
               (xii) The statements in the Prospectuses under the caption
          "Description of Capital Stock," insofar as they summarize provisions
          of the Articles of Incorporation and Bylaws of the Company, fairly
          present the information required by Form S-1.

          Such counsel shall state that in connection with such counsel's
     participation in conferences in connection with the preparation of the
     Initial Registration Statement and, if applicable, the Additional
     Registration Statement, and the Prospectuses, such counsel has not
     independently verified the accuracy, completeness or fairness of the
     statements contained therein, and the limitations inherent in the
     examination made by such counsel and the knowledge available to such
     counsel are such that such counsel is unable to assume, and does not
     assume, any responsibility for such accuracy, completeness or fairness
     (except as otherwise specifically stated in paragraph (xii) above).
     However, such counsel shall state that on the basis of such counsel's
     review and participation in conferences in connection with the preparation
     of the Initial Registration Statement and, if applicable, the Additional
     Registration Statement and the Prospectuses and relying on such counsel's
     determination as to materiality to an extent upon opinions of officers and
     other representatives of the Company, such counsel does not believe that
     the Initial Registration Statement and, if applicable, the Additional
     Registration Statement, as of their respective effective dates, contained
     any untrue statement of a material fact or omitted to state a material fact
     required to be stated therein or necessary in order to make the statements
     therein not misleading, and such counsel does not believe that the
     Prospectuses on the date of such opinion, contain any untrue statement of a
     material fact or omit to state a material fact necessary in order to make
     the statements therein, in light of the circumstances under which they were
     made, not misleading; it being understood that such counsel need express no
     opinion or belief as to the financial statements and other financial
     information contained in the Initial Registration Statement, the Additional
     Registration Statement, if any, or the Prospectuses.

          (e) The Representatives shall have received an opinion, dated the
     first Closing Date, of Latham & Watkins, special counsel for the Selling
     Shareholders, to the effect that:

               (i)  Assuming that each Selling Shareholder (A) has the capacity,
          power and authority, as applicable, to execute, deliver and perform
          the Power of Attorney, the Custody Agreement and this Agreement, (B)
          as applicable, has duly authorized the execution, delivery and
          performance of the Power of Attorney, the Custody Agreement, and this
          Agreement, (C) has duly executed and delivered the Power of Attorney
          and the Custody Agreement, and (D) such execution, delivery and
          performance of the Power of Attorney, the Custody Agreement, and this
          Agreement do not violate any law, rule or regulation applicable to
          such Selling Shareholder, and do not require any consent, approval or
          authorization to be obtained or filing, registration or declaration to
          be made by or on behalf of such Selling Shareholder which has not been
          duly obtained or made, each of the Power of Attorney and Custody
          Agreement is a legally valid and binding obligation of such Selling
          Shareholder, enforceable in accordance with its terms, subject to (1)
          bankruptcy, insolvency, reorganization, moratorium, or other similar
          laws now or hereafter in effect relating to or affecting the rights
          and remedies of creditors, (2) laws governing the enforceability of
          agencies and obligations after death, (3) general principles of
          equity, whether enforcement is considered in a proceeding in equity or
          at law, and the discretion of a court before which any proceeding may
          therefore be brought, and (4) the unenforceability under certain
          circumstances under law or court decisions of provisions providing for
          the indemnification of or contribution to a party with respect to a
          liability where such indemnification or contribution is contrary to
          public policy; and this Agreement 

                                       15

<PAGE>
 
          has been duly executed and delivered by [Attorney-in-Fact] on behalf
          on the Selling Shareholders; and

               (ii)  Assuming that the representations of the Company herein and
          of the Selling Shareholders as to their ownership of the Offered
          Securities in Section 2(b) are correct, upon payment for such Offered
          Securities in accordance with the terms of this Agreement, delivery of
          such Offered Securities to DTC or its nominee ("DTC") in the State of
          New York, registration of such Offered Securities in the name of DTC,
          and registration of such Offered Securities to the account of the
          Underwriters in the records of DTC, the Underwriters will become the
          owners of such Offered Securities, free of any "adverse claim" (as
          defined in Section 8-101(a)(1) of the New York UCC), assuming that the
          Underwriters do not have notice of any adverse claim to such Offered
          Securities.

               In rendering such opinion, such counsel may assume that the
          parties to this Agreement, the Power of Attorney and the Custody
          Agreement are duly organized and existing, have requisite capacity,
          power and authority to enter into and perform this Agreement, the
          Power of Attorney and the Custody Agreement, and that this Agreement,
          the Power of Attorney and the Custody Agreement have been duly
          authorized, executed and delivered by such parties and constitute
          their respective legally valid and binding obligations, and that such
          execution, delivery and performance does not violate any law, rule or
          regulation applicable to them or require any consent, approval or
          authorization to be obtained or filing, registration or declaration to
          be made by or on behalf of such persons which has not been obtained or
          made.

          (f)  The Representatives shall have received from Sullivan & Cromwell,
     counsel for the Underwriters, such opinion or opinions, dated such Closing
     Date, with respect to the incorporation of the Company, the validity of the
     Offered Securities delivered on such Closing Date, the Registration
     Statements, the Prospectuses and other related matters as the
     Representatives may require, and the Selling Shareholders and the Company
     shall have furnished to such counsel such documents as they request for the
     purpose of enabling them to pass upon such matters.

          (g)  The Representatives shall have received a certificate, dated such
     Closing Date, of the President, a Vice Chair or any Vice President and the
     Chief Financial Officer of the Company in which such officers, to the best
     of their knowledge after reasonable investigation, shall state that: the
     representations and warranties of the Company in this Agreement are true
     and correct; the Company has complied in all material respects with all
     agreements and satisfied all conditions on its part to be performed or
     satisfied hereunder at or prior to such Closing Date; no stop order
     suspending the effectiveness of any Registration Statement has been issued
     and no proceedings for that purpose have been instituted or are
     contemplated by the Commission; the Additional Registration Statement (if
     any) satisfying the requirements of subparagraphs (1) and (3) of Rule
     462(b) was filed pursuant to Rule 462(b), including payment of the
     applicable filing fee in accordance with Rule 111(a) or (b) under the Act,
     prior to the time either Prospectus was printed and distributed to any
     Underwriter or Manager; and, subsequent to the date of the most recent
     financial statements in the Prospectuses, there has been no material
     adverse change, nor any development or event involving a prospective
     material adverse change, in the condition (financial or other), business,
     properties or results of operations of the Company and the Subsidiaries
     taken as a whole except as set forth in or contemplated by the Prospectuses
     or as described in such certificate.

                                       16

<PAGE>
 
          (h)  The Representatives shall have received a certificate, dated such
     Closing Date, of each of the Selling Shareholders stating that the
     representations and warranties of such Selling Shareholder in this
     Agreement are true and correct and such Selling Shareholder has complied in
     all material respects with all agreements and satisfied all conditions on
     its part to be performed or satisfied hereunder at or prior to such Closing
     Date.

          (i)  The Representatives shall have received a letter, dated such
     Closing Date, of Arthur Andersen LLP, which meets the requirements of
     subsection (a) of this Section, except that the specified date referred to
     in such subsection will be a date not more than three business days prior
     to such Closing Date for the purposes of this subsection.

          (j)  On such Closing Date, the Managers shall have purchased the
     International Firm Securities or the International Optional Securities, as
     the case may be, pursuant to the Subscription Agreement.

The Company and the Selling Shareholders will furnish the Representatives with
such conformed copies of such opinions, certificates, letters and documents as
the Representatives reasonably request.  CSFBC may in its sole discretion waive
on behalf of the Underwriters compliance with any conditions to the obligations
of the Underwriters hereunder, whether in respect of an Optional Closing Date or
otherwise.

     7.  Indemnification and Contribution.  (a)  The Company will indemnify and
hold harmless each Underwriter against any losses, claims, damages or
liabilities, joint or several, to which such Underwriter may become subject,
under the Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon any
untrue statement or alleged untrue statement of any material fact contained in
any Registration Statement, either of the Prospectuses, or any amendment or
supplement thereto, or any related preliminary prospectus, or arise out of or
are based upon the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, and will reimburse each Underwriter for any legal or other expenses
reasonably incurred by such Underwriter in connection with investigating or
defending any such loss, claim, damage, liability or action as such expenses are
incurred; provided, however, that the Company will not be liable in any such
case to the extent that any such loss, claim, damage or liability arises out of
or is based upon an untrue statement or alleged untrue statement in or omission
or alleged omission from any of such documents in reliance upon and in
conformity with written information furnished to the Company by any Underwriter
through the Representatives specifically for use therein, it being understood
and agreed that the only such information furnished by any Underwriter consists
of the information described as such in subsection (c) below; and provided,
further, that the indemnity agreement contained in this subsection (a) shall not
inure to the benefit of any Underwriter from whom the person asserting any such
losses, claims, damages or liabilities purchased the Offered Securities
concerned in respect of any preliminary prospectus, or any amendment or
supplement thereto, to the extent that both (i) the untrue statements or alleged
untrue statements or omissions or alleged omissions of material fact contained
in any preliminary prospectus or any amendment or supplement thereto were fully
corrected in the Prospectuses or any amendments or supplements thereto and (ii)
the fully corrected Prospectuses or amendments or supplements were required to
be delivered by such Underwriter under the Act in connection with such purchase,
were provided to such Underwriter by the Company prior to the time the written
confirmation of the sale of the Offered Securities to such purchaser was sent
and were not sent or given to such purchaser at or prior to the written
confirmation of the sale of Offered Securities to such person.

     (b) The Selling Shareholders, severally and not jointly, will indemnify and
hold harmless each Underwriter against any losses, claims, damages or
liabilities, joint or several, to which such Underwriter may become subject,
under the Act or otherwise, insofar as such losses, claims, damages or
liabilities (or 

                                       17

<PAGE>
 
actions in respect thereof) arise out of or are based upon any untrue statement
or alleged untrue statement of any material fact contained in any Registration
Statement, either of the Prospectuses, or any amendment or supplement thereto,
or any related preliminary prospectus, or arise out of or are based upon the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, in
each case to the extent, but only to the extent, that such untrue statement or
alleged untrue statement or omission or alleged omission was made in reliance
upon and in conformity with written information furnished by such Selling
Shareholder to the Company specifically for use therein and will reimburse each
Underwriter for any legal or other expenses reasonably incurred by such
Underwriter in connection with investigating or defending any such loss, claim,
damage, liability or action as such expenses are incurred; it being understood
and agreed that the only such information furnished by such shareholder consists
of his name, address, number of shares beneficially owned and number of shares
offered for sale. The indemnity agreement contained in this subsection (b) shall
not inure to the benefit of any Underwriter from whom the person asserting any
such losses, claims, damages or liabilities purchased the Offered Securities
concerned in respect of any preliminary prospectus, or any amendment or
supplement thereto, to the extent that both (i) the untrue statements or alleged
untrue statements or omissions or alleged omissions of material fact contained
in any preliminary prospectus or any amendment or supplement thereto were fully
corrected in the Prospectuses or any amendments or supplements thereto and (ii)
the fully corrected Prospectuses or amendments or supplements were required to
be delivered by such Underwriter under the Act in connection with such purchase,
were provided to such Underwriter by the Company prior to the time the written
confirmation of the sale of the Offered Securities to such purchaser was sent
and were not sent or given to such purchaser at or prior to the written
confirmation of the sale of Offered Securities to such person.

     (c)  Each Underwriter will severally and not jointly indemnify and hold
harmless the Company and each Selling Shareholder against any losses, claims,
damages or liabilities to which the Company or such Selling Shareholder may
become subject, under the Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are based
upon any untrue statement or alleged untrue statement of any material fact
contained in any Registration Statement, either of the Prospectuses, or any
amendment or supplement thereto, or any related preliminary prospectus, or arise
out of or are based upon the omission or the alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, in each case to the extent, but only to the extent, that
such untrue statement or alleged untrue statement or omission or alleged
omission was made in reliance upon and in conformity with written information
furnished to the Company by such Underwriter through the Representatives
specifically for use therein, and will reimburse any legal or other expenses
reasonably incurred by the Company and each Selling Shareholder in connection
with investigating or defending any such loss, claim, damage, liability or
action as such expenses are incurred, it being understood and agreed that the
only such information furnished by any Underwriter consists of the following
information in the U.S. Prospectus furnished on behalf of each Underwriter: the
last paragraph at the bottom of the cover page concerning the terms of the
offering by the Underwriters, the legend concerning over-allotments and
stabilizing on the inside front cover page, the concession and reallowance
figures appearing in the fifth paragraph under the caption "Underwriting" and
the information contained in the seventeenth paragraph under the caption
"Underwriting".

     (d)  Promptly after receipt by an indemnified party under this Section of
notice of the commencement of any action, such indemnified party will, if a
claim in respect thereof is to be made against the indemnifying party under
subsection (a), (b) or (c) above, notify the indemnifying party of the
commencement thereof; but the omission so to notify the indemnifying party will
not relieve it from any liability which it may have to any indemnified party
otherwise than under subsection (a), (b) or (c) above. In case any such action
is brought against any indemnified party and it notifies an indemnifying party
of the commencement thereof, the indemnifying party will be entitled to
participate therein and, to the extent that 

                                       18

<PAGE>
 
it may wish, jointly with any other indemnifying party similarly notified, to
assume the defense thereof, with counsel satisfactory to such indemnified party
(who shall not, except with the consent of the indemnified party, be counsel to
the indemnifying party), and after notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof, the
indemnifying party will not be liable to such indemnified party under this
Section for any legal or other expenses subsequently incurred by such
indemnified party in connection with the defense thereof other than reasonable
costs of investigation. No indemnifying party shall, without the prior written
consent of the indemnified party, effect any settlement of any pending or
threatened action in respect of which any indemnified party is or could have
been a party and indemnity could have been sought hereunder by such indemnified
party unless such settlement includes an unconditional release of such
indemnified party from all liability on any claims that are the subject matter
of such action. No indemnified party shall, without the prior written consent of
the indemnifying party, which consent will not be unreasonably withheld, effect
any settlement of any pending or threatened action in respect of which any
indemnified party seeks indemnification pursuant to this Section.

     (e)  If the indemnification provided for in this Section is unavailable or
insufficient to hold harmless an indemnified party under subsection (a), (b) or
(c) above, then each indemnifying party shall contribute to the amount paid or
payable by such indemnified party as a result of the losses, claims, damages or
liabilities referred to in subsection (a), (b) or (c) above, but only in respect
of matters that such party would otherwise be entitled to indemnify pursuant to
such subsections,  (i) in such proportion as is appropriate to reflect the
relative benefits received by the Company and the Selling Shareholders on the
one hand and the Underwriters on the other from the offering of the U.S.
Securities or (ii) if the allocation provided by clause (i) above is not
permitted by applicable law, in such proportion as is appropriate to reflect not
only the relative benefits referred to in clause (i) above but also the relative
fault of the Company and the Selling Shareholders on the one hand and the
Underwriters on the other in connection with the statements or omissions which
resulted in such losses, claims, damages or liabilities as well as any other
relevant equitable considerations. The relative benefits received by the Company
and the Selling Shareholders on the one hand and the Underwriters on the other
shall be deemed to be in the same proportion as the total net proceeds from the
offering of the U.S. Securities (before deducting expenses) received by the
Company and the Selling Shareholders bear to the total underwriting discounts
and commissions received by the Underwriters. The relative fault shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to state
a material fact relates to information supplied by the Company, the Selling
Shareholders or the Underwriters and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such untrue
statement or omission. The amount paid by an indemnified party as a result of
the losses, claims, damages or liabilities referred to in the first sentence of
this subsection (e) shall be deemed to include any legal or other expenses
reasonably incurred by such indemnified party in connection with investigating
or defending any action or claim which is the subject of this subsection (e).
Notwithstanding the provisions of this subsection (e), no Underwriter shall be
required to contribute any amount in excess of the amount by which the total
price at which the U.S. Securities underwritten by it and distributed to the
public were offered to the public exceeds the amount of any damages which such
Underwriter has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission.  No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. The Underwriters' obligations in this subsection
(e) to contribute are several in proportion to their respective underwriting
obligations and not joint.

     (f)  The obligations of the Company and the Selling Shareholders under this
Section shall be in addition to any liability which the Company and the Selling
Shareholders may otherwise have and shall extend, upon the same terms and
conditions, to each person, if any, who controls any Underwriter within the
meaning of the Act; and the obligations of the Underwriters under this Section
shall be in addition to any liability which the respective Underwriters may
otherwise have and shall extend, upon the same terms and 

                                       19

<PAGE>
 
conditions, to each director of the Company, to each officer of the Company who
has signed a Registration Statement and to each person, if any, who controls the
Company within the meaning of the Act.

     8.  Default of Underwriters.  If any Underwriter or Underwriters default in
their obligations to purchase U.S. Securities hereunder on either the First or
any Optional Closing Date and the aggregate number of shares of U.S. Securities
that such defaulting Underwriter or Underwriters agreed but failed to purchase
does not exceed 10% of the total number of shares of U.S. Securities that the
Underwriters are obligated to purchase on such Closing Date, CSFBC may make
arrangements satisfactory to the Company and the Selling Shareholders for the
purchase of such U.S. Securities by other persons, including any of the
Underwriters, but if no such arrangements are made by such Closing Date the non-
defaulting Underwriters shall be obligated severally, in proportion to their
respective commitments hereunder, to purchase the U.S. Securities that such
defaulting Underwriters agreed but failed to purchase on such Closing Date. If
any Underwriter or Underwriters so default and the aggregate number of shares of
U.S. Securities with respect to which such default or defaults occur exceeds 10%
of the total number of shares of U.S. Securities that the Underwriters are
obligated to purchase on such Closing Date and arrangements satisfactory to
CSFBC, the Company and the Selling Shareholders for the purchase of such U.S.
Securities by other persons are not made within 36 hours after such default,
this Agreement will terminate without liability on the part of any non-
defaulting Underwriter, the Company or the Selling Shareholders, except as
provided in Section 9 (provided that if such default occurs with respect to U.S.
Optional Securities after the First Closing Date, this Agreement will not
terminate as to the U.S. Firm Securities or any U.S. Optional Securities
purchased prior to such termination). As used in this Agreement, the term
"Underwriter" includes any person substituted for an Underwriter under this
Section. Nothing herein will relieve a defaulting Underwriter from liability for
its default.

     9.  Survival of Certain Representations and Obligations.  The respective
indemnities, agreements, representations, warranties and other statements of the
Company or its officers, of the Selling Shareholders and of the several
Underwriters set forth in or made pursuant to this Agreement will remain in full
force and effect, regardless of any investigation, or statement as to the
results thereof, made by or on behalf of the Company, any Selling Shareholder,
any Underwriter or any of their respective representatives, officers or
directors or any controlling person, and will survive delivery of and payment
for the U.S. Securities. If this Agreement is terminated pursuant to Section 8
or if for any reason the purchase of the U.S. Securities by the Underwriters is
not consummated, the Company shall remain responsible for the expenses to be
paid or reimbursed by them pursuant to Section 5 and the respective obligations
of the Company, the Selling Shareholders, and the Underwriters pursuant to
Section 7 shall remain in effect, and if any U.S. Securities have been purchased
hereunder the representations and warranties in Section 2 and all obligations
under Section 5 shall also remain in effect. If the purchase of the U.S.
Securities by the Underwriters is not consummated for any reason other than
solely because of the termination of this Agreement pursuant to Section 8 or the
occurrence of any event specified in clause (ii), (iii), or (iv) of Section
6(c), the Company will reimburse the Underwriters for all out-of-pocket expenses
(including fees and disbursements of counsel) reasonably incurred by them in
connection with the offering of the U.S. Securities.

     10.  Notices. All communications hereunder will be in writing and, if sent
to the Underwriters, will be mailed, delivered or telegraphed and confirmed to
the Representatives, c/o Credit Suisse First Boston Corporation, Eleven Madison
Avenue, New York, N.Y. 10010-3629, Attention:  Investment Banking Department -
Transactions Advisory Group, or, if sent to the Company, will be mailed,
delivered or telegraphed and confirmed to it at 1800 Century Park East, Suite
900, Los Angeles, CA 90067, Attention:  General Counsel, or, if sent to the
Selling Shareholders or any of them, will be mailed, delivered or telegraphed
and confirmed to [Attorney-in-Fact] at the Company, 1800 Century Park East,
Suite 900, Los Angeles, CA 90067; provided, however, that any notice to an
Underwriter pursuant to Section 7 will be mailed, delivered or telegraphed and
confirmed to such Underwriter.

                                       20

<PAGE>
 
     11.  Successors. This Agreement will inure to the benefit of and be binding
upon the parties hereto and their respective personal representatives and
successors and the officers and directors and controlling persons referred to in
Section 7, and no other person will have any right or obligation hereunder.

     12.  Representation.  The Representatives will act for the several
Underwriters in connection with the transactions contemplated by this Agreement,
and any action under this Agreement taken by the Representatives jointly or by
CSFBC will be binding upon all the Underwriters.  [Attorney-in-Fact] will act
for the Selling Shareholders in connection with such transactions, and any
action under or in respect of this Agreement taken by [Attorney-in-Fact] will be
binding upon the Selling Shareholders.

     13.  Counterparts.  This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, but all such
counterparts shall together constitute one and the same Agreement.

     14.  APPLICABLE LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES
OF CONFLICTS OF LAWS.

     The Company hereby submits to the non-exclusive jurisdiction of the Federal
and state courts in the Borough of Manhattan in The City of New York in any suit
or proceeding arising out of or relating to this Agreement or the transactions
contemplated hereby.

                                       21

<PAGE>
 
     If the foregoing is in accordance with the Representatives' understanding
of our agreement, kindly sign and return to the Company one of the counterparts
hereof, whereupon it will become a binding agreement among the Selling
Shareholders, the Company and the several Underwriters in accordance with its
terms.

                              Very truly yours,


                              SELLING SHAREHOLDERS (set forth in Schedule A)


                                    By_____________________________________
                                              Attorney-in-Fact


                              KORN/FERRY INTERNATIONAL


                                    By_____________________________________
                                         Elizabeth S.C.S. Murray
                                         Executive Vice President and Chief
                                         Financial Officer


                                    By_____________________________________
                                         Peter L. Dunn
                                         Vice Chair and Corporate Secretary

The foregoing Underwriting Agreement 
is hereby confirmed and accepted as 
of the date first above written.

CREDIT SUISSE FIRST BOSTON CORPORATION
DONALDSON, LUFKIN & JENRETTE SECURITIES 
  CORPORATION
PAINEWEBBER INCORPORATED

  Acting on behalf of themselves and 
  as the Representatives of the several
  Underwriters.

  By CREDIT SUISSE FIRST BOSTON CORPORATION

   By______________________________________
                           [Insert title]

                                       22



<PAGE>
 
Common Stock                                                        Common Stock

=============                                                      =============
   NUMBER                                                              SHARES
=============                                                      =============

NO PAR VALUE                                                        NO PAR VALUE


                      [LOGO OF KORN/FERRY INTERNATIONAL]

            INCORPORATED UNDER THE LAWS OF THE STATE OF CALIFORNIA

THIS CERTIFICATE IS TRANSFERABLE IN              COUNTERSIGNED AND REGISTERED:
CALIFORNIA OR NEW YORK, NEW YORK                 CHASEMELLON BANK SHAREHOLDER 
                                                 SERVICES L.L.C.

CUSIP 500643 20 0                                BY

                                                           TRANSFER AGENT
                                                             AND REGISTRAR

                                                      AUTHORIZED SIGNATURE

This certifies that





is the owner of

          FULLY PAID AND NON-ASSESSABLE SHARES OF THE COMMON STOCK OF

Korn/Ferry, International transferable in person or by duly authorized attorney 
upon surrender of this certificate properly endorsed.  This certificate is not 
valid unless countersigned by the transfer agent and registered by the 
registrar.

     Witness the seal of the corporation and the facsimile signatures of its
duly authorized officers.

Dated:
                                  [SEAL]
               SECRETARY                              CHIEF EXECUTIVE OFFICER
                                                      AND PRESIDENT

<PAGE>
 
                           KORN FERRY INTERNATIONAL

      Upon request to the Secretary of the Corporation or the transfer agent for
the Common Stock, the Corporation will furnish to any shareholder, without
charge, a full statement of the designations and any preferences, conversion and
other rights, voting powers, restrictions, limitations as to dividends,

qualifications, terms and conditions of redemption of the stock of each class
that the Corporation is authorized to issue, the differences in the relative
rights and preferences between the shares of each series of the Corporation's
stock to the extent they have been set and the authority of the Board of
Directors to set the relative rights and preferences of subsequent series of
stock.

NOTICE: THE SIGNATURE TO THIS ASSIGNMENT MUST CORRESPOND WITH NAME AS WRITTEN 
UPON THE FACE OF THE CERTIFICATE, IN EVERY PARTICULAR, WITHOUT ALTERATION OR 
ENLARGEMENT OR ANY CHANGE WHATEVER.


                For Value received,        hereby sell, assign and transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
     IDENTIFYING NUMBER OF ASSIGNEE
- --------------------------------------
_______________________________________________________________________________
_______________________________________________________________________________
   (PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS INCLUDING POSTAL ZIP CODE OF 
                                   ASSIGNEE)
_______________________________________________________________________________
_________________________________________________________________________Shares
of the Common Stock represented by the within Certificate, and do hereby 
irrevocably constitute and appoint
________________________________________________________________________Attorney
to transfer the said shares on the books of the within named Corporation, with 
full power of substitution in the premises.
Dated:______________________________________
                                              __________________________________
                                                          Signature




Signature
Guaranteed:_______________________________





By________________________________________
THE SIGNATURE(S) SHOULD BE GUARANTEED BY 
AN ELIGIBLE GUARANTOR INSTITUTION, GENERALLY, 
BANKS, STOCK BROKERS, SAVINGS INSTITUTIONS
AND CREDIT UNIONS WITH MEMBERSHIP IN AN 
APPROVED SIGNATURE GUARANTEE PROGRAM.




<PAGE>
 
                                                                     EXHIBIT 5.1

                     [LETTERHEAD OF O'MELVENY & MYERS LLP]



December 22, 1998



Korn/Ferry International
1800 Century Park East, Suite 900
Los Angeles, California 90067


          Re:  REGISTRATION OF SHARES OF COMMON STOCK OF
               KORN/FERRY INTERNATIONAL
               ------------------------------------------

Ladies and Gentlemen:

          At your request, we have examined Amendment No. 3 to the Registration
Statement (the "Registration Statement") on Form S-1 (File No. 333-61697) of
Korn/Ferry International, a California corporation (the "Company"), in
connection with the registration under the Securities Act of 1933 of shares of
Common Stock, no par value, of the Company having an aggregate offering price of
up to $201,250,000 (the "Shares"). Certain of the Shares are being offered by
the Company (including the Shares subject to the underwriters' over-allotment
option) and the Shares not being offered by the Company are being offered by
certain shareholders of the Company. We are familiar with the proceedings taken
by the Company in connection with the authorization, issuance and sale of the
Shares.

          Subject to certain proposed additional proceedings being taken as 
contemplated by the Registration Statement prior to the issuance and sale of the
Shares being offered by the Company and the sale of the Shares
 being offered by 
certain shareholders of the Company, we are of the opinion that the Shares will 
be duly authorized by all necessary corporate action on the part of the Company 
and, upon payment for and delivery of the Shares as contemplated by the 
Registration Statement and the countersigning of the certificate or certificates
representing the Shares by a duly authorized signatory of the registrar for the
Company's Common Stock, the Shares will be validly issued, fully paid and 
non-assessable.

          We hereby consent to the use of this opinion as an exhibit to the 
Registration Statement and to the reference to this firm under the heading 
"Legal Matters" in the Prospectus constituting part of the Registration 
Statement.

                                  Respectfully submitted,

                                  /s/ O'MELVENY & MYERS LLP



<PAGE>
 
                                                                    EXHIBIT 10.1

                          FORM OF INDEMNITY AGREEMENT

                                        

     This Indemnity Agreement ("Agreement") is made as of _________________,
19__ by and between Korn/Ferry International, a California corporation
("Company"), and _____________________ ("Indemnitee"), a [director] [and]
[officer] of the Company.

                                R E C I T A L S

                                        

     A.  The Indemnitee is currently serving [has agreed to serve] as a
[director] [and] [officer] of the Company and in such capacity has rendered
[will render] valuable services to the Company.

     B.  The Company has investigated the availability and sufficiency of
liability insurance and California statutory indemnification provisions to
provide its [directors] [and] [officers] with adequate protection against
various legal risks and potential liabilities to which such individuals are
subject due to their positions with the Company and has concluded that such
insurance and statutory provisions may provide inadequate and unacceptable
protection to certain individuals requested to serve as its [directors] [and]
[officers].

     C.  In order to induce and encourage highly experienced and capable persons
such as the Indemnitee [to continue] to serve as a [director] [and] [officer] of
the Company, the Board of Directors has determined, after due consideration and
investigation of the terms
 and provisions of this Agreement and the various
other options available to the Company and the Indemnitee in lieu hereof, that
this Agreement is not only reasonable and prudent but necessary to promote and
ensure the best interests of the Company and its shareholders.

                                   AGREEMENT

NOW, THEREFORE, in consideration of the [continued] services of the Indemnitee
and in order to induce the Indemnitee [to continue] to serve as a [director]
[and] [officer], the Company and the Indemnitee do hereby agree as follows:

          1.  DEFINITIONS.  As used in this Agreement:
              -----------                             

              (a) The term "Proceeding" shall include any threatened, pending
          or completed action, suit or proceeding, formal or informal, whether
          brought in the name of the Company or otherwise and whether of a
          civil, criminal or administrative or investigative nature, against the
          Indemnitee by reason of the fact that the Indemnitee is or was a
          [director] [and] [officer] of the Company, or is or was serving at the
          request of the Company as a director, officer, employee or agent of
          another enterprise, whether or not he [she] is serving in such
          capacity at the time any liability or Expense is incurred for which
          indemnification or reimbursement is to be provided under this
          Agreement.

<PAGE>
 
              (b) The term "Expenses" includes, without limitation, attorneys'
          fees, disbursements and retainers, accounting and witness fees, travel
          and deposition costs, expenses of investigations, judicial or
          administrative proceedings and appeals, amounts paid in settlement by
          or on behalf of Indemnitee, and any expenses of establishing a right
          to indemnification, pursuant to this Agreement or otherwise, including
          reasonable compensation for time spent by the Indemnitee in connection
          with the investigation, defense or appeal of a Proceeding or action
          for indemnification for which he [she] is not otherwise compensated by
          the Company or any third party. The term "Expenses" does not include
          the amount of judgments, fines, penalties or ERISA excise taxes
          actually levied against the Indemnitee.

          2.  AGREEMENT TO SERVE.  The Indemnitee agrees [to continue] to serve
              ------------------                                               
     as a [director] [and] [officer] of the Company [at the will of the Company]
     [under the terms of his [her]agreement with the Company] for so long as he
     [she] is duly elected or appointed or until such time as he [she] tenders
     his [her] resignation in writing or is removed as a [director] [and]
     [officer].

          3.  INDEMNIFICATION IN THIRD PARTY ACTIONS.  The Company shall
              --------------------------------------                    
     indemnify the Indemnitee if the Indemnitee is a party to or threatened to
     be made a party to or is otherwise involved in any Proceeding (other than a
     Proceeding by or in the name of the Company to procure a judgment in its
     favor), by reason of the fact that the Indemnitee is or was a [director]
     [and] [officer] of the Company, or is or was serving at the request of the
     Company as a director, officer, employee or agent of another enterprise,
     against all Expenses, judgments, fines, penalties and ERISA excise taxes
     actually and reasonably incurred by the Indemnitee in connection with the
     defense or settlement of such a Proceeding, to the fullest extent permitted
     by California law and the Company's Amended and Restated Articles of
     Incorporation; provided that any settlement of a Proceeding be approved in
     writing by the Company.

          4.  INDEMNIFICATION IN PROCEEDINGS BY OR IN THE NAME OF THE COMPANY.
              ---------------------------------------------------------------  
     The Company shall indemnify the Indemnitee if the Indemnitee is a party to
     or threatened to be made a party to or is otherwise involved in any
     Proceeding by or in the name of the Company to procure a judgment in its
     favor by reason of the fact that the Indemnitee was or is a [director]
     [and] [officer] of the Company, or is or was serving at the request of the
     Company as a director, officer, employee or agent of another enterprise,
     against all Expenses, judgments, fines, penalties and ERISA excise taxes
     actually and reasonably incurred by the Indemnitee in connection with the
     defense or settlement of such a Proceeding, to the fullest extent permitted
     by California law and the Company's Amended and Restated Articles of
     Incorporation.

          5.  CONCLUSIVE PRESUMPTION REGARDING STANDARDS OF CONDUCT.  The
              -----------------------------------------------------      
     Indemnitee shall be conclusively presumed to have met the relevant
     standards of conduct, if any, as defined by California law, for
     indemnification pursuant to this Agreement, unless a determination is made
     that the Indemnitee has not met such standards (i) by the Board of
     Directors by a majority vote of a quorum thereof consisting of directors
     who

                                      -2-

<PAGE>
 
     were not parties to the Proceeding for which a claim is made under this
     Agreement, (ii) by the shareholders of the Company by majority vote of a
     quorum thereof consisting of shareholders who are not parties to the
     Proceeding due to which a claim is made under this Agreement, (iii) in a
     written opinion by independent counsel, the selection of whom has been
     approved by the Indemnitee in writing, or (iv) by a court of competent
     jurisdiction.

          6.  INDEMNIFICATION OF EXPENSES OF SUCCESSFUL PARTY.  Notwithstanding
              -----------------------------------------------                  
     any other provision of this Agreement, to the extent that the Indemnitee
     has been successful in defense of any Proceeding or in defense of any
     claim, issue or matter therein, on the merits or otherwise, including the
     dismissal of a Proceeding without prejudice or the settlement of a
     Proceeding without an admission of liability, the Indemnitee shall be
     indemnified against all Expenses incurred in connection therewith to the
     fullest extent permitted by California law.

          7.  ADVANCES OF EXPENSES.  The Expenses incurred by the Indemnitee in
              --------------------                                             
     any Proceeding shall be paid promptly by the Company in advance of the
     final disposition of the Proceeding at the written request of the
     Indemnitee to the fullest extent permitted by California law; provided that
     the Indemnitee shall undertake in writing to repay any advances if it is
     ultimately determined that the Indemnitee is not entitled to
     indemnification.

          8.  PARTIAL INDEMNIFICATION.  If the Indemnitee is entitled under any
              -----------------------                                          
     provision of this Agreement to indemnification by the Company for a portion
     of the Expenses, judgments, fines, penalties or ERISA excise taxes actually
     and reasonably incurred by him [her] in the investigation, defense, appeal
     or settlement of any Proceeding but not, however, for the total amount of
     his [her] Expenses, judgments, fines, penalties or ERISA excise taxes, the
     Company shall nevertheless indemnify the Indemnitee for the portion of
     Expenses, judgments, fines, penalties or ERISA excise taxes to which the
     Indemnitee is entitled.

          9.  INDEMNIFICATION PROCEDURE; DETERMINATION OF RIGHT TO
              ----------------------------------------------------
     INDEMNIFICATION.
     --------------- 

              (a) Promptly after receipt by the Indemnitee of notice of the
          commencement of any Proceeding, the Indemnitee shall, if a claim in
          respect thereof is to be made against the Company under this
          Agreement, notify the Company of the commencement thereof in writing.
          The omission to so notify the Company will relieve the Company of any
          liability which it may have to the Indemnitee under this Agreement but
          will not relieve the Company from any liability which it may have to
          the Indemnitee otherwise than under this Agreement.

              (b) If a claim for indemnification or advances under this
          Agreement is not paid by the Company within 30 days of receipt of
          written notice, the rights provided by this Agreement shall be
          enforceable by the Indemnitee in any court of competent jurisdiction.
          The burden of proving by clear and convincing evidence
          that indemnification or advances are not appropriate shall be on the

                                      -3-

<PAGE>
 
          Company. Neither the failure of the directors or shareholders of the
          Company or its independent legal counsel to have made a determination
          prior to the commencement of such action that indemnification or
          advances are proper in the circumstances because the Indemnitee has
          met the applicable standard of conduct, if any, nor an actual
          determination by the directors or shareholders of the Company or
          independent legal counsel that the Indemnitee has not met the
          applicable standard of conduct, shall be a defense to the action or
          create a presumption for the purpose of an action that the Indemnitee
          has not met the applicable standard of conduct.

              (c) The Indemnitee's Expenses incurred in connection with any
          proceeding concerning his [her] right to indemnification or advances
          in whole or in part pursuant to this Agreement shall also be
          indemnified by the Company, regardless of the outcome of such action,
          suit or proceeding.

              (d) With respect to any Proceeding for which indemnification is
          requested, the Company will be entitled to participate therein at its
          own expense and, except as otherwise provided below, to the extent
          that it may wish, the Company may assume the defense thereof, with
          counsel satisfactory to the Indemnitee. After notice from the Company
          to the Indemnitee of its election to assume the defense of a
          Proceeding, the Company will not be liable to the Indemnitee under
          this Agreement for any Expenses subsequently incurred by the
          Indemnitee in connection with the defense thereof, other than as
          provided below. The Company shall not settle any Proceeding in any
          manner which would impose any penalty or limitation on the Indemnitee
          without the Indemnitee's written consent. The Indemnitee shall have
          the right to employ his [her] own counsel in any Proceeding, but the
          fees and expenses of such counsel incurred after notice from the
          Company of its assumption of the defense of the Proceeding shall be at
          the expense of the Indemnitee, unless (i) the employment of counsel by
          the Indemnitee has been authorized by the Company, (ii) the Indemnitee
          shall have reasonably concluded that there may be a conflict of
          interest between the Company and the Indemnitee in the conduct of the
          defense of a Proceeding, or (iii) the Company shall not in fact have
          employed counsel to assume the defense of a Proceeding, in each of
          which cases the fees and expenses of the Indemnitee's counsel shall be
          advanced by the Company. The Company shall not be entitled to assume
          the defense of any Proceeding brought by or on behalf of the Company
          or as to which the Indemnitee has concluded that there may be a
          conflict of interest between the Company and the Indemnitee.

          10. LIMITATIONS ON INDEMNIFICATION.  No payments pursuant to this
              ------------------------------                               
     Agreement shall be made by the Company:

              (a) To indemnify or advance funds to the Indemnitee for Expenses
          with respect to Proceedings initiated or brought voluntarily by the
          Indemnitee and not by way of defense, except with respect to
          Proceedings brought to establish or enforce a right to indemnification
          under this Agreement or any other statute or

                                      -4-

<PAGE>
 
          law or otherwise as required under California law, but such
          indemnification or advancement of expenses may be provided by the
          Company in specific cases if the Board of Directors finds it to be
          appropriate;

              (b) To indemnify the Indemnitee for any Expenses, judgments,
          fines, penalties or ERISA excise taxes sustained in any Proceeding for
          which payment is actually made to the Indemnitee under a valid and
          collectible insurance policy, except in respect of any excess beyond
          the amount of payment under such insurance;

              (c) To indemnify the Indemnitee for any Expenses, judgments,
          fines or penalties sustained in any Proceeding for an accounting of
          profits made from the purchase or sale by the Indemnitee of securities
          of the Company pursuant to the provisions of Section 16(b) of the
          Securities Exchange Act of 1934, the rules and regulations promulgated
          thereunder and amendments thereto or similar provisions of any
          federal, state or local statutory law;

              (d) If a court of competent jurisdiction finally determines that
          any indemnification hereunder is unlawful.

              (e) To indemnify the Indemnitee for any Expenses based upon or
          attributable to the Indemnitee gaining in fact any personal profit or
          advantage to which he [she] was not legally entitled; and

              (f) To indemnify the Indemnitee for any Expenses brought about or
          contributed to by the dishonesty of the Indemnitee seeking payment
          hereunder; however, notwithstanding the foregoing, the Indemnitee
          shall be protected under this Agreement to the fullest extent
          permitted under law as to any claims upon which suit may be brought
          against him [her] by reason of any alleged dishonesty on his [her]
          part, unless a judgement or other final adjudication thereof adverse
          to the Indemnitee shall establish that he [she] committed (i) acts of
          active and deliberate dishonesty (ii) with actual dishonest purpose
          and intent, which acts were material to the cause of action so
          adjudicated.

          11. MAINTENANCE OF LIABILITY INSURANCE.
              ---------------------------------- 

              (a) The Company hereby covenants and agrees that, as long as the
          Indemnitee continues to serve as a [director] [and] [officer] of the
          Company and thereafter as long as the Indemnitee may be subject to any
          possible Proceeding, the Company, subject to subsection (c) below,
          shall promptly obtain and maintain in full force and effect directors'
          and officers' liability insurance ("D&O Insurance") in reasonable
          amounts from established and reputable insurers.

              (b) In all D&O Insurance policies, the Indemnitee shall be named
          as an insured in such a manner as to provide the Indemnitee the same
          rights and

                                      -5-

<PAGE>
 
          benefits as are accorded to the most favorably insured of the
          Company's directors [and officers].

              (c) Notwithstanding the foregoing, the Company shall have no
          obligation to obtain or maintain D&O Insurance if the Company
          determines, in its sole discretion, that such insurance is not
          reasonably available, the premium costs for such insurance are
          disproportionate to the amount of coverage provided, the coverage
          provided by such insurance is so limited by exclusions that it
          provides an insufficient benefit, or the Indemnitee is covered by
          similar insurance maintained by a subsidiary of the Company.

          12. INDEMNIFICATION HEREUNDER NOT EXCLUSIVE.  The indemnification
              ---------------------------------------                      
     provided by this Agreement shall not be deemed exclusive of any other
     rights to which the Indemnitee may be entitled under the Company's Amended
     and Restated Articles of Incorporation, the Company's Bylaws, any
     agreement, vote of shareholders, or disinterested directors of the Company,
     provision of California law, or otherwise, both as to action in his [her]
     official capacity and as to action in another capacity on behalf of the
     Company while holding such office.

          13. SUCCESSORS AND ASSIGNS.  This Agreement shall be binding upon,
              ----------------------                                        
     and shall inure to the benefit of the Indemnitee and his [her] heirs,
     executors, administrators and assigns, whether or not Indemnitee has ceased
     to be a director or officer, and the Company and its successors and
     assigns.

          14. SEPARABILITY.  Each and every paragraph, sentence, term and
              ------------                                               
     provision of this Agreement is separate and distinct so that if any
     paragraph, sentence, term or provision hereof shall be held to be invalid
     or unenforceable for any reason, such invalidity or unenforceability shall
     not affect the validity or enforceability of any other paragraph, sentence,
     term or provision hereof. To the extent required, any paragraph, sentence,
     term or provision of this Agreement may be modified by a court of competent
     jurisdiction to preserve its validity and to provide the Indemnitee with
     the broadest possible indemnification permitted under California law.

          15. SAVINGS CLAUSE.  If this Agreement or any paragraph, sentence,
              --------------                                                
     term or provision hereof is invalidated on any ground by any court of
     competent jurisdiction, the Company shall nevertheless indemnify the
     Indemnitee as to any Expenses, judgments, fines, penalties or ERISA excise
     taxes incurred with respect to any Proceeding to the full extent permitted
     by any applicable paragraph, sentence, term or provision of this Agreement
     that has not been invalidated or by any other applicable provision of
     California law.

          16. INTERPRETATION: GOVERNING LAW.  This Agreement shall be construed
              -----------------------------                                    
     as a whole and in accordance with its fair meaning. Headings are for
     convenience only and shall not be used in construing meaning. This
     Agreement shall be governed and interpreted in accordance with the laws of
     the State of California.

                                      -6-

<PAGE>
 
          17. AMENDMENTS.  No amendment, waiver, modification, termination or
              ----------                                                     
     cancellation of this Agreement shall be effective unless in writing signed
     by the party against whom enforcement is sought. The indemnification rights
     afforded to the Indemnitee hereby are contract rights and may not be
     diminished, eliminated or otherwise affected by amendments to the Company's
     Amended and Restated Articles of Incorporation, the Company's Bylaws or by
     other agreements, including directors' and officers' liability insurance
     policies.

          18. COUNTERPARTS.  This Agreement may be executed in one or more
              ------------                                                
     counterparts, all of which shall be considered one and the same agreements
     and shall become effective when one or more counterparts have been signed
     by each party and delivered to the other.

          19. NOTICES.  Any notice required to be given under this Agreement
              -------                                                       
     shall be directed to Korn/Ferry International, 1800 Century Park East,
     Suite 900, Los Angeles, California 90067, Attention: General Counsel, and
     to Indemnitee at _______________ ______________________________ or to such
     other address as either shall designate in writing.


     IN WITNESS WHEREOF, the parties have executed this Indemnity Agreement as
of the date first written above.

                                  INDEMNITEE

 
                                  ________________________________
 


                                  KORN/FERRY INTERNATIONAL

                                  By:_____________________________

                                  Its:____________________________

                                      -7-



<PAGE>
 
                                                                   EXHIBIT 10.19

                   TRADEMARK LICENSE AND PROMOTION AGREEMENT

     This is a TRADEMARK LICENSE AND PROMOTION AGREEMENT ("Agreement") entered 
into and effective as of June 8, 1998 (the "Effective Date") among DOW JONES & 
COMPANY, INC., a Delaware corporation ("Dow Jones"), KORN/FERRY INTERNATIONAL 
FUTURESTEP, INC., a Delaware corporation ("Futurestep"), and KORN/FERRY 
INTERNATIONAL, a California corporation ("KF").

     Futurestep owns and will operate an online executive employment 
recruitment service accessible from the World Wide Web, currently located at 
http://www.futurestep.com, and further defined on Exhibit A (the "Futurestep 
- -------------------------
Business"). Futurestep wants to license the right to use Dow Jones's trademark  
THE WALL STREET JOURNAL and other marks in connection with the promotion of the 
Futurestep Business, and Dow Jones wants to grant such license, subject to the 
terms and conditions set forth herein. Each of Dow Jones, Futurestep and KF 
also wants to commit to promote the other party's products and services, as set
forth herein. Therefore, in consideration of the mutual promises set forth 
below, and intending to be legally bound hereby, Dow Jones, Futurestep and KF 
hereby agree as follows:

1.   CERTAIN DEFINITIONS. As used in this Agreement,
 the following capitalized 
     -------------------
terms shall have the following meanings. Other terms are defined elsewhere in 
this Agreement.

     (a)  "Business Ad" shall mean: (1) during the first twelve months of the 
           -----------
Initial Term, an advertisement promoting a product or service of the Futurestep
Business; and (2) during the remainder of the Initial Term, an advertisement 
promoting a product or service of the Futurestep Business and/or the business of
KF, as applicable, including advertisements for or by the KF Selection division.
A "Business Ad" shall not include, among other things, a Selection Ad or a 
Recruitment Ad.

     (b)  "Business Tag Line" shall mean "Futurestep, a service of Korn/Ferry 
           -----------------
[International] and The Wall Street Journal", or such other statement mutually 
agreed to by all parties that includes a trade name, trademark, or other 
branding identifying both KF and Dow Jones or The Wall Street Journal as the 
source and origin of the Futurestep Business.

     (c)  "Business Web Site" shall mean the web site from which the Futurestep 
           -----------------
Business operates. As of the Effective Date, the URL for the Business Web Site 
was http://www.futurestep.com.
           -------------------

     (d)  "careers.wsj.com web site Business" shall mean the operation of a web 
           ---------------------------------
site, currently located at http://careers.wsj.com, containing news, information 
                           ----------------------  
and other content on career development, employment searching, employment 
consulting and similar human resources and work-related issues, including 
operation of an online database of available employment opportunities with third
persons which individuals seeking employment can search electronically, a 
"networking database" (that is not an online database of job placement 
candidates or of resumes, and that is not a dating service database), and links 
to co-branded career counseling services and a database of executive recruitment
companies.

<PAGE>
 
     (e)  "Client" shall mean a customer or client of Futurestep or KF.
           ------

     (f)  "Dow Jones Business" shall mean the publication of business and 
           ------------------
financial news and information around the world, in media including print, 
electronic, radio, television, cable, satellite, video; software, and the 
Internet, including: The Wall Street Journal; The Wall Street Journal Europe;
The Asian Wall Street Journal; The Wall Street Journal Americas; The Wall Street
Journal Interactive Edition; Barrons's; Barron's Online; SmartMoney; SmartMoney
Online; careers.wsj.com; National Business Employment Weekly; Dow Jones
Newswires; Dow Jones Interactive; Far Eastern Economic Review;Far Eastern
Economic Review Interactive; Dow Jones Indexes; Wall Street Journal Radio; Dow
Jones Radio; CNBC Asia; CNBC Europe; business programming on CNBC; CNBC/Dow
Jones Business Video; Ottaway Newspapers; America Economia; and Central European
Economic Review.

     (g)  "Dow Jones Marks" shall mean, collectively, certain trademarks, 
           ---------------
service marks, trade names, logos, brands and other identifiers in which Dow 
Jones claims proprietary rights related to its products or services, and which 
are licensed pursuant to, and subject to, certain terms and conditions set forth
in this Agreement. A list of the Dow Jones Marks as of the Effective Date is set
forth on Exhibit D.

     (h)  "KF Business" shall mean: (1) an online database of job placement 
           -----------
candidates or of resumes from individuals seeking employment with third persons;
(2) the providing of Selection Services either by KF or KF Selection; and/or (3)
the furnishing of professional executive recruitment services.

     (i)  "NBEW" shall mean National Business Employment Weekly, a print 
           ----
publication published by Dow Jones focusing on employment issues.

     (j)  "Net Ad Revenue" shall mean the gross dollar amount received by Dow 
           --------------
Jones in connection with the purchase and publication of an advertisement, minus
any amounts or discounts paid or payable to advertising agencies, media
placement agencies, or similar third persons purchasing such advertisement on
behalf of another.

     (k)  "Recruitment Ad" shall mean an advertisement purchased by an employer 
           --------------
directly from the publication or media source, without involvement of 
Futurestep or KF, publicizing the availability of one or more employment 
positions for that particular employer. A Recruitment Ad could be ordered and 
placed by either the employer directly, or an advertising or media placement 
agency working for the employer. A "Recruitment Ad" shall not include a 
"Selection Ad".

     (l)  "Registered Candidate" shall mean an individual who registers and 
           --------------------
completes the User Registration Page online at the Business Web Site.

     (m)  "Response Management Service" shall mean the providing of: (1) one or 
           ---------------------------
more of the products or services set forth on Exhibit C with respect to a 
Referred Response Management

                                       2

<PAGE>
 
Service Client; or (2) such other new or amended or different product or 
service, or combination of products and services, related to those products and 
services set forth on Exhibit C with respect to a Referred Response Management 
Service Client, as may be agreed upon in advance by Futurestep and Dow Jones.

The parties acknowledge that, when Futurestep or KF provides certain of the
services set forth on Exhibit C in connection with a Selection Ad, Futurestep
and KF generally refer to the provision of such services as "Selection
Services", not "Response Management Services". * (a) in connection with Response
Management Services provided by Futurestep or KF during the Term with respect to
a particular Recruitment Ad for a Referred Response Management Service Client;
and (b) in connection with Futurestep or KF providing any of the products or
services set forth on Exhibit C (whether referred to by Futurestep or KF as
"Selection Services" or "Response Management Services" or otherwise) to such
Client. *

For purposes of Section 9(c), "Response Management Services" shall not include 
"Selection Services" or the provision of those products and services set forth 
on Exhibit C in connection with a Selection Ad.

     (n)  "Selection Ad": KF operates an advertised recruitment business
           ------------
currently known as "KF Selection", which is conducted in both print and
electronic mediums. The term "Selection Ad" shall mean an advertisement paid for
by a Client, designed to publicize the availability of one or more employment
positions for one or more Clients for whom Futurestep or KF is providing
professional recruitment services and/or Selection Services. A Selection Ad
could be ordered and placed by either Futurestep or KF, or an advertising or
media placement agency working for Futurestep or KF. A "Selection Ad" shall not
include a "Recruitment Ad".

     (o)  "Selection Service" shall mean the providing of: (1) one or more of 
           -----------------
the products or services set forth on Exhibit C with respect to a Selection Ad; 
or (2) such other new or amended or different product or service, or combination
of products or services, related to those products or services set forth on 
Exhibit C and the Futurestep Business with respect to a Selection Ad, as may be 
agreed upon in advance by Futurestep and Dow Jones.

     (p)  "User Registration Page" shall mean the web page, hosted by 
           ----------------------
Futurestep, which potential Registered Candidates complete as a prerequisite to 
completing the questionnaires and/or other application forms online at the 
Business Web Site.

     (q)  "WSJ" shall mean the Global, National, Eastern, Central (Midwest plus 
           ---
Southwest), and Western editions of the print newspaper The Wall Street Journal 
(or their successor editions).

* Confidential portions omitted and filed separately with the Commission

                                       3

      

<PAGE>
 
     (r)  "WSJIE" shall mean the basic, subscription-based edition of The Wall
           -----
Street Journal Interactive Edition, currently located at http://wsj.com. "WSJIE"
                                                         --------------
shall not include any "premium" or additional content available as part of or
through the basic edition of The Wall Street Journal Interactive Edition for
which there is an additional charge or fee, such as, for example, the Dow Jones
Interactive Publications Library, or separately branded publications or areas
accessed through The Wall Street Journal Interactive Edition, such as, for
example, Barron's Online or SmartMoney Interactive.

2.   TERM OF AGREEMENT. Unless terminated earlier pursuant to a term in Section 
     -----------------
15 herein, the term of this Agreement shall commence on the Effective Date and 
shall expire on the third anniversary of the Effective Date (the "Initial 
Term"). Unless Dow Jones or Futurestep delivers written notice of nonrenewal of 
this Agreement to all other parties to this Agreement at least sixty (60) days 
prior to the end of the then-current term, this Agreement shall automatically 
renew for an additional one year term (each, a "Renewal Term"), upon the same 
terms and conditions as in effect as of the expiration of the previous term 
(except where a different term for a Renewal Term is set forth herein). The 
Initial Term and all Renewals Terms (if any) shall collectively be defined as 
the "Term".

3.   TRADEMARK LICENSE.
     -----------------

     (a)  Grant of License. Subject to the terms and conditions of this 
          ----------------
Agreement, Dow Jones hereby grants to Futurestep a nontransferable, nonexclusive
(except to the extent expressly set forth in this Agreement), worldwide right 
and license to use and refer to: (1) the mark THE WALL STREET JOURNAL as part of
the Business Tag Line and in accordance with this Agreement, in order to 
indicate the source and origin of the Futurestep Business; and (2) the Dow Jones
Marks solely in connection with the marketing and promotion of the Futurestep 
Business and in accordance with this Agreement, in order to indicate the source 
and origin of the Futurestep Business.

     (b)  Nonexclusive Grant. Subject only to the terms in Section 9(a), nothing
          ------------------
in this Agreement shall be deemed to or interpreted or construed to restrict Dow
Jones from licensing any one or more of the Dow Jones Marks to any other person 
at any time for any purpose.

     (c)  Reservation of Rights. All rights in or to any of the Dow Jones Marks 
          ---------------------
not expressly granted to Futurestep herein are expressly reserved and retained 
by Dow Jones.

     (d)  Quality Control; Prior Approval of Materials and Relationships.
          --------------------------------------------------------------

          (1)  Materials. Without first obtaining prior approval from Dow 
               ---------
Jones's Relationship Manager (defined in Section 16(k)) of the manner and 
context in which the Dow Jones Marks are used, Futurestep shall not make, 
publish or distribute, or cooperate with any third person in making, publishing 
or distributing, any use of a Dow Jones Mark in connection with the Futurestep 
Business, the marketing or promotion of the Futurestep Business, or a public 
statement regarding the execution or performance of this Agreement 
(collectively, "Materials"). Materials shall include, without limitation, the 
Futurestep home page for the Business Web Site,

                                       4



<PAGE>
 
public announcements, press releases, advertising, and marketing and promotional
materials (whether in print, electronic or other form or media). Materials shall
not include (a) any Selection Ad; or (b) any verbal extemporaneous statements or
comments, or verbal responses to questions from the press. Futurestep shall
deliver Materials to Dow Jones's Relationship Manager for review of the manner
and context in which the Dow Jones Marks are used. If Dow Jones has not notified
Futurestep in writing of its disapproval within five (5) days after Futurestep
delivers samples of a particular item of Material, such Material shall be deemed
approved. Dow Jones's Relationship Manager shall not arbitrarily and
capriciously disapprove of the manner and context in which the Dow Jones Marks
are used. If Dow Jones's Relationship Manager disapproves of the manner and
context in which the Dow Jones Marks are used, he or she shall provide to
Futurestep's and KF's Relationship Managers reasons, in writing, for the
disapproval, and Dow Jones will use good faith efforts to resolve any
disagreement with Futurestep regarding such disapproval.

          (2)  "Manner and Context". When used in this Agreement, the phrase
               --------------------
"manner and context in which the Dow Jones Marks are used" shall include,
without limitation: (a) a review by Dow Jones of its legal and contractual
ability to permit Futurestep to use the Dow Jones Mark(s) in such Material, or
in connection with the business or agreement or arrangement being referred to in
the Material; and (b) a review by Dow Jones of its business desire to have a Dow
Jones Mark used in connection with the business or agreement or arrangement.

          (3)  Approval of Certain Associations with Certain Third Persons. In
               -----------------------------------------------------------
part to enable Dow Jones to effectively exercise quality control over the
products and services associated with the Dow Jones Marks, Futurestep will not,
without the prior written consent from Dow Jones's Relationship Manager, enter
into any contract, association, partnership, affiliation, or business
relationship (each, an "Association") with any of the following third persons
(other than Clients), in connection with or related to the Futurestep Business,
pursuant to which any Dow Jones Mark is used or will be used: (1) third persons
who directly compete with Dow Jones; (2) third persons who are in businesses
from whom Dow Jones will not accept advertising, according to Dow Jones's then-
current advertising policies; (3) third persons with whom Dow Jones was not
legally or contractually able to permit one of the Dow Jones Marks to be
associated with; (4) third persons with whom Dow Jones was then, or recently had
been, involved in litigation or other legal dispute resolution proceeding; or
(5) third persons who have a severe and well-known negative public reputation.
Dow Jones shall not unreasonably withhold its written consent to any such
proposed Association. If Dow Jones's Relationship Manager has not notified
Futurestep and KF in writing of Dow Jones's disapproval within five (5) days
after Futurestep's Relationship Manager provides reasonably detailed information
regarding the overall nature of the proposed Association and identity of
individuals or entities involved in such proposed Association, such proposed
Association shall be deemed approved. If Dow Jones's Relationship Manager
disapproves of the proposed Association, he or she shall provide to Futurestep's
and KF's Relationship Managers reasons, in writing, for the disapproval, and Dow
Jones will use good faith efforts to resolve any disagreement with Futurestep
regarding such disapproval. Dow Jones will not arbitrarily or capriciously
exercise the rights granted pursuant to this Section of the Agreement.

                                       5


<PAGE>
 
          (4)  Notice of Trademarks. Immediately following the first reference
               --------------------
to a Dow Jones Mark in any written or electronic Material, Futurestep shall
include the trademark symbol (e.g., (R) or (TM)) for each Dow Jones Mark that
Dow Jones indicates to Futurestep is appropriate. Unless impracticable due to
space limitations, Futurestep and KF shall use the following notice (or such
similar language as may be approved in advance in writing by Dow Jones) when
referring to any of the Dow Jones Marks in any print Materials: [Insert Dow
Jones Mark] is a trademark of Dow Jones & Company, Inc. and licensed to
Futurestep for use for certain purposes.

          (5)  Goodwill. Futurestep shall use its best efforts to protect the
               --------
goodwill and reputation of Dow Jones, The Wall Street Journal, and the Dow Jones
Marks, in connection with the use of the Dow Jones Marks under this Agreement.
Futurestep and KF acknowledge and agree that the submission of Materials and
information regarding proposed Associations for prior review and approval is a
reasonable exercise of control by Dow Jones over the quality of the goods and
services provided by the Futurestep Business.

          (6)  Additional Quality Control. Futurestep shall, at all times during
               --------------------------
the Term, operate the Futurestep Business in accordance with the highest
standards of professionalism and business practices, and operate the Futurestep
Business in accordance with all applicable laws, rules and regulations.
Futurestep shall not perform, or fail to perform, any act which, in Dow Jones's
sole opinion, materially adversely reflects upon the business reputation of
Futurestep or Dow Jones, or in any way diminishes or tarnishes the reputation of
Dow Jones or any of the Dow Jones Marks. If at any time Dow Jones is of the
opinion that Futurestep is not properly using any of the Dow Jones Marks in
connection with the Futurestep Business, or that the standard of quality of any
of the Futurestep Business's products or services does not conform with Dow
Jones's standards for use of a Dow Jones Mark, Dow Jones shall deliver written
notice to Futurestep and KF to that effect. Upon receipt of such notice,
Futurestep and KF shall forthwith correct the deficiencies noted to Dow Jones's
reasonable satisfaction.

     (e)  Trademark Registration Filings. During the Term, Dow Jones shall apply
          ------------------------------               
for trademark registrations for the Dow Jones Marks only in such jurisdictions,
if any, where Dow Jones, in its sole discretion, considers such filings
appropriate. Futurestep and KF shall reasonably cooperate with Dow Jones, at Dow
Jones's sole expense, in the maintenance of such rights and registrations and
shall do such acts and execute such instruments as Dow Jones determines is
reasonably necessary or appropriate for such purpose.

     (f)  Ownership of Marks and Goodwill. Futurestep and KF agree that the Dow
          -------------------------------
Jones Marks and all intellectual property and other rights, registrations and
entitlement thereto, together with all applications, registrations and filings
with respect to any of the Dow Jones Marks and any renewals and extensions of
any such applications, registration and filings, are and shall remain the sole
and exclusive property of Dow Jones. Futurestep and KF acknowledge that each of
the Dow Jones Marks is part of the business and goodwill of Dow Jones.
Futurestep and KF recognize the great value of the reputation and goodwill
associated with the Dow Jones Marks and acknowledge that such goodwill
associated with the Dow Jones Marks belongs exclusively to Dow Jones, and that
Dow Jones is the owner of all right, title and interest in and to the Dow

                                       6


<PAGE>
 
Jones Marks. Futurestep and KF shall never, either directly or indirectly, 
contest Dow Jones's exclusive ownership of any of the Dow Jones Marks. In the 
event that Dow Jones consents to, and Futurestep or KF uses any Dow Jones Marks 
in conjunction with Futurestep's and KF's own trademark(s), such resulting mark 
shall be owned jointly by Dow Jones, on the one hand, and KF and Futurestep, as 
applicable, on the other hand, and the use of such composite mark will remain 
subject to this Agreement as it relates to the Dow Jones Marks. With respect to 
any such composite mark: (1) neither Futurestep, KF nor Dow Jones shall register
or apply for registration of such mark; (2) neither Futurestep, KF nor Dow Jones
shall use such mark except in accordance with this Agreement; and (3) after
termination or expiration of this Agreement, Dow Jones shall disclaim ownership
rights in Futurestep's and/or KF's own trademark forming a part of such mark and
shall assign to Futurestep and/or KF any rights in Futurestep's and/or KF's own
trademark forming a part of such mark and the goodwill associated therewith that
Dow Jones might have acquired during the Term; and (4) after termination or
expiration of this Agreement, Futurestep and KF shall disclaim ownership rights
in the Dow Jones Marks forming a part of such composite mark and shall assign to
Dow Jones any rights in the Dow Jones Marks forming a part of such composite
mark and goodwill associated therewith that Futurestep or KF might have acquired
during the Term. Nothing in this Agreement grants Dow Jones any right, title or
interest in the Futurestep Business.

     (g)  Alleged Infringements. In the event that Futurestep or KF has 
          ---------------------
knowledge of any infringement or imitation of any of the Dow Jones Marks, or of 
any use by any person of a trademark similar to any of the Dow Jones Marks, it 
shall promptly notify Dow Jones. Dow Jones shall take such action as it deems 
advisable for the protection of rights in and to the Dow Jones Marks and, if 
requested to do so by Dow Jones, Futurestep and KF shall cooperate with Dow
Jones in all respects, at Dow Jones's expense, including, without limitation, by
being a plaintiff or co-plaintiff and, upon Dow Jones's reasonable request, by
causing its officers to execute appropriate pleadings and other necessary
documents. In no event, however, shall Dow Jones be required to take any action
it deems inadvisable. Futurestep and KF shall have no right to take any action
which would materially and adversely affect any of the Dow Jones Marks without
Dow Jones's prior written approval.

     (h)  Use of Business Tag Line. During the Term, Futurestep shall use the 
          ------------------------
Business Tag Line in all Materials, except: (1) in "tile" advertisements on the 
World Wide Web or other instances where space does not permit inclusion of the 
Business Tag Line; (2) when prohibited pursuant to a term in this Agreement; (3)
on the outside of envelopes used in direct mail campaigns; and (4) when agreed 
otherwise by Dow Jones's Relationship Manager.

4.   PRINT MEDIA ADVERTISING.
     -----------------------

     (a)  WSJ and NBEW. Futurestep and KF shall, jointly and severally, pay Dow 
          ------------
Jones *. The * Payment shall mean:

          (1)  * in Net Ad Revenues (the *

* Confidential portions omitted and filed separately with the Commission

                                       7

<PAGE>

*, in connection with Business Ads purchased and published in the WSJ 
and/or NBEW *;

          (2) * in Net Ad Revenues (the *"), in connection with Business Ads
published in the WSJ and/or NBEW *;

          (3) * in Net Ad Revenues (the *"), in connection with Business Ads
published in the WSJ and/or NBEW *; and

          (4) * , a payment equal to *, plus the PPI Adjustment. The "PPI
                                        ----
Adjustment"

shall mean an adjustment based upon the percentage increase in the United States
Department of Labor Bureau of Labor Statistics Producer Price Index for Finished
Goods (1982=100) or its successor index ("PPI"), for the immediately preceding
twelve month period. (As an example only, if the PPI * equaled five percent
(5%), *. If the PPI * equaled six percent (6%), *.

     (b)  Business Ads Only. Amounts spent for Selection Ads or Recruitment Ads 
          -----------------
shall not be counted when calculating whether Futurestep and KF fulfilled the 
* obligations set forth in Section 4(a).

     (c)  Reduced Advertising Rates; Subject to Rate Card Terms. In connection 
          -----------------------------------------------------
with Business Ads and Selection Ads published in the WSJ and/or NBEW during the 
Term, Dow Jones will bill Futurestep or KF, as applicable, at the rates set 
forth in Exhibit B. The purchase and publication of Business Ads and Selection 
Ads shall otherwise be subject to and governed by the terms set forth in the 
then-current applicable classified advertising rate card; provided, however, 
                                                          --------  -------
that in the event of a conflict between a term in this Agreement and in such 
rate card, the term in this Agreement shall govern such ad purchase and 
publication.

     (d)  Payment Terms *. Futurestep and KF will pay for the Business Ads and
          ---------------
Selection Ads published in the WSJ and/or NBEW at the times set forth in the
then-current classified advertising rate card. If Futurestep and KF purchase and
pay for Business Ads published in the WSJ and/or NBEW *. (As an example only, if
Futurestep and KF purchased and paid for * in Net Ad Revenues in
connection with Business Ads *

* Confidential portions omitted and filed separately with the Commission

                                       8

<PAGE>

* in Net Ad Revenues in connection with Business Ads * 

     (e)  Limited Exclusivity.
          -------------------

          (1)  During the Term, without obtaining Dow Jones's prior written
consent, neither Futurestep nor KF shall, directly or indirectly, purchase or
otherwise place a Business Ad for the Futurestep Business in any print
newspaper, other than the WSJ, NBEW, or another print publication in which Dow
Jones owns, directly or indirectly, a fifty percent (50%) or greater interest.

          (2) Notwithstanding Section 4(e)(1), Futurestep and/or KF shall be
entitled to purchase or otherwise place Business Ads for the Futurestep Business
in local, city or regional newspapers * the date on which the Futurestep
Business is first "launched" in such locale city or region *. For purposes of
this Section 4(e)(2), the Futurestep Business shall have been "launched" in a
particular locale, city or region when local media (print or radio) has been
used to advertise the Futurestep Business in such locale, city or region.

          (3)  This Section 4(e) shall not affect or limit the right of
Futurestep and/or KF to purchase or otherwise place Business Ads in vertical
newspaper publications designed for specific audiences (e.g., engineers,
computer programmers, et cetera).

5.   INTERNET ADVERTISING.
     --------------------

     (a)  "Tile Position" on careers.wsj.com; *.
          --------------------------------------
*, Futurestep and KF shall, jointly and severally, pay Dow Jones a total of * in
Net Ad Revenues *, in connection with Business Ads purchased and published
during such month in the Tile Position Ad (as defined in Section 5(b)) of each
web page of the careers.wsj.com site. Unless agreed otherwise by Futurestep and
Dow Jones prior to the commencement of a Renewal Term, during each Renewal Term
(if any), Futurestep and KF shall, jointly and severally, pay Dow Jones a total
*, plus the PPI Adjustment. (As an example only, if the PPI * equaled five
percent(5%), *. If the PPI * equaled six percent (6%), *

     (b)  Exclusive Use of Tile Position Ad. During the Term, Futurestep and KF 
          ---------------------------------
shall be entitled to the exclusive use of the Tile Position Ad on each page of 
the careers.wsj.com internet 

* Confidential portions omitted and filed separately with the Commission

                                       9

<PAGE>

site, for Business Ads. The "Tile Position Ad" shall be defined as the "tile
ad", * located in the left side navigation bar of each page of the
careers.wsj.com internet site. The Tile Position Ad shall always be visible in
its entirety on a full screen basis without the need for scrolling, shall be in
the same position on each page of the careers.wsj.com internet site that
contains the left column navigation bar, shall not rotate with any other ads,
and shall have the capability of being both static and dynamic (e.g., flashing,
changing, et cetera). The Tile Position Ad will link to the Intermediate Page
(as defined below). During the Term, without Futurestep's prior consent, Dow
Jones will not sell or otherwise place any other "tile ad" on a page of the
careers.wsj.com site, that is: (1) purchased by or promotes a third person that
competes with Futurestep, or that advertises a service that competes with the
Futurestep Business; or (2) placed above the Tile Position Ad on the screen
display. Nothing in this Agreement is intended to, or shall be construed or
interpreted to, limit Dow Jones's ability to place "banner ads" or sponsorships
on pages of the careers.wsj.com web site.

     (c)  Subject to Rate Card. In connection with Business Ads (other than the
          --------------------
Tile Position Ad) and/or Selection Ads in careers.wsj.com during the Term, Dow
Jones will charge Futurestep or KF, as applicable, * The purchase and
publication of the Tile Position Ad, and any other Business Ads or Selection Ads
by Futurestep or KF in careers.wsj.com, shall otherwise be subject to and
governed by the terms set forth in the then-current applicable rate card for
careers.wsj.com; provided, however, that in the event of a conflict between a
                 -------- -------
term in this Agreement and such rate card, the term in this agreement shall
govern such ad purchase and publication.

     (d)  Limited Exclusivity. During the Term, without obtaining Dow Jones's
          -------------------
prior written consent, neither Futurestep nor KF shall, directly or indirectly,
purchase a Business Ad for the Futurestep Business to appear on any other
newspaper site or newspaper web page on the Internet, other than WSJIE,
careers.wsj.com site, or another web site in which Dow Jones owns, directly or
indirectly, a fifty percent (50%) or greater interest.

6.   ADDITIONAL PROMOTIONAL OBLIGATIONS.
     ----------------------------------

     (a)  Promotion of Dow Jones Publications for Selection Ads. Futurestep and
          -----------------------------------------------------
KF shall * cause Futurestep and KF Selection recruiting professionals to
promote, where appropriate, the purchase by Clients of Selection Ads to be
published in WSJ, NBEW, WSJIE careers.wsj.com, and other print, Internet, and
forms of media in which Dow Jones owns, directly or indirectly, a fifty percent
(50%) or greater interest.

     (b)  * During the Term, Futurestep shall include * in all of its Business
          ------------------
Ads for the Futurestep Business appearing in print media, unless agreed
otherwise in advance by Dow Jones for a particular advertisement; provided,
however, that the requirements of this Section 6(b) shall not apply * the date
on which the Futurestep Business is first "launched" in such market. For
purposes of this Section 6(b), "launched" shall have the same meaning as set
forth in section 4(e)(2).

* Confidential portions omitted and filed separately with the Commission

                                      10

<PAGE>
 
     (c)  Links from careers.wsj.com to the Business Web Site. During the Term, 
          ---------------------------------------------------
Dow Jones shall include on the WSJIE home page a link to and description of
careers.wsj.com as a free feature, which shall include a reference to and brief
explanation of the Futurestep Business. During the Term, Dow Jones shall include
on the careers.wsj.com front page a link, positioned near the JobSeek database
logo or its successor, to an intermediate page, hosted on a Dow Jones server and
co-branded with the careers.wsj.com and Futurestep trade names, which contains
an explanation of the Futurestep Business prepared by Futurestep (the
"Intermediate Page"). Dow Jones and Futurestep shall mutually agree upon the
design of and text on this Intermediate Page. This Intermediate Page shall
contain at least one link to the User Registration Page and at least one link to
return to careers.wsj.com.

     (d)  Links from the Business Web Site to Dow Jones Sites. During the Term, 
          ---------------------------------------------------
Futurestep shall include at least one link to the careers.wsj.com front page on
each home page Futurestep creates or has created for each Registered Candidate,
and at least one link to an editorial section within careers.wsj.com from each
"table of contents" or navigation bar or index or directory or similar listing
of areas on the Business Web Site. Each of the links referred to in the
preceding sentence shall always be visible in its entirety on a full screen
basis without the need for scrolling, and shall appear in the same position on
each page of the Business Web Site where such link is required in the preceding
sentence to be included. During the Term, Futurestep shall include a link to the
WSJIE home page from each display of the "wsj.com" logo, "WSJ" logo, or the
words "The Wall Street Journal" as part of the branding on the Business Web
Site, and as part of the Business Tag Line when the Business Tag Line is
displayed on the Business Web Site.

     (e)  Electronic Messages to Registered Candidates. Upon request by Dow
          --------------------------------------------
Jones, not more often than once a week but at least once each three (3) months
throughout the Term, Futurestep shall post an electronic message to each
Registered Candidate's mailbox on the Business Web Site, containing promotions
for WSJIE or articles from WSJIE and/or careers.wsj.com, unless Futurestep is
prohibited by law from posting such electronic messages. In the event a
particular Registered Candidate has indicated to Futurestep that he or she does
not want to receive electronic messages, or sending such electronic message
would violate applicable law, then Futurestep shall not be required to send or
post such electronic messages to such Registered Candidates. Dow Jones shall be
responsible for creating and delivering, in HTML format or other format mutually
agreeable to Futurestep and Dow Jones, the content of the materials to be sent
in such electronic messages. The content of the materials to be sent in such
electronic messages shall be consistent with the standards of professionalism
and business practices under which the Futurestep Business is operated and shall
comply with all applicable laws, rules and regulations.

     (f)  Additional Promotions. Futurestep and Dow Jones shall use reasonable 
          ---------------------
commercial efforts to agree upon additional joint promotional activities in 
connection with the Futurestep Business, including but not limited to the 
issuance of a joint press release following execution of this Agreement by all 
parties, and another joint press release upon the "re-launch"

                                      11


<PAGE>
 
of the Futurestep Business using the Business Tag Line. (Such press releases
shall be subject to prior review and approval pursuant to Section 3(d)(1) of
this Agreement.)

     (g)  Other Links.
          -----------

          (1)  *

          (2)  *

          (3)  During the Term, Dow Jones shall not, directly or indirectly,
through WSJIE or careers.wsj.com, include links from the WSJIE or
careers.wsj.com web sites to: (a) other web sites that directly compete with the
Futurestep Business or the KF Business; or (b) portions of other web sites owned
or operated by, or branded with the name or trademark of, a third person that
directly competes with the Futurestep Business or the KF Business. Nothing in
this Agreement, including the foregoing sentence, shall restrict or limit Dow
Jones from including links from the WSJIE or careers.wsj.com web sites: (y)
embedded within news stories, "briefing books", or other news and editorial
content published at the WSJIE or careers.wsj.com web sites; or (z) in
connection with contractual obligations binding Dow Jones as of the Effective
Date or the Career Development Services web site.

          (4)  Other than as set forth in this Section 6(g) of the Agreement, 
and other than the trademark license terms set forth in Section 3(d), nothing 
contained in this Agreement shall prevent or restrict any party to this 
Agreement who maintains a site on the Internet from having a link to one or more
other sites on the Internet maintained by them or others. Nothing in this
Section 6(g) shall prevent a party from accepting a web site advertisement that
includes an embedded link to another web site.


7.   RESPONSE MANAGEMENT SERVICE OBLIGATIONS.
     ---------------------------------------

     (a)  Promotion of Futurestep's Response Management Services. Dow Jones 
          ------------------------------------------------------
shall use reasonable commercial efforts to cause the appropriate Dow Jones 
Classified Advertising salespeople to promote, where appropriate, Futurestep's 
Response Management Services to 

* Confidential portions omitted and filed separately with the Commission

                                      12

<PAGE>
 
companies purchasing, and companies considering purchasing, Recruitment Ads in 
the WSJ. Dow Jones shall create and prepare, at its expense, print materials 
approved by Futurestep describing the Response Management Services, for 
distribution in connection with such promotion. Dow Jones shall refer all 
inquiries regarding the Response Management Services or other aspects of the 
Futurestep Business to Futurestep.

     (b)  Tracking and Response Management Service *.
          -----------------------------------------------------

          (1)  Futurestep and Dow Jones shall agree upon a system, to be
operated by Futurestep at Futurestep's expense, to track the number and
identities of companies referred by Dow Jones to Futurestep for potential
purchase of Response Management Services with respect to a particular
Recruitment Ad. A company referred by Dow Jones to Futurestep that actually
purchases on or more of the Response Management Services during the Term with
respect to a particular Recruitment Ad, shall be defined as a "Referred Response
Management Service Client."

          (2)  Futurestep and KF, jointly and severally, shall pay Dow Jones *

               (a)  for Response Management Services provided by Futurestep or
KF during the Term with respect to a particular Recruitment Ad; and

               (b)  in connection with Futurestep or KF providing any of the 
products or services set forth on Exhibit C (whether referred to by Futurestep
or KF as "Selection Services" or "Response Management Services" or otherwise) to
such Client, during the Term and within the twelve (12) month period after such
Client was first referred from Dow Jones to Futurestep and became a Referred
Response Management Service Client, in connection with any advertisement printed
in the WSJ.

          (3)  For purposes of this Section 7(b), *.

     (c)  Customer Relationship with Futurestep. Futurestep shall be 
          -------------------------------------
responsible for entering into all business and contractual relationships with
Referred Response Management Service Clients. Dow Jones shall not be a party to,
or be liable in connection with, any business or contractual relationship
between a Referred Response Management Service Client and Futurestep. Neither
Futurestep nor KF shall express or imply that Dow Jones is a party to, or liable
for, any business or contractual relationship between a Referred Response
Management Service Client and Futurestep.

* Confidential portions omitted and filed separately with the Commission

                                      13

<PAGE>

8.   CANDIDATE PLACEMENT *.
     ---------------------

     (a)  Registration System. Futurestep shall develop and implement an online
          -------------------
system at the Business Web Site by which all individuals interested in being
considered for employment must complete an online application form or forms (the
"Registration System"). The Registration System shall include the User
Registration Page. Futurestep shall develop and implement the Registration
System at its own expense and in accordance with this Agreement. In order to
protect the Dow Jones Marks, Dow Jones shall have the right to review and
approve the operation of the Registration System prior to its implementation,
and prior to implementation of any significant revision. Dow Jones will not
unreasonably withhold or delay its approval of the Registration System. By
executing this Agreement, Dow Jones is deemed to have approved the Registration
System as it exists immediately prior to the date and time of such execution by
Dow Jones. If Futurestep does not receive from Dow Jones written disapproval of
any Registration System revisions within five (5) days after receiving written
notice from Futurestep requesting such approval, then Dow Jones shall be deemed
to have approved such revisions.

     (b)  Tracking Obligations.
          --------------------

          (1)  Tracking Registered Candidates Using the Registration System. 
               ------------------------------------------------------------
Futurestep shall design the User Registration Page so that every potential 
Registered Candidate must respond to the following question (or a substantially 
similar question approved in advance by Dow Jones): "Where did you hear about 
Futurestep?" (the "Question"). During the first twelve months of the Initial 
Term, Futurestep shall list The Wall Street Journal in the top position in the 
list of sources/answers to the Question. Beginning after the end of the first 
twelve months of the Initial Term and continuing until the end of the Term, 
Futurestep shall list The Wall Street Journal in the second position in the list
of sources/answers to the Question ("radio" will be listed in the top position).

          (2)  Tracking Individuals Linking From the Intermediate Page. 
               -------------------------------------------------------
Futurestep also shall track the number of individuals coming to the Business Web
Site or the User Registration Page from a link from careers.wsj.com, the 
Intermediate Page, or other web site (not including an embedded link in a
Futurestep or KF advertisement in such other web site) in which Dow Jones owns,
directly or indirectly, a fifty percent (50%) or greater interest, and the
identity of such individuals who become Registered Candidates. Dow Jones will
notify Futurestep at least ten (10) days in advance of adding a link to the
Business Web Site from a new Dow Jones web site, in order to enable Futurestep
to take steps necessary to track these individuals.

     (c)  *

          (1) *

               (a)  (i)  who indicated The Wall Street Journal when answering 
the Question in the User Registration Page; or

* Confidential portions omitted and filed separately with the Commission

                                      14



<PAGE>
 
               (ii) who became a Registered Candidate directly as a result of
the links from careers.wsj.com, the Intermediate Page, or other web site (not
including an embedded link in a Futurestep or KF advertisement in such other web
site) in which Dow Jones owns, directly or indirectly, a fifty percent (50%) or
greater interest; and
                  ---

               (b)  that Futurestep or KF * the date such Registered Candidate
first completed the User Registration Page.

          (2)  *

               (a)  (i)  who indicated The Wall Street Journal when answering
the Question in the User Registration Page; or

                    (ii) who became a Registered Candidate directly as a result 
of the links from careers.wsj.com, the Intermediate Page, or other web site (not
including an embedded link in a Futurestep or KF advertisement in such other web
site) in which Dow Jones owns, directly or indirectly, a fifty percent (50%) or 
greater interest; and
                  ---

               (b)  that Futurestep or KF * after the date such Registered
Candidate first completed the User Registration Page.

     (d)  Continuation of Tracking from the Question. Futurestep shall continue 
          ------------------------------------------
to list The Wall Street Journal as a possible answer to the Question, and 
maintain the Question within the Registration System and User Registration Page:

          (1)  for at least six (6) months after the termination of this 
Agreement, if this Agreement is terminated prior to the end of one (1) year 
after the Effective Date;

          (2)  for at least nine (9) months after the termination of this 
Agreement, if this Agreement is terminated at least one (1) year after, but
prior to the end of two (2) years after, the Effective Date; and

          (3)  for at least twelve (12) months after the termination or 
expiration of this Agreement, if this Agreement is terminated or expires at 
least two (2) years after the Effective Date.

*

* Confidential portions omitted and filed separately with the Commission

                                      15

<PAGE>
 
9.   LIMITATIONS ON OTHER BUSINESS ACTIVITIES.
     ----------------------------------------

     (a)  Use of Mark to Promote Competing Business. During the Term, and for 
          -----------------------------------------
one year following the expiration or termination of this Agreement for any 
reason, except for contractual obligations binding Dow Jones as of the Effective
Date and except for the careers.wsj.com web site Business, WSJIE, and NBEW, Dow
Jones will not, directly or indirectly, promote or offer or use any of the Dow 
Jones Marks, or license any of the Dow Jones Marks for use, to promote or offer 
a product or service that directly or indirectly competes with the Futurestep 
Business and/or the KF Business, including without limitation Futurestep's and 
KF's Response Management Services and KF Selection. During the Term, and for one
year following the expiration or termination of this Agreement for any reason,
Dow Jones will not, directly or indirectly (except for its Ottaway Newspapers
subsidiary), promote, use or offer any Response Management Services, or services
substantially similar to and competitive with Response Management Services,
whether or not utilizing or in conjunction with the use of one or more of the
Dow Jones Marks, other than Futurestep's or KF's Response Management Services
(except for its Ottaway Newspapers subsidiary); provided, however, that Dow
                                                -----------------
Jones may list other advertising agencies that may also happen to offer Response
Management Services, or services substantially similar to and competitive with
Response Management Services, in response to inquiries from potential and actual
advertisers. Notwithstanding the foregoing sentences or anything in this
Agreement to the contrary, Dow Jones may accept and publish advertisements in
any media from any third person or service, including, without limitation, a
third person or service that competes with Futurestep or KF or is similar to the
Futurestep Business, including but not limited to the Response Management
Services. Nothing in this Agreement shall limit or restrict Dow Jones's ability
to report news and information regarding Futurestep, KF, or any third person.

     (b)  No Resume Database. During the Term, Dow Jones will not create or 
          ------------------
operate, itself or in partnership or association with a third person, an online 
database of job placement candidates or of resumes from individuals seeking 
employment with third persons. Notwithstanding the foregoing sentence or 
anything in this Agreement to the contrary, Dow Jones may create and operate, or
retain a third person to create and/or operate on its behalf, an online database
of job placement candidates, or of resumes from individuals who have submitted 
employment inquiries or resumes to Dow Jones or its affiliates, seeking 
employment with Dow Jones or its affiliates. Notwithstanding anything in this 
Agreement to the contrary, Dow Jones may create and operate, or retain a third 
person to create and/operate on its behalf, an online database of information 
from Dow Jones customers and visitors to Dow Jones web sites, where the 
principal purpose of such database is not the listing of names of individuals 
seeking employment and where such database is not marketed or promoted as such.

     (c)  Response Management Services. During the Term, unless agreed otherwise
          ----------------------------
in advance by Dow Jones's Relationship Manager for a particular potential
Client, Futurestep and KF shall provide Response Management Services solely to
Clients who also purchase a Recruitment Ad published in the WSJ or other print
publication in which Dow Jones owns, directly or indirectly, a fifty percent
(50%) or greater interest, or published in WSJIE or careers.wsj.com. During the
Term, unless agreed otherwise in advance by Dow Jones's Relationship Manager for
a particular potential Client, neither Futurestep nor KF shall provide
                           
                                      16

<PAGE>
 
Response Management Services to any third person in connection with a 
Recruitment Ad which was not published in the WSJ or other print publication in 
which Dow Jones owns, directly or indirectly, a fifty percent (50%) or greater 
interest, or published in WSJIE or careers.wsj.com.

For purposes of this Section 9(c), "Response Management Services" shall not 
include "Selection Services" or the provision of those products and services set
forth on Exhibit C in connection with a Selection Ad.

     (d)  No Online Job Database; Definition of "KF Database". During the Term,
          --------------------------------------------------
except for the KF Database (as defined below), neither Futurestep nor KF will 
create or operate, itself or in partnership or association with a third person, 
an online database of available employment opportunities with third persons, 
which individuals seeking employment can search electronically. During the Term,
except for the KF Database (as defined below), neither Futurestep nor KF will 
create or operate, itself or in partnership or association with a third person, 
a web site that competes with the careers.wsj.com web site Business as it is 
then being published and which contains features and functions similar to those 
available at that time on careers.wsj.com. "KF Database" shall mean an online 
database of available employment opportunities with third persons who have 
retained Futurestep and/or KF to provide search, recruitment, or selection 
services for such third persons, but does not contain any listings or employment
opportunities from third persons who have not retained Futurestep or KF to 
provide either search, recruitment, or selection services for such third 
persons.

     (e)  No Content Branded with a Competitor's Brand. During the Term, without
          --------------------------------------------
Dow Jones's prior consent, which consent will not be unreasonably withheld, 
Futurestep shall not include on any web page within the Business Web Site 
business or financial news or information branded or identified with the name or
trademark of a competitor of Dow Jones in the business of providing business and
financial news and information.

     (f)  No Promotion Using a Competitor's Brand. During the Term, and for one 
          ---------------------------------------
year following the expiration or termination of this Agreement for any reason, 
neither Futurestep nor KF shall, directly or indirectly, operate or promote the 
Futurestep Business, or a business substantially similar to the Futurestep
Business, using the name or trademark or logo of a third person or entity which
competes with WSJ, NBEW, WSJIE, or the careers.wsj.com web site Business.

10.  PAYMENT AND REPORTING TERMS; TAXES.
     ----------------------------------

     (a)  *

* Confidential portions omitted and filed separately with the Commission

                                      17

<PAGE>

*

     (b)  Each Party to Bear Its Expenses. Except as expressly set forth 
          -------------------------------
otherwise in this Agreement, each party shall bear all of its respective costs 
and expenses in connection with the execution and performance of this Agreement 
and the grant of licenses herein.

     (c)  Maintenance and Inspection of Records. Futurestep shall maintain 
          -------------------------------------
complete and accurate books and records, in accordance with generally accepted 
accounting practices, of all matters related to its compliance with its 
obligations hereunder ("Records"). Dow Jones shall have the right itself, or 
through its authorized representatives, upon at least ten (10) business days' 
prior written notice, to inspect the Records during the other party's normal 
business hours, but no more often than once during each calendar year. If any 
such inspection reveals an underpayment of more than five percent (5%) related 
to the time period under inspection, the reasonable costs and expenses to
conduct such inspection shall be paid by the underpaying party, and the
underpaying party shall pay the amount of such underpayment within thirty (30)
days. All information disclosed or obtained in the course of conducting any such
inspection shall be deemed Confidential Information of the party whose Records
are being inspected, and used solely for the purpose of verifying compliance
with the terms of this Agreement. If Dow Jones elects to have an authorized
representative conduct its inspection of Records, the other party may require
such authorized representative to execute and deliver a confidentiality
agreement reasonably acceptable to the party whose Records are being inspected.

     (d)  U.S. Dollars. All amounts set forth herein are in U.S. Dollars and 
          ------------
shall be paid in U.S. Dollars.

11.  WARRANTIES.
     ----------

     (a)  By Dow Jones. Dow Jones hereby represents and warrants to Futurestep 
          ------------
that:

          (1)  Dow Jones has the authority required to enter into this Agreement
according to its terms, and that the execution, delivery, and performance of 
this Agreement will not, with or without the giving of notice or the passage of 
time, or both, violate any provision of law, rule or regulation to which Dow
Jones is subject, or conflict with or result in a breach or default under any
agreement or other instrument to which Dow Jones is a party or by which Dow
Jones may be bound; and

          (2)  Dow Jones has and will maintain during the Term all necessary 
legal rights to grant the license to use the Dow Jones Marks as set forth in 
this Agreement.

     (b)  By Futurestep. Futurestep hereby represents and warrants to Dow Jones 
          --------------
that:

* Confidential portions omitted and filed separately with the Commission

                                      18

<PAGE>
 
          (1)  Futurestep has the authority required to enter into this 
Agreement according to its terms, and that the execution, delivery, and 
performance of this Agreement will not, with or without the giving of notice or 
the passage of time, or both, violate any provision of law, rule or regulation 
to which Futurestep is subject, or conflict with or result in a breach or 
default under any agreement or other instrument to which Futurestep is a party 
or by which Futurestep may be bound; and

          (2)  Futurestep is a corporation duly formed and in valid existence, 
and will remain throughout the Term a corporation in good standing, under the 
laws of the State of Delaware;

          (3)  Futurestep or KF has conducted an intellectual property search to
determine whether its use of the trade name and mark Futurestep is likely to 
cause confusion or otherwise infringe on a third person's trademark, trade name,
trade dress, or other intellectual property rights; and


          (4)  to the best of Futuresteps's knowledge, its use of the trade name
and mark Futurestep does not, and will not during the Term, infringe upon the 
trademark, trade name, trade dress, or other intellectual property rights of a 
third person.

     (c)  By KF. KF hereby represents and warrants to Dow Jones that:
          -----

          (1)  KF has the authority required to enter into this Agreement 
according to its terms, and that the execution, delivery, and performance of 
this Agreement will not, with or without the giving of notice or the passage of 
time, or both, violate any provision of law, rule or regulation to which KF is 
subject, or conflict with or result in a breach or default under any agreement 
or other instrument to which KF is a party or by which KF may be bound; and

          (2)  to the best of KF's knowledge and ability, Futurestep's use of 
the trade name and mark Futurestep does not, and will not during the Term, 
infringe upon the trademark, trade name, trade dress, or other intellectual 
property rights of a third person.

     (d)  Disclaimer of Other Warranties. EXCEPT FOR THE WARRANTIES SET FORTH IN
          ------------------------------
THIS SECTION 11, NO PARTY TO THIS AGREEMENT MAKES ANY OTHER REPRESENTATION OR 
WARRANTY TO ANOTHER PARTY TO THIS AGREEMENT IN CONNECTION WITH THE SUBJECT 
MATTER OF THIS AGREEMENT, AND EXPRESSLY DISCLAIMS ANY EXPRESS OR IMPLIED 
WARRANTIES, INCLUDING WITHOUT LIMITATION THE WARRANTIES OF MERCHANTABILITY AND 
FITNESS FOR A PARTICULAR PURPOSE. WITHOUT LIMITING THE GENERALITY OF THE 
FOREGOING, NEITHER FUTURESTEP NOR KF HAS MADE OR WILL MAKE OR HAS AUTHORIZED 
ANYONE ELSE TO MAKE ANY REPRESENTATIONS, WARRANTIES, PROMISES OR GUARANTIES, 
EXPRESS OR IMPLIED, RELATING TO THE FUTURESTEP BUSINESS OR ITS PROSPECTS OR ANY 
PROJECTIONS OR PLANS RELATING TO THE FUTURESTEP BUSINESS.

                                      19

<PAGE>
 
12.  INDEMNIFICATION.
     ---------------
    
     (a)  By Futurestep and KF. Futurestep and KF, jointly and severally, shall 
          --------------------
indemnify and hold harmless Dow Jones and its affiliates, and their respective 
officers, directors, members, employees, and agents (collectively, the "Dow 
Jones Indemnified Persons"), against any and all judgments, damages, 
liabilities, costs, expenses, and losses of any kind (including, but not limited
to, reasonable attorneys' and experts' fees) (collectively, "Losses") that arise
out of or relate to any claim, cause of action, demand or proceeding by a third 
person (each, a "Claim") arising out of or related to or in connection with: (1)
the Futurestep Business (including, but not limited to, a Claim regarding 
Response Management Services or by Referred Response Management Service Clients 
or Registered Candidates); or (2) a breach or alleged breach by Futurestep or KF
of any representation or warranty or covenant set forth in this Agreement. Dow 
Jones must promptly notify Futurestep and KF in writing of any such Claim, but 
the failure to do so shall not relieve Futurestep and KF of any obligation or 
liability hereunder except to the extent Futurestep and KF have been materially 
prejudiced therefrom. Futurestep or KF may elect, by written notice to Dow Jones
within ten (10) days after receiving notice of such Claim, to assume the defense
thereof with counsel reasonably acceptable to Dow Jones and/or the Dow Jones 
Indemnified Person(s). If Futurestep or KF does not so elect to assume such 
defense, then Dow Jones and/or the Dow Jones Indemnified Person(s) shall retain 
its own counsel to defend such Claim, at the expense of Futurestep and KF, 
jointly and severally. If Futurestep or KF disputes its respective indemnity 
obligation with respect to such Claim, or if Dow Jones or the Dow Jones 
Indemnified Person(s) reasonably believes that there are conflicts of interest 
between Futurestep and/or KF (on the one hand) and Dow Jones and/or the Dow 
Jones Indemnified Person(s) (on the other hand), or that additional defenses are
available to Dow Jones and/or the Dow Jones Indemnified Person(s) with respect 
to such defense, then Dow Jones and/or the Dow Jones Indemnified Person(s) may 
retain its own counsel to defend such Claim, at its own expense (unless 
ultimately determined that Futurestep or KF did have an indemnity obligation 
with respect to such Claim). Futurestep and KF shall reimburse Dow Jones and the
Dow Jones Indemnified Person(s) for their respective costs and expenses incurred
under this Section 12(a) if and to the extent such costs and expenses constitute
Losses that arise out of or relate to a Claim for which they are entitled to be
indemnified by Futurestep or KF under this Section 12(a). Dow Jones and the Dow
Jones Indemnified Person(s) shall have the right, at their own respective
expense, to participate in the defense of any Claim against which it is
indemnified hereunder and for which Futurestep or KF has assumed the defense; 
provided, however, that Dow Jones and the Dow Jones Indemnified Person(s) shall 
- --------  -------
have no right to control the defense, consent to judgment, or agree to settle 
any such Claim without the prior written consent of the party that has assumed 
the defense of such Claim, unless Dow Jones or such Dow Jones Indemnified 
Person(s) waive their respective rights to indemnity hereunder. In defending 
such Claim, Futurestep and KF shall not, without Dow Jones's prior written 
consent, consent to entry of any judgment or enter into any settlement which: 
(x) does not include, as an unconditional term, the grant by the claimant to Dow
Jones and the Dow Jones Indemnified Person(s) of a release of all liabilities in
respect of such Claim; or (y) otherwise adversely affects the rights of Dow
Jones or the Dow Jones Indemnified Person(s).

                                      20


<PAGE>
 
     (b)  By Dow Jones. Dow Jones shall indemnify and hold harmless Futurestep 
          ------------
and KF and their respective affiliates, officers, directors, members, employees,
and agents (collectively, the "Futurestep Indemnified Persons"), against any and
all Losses that arise out of or relate to any Claim arising out of or related 
to or in connection with a breach or alleged breach by Dow Jones of any
representation or warranty or covenant set forth in this Agreement. Futurestep
and/or KF must promptly notify Dow Jones in writing of any such Claim, but the
failure to do so shall not relieve Dow Jones of any obligation or liability
hereunder except to the extent Dow Jones has been materially prejudiced
therefrom. Dow Jones may elect, by written notice to Futurestep and KF within
ten (10) days after receiving notice of such Claim, to assume the defense
thereof with counsel reasonably acceptable to Futurestep (if the subject of the
Claim) and/or KF (if the subject of the Claim), and/or the Futurestep
Indemnified Person(s). If Dow Jones does not so elect to assume such defense,
then Futurestep (if the subject of the Claim) and/or KF (if the subject of the
Claim) or the Futurestep Indemnified Person(s) shall retain its own counsel to
defend such Claim, at Dow Jones's expense. If Dow Jones disputes its indemnity
obligation with respect to such Claim, or if Futurestep (if the subject of the
Claim) and/or KF (if the subject of the Claim) or the Futurestep Indemnified
Person(s) reasonably believes that there are conflicts of interest between Dow
Jones (on the one hand) and Futurestep and/or KF and/or the Futurestep
Indemnified Person(s) (on the other hand), or that additional defenses are
available to Futurestep (if the subject of the Claim) and/or KF (if the subject
of the Claim) or the Futurestep Indemnified Person(s) with respect to such
defense, then Futurestep (if the subject of the Claim) and/or KF (if the
subject of the Claim) and the Futurestep Indemnified Person(s) may retain its
own counsel to defend such Claim, at its own expense (unless ultimately
determined that Dow Jones did have an indemnity obligation with respect to such
Claim). Dow Jones shall reimburse Futurestep (if the subject of the Claim)
and/or KF (if the subject of the Claim) and the Futurestep Indemnified Person(s)
for their respective costs and expenses incurred under this Section 12(b) if and
to the extent such costs and expenses constitute Losses that arise out of or
relate to a Claim for which they are entitled to be indemnified by Dow Jones
under this Section 12(b). Futurestep (if the subject of the Claim) and/or KF (if
the subject of the Claim) and the Futurestep Indemnified Person(s) shall have
the right, at their own respective expense, to participate in the defense of any
Claim against which it is indemnified hereunder and for which Dow Jones has
assumed the defense; provided, however, that Futurestep (if the subject of the
                     --------  -------
Claim) and/or KF (if the subject of the Claim) and the Futurestep Indemnified
Person(s) shall have no right to control the defense, consent to judgment, or
agree to settle any such Claim without the prior written consent of Dow Jones,
unless Futurestep (if the subject of the Claim) and/or KF (if the subject of the
Claim) and the Futurestep Indemnified Person(s) waive their respective rights to
indemnity hereunder. In defending such Claim, Dow Jones shall not, without the
prior written consent of Futurestep (if the subject of the Claim) and/or KF (if
the subject of the Claim), consent to entry of any judgment or enter into any
settlement which: (x) does not include, as an unconditional term, the grant by
the claimant to Futurestep (if the subject of the Claim) and/or KF (if the
subject of the Claim) and the Futurestep Indemnified Person(s) of a release of
all liabilities in respect of such Claim; or (y) otherwise adversely affects the
rights of Futurestep (if the subject of the Claim) and/or KF (if the subject of
the Claim) and the Futurestep Indemnified Person(s).

                                      21

<PAGE>
 
     (c)  No Third Party Beneficiaries. The terms set forth in Section 12 are 
          ----------------------------
solely for the benefit of Dow Jones, Futurestep, and KF, and are not intended 
to, and do not, create any rights or causes of actions on behalf of any third 
person, or any intended or implied third party beneficiaries.

13.  CONFIDENTIAL INFORMATION.
     ------------------------

     (a)  General Obligations. The parties understand and agree that in the 
          -------------------
performance of this Agreement each party may have access to private or 
confidential information of the other party, including, but not limited to, 
trade secrets, marketing and business plans, technical information, customer 
identities, candidates identities, projections, customer lists, lists of 
advertisers, and product and service pricing, which is designated as 
confidential by the disclosing party in writing or which the receiving party 
knew or should have known was confidential (collectively, "Confidential 
Information"). Both parties agree that the terms of this Agreement, including 
without limitation its financial terms, shall be deemed Confidential Information
owned by the other party. Each party agrees that: (a) all Confidential 
Information shall remain the exclusive property of the owner; (b) it shall 
maintain, and shall use prudent methods to cause its employees and agents to 
maintain, the confidentiality and secrecy of the Confidential Information; (c) 
it shall not, and shall use prudent methods to ensure that its employees and 
agents do not, copy, publish, disclose to others or use (other than pursuant to 
the terms hereof) the Confidential Information; and (d) it shall return or 
destroy all copies of Confidential Information upon request of the other party. 
Notwithstanding the foregoing, Confidential Information shall not include any 
information to the extent it (i) is or becomes a part of the public domain 
through no act or omission on the part of the receiving party, (ii) is disclosed
to a third person by the disclosing party without restriction on such third 
person, (iii) is in the receiving party's possession, without actual or 
constructive knowledge of an obligation of confidentiality with respect thereto,
at or prior to the time of disclosure under or in connection with this 
Agreement, whether received prior to or after the date of this Agreement, (iv) 
is disclosed to the receiving party by a third person having no obligation of 
confidentiality with respect thereto, (v) is independently developed by the 
receiving party without reference to the disclosing party's Confidential 
Information, (vi) is released from confidential treatment by written consent of 
the disclosing party, or (vii) is required to be disclosed by law, provided the 
receiving party gives sufficient notice to the disclosing party in advance of 
such disclosure to enable the disclosing party to seek legal recourse to prevent
such disclosure.

     (b)  Customer Identities. The fact than an individual subscribes to or uses
          -------------------
WSJIE or careers.wsj.com or WSJ or NBEW or any other Dow Jones publication or 
service, or that a company has purchased an advertisement that has not yet been 
published in a Dow Jones publication or service, shall be deemed Dow Jones's 
Confidential Information. The fact that an individual or company uses any of 
Futurestep's or KF's products or services, or uses any of Futurestep's or KF's 
business products or services, shall be deemed Futurestep's or KF's, as 
applicable, Confidential Information.

14.  INSURANCE. Futurestep, at its own expense, shall procure and maintain 
     ---------
during the Term policies of insurance customary for employment search companies
and companies doing

                                      22

<PAGE>
 
business using the Internet, which shall include at a minimum Errors and 
Omissions Liability insurance with a combined single limit of not less than 
$10,000,000 per occurrence. Dow Jones shall be named as an additional insured on
all such policies of insurance.

15.   TERMINATION AND EFFECT OF TERMINATION.
      -------------------------------------

     (a)  Uncured Breach. (1) If Futurestep or KF shall breach any material 
          --------------
provision contained in this Agreement, and such breach is not cured within 
thirty (30) days after receiving written notice of such breach from Dow Jones, 
then Dow Jones may deliver a second written notice to Futurestep and KF 
terminating this Agreement, in which event this Agreement, and the license and 
rights granted hereunder, shall terminate on the date specified in such second 
notice. 

          (2) If Dow Jones shall breach any material provision contained in this
Agreement, and such breach is not cured within thirty (30) days after receiving 
written notice of such breach from Futurestep or KF, then Futurestep or KF (as 
the case may be) may deliver a second written notice to Dow Jones terminating 
this Agreement, in which event this Agreement, and the license and rights 
granted hereunder, shall terminate on the date specified in such second notice.


          (3) Each party shall inform the other parties of breaches of 
immaterial provisions of which such party becomes aware, but a breach of an 
immaterial provision shall not give rise to a right to terminate the Agreement.

     (b)  Series of Cured Breaches of Material Term. (1) If Futurestep or KF 
          -----------------------------------------
shall materially breach a term in Sections 3(d)(1), 3(d)(3), 3(d)(6), 3(h), 
4(d), 4(e)(1), 5(d), 6(g), 9(c), 9(d), 9(e), 9(f), or 10(a) three (3) or more 
times during a six (6) month period, regardless of whether each breach of such 
provision was cured within the time period specified in this Agreement, then Dow
Jones may deliver written notice to the parties terminating this Agreement, in 
which event this Agreement, and the license and rights granted hereunder, shall 
terminate on the date specified in such second notice.

          (2) If Dow Jones shall materially breach a term in Sections 5(b),
6(g), 9(a) or 9(b) three (3) or more times, regardless of whether each breach of
such provision was cured within the time period specified in this Agreement,
then Futurestep or KF may deliver written notice to the parties terminating this
Agreement, in which event this Agreement, and the license and rights granted
hereunder, shall terminate on the date specified in such second notice.

     (c)  Change in Control. If there is a direct or indirect change in the 
          -----------------
effective control of Futurestep or KF, or if Futurestep or KF merges into or is
acquired by any person (other than a merger of Futurestep into or with KF), or
if Futurestep or KF sells or transfers the Futurestep Business or all or
substantially all of the assets of the Futurestep Business (other than a sale by
Futurestep to KF) (each, a "Futurestep Change in Control"), then Futurestep or
KF (as the case may be) shall give prompt written notice thereof to Dow Jones,
and Dow Jones at its option may, within thirty (30) days after receipt of such
written notice, terminate this Agreement, and the licenses and rights hereunder,
immediately, by delivering written notice to Futurestep

                                      23

<PAGE>
 
and KF. Notwithstanding anything contained herein to the contrary: (1) the
consummation of an initial public offering of its debt or equity securities by
Futurestep or KF or the issuance from time to time thereafter of debt or equity
securities pursuant to an effective registration statement filed with the
Securities and Exchange Commission shall not be deemed a Futurestep Change in
Control within the meaning of this Section 15(c), regardless of the number or
identity of the purchasers of such securities or the concentration of the debt
and equity securities of Futurestep or KF thereafter; and (2) the issuance of
equity and/or debt securities by Futurestep and/or KF in transactions not
involving public offerings or distributions shall not constitute a Futurestep
Change of Control within the meaning of this Section 15(c) so long as such
issuances do not result in a change in the effective control of Futurestep or
KF.

     (d)  Insolvency. In the event that any party shall be adjudged insolvent or
          ----------
bankrupt, or upon the institution of any proceedings by it seeking relief, 
reorganization or arrangement under any laws relating to insolvency, or if an 
involuntary petition in bankruptcy is filed against such party and said petition
is not discharged within thirty (30) days after such filing, or upon any 
assignment for the benefit of its creditors, or upon the appointment of a 
receiver, liquidator or trustee of any of its assets, or upon the liquidation, 
dissolution or winding up of its business (an "Event of Bankruptcy"), then the 
party affected by any such Event of Bankruptcy shall immediately give notice 
thereof to the other parties, and either of the other parties at its option may 
terminate this Agreement, and the licenses and rights granted hereunder, upon 
written notice.

     (e)  The Wall Street Journal. Any party to this Agreement may terminate the
          -----------------------
Agreement, and the licenses and rights granted hereunder, by delivering written
notice of termination to all other parties to the Agreement, if Dow Jones ceases
publication of the print edition of The Wall Street Journal for general
circulation within the United States, or if Dow Jones ceases to own fifty
percent (50%) or greater interest in The Wall Street Journal. Nothing in this
Agreement is intended to, or shall be interpreted or construed to, restrict Dow
Jones's ability to cease publication of, or alter the format, content,
circulation or distribution of, any of its publications, products or services.

     (f)  *

          *

* Confidential portions omitted and filed separately with the Commission

                                      24

<PAGE>
 
     (g)  Termination After End of First Year but During First Three Years. 
          ----------------------------------------------------------------
Futurestep may terminate this Agreement, and the licenses and rights granted 
hereunder, for any or no reason, by delivering written notice of termination to 
all other parties to the Agreement, at any time after the end of the first year
of the Initial Term, but prior to the end of the third year of the Initial Term.

     (h)  Effect of Termination on Payment Obligations.
          -------------------------------------------

          (1)  *
               ----------------------------------------------

          (2)  *
               ---------------------------------------

               (a)  *

               (b)  *

*

* Confidential portions omitted and filed separately with the Commission

                                      25

<PAGE>

*

          (3)  *

               (a)  *

               (b)  *



          (4)  *

*

* Confidential portions omitted and filed separately with the Commission

                                      26

<PAGE>

*

     (i)  Effect of Termination on Other Obligations. Upon the expiration or 
          ------------------------------------------
termination of this Agreement for any reason, the license and rights regarding 
the Dow Jones Marks shall terminate immediately, and Futurestep shall
immediately stop all use of the Dow Jones Marks. Notwithstanding the foregoing
sentence, Futurestep may continue to use the Dow Jones Marks solely in
connection with Materials that cannot be cancelled or altered because of
printing or production deadlines (e.g., ads already scheduled to run in the WSJ
or NBEW). In addition, upon expiration or termination of this Agreement for any
reason, each party, at its expense, shall either destroy or return to the other
party within (5) days all copies of another party's Confidential Information.

     (j)  Nonsolicitation. During the term of this Agreement and for one year 
          ---------------
after the expiration or termination of this Agreement for any reason:

          (1)  Without Futurestep's or KF's (as the case may be) prior consent, 
Dow Jones will not solicit for employment or employ any Futurestep or KF
employee who Dow Jones knew or should have known worked in a material capacity
with the performance of Futurestep's or KF's obligations pursuant to this
Agreement; and

          (2)  Without Dow Jones's prior consent, neither Futurestep nor KF 
will solicit for employment or employ any Dow Jones employee who Futurestep of 
KF (as the case may be) knew or should have known worked in a material capacity 
in connection with the performance of Dow Jones's obligations pursuant to this 
Agreement.

For purposes of this Section of the Agreement, "worked in a material capacity" 
shall not include secretaries and other administrative personnel, attorneys, and
accountants, among other individuals, but shall include advertising sales
personnel and executives, among other individuals. For purposes of this Section
of the Agreement, placing advertisements soliciting employees, which ads are not
targeted specifically to the employees of another party hereto, shall not
constitute solicitation for employment. As a party's sole and exclusive remedy
for any breach of any term of this Section of the Agreement, the nonbreaching
party shall be entitled to receive a payment from the breaching party equal to
*. The parties agree that the sole and exclusive remedy and amount of damages
set forth in the preceding sentence is reasonable in light of the anticipated or
actual harm cause by the breach, the difficulties of proof of loss, and the
inconvenience or nonfeasibility of otherwise obtaining an adequate remedy.

* Confidential portions omitted and filed separately with the Commission

                                      27

<PAGE>
 
16.  MISCELLANEOUS TERMS.
     -------------------

     (a)  Business Responsibilities. Except as specifically set forth otherwise 
          -------------------------
in this Agreement, Futurestep shall be responsible for all aspects of the 
Futurestep Business, including, without limitation: operation of the Futurestep 
Business; accounts payable and accounts receivable; taxes; employment issues for
individuals performing work for the Futurestep Business; and insuring the 
Futurestep Business.

     (b)  Severability. If any term or other provision of this Agreement is held
          ------------
to be invalid, illegal or incapable of being enforced by any rule of law or 
public policy, all other terms and provisions of this Agreement shall 
nevertheless remain in full force and effect. Upon a determination that any term
or other provision is invalid, illegal or incapable of being enforced, the 
parties hereto shall negotiate in good faith to modify this Agreement so as to 
effect the original intent of the parties as closely as possible in a mutually 
acceptable manner in order that the transactions contemplated hereby be 
consummated as originally contemplated to the fullest extent possible.

     (c)  Assignment; Amendment. Except for a transfer or assignment of this 
          ---------------------
Agreement in connection with a merger of Futurestep into or with KF, an 
acquisition by KF of Futurestep, the Futurestep Business or all or substantially
all of the assets of Futurestep, neither this Agreement, the license granted 
herein, nor any of the rights or obligations hereunder, shall be assigned or 
transferred, whether by operation of law or otherwise, without the prior written
consent of all other parties hereto. Any purported assignment or transfer in 
violation of the first sentence of this Section 16(c) shall be void. This 
Agreement and all of its rights and obligations shall be binding upon and inure 
to the benefit of the parties hereto and their respective successors and 
permitted assigns. This Agreement may be amended only by a written instrument 
executed by the party or parties to be bound thereby.

     (d)  Specific Performance. The parties hereto acknowledge and agree that 
          --------------------
irreparable damage would occur in the event any provision of this Agreement was
not performed in accordance with the terms hereof and that the parties shall be
entitled to specific performance of the terms hereof, and other equitable
relief, in addition to any other remedy at law or in equity, except for those
terms where a sole and exclusive remedy is expressly set forth herein.

     (e)  Notices. All notices, consents, approvals, requests, claims, demands 
          -------
and other communications hereunder (collectively, "Notices") shall be in writing
and shall be given (and shall be deemed to have been duly given upon receipt) 
by delivery in person, by telecopy, by reliable overnight courier service, or 
by registered or certified mail (postage prepaid, return receipt requested) to 
the respective Relationship Manager(s) at the addresses on the signature page of
this Agreement (or at such other address for a party as shall be specified in a 
Notice given in accordance with this Section).

     (f)  Governing Law. This Agreement, the license, and all rights and 
          -------------
obligations hereunder, shall be governed by, and construed in accordance with, 
the laws of the State of New York applicable to contracts executed in and to be 
performed wholly in New York, without

                                      28


<PAGE>
 
regard to any principles of conflict of law. It is the intent of the parties 
that the substantive law of the State of New York govern this Agreement.

     (g)  Counterparts. This Agreement may be executed and delivered (including 
          ------------
by facsimile transmission) in one or more counterparts, and by the different 
parties hereto in separate counterparts, each of which when executed and 
delivered shall be deemed to be an original but all of which when taken together
shall constitute one and the same agreement.

     (h)  Survival. (1) The terms in the following Sections of this Agreement 
          --------
shall survive its expiration or termination for any reason: Sections 3(f), 7(c),
8(c), 8(d), 9(a), 9(f), 10(b), 10(c), 11(d), 15(h), 15(i), 15(j), and all of 
Sections 1, 12, 13, and 16. (2) All causes of action for breach of the terms in 
the following Sections of this Agreement shall survive its expiration or 
termination for any reason for the applicable statute of limitations: Sections 
3(f), 7(c), 8(c), 8(d), 9(a), 9(f), 10(b), 10(c), 11(d), 15(h), 15(i), 15(j), 
and all of Sections 1, 12, 13, and 16.

     (i)  Waiver. Failure or delay by any party to enforce compliance with any 
          ------
term or condition of this Agreement shall not constitute a waiver of such term 
or condition. All waivers hereunder must be in writing and executed by an 
authorized representative on behalf of the party against whom such waiver is 
asserted. A waiver of a breach or a term under this Agreement shall not be 
deemed a waiver or any other or subsequent breach, or a waiver of any other 
term.

     (j)  Headings. Section headings are for the convenience of the parties and 
          --------
shall not affect the meaning, construction or interpretation of the text of this
Agreement.

     (k)  Relationship Managers. Each party shall designate one individual as 
          ---------------------
that party's Relationship Manager, with the authority to make decisions and 
legally bind such party regarding the matters set forth in this Agreement. The 
Relationship Managers shall be the first and principal contact for each party 
for matters arising in connection with this Agreement, unless a Relationship 
Manager has designated another individual at its employer to serve as the first 
and principal contact for a particular matter (e.g., one individual for issues 
regarding print WSJ ads, and a different individual for issues regarding 
careers.wsj.com ads).

     (l)  Costs and Expenses. If any party brings an action against another 
          ------------------
party to enforce rights under this Agreement, the prevailing party shall be 
entitled to recover its reasonable costs and expenses incurred in connection 
with such action and all appeals of such action, including, without limitation, 
reasonable attorneys' fees and costs.

     (m)  Text References to Material Breaches. A statement in this Agreement 
          ------------------------------------
that a breach of a particular term shall be deemed a material breach of this 
Agreement does not mean or imply that a breach of any other particular term does
not constitute a material breach of this Agreement.

     (n)  KF Selection. Unless expressly set forth otherwise in this Agreement, 
          ------------
references to "KF" include, without limitation, its KF Selection division or 
business.

                                      29

<PAGE>
 
     (o)  Mutual Amendment of Business Definitions. The parties anticipate that,
          ----------------------------------------
during the Term, the categories of business conducted by the Futurestep 
Business, KF Business, careers.wsj.com web site Business, and Dow Jones Business
will change. In part to enable parties to determine what activities might 
compete with another party's business in ways restricted by this Agreement, each
party will need to inform the other parties regarding bona fide changes to their
respective businesses. Therefore, upon the occurrence of a bona fide change to 
the actual operation of the Futurestep Business, KF Business, careers.wsj.com 
web site Business, or the Dow Jones Business, the applicable party to this 
Agreement owning such business may propose an amendment to the applicable 
respective definition of such business, and such proposed amendment shall be 
adopted if mutually agreed upon by the other parties to this Agreement, which 
agreement shall not be unreasonably withheld or delayed.

     (p)  Integration. This Agreement (including, without limitation, the 
          -----------
Exhibits attached hereto, which are expressly incorporated into this Agreement 
by this reference) is the final and entire agreement of the parties on the 
subject matter herein, and supersedes all previous oral and written 
understandings, negotiations, letters, writings, and agreements on the subject 
matter herein.

                                      30

<PAGE>
 
     IN WITNESS WHEREOF, Dow Jones, Futurestep, and KF have caused each of its
respective authorized representatives to execute this Agreement, as of the
Effective Date.

DOW JONES                              FUTURESTEP
DOW JONES & COMPANY, INC.              KORN/FERRY INTERNATIONAL FUTURESTEP, INC.


By: /s/ Michael J. Wilson              By: /s/ Man Jit Singh
   --------------------------              -------------------------
Print Name: Michael J. Wilson          Print Name: Man Jit Singh
Title: Director of The Wall Street     Title: President & CEO
       Journal Classified Advertising   

                                       KF
                                       KORN/FERRY INTERNATIONAL 
                                       

                                       By: /s/ Peter L. Dunn
                                          -------------------------
                                       Print Name: Peter L. Dunn
                                       Title: Vice Chairman

Initial Addresses for Notices:
DOW JONES & COMPANY, INC.              KORN/FERRY INTERNATIONAL FUTURESTEP, INC.

Mr. Michael Wilson                     Korn/Ferry International Futurestep Inc.
Director of Wall Street Journal        13743 Ventura Blvd., Suite 350
Classified Advertising                 Sherman Oaks, CA 91423
Dow Jones & Company, Inc.              Attn.: Mr. Man Jit Singh, President
1155 Avenue of the Americas            Phone: 818-380-2993
New York, NY 10036                     Fax: 818-981-9956
Phone: 212-597-5619
Fax: 212-597-5866

With a copy to:                        KORN/FERRY INTERNATIONAL
Robert F. Firestone, Esq.              1800 Century Park East, Suite 900
Dow Jones & Company, Inc.              Los Angeles, CA 90067
U.S. Highway One at Ridge Road         Attn.: Mr. Peter Dunn, Vice Chairman
Princeton, NJ 08852                    Phone: 310-843-4101
Phone: 609-520-4094                    Fax: 310-553-8640
Fax: 609-520-4021   
                                       With a copy to:
                                       Michael C. Cohen, Esq.
                                       Morrison & Foerster LLP
                                       555 West Fifth Street, Suite 3500
                                       Los Angeles, CA 90013
                                       Phone: 213-892-5404
                                       Fax: 213-892-5454

                                      31




<PAGE>
 
                                                                   EXHIBIT 10.25

                                                               PRELIMINARY DRAFT

                        ADDITIONAL REDEMPTION AGREEMENT

          This Additional Redemption Agreement (the "Agreement") is made as of
December __, 1998 by and between KORN/FERRY INTERNATIONAL, a California
corporation (the "Company") and RICHARD M. FERRY ("Ferry").

                                R E C I T A L S

          WHEREAS, pursuant to certain Purchase Agreements between the Company
and certain shareholders of the Company (the "Sellers") dated as of December 31,
1994 and January __, 1995 (collectively, the "1994 Purchase Agreement"), the
Sellers agreed to have certain shares of the Company's common stock, no par
value (the "Common Stock"), redeemed by the Company in an integrated fixed
redemption plan initiated by the Company that required the redemption of a
portion of the holdings of any shareholder whose aggregate ownership of
securities exceeded a certain level of equity ownership in the Company (the
"Redemption").

          WHEREAS, pursuant to the Redemption, 304,223 shares of Common Stock
owned by Ferry were redeemed by the Company (the "Redeemed Stock");

          WHEREAS, the redemption price consisted of (i) a fixed amount of $7.29
per share (the "Fixed Redemption Amount"), (ii) a contingent additional amount
(the "Additional Redemption Amount") payable if the Company engaged in any
extraordinary
 transaction, such as a public offering of the Common Stock of the
Company at any time prior to December 31, 2004 (an "Initial Public Offering")
and (iii) one share of Series A Preferred Stock for each 100 shares of Common
Stock redeemed;

          WHEREAS, the Fixed Redemption Amount resulted in a total payment of
$2,217,785.60, with $369,484.77 paid in cash and the balance of $1,848,300.90
paid in the form of a promissory note in the principal amount of $1,826,124.72
(the "Fixed Redemption Promissory Note") and $22,176.18 in the form of 3,042
shares of Series A Preferred Stock @ $7.29 per share;

          WHEREAS, in the event of an Initial Public Offering, the Additional
Redemption Amount per share was defined in the 1994 Purchase Agreement to be an
amount equal to the amount Ferry would have received in an Initial Public
Offering had the Redeemed Stock not been redeemed in the Redemption, reduced by
the Fixed Redemption Amount plus 8.5% per annum accrued interest;

          WHEREAS, because the Company's current balance of cash and cash
equivalents is not sufficient to pay the aggregate Additional Redemption Amount
and therefore a substantial amount of the proceeds from the Initial Public
Offering would have been required to pay the total aggregate Additional
Redemption Amount rather than providing new capital for the Company, each Seller
has agreed with the Company to reduce the Additional Redemption Amount otherwise
required to be paid to such Seller by 30.25% (the "Negotiated Adjustment
Percentage");

<PAGE>

                                                               PRELIMINARY DRAFT
 
          WHEREAS, the Company and Ferry desire to enter into this Agreement to
reduce the Additional Redemption Amount otherwise required to be paid to Ferry
by the Negotiated Adjustment Percentage;

          WHEREAS, concurrent with the transactions contemplated in this
Agreement and as part of the Redemption, all shares of Series A Preferred Stock
issued pursuant to the 1994 Purchase Agreement will be retired in an amount
equal to $7.29 per share of Series A Preferred Stock (the "Preferred Stock
Amount"); and

          WHEREAS, upon completion of the transactions contemplated in this
Agreement and the retirement of all shares of Series A Preferred Stock, all
obligations of the Company and Ferry in respect of the Redemption will have been
satisfied.

                               A G R E E M E N T

          NOW, THEREFORE, in consideration of the mutual promises and covenants
contained herein, the Company and Ferry hereby agree as follows:

                                   SECTION 1

                            PAYMENT; MUTUAL RELEASE

          1.1  PAYMENT.  Subject to the terms and conditions contained herein,
               -------                                                        
the Company agrees to pay Ferry at the time and manner set forth in Section 4
the sum of (i) the outstanding balance of the Fixed Redemption Promissory Note
at the Closing (as defined in Section 4.1) plus all accrued and unpaid interest
thereon; (ii) the Preferred Stock Amount and (iii) an amount equal to the
product of 304,223 times the difference between (a) the initial price of the
shares of Common Stock sold by the Underwriters to the public in the Initial
Public Offering (the "Initial Offering Price") times 0.6975 and (b) the Fixed
Redemption Amount plus 8.5% per annum accrued interest since ____________ 1995,
the date of the Redemption (collectively, the "Payment Amount") as payment in
full of (x) the Fixed Redemption Promissory Note, (y) the retirement of the
Series A Preferred Stock; and (z) the Additional Redemption Amount owed to Ferry
under the 1994 Purchase Agreement.  The Company shall pay Ferry the Preferred
Stock Amount upon the retirement of the Series A Preferred Stock.

                                       2

<PAGE>

                                                               PRELIMINARY DRAFT
 
          1.2  MUTUAL RELEASE.  Subject to the terms and conditions contained
               --------------                                                
herein, at the Closing each of Ferry and the Company agree to execute a mutual
release, in the form attached hereto as Exhibit A (the "Mutual Release").

                                   SECTION 2

                 REPRESENTATIONS AND WARRANTIES OF THE COMPANY

          The Company represents and warrants to Ferry as follows:

          2.1  ORGANIZATION AND POWERS.  The Company is a corporation duly
               -----------------------                                    
organized, validly existing and in good standing under the laws of the State of
California and has all requisite corporate power and authority to own and
operate its properties and assets, to carry on its business as presently
conducted and as now proposed to be conducted and to enter into this Agreement
and carry out the transactions contemplated hereby.

          2.2  AUTHORIZATION AND BINDING OBLIGATION.  The execution, delivery
               ------------------------------------                          
and performance of this Agreement, including, but not limited to, the payment of
the Payment Amount, have been duly authorized by all necessary corporate action
on the part of the Company.  This Agreement is the legally valid and binding
obligation of the Company, enforceable against it in accordance with its terms,
except as enforcement may be limited by bankruptcy, insolvency, reorganization,
moratorium or similar laws or equitable principles relating to or limiting
creditors' rights generally.

          2.3  COMPLIANCE WITH OTHER INSTRUMENTS.  The Company is not in
               ----------------------------------                       
violation of any term of its Articles of Incorporation or Bylaws, or in any
material respect of any term or provision of any material mortgage,
indebtedness, indenture, contract, agreement, instrument, judgment or decree,
and, to the best of its knowledge, is not in violation of any order, statute,
rule or regulation applicable to the Company where such violation would
materially and adversely affect the Company.  The execution, delivery and
performance of and compliance with this Agreement, and the payment of the
Payment Amount, have not resulted and will not result in any violation of, or
conflict with, or constitute a default under, the Company's Articles of
Incorporation or Bylaws or any of its material agreements nor result in the
creation of any mortgage, pledge, lien, encumbrance or charge upon any material
portion of the properties or assets of the Company.

                                   SECTION 3

                    REPRESENTATIONS AND WARRANTIES OF FERRY

          Ferry hereby represents and warrants to the Company as follows:

          3.1  EXPERIENCE.  Ferry, through his authorized representative or
               ----------                                                  
otherwise, has experience in evaluating the fairness of the Negotiated
Adjustment Percentage to the Additional Redemption Amount and the terms of this
Agreement, and is capable of evaluating

                                       3

<PAGE>

                                                               PRELIMINARY DRAFT
 
the merits and risks of this Agreement and has the capacity to protect his own
interest in entering into this Agreement with the Company.

          3.2  AUTHORIZATION AND BINDING OBLIGATION. Ferry is duly authorized to
               ------------------------------------ 
execute, deliver and perform this Agreement. This Agreement is the legally valid
and binding obligation of Ferry, enforceable against him in accordance with its
terms, except as enforcement may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws or equitable principles relating to
or limiting creditors' rights generally.

          3.3  COMPLIANCE WITH OTHER INSTRUMENTS. The execution of this
               ---------------------------------
Agreement by Ferry does not, and the performance by Ferry of his obligations
hereunder will not, constitute a violation of, conflict with or result in a
default under, any contract, commitment, agreement, understanding, arrangement
or restriction of any kind to which Ferry is bound.

          3.4  NO PRIOR TRANSFER.  Ferry has not transferred, assigned or
               ------------------                                        
pledged all, or any part, of his rights under the 1994 Purchase Agreement, and
the release by Ferry of his rights under the 1994 Purchase Agreement will
constitute a full and complete release of any right owed under the 1994 Purchase
Agreement, subject to Section 1546 of the California Civil Code.

          3.5  REVIEW OF APPRAISALS.  Ferry has reviewed the appraisals of the
               --------------------                                           
fair market value of the Common Stock of the Company as of April 30, 1998 and
June 30, 1998 prepared by Houlihan Lokey Howard & Zukin.

                                   SECTION 4

                                    CLOSING

          4.1  CLOSING.  The closing of the transaction contemplated in Section
               -------
1 of this Agreement (the "Closing") will take place at the offices of
________________, 9:00 a.m. two business days after the consummation of the
Initial Public Offering.

          4.2  PAYMENT BY WIRE TRANSFER.  At the Closing, the Company will pay
               ------------------------                                       
the Payment Amount by wire transfer to Ferry's account.

          4.3  DELIVERY OF EXECUTED RELEASE.  At the Closing, Ferry will deliver
               ----------------------------                                     
to the Company an executed copy of the Release, in the form attached as Exhibit
A.

                                   SECTION 5

                        CONDITIONS PRECEDENT TO CLOSING

          5.1  CONDITIONS PRECEDENT TO CLOSING.  The obligations of the Company
and Ferry under this Agreement will be subject to the fulfillment of each and
all of the following conditions at or before the Closing, each of which is
individually deemed material.

                                       4

<PAGE>

                                                               PRELIMINARY DRAFT
 
          5.2  REPRESENTATIONS AND WARRANTIES. The representations and
               ------------------------------
warranties made by the Company and Ferry will be true and correct on and as of
the Closing to the same extent and with the same effect as if made on and as of
the Closing.

          5.3  CONSUMMATION OF INITIAL PUBLIC OFFERING.  The Initial Public
               ---------------------------------------
Offering of the Common Stock of the Company will have been consummated.

                                   SECTION 6

                                  TERMINATION

          6.1  TERMINATION.  If the Closing does not occur on or before
               ------------                                            
September 1, 1999, this Agreement will terminate.

                                   SECTION 7

                                 MISCELLANEOUS

          7.1  GOVERNING LAW.  This Agreement will be governed and construed in
               -------------
all respects in accordance with the laws of the State of California.

          7.2  SUCCESSORS AND ASSIGNS.  Except as otherwise provided herein, the
               -----------------------                                          
provisions hereof  will inure to the benefit of, and be binding upon, the
successors, assigns, heirs, executors and administrators of the parties hereto.

          7.3  ENTIRE AGREEMENT; AMENDMENT.  This Agreement and the other
               ----------------------------                              
documents delivered pursuant hereto constitute the full and entire understanding
and agreement between the parties with regard to the subjects hereof and
thereof, and no party shall be liable or bound to any other party in any manner
by any warranties, representations or covenants except as specifically set forth
herein or therein.  Except as expressly provided herein, neither this Agreement
nor any term hereof may be amended, waived, discharged or terminated other than
by a written instrument signed by the party against whom enforcement of any such
amendment, waiver, discharge or termination is sought.

          7.4  NOTICES, ETC.  All notices and other communications required or
               -------------                                                  
permitted hereunder will be in writing and will be mailed by registered or
certified mail, postage prepaid, or otherwise delivered by messenger, addressed
to the address set forth on the signature page hereto, or at such other address
as a party shall have furnished the other party by notice given in the above
manner.

          Each such notice or other communication will for all purposes of this
Agreement be treated as effective or having been given when delivered if
delivered personally, or, if sent by mail, at the earlier of its receipt or ten
(10) business days after the same has been deposited in a regularly maintained
receptacle for the deposit of the United States mail, addressed and mailed as
aforesaid.

                                       5

<PAGE>

                                                               PRELIMINARY DRAFT
 
          7.5  EXPENSES.  Each party hereto will bear all expenses it incurs
               ---------                                                    
with respect to the negotiation, execution, delivery and performance of this
Agreement.  If any action at law or in equity is necessary to enforce or
interpret the terms of this Agreement or the Articles, the prevailing party will
be entitled to reasonable attorney's fees, costs and necessary disbursements in
addition to any other relief to which such party may be entitled.

          7.6  COUNTERPARTS.  This Agreement may be executed in any number of
               -------------                                                 
counterparts, each of which may be executed by less than all of the parties,
each of which will be enforceable against the party actually executing such
counterpart, and all of which together will constitute one instrument.

          7.7  SEVERABILITY.  In the event that any provision of this Agreement
               -------------                                                   
becomes or is declared by a court of competent jurisdiction to be illegal,
unenforceable or void, this Agreement will continue in full force and effect
without said provision.

          7.8  TITLES AND SUBTITLES.  The titles and subtitles used in this
               ---------------------                                       
Agreement are used for convenience only and are not considered in construing or
interpreting this Agreement.

          7.9  LEGAL COUNSEL.  In entering into this Agreement, the parties
               --------------                                              
represent that they have relied upon the advice of their respective attorneys,
who are attorneys of their own choice, and that the terms of this Agreement have
been completely read and explained to them by their attorneys, and that those
terms are fully understood and voluntarily accepted by them.

                                       6

<PAGE>

                                                               PRELIMINARY DRAFT
 
          IN WITNESS WHEREOF, the parties hereto have executed this Additional
Redemption Agreement as of the date first above written.

                                  "COMPANY"
                                  KORN/FERRY INTERNATIONAL



                                  By:___________________________
                                  Name:  Elizabeth S.C.S. Murray
                                  Title:  Chief Financial Officer
                                            and Executive Vice President
                                  Notice Address:  Korn/Ferry International
                                                   1800 Century Park East
                                                   Suite 900
                                                   Los Angeles, CA  90067

                                  "FERRY"
                                  RICHARD M. FERRY



                                  _____________________________
                                  Name:  Richard M. Ferry
                                  Notice Address:  c/o Korn/Ferry International
                                                   1800 Century Park East
                                                   Suite 900
                                                   Los Angeles, CA  90067

                                       7



<PAGE>
 
                                                                   EXHIBIT 10.32


                   GENERAL RELEASE AND SETTLEMENT AGREEMENT 
                   ----------------------------------------


     This General Release and Settlement Agreement ("Agreement") is entered into
effective as of the third day of December, 1998 by and between Korn/Ferry 
International, a California corporation (which, together with all of its 
subsidiaries and affiliates, is referred to as "Employer"), and Michael D. 
Boxberger ("Employee") with reference to the following facts:

     A.   Employee has been employed by Employer since 1986 and has been 
Employer's Chief Executive Officer since May, 1997.

     B.   Except as specifically provided for in this Agreement, Employee and 
Employer have agreed to sever all relationships between themselves.

     C.   The parties desire to resolve and settle finally, fully and completely
all claims and disputes that exist between them in accordance with the terms and
conditions of this Agreement. 

     IN CONSIDERATION OF THE RECITALS AND PROMISES SET FORTH IN THIS AGREEMENT, 
THE PARTIES AGREE AS FOLLOWS:

     1.   Resignation. Effective as of December 3, 1998 (the "Resignation 
          -----------
Date"), Employee resigns as an officer and director of Employer, and Employer 
confirms that it has accepted this resignation.

     2.   Return of Property. Employee hereby acknowledges and confirms to 
          ------------------
Employer
 that, within ten (10) days after the Resignation Date, he will return 
to Employer all books, records, documents, manuals, lists, computer programs, 
computer data, credit cards and other property in his possession or under his 
management and control which belong to Employer, and any other books, records, 
documents, manuals, lists and computer programs or data relating to Employer's 
business that were used by Employee during the course and scope of his 
employment by Employer. Employee shall be permitted to retain and use any 
computers owned by Employer which are in Employee's residence (but not any 
computer programs or data relating to Employer's business or other Employer 
information, all of which shall be returned or deleted to Employer's 
satisfaction), and shall return such computers to Employer on the earliest to 
occur of (a) Employee's commencement of employment by anyone other than 
Employer, (b) December 3, 1999, or (c) Employee's relocation from Los Angeles, 
California. Employee shall, at a time mutually agreeable to Employer and 
Employee, cause the removal of his personal items from his office, including, 
without limitation, an oriental screen in the conference room, an oriental table
in the conference room, an oriental rug in his office, and the pictures on the
walls of his office. Upon presentation of a reasonably itemized bill, Employer
will reimburse Employee for the reasonable costs incurred by Employee in
removing his personal items from Employer's offices.

<PAGE>
 
          3.   Communications Concerning Resignation: Confidentiality: 
               ------------------------------------------------------
Non-Disparagement.
- -----------------

               3.1  Communications.  If any inquiries by third parties are made 
                    --------------
of Employer or Employee with respect to the reasons for Employee's departure 
from Employer, each agree that it or he will respond consistent with the draft 
of the press release (the "Press Release") which is attached hereto and is 
hereby incorporated as Exhibit A.
                       ---------

               3.2  Agreement to Keep Terms Confidential. Employer and Employee 
                    ------------------------------------
agree to keep the provisions of this Agreement confidential and not to discuss 
or disclose them to any other person, firm, organization or entity for any 
reason, at any time, without the prior written consent of the other party, 
unless otherwise required by law or legal process. Upon inquiry, either may 
state that Employee's reasons for leaving are those described in Section 3.1 
above. Notwithstanding the foregoing, Employer may disseminate the Press Release
to the news media; the parties may discuss this Agreement with, or disclose it 
to, their respective attorneys or accountants; Employer may disclose the 
Agreement to, or discuss it with, its shareholders as the same may be necessary 
or appropriate, and may make such disclosures which are necessary or appropriate
under any applicable securities laws; and Employee may disclose the Agreement 
to, or discuss it with, his spouse.

               3.3  Non-Disparagement. For a period of two (2) years following 
                    -----------------
the Resignation Date: Except for communications among its shareholders, Employer
agrees that it will not disparage, ridicule or criticize Employee, or discuss or
describe Employee in negative terms; and Employee agrees that he will not 
disparage, ridicule or criticize Employer or any of its employees, officers or 
directors, or discuss or describe any of them in negative terms.

               3.4  Employer's Obligations Only Bind Senior Officers. All 
                    ------------------------------------------------
references to "Employer" in Section 3.1, 3.2 and 3.3, and to Employer's 
obligations to refrain from the conduct described in such subsections, refer 
only to the Employer's regional heads, the members of Employer's Board of 
Directors and its office of the Chief Executive Officer.

               3.5  Liquidated Damages. The parties acknowledge that a breach by
                    ------------------
either of them of any of the provisions of this Section 3 will cause substantial
harm to the non-breaching party. The parties believe that the damages resulting
from a breach would be extremely difficult or impracticable to determine.
Because of the difficulty in determining the damages resulting from a breach,
the parties agree that, in the event of such a breach, the breaching party will
pay to the non-breaching party the sum of Fifteen Thousand Dollars ($15,000), as
liquidated damages, for each separate breach of any of the obligations described
in Section 3, which the parties believe is a reasonable estimation of the
damages that will be suffered as a result of each breach.

          4.   Employee Will Not Seek Re-Employment. Employee agrees that he 
               ------------------------------------
will not seek re-employment with Employer.

          5.   Proprietary Information. Employee agrees that he will not use, 
               -----------------------
reveal, divulge or make known to any person, firm or corporation, and shall
maintain as confidential, all privileged, proprietary and/or secret information,
communications, knowledge or data relating to the business of Employer. Employee
recognizes and acknowledges that all such

                                      -2-

<PAGE>
 
information, communications, knowledge or data is a valuable and unique asset of
Employer and, accordingly, he will not discuss or divulge any such information, 
communications, knowledge or data to any person, firm, partnership, corporation 
or organization other than Employer, except as may otherwise be required by law.
Employee further agrees that if he is contacted by any governmental agency or is
served with any subpoena relating to or arising out of Employer's business, his 
employment by Employer, or work he did while employed by Employer, he will 
immediately contact Employer and provide it with a copy of any subpoena or 
written communication relating to such contact.

          6.   Purchase of Stock.
               -----------------

               6.1  Representations by Employee. Employee represents and 
                    ---------------------------
warrants to Employer that:

                    (a)  Employee is the lawful owner of ninety-eight thousand 
three hundred fourteen (98,314) shares (the "Employee Shares") of the common 
stock of Employer, free and clear of any liens, claims or encumbrances, except 
the lien created pursuant to the "Mortgage Loan Agreements" (as described 
below);

                    (b)  Employee can, without obtaining the consent of any 
other person and without breaching any agreement to which Employee is a party, 
transfer the Employee Shares as provided for in this Agreement; and

                    (c)  Other than the Employee Shares, Employee does not own 
any other shares, rights to purchase shares, or any interest convertible into 
shares, of Employer.

               6.2  Purchase and Sale.
                    -----------------

                    (a)  Employer and Employee acknowledge and agree that the
retention and disposition of the Employee Shares are governed by an undated
Stock Repurchase Agreement (the "Repurchase Agreement") between Employer and
Employee. Pursuant to the Repurchase Agreement, Employer has custody of the
original certificates evidencing the Employee Shares and will continue to retain
such custody. Employer and Employee further agree that, except as specifically
set forth in this Agreement to the contrary, the terms and provisions of the
Repurchase Agreement shall remain in full force and effect.

                    (b)  Within ten (10) days after the execution and delivery 
of this Agreement, Employer shall purchase, and Employee shall sell, fifty-seven
thousand twenty-two (57,022) of the Employee Shares (the "Purchased Shares") for
a purchase price (the "Purchase Price") equal to the number of Purchased Shares,
multiplied by Eleven Dollars and Fifteen Cents ($11.15), for a total payment 
equal to Six Hundred Thirty-Five Thousand Seven Hundred Ninety-Five Dollars and 
Thirty Cents ($635,795.30). Subject to Section 6.2(f) below, the Purchase Price 
shall be paid in cash concurrent with the purchase, at which time Employee will 
deliver to Employer an Assignment Separate from Certificate, evidencing the 
Purchased Shares, duly endorsed in blank by Employee, and Employer will cancel 
the certificate(s) in its possession which represent the Purchased Shares. 
Employee acknowledges that Employer is contemplating a sale of its shares in an 
underwritten public offering pursuant to the Securities Act of 1933, as amended 
(an "IPO"). Employee acknowledges that, even though the Purchased 

                                      -3-

<PAGE>
 
Shares may be worth more than the Purchase Price following an IPO (if there is 
one), the Purchase Price is a fair and equitable price for the Purchased Shares.

                    (c) If, by December 3, 1999, there has not been an IPO, 
then, by March 3, 2000, Employer will purchase Employee's remaining shares (the 
"Retained Shares") (i.e, 41,292 shares) for a purchase price (the "Retained 
Purchase Price") equal to the number of the Retained Shares, multiplied by 
Employer's "Book Value" (as that term is used in the Repurchase Agreement). 
Subject to Section 6.2(f) below, the Retained Purchase Price shall be paid 
concurrent with the purchase, at which time Employee shall deliver to Employer 
an Assignment Separate From Certificate, evidencing the Retained Shares, duly 
endorsed in blank by Employee, and Employer will cancel the certificates in its 
possession which represent the Retained Shares.

                    (d) Following the Resignation Date, or, if there is an IPO 
by December 3, 1999, then only through the fourth anniversary of the IPO, 
Employee agrees that he will not sell, transfer, pledge or hypothecate any of 
the Retained Shares, except pursuant to the Repurchase Agreement or Sections 
6.2(c) or 6.2(e) of this Agreement.

                    (e) If there is an IPO by December 3, 1999, then, following
such IPO, but subject to applicable securities laws and regulations, Employee 
may direct Employer to sell the following percentage of the Retained Shares:

                        (i)   Ten percent (10%) concurrent with the IPO:

                        (ii)  Twenty percent (20%) on the second anniversary of
the IPO;

                        (iii) Twenty percent (20%) on the third anniversary of 
the IPO; and 

                        (iv)  Any of the remaining Retained Shares on or after 
the fourth anniversary of the IPO.

                    (f) Until such time as the "Mortgage Note" (as described 
below) has been repaid in full, the proceeds from the sale of any of the 
Employee Shares sold pursuant to Sections 6.2(b), (c) or (e) above (whether sold
to Employer or otherwise) shall be deposited by Employer in a segregated,
interest bearing bank account (the "Share Account") as additional security for 
the repayment of the Mortgage Note and Employee's other obligations under and
pursuant to the Mortgage Loan Agreements. Following the complete repayment of
the Mortgage Note and discharge of Employee's obligations under and pursuant to
the Mortgage Loan Agreements, the remaining balance in the Share Account shall
be paid to Employee.

                    (g) If requested by Employer, the certificate(s) evidencing
the Retained Shares shall be imprinted with a legend reflecting the prohibitions
described in this Section 6.2.

          7.   UNPAID LEAVE; SEVERANCE AND OTHER BENEFITS. Employee shall be on 
               ------------------------------------------
unpaid leave until December 3, 1999. As a severance payment and as further 
consideration for 

                                      -4-

<PAGE>
 
Employee's representations, covenants and obligations under and pursuant to this
Agreement, Employer agrees to pay to Employee and on Employee's behalf the 
following amounts:

          7.1 Cash Payments. A total severance payment in an amount equal to One
              -------------
Million Two Hundred Thousand Dollars ($1,200,000), less any required payroll 
deductions or withholding, payable One Hundred Thousand Dollars ($100,000), less
any required payroll deductions and withholding, within ten (10) days after the
execution and delivery of this Agreement, and Fifty Thousand Dollars ($50,000),
less any required payroll deductions and withholding bi-monthly, on Employer's
regular payroll dates, with the first Fifty Thousand Dollar ($50,000) payment
being due on January 15, 1999 and the last such payment being due on the last
day of November, 1999.

          7.2 Insurance. Employer shall (a) continue to provide and pay for 
              ---------
medical insurance for Employee and his immediate family under the medical 
insurance policy then in effect (as it may change from time to time), and (b) 
allow Employee to continue to participate in Employer's executive medical 
reimbursement program, in each case in the same manner and amounts as prior to 
the Resignation Date, in all cases until the earlier of (i) such date that 
Employee commences employment by someone other than Employer, or (ii) December 
3, 1999.

          7.3 Relocation Allowance. Upon the request of Employee, Employer will 
              --------------------
reimburse Employee for the reasonable costs which Employee incurs on or before 
December 1, 1999 in relocating from Los Angeles, California to Texas, Illinois, 
or any other location selected by Employee so long as the relocation is not for 
employment purposes. As used herein, reasonable costs include one way economy 
air fare for Employee and his immediate family and the cost of moving Employee's
household furnishings by a commercial moving company charging competitive rates.
In order to obtain the reimbursement provided for herein, Employee shall be 
required to submit receipts to Employer which itemize in reasonable detail the 
costs for which Employee seeks reimbursement. In no event shall Employer be 
required to reimburse Employee for more than Fifty Thousand Dollars ($50,000).

          7.4 Office, Secretarial and Travel Expenses. Employer shall reimburse 
              ---------------------------------------
Employee, in accordance with Employer's regular policies, for all expenses 
incurred by Employee on behalf of Employer prior to the Resignation Date. 
Employer shall also reimburse Employee for the reasonable office, secretarial 
support, use of computers in his residence, business and travel expenses (to 
pursue other employment, including, without limitation, travel expenses of 
Employee's spouse directly related to Employee's pursuit of other employment) 
which Employee incurs until the earlier of (a) such date that Employee commences
employment by someone other than Employer, or (b) December 3, 1999. The 
aggregate of all such expenses (other than those referred to in the first 
sentence of this Section 7.4) shall not exceed Ten Thousand Dollars ($10,000) 
per month in any one month, Thirty Thousand Dollars ($30,000) in any consecutive
six (6) month period or Fifty-One Thousand Seven Hundred Dollars ($51,700) in 
the aggregate. In order to obtain the reimbursement provided for herein, 
Employee shall be required to submit receipts to Employer which itemize in 
reasonable detail the costs for which Employee seeks reimbursement.

          7.5 Advisor Fees. Employer shall reimburse Employee for the legal and 
              ------------
advisory fees Employee incurs in connection with the negotiation and preparation
of this

                                      -5-

<PAGE>
 
Agreement, up to a maximum of $20,000, upon the presentation of bills by 
Employee to Employer.

               7.6  Reimbursement for Certain Club Dues. Employer shall 
                    -----------------------------------
reimburse Employee for Employee's club dues for Max McGraw Wildlife Foundation, 
California Club and Chicago Club until the earlier of December 3, 1999 or 
Employee's commencement of employment by someone other than Employer.

               7.7  Notification of Re-Employment. Employee agrees to 
                    -----------------------------
immediately notify Employer of Employee's employment by someone other than 
Employer if Employee commences such other employment prior to December 3, 1999.

          8.   Non-Solicitation. Employee agrees that, during the two (2) year 
               -----------------
period following the Resignation Date, he will not, directly or indirectly,
solicit or encourage any of Employer's employees to terminate his or her
employment with Employer; provided, however, that Employee shall have no
liability to Employer if any employee of Employer approaches a future employer
of Employee and asks to be considered as a candidate for employment or is hired
by such employer without any direct or indirect solicitation or encouragement
from Employee. Employee acknowledges that the non-solicitation obligation set
forth in this Section 8 is a material and integral part of this Agreement.
Employee further acknowledges that if he breaches his non-solicitation
obligations under this Section 8, Employer may, in addition to any other
remedies which it may have, elect to stop making severance payments to, and
providing benefits for, Employee.

          9.   BENEFIT PLANS. Employee is currently a beneficiary or participant
               -------------
of or in the benefits and plans (the "Benefits") which are described on the 
attached and incorporated Schedule 1. Employee's rights and obligations with 
                          ----------
respect to the Benefits shall be governed by the agreements and documents 
granting and describing the Benefits.

          10.  Repayment of Loans.
               ------------------

               10.1 Mortgage Loan. Employer and Employee are Co-Obligors with 
                    -------------
respect to a Promissory Note dated January 28, 1998 in the principal amount of 
One Million Dollars ($1,000,000), payable to 1st Business Bank (which, together 
with the Addendum to Promissory Note, is referred to as the "Mortgage Note"). 
Employer and Employee are also the parties to related agreements, entitled 
Funding, Indemnification and Contribution Agreement (the "Funding Agreement") 
and Stock Pledge Agreement (the "Pledge Agreement"), each dated January 28, 1998
(which, together with the Mortgage Note and the Funding Agreement, are referred 
to as the "Mortgage Loan Agreements"). Employer and Employee acknowledge and 
agree that the Mortgage Loan Agreements remain in full force and effect and are 
unaffected by this Agreement, except:

                    (a)  Promptly upon receipt of proof of payment by Employee,
Employer shall reimburse Employee for the interest due and paid (and shall gross
up such reimbursement to cover any taxes payable by Employee in connection with
such reimbursement) with respect to the Mortgage Note through the earlier of the
sale of the residence (the "Residence") located at 621 Stone Canyon Road, Los 
Angeles, CA 90077, or December 3, 1999; Employee shall pay all interest and 
principal payments due thereafter and 

                                      -6-


<PAGE>
 
shall repay or refinance (without Employer's guaranty or co-obligation) the 
Mortgage Note in full on or prior to the earlier of the sale of the Residence or
November 30, 2000.

                    (b) Employer shall release from the lien imposed by the 
Pledge Agreement's sufficient number of Employee's Shares to permit Employee to 
sell such shares as otherwise permitted by this Agreement.

              10.2 Other Loans to Employee. Employee acknowledges that he is
                   -----------------------
indebted to Employer for the aggregate sum of Ninety-Nine Thousand Nine Hundred
Eighty-Nine Dollars ($99,989) principal, plus, in the case of the promissory
note dated June 30, 1998 (the "June 30 Note"), interest as provided in such
note, which debt is evidenced by three separate Promissory Notes signed by
Employee as of June 22, 1992, in the amount of Seven Thousand Five Hundred
Dollars ($7,500); as of November 2, 1992 in the amount of Seven Thousand Dollars
($7,000); and as of June 30, 1998 in the amount of Seventy-Six Thousand Four
Hundred Eighty-Nine Dollars ($76,489), and an additional obligation in the
amount of Nine Thousand Dollars ($9,000) which was incurred in April, 1997 for
the purpose of paying the initiation fee for membership in the California Club.
Employee agrees to repay the aforesaid amounts on the earlier of an IPO or
October 31, 1999.

          11. Proxy. Concurrent with his execution and delivery of this 
              -----
Agreement to Employer, Employee will execute and deliver to Employer a Voting 
Proxy covering the Retained Shares in the form of the Voting Proxy attached 
hereto and hereby incorporated as Exhibit B
                                  ---------

          12. Release of Claims.
              -----------------

              12.1  Release by Employee. Except for the obligations set forth in
                    -------------------
this Agreement, Employee, on behalf of himself and his representatives,
successors and assigns, completely releases and forever discharges Employer and
each of its predecessors, successors, assigns, agents, directors, officers,
employees, representatives, attorneys, parent companies, divisions,
subsidiaries, affiliates (and agents, directors, officers, employees,
representatives and attorneys of such companies), and all persons acting by,
through, under or in concert with any of them (collectively, referred to as
"Employer Releasees"), from any and all demands, charges, complaints,
liabilities, obligations, promises, agreements, damages, suits, costs, losses,
debts and expenses (including attorney's fees and costs actually incurred) of
any nature, known or unknown (collectively, "Claims"), which Employee now has,
or which Employee at any time had, or which Employee at any time may have,
against each or any of the Employer Releasees, arising out of or related to any
act, omission, or other thing which existed or occurred on or before the date of
Employee's signing of this Agreement. The Claims released under this Agreement
include, but are not limited to, any rights arising out of any alleged
violations of any contract or covenant, any tort, any legal restriction on the
right of the Employer Releasees or any of them to terminate employees, and any
federal, state or other governmental statute or regulation, including, without
limitation: (1) the Age Discrimination in Employment Act (age discrimination in
employment, including discrimination against individuals forty (40) years of age
or over); (2) Title VII of the Civil Rights Act of 1964 (race, color, religion,
sex and national origin discrimination); (3) the Americans With Disabilities Act
(discrimination against individuals with disabilities); (4) the California Fair
Employment and Housing Act (discrimination, including race, religious creed,
color, national origin, ancestry, physical disability, mental disability,
medical condition, marital status, sex or age discrimination); (5) any

                                      -7-
 

<PAGE>
 
Claim for salary, bonus, expense reimbursement, accrued vacation and accrued 
sick leave; and (6) any Claim that the sale of the Employee Shares was for 
inadequate or unfair consideration. 

                    12.2 Release by Employer. Except for (a) the obligations set
                         -------------------
forth in this Agreement and (b) any Claims based upon either Employee's criminal
conduct or actions by Employee outside the course or scope of his employment, 
Employer, on behalf of its representatives, successors, assigns and affiliates, 
completely releases and forever discharges Employee, from any and all Claims 
which Employer now has, or which Employer at any time had, or which Employer at 
any time may have had against Employee, arising out of or related to any act, 
omission, or other thing which existed or occurred on or before the date of 
Employer's signing of this Agreement.

                    12.3 Release of Unknown Claims. Employee and Employer waive 
                         -------------------------
and relinquish any and all rights or benefits which he or it may now have under 
the provisions of Section 1542 of the California Civil Code, which provide as 
follows:

                    "A general release does not extend
                    to claims which the creditor does 
                    not know or suspect to exist in his 
                    favor at the time of executing the 
                    release, which if known by him must 
                    have materially affected his 
                    settlement with the debtor."

                    Notwithstanding the provisions of Section 1542, Employee and
Employer expressly acknowledge that this Agreement is intended to include in its
effect, without limitation, all Claims which he and it do not know of or suspect
to exist in his or its favor at the time of signing this Agreement, and that 
this Agreement contemplates the release of any such Claims.

                    12.4 Release Not Affected by Later Discovery. Employee and 
                         ---------------------------------------
Employer acknowledge that he or it may hereafter discover Claims or facts in 
addition to or different from those which he or it now know or believe to exist 
with respect to the subject matter of this Agreement and which, if known or 
suspected at the time of executing this Agreement, may have materially affected 
this settlement. Nevertheless, Employee and Employer waive any right, Claim or 
cause of action that might arise as a result of such different or additional 
Claims or facts. Employee and Employer acknowledge that he and it understand the
significance and consequence of such a release and specific waiver of Section 
1542. Employee and Employer further waive and relinquish all other statutes, 
rights, remedies and benefits of all other jurisdictions, state or federal, 
which are of the same or similar import or effect as Section 1542 of the 
California Civil Code.

                    12.5 No Litigation. Employee and Employer confirm that he 
                         -------------
and it have not and will not file any charge, Claim, suit or action against any 
of the Employer Releasees or Employee with any court of law or before any 
federal, state, or administrative agency based on the matters released in this 
Agreement. If any court of law, federal, state or administrative agency assumes 
jurisdiction of any such charge, Claim, suit or action on behalf of Employee or 
Employer, Employee or Employer, as applicable, will direct that agency or court 
to withdraw from or dismiss the matter with prejudice.

                                      -8-


<PAGE>
 
               12.6 No Admission of Liability. This settlement shall not be 
                    -------------------------
deemed or construed as an admission of any fact, liability or responsibility at 
any time for any purpose.

               12.7 No Prior Sale of Any Claim. Employee and Employer represent 
                    --------------------------
and warrant that he and it have not sold, assigned, transferred, conveyed, 
encumbered, or otherwise disposed of any of the Claims purportedly released by 
him or it pursuant to this Agreement, nor any recovery, settlement or portion 
thereof to which he or it might be entitled, with respect to the matters 
released hereunder, to a person or entity not a party to this Agreement.

          13.  No Reliance on Representations. Each party represents and 
               -------------------------------
warrants to the other that in executing this Agreement they do not rely and have
not relied upon any representation or statement made by the other party or by 
the other party's agents or attorneys with regard to the subject matter, basis 
or effect of this Agreement or otherwise, other than those specifically stated 
in this written Agreement.

          14.  Right of Offset. Employer shall be permitted to offset the amount
               ---------------
of any claims it may have against, or amounts owed by, Employee pursuant to this
Agreement against any amounts owed by Employer to Employee pursuant to this 
Agreement.

          15.  Miscellaneous Provisions.
               ------------------------

               15.1 Integration. This Agreement constitutes the entire 
                    -----------
agreement and understanding of the parties with respect to the transactions 
contemplated hereby, and supersedes all prior agreements, arrangements and 
understandings related to the subject matter hereof. No representation, promise,
inducement or statement of intention has been made by any of the parties hereto 
not embodied in this Agreement or in the documents referred to herein, and no 
party shall be bound by, or be liable for, any alleged representation, promise, 
inducement or statements of intention not set forth or referred to herein.

               15.2 Governing Law, Jurisdiction and Venue. This Agreement shall 
                    -------------------------------------
be governed by, and construed and enforced in accordance with, the laws of the 
State of California without regard to the conflict or choice of law provisions 
thereof.

               15.3 Binding Effect. All of the terms, covenants, 
                    --------------
representations, warranties and conditions herein shall be binding upon, and 
inure to the benefit of, and be including but not limited to, successor 
corporations.

               15.4 Waiver. This Agreement may not be amended, modified, 
                    ------
superseded or canceled, nor may any of the terms, covenants, representations, 
warranties or conditions hereof be waived, except by a written instrument 
executed by the party against whom such amendment, modification, supersedure, 
cancellation or waiver is charged. The failure of any party at any time or times
to require performance of any provision hereof shall in no manner affect the 
right at a later time to enforce the same. No waiver by any party of any 
condition, or of any breach of any term, covenant, representation, or warranty 
contained herein, in any one or more instances, shall be deemed to be, or be 
construed as, a further or continuing

                                      -9-

<PAGE>
 
waiver of any such condition or breach or waiver of any other condition or of 
any breach of any other term, covenant, representation or warranty.

          15.5      Construction.  The captions and headings contained herein 
                    ------------ 
are for convenient reference only, and shall not in any way affect the meaning
or interpretation of this Agreement. All references in this Agreement to a
"person" mean and refer to natural persons, partnerships, corporations, trusts,
associations, governmental agencies and any other entity of any kind whatsoever.
Notwithstanding any rule or maxim of construction to the contrary, any ambiguity
or uncertainty in this Agreement shall not be constructed against either party
based upon authorship of any of the provisions hereof.

          15.6      Counterparts and Facsimile Signatures.  This Agreement may 
                    -------------------------------------  
be executed by facsimile signature and executed in two or more counterparts, 
each of which shall be deemed an original, and all of which together shall 
constitute one and the same instrument.

          15.7      Attorneys' Fees. In the event that any party shall bring an
                    ---------------
action in connection with the performance, breach or interpretation of this
Agreement, or any action related to the transaction contemplated hereby, the
prevailing party in such action, as may be determined by the court or other
tribunal having jurisdiction, shall be entitled to recover from the losing party
in such action, also as determined by the court or other tribunal having
jurisdiction, all actual costs and expenses of such litigation, including
attorneys' fees, court costs, costs of investigation, accounting, and other
costs reasonably related to such litigation, in such amount as may be determined
in the discretion of the court or other tribunal having jurisdiction of such
action.

          15.8      Severability.  In the event that any provision hereof is 
                    ------------ 
determined to be illegal or unenforceable, such determination shall not affect 
the validity or enforceability of the remaining provisions hereof, all of which 
shall remain in full force and effect.

          15.9      Further Documents.  The parties each hereby covenant and 
                    -----------------
agree that, from time to time, after the date hereof, at the reasonable request 
of any party, and without further consideration, they will execute and deliver 
such other documents and take such other action as may be reasonably required to
carry out in all respects the transactions contemplated and intended by this 
Agreement.

          15.10     Notices.  All notices, requests, demands and other 
                    -------
communications required or permitted to be given under this Agreement shall be 
in writing and shall be conclusively deemed to have been duly given (1) when 
hand delivered to the other party, or (2) when received, if sent by telex or 
facsimile at the address and number set forth below (provided, however, that 
notices given by facsimile shall not be effective unless either (a) a duplicate 
copy of such facsimile notice is promptly given by depositing same in a United
States post office with first-class postage prepaid and addressed to the 
parties as set forth below, or (b) the receiving party delivers a written 
confirmation of receipt for such notice either by facsimile or any other method
permitted under this subparagraph; additionally, any notice given by telex or
facsimile shall be deemed received on the next business day if such notice is
received after 5:00 p.m. (recipient's time) or on a nonbusiness day; or (3)
three (3) business days after the same have been deposited in a United States
post office with first-class or certified mail, return receipt, postage prepaid
and addressed to the parties as set forth below; or (4) the next business

                                     -10-


<PAGE>
 
day after same have been deposited with a national overnight delivery service 
reasonably approved by the parties (Federal Express and DHL WorldWide Express 
being deemed approved by the parties), postage prepaid, addressed to the parties
as set forth below with next-business-day delivery guaranteed, provided that the
sending party receives a confirmation of delivery from the delivery service 
provider.

                    To:       Employer
                              Korn/Ferry International
                              1800 Century Park East, Suite 900
                              Los Angeles, California 90067
                              Attn: General Counsel

                    To:       Employee
                              Michael D. Boxberger         
                              621 Stone Canyon Road        
                              Los Angeles, California 90077 

                    15.11  Gender and Tense. As used in this Agreement, the 
                           ----------------
masculine, feminine and neuter gender, and the singular or plural number, shall
each be deemed to include the other or others whenever the context so indicates.

                    15.12  Time. Time is of the essence in this Agreement.
                           ----   

                    15.13  Parties in Interest. Nothing in this Agreement, 
                           -------------------   
whether express or implied, is intended to confer any rights or remedies under 
or by reason of this Agreement on any persons other than the parties to it and 
their respective successors and assigns, nor is anything in this Agreement 
intended to relieve or discharge the obligation or liability of any third 
persons to any party to this Agreement, nor shall any provision give any third 
persons a right of subrogation or action over or against any party to this 
Agreement.

                    15.14  Assignment. Neither party shall, voluntarily or by 
                           ----------   
operation of law, assign, hypothecate, give, transfer, mortgage, sublet, license
or otherwise transfer or encumber all or any part of its rights, duties or other
interest in this Agreement, or the proceeds thereof (collectively,
"Assignment"), without the other party's prior written consent, which

                                     -11-

<PAGE>
 
consent shall not be unreasonably withheld or delayed. Any attempt to make an 
Assignment in violation of this provision shall be a material default under this
Agreement, and any Assignment in violation of this provision shall be null and 
void.

                                        EMPLOYEE:

DATE:________________, 1998             /s/ Michael D. Boxberger
                                        ----------------------------------------
                                        Michael D. Boxberger

                                        EMPLOYER:

DATE:________________, 1998             KORN/FERRY INTERNATIONAL

                                                            
                                        By: /s/ Richard M. Ferry
                                            ------------------------------------
                                        Its:  Chairman
                                            ------------------------------------

                                     -12-





<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 a part of this
registration statement.
 
                                          /s/ Arthur Andersen LLP
 
Los Angeles, California
   
December 22, 1998     





<PAGE>

                                                                    EXHIBIT 24.1
 

                               POWER OF ATTORNEY

     KNOW ALL MEN BY THESE PRESENTS, that the undersigned, Windle B. Priem, as
Chief Executive Officer, President and a member of the Board of Directors of
Korn/Ferry International ("the Registrant"), hereby constitutes and appoints
Peter L. Dunn and Elizabeth S.C.S. Murray, and each of them, as lawful 
attorneys-in-fact and agent for the undersigned (with full power of substitution
and resubstitution, for and in the name, place and stead of the undersigned
officer and director), to sign and file with the Securities and Exchange
Commission under the Securities Act of 1933, as amended, any and all amendments,
supplements and exhibits to the Registrant's Registration Statement
(Registration No. 333-61697) (the "Registration Statement"), including post-
effective amendments and any and all applications or other documents in
connection with inclusion of the Registrant's Common Stock on the New York Stock
Exchange, and any and all documents required to be filed with any state
securities regulating board or commission pertaining to the Registration
Statement or securities covered thereby, hereby granting unto said attorneys-in-
fact, and each of them, full power and authority to do and perform
 each and
every act and thing necessary or desirable to be done in order to effectuate the
same as fully and to all intents and purposes as each of the undersigned might
or could do if personally present, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or any of them, or any of their substitutes, may
do or cause to be done by virtue hereof.

Dated: December 22, 1998


                                     /s/ Windle B. Priem
                                    ---------------------------------
                                    Windle B. Priem
                                    Chief Executive Officer, President and 
                                    Director




<TABLE> <S> <C>


<PAGE>
 
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM KORN/FERRY
INTERNATIONAL AND SUBSIDIARIES AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
       
<S>                             <C>                     <C>
<PERIOD-TYPE>                   YEAR                   OTHER
<FISCAL-YEAR-END>                          APR-30-1998             APR-30-1999
<PERIOD-START>                             MAY-01-1997             MAY-01-1998
<PERIOD-END>                               APR-30-1998             OCT-31-1998
<CASH>                                          32,358                  23,277
<SECURITIES>                                         0                       0
<RECEIVABLES>                                   63,144                  75,174 
<ALLOWANCES>                                   (5,390)                 (7,307)
<INVENTORY>                                          0                       0
<CURRENT-ASSETS>                                99,878                 101,216
<PP&E>                                          38,680                  43,858
<DEPRECIATION>                                (17,583)                 (21,853)
<TOTAL-ASSETS>                                 176,371                 187,439
<CURRENT-LIABILITIES>                           73,305                  76,659
<BONDS>                                              0                       0
<PREFERRED-MANDATORY>                            1,416                   1,452
<PREFERRED>                                          0                       0
<COMMON>                                         2,593                   2,656
<OTHER-SE>                                      54,745                  61,733
<TOTAL-LIABILITY-AND-EQUITY>                   176,371                 187,439
<SALES>                                              0                       0
<TOTAL-REVENUES>                               315,025                 183,762
<CGS>                                                0                       0
<TOTAL-COSTS>                                  282,365                 168,341
<OTHER-EXPENSES>                                     0                       0
<LOSS-PROVISION>                                     0                       0
<INTEREST-EXPENSE>                               4,234                   2,582
<INCOME-PRETAX>                                 13,956                   4,766
<INCOME-TAX>                                     6,687                   2,069
<INCOME-CONTINUING>                              5,244                   1,373
<DISCONTINUED>                                       0                       0
<EXTRAORDINARY>                                      0                       0
<CHANGES>                                            0                       0
<NET-INCOME>                                     5,244                   1,373
<EPS-PRIMARY>                                      .24                     .05
<EPS-DILUTED>                                      .23                     .05
        

</TABLE>