As Nick said above, the button stays in seat one.
Ann is on the button.
Bob is the small blind.
Carl is the big blind.
Don is under the gun.
All four players go all-in. Bob and Carl get knocked out. Ann and Don are now heads-up. Ann was big blind most recently. Therefore, Don now becomes big blind. Ann becomes small blind and on the button. Don is dealt first and Ann acts first pre-flop. Ann acts last on all other betting rounds.
IMO, TDA Rule #34 is inadequate as it states that the button may need to be adjusted to ensure no player has the big blind twice in a row. As you can see in the above example, the button may need to be adjusted to ensure that the most recent big blind gets the button and the small blind even though they would not have been big blind twice on row otherwise.
The wording is more accurate in:
ROBERTS RULES OF POKER VERSION 11
RULES FOR USING BLINDS
3. In heads-up play with two blinds, the small blind is on the button. When play becomes heads-up, the player who had the big blind most recently is given the button, and his opponent is given the big blind.