Exhibit 10.59

 

EXECUTION VERSION

 

A MARK OF *** IN THE TEXT OF THIS EXHIBIT INDICATES THAT CONFIDENTIAL MATERIAL
HAS BEEN OMITTED.  THIS EXHIBIT, INCLUDING THE OMITTED PORTIONS, HAS BEEN FILED
SEPARATELY WITH THE SECRETARY OF THE SECURITIES AND EXCHANGE COMMISSION PURSUANT
TO AN APPLICATION REQUESTING CONFIDENTIAL TREATMENT UNDER RULE 24B-2 OF THE
SECURITIES EXCHANGE ACT OF 1934.

 

ASSET PURCHASE AGREEMENT

 

This Asset Purchase Agreement (the “Agreement”) is entered into as of August 1,
2005 (the “Agreement Date”) by and among Bates Private Capital Incorporated, an
Oregon corporation (“Seller”), John E. Bates (“Bates”), Rob J. Lee (“Lee”),
Nancy S. Ranchel (“Ranchel”), Michael D. Weiner (“Weiner”) and Jennifer L. Stout
(“Stout”), LECG, LLC, a California limited liability company (“Purchaser”), and
LECG Corporation, a Delaware corporation (“Parent”).  Bates, Lee, Ranchel,
Weiner and Stout are individually referred to herein each as a “Principal” and
collectively as the “Principals.”  The Seller and the Principals are
collectively referred to herein as the “Seller Entities.”

 

RECITALS

 

A.                                    Seller provides expert services and data
analysis for retail securities dispute resolution and other related services
(the “Business”).

 

B.                                    Seller desires to sell to Purchaser, on
the terms and conditions set forth herein, substantially all of the assets of
Seller used in the Business.

 

C.                                    Purchaser desires to purchase
substantially all of assets of Seller used in the Business and is prepared to
assume certain specified liabilities and obligations of Seller on the terms and
conditions set forth herein.

 

D.                                    The Principals own all of the equity
interests in Seller and desire that the transactions described in this Agreement
be consummated.

 

E.                                      In connection with the purchase and sale
of substantially all of the operating assets and selected non-working capital
assets of Seller, Purchaser will also retain the services of each Principal
(each, a “Bates Director”) as an employee of Purchaser pursuant to the terms of
an individual Expert Agreement to be entered into by and between Purchaser and
each Principal as of the Closing Date in substantially the form of Exhibits A-1
through A-5 attached hereto (each, individually, an “Expert Agreement”).

 

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TABLE OF CONTENTS

 

1.

CERTAIN DEFINITIONS

 

 

 

 

2.

SALE AND PURCHASE OF ASSETS

 

 

 

 

 

2.1

Purchased Assets

 

 

 

 

 

 

2.2

Excluded Assets

 

 

 

 

 

 

2.3

Assumed Liabilities

 

 

 

 

 

 

2.4

Excluded Liabilities

 

 

 

 

 

3.

CONSIDERATION

 

 

 

 

 

3.1

Purchase Price and Payment

 

 

 

 

 

 

3.2

Allocation of Purchase Price

 

 

 

 

 

 

3.3

Earn Out Payments

 

 

 

 

 

 

3.4

Operational Impact on Earn Out Payments

 

 

 

 

 

 

3.5

Accounts Receivable

 

 

 

 

 

4.

COVENANT NOT TO COMPETE

 

 

 

 

 

4.1

Covenant Not to Compete

 

 

 

 

 

 

4.2

Non-Solicitation

 

 

 

 

 

 

4.3

Separate Covenants

 

 

 

 

 

5.

TRANSFER OF EMPLOYEES AND EMPLOYEE BENEFITS

 

 

 

 

 

5.1

Workers’ Compensation

 

 

 

 

 

 

5.2

Transfer of Employees

 

 

 

 

 

 

5.3

Employee Benefit Plans

 

 

 

 

 

6.

THE CLOSING

 

 

 

 

 

6.1

The Closing

 

 

 

 

 

 

6.2

Seller Deliveries at Closing

 

 

 

 

 

 

6.3

Purchaser Deliveries at Closing

 

 

 

 

 

7.

REPRESENTATION AND WARRANTIES OF SELLER ENTITIES

 

 

 

 

 

7.1

Organization and Valid Existence

 

 

 

 

 

 

7.2

Corporate Authority

 

 

 

 

 

 

7.3

No Violations

 

 

 

 

 

 

7.4

Financial Statements

 

 

 

 

 

 

7.5

Absence of Certain Changes

 

 

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7.6

Title to and Condition of Purchased Assets

 

 

 

 

 

 

7.7

Real Estate

 

 

 

 

 

 

7.8

Contracts

 

 

 

 

 

 

7.9

Litigation

 

 

 

 

 

 

7.10

Intellectual Property

 

 

 

7.11

Compliance with Laws

 

 

 

 

 

 

7.12

Employee Benefit Plans

 

 

 

 

 

 

7.13

Taxes

 

 

 

 

 

 

7.14

Insurance

 

 

 

 

 

 

7.15

Employees; Employment Matters

 

 

 

 

 

 

7.16

Brokers

 

 

 

 

 

 

7.17

Business Relations

 

 

 

 

 

 

7.18

Warranty; Nonbillable Work

 

 

 

 

 

 

7.19

Consents

 

 

 

 

 

 

7.20

Schedules

 

 

 

 

 

 

7.21

1933 Act Matters

 

 

 

 

 

 

7.22

Information, Experience, and Ability to Bear Risk

 

 

 

 

 

 

7.23

Accuracy of Disclosure

 

 

 

 

 

 

7.24

No Other Warranties or Representations

 

 

 

 

 

8.

REPRESENTATIONS AND WARRANTIES OF THE PRINCIPALS

 

 

 

 

 

8.1

Ownership of Seller Equity

 

 

 

 

 

 

8.2

Authority of Principals

 

 

 

 

 

 

8.3

Consents

 

 

 

 

 

 

8.4

No Other Warranties or Representations

 

 

 

 

 

9.

REPRESENTATIONS OF PURCHASER AND PARENT

 

 

 

 

 

9.1

Organization and Authority

 

 

 

 

 

 

9.2

Authorization of Agreement

 

 

 

 

 

 

9.3

No Violations

 

 

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A mark of *** on this page indicates that confidential material has been
omitted.

This Exhibit, including the omitted portions, has been filed separately with the
Secretary of the Securities and Exchange Commission pursuant to an application
requesting confidential treatment under Rule 24b-2 of the Securities Exchange
Act of 1934.

 

 

9.4

Capital Stock

 

 

 

 

 

 

9.5

Litigation; Compliance with Law

 

 

 

 

 

 

9.6

SEC Filings

 

 

 

 

 

 

9.7

No Finder

 

 

 

 

 

 

9.8

Consents

 

 

 

 

 

 

9.9

***

 

 

 

 

 

10.

PRE-CLOSING COVENANTS

 

 

 

 

 

10.1

Affirmative Covenants

 

 

 

 

 

 

10.2

Restrictions on Conduct of the Business Prior to Closing

 

 

 

 

 

 

10.3

Certain Notifications by Seller Entities

 

 

 

 

 

 

10.4

Risk of Loss

 

 

 

 

 

 

10.5

Updating the Seller Disclosure Schedule

 

 

 

 

 

 

10.6

Access to Information

 

 

 

 

 

11.

ADDITIONAL COVENANTS

 

 

 

 

 

11.1

Confidentiality

 

 

 

 

 

 

11.2

Public Announcements

 

 

 

 

 

 

11.3

Taxes

 

 

 

 

 

 

11.4

Further Assurances

 

 

 

 

 

 

11.5

Retained Information

 

 

 

 

 

 

11.6

Escrow Terms

 

 

 

 

 

12.

CONDITIONS PRECEDENT TO OBLIGATIONS OF PURCHASER AND PARENT

 

 

 

 

 

12.1

Continued Truth of Representations and Warranties; No Breach

 

 

 

 

 

 

12.2

Absence of Litigation

 

 

 

 

 

 

12.3

Landlord Consent

 

 

 

 

 

 

12.4

No Material Adverse Change

 

 

 

 

 

 

12.5

Dissolution of Bates Private Capital Advisors

 

 

 

 

 

 

12.6

Errors and Omissions Insurance

 

 

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13.

CONDITIONS TO OBLIGATIONS OF SELLER ENTITIES

 

 

 

 

 

13.1

Continued Truth of Representations and Warranties; No Breach

 

 

 

 

 

 

13.2

Absence of Litigation

 

 

 

 

 

 

13.3

Landlord Consent

 

 

 

 

 

 

13.4

No Material Adverse Change

 

 

 

 

 

14.

SURVIVAL OF REPRESENTATIONS AND WARRANTIES

 

 

 

 

15.

INDEMNIFICATION

 

 

 

 

 

15.1

Indemnification By Seller Entities

 

 

 

 

 

 

15.2

Indemnification by Purchaser and Parent

 

 

 

 

 

 

15.3

Limitations

 

 

 

 

 

 

15.4

Insurance and Tax Effect

 

 

 

 

 

16.

RIGHT OF OFFSET

 

 

 

 

17.

TERMINATION OF AGREEMENT

 

 

 

 

18.

EFFECT OF TERMINATION

 

 

 

 

19.

EXPENSES

 

 

 

 

20.

NOTICES

 

 

 

 

21.

SUCCESSORS

 

 

 

 

22.

ARTICLE AND SECTION HEADINGS

 

 

 

 

23.

GOVERNING LAW; CONSENT TO SERVICE

 

 

 

 

24.

DISPUTE RESOLUTION

 

 

 

 

25.

ENTIRE AGREEMENT

 

 

 

 

26.

SURVIVAL

 

 

 

 

27.

PARENT GUARANTY

 

 

 

 

28.

COUNTERPARTS

 

 

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LIST OF EXHIBITS(1)

 

Exhibits A-1 through A-5

 

Forms of Expert Agreements

Exhibit B

 

Purchaser’s Code of Conduct

Exhibit C

 

Form of Assignment and Assumption Agreement

Exhibit D

 

Form of Bill of Sale

Exhibit E-1

 

Form of Opinion of Counsel to Seller

Exhibit E-2

 

Form of Opinion of Counsel to Principals

Exhibit F-1

 

Form of Assignment of Subleases

Exhibit F-2

 

Form of Assignment of Lease

Exhibit G

 

Financial Statements

Exhibit H

 

Form of Seller Closing Certificate

Exhibit I

 

Form of Purchaser Closing Certificate

Exhibit J

 

Form of Parent Closing Certificate

Exhibit K

 

Form of Escrow Agreement

 

LIST OF SCHEDULES(2)

 

Allocation Schedule

 

 

Schedule 2.1.1

 

Fixed Assets

Schedule 2.1.5

 

Deposits and Prepayments

Schedule 2.1.6

 

Cash

Schedule 3.1.2

 

Parent Stock; Principal Percentage Interest

Schedule 3.3.6

 

Corporate Support Services

Schedule 3.5

 

Accounts Receivable

Schedule 5.1

 

Workers’ Compensation

Schedule 7.5

 

Absence of Certain Changes

Schedule 7.6

 

Permitted Liens

Schedule 7.8

 

Contracts

Schedule 7.9

 

Litigation

Schedule 7.10

 

Intellectual Property

Schedule 7.10.2

 

Third Person Licenses

Schedule 7.12

 

Employee Benefit Plan

Schedule 7.14

 

Insurance Policies

Schedule 7.15

 

Employees

Schedule 7.17

 

Business Relations

 

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(1) Pursuant to Item 601(b)(2) of Subpart § 229.601 of Regulation S-K, the
Exhibits to this Asset Purchase Agreement briefly described in this Table of
Contents have been omitted from Exhibit 10.59 furnished in connection with LECG
Corporation’s electronic filing of Form 10-Q on November 9, 2005.  LECG
Corporation agrees to furnish a copy of any omitted Exhibit to the Securities
and Exchange Commission upon request.

 

(2) Pursuant to Item 601(b)(2) of Subpart § 229.601 of Regulation S-K, the
Schedules to this Asset Purchase Agreement briefly described in this Table of
Contents have been omitted from Exhibit 10.59 furnished in connection with LECG
Corporation’s electronic filing of Form 10-Q on November 9, 2005.  LECG
Corporation agrees to furnish a copy of any omitted Schedule to the Securities
and Exchange Commission upon request.

 

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AGREEMENT

 

In consideration of the mutual covenants, agreements, representations and
warranties contained in this Agreement, and for other good and valuable
consideration, the receipt and adequacy of which are hereby acknowledged, the
parties agree as follows:

 

1.                                      Certain Definitions.

 

As used herein, the following terms will have the meanings indicated.

 

“1933 Act”  has the meaning given in Section 7.21.

 

“1934 Act” has the meaning given in Section 9.6.

 

“300 Sublease” has the meaning given in Section 2.1.11.

 

“420 Office Lease” has the meaning given in Section 2.1.12.

 

“Accounts Receivable” has the meaning given in Section 2.2.6

 

“Agreement” has the meaning given in the Preamble.

 

“Agreement Date” has the meaning given in the Preamble.

 

“Allocation Schedule” has the meaning given in Section 3.2.

 

“Articles of Incorporation” means the Articles of Incorporation of Seller, as
amended and/or restated from time to time.

 

“Assignment and Assumption Agreement” has the meaning given in Section 2.3.

 

“Assumed Liabilities” has the meaning given in Section 2.3.

 

“Basket” has the meaning given in Section 15.3.1.

 

“Bates” has the meaning given in the Preamble to this Agreement.

 

“Bates Director” has the meaning given in Recital E to this Agreement.

 

“Bates Persons” means the Operation’s professional workforce as now constituted
or as constituted in the future, including the Bates Directors, and all other
directors, principals, senior and junior professional staff, and administrative
staff.

 

“Business” has the meaning given in Recital A to this Agreement.

 

“Cause” means any of the following grounds for termination by Purchaser of the
employment of a Bates Director: (i) commission of a felony; (ii) the commission
of any willful act or omission involving dishonesty or fraud with respect to
Purchaser or Parent or involving harassment of or discrimination against any
employee of Purchaser or

 

2

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A mark of *** on this page indicates that confidential material has been
omitted.

This Exhibit, including the omitted portions, has been filed separately with the
Secretary of the Securities and Exchange Commission pursuant to an application
requesting confidential treatment under Rule 24b-2 of the Securities Exchange
Act of 1934.

 

Parent; (iii) willful misappropriation of funds or assets of Purchaser or Parent
for personal use; (iv) failure to perform material duties (other than as a
result of incapacity due to physical or mental illness lasting not more than 120
days in any 12-month period or an excused absence) under such Bates Director’s
Expert Agreement that is not cured within 30 days after written notice from
Purchaser describing such failure to perform and demanding immediate
performance; provided, however, that if a cure is not practical within 30 days,
and such Bates Director commences to effect a cure within the foregoing 30-day
period, such Bates Director will be permitted reasonable additional time to cure
so long as he or she diligently continues to seek to effect a cure; (v) gross
negligence or willful misconduct in the performance of material duties under
such Bates Director’s Expert Agreement that is capable of cure and is not cured
within 10 days after written notice from Purchaser describing such negligence or
misconduct; provided, however, that if a cure is not practical within 10 days,
and such Bates Director commences to effect a cure within the foregoing 10-day
period, such Bates Director will be permitted reasonable additional time to cure
so long as he or she diligently continues to seek to effect a cure; (vi) a
breach of this Agreement that involves fraud, or a material breach of Section 4
of this Agreement that is not cured within 30 days after written notice from
Purchaser describing such breach; or (vii) a material willful breach of
Purchaser’s Corporate Code of Conduct, as may be amended by Purchaser from time
to time.  A copy of Purchaser’s Corporate Code of Conduct is attached hereto as
Exhibit B.

 

“Closing” has the meaning given in Section 6.1.

 

“Closing Date” has the meaning given in Section 6.1.

 

“Closing Payment” has the meaning given in Section 3.1.

 

“Code” means the Internal Revenue Code of 1986, as amended.

 

“Contracts” has the meaning given in Section 7.8.

 

“Corporate Support Services” for any Measurement Period has the meaning given in
Section 3.3.6.

 

“Cost of Services” for any Measurement Period means ***.

 

“Delivery Instructions” has the meaning given in Section 3.3.4.

 

“Disagreement Notice” has the meaning given in Section 3.3.5.

 

“Dispute” has the meaning given in Section 24.

 

“Distributee” has the meaning given in Section 7.21.

 

“Documents” has the meaning given in Section 2.1.10.

 

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“Earn Out Accounting” has the meaning given in Section 3.3.3.

 

“Earn Out Maximum” has the meaning given in Section 3.3.1.

 

“Earn Out Payment” has the meaning given in Section 3.3.1.

 

“Earn Out Payment Computation” has the meaning given in Section 3.3.5.

 

“Earn Out Period” has the meaning given in Section 3.3.1.

 

“Effective Time” has the meaning given in Section 6.1.

 

“Enforceability Limitations” means (i) bankruptcy, insolvency, reorganization,
moratorium or similar laws now or hereafter in effect affecting or limiting the
enforcement of creditors’ rights generally and (ii) the discretion of the
appropriate court with respect to specific performance, injunctive relief or
other equitable remedies.

 

“Employee Benefit Plan” means all plans, contracts, schemes, programs, funds,
commitments or arrangements providing money, services, property, or other
benefits, whether written or oral, formal or informal, qualified or
non-qualified, funded or unfunded and including any that have been frozen or
terminated, which pertain to any employee, former employee, partner, consultant
or independent contractor of Seller and identified on Schedule 7.12.

 

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended.

 

“Errors and Omissions Tail Policy” has the meaning given in Section 12.6.

 

“Escrow” has the meaning given in Section 6.3.2.

 

“Escrowed Amount” has the meaning given in Section 6.3.2.

 

“Excess Loss” has the meaning given in Section 15.3.3.

 

“Excluded Assets” has the meaning given in Section 2.2.

 

“Excluded Liabilities” has the meaning given in Section 2.4.

 

“Expert Agreement” has the meaning given in Recital E to this Agreement.

 

“Financial Statements” has the meaning given in Section 7.4.

 

“Fixed Assets” has the meaning given in Section 2.1.1.

 

“GAAP” means generally accepted accounting principles as applied in the United
States.

 

4

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A mark of *** on this page indicates that confidential material has been
omitted.

This Exhibit, including the omitted portions, has been filed separately with the
Secretary of the Securities and Exchange Commission pursuant to an application
requesting confidential treatment under Rule 24b-2 of the Securities Exchange
Act of 1934.

 

“Good Reason” means the following grounds for the termination by a Principal of
his or her employment with Purchaser: (a) a willful failure by Purchaser or
Parent to pay a monetary obligation or monetary obligations exceeding (i) *** in
the aggregate to such Principal under his or her Expert Agreement or (ii) *** to
Seller under this Agreement, which non-payment is not cured within 30 days after
written notice from such Principal or Seller, as applicable, describing such
failure to pay; provided, however, that a failure by Purchaser or Parent to pay
a monetary obligation (i) under such Principal’s Expert Agreement because of a
good faith disagreement with such Principal over the amount owed or (ii) under
this Agreement that is the subject of a pending disagreement resolution
procedure under Section 24 will not constitute Good Reason; and (b) during the
Earn Out Period, Purchaser sells all or substantially all of the assets
comprising the Operation (whether separately or as part of a sale of all or
substantially all of the assets or equity of Purchaser or Parent) to a third
Person who thereafter elects to discontinue the Operation or substantially
modifies the business and objectives of the Operation and such modification has
a Material adverse effect on the ability of the Principals to achieve the
Earn-Out Payments.

 

“Governmental Body” means any foreign, federal, state, local or other
governmental authority or regulatory body.

 

“Hired Employees” has the meaning given in Section 5.2.

 

“Independent Firm” has the meaning given in Section 3.3.5.

 

“Intellectual Property Rights” means (a) all trademarks, service marks, trade
dress, logos, trade names, domain names and corporate names, together with all
translations, adaptations, derivations and combinations thereof, and all
applications, registrations and renewals in connection therewith, (b) all
copyrightable works, all copyrights, and all applications, registrations and
renewals in connection therewith, (c) all trade secrets and confidential
business information (including, without limitation, all research, techniques,
models, databases, specifications, customer and supplier lists, pricing and cost
information, means and methods of doing business, and business and marketing
plans and proposals), (d) all proprietary rights, databases and computer models,
including the Bates Standard Analysis, (e) all copies and tangible embodiments
of the foregoing (in whatever form or medium), and (f) any remedies against
infringements thereof and rights to protection of interest therein under the
laws of all jurisdictions (including foreign jurisdictions).

 

“Interest Rate” means the prime rate as announced by U.S. Bank in Minneapolis,
Minnesota, from time to time, plus one percent.

 

“Interim Financial Statement” has the meaning given in Section 7.4.

 

“Interim Financial Statement Date” has the meaning given in Section 7.4.

 

5

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A mark of *** on this page indicates that confidential material has been
omitted.

This Exhibit, including the omitted portions, has been filed separately with the
Secretary of the Securities and Exchange Commission pursuant to an application
requesting confidential treatment under Rule 24b-2 of the Securities Exchange
Act of 1934.

 

“IP Assets” has the meaning given in Section 2.1.3.

 

“Knowledge” of the Seller Entities means (i) facts or matters actually known by
each Principal and each officer and director of the Seller, and (ii) facts or
matters that any of the foregoing persons should know or could be reasonably
expected to discover following a reasonable inquiry with respect to such matter.

 

“Lease Assignment” has the meaning given in Section 6.2.7.

 

 “Lee” has the meaning given in the Preamble of this Agreement.

 

“Liens” has the meaning given in Section 7.6.

 

“Losses” has the meaning given in Section 15.1.

 

“Material” and “Materially” or any variation thereof, means, with respect to an
obligation, contract, commitment or Lien, any obligation, contract, commitment
or Lien that requires an expenditure of more than ***.

 

“Material Adverse Change” or “Material Adverse Effect” means a Material adverse
change in, or effect on, the Business, assets (including intangible assets),
financial condition or results of operations of Seller; provided, that none of
the following (individually or in combination) will be deemed to constitute, or
will be taken into account in determining whether there has been or would be, a
Material Adverse Change or Material Adverse Effect:  any event, violation,
inaccuracy, circumstance or other matter resulting primarily from or relating
primarily to (directly or indirectly) general economic changes in conditions
affecting the industry in which the Business participates or in the United
States economy as a whole.

 

“Measurement Period” has the meaning given in Section 3.3.2.

 

“Mediation Notice” has the meaning given in Section 24.

 

“Mediator” has the meaning given in Section 24.

 

“Net Loss” has the meaning given in Section 15.4.

 

“Operating Expenses” for any Measurement Period means ***.

 

“Operating Profit” for any Measurement Period means ***.

 

“Operation” means the Business operations, as acquired by Purchaser from Seller,
and conducted by Bates Persons after the Closing, which will be maintained as a
separate accounting division of Purchaser after the Closing.

 

6

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A mark of *** on this page indicates that confidential material has been
omitted.

This Exhibit, including the omitted portions, has been filed separately with the
Secretary of the Securities and Exchange Commission pursuant to an application
requesting confidential treatment under Rule 24b-2 of the Securities Exchange
Act of 1934.

 

“Parent” has the meaning given in the Preamble hereof.

 

“Parent SEC Report” has the meaning given in Section 9.6.

 

“Permitted Liens” means those Liens that Purchaser and Seller have mutually
agreed will remain in place against the Purchased Assets as of the Closing Date,
and which Liens are listed on Schedule 7.6 attached hereto.

 

“Person” means any individual, corporation, partnership, joint venture, limited
liability company, association, joint-stock company, trust, unincorporated
organization or Governmental Body.

 

“Principal” and “Principals” have the meanings given in the Preamble hereof.

 

“Principal Percentage Interest” means the percentage of each Principal’s
ownership interest in Seller as set forth on Schedule 3.1.2 attached hereto and
incorporated herein by this reference.

 

“Principal Restrictive Period” means ***.

 

“Proposing Party” has the meaning given in Section 24.

 

“Protected Party” has the meaning given in Section 11.1.

 

“Purchase Price” has the meaning given in Section 3.1.

 

“Purchased Assets” has the meaning given in Section 2.1.

 

“Purchaser” has the meaning given in the Preamble hereof.

 

“Purchaser Funds” has the meaning given in Section 11.4.2.

 

“Purchaser Party” has the meaning given in Section 15.1.

 

“Ranchel” has the meaning given in the Preamble of this Agreement.

 

“Recipient” has the meaning given in Section 11.1.

 

“Representative” means, collectively, the two Persons authorized by the Seller
Entities to jointly give instructions, take actions, perform duties, respond to
inquiries from Purchaser or Parent, and otherwise represent the interests of the
Seller Entities for purposes of this Agreement.  The Representative will be John
E. Bates and Rob J. Lee, until changed by advance written notice to Purchaser. 
The Seller Entities will have the right to give written notice to Purchaser at
any time, and from time to time, that the Representative means only one Person. 
All jointly made acts of the Representative will be binding on the Seller
Entities for all purposes, and Purchaser and Parent may rely on

 

7

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A mark of *** on this page indicates that confidential material has been
omitted.

This Exhibit, including the omitted portions, has been filed separately with the
Secretary of the Securities and Exchange Commission pursuant to an application
requesting confidential treatment under Rule 24b-2 of the Securities Exchange
Act of 1934.

 

the authority of the Representative, as so jointly expressed, for all purposes. 
So long as the Representative consists of two Persons, any instruction, notice
or communication purportedly received from the Representative that does not bear
the two signatures of the Persons authorized to jointly serve as Representative
will be disregarded by Purchaser and will have no force or effect.

 

“Restricted Activities” means the Business conducted by Seller on or prior to
the Closing Date; provided, however, that providing services as an employee of a
college, university or other educational institution or as an employee of a
governmental agency will not constitute Restricted Activities.

 

“Retained Business Records” has the meaning given in Section 11.5.

 

“Revenue” for any Measurement Period means ***.

 

“Seller” has the meaning given in the Preamble hereof.  If Seller is dissolved
or otherwise ceases to exist as an entity at any time after the date hereof,
“Seller” will be deemed to mean any entity created to administer the dissolution
and liquidation of Seller, and if no such entity is created, then the
Principals, jointly and severally, as successors in interest to the Seller.

 

“Seller Entities” has the meaning given in the Preamble hereof.

 

“Seller Funds” has the meaning given in Section 11.4.3.

 

“Seller Party” has the meaning given in Section 15.2.

 

“Seller Restrictive Period” means ***.

 

“Stout” has the meaning given in the Preamble of this Agreement.

 

“Sublease Assignment” has the meaning given in Section 6.2.6.

 

“Tax” (and “Taxes”) means (i) any federal, state, local or foreign net income,
alternative or add-on minimum, gross income, gross receipts, property, sales,
use, transfer, gains, license, excise, employment, payroll, withholding or
minimum tax; or (ii) any other tax custom, duty, governmental fee or other like
assessment or charge of any kind whatsoever, together with any interest or any
penalty thereon, addition to tax or additional amount imposed by any taxing
authority.

 

“Territory” means the United States and other countries throughout the world, if
any, where Seller conducts the Business as of the Closing Date.

 

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“Third Person Licenses” means Seller’s licenses to third Person software and
other technology used by Seller in connection with the Business as currently
conducted, which licenses are capable of assignment and are listed on
Schedule 7.10.2.

 

“Transaction Documents” has the meaning given in Section 3.1.

 

“Transferred Business Records” has the meaning given in Section 11.5.

 

“WARN Act” has the meaning given in Section 5.2.

 

“Weiner” has the meaning given in the Preamble of this Agreement.

 

“Year-End Financial Statements” has the meaning given in Section 7.4.

 

2.                                      Sale And Purchase Of Assets.

 

2.1                               Purchased Assets.  Subject to the terms and
conditions of this Agreement, on the Closing Date, Seller will sell, convey,
assign, transfer and deliver to Purchaser and Purchaser will purchase, receive
and accept delivery from Seller, free and clear of all Liens (other than
Permitted Liens), all of Seller’s then existing properties and assets (other
than the Excluded Assets) of every kind and nature, real, personal or mixed,
tangible or intangible, wherever located, used in connection with the Business
(collectively, the “Purchased Assets”), including, without limitation, all
right, title and interest of Seller in, to and under:

 

2.1.1                        All equipment and physical plant, including,
without limitation, furniture, furnishings, trade fixtures, leasehold
improvements, computers, servers, telephone equipment and all other owned and
leased tangible personal property used in or useful to the Business as listed on
Schedule 2.1.1 attached hereto and incorporated herein by this reference (the
“Fixed Assets”);

 

2.1.2                        All of the assets reflected on the Interim
Financial Statement, other than the Excluded Assets and those assets disposed of
after the Interim Financial Statement Date in the ordinary course of business
consistent with past practice;

 

2.1.3                        All Intellectual Property Rights owned and used by
Seller in connection with the Business as currently conducted that are capable
of assignment (“IP Assets”) and the goodwill associated therewith, including,
without limitation, the trade names “Bates Private Capital,” “Bates Standard
Analysis” and “Bates”;

 

2.1.4                        All of the Contracts, including, without
limitation, the Third Person Licenses;

 

2.1.5                        All rights to payment as a consequence of
(i) deposits and prepayments, including, without limitation, the deposit under
the 300 Sublease and the 420 Office Lease, listed on Schedule 2.1.5 attached
hereto and incorporated herein by this reference, and (ii) refunds, rights of
set off, rights of recovery, rights to payment or proceeds under contracts of
insurance to the extent applicable to an Assumed Liability,

 

9

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and claims or causes of action relating to the Purchased Assets that arise on or
after the Closing (except for refunds of Taxes to the extent provided in
Section 11.3); provided, however, that nothing in the foregoing will be
construed to prevent Seller from asserting any such rights, claims or causes of
action as a defense in any legal proceeding;

 

2.1.6                        Cash in an amount equal to the sum of (a) all
client retainer balances that have been paid but not applied as of the Closing
Date, as set forth in Schedule 2.1.6 and (b) payments received from clients for
services that have not been rendered as of the Closing Date, as set forth in
Schedule 2.1.6;

 

2.1.7                        All general intangibles used by or useful to the
Business, including, without limitation, all corporate goodwill of Seller;

 

2.1.8                        All other assets of Seller used in or useful to the
conduct of the Business, whether or not reflected on the books or records of
Seller or the Business;

 

2.1.9                        All creative materials, advertising and promotional
materials necessary or used in connection with the Business, wherever stored or
located;

 

2.1.10                  All files, documents, correspondence, studies, reports,
books and records of Seller (including all data and other information stored on
discs, tapes or other media), client lists, client records and credit data,
computer programs, software, and hardware owned and used by Seller in connection
with the Business (collectively, the “Documents”); and

 

2.1.11                  All rights and obligations of Seller under (i) that
certain Sublease dated December 12, 2003, by and between Seller, as subtenant,
and Jacobs Engineering, Inc., as sublandlord, for the premises at 5005 SW
Meadows Road, Suite 300, Lake Oswego, Oregon 97035, as amended on July 7, 2004
to include Suite 320 and as amended in July, 2005 to include Suite 310 (the “300
Sublease”).

 

2.1.12                  All rights and obligations of Seller under that certain
Office lease dated on or about May 1, 2004, by and between Seller, as tenant,
and EOP-Kruse Woods, L.L.C., as landlord, for the premises at 5005 SW Meadows
Road, Suite 420, Lake Oswego, Oregon 97035, as amended on July 12, 2004 to
include Suite 410 and on March 31, 2005 to reduce the leased premises (the “420
Office Lease”).

 

2.2                               Excluded Assets.  Notwithstanding the
provisions of Section 2.1, the Purchased Assets will not include the following
(collectively, the “Excluded Assets”):

 

2.2.1                        All securities, equity interests, company minute
books, equity transfer books, company seals and other documents relating to the
organization, maintenance and existence of Seller as a corporation;

 

2.2.2                        All taxpayer and other identification numbers;

 

2.2.3                        All Tax returns filed by the Seller Entities and
associated Tax records;

 

10

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2.2.4                        Any contracts, agreements or understandings between
or among Seller and the Principals;

 

2.2.5                        The insurance policies set forth in Schedule 7.14
and all prepaid expenses and deposits related thereto, subject, however, to
Purchaser’s rights under Section 2.1.5 under claims-made insurance policies;

 

2.2.6                        All work in process and accounts receivable,
including billable expenses, whether billed or unbilled, with respect to client
work of Seller which has been performed as of the Closing Date (“Accounts
Receivable”);

 

2.2.7                        All cash of Seller as of the Closing Date in excess
of the cash amount specified in Section 2.1.6;

 

2.2.8                        All rights of Seller under this Agreement;

 

2.2.9                        All Retained Business Records; and

 

2.2.10                  All rights to payment as a consequence of refunds,
rights of set off, rights of recovery, and claims or causes of action relating
to the Business (including Tax refunds) that arise before the Closing.

 

2.3                               Assumed Liabilities.  On the Closing Date,
Purchaser and Seller will enter into an assignment and assumption agreement in
substantially the form attached hereto as Exhibit C (the “Assignment and
Assumption Agreement”) pursuant to which Seller will assign, and Purchaser will
assume and agree to perform, discharge and satisfy, in accordance with their
respective terms and subject to the respective conditions thereof, only the
following obligations and liabilities of Seller (the “Assumed Liabilities”):
(a) all liabilities and obligations of Seller incurred, attributable to or
otherwise arising under the Contracts on or after the Closing Date, the 300
Sublease and the 420 Office Lease; (b) obligations and liabilities relating to
client retainer balances that are transferred to Purchaser under Section 2.1.5;
and (c) all other liabilities and obligations incurred on or after the Closing
Date in connection with or arising from the conduct of the Business by
Purchaser.

 

2.4                               Excluded Liabilities.  Notwithstanding
anything to the contrary contained in this Agreement, Purchaser will not assume
or be liable for, and Seller will retain and remain responsible for, all of
Seller’s debts, liabilities and obligations, of any nature whatsoever, other
than the Assumed Liabilities, whether accrued, absolute or contingent, whether
known or unknown, whether due or to become due, whether related to the Purchased
Assets, the Business, or otherwise, and regardless of when asserted (the
“Excluded Liabilities”).  Without limiting the scope of Excluded Liabilities
under this Section 2.4, Excluded Liabilities will specifically include (a) any
liabilities with respect to Taxes for which Seller is liable pursuant to
Section 11.3 hereof, (b) all liabilities and obligations of Seller arising out
of any actions or omissions of employees, consultants, independent contractors
and experts of any kind, including, without limitation, in connection with the
performance of services for clients of Seller prior to the Closing Date, and
unlawful discrimination or harassment, or (c) any costs and expenses incurred

 

11

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by the Seller Entities incident to the negotiation and preparation of this
Agreement and their performance and compliance with the agreements and
conditions contained herein.

 

3.                                      Consideration.

 

3.1                               Purchase Price and Payment.  The purchase
price for the Purchased Assets (the “Purchase Price”) is Eighteen Million
Dollars ($18,000,000) (the “Closing Payment”) plus an amount equal to the Earn
Out Payments made to Seller under Section 3.3.  As partial consideration for the
sale, assignment, transfer and delivery of the Purchased Assets, the assumption
of the Assumed Liabilities, and the execution and delivery of this Agreement and
any related documents referenced herein (collectively, the “Transaction
Documents”) by Seller to Purchaser, Purchaser will make the Closing Payment at
the Closing as follows:

 

3.1.1                        Purchaser will pay Seller and deposit in Escrow an
aggregate of Seventeen Million Dollars ($17,000,000) in cash by wire transfer of
immediately available funds pursuant to wire instructions supplied by Seller at
least three (3) days prior to the Closing Date; and

 

3.1.2                        Purchaser will cause Parent to issue to Seller a
number of unregistered shares of the common stock of Parent (“Parent Stock”)
calculated by dividing One Million Dollars ($1,000,000) by the average closing
price of Parent’s common stock on NASDAQ for the twenty (20) trading days
immediately preceding the Closing Date.  The certificate representing the Parent
Stock will be delivered to Seller by Parent within five (5) business days after
the Closing Date.  Promptly following the release of the Parent Stock from
Escrow, as herein provided, at Seller’s direction and upon receipt of a duly
executed stock power by Seller, Parent will facilitate the distribution of the
Parent Stock by Seller to the Principals in such percentages as reflect their
current ownership interest in Seller, all as are listed on Schedule 3.1.2, by
reissuing stock certificates to such Distributees.

 

3.2                      Allocation of Purchase Price.  The Purchase Price for
the Assets will be allocated as set forth on the attached allocation
schedule (the “Allocation Schedule”) which Purchaser and Seller agree is
reasonable and prepared in accordance with the requirements of Section 1060 of
the Code, and the regulations promulgated thereunder.  After the Closing,
Purchaser and Seller will each file Internal Revenue Service Form 8594, and all
federal, state, local and foreign Tax returns, in accordance with the Allocation
Schedule.  Purchaser and Seller each agrees to provide the other promptly with
any other information required to complete Form 8594.  With respect to any Tax
returns filed by the Seller, Principals, Purchaser or Parent, (i) no party will
take a position on any Tax return (including IRS Form 8594), before any Tax
Authority or in any judicial proceeding, that is in any way inconsistent with
the Allocation Schedule without the written consent of both the Seller and the
Purchaser or unless specifically required pursuant to a determination by an
applicable Tax Authority; (ii) the parties will cooperate with each other in
connection with the preparation, execution and filing of all Tax returns related
to the Allocation Schedule; and (iii) the parties will promptly advise each
other

 

12

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A mark of *** on this page indicates that confidential material has been
omitted.

This Exhibit, including the omitted portions, has been filed separately with the
Secretary of the Securities and Exchange Commission pursuant to an application
requesting confidential treatment under Rule 24b-2 of the Securities Exchange
Act of 1934.

 

regarding the existence of any Tax audit, controversy or litigation related to
such allocation.

 

3.3                      Earn Out Payments.

 

3.3.1                        In addition to the Purchase Price set forth in
Section 3.1, and subject to the conditions set forth in this Section 3.3,
Purchaser will make payments (each, an “Earn Out Payment” and collectively, the
“Earn Out Payments”) to the Seller in an amount of up to Thirteen Million
Dollars ($13,000,000) in the aggregate (the “Earn Out Maximum”) during the
period from the Closing Date through the earlier of July 31, 2011 or payment of
the Earn Out Maximum (the “Earn Out Period”).

 

3.3.2                        The aggregate amount of each Earn Out Payment will
be equal to ***.  The amount of any Earn Out Payment will be unlimited, subject
only to the Earn Out Maximum.  Accordingly, after the Earn Out Maximum has been
paid, no subsequent Earn Out Payments otherwise capable of being earned during
the Earn Out Period will be due and payable.

 

3.3.3                        Within thirty (30) days after the end of each month
during the Earn Out Period, Purchaser will issue a report to the Representative
that details for each of those periods (and cumulatively to date for each
Measurement Period) the calculation of Revenue, Cost of Services, Operating
Expenses, and Operating Profit (collectively, the “Earn Out Accounting”). 
Purchaser will maintain its books and records to be able to calculate or
reconstruct an Earn Out Payment.  Purchaser will pay all reasonable expenses in
connection with the preparation of the Earn Out Accounting and determination of
the Earn Out Payment under this Section 3.3.3.

 

3.3.4                        Subject to the Earn Out Maximum, any Earn Out
Payments (or portion thereof) earned pursuant to the terms of this Section 3.3
will be accompanied by the Earn Out Accounting and will be paid in cash by
Purchaser to Seller within sixty (60) days following the end of the applicable
Measurement Period in accordance with written payment instructions received by
Purchaser from Seller no later than ten (10) days before the Earn Out Payment is
due (the “Delivery Instructions”).  The Delivery Instructions will specify the
Persons entitled to receive the Earn Out Payment, the portion thereof that each
such Person will receive and the address to which a check for such amount will
be sent (or appropriate account and other information for purposes of delivery
of such amount by wire transfer of immediately available funds).

 

3.3.5                        If within fifteen (15) days after receipt of the
Earn Out Accounting and any Earn Out Payment, the Representative delivers
written notice to Purchaser that the Seller Entities disagree with the
calculation of the Earn Out Payment (the “Disagreement Notice”), then Seller and
Purchaser will attempt in good faith to determine mutually the correct amount of
the applicable Earn Out Payment.  If Seller and Purchaser cannot in good faith
mutually determine the amount of the applicable Earn Out

 

13

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A mark of *** on this page indicates that confidential material has been
omitted.

This Exhibit, including the omitted portions, has been filed separately with the
Secretary of the Securities and Exchange Commission pursuant to an application
requesting confidential treatment under Rule 24b-2 of the Securities Exchange
Act of 1934.

 

Payment within fifteen (15) days after delivery of the Disagreement Notice (or
such longer period as mutually agreed by Seller and Purchaser), then a reputable
regional accounting firm, excluding the firm that represents Purchaser, jointly
selected by Seller and Purchaser (the “Independent Firm”), will compute the
amount of the Earn Out Payment (the “Earn Out Payment Computation”).  The Earn
Out Payment Computation will be final, conclusive and binding on the parties to
this Agreement.  If the amount of the Earn Out Payment calculated under the Earn
Out Payment Computation exceeds by more than 1% the amount of the Earn Out
Payment calculated by Purchaser under the Earn Out Accounting, then Purchaser
will be responsible for the costs of performing the Earn Out Payment
Computation.  Otherwise, Seller will be responsible for the costs of the Earn
Out Payment Computation.  If the amount of the Earn Out Payment calculated under
the Earn Out Payment Computation exceeds the amount calculated under the Earn
Out Accounting, then Purchaser will pay the difference to Seller, plus accrued
interest on such difference at the Interest Rate from the date the Earn Out
Payment was originally due, in accordance with the Delivery Instructions no
later than five (5) days following receipt of the Earn Out Payment Computation. 
If the amount of the Earn Out Payment Calculated under the Earn Out Payment
Computation is less than the amount calculated under the Earn Out Accounting,
then Seller will reimburse Purchaser for the difference no later than five
(5) days following receipt of the Earn Out Payment Computation.

 

3.3.6                        Purchaser will provide corporate support services
in support of the Operation as described in Schedule 3.3.6 (the “Corporate
Support Services”)***.  If Purchaser fails to provide any of the Corporate
Support Services, Seller will provide written notice to Purchaser of such
failure, including a specific description of the service(s) not provided, and
Purchaser will correct such failure within ten (10) business days following
notice thereof.

 

3.4                               Operational Impact on Earn Out Payments.  ***

 

3.5                               Accounts Receivable.  Schedule 3.5 sets forth
an accurate breakdown and aging of all Accounts Receivable, including a complete
itemization of all related invoices, that have been billed as of July 23, 2005. 
In order to also capture all Accounts Receivable that (i) are billed as of the
Closing Date or (ii) that were unbilled as of the Closing Date, Seller will
provide Purchaser, at Seller’s expense, with an updated Schedule 3.5, not later
than the thirtieth (30th) day following the Closing Date.  The Principals and
other Bates Persons, as applicable, may devote such portion of their working
hours as is reasonably required to compile the updated Schedule 3.5.  The
Principals and other Bates Persons may devote a reasonable amount of time
(collectively not more than five (5) to ten (10) hours per week on average for
the first three (3) months from the Closing Date) to collect the Accounts
Receivable.  Any amount of the Accounts Receivable collected by Purchaser will
be remitted to Seller reasonably promptly following the recognition of
collection.

 

14

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4.                                      Covenant Not To Compete.

 

4.1                      Covenant Not to Compete.

 

4.1.1                        In consideration for the Purchase Price to be paid
by Purchaser under Section 3 hereof, each Principal agrees that during the
Principal Restrictive Period applicable to him or her;

 

(a)                                  he or she will not, directly or indirectly,
within the Territory, engage in, or have any interest in any Person other than
Purchaser or Parent (whether as a securityholder, creditor or otherwise) that
engages in, any Restricted Activities; and

 

(b)                                 he or she will not on his or her own behalf
or on behalf of any Person other than Purchaser or Parent: (i) solicit from any
Person any business involving Restricted Activities within the Territory,
(ii) cause, induce, or attempt to cause or induce any client or other business
relation of Purchaser to cease doing business with Purchaser or to deal with any
competitor of Purchaser or take any action with respect to any such client or
other business relation that could reasonably be expected to interfere with its
relationship with Purchaser, in each case in connection with the Restricted
Activities, or (iii) cause, induce or attempt to cause or induce any client or
other business relation of a Seller Entity on the Closing Date or within the
year preceding the Closing Date to cease doing business with Purchaser or to
deal with any competitor of Purchaser or take any action with respect to any
such client or other business relation that could reasonably be expected to
interfere with its relationship with Purchaser, in each case in connection with
the Restricted Activities.

 

The Principals acknowledge that the provisions of this Section 4.1.1 are
reasonable and necessary to protect and preserve Purchaser’s legitimate business
interests and the value of the Purchased Assets and to prevent any unfair
advantage being conferred on the Principals.  Notwithstanding anything to the
contrary contained herein, a Principal may own up to 1% of the capital stock of
any entity engaged in any Restricted Activities that is publicly traded,
provided that such Principal does not control, directly or indirectly, through
one or more entities or groups (whether formal or informal), the voting or
disposition of greater than 1% of the aggregate beneficial ownership interest of
any such entity.

 

4.1.2                        In consideration for the Purchase Price to be paid
by Purchaser under Section 3 hereof, Seller agrees that during the Seller
Restrictive Period:

 

(a)                                  it will not, directly or indirectly, within
the Territory, engage in or have any interest in any Person (whether as a
securityholder, creditor or otherwise) that engages in any Restricted
Activities; and

 

(b)                                 it will not: (i) solicit from any Person any
business involving Restricted Activities, (ii) cause, induce, or attempt to
cause or induce any client or other business relation of Purchaser to cease
doing business with Purchaser or to deal with any competitor of Purchaser or
take any action with respect to any such client or

 

15

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other business relation that could reasonably be expected to interfere with its
relationship with Purchaser, in each case in connection with the Restricted
Activities, or (iii) cause, induce or attempt to cause or induce any client or
other business relation of a Seller Entity on the Closing Date or within the
year preceding the Closing Date to cease doing business with Purchaser or to
deal with any competitor of Purchaser or take any action with respect to any
such client or other business relation that could reasonably be expected to
interfere with its relationship with Purchaser, in each case in connection with
the Restricted Activities.

 

Seller acknowledges that the provisions of this Section 4.1.2 are reasonable and
necessary to protect and preserve Purchaser’s legitimate business interests and
the value of the Purchased Assets and to prevent any unfair advantage being
conferred on Seller.  Notwithstanding anything to the contrary contained herein,
Seller may own up to 1% of the capital stock of any entity engaged in any
Restricted Activities that is publicly traded, provided that Seller does not
control, directly or indirectly, through one or more entities or groups (whether
formal or informal), the voting or disposition of greater than 1% of the
aggregate beneficial ownership interest of any such entity.

 

4.2                      Non-Solicitation.

 

4.2.1                        Each Principal will not, directly or indirectly,
during the period commencing on the Closing Date and ending on the second
anniversary of the termination of Principal’s employment with Purchaser,
solicit, hire, retain or attempt to hire or retain any Principal, any of the
Hired Employees or any other employee or independent contractor of Purchaser or
Parent.  Principals acknowledge that this Section 4.2.1 is reasonable and
necessary to protect and preserve Purchaser’s legitimate business interests and
the value of the Purchased Assets and to prevent any unfair advantage being
conferred on Principals.

 

4.2.2                        Seller will not, directly or indirectly, during the
period commencing on the Closing Date and ending on the second anniversary of
the expiration of the Earn Out Period, solicit, hire, retain or attempt to hire
or retain any Principal, any of the Hired Employees or any other employee or
independent contractor of Purchaser or Parent.  Seller acknowledges that this
Section 4.2.1 is reasonable and necessary to protect and preserve Purchaser’s
legitimate business interests and the value of the Purchased Assets and to
prevent any unfair advantage being conferred on Seller.

 

4.3                      Separate Covenants.  The covenants contained in
Sections 4.1 and 4.2 are a series of separate covenants for each state and each
country in the Territory.  Except for geographic coverage, each separate
covenant will be considered identical in terms to the covenant contained in
Section 4.1 and Section 4.2 respectively.  If, in any judicial proceeding, a
court refuses to enforce any of the separate covenants, the unenforceable
covenant or covenants will be eliminated from this Section 4 for the purpose of
those proceedings to the extent necessary to permit the remaining separate
covenants to be enforced.

 

16

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5.                                      Transfer Of Employees And Employee
Benefits.

 

5.1                      Workers’ Compensation.  Without limiting the scope of
Excluded Liabilities under Section 2.4 hereof, Seller will be responsible for
any workers’ compensation claims based on injuries initially occurring prior to
the Closing Date regardless of the date on which the claim was filed and for
subsequent re-injuries if a claim for the initial injury was made prior to the
Closing Date.  Seller will indemnify and hold Purchaser harmless against any and
all losses, damages, costs and expenses (including, without limitation,
reasonable attorneys’ fees and related expenses) arising out of or relating to
all such claims in accordance with Section 15.1 hereof.  All workers’
compensation claims currently filed against Seller are listed on Schedule 5.1.

 

5.2                      Transfer of Employees.  In addition to the employment
of the Principals pursuant to the Expert Agreements, as a condition of the
Closing, Purchaser will have the right, but not the obligation, to offer
employment to other employees and independent contractors of Seller with titles,
responsibilities, compensation and benefits comparable to those currently
provided by Seller to each such employee or independent contractor; provided,
however, that Purchaser will have no continuing obligation as of the Closing
Date to continue the employment of any employee or to maintain the compensation
of any employee at any particular level.  Those employees hired by Purchaser
will be referred to herein as the “Hired Employees.”  Purchaser will provide
Seller with a list of the Hired Employees no later than ten (10) days before the
Closing.  On the Closing Date, Seller will terminate all of the Hired Employees
and will ensure full and final payment to such Hired Employees of all salary,
commissions, accrued bonuses, any severance payments and benefits (including
accrued vacation and personal time off) payable as of the close of business on
the day preceding the Closing Date.  Seller and Purchaser will cooperate to
transition the Hired Employees to Purchaser’s benefit programs so as to minimize
(to the extent reasonably possible) the loss of benefits of the Hired
Employees.  Seller is solely responsible for any liability which may arise under
the Worker Adjustment and Retraining Notification Act, 29 U.S.C. § 2102 et seq
(the “WARN Act”) as a result of any acts or omissions of Seller prior to the
Closing Date, or the transactions contemplated by this Agreement, and will
indemnify, defend and hold Purchaser and Parent harmless from and against any
and all such liabilities in accordance with Section 15.1 hereof.

 

5.3                               Employee Benefit Plans.  The parties hereto
agree that Purchaser will not have any liability or obligation to continue or to
make any contribution or payment with respect to any Employee Benefit Plan
identified in Schedule 7.12.  Seller will indemnify and hold Purchaser harmless
against any and all losses, damages, costs and expenses (including, without
limitation, reasonable attorneys’ fees and related expenses) arising out of or
relating to any Employee Benefit Plan of Seller in accordance with Section 15.1
hereof.

 

6.                                      The Closing.

 

6.1                      The Closing.  The “Closing” means the time at which
Seller will effect the sale and transfer of the Purchased Assets in exchange for
the Purchase Price to be

 

17

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delivered by Purchaser pursuant to Section 3 hereof.  The Closing is expected to
occur on or before August 15, 2005 at the offices of Folger Levin & Kahn, LLP,
1900 Avenue of the Stars, Suite 2800, Los Angeles, California 90067, or at such
other place as the parties may mutually agree.  The “Closing Date” will be the
date on which the Closing occurs.  The Closing will be effective for all
purposes under this Agreement as of 12:01 a.m. local time on the Closing Date
(the “Effective Time”).

 

6.2                      Seller Deliveries at Closing.  Subject to fulfillment
or waiver of the conditions set forth in Section 12, at the Closing the Selling
Entities, as applicable, will execute and/or deliver to Purchaser all of the
following:

 

6.2.1                        An Officer’s Certificate of Seller dated the
Closing Date, in form and substance reasonably satisfactory to Purchaser
(i) attaching a true and correct copy of an action of the Principals authorizing
the execution and performance of this Agreement and the other Transaction
Documents to which Seller is a party, and the transactions contemplated hereby
and thereby; and (ii) containing incumbency certificates for the individuals
authorized to execute this Agreement and all related agreements on behalf of
Seller and authorized to give instructions and directions on Seller’s behalf;

 

6.2.2                        A Bill of Sale in substantially the form attached
hereto as Exhibit D hereto, duly executed by Seller;

 

6.2.3                        The Assignment and Assumption Agreement, duly
executed by Seller;

 

6.2.4                        An opinion of counsel to Seller in substantially
the form attached hereto as Exhibit E-1, and an opinion of counsel to the
Principals in substantially the form attached hereto as Exhibit E-2;

 

6.2.5                        The closing certificate contemplated by Section 12
hereof;

 

6.2.6                        An Assignment of Sublease in substantially the form
attached hereto as Exhibit F-1 (the “Sublease Assignment”) together with a
consent to such assignment from EPO-Kruse Woods, L.L.C., as landlord, and Jacobs
Engineering Group Inc., as sublandlord, under the 300 Sublease;

 

6.2.7                        An Assignment of Lease in substantially the form
attached hereto as Exhibit F-2 (the “Lease Assignment”) together with a consent
to such assignment from EOP-Kruse Woods, L.L.C., as landlord under the 420
Office Lease;

 

6.2.8                        The Expert Agreements, duly executed by the
applicable Principal; and

 

6.2.9                        All other such executed endorsements, assignments
and other instruments of transfer and conveyance consistent with the terms of
this Agreement and as may be reasonably requested by Purchaser, in form and
substance reasonably satisfactory to counsel for Purchaser, to effectively vest
in Purchaser all of the right, title and interest of Seller in the Purchased
Assets, free and clear of all Liens (other than

 

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A mark of *** on this page indicates that confidential material has been
omitted.

This Exhibit, including the omitted portions, has been filed separately with the
Secretary of the Securities and Exchange Commission pursuant to an application
requesting confidential treatment under Rule 24b-2 of the Securities Exchange
Act of 1934.

 

Permitted Liens) including, without limitation, releases of the Purchased Assets
from any lending arrangements and any related bank consents.

 

6.3                      Purchaser Deliveries at Closing.  Subject to
fulfillment or waiver of the conditions set forth in Section 13, at the Closing
Purchaser will execute and/or deliver (or cause Parent to deliver) to Seller all
of the following:

 

6.3.1                        *** of the cash portion of the Purchase Price as
provided in Section 3 by wire transfer of immediately available funds to the
account designated by Seller in advance of the Closing Date as provided in
Section 3.1.1;

 

6.3.2                        *** of the cash portion of the Purchase Price plus
the Parent Stock, with appropriate stock powers endorsed by Seller in blank (the
“Escrowed Amount”) to be deposited into an escrow account with U.S. Bank, N.A.
(the “Escrow”);

 

6.3.3                        An Officer’s Certificate of Purchaser, dated the
Closing Date, in form and substance reasonably satisfactory to Seller
(i) attaching a true and correct copy of an action of Parent, acting in its
capacity as the sole member and manager of Purchaser, authorizing the execution
and performance of this Agreement and the other Transaction Documents, and the
transactions contemplated hereby and thereby; and (ii) containing incumbency
certificates for the individuals authorized to execute this Agreement and all
related agreements on behalf of Purchaser;

 

6.3.4                        An Officer’s Certificate of Parent, dated the
Closing Date, in form and substance reasonably satisfactory to Seller
(i) attaching a true and correct copy of an action of Parent authorizing the
execution and performance of this Agreement and the other transaction documents
described herein, and the transactions contemplated hereby and thereby; and
(ii) containing incumbency certificates for the individuals authorized to
execute this Agreement and all related agreements on behalf of Parent;

 

6.3.5                        The Assignment and Assumption Agreement, duly
executed by Purchaser;

 

6.3.6                        The Lease Assignment, duly executed by Purchaser;
and

 

6.3.7                        The Expert Agreements, duly executed by Purchaser.

 

7.                                      Representation and Warranties of Seller
Entities.

 

As an inducement to Purchaser to enter into this Agreement and to consummate the
transactions contemplated in this Agreement, and subject to the disclosure
schedules attached hereto, the Seller Entities jointly and severally represent
and warrant to Purchaser and agree as follows:

 

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7.1                               Organization and Valid Existence.  Seller is a
corporation duly organized and validly existing under the laws of the State of
Oregon.  Seller has all requisite corporate power and authority to own and
operate its properties and assets, to enter into and perform this Agreement and
the other Transaction Documents, and to carry on the Business as currently
conducted.  Seller is duly qualified to do business as a foreign corporation in
all jurisdictions wherein the character of the property owned or leased or the
nature of the activities conducted by it makes such qualification necessary,
except where the failure to so qualify could not reasonably be expected to have
a Material Adverse Effect.

 

7.2                      Corporate Authority.  The execution and delivery of
this Agreement and the other Transaction Documents by Seller and the
consummation by Seller of the transactions contemplated hereby and thereby have
been duly authorized by Seller and the Principals and no other shareholder
consents or approvals are required.  This Agreement and the other Transaction
Documents constitute the valid and legally binding obligations of Seller
enforceable against Seller in accordance with their respective terms, except as
may be limited by the Enforceability Limitations.

 

7.3                      No Violations.  Neither the execution and delivery of
this Agreement or the other Transaction Documents, the consummation of any of
the transactions contemplated hereby or thereby, nor the fulfillment of any of
the terms hereof, except to the extent disclosed herein or in any
Schedule hereto, (i) will violate or conflict with the Articles of Incorporation
or bylaws of Seller or any other agreement among the Principals, (ii) will
result in any Material breach of or any Material default (including events of
acceleration, termination or cancellation or loss of rights) under any provision
of any Contract, or (iii) will result in a Material violation of any statutes,
laws, ordinances, rules, regulations or requirements of Governmental Bodies
having jurisdiction over the Business or Seller.

 

7.4                      Financial Statements.  Seller has delivered to
Purchaser Seller’s audited balance sheets for the fiscal years ended
December 31, 2003 and December 31, 2004, and the statements of income for the
fiscal years ended on December 31, 2003 and December 31, 2004 (collectively, the
“Year-End Financial Statements”).  The Year-End Financial Statements present
fairly the financial condition of Seller and the results of Seller’s operations
for the periods indicated.  Seller has also delivered to Purchaser compiled
balance sheets and the statements of income of Seller for the 6-month period
ended June 30, 2005 (the “Interim Financial Statement Date”) (such statement to
be referred to as the “Interim Financial Statement”).  The Interim Financial
Statement presents fairly the financial condition of Seller as of the Interim
Financial Statement Date, and the results of its operations for the period ended
the Interim Financial Statement Date on a basis consistent with that of
preceding periods; provided, however, that the Interim Financial Statement
(i) is subject to normal year-end adjustments and (ii) lacks notes and other
financial statement presentation items.  The Year-End Financial Statements and
the Interim Financial Statement are sometimes collectively referred to herein as
the “Financial Statements.”  The Financial Statements are prepared in accordance
with GAAP and are collectively attached hereto as Exhibit G.

 

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7.5                      Absence of Certain Changes.  Except (i) as disclosed in
the Financial Statements or in any Schedule delivered pursuant hereto; (ii) for
the execution and delivery of this Agreement and any applicable Transaction
Document; and (iii) as set forth in Schedule 7.5, Seller has not since the
Interim Financial Statement Date:

 

7.5.1                        Had any Material Adverse Change, other than changes
in the ordinary course of business consistent with past practice;

 

7.5.2                        Suffered any damage, destruction or loss of
physical property (whether or not covered by insurance) that could reasonably be
expected to have a Material Adverse Effect;

 

7.5.3                        Sold, transferred or otherwise disposed of, or
agreed to sell, transfer or otherwise dispose of, any assets having a fair
market value at the time of sale, transfer or disposition of $2,000 or more in
the aggregate, other than in the ordinary course of business and consistent with
past practice;

 

7.5.4                        Increased, or agreed to increase, the compensation
or bonuses or special compensation of any kind of any Hired Employee over the
rate being paid to them on the Interim Financial Statement Date, other than
merit, incentive, and/or cost-of-living increases made in the ordinary course of
business consistent with past practices of Seller, and no such increases are
required by written agreement or, to the Knowledge of the Seller Entities, oral
understanding; or adopted or increased any benefit under any insurance, pension
or other employee benefit plan, program or arrangement made to, for, or with any
such Hired Employee;

 

7.5.5                        Had any strike or work stoppage;

 

7.5.6                        Made any change in its accounting methods or
practices with respect to its Business or the Purchased Assets;

 

7.5.7                        Entered into any Material transaction not in the
ordinary course of its Business consistent with past practice.

 

7.6                               Title to and Condition of Purchased Assets. 
Seller has good and valid title to, or a valid leasehold interest in, all of the
Purchased Assets, free and clear of any mortgage, pledge, conditional sales
contract, lien, security interest, right of possession in favor of any third
party, claim or encumbrance (collectively “Liens”), except for the Permitted
Liens.

 

7.7                               Real Estate.  The conduct of Seller’s Business
in any premises occupied by Seller is not in violation of any law, statute,
ordinance, rule or regulation of any Governmental Body in any respect
(including, without limitation, those concerned with environmental or
occupational safety standards), which violations would have a Material Adverse
Effect.

 

7.8                               Contracts.  Schedule 7.8 contains a complete
list (and, in the case of oral agreements, contracts or leases, a summary of the
material terms) of all contracts,

 

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equipment leases, work orders, client engagement letters, retainer letters, fee
agreements and other agreements or arrangements that are Material to the
Business or to which the Purchased Assets may be subject (the “Contracts”).  In
the case of client engagement letters, retainer letters and fee agreements, all
such client agreements are listed on Schedule 7.8, regardless of whether they
are Material.  The Contracts are valid, binding and enforceable by Seller in
accordance with their respective terms and are in full force and effect, except
as may be limited by the Enforceability Limitations.  Seller has delivered to
Purchaser true and complete copies of the Contracts listed in Schedule 7.8 and
all amendments thereto, other than those oral agreements summarized on
Schedule 7.8.  Seller has complied in all Material respects with all of the
Contracts and is not in Material default under any of the Contracts.  To the
Knowledge of the Seller Entities, no other party is in default in the observance
or the performance of any Material term or obligation to be performed by it
under any Contract listed in Schedule 7.8.

 

7.9                               Litigation.  Except as described on
Schedule 7.9, there is no litigation, proceeding (arbitral or otherwise), claim
or investigation of any nature pending or, to the Knowledge of the Seller
Entities, threatened against Seller relating to either the Business or the
Purchased Assets.  Except as described on Schedule 7.9, there are no writs,
injunctions, decrees, arbitration decisions, unsatisfied judgments or similar
orders outstanding against Seller relating to either the Business or the
Purchased Assets.

 

7.10                        Intellectual Property.

 

7.10.1                  Schedule 7.10 contains a true and complete list of the
IP Assets other than copyrightable materials for which no copyrights have been
filed.  Seller has delivered to Purchaser copies of all documents (if any)
establishing Seller’s ownership of or rights to use the IP Assets.

 

7.10.2                  Seller owns, or uses pursuant to valid licenses, all IP
Assets.  Without limiting the foregoing, Seller has a sufficient number of
licenses for the Third Person Licenses for each of Seller’s current employees,
independent contractors and/or items of equipment listed in Schedule 2.1.1.

 

7.10.3                  There are no third Person claims or demands pending or,
to the Seller Entities’ Knowledge, threatened orally or in writing, before any
Governmental Body or court, against any Seller Entity that any of the IP Assets
infringes any copyright, patent, trademark, service mark trade name, trade
secret, license, application or other proprietary right or intellectual property
of any other Person, or makes unauthorized use of any secret process, formula,
method, information, know-how, or any other proprietary confidential
information, including, without limitation, any software or software
documentation of any other Person.

 

7.10.4                  Seller’s rights in and to the IP Assets are freely
assignable, including the right to create derivative works, and Seller is not
under any obligation to pay any royalty or other compensation to any third
Person or to obtain approval or consent for use of licensing any of the IP
Assets.  All of the interests of Seller in the IP Assets are free and clear of
all Liens, other than Permitted Liens, and are not currently

 

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being challenged or infringed in any way or involved in any pending legal or
administrative proceeding before any Governmental Body or court.  Except for
licenses to clients in the ordinary course of business or as otherwise disclosed
in Schedule 7.10, no current licenses or other rights for the use of the IP
Assets have been granted by Seller to any third Persons, Seller has no
obligation to grant any such licenses or rights, and none of the IP Assets are
being used by any other Person.

 

7.10.5      No employee or independent contractor of Seller has any valid claim
or right to any of the IP Assets.  No employee or independent contractor of
Seller is a party to or otherwise bound by any agreement with or obligated to
any other Person (including any former employer) which in any respect conflicts
with any obligation, commitment or job responsibility to which he or she is a
party or otherwise.

 

7.10.6      The Seller Entities do not make any representation and warranty
regarding the performance or functionality of any third Person software or
technology licensed to Seller pursuant to the Third Person Licenses or regarding
the performance or functionality of those items of Intellectual Property Rights
that are standard, “off-the-shelf” items that Seller uses for word processing,
accounting, database management, programming languages, development tools,
office management, or similar functions.

 

7.11        Compliance with Laws.  Except to the extent otherwise specifically
referred to herein, Seller has complied with and is in compliance with all
federal, state, local and foreign statutes, laws, ordinances, regulations,
rules, permits, judgments, orders or decrees applicable to Seller, the Business
and the Purchased Assets, except where the failure to comply will not have a
Material Adverse Effect.

 

7.12        Employee Benefit Plans.  Schedule 7.12 contains a true and complete
list of all Employee Benefit Plans maintained by Seller.  There has been no
failure by such Employee Benefit Plans to comply with any applicable laws
relating to labor and employee benefits, including, without limitation, any
applicable provisions of ERISA and the Code, any laws relating to wages,
termination pay, vacation pay, fringe benefits, collective bargaining and the
payment and/or accrual of the same and all taxes, insurance and other costs and
expenses applicable thereto, for which such failure Purchaser would be liable in
any Material amount.

 

7.13        Taxes.  Except as otherwise indicated in Schedule 7.13, there are no
Tax liens on any of the Purchased Assets.  The Seller Entities have paid all
Taxes that are due from them with respect to the Business and the Purchased
Assets and have duly filed all Tax returns and reports required to be filed by
them.  Seller has withheld and paid all Taxes required to have been withheld and
paid in connection with amounts paid or owing to any employee, independent
contractor, creditor or other Person.  No transaction contemplated by this
Agreement is subject to withholding under Section 1445 of the Code.  Seller has
not at any time during Seller’s existence owned any subsidiaries.

 

7.14        Insurance.  Schedule 7.14 contains a complete description of all
material policies of fire, liability, workmen’s compensation, directors and
officers, errors and omissions and other forms of insurance owned or held by
Seller.  Except for the Errors

 

23

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A mark of *** on this page indicates that confidential material has been
omitted.

This Exhibit, including the omitted portions, has been filed separately with the
Secretary of the Securities and Exchange Commission pursuant to an application
requesting confidential treatment under Rule 24b-2 of the Securities Exchange
Act of 1934.

 

and Omissions Tail Policy, all such policies will remain in full force and
effect up to and inclusive of the Closing Date.  Seller has provided Purchaser
with a true and complete copy of the Errors and Omissions Tail Policy.

 

7.15        Employees; Employment Matters.

 

7.15.1      Seller has no unsatisfied liability to any previously terminated
employee or independent contractor.  Seller has disclosed all written employee
handbooks, policies, programs and arrangements to Purchaser.

 

7.15.2      Except as otherwise indicated in Schedule 7.15, no key employee or
independent contractor or group of employees or independent contractors has
informed Seller of any plans to terminate their employment with Seller for any
reason, including as a result of the transactions contemplated by this
Agreement.

 

7.15.3      All persons employed by Seller are employees at will.

 

7.16        Brokers.  Except for Macadam Capital Partners, for whose fees Seller
is solely responsible, neither Seller, nor any Person acting on its behalf has
paid or become obligated to pay, any fee or commission to any broker, finder or
intermediary for or on account of the transactions contemplated by this
Agreement.

 

7.17        Business Relations.  Except as otherwise indicated in Schedule 7.17,
Seller has not received any written notice or, to the Knowledge of the Seller
Entities, any oral notice that any client (including, without limitation, ***),
supplier or vendor engaged in or doing business with Seller will cease to do
business (other than due solely to completion of engagements or assignments
commenced prior to the Closing Date) with Purchaser after the consummation of
the transactions contemplated hereby in the same manner and at the same levels
as previously conducted with Seller except for any reductions that, individually
or in the aggregate, could not reasonably be expected to have a Material Adverse
Effect.  Within the last twelve (12) months, no Seller Entity has received any
notice of cancellation of any Contract or Material business arrangement with any
Person and no Seller Entity has Knowledge of any facts that could lead it to
believe that the Business will be subject to cancellation of any such Contract
or Material business arrangement.  Within the last twelve (12) months, no Seller
Entity has received a written or oral notice of a Material dispute or problem,
or Material dissatisfaction with Seller from any client of Seller.  To the
Knowledge of the Seller Entities, the consummation of the transactions
contemplated by this Agreement will not have a Material Adverse Effect on any
relationships with any clients of Seller.

 

7.18        Warranty; Nonbillable Work.  All services rendered by Seller have
been in Material conformity with all applicable contractual commitments and all
warranties, and Seller has no Material liability for damages in connection
therewith.  Seller is not obligated to perform nonbillable client service work
under the terms of any

 

24

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Contract in order to correct work previously performed that was incorrect or
deficient, to complete work in excess of the fixed rate limit with respect to a
particular project or otherwise, other than reasonable and customary efforts to
maintain client satisfaction consistent with the size and scope of a particular
project and consistent with maintaining the profitability of such project. 
Seller is not a party to any fixed fee or capped price contracts or engagement
arrangements involving work which if billed at Seller’s normal hourly rates
would exceed $10,000 in annual revenues, nor does Seller have any outstanding
offers, bids or proposals to perform any services on a fixed fee or capped basis
exceeding such amount; provided, however, that Purchaser acknowledges that from
time to time Seller provides estimated budgets to clients in connection with
engagements and that the incurrence of fees and expenses beyond such estimated
budgets are subject to client approval.

 

7.19        Consents.  The execution, delivery and performance of this Agreement
and all ancillary agreements, documents, instruments and schedules executed in
connection herewith by Seller do not require the consent, approval authorization
or act of, or the making by Seller of any declaration, filing or registration
with, any Governmental Body or any other Person that applies to or binds Seller
which has not been obtained or made or which will not have been obtained or made
as of the Closing Date.

 

7.20        Schedules.  Any information set forth in or attached to any
Schedule delivered or required to be delivered pursuant to this Agreement will
be deemed to constitute disclosure for any other Schedule delivered or to be
delivered pursuant to this Agreement.

 

7.21        1933 Act Matters.  Seller and each Principal, if a distributee of
the Parent Stock from Seller (each, a “Distributee”) will acquire the shares of
Parent Stock to be acquired pursuant to this Agreement either (i) for investment
for Distributee’s own account and not with a view to or for offer or sale in
connection with any distribution thereof, or (ii) for resale solely pursuant to
an effective registration statement or applicable exemption under Securities Act
of 1933, as amended, and the respective rules and regulations thereunder (the
“1933 Act”).  Distributee understands that the shares of Parent Stock to be
acquired pursuant to this Agreement will not have been registered under the 1933
Act with respect to such transaction by reason of a specific exemption or
exception from the registration requirements of the 1933 Act which depend upon,
among other things, the accuracy of Distributee’s representations herein. 
Distributee understands that, until such time as a registration statement for
the resale of such shares of Parent Stock is effective, each certificate
evidencing such shares will bear a legend substantially to the effect that the
shares represented by such certificate have not been registered or qualified
under the 1933 Act or the securities or blue sky laws of any state and may be
offered and sold only if registered and qualified pursuant to the relevant
provisions of the 1933 Act and applicable state securities or blue sky laws or
upon delivery to Parent of an opinion of counsel that an exemption from such
registration or qualification is applicable.

 

7.22        Information, Experience, and Ability to Bear Risk.  Distributee
acknowledges receipt of all the information requested from Parent by Distributee
and

 

25

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considered by Distributee to be necessary or appropriate for deciding whether to
acquire the shares of Parent Stock to be acquired pursuant to this Agreement,
including, without limitation, the Parent SEC Reports (as defined in
Section 9.6).  Distributee is an “accredited investor” within the meaning of
Rule 501(a) under the 1933 Act and has such knowledge and experience in
financial and business matters that Distributee is capable of evaluating the
merits and risks of, and Distributee is able to bear the economic risk of, its
acquisition of such shares of Parent Stock pursuant to this Agreement. 
Distributee has had the opportunity to ask questions and receive answers
regarding the terms and conditions of such acquisition of shares of Parent
Stock.

 

7.23        Accuracy of Disclosure.  No representation or warranty made by a
Seller Entity in this Section 7, and no exhibit, certificate or
schedule prepared, made or delivered, or to be prepared, made or delivered, by
or on behalf of a Seller Entity pursuant hereto contains or will contain on the
date when made any untrue statement of a Material fact or omits or will omit to
state a Material fact on the date when made necessary to make the statements
contained herein and therein not misleading.

 

7.24        No Other Warranties or Representations.  SUBJECT TO THE EXPRESS
REPRESENTATIONS AND WARRANTIES CONTAINED IN THIS SECTION 7, (I) NO SELLER ENTITY
MAKES ANY REPRESENTATIONS OR WARRANTIES WHATSOEVER, EXPRESS OR IMPLIED,
CONCERNING THE PURCHASED ASSETS, INCLUDING, WITHOUT LIMITATION, ANY
REPRESENTATION OR WARRANTY AS TO VALUE, QUANTITY, QUALITY, CONDITION,
MERCHANTABILITY, SUITABILITY FOR USE, SALABILITY, OBSOLESCENCE, WORKING ORDER,
VALIDITY OR ENFORCEABILITY, AND (II) PURCHASER AND PARENT SPECIFICALLY
ACKNOWLEDGE THAT NO WARRANTIES THAT ANY OF THE PURCHASED ASSETS ARE MERCHANTABLE
OR FIT FOR ANY PARTICULAR PURPOSE ARE MADE OR SHOULD BE IMPLIED.

 

8.             Representations and Warranties of the Principals.

 

As an inducement to Purchaser to enter into this Agreement and to consummate the
transactions contemplated in this Agreement, and in addition to the
representations and warranties made under Section 7, each Principal severally
but not jointly represents and warrants to Purchaser and agrees as follows:

 

8.1          Ownership of Seller Equity.  Each Principal owns, beneficially or
of record, the equity interests of Seller shown opposite such Principal’s name
on Schedule 3.1.2.

 

8.2          Authority of Principals.  Each Principal has the requisite power
and authority to execute and deliver this Agreement and the Transaction
Documents to which he or she is a party, and to consummate the transactions
contemplated hereby and thereby to be consummated by such Principal.  This
Agreement has been duly and validly executed and delivered by such Principal. 
This Agreement and all other agreements and written obligations entered into or
undertaken in connection with the transactions

 

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contemplated hereby constitute the valid and legally binding obligations of such
Principal, enforceable against such Principal in accordance with their
respective terms, except as may be limited by the Enforceability Limitations.

 

8.3          Consents.  The execution, delivery and performance of this
Agreement, the Expert Agreement and all other Transaction Documents executed by
such Principal do not require the consent, approval, authorization or act of, or
the making by such Principal of any declaration, filing or registration with,
any Governmental Body or any other Person, including such Principal’s spouse,
that applies to or binds such Principal that has not been obtained or made or
that will not have been obtained or made as of the Closing Date.

 

8.4          No Other Warranties or Representations.  SUBJECT TO THE EXPRESS
REPRESENTATIONS AND WARRANTIES CONTAINED IN THIS SECTION 8, (I) NO PRINCIPAL
MAKES ANY REPRESENTATIONS OR WARRANTIES WHATSOEVER, EXPRESS OR IMPLIED,
CONCERNING THE PURCHASED ASSETS, INCLUDING, WITHOUT LIMITATION, ANY
REPRESENTATION OR WARRANTY AS TO VALUE, QUANTITY, QUALITY, CONDITION,
MERCHANTABILITY, SUITABILITY FOR USE, SALABILITY, OBSOLESCENCE, WORKING ORDER,
VALIDITY OR ENFORCEABILITY, AND (II) PURCHASER AND PARENT SPECIFICALLY
ACKNOWLEDGE THAT NO WARRANTIES THAT ANY OF THE PURCHASED ASSETS ARE MERCHANTABLE
OR FIT FOR ANY PARTICULAR PURPOSE ARE MADE OR SHOULD BE IMPLIED.

 

9.             Representations of Purchaser and Parent.

 

As an inducement to the Seller Entities to enter into this Agreement and to
consummate the transactions contemplated in this Agreement, Purchaser and Parent
jointly and severally represent and warrant to the Seller Entities and agree as
follows:

 

9.1          Organization and Authority.  Purchaser is a limited liability
company duly formed and existing in good standing under the laws of the State of
California.  Purchaser has the requisite power and authority, as a limited
liability company, to own its properties and assets and to carry on its business
as now conducted.  Purchaser has the limited liability company power to execute,
deliver and perform this Agreement.  This Agreement has been duly authorized by
all necessary limited liability company action on the part of Purchaser.  Parent
is a corporation duly organized and existing in good standing under the laws of
the State of Delaware, is qualified to do business in California, and has the
requisite corporate power and authority to own its properties and assets and to
carry on its business as now conducted.  Each of Purchaser and Parent is duly
qualified to do business as a foreign limited liability company or corporation,
as applicable, in all jurisdictions wherein the character of the property owned
or leased or the nature of the activities conducted by it makes such
qualification necessary.

 

9.2          Authorization of Agreement.  Purchaser and Parent have the
requisite power and authority to execute and deliver this Agreement and to
consummate the

 

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transactions contemplated hereby.  The execution and delivery of this Agreement
by Purchaser and Parent and the consummation by Purchaser and Parent of all
obligations contemplated hereby have been duly authorized by all requisite
limited liability company action on the part of Purchaser, and by all requisite
corporate action on the part of Parent.  This Agreement and all other agreements
and written obligations entered into or undertaken in connection with the
transactions contemplated hereby constitute the valid and legally binding
obligations of Purchaser and Parent, enforceable against such Purchaser and
Parent in accordance with their respective terms, except as may be limited by
the Enforceability Limitations.

 

9.3       No Violations.  Neither the execution or delivery of this Agreement,
the consummation of any of the transactions contemplated hereby, nor the
fulfillment of any of the terms hereof, except to the extent disclosed herein or
in any Schedule hereto, (i) will violate or conflict with the Articles of
Organization or Operating Agreement of Purchaser or the Certificate of
Incorporation or Bylaws of Parent, (ii) will result in any Material breach of or
any default (including events of acceleration, termination or cancellation or
loss of rights) under any provision of any contract or agreement to which
Purchaser or Parent are parties or by which Purchaser or Parent are bound, or
(iii) will result in a Material violation of any statutes, laws, ordinances,
rules, regulations or requirements of Governmental Bodies having jurisdiction
over Purchaser or Parent.

 

9.4       Capital Stock.  The shares of Parent Stock to be issued pursuant to
this Agreement, when issued in accordance with this Agreement, will be duly
authorized, validly issued, fully paid and nonassessable, and free and clear
from any Liens in respect of the issuance thereof, except as provided in this
Agreement and except for Liens created by or imposed upon the holder of such
shares.  Such shares of Parent Stock will not be subject to any preemptive
rights or other restrictions, except as provided in this Agreement, pursuant to
an agreement with Parent’s underwriters, or under federal and applicable state
securities laws.  Assuming the representations and warranties of each
Distributee set forth in Sections 7.21 and 7.22 are true and correct, the shares
of Parent Stock to be issued pursuant to this Agreement will be issued in
compliance with applicable federal or state securities laws, including, without
limitation, the Oregon Revised Statutes and the California Corporate Securities
Law of 1968, as amended.

 

9.5          Litigation; Compliance with Law.  There is no litigation,
proceeding (arbitral or otherwise), claim or investigation of any nature,
pending, or to Purchaser’s or Parent’s actual knowledge, threatened, against
Purchaser or Parent that could reasonably be expected to have a Material Adverse
Effect on Purchaser’s or Parent’s ability to perform in accordance with the
terms of this Agreement.

 

9.6          SEC Filings.  Parent has filed, and has made available to the
Seller Entities, true and complete copies of, all forms, reports, schedules,
statements, and other documents required to be filed by it under the 1933 Act
and the Securities Exchange Act of 1934, as amended, and the respective
rules and regulations thereunder (the “1934 Act”) (such forms, reports,
schedules, statements and other documents are each referred to as a “Parent SEC
Report”).  Each Parent SEC Report, at the time filed, (a) did not contain any
untrue statement of a material fact that would have a Material Adverse Effect

 

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A mark of *** on this page indicates that confidential material has been
omitted.

This Exhibit, including the omitted portions, has been filed separately with the
Secretary of the Securities and Exchange Commission pursuant to an application
requesting confidential treatment under Rule 24b-2 of the Securities Exchange
Act of 1934.

 

on Parent, or omit to state a material fact that would have a Material Adverse
Effect on Parent, required to be stated therein or necessary in order to make
the statements made therein, in light of the circumstances under which they were
made, not misleading, (b) complied in all Material respects with the applicable
requirements of the 1933 Act and the 1934 Act, as the case may be, and the
applicable rules and regulations of the SEC thereunder, and (c) were certified
by officers of Parent in the manner required by the Sarbanes-Oxley Act of 2002. 
So long as Parent is a reporting company under the 1934 Act, Parent will
continue to make Parent SEC Reports so as to permit the information requirements
under Rule 144 of the 1933 Act to be met.

 

9.7       No Finder.  Neither Purchaser, Parent nor any Person acting on their
behalf has paid or become obligated to pay, any fee or commission to any broker,
finder or intermediary for or on account of the transactions contemplated by
this Agreement.

 

9.8       Consents.  All consents, approvals, authorizations or acts of, or the
making by either Parent or Purchaser of any declaration, filing or registration
with, any Governmental Body or any other Person that apply to or bind Parent or
Purchaser and that are required to be obtained or made as of the Closing Date in
connection with the execution, delivery and performance of this Agreement and
the other Transaction Documents, will have been obtained or made as of the
Closing Date.

 

9.9       ***

 

10.          Pre-Closing Covenants.

 

10.1     Affirmative Covenants.  From the Agreement Date until the Closing Date,
the Seller Entities will, and will cause the employees of Seller, as applicable,
to:

 

10.1.1      Conduct the Business in the ordinary course of business and in
compliance with all legal requirements applicable to the Business;

 

10.1.2      Pay all of the liabilities and Taxes of the Business when due,
except for liabilities or Taxes being contested in good faith (which will be
paid by Seller when due and will not become an Assumed Liability);

 

10.1.3      Maintain existing insurance coverages; use all commercially
reasonable efforts to (i) preserve intact all rights of the Business to retain
its employees; and (ii) maintain good relationships with its employees, clients,
suppliers, and others having business dealings with the Business; and

 

10.1.4      Make a good faith effort to obtain the written consent of EOP-Kruse
Woods, L.L.C., as landlord, and Jacobs Engineering Group Inc., as sublandlord,
under the 300 Sublease, to the assignment of the 300 Sublease to Purchaser.

 

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10.2        Restrictions on Conduct of the Business Prior to Closing.  From the
Agreement Date until the Closing Date, no Seller Entity, with respect to the
Business, will, directly or indirectly, without Purchaser’s prior written
consent:

 

10.2.1      Enter into, create, incur or assume (i) any borrowings under capital
leases or (ii) any other obligations which would, in each such case or on a
cumulative basis, have a Material Adverse Effect on the Seller’s ability to
conduct the Business, or on Purchaser’s ability to conduct the Business after
the Closing, in substantially the same manner and condition as currently
conducted by Seller;

 

10.2.2      Acquire by merging or consolidating with, or by purchasing any
equity securities or assets (which are Material, individually or in the
aggregate, to Seller) of, or by any other manner, any business or any entity;

 

10.2.3      Sell, transfer, lease, license or otherwise encumber any of the
Purchased Assets or enter into any agreement, contract, memorandum or
understanding regarding such a sale, transfer, lease or license;

 

10.2.4      Enter into any Material contracts or commitments with another
Person, other than such contracts approved in advance by Purchaser or that can
be canceled on less than 30 days written notice, provided such approval will not
be unreasonably withheld or delayed; provided, however, Seller may enter into
(a) new client engagements subject to compliance with Purchaser’s conflict check
procedure, (b)  an agreement with EOP-Kruse Woods, L.L.C., as landlord under the
420 Office Lease, to assign the 420 Office Lease to Purchaser effective as of
the Closing, and (c) an agreement with EOP-Kruse Woods, L.L.C., as landlord, and
Jacob Engineering Group Inc., as sublandlord, under the 300 Sublease, to assign
the 300 Sublease to Purchaser effective as of the Closing;

 

10.2.5      Violate any legal requirement applicable to Seller;

 

10.2.6      Purchase, license or otherwise acquire any assets, except for
supplies and standard office equipment acquired in the ordinary course of
business;

 

10.2.7      Change its credit practices, accounting methods or practices or
standards used to maintain its books, accounts or business records;

 

10.2.8      Incur or become subject to any liability, contingent or otherwise,
except current liabilities in the ordinary course of business;

 

10.2.9      Enter into an agreement, contract, memorandum or understanding for
the sale of all or any part of the equity securities of Seller without the prior
written consent of Purchaser, which consent may be granted or withheld by
Purchaser in its sole discretion;

 

10.2.10    Fail to maintain the Purchased Assets in their existing order and
condition, reasonable wear and tear excepted; or

 

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A mark of *** on this page indicates that confidential material has been
omitted.

This Exhibit, including the omitted portions, has been filed separately with the
Secretary of the Securities and Exchange Commission pursuant to an application
requesting confidential treatment under Rule 24b-2 of the Securities Exchange
Act of 1934.

 

10.2.11    Agree, in writing or otherwise, to take any of the actions proscribed
by this Section 10.2, or any action that would make any of its representations
or warranties contained in this Agreement untrue or incorrect in any Material
respect or prevent it from performing or cause it not to perform its covenants
hereunder.

 

10.3    Certain Notifications by Seller Entities.  From the Agreement Date until
the Closing, the Seller Entities, as applicable, will promptly notify Purchaser
in writing regarding any:

 

10.3.1      Action taken by Seller not in the ordinary course of business and
any circumstance or event that could reasonably be expected to have a Material
Adverse Effect;

 

10.3.2      Fact, circumstance, event, or action by Seller (i) which, if known
on the Agreement Date, would have been required to be disclosed in or pursuant
to this Agreement; or (ii) the existence, occurrence, or taking of which would
result in any of the representations and warranties of Seller or the Principals
contained in this Agreement or in any agreement entered into in connection
herewith not being true and correct when made or at Closing;

 

10.3.3      Breach of any covenant or obligation of Seller or any Principal
hereunder;

 

10.3.4      Circumstance or event which will result in, or could reasonably be
expected to result in, the failure of Seller to timely satisfy any of the
closing conditions specified in Section 12 of this Agreement;

 

10.3.5      Actions, suits or proceedings against or, to the Knowledge of the
Seller Entities, threatened against the Business or the Purchased Assets, in any
court, or before any arbitrator, or before or by any Governmental Body;

 

10.3.6      Termination or, to the Knowledge of the Seller Entities, any
threatened termination of any Contract or other right that is necessary for the
ownership by Purchaser of any of the Purchased Assets or the operation by
Purchaser following the Closing Date of any of the Business including, without
limitation, any termination or any written notice, or to the Knowledge of the
Seller Entities, any oral notice of termination of any Material Contract with a
client, including, without limitation, any contracts with ***; and

 

10.3.7      Notice or other communication from any third Person alleging that
the consent of such third Person is or may be required in connection with the
transactions contemplated by this Agreement.

 

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10.4        Risk of Loss.  The risk of any loss, damage or impairment,
confiscation or condemnation of the Purchased Assets or any part thereof from
fire or any other casualty or cause will be borne by Seller at all times prior
to the Closing Date.

 

10.5        Updating the Seller Disclosure Schedule.  If any event, condition,
fact or circumstance that is required to be disclosed pursuant to Section 7
would require a change to the Seller’s disclosure schedules referenced therein
if the Seller’s disclosure schedules were dated as of the date of the
occurrence, existence or discovery of such event, condition, fact or
circumstance, then Seller will promptly deliver to Purchaser an update to the
applicable disclosure schedule specifying such change, provided, however, that
no such update will be deemed to supplement or amend the applicable disclosure
schedule for the purpose of (a) determining the accuracy of any of the
representations and warranties made by Seller in this Agreement or
(b) determining whether any of the conditions set forth in Section 12 have been
satisfied.

 

10.6        Access to Information.  From the Agreement Date until the Closing,
Seller will (a) permit Purchaser and its representatives to have reasonable
access during regular business hours, and in a manner so as not to interfere
with the normal operations associated with the Business, to all premises,
properties, personnel, books, records, Contracts, and Documents of or pertaining
to the Business; (b) furnish Purchaser with all financial, operating and other
data and information related to the Business (including copies thereof), as
Purchaser may reasonably request; and (c) otherwise cooperate and assist, to the
extent reasonably requested by Purchaser, with Purchaser’s investigation of the
Business, the Purchased Assets and the Assumed Liabilities.  No information or
knowledge obtained in any investigation pursuant to this Section 10.6 will
affect or be deemed to modify any representation or warranty contained herein or
the conditions to the obligations of the parties to consummate the Transaction. 
Any such access by Purchaser will not materially interfere with the normal
operation of the Business.

 

11.          Additional Covenants.

 

11.1        Confidentiality.  Both before and after the Closing, each of the
parties hereto agrees that it will treat in confidence this Agreement and all
documents, materials and other information that it may have obtained regarding
the other party during the course of the negotiations leading to the preparation
of this Agreement and other related documents.  If a party (the “Recipient”) is
requested or required (by deposition questions, interrogatories, requests for
information or documents, subpoena, civil investigative demand or similar
process) to disclose the confidential information of another party (the
“Protected Party”), the Recipient must provide the Protected Party with prompt
notice of such request(s), except under the Patriot Act, so the Protected Party
may seek an appropriate protective order or other appropriate remedy and/or
waive compliance with the confidentiality provisions of this Agreement.  (The
preceding sentence will not apply to public disclosures by a Recipient that the
Recipient believes in good faith to be required by federal securities laws or
any listing or trading agreement concerning the Recipient’s publicly-traded
securities, after reasonable advance notice to the Protected Party.)  In the
event that such protective order or other remedy is not obtained, or the
Protected Party grants a waiver hereunder, the Recipient may furnish that
portion (and

 

32

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only that portion) of the confidential information that it is legally compelled
to disclose and must exercise its reasonable efforts to obtain reliable
assurance that confidential treatment will be accorded any confidential
information so furnished.  The obligation of each party to treat such documents,
materials and other information in confidence will not apply to any information
(i) that is or becomes available to such party from a source other than the
Protected Party, unless the source is bound by a confidentiality agreement with
respect to the information, (ii) that is or becomes available to the public
other than as a result of improper disclosure by such party or its agents, or
(iii) the disclosure of which such party reasonably deems to be necessary in
order to obtain any of the consents or approvals contemplated hereby, provided
such party obtains the prior written consent of the Protected Party.

 

11.2        Public Announcements.  The parties agree that any press release or
releases to be issued prior to the Closing Date with respect to the announcement
of the transactions contemplated by this Agreement, and the press release, if
any, to be issued on the Closing Date with respect to the announcement of the
consummation of such transactions, will be mutually agreed upon by Purchaser and
Seller prior to the issuance thereof, and agree not to issue any such press
release or make any related public statement prior to the Closing Date relating
to the announcement of the transactions contemplated by this Agreement without
the mutual agreement of Purchaser and Seller, except as may be required by
applicable law, court process or by obligations pursuant to any listing
agreement with any securities exchange.

 

11.3        Taxes.

 

11.3.1      The Seller Entities will be solely liable for and will pay all Taxes
(whether assessed or unassessed) applicable to the Business and the Purchased
Assets, in each case attributable to any period (or portions thereof) ending
prior to the Closing Date, including all income or franchise Taxes arising in
connection with the consummation of the transactions contemplated by this
Agreement.  If Seller intends to dissolve or be wound up, the Seller Entities
will promptly file any final Tax returns in connection with such dissolution or
winding up.  Purchaser will be liable for and will pay all Taxes (whether
assessed or unassessed) applicable to the Business and the Purchased Assets, in
each case attributable to periods (or portions thereof) beginning on or after
the Closing Date.  For purposes of this Section 11.3, any period beginning
before and ending after the Closing Date will be treated as two partial periods,
one ending prior to the Closing Date and the other beginning on the Closing Date
except that Taxes (such as property Taxes) imposed on a periodic basis will be
allocated on a daily basis.

 

11.3.2      Notwithstanding Section 11.3.1, any sales Tax, use Tax or similar
Tax attributable to the sale or transfer of the Purchased Assets will be paid by
Seller.  Purchaser agrees to timely sign and deliver such certificates or forms
as may be necessary or appropriate to establish an exemption from (or otherwise
reduce) or make a report with respect to such Taxes.

 

11.3.3      The Seller Entities or Purchaser, as the case may be, will provide
reimbursement for any Tax paid by one party all or a portion of which is the

 

33

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responsibility of another party in accordance with the terms of this
Section 11.3.  Within a reasonable time prior to the payment of any said Tax,
the party paying such Tax will give notice to the other parties of the Tax
payable and the portion which is the liability of each party, although failure
to do so will not relieve the other party from its liability hereunder.

 

11.4     Further Assurances.

 

11.4.1      From and after the Closing Date, the Seller Entities will take all
such steps as may be necessary to put Purchaser in actual possession and
operating control of the Purchased Assets, and the Seller Entities agree that at
any time or from time to time (without further cost or expense to Purchaser)
after the Closing Date, upon the reasonable request of Purchaser, the Seller
Entities will execute, acknowledge and deliver such other instruments of
conveyance and transfer and take such other action as may be reasonably required
to vest in Purchaser good title to any of the Purchased Assets.

 

11.4.2      To the extent Seller receives any funds or other assets that are
part of the Purchased Assets (the “Purchaser Funds”) after the Closing Date,
Seller will, as soon as practicable, deliver such Purchaser Funds to Purchaser
and will take all steps necessary to vest title to such funds and assets in
Purchaser.  Seller hereby designates Purchaser as its true and lawful
attorney-in-fact, with full power of substitution, to execute or endorse for the
benefit of Purchaser any checks, notes or other documents received by Seller in
connection with the Purchaser Funds.  Seller hereby acknowledges and agrees that
the power of attorney set forth in the preceding sentence is coupled with an
interest, and further agrees to execute and deliver to Purchaser from time to
time any documents or instruments reasonably requested by Purchaser to evidence
such power of attorney.

 

11.4.3      Subject to Section 11.4.2, to the extent Purchaser receives any
funds or other assets that are Excluded Assets (the “Seller Funds”) after the
Closing Date, Purchaser will, as soon as practicable, deliver such Seller Funds
to Seller and will take all steps necessary to vest title to such funds and
assets in Seller.  Purchaser hereby designates Seller as its true and lawful
attorney-in-fact, with full power of substitution, to execute or endorse for the
benefit of Seller any checks, notes or other documents received by Purchaser in
connection with the Seller Funds.  Purchaser hereby acknowledges and agrees that
the power of attorney set forth in the preceding sentence is coupled with an
interest, and further agrees to execute and deliver to Seller from time to time
any documents or instruments reasonably requested by Purchaser to evidence such
power of attorney.

 

11.4.4      Within ten (10) days after the Closing Date, Seller will change its
corporation name to a name that does not include the name “Bates.”  After the
Closing, Purchaser will maintain Seller’s brand identity, including the use of
the name “Bates Private Capital” for so long as Purchaser believes in its sole
discretion that it is commercially productive to do so; however, as of the
Closing Date, Seller’s brand will be associated with Purchaser’s brand in such
manner as Purchaser deems reasonably

 

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A mark of *** on this page indicates that confidential material has been
omitted.

This Exhibit, including the omitted portions, has been filed separately with the
Secretary of the Securities and Exchange Commission pursuant to an application
requesting confidential treatment under Rule 24b-2 of the Securities Exchange
Act of 1934.

 

appropriate.  Purchaser may at its sole option register “Bates Private Capital”
as a fictitious business name and/or as a division of Purchaser to maintain
Seller’s brand.

 

11.4.5      At any time or from time to time after the Closing, each party
hereunder will, at the request of the other, execute and deliver any further
instruments or documents and take all such further action as any party may
reasonably request in order to carry out the transactions contemplated hereby.

 

11.5        Retained Information.  For a period of three years following the
Closing, to the extent not prohibited by law or restricted by applicable ethical
rules, Purchaser will make available to Seller any business records related to
the operations of Seller prior to the Closing which are transferred to Purchaser
at the Closing (the “Transferred Business Records”) for inspection and copying
to the extent Seller requires access to such records in response to tax audits
or other reasonable business necessity.  Seller’s access to the Transferred
Business Records is subject to the confidentiality obligations of Seller under
Section 11.1 hereof.  After the Closing, Seller, to the extent not prohibited by
law or restricted by applicable ethical rules, will make available to Purchaser
any business records related to the operations of Seller prior to the Closing
which are not transferred to Purchaser at the Closing (the “Retained Business
Records”) for inspection and copying to the extent Purchaser requires access to
such records for reasonable business necessity.  Purchaser’s access to the
Retained Business Records is subject to the confidentiality obligations of
Purchaser under Section 11.1 hereof.  Notwithstanding the foregoing, Parent and
Purchaser each waive any and all rights, including the right to inspect and
copy, with respect to all of the books, files, documents and records of
attorneys or accountants relating to their respective representations of any
Seller Entity in connection with the negotiation, execution and delivery of this
Agreement.

 

11.6     Escrow Terms.  The Escrowed Amount will be held in the Escrow pursuant
to the terms of that certain Escrow Agreement substantially in the form attached
hereto as Exhibit K.  ***

 

12.          Conditions Precedent To Obligations Of Purchaser and Parent.

 

The obligations of Purchaser and Parent under this Agreement are subject to the
fulfillment of all of the following conditions precedent on or before the
Closing Date, each of which may be waived in writing at the sole discretion of
Purchaser.  Seller must execute and deliver a certificate in substantially the
form attached hereto as Exhibit H certifying the satisfaction of all of the
conditions precedent set forth in this Section 12.  If any of the conditions
precedent to the obligations of Purchaser and Parent are not satisfied or waived
on the Closing Date, Purchaser will have the right to elect not to proceed with
the Closing and the parties will have no further rights or obligations under
this Agreement, the Expert Agreements or otherwise.

 

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12.1        Continued Truth of Representations and Warranties; No Breach.  The
representations and warranties made by the Seller Entities in this Agreement
will be true and correct in all Material respects on and as of the Closing Date
as though such representations and warranties were made on and as of such date,
except for any changes permitted by the terms hereof or consented to in writing
by Purchaser, and the Seller Entities will have performed and complied in all
Material respects with all terms, conditions, obligations, agreements and
restrictions required by this Agreement to be performed or complied with by them
prior to or on the Closing Date, including making the deliveries required under
Section 6.2 hereof.

 

12.2        Absence of Litigation.  No action or proceeding will have been
instituted or threatened orally or in writing by any public authority prior to
the Closing Date before a Governmental Body for the stated purpose of enjoining
or preventing the consummation of this Agreement and the transactions
contemplated hereby or to recover damages by reason thereof.  No action or
proceeding will have been instituted or threatened in writing by any private
Person prior to the Closing Date before a Governmental Body for the stated
purpose of enjoining or preventing the consummation of this Agreement and the
transactions contemplated hereby.

 

12.3        Landlord Consent.  The parties will have obtained the written
consent of EPO-Kruse Woods, L.L.C., as landlord, and Jacobs Engineering Group
Inc., as sublandlord, under the 300 Sublease, to the assignment of each sublease
to Purchaser.

 

12.4        No Material Adverse Change.  There will have been no Material
Adverse Change from the Interim Financial Statement Date through and including
the Closing Date.

 

12.5        Dissolution of Bates Private Capital Advisors.  On or before the
Closing, the Seller Entities will cause Bates Private Capital Advisors to be
dissolved and to cease to conduct all business operations.

 

12.6        Errors and Omissions Insurance.  Seller will have obtained an
extension of its existing errors and omissions insurance coverage for the
twenty-four (24) months immediately following the Closing Date (the “Errors and
Omissions Tail Policy”).  The Errors and Omissions Tail Policy will name
Purchaser and Parent as additional insureds.

 

13.          Conditions To Obligations Of Seller Entities.

 

The obligations of the Seller Entities under this Agreement are subject to the
fulfillment of all of the following conditions precedent on or before the
Closing Date, each of which may be waived in writing at the sole discretion of
Seller.  Each of Purchaser and Parent must execute and deliver a certificate in
substantially the forms attached hereto as Exhibits I and J, respectively,
certifying the satisfaction of all of the conditions precedent set forth in this
Section 13.  If any of the conditions precedent to the obligations of the Seller
Entities are not satisfied or waived on the Closing Date, the Seller Entities
will have the right to elect not to proceed with the Closing and the parties

 

36

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will have no further rights or obligations under this Agreement, the Expert
Agreements or otherwise.

 

13.1        Continued Truth of Representations and Warranties; No Breach.  The
representations and warranties made by Purchaser or Parent in this Agreement
will be true in all Material respects on and as of the Closing Date as though
such representations and warranties were made on and as of such date, except for
any changes permitted by the terms hereof or consented to in writing by Seller,
and Purchaser and Parent will have performed and complied in all Material
respects with all terms, conditions, obligations, agreements and restrictions
required by this Agreement to be performed or complied with by it prior to or on
the Closing Date, including making the deliveries required under Section 6.3
hereof.

 

13.2        Absence of Litigation.  No action or proceeding will have been
instituted or threatened orally or in writing by any public authority prior to
the Closing Date before a Governmental Body for the stated purpose of enjoining
or preventing the consummation of this Agreement and the transactions
contemplated hereby or to recover damages by reason thereof.  No action or
proceeding will have been instituted or threatened in writing by any private
Person prior to the Closing Date before Governmental Body for the stated purpose
of enjoining or preventing the consummation of this Agreement and the
transactions contemplated hereby.

 

13.3        Landlord Consent.  The parties will have obtained the written
consent of EPO-Kruse Woods, L.L.C., as landlord, and Jacobs Engineering Group
Inc., as sublandlord, under the 300 Sublease, to the assignment of each sublease
to Purchaser.

 

13.4        No Material Adverse Change.  There will have been no Material
adverse change in the business, assets (including intangible assets), financial
condition or results of operations of Parent from the date hereof through and
including the Closing Date.

 

14.          Survival Of Representations And Warranties.

 

The representations and warranties of the parties contained herein, and all
claims and causes of action related thereto, will survive the consummation of
the transactions contemplated hereby until the second anniversary of the Closing
Date.  Notwithstanding the foregoing, the limitation period for the survival of
representations and warranties set forth in this Section 14 will not apply to
any breach of a representation or warranty as a result of fraud.

 

15.          Indemnification

 

15.1     Indemnification By Seller Entities.

 

(a)           Subject to the limitations set forth in Section 15.3, the Seller
Entities, jointly and severally, agree to indemnify, defend and hold harmless
each of Purchaser, Parent and any of their respective members, shareholders,
officers, directors, employees, agents, affiliates, successors or assigns (each,
a “Purchaser Party”) from any

 

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loss, damage or expense (including reasonable attorneys’ fees) (collectively,
“Losses”) which a Purchaser Party may incur, suffer or become liable for as a
result of or in connection with (i) the breach of any representation or warranty
of the Seller Entities contained in this Agreement, including any Exhibit or
Schedule hereto, occurring or developing during the period of survival of such
representation or warranty, provided that the Purchaser Party makes a written
claim for indemnification against the Seller Entities within the two (2) year
survival period; and further provided that the liability of each Principal for
breach of any representation or warranty contained in Sections 7.21, 7.22 and 8
of this Agreement shall be governed by Section 15.1(b); (ii) the breach of any
covenant of the Seller contained in this Agreement or the other Transaction
Documents; or (iii) any assertion against a Purchaser Party of any claim or
liability constituting an Excluded Liability, including, without limitation, the
assertion against a Purchaser Party by any Person of any obligation or liability
relating to the Purchased Assets, the conduct of the Business by Seller, or the
conduct of any Seller Entity prior to the Closing Date, including, without
limitation, Tax claims or liabilities.  Notwithstanding the foregoing, other
than as set forth in Section 11.3.2, the Seller Entities will have no
indemnification, defense or hold harmless obligation to any Purchaser Party with
respect to the liability of any Purchaser Party for Taxes as a result of the
transactions contemplated by this Agreement or the Expert Agreements. 
Purchaser, acting on behalf of a Purchaser Party, will give the Seller Entities
prompt written notice of any claim, suit or demand that Purchaser believes will
give rise to indemnification by the Seller Entities under this section stating
in reasonable detail the nature and basis of such claim, suit or demand,
provided, however, that, the failure to give such notice will not affect the
obligations of the Seller Entities hereunder, except to the extent they are
prejudiced by such failure.

 

(b)           Subject to the limitations set forth in Section 15.3, each
Principal, severally and not jointly, agrees to indemnify, defend and hold
harmless each Purchaser Party from any Loss that such Purchaser Party may incur,
suffer or become liable for as a result of or in connection with the breach of
any representation or warranty of the Principal contained in Sections 7.21, 7.22
and 8 of this Agreement, occurring or developing during the period of survival
of such representation or warranty, provided that the Purchaser Party makes a
written claim for indemnification against the Principal within the two (2) year
survival period.

 

(c)           Except as hereinafter provided and except where a conflict of
interest between any Seller Entity and the Purchaser Party suggests separate
counsel is appropriate, the Seller Entities will have the right to defend and to
direct the defense against any such claim, suit or demand, in its name or in the
name of the Purchaser Party at the Seller Entities’ expense and with outside
counsel of the Seller Entities’ own choosing.  Each Purchaser Party will, at the
Seller Entities’ expense, cooperate reasonably in the defense of any such claim,
suit or demand.  If the Seller Entities, within a reasonable time after notice
of a claim, fail to defend a Purchaser Party, the Purchaser Party will be
entitled to undertake the defense, compromise or settlement of such claim at the
expense of and for the account and risk of the Seller Entities subject to the
right of the Seller Entities to assume the defense of such claim at any time
prior to the settlement, compromise or final determination thereof if the only
issues remaining therein involve liability for, or the amount of, money damages
to be assessed against the Purchaser Party,

 

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provided no Seller Entity will, without the Purchaser Party’s written consent,
settle or compromise any claim or consent to any entry of judgment that does not
include as an unconditional term thereof the giving by the claimant or the
plaintiff to the Purchaser Party a release from all liability in respect of such
claim.

 

15.2        Indemnification by Purchaser and Parent.  Purchaser and Parent,
jointly and severally, agree to indemnify, defend and hold harmless the Seller
Entities, and each of their respective shareholders, officers, directors,
employees, agents, affiliates, successors or assigns (each, a “Seller Party”)
from any Losses that a Seller Party may incur, suffer or become liable for as a
result of or in connection with (a) the breach of any representation or warranty
of Purchaser or Parent contained in this Agreement, including any Exhibit or
Schedule hereto, occurring or developing during the two (2) year period of
survival of such representation or warranty; (b) the breach of any agreement of
Purchaser or Parent contained in this Agreement or the other Transaction
Documents; or (c) any assertion against a Seller Party of any claim or liability
constituting an Assumed Liability or relating to the Purchased Assets or the
conduct of the Business by Purchaser or Parent on or after the Closing Date,
including, without limitation, Tax claims or liabilities.  Notwithstanding the
foregoing, other than as set forth in Section 11.3, Purchaser will have no
indemnification, defense or hold harmless obligation to any Seller Party with
respect to the liability of any Seller Party for Taxes as a result of the
transactions contemplated by this Agreement or the Expert Agreements.  Seller,
on behalf of each Seller Party, will give Purchaser prompt written notice of any
claim, suit or demand that it believes will give rise to indemnification by
Purchaser under this paragraph stating in reasonable detail the nature and basis
of such claim, suit or demand; provided, however, that, the failure to give such
notice will not affect the obligations of Purchaser hereunder, except to the
extent it is prejudiced by such failure.  Except as hereinafter provided and
except where a conflict of interest between a Seller Party and Purchaser and
Parent suggests separate counsel is appropriate, Purchaser will have the right
to defend and to direct the defense against any such claim, suit or demand, in
its name or in the name the Seller Party at Purchaser’s expense and with outside
counsel of Purchaser’s own choosing.  Each Seller Party will, at Purchaser’s
expense, cooperate reasonably in the defense of any such claim, suit or demand. 
If Purchaser, within reasonable time after notice of a claim, fails to defend a
Seller Party, such Seller Party will be entitled to undertake the defense,
compromise or settlement of such claim at the expense of and for the account and
risk of Purchaser subject to the right of Purchaser to assume the defense of
such claim at any time prior to the settlement, compromise or final
determination thereof if the only issues remaining therein involve liability
for, or the amount of, money damages to be assessed against Seller Party,
provided that Purchaser will not, without Seller Party’s written consent, settle
or compromise any claim or consent to any entry of judgment which does not
include as an unconditional term thereof the giving by the claimant or the
plaintiff to the Seller Party a release from all liability in respect of such
claim.

 

15.3     Limitations.  The indemnification provided for in Section 15.1 and 15.2
will be subject to the following limitations:

 

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A mark of *** on this page indicates that confidential material has been
omitted.

This Exhibit, including the omitted portions, has been filed separately with the
Secretary of the Securities and Exchange Commission pursuant to an application
requesting confidential treatment under Rule 24b-2 of the Securities Exchange
Act of 1934.

 

15.3.1      The Seller Entities will not have any obligation to indemnify any
Purchaser Party from and against any Losses resulting from, arising out of,
relating to, in the nature of, or caused by the breach of any representation,
warranty or covenant of the Seller Entities contained in this Agreement (a) less
than *** and (b) until the Purchaser Parties have suffered Losses by reason of
all such breaches in excess of a *** aggregate deductible (the “Basket”),
whereupon the Purchaser Parties will be entitled to indemnification thereunder
for all such Losses (back to the first dollar of the Basket).

 

15.3.2      The Seller Entities’ maximum obligation to indemnify the Purchaser
Parties from and against Losses resulting from, arising out of, relating to, in
the nature of or caused by breaches of the representations, warranties or
covenants of the Seller Entities contained in this Agreement (other than the
indemnification obligation under Section 15.1(a)(iii)) will not exceed ***.  The
maximum obligation of Purchaser and Parent to indemnify the Seller Parties from
and against Losses resulting from, arising out of, relating to, in the nature of
or caused by breaches of the representations, warranties or covenants of the
Purchaser or Parent contained in this Agreement (other than the indemnification
obligation under Section 15.2(c) will not exceed ***.

 

15.3.3      In addition to the other limitations set forth in this Section 15.3,
the maximum joint and several liability of the Seller Entities will be further
capped at the Escrowed Amount, and the Purchaser Parties will be entitled to
recover out of the Escrow the amount of any Losses for which Purchaser is
entitled to joint and several indemnification from the Seller Entities
hereunder.  In the event of Losses that exceed the Escrowed Amount (the “Excess
Loss”), the Purchaser Parties may recover such Excess Loss from the Seller and
each Principal on a several basis; provided, however, that no Principal will
have an obligation to indemnify the Purchaser Parties from and against an
individual claim, or otherwise be liable hereunder, for such Excess Loss in an
amount that exceeds ***.

 

15.3.4      The parties acknowledge and agree that the foregoing indemnification
provisions in this Section 15 will be the sole and exclusive remedies of the
Purchaser Parties and the Seller Parties for any inaccuracy or breach of the
representations, warranties or covenants in this Agreement (other than under
either Sections 15.1(a)(iii) or 15.2(c)) except in the event of fraud by another
party.

 

15.4     Insurance and Tax Effect.

 

15.4.1      The amount of any Loss for which indemnification is provided under
any of Sections 15.1 or 15.2 will be net of any amounts (net of the costs of
recovery of such amounts) recoverable by the indemnified party under insurance
policies, indemnification agreements or similar arrangements with respect to
such Loss (collectively, a “Net Loss”).

 

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15.4.2      Any payments made pursuant to the provisions of this Section 15 will
be treated as an adjustment to the total consideration payable to Seller under
this Agreement.  The amount of any Loss will be reduced to take account of any
net Tax benefit (if any) actually realized by the indemnified party arising from
the incurrence or payment of any such Net Loss.

 

16.          Right of Offset.

 

Purchaser will be entitled, but not obligated, to offset any portion of the Earn
Out Payment against Losses or Excess Losses for which Purchaser is entitled to
several indemnification from a Principal under Section 15.   Purchaser will pay
the remaining amount of the Earn Out Payment to the other Principals.  If
Purchaser undertakes an offset of the Earn Out Payment against Losses or Excess
Losses and it is finally determined by a court of competent jurisdiction that
such Losses or Excess Losses had not been incurred, then Purchaser will pay
interest on the amount of such improper offset at the Interest Rate from the
date of the offset through the date when such improper offset amount is paid to
the Principal.

 

17.          Termination of Agreement.

 

The parties may terminate this Agreement as provided below:

 

(a)           Purchaser and Seller may terminate this Agreement by mutual
written consent at any time prior to the Closing;

 

(b)           Purchaser may terminate this Agreement by giving written notice to
Seller at any time prior to the Closing (i) in the event Seller has breached any
representation, warranty, or covenant contained in this Agreement, Purchaser has
notified Seller in writing of the breach, and the breach has continued without
cure for a period of ten (10) days after the notice of breach, or (ii) if the
Closing will not have occurred on or before August 31, 2005 by reason of the
failure of any condition precedent under Section 12 (unless the failure results
primarily from Purchaser or Parent breaching in any Material way any
representation, warranty, or covenant contained in this Agreement or Purchaser
or Parent fails to make good faith efforts to fulfill its obligations under this
Agreement); and

 

(c)           Seller may terminate this Agreement by giving written notice to
Purchaser at any time prior to the Closing (i) in the event Purchaser or Parent
has breached any representation, warranty, or covenant contained in this
Agreement, Seller has notified Purchaser in writing of the breach, and the
breach has continued without cure for a period of ten (10) days after the notice
of breach, or (ii) if the Closing will not have occurred on or before August 31,
2005, by reason of the failure of any condition precedent under Section 13
(unless the failure results primarily from Seller breaching in any Material way
any representation, warranty or covenant contained in this Agreement or Seller
fails to make good faith efforts to fulfill its obligations under this
Agreement).

 

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18.          Effect of Termination.

 

If any Party terminates this Agreement pursuant to Section 17, all rights and
obligations of the parties under this Agreement will terminate without any
liability of any party to any other party (except for any liability of any party
then in breach); provided, however, that the confidentiality provisions of
Section 11.1 will survive termination.

 

19.          Expenses.

 

Except as may otherwise be expressly provided herein, each party to this
Agreement will pay his, her or its own expenses in connection with this
Agreement and the transactions contemplated hereby, including taxes, recording
fees and attorneys’ or accountants’ fees.

 

20.          Notices.

 

Any notices or other communications required or permitted hereunder will be
sufficiently given if delivered personally or sent by registered or certified
mail, return receipt requested, postage prepaid, or transmitted by telecopy with
confirmation copy sent by first class mail, postage prepaid, addressed as
follows or to such other address of which the parties may have given notice in
accordance with this Section :

 

In the case of Purchaser, to:

 

LECG, LLC
2000 Powell Street, Suite 600
Emeryville, California  94608
Attention:  Chief Financial Officer
Fax:  (510) 653-9898

 

In the case of Parent, to:

 

LECG Corporation
2000 Powell Street, Suite 600
Emeryville, California  94608
Attention:  Chief Financial Officer
Fax:  (510) 653-9898

 

with copies of notices to Purchaser or Parent to:

 

Marvin A. Tenenbaum, Esq.
General Counsel
LECG, LLC
33 West Monroe Street, Suite 1850
Chicago, IL 60603
Fax:  (312) 267-8220

 

and

 

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A mark of *** on this page indicates that confidential material has been
omitted.

This Exhibit, including the omitted portions, has been filed separately with the
Secretary of the Securities and Exchange Commission pursuant to an application
requesting confidential treatment under Rule 24b-2 of the Securities Exchange
Act of 1934.

 

Carol Kerr, Esq.

Folger Levin & Kahn, LLP

1900 Avenue of the Stars, Suite 2800

Los Angeles, California 90067

Fax:  (310) 556-3770

 

In the case of Seller or Principals, to:

 

Mr. John E. Bates

***

 

and

 

Mr. Rob Lee

5005 SW Meadows Road, Suite 300

Lake Oswego, OR 97035

Fax: (503) 639-2539

 

with a copy to:

 

Ronald L. Greenman
Tonkon Torp, LLP
888 SW Fifth Avenue
1600 Pioneer Tower
Portland, Oregon 97204
Fax:  (503) 972-3743

 

and

 

Mr. Ronald K. Ragen

Davis Wright Tremaine LLP

Suite 2300

1300 SW 5th Avenue

Portland, OR 97201

Fax: (503) 778-5299

 

21.          Successors.

 

This Agreement will be binding upon and inure to the benefit of the parties
hereto and their respective successors and assigns, except that no party may
assign its rights or obligations hereunder (directly or indirectly or as a
matter of law) without the prior written consent of all of the other parties. 
Notwithstanding the foregoing, any Principal may assign his or her rights to
payment, if any, under this Agreement to (a) any other Principal, (b) any of the
Principal’s spouse or biological or adoptive lineal ancestors or

 

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descendants, (c) trusts for the benefit of the Principal and/or one or more of
such spouse, ancestors or descendants, (d) the Principal’s executor,
administrator, trustee or personal representative to whom such rights and
obligations are transferred at death.  The obligations of Purchaser and Parent
with respect to the Earn Out Payment are intended to be binding on any successor
in interest to the Business.

 

22.          Article and Section Headings.

 

The Article and Section headings used in this Agreement are for the convenience
of the parties and in no way alter, modify, amend, limit, or restrict the
contractual obligations of the parties.

 

23.          Governing Law; Consent To Service.

 

This Agreement will be governed by and construed in accordance with the laws of
the State of California applicable to agreements made and to be performed
therein (without giving effect to the conflict of law provisions of such
jurisdiction).  The parties agree that service of process of notice in any such
action, suit or proceeding will be effective if in writing and sent by certified
or registered mail, return receipt requested, postage prepaid, as provided in
Section 20.

 

24.          Dispute Resolution.

 

In the event of any dispute or disagreement arising out of or relating to this
Agreement (a “Dispute”), the parties will attempt to resolve such Dispute by
good faith negotiation prior to resorting to mediation or litigation.  In the
event such Dispute is not resolved by means of such good faith negotiation, any
party (the “Proposing Party”) may require the Dispute to be referred to the
non-binding mediation of a single mediator (the “Mediator”) to be appointed
jointly by the parties.  The Proposing Party will give written notice to the
other parties of the Proposing Party’s intention to refer the Dispute to
mediation (the “Mediation Notice”).  Such Mediation Notice will specify in
reasonable detail the nature of the issue giving rise thereto and nominate a
single mediator to co-appoint, along with the other party’s selection of
mediator, the Mediator.  Within ten (10) days after the delivery of the
Mediation Notice, the other party to the Dispute will nominate in writing to the
Proposing Party a second mediator.   The two mediators so chosen will,
within ten (10) days after the second mediator’s selection, jointly appoint a
single mediator to serve as the Mediator. The Mediator will conduct the
mediation in accordance with the guidelines set by the parties to the Dispute. 
 In the event such guidelines cannot be agreed upon, the mediation will be
governed by the Rules of Practice and Procedure of Judicial Arbitration &
Mediation Services, Inc. (JAMS), or its successor entity.  The costs of engaging
the Mediator will be borne equally by the Proposing Party and the other party to
the Dispute and each party will bear its own costs of preparing the materials
for and making presentations to the Mediator.  The mediation will be held in
Emeryville, California.

 

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25.          Entire Agreement.

 

This Agreement and the other Transaction Documents, including all schedules and
exhibits hereto and thereto represent the entire understanding and agreement
between the parties hereto with respect to the subject matter hereof and thereof
and supersede all prior negotiations between the parties including, without
limitation, that certain Term Sheet dated May 19, 2005, and cannot be amended,
supplemented or changed orally, but may only be so modified by an agreement in
writing, which makes specific reference to this Agreement or the applicable
Transaction Document delivered pursuant hereto, and which is signed by the party
against whom enforcement of any such amendment, supplement or modification is
sought.

 

26.          Survival.

 

The respective rights and obligations of the parties set forth in Sections 3.3,
3.5, 4, 5, 11, and 14 through 27 of this Agreement will survive the Closing.

 

27.          Parent Guaranty.

 

Parent absolutely and unconditionally guaranties the performance of all of
Purchaser’s obligations under this Agreement and the other Transaction
Documents, and will be responsible, jointly and severally, for any breach by
Purchaser of any of the Transaction Documents.

 

28.          Counterparts.

 

This Agreement may be signed in two or more counterparts, each signed by one or
more of the parties hereto so long as each party will sign at least one
counterpart of this Agreement, all of which taken together will constitute one
and the same instrument.  Signatures delivered by facsimile or electronic file
format will be treated in all respects as originals.

 

[Remainder of this Page Intentionally Left Blank]

 

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
by their duly authorized representatives as of the date first above written.

 

 

PURCHASER:

PARENT:

 

 

LECG, LLC
A California limited liability company

LECG Corporation,
A Delaware corporation

 

 

By:

LECG Corporation

By:

/s/ John C. Burke

Its:

Sole Manager

 

 

 

 

 

By:

/s/ John C. Burke

 

Its:

CFO

 

 

 

 

 

 

Its:

CFO

 

 

 

SELLER ENTITIES:

 

 

 

 

 

Bates Private Capital, Incorporated
an Oregon corporation

 

 

 

By:

/s/ Rob J. Lee

 

 

 

 

Its:

President

 

 

 

 

 

/s/ John E.Bates

 

John E. Bates

 

 

 

 

 

/s/ Rob J. Lee

 

Rob J. Lee

 

 

 

 

 

/s/ Nancy S. Ranchel

 

Nancy S. Ranchel

 

 

 

 

 

/s/ Michael D. Weiner

 

Michael D. Weiner

 

 

 

 

 

/s/ Jennifer L. Stout

 

Jennifer L. Stout

 

 

Signature Page to Asset Purchase Agreement

 

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