Exhibit 10.62

 

EXECUTION VERSION

 

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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 May 5,
2006 by and among: BMB Mack Barclay, Inc., a California corporation (“BMB”);
Southern California Assets LLC, a California limited liability company (“SCA”);
CD-LIT Solutions LLC, a California limited liability company (“CD-LIT”); Cary P.
Mack, both personally (“Mack”) and as Trustee of the Mack Family Trust dated
April 21, 1999 (in such capacity, “Mack Trustee”); Christopher R. Barclay, both
personally (“Barclay”) and as Trustee of the 2000 Barclay Family Trust dated
January 27, 2000 (in such capacity, “Barclay Trustee”); Patrick F. Kennedy
(“Kennedy”); Michael R. Bandemer (“Bandemer”); Brian J. Bergmark (“Bergmark”);
Laura Fuchs Dolan (“Dolan”); Stacy Elledge Chiang (“Chiang”); Heather H. Xitco
(“Xitco”); LECG, LLC, a California limited liability company (“Purchaser”); and
LECG Corporation, a Delaware corporation (“Parent”). BMB, SCA and CD-LIT are
referred to herein each as a “Seller” and collectively as the “Sellers.”  Mack,
Barclay, Kennedy, Bandemer, Bergmark, Dolan, Chiang, Xitco, Mack Trustee and
Barclay Trustee are collectively referred to herein as the “Principals.”  The
Principals and Sellers are collectively referred to herein as the “Seller
Entities.”

 

RECITALS

 

A.            Sellers provide expert and consulting services involving forensic
certified public accounting, business advisory, economic and information
technology issues, client trust administration services, personal property
management and leasing services, software technology licensing services, and
various other services (collectively, the “Business”).

 

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

 

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

 

D.            As more fully described herein, the Principals own all of the
equity interests in Sellers and desire that the transactions described in this
Agreement be consummated.

 

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E.             In connection with the purchase and sale of substantially all of
the assets of Sellers, Purchaser will also retain the services of Mack, Barclay,
Kennedy, Bandemer, Bergmark, Dolan, Chiang, and Xitco (each, a “Mack Barclay
Director,” and collectively, the “Mack Barclay Directors”) pursuant to the terms
of individual Director Agreements to be entered into by and between Purchaser
and each Mack Barclay Director, as of the Closing Date in substantially the form
of Exhibits A-1 through A-8 attached hereto (each, individually, an “Director
Agreement”).

 

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 7.4.

 

“1934 Act” has the meaning given in Section 8.6.

 

“Accounts Receivable” has the meaning given in Section 2.2.6.

 

“Additional Payment” and “Additional Payments” have the meanings given in
Section 3.3.1.

 

“Additional Payment Accounting” has the meaning given in Section 3.3.5.

 

“Additional Payment Maximum” has the meaning given in Section 3.3.1.

 

“Additional Payment Percentage” has the meaning given in Section 3.3.3.

 

“Additional Payment Period” has the meaning given in Section 3.3.1.

 

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

 

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

 

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

 

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

 

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

 

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

 

“Barclay Trustee” has the meaning given in the Preamble hereof.

 

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“Basket” has the meaning given in Section 14.3.1.

 

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

 

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

 

“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 any Mack Barclay Director: (i) commission of a felony, as
determined by a court of competent jurisdiction; (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 Parent; (iii) willful misappropriation of funds or assets of
Purchaser or Parent for personal use; (iv) failure to perform material duties
(an incapacity due to physical or mental illness lasting not more than 120 days
in any 12-month period or an excused absence will not constitute such a failure)
under such Mack Barclay Director’s Director 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 Mack Barclay Director commences to effect a
cure within the foregoing 30-day period, he or she 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 Mack Barclay Director’s Director 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 Mack Barclay Director commences
to effect a cure within the foregoing 10-day period, he or she 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.

 

“CD-LIT” has the meaning given in the Preamble hereof.

 

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

 

“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” means all contracts, equipment leases, work orders, client
engagement letters, retainer letters, fee agreements and all other agreements 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.

 

arrangements, whether written or otherwise, that are Material to the Business or
to which the Purchased Assets may be subject, as set forth in Schedule 7.16.

 

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

 

“Costa Mesa Lease” has the meaning given in Section 2.1.11.

 

“Delivery Instructions” has the meaning given in Section 3.3.6.

 

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

 

“Director Restrictive Period” means ***.

 

“Dispute” has the meaning given in Section 21.

 

“Distributee” has the meaning given in Section 7.4.

 

“Documents” has the meaning given in Section 2.1.10.

 

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

 

“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 7.20.

 

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

 

“Errors and Omissions Tail Policy” has the meaning given in Section 10.11.

 

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

 

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

 

“Financial Statements” has the meaning given in Section 7.1.

 

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

 

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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.

 

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

 

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

 

“Gross Margin” means ***. Gross Margin will be expressed as a percentage.

 

“Gross Profit” means ***.

 

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

 

“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,
(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).

 

“Interim Financial Statement” has the meaning given in Section 7.1.

 

“Interim Financial Statement Date” has the meaning given in Section 7.1.

 

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

 

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

 

“Knowledge” of any Seller Entity means (i) facts or matters actually known by
the applicable Principals holding equity interests in such Seller Entity, and
(ii) facts or matters that such Principals 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 6.2.6.

 

“Liens” means any mortgage, pledge, conditional sales contract, lien, security
interest, right of possession in favor of any third party, claim or encumbrance.

 

“Losses” has the meaning given in Section 14.1.

 

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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.

 

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

 

“Mack Barclay Director” (or “Mack Barclay Directors”) has the meaning given in
Recital E to this Agreement.

 

“Mack Barclay Practice” means the client matters of any type secured for the
Purchaser by and attributable to any Mack Barclay Director, any Hired Employee,
or any Substitute Mack Barclay Director, in accordance with Purchaser’s standard
practice.

 

“Mack Trustee” has the meaning given in the Preamble hereof.

 

“Material” 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 a Seller, Purchaser or Parent,
as applicable.

 

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

 

“Mediation Notice” has the meaning given in Section 21.

 

“Mediator” has the meaning given in Section 21.

 

“Net Loss” has the meaning given in Section 14.4.1.

 

“New San Diego Lease” has the meaning given in Section 2.1.11.

 

“Office Leases” has the meaning given in Section 2.1.11.

 

“Parent” has the meaning given in the Preamble.

 

“Parent SEC Report” has the meaning given in Section 8.8.

 

“Parent Stock” has the meaning given in Section 3.1.2.

 

“Patriot Act” means the Uniting and Strengthening America by Providing
Appropriate Tools Required to Intercept and Obstruct Terrorism (USA PATRIOT ACT)
Act of 2001, as amended.

 

“Permitted Liens” means those Liens that Purchaser and the Seller Entities have
mutually agreed will remain in place against the Purchased Assets as of the
Closing Date, and which Liens are listed on Schedule 7.15 attached hereto.

 

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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.

 

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

 

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

 

“Principal Percentage Interest” has the meaning given in Section 3.1.2.

 

***

 

“Proposing Party” has the meaning given in Section 21.

 

“Protected Party” has the meaning given in Section 10.1.

 

“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 10.4.2.

 

“Purchaser Party” has the meaning given in Section 14.1.

 

“Recipient” has the meaning given in Section 10.1.

 

“Reimbursable Expenses” has the meaning given in Section 10.7.

 

“Representative” means the Person authorized by the Seller Entities to 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 Mack until changed by
advance written notice to Purchaser. All acts taken by the Representative after
the Closing will be binding on the Seller Entities for all purposes, and
Purchaser and Parent may rely on the authority of the Representative for all
purposes.

 

“Restricted Activities” means the Business, or any component thereof, conducted
by Sellers on or prior to the Closing Date; provided, however, that providing
services as an employee of a college, university or other educational
institution, as an employee of a governmental agency, as an outside director, as
a representative of a professional organization, as a representative of a
non-profit entity or foundation, as a speaker, panelist or author, will not
constitute Restricted Activities. In addition, services provided in connection
with the winding down and dissolution of any Seller, including the billing and
collection of Accounts Receivable on behalf of such Seller, and services
provided in

 

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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.

 

connection with CTAS, LLC or pursuant to a shared services agreement between
Purchaser and CTAS, LLC will not constitute Restricted Activities.

 

“Retained Business Records” has the meaning given in Section 10.5.

 

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

 

“San Diego Lease” has the meaning given in Section 2.1.11.

 

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

 

“Seller” (or “Sellers”) has the meaning given in the Preamble hereof. If any
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 “Seller” will be deemed to mean the Principals, severally and
jointly, as successors in interest to such Seller.

 

“Seller Affiliate” means a party formerly affiliated with any Seller, prior to
the Closing, in his or her capacity as an expert, independent contractor or
employee.

 

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

 

“Seller Funds” has the meaning given in Section 10.4.3.

 

“Seller Party” has the meaning given in Section 14.2.

 

“Seller Percentage” has the meaning given in Section 3.1.1.

 

“Seller Restrictive Period” means ***.

 

“Substitute Mack Barclay Director” means any individual that is recommended by
one or more Mack Barclay Directors to be hired by Purchaser as a director to
replace a Mack Barclay Director whose employment relationship with Purchaser is
terminated for any reason and such individual is subsequently hired by
Purchaser; provided, however, that no such individual will have been employed by
Purchaser prior to the Closing.

 

“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.

 

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

 

“Third Person Licenses” means Sellers’ licenses to third Person software and
other technology used by Sellers in connection with the Business as currently
conducted, which licenses are capable of assignment and are listed on Schedule
7.18.2.

 

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

 

“Transferred Business Records” has the meaning given in Section 10.5.

 

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

 

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

 

“Year-End Financial Statements” has the meaning given in Section 7.1.

 

2.             Sale And Purchase Of Assets.

 

2.1  Purchased Assets. Subject to the terms and conditions of this Agreement, on
the Closing Date, Sellers will sell, convey, assign, transfer and deliver to
Purchaser and Purchaser will purchase, receive and accept delivery from Sellers,
free and clear of all Liens (other than Permitted Liens), all of Sellers’ 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 Sellers 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”), which
schedule will detail the applicable Seller(s) of each Fixed Asset;

 

2.1.2  All of the assets reflected on the Interim Financial Statement, other
than (i) the Excluded Assets and (ii) 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 Sellers in connection
with the Business as currently conducted that are capable of assignment and that
are listed on Schedule 2.1.3 (“IP Assets”) and the goodwill associated
therewith, including, without limitation, the trade name “Mack Barclay.”

 

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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.

 

2.1.4  All of the Contracts, including, without limitation, the Third Person
Licenses; provided, however, that Purchaser and BMB will together use good faith
efforts to obtain a refund, for the benefit of BMB, of the *** deposit delivered
to Thomson Elite pursuant to the Contract with Thomson Elite, as modified by the
Addendum thereto dated December 29, 2005;

 

2.1.5  All rights to payment as a consequence of (i) deposits and prepayments
listed on Schedule 2.1.5 attached hereto and incorporated herein by this
reference, which schedule will detail the applicable Seller(s) for each deposit
or prepayment, 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, 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 10.3); 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, which
schedule will detail the applicable Seller(s) for each such client retainer or
payment;

 

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

 

2.1.8  All other assets of Sellers used in or useful to the conduct of the
Business, whether or not reflected on the books or records of Sellers 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  Except for the Retained Business Records, all files, documents,
correspondence, studies, reports, books and records of Sellers (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 Sellers in connection with client matters of the Business that are
open as of the Closing Date (collectively, the “Documents”), and

 

2.1.11  All rights and obligations of BMB under (i) that certain Lease dated
December 15, 2003, by and between BMB, as tenant, and 600 Anton Boulevard
Associates, as landlord, for the premises at 600 Anton Boulevard, Costa Mesa,
California, 92626 (the “Costa Mesa Lease”); (ii) that certain Lease dated
September 13, 1995, by and between BMB, as tenant, and 400 West Broadway LLC, as
landlord, for the

 

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premises at 402 West Broadway, San Diego, California 92101 (the “San Diego
Lease”); and (iii) that certain Lease dated April 24, 2006, by and between BMB
as tenant, and Broadway Tower 655, LLC as landlord, for the premises at 655 West
Broadway, San Diego, California, 92101 (the “New San Diego Lease”). The Costa
Mesa Lease, the San Diego Lease and the New San Diego Lease are collectively
referred to as the “Office Leases.”

 

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 shares, membership units or other equity interests, certificates,
books and records relating to the formation, maintenance and existence of each
Seller as a corporation or limited liability company, as the case may be;

 

2.2.2  All taxpayer and other identification numbers;

 

2.2.3  All Tax returns filed by any Seller Entity and associated Tax records;

 

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

 

2.2.5  The insurance policies set forth in Schedule 7.21 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 Sellers, as
applicable, that has been performed as of the date immediately prior to the
Closing Date (“Accounts Receivable”);

 

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

 

2.2.8  All rights of Sellers under this Agreement;

 

2.2.9  All Retained Business Records;

 

2.2.10 That certain ownership interest in the Padres Founders’ Club; and

 

2.2.11  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 Date.

 

2.3  Assumed Liabilities. On the Closing Date, Purchaser will enter into an
assignment and assumption agreement in substantially the form attached hereto as
Exhibit C (the “Assignment and Assumption Agreement”) with each Seller, as

 

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applicable, pursuant to which each 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 such Seller, as applicable (the “Assumed
Liabilities”): (a) all liabilities and obligations of such Seller incurred,
attributable to or otherwise arising under the Contracts and Office Leases on or
after the Closing Date; (b) obligations and liabilities relating to client
retainer balances that are transferred to Purchaser under Section 2.1.6, (c) the
obligations and liabilities set forth on Schedule 2.3; (d) 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; and (e) the obligation to
transfer to Purchaser’s benefit plans any participants in any Seller’s benefit
plans who are receiving, or will elect to receive, benefits under their COBRA
rights.

 

2.4  Excluded Liabilities. Notwithstanding anything to the contrary contained in
this Agreement, Purchaser will not assume or be liable for, and Sellers will
retain and remain responsible for, all of Sellers’ respective 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 any Seller is liable pursuant to Section 10.3 hereof, (b) all
liabilities and obligations of each 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 such Seller prior to the Closing Date, and unlawful
discrimination or harassment, (c) any costs and expenses incurred 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;
(d) any obligations of any Seller pursuant to any contract listed on Schedule
2.4; and (e) any obligations or liabilities arising out of or related to any
failure by the BMB Flexible Spending Account Plan identified in Schedule 7.20 to
comply with applicable laws pursuant to Section 7.20.

 

3.             Consideration.

 

3.1  Purchase Price and Payment. The purchase price for the Purchased Assets
(the “Purchase Price”) is Thirteen Million Two Hundred Thousand Dollars
($13,200,000) (the “Closing Payment”) plus an amount equal to the Additional
Payments, if any, made to Sellers 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 Sellers to Purchaser, Purchaser will make the
Closing Payment at the Closing as follows:

 

3.1.1  Purchaser will pay Sellers, in the aggregate, Twelve Million Nine Hundred
Fifty Thousand Dollars ($12,950,000) in cash by wire transfer of immediately
available funds pursuant to wire instructions that Sellers will supply to

 

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Purchaser at least three (3) days prior to the Closing Date. Each Seller will
receive that percentage of the Cash Payment as indicated on Schedule 3.1.1
attached hereto and incorporated herein by this reference (each such payment
percentage, a “Seller Percentage”). Further distributions by each Seller to the
Principals must be made in the percentages indicated in Schedule 3.1.2.

 

3.1.2  Purchaser will cause Parent to issue to Sellers, in the aggregate, a
number of unregistered shares of the common stock of Parent (“Parent Stock”)
calculated by dividing Two Hundred Fifty Thousand Dollars ($250,000) by the
average closing price of Parent’s common stock on NASDAQ for the twenty (20)
trading days immediately preceding the Closing Date. Purchaser will issue each
Seller an amount of Parent Stock calculated by multiplying the aggregate amount
of Parent Stock by such Seller’s Seller Percentage, and will cause the
certificates representing the Parent Stock to be delivered to Sellers within
five (5) business days after the Closing Date. At the direction of any Seller,
and upon receipt of a duly executed stock power by such Seller, Parent will
facilitate the distribution of the Parent Stock by such Seller to the Principals
holding its equity in such percentages as reflect their ownership interest in
such Seller as of the Closing Date, by reissuing stock certificates to such
Distributees. The percentage ownership interests of the Principals with respect
to each Seller are listed on Schedule 3.1.2 attached hereto and incorporated
herein by this reference (each such percentage interest, a “Principal Percentage
Interest”), by reissuing stock certificates to such Distributees.

 

3.1.3  Notwithstanding anything to the contrary contained herein, Purchaser may,
at Purchaser’s sole option on or before the Closing Date, substitute the Parent
Stock with Two Hundred Fifty Thousand Dollars ($250,000) in cash to be included
in the payment made under Section 3.1.1.

 

3.2  Allocation of Purchase Price. The Seller Percentage of the Purchase Price
for the Assets with respect to each Seller will be allocated in accordance with
an independent fair market value appraisal to be performed by a valuation firm
of Purchaser’s choosing (each, an “Allocation Schedule”). After the Closing,
Purchaser and each Seller will each file Internal Revenue Service Form 8594, and
all federal, state, local and foreign Tax returns, in accordance with the
applicable Allocation Schedule. Purchaser and each 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 Entities, 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 applicable Allocation Schedule without the written
consent of both the applicable 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 applicable Allocation
Schedule; and (iii) the parties will promptly advise each other regarding the
existence of any Tax audit, controversy or litigation related to such
allocation.

 

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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.

 

3.3  Additional Payments.

 

3.3.1  In addition to the Closing Payment set forth in Section 3.1, and subject
to the conditions set forth in this Section 3.3, Purchaser will make payments
(each, an “Additional Payment” and collectively, the “Additional Payments”) to
Sellers in an amount of up to Eight Million Eight Hundred Thousand Dollars
($8,800,000) in the aggregate (the “Additional Payment Maximum”) provided that
the measurement targets set forth in this Section 3.3 have been achieved during
the period from the Closing Date through April 30, 2011 (the “Additional Payment
Period”). The Additional Payments will be allocated among the Sellers in
accordance with their respective Seller Percentages. Further distributions by
each Seller to the Principals must be made in accordance with the Principals’
respective Principal Percentage Interest as indicated in Schedule 3.1.2.

 

3.3.2  The amount of each Additional Payment will be equal to ***. For the
purpose of illustration only, a sample calculation of an Additional Payment is
attached hereto as Exhibit K. Purchaser will deliver each Additional Payment to
Sellers on July 1 following the end of each Measurement Period. The amount of
any Additional Payment will be unlimited, subject only to the Additional Payment
Maximum. Accordingly, once the aggregate amount of Additional Payments equals
the Additional Payment Maximum, no subsequent Additional Payments will be
capable of being earned and no further Additional Payments will be due and
payable.

 

3.3.3  The “Additional Payment Percentage” equals ***.

 

3.3.4  Additional Payment Factor.

 

(a)   During the Measurement Period ending April 30, 2007, the “Additional
Payment Factor” will be ***.

 

(b)   During the Measurement Period ending April 30, 2008, the “Additional
Payment Factor” will be ***.

 

(c)   During each Measurement Period ending after May 1, 2008, the “Additional
Payment Factor” will be ***.

 

3.3.5  Within thirty (30) days after the end of each calendar month during the
Additional Payment 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 Gross Margin, Gross Profit, Revenue, and
Cost of Services, which, to the extent practical, will be detailed on an hourly
cost basis per project (collectively, the “Additional Payment Accounting”).
Purchaser will pay all reasonable expenses in connection with the preparation of
the Additional Payment Accounting and determination of the Additional Payment
under this Section 3.3.5.

 

14

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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.

 

3.3.6  Subject to the Additional Payment Maximum, any Additional Payments (or
portion thereof) earned pursuant to the terms of this Section 3.3 will be
accompanied by the Additional Payment Accounting for the applicable Measurement
Period and will be paid in cash by Purchaser to each Seller in accordance with
written payment instructions received by Purchaser from each Seller no later
than ten (10) days before the Additional Payment is due (the “Delivery
Instructions”). The Delivery Instructions will specify 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).

 

3.4  Operational Impact on Additional Payments. ***

 

3.5  Accounts Receivable. Schedule 3.5 sets forth for each Seller an accurate
breakdown and aging of all Accounts Receivable, including a complete itemization
of all related invoices that have been billed as of February 28, 2006. Schedule
3.5 will be separated into closed and open matters. 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, Sellers will provide Purchaser with an updated
Schedule 3.5, not later than the thirtieth (30th) day following the Closing
Date. The Seller Entities will be responsible for, and the Principals and the
Hired Employees, as applicable, may spend reasonable amounts of time after the
Closing, billing and collecting Accounts Receivable that are attributable to the
open and closed matters identified on Schedule 3.5, as well as any additional
billable client services provided after the date of Schedule 3.5 but prior to
the Closing without offset or chargeback. Any amount of the Accounts Receivable
collected by Purchaser will be remitted to the applicable Sellers within fifteen
(15) days after the end of the calendar month in which such collection occurs.
On open matters in existence at Closing, collections will be applied to the
oldest invoice first unless a specific invoice is identified by the client for
the payment.

 

4.             Covenant Not To Compete; Non-Solicitation

 

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 Mack Barclay Director agrees that during the Director
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 (whether as a securityholder, creditor or
otherwise) that engages in, any Restricted Activities; and

 

(b)   he or she will not: (i) solicit from any Person any business involving
Restricted Activities, (ii) cause, induce, or attempt to cause or induce any
client

 

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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.

 

Each Mack Barclay Director acknowledges 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 Mack Barclay Directors.
Notwithstanding anything to the contrary contained herein, each Mack Barclay
Director may own up to 1% of the capital stock of any entity engaged in any
Restricted Activities that is publicly traded, provided that he or she 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, each Seller, the Mack Trustee and the Barclay Trustee, 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 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.

 

Each Seller, Mack Trustee and Barclay Trustee 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 Sellers. Notwithstanding
anything to the contrary contained herein, each Seller, Mack Trustee and Barclay
Trustee may own up to 1% of

 

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the capital stock of any entity engaged in any Restricted Activities that is
publicly traded, provided that it 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 Mack Barclay Director will not, directly or indirectly, during the
period commencing on the Closing Date and ending on the second anniversary of
the termination of his or her employment with Purchaser, solicit, hire, retain
or attempt to hire or retain any other Director, including without limitation
any other Mack Barclay Director, employed or engaged as an independent
contractor by Purchaser or Parent. Each Mack Barclay Director 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 the Mack Barclay
Directors.

 

4.2.2  Each Seller, Mack Trustee and Barclay Trustee will not, directly or
indirectly, during the period commencing on the Closing Date and ending on the
third anniversary of the expiration of the Additional Payment Period, solicit,
hire, retain or attempt to hire or retain any of the Hired Employees or any
other employee or independent contractor of Purchaser or Parent. Each Seller
acknowledges that this Section 4.2.2 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 Sellers.

 

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.

 

5.             Transfer Of Employees And Employee Benefits.

 

5.1  Workers’ Compensation. Without limiting the scope of Excluded Liabilities
under Section 2.4 hereof, each Seller, as applicable, 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. Each Seller, as applicable, 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 14.1 hereof. All
workers’ compensation claims currently filed against any Sellers

 

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are listed on Schedule 5.1, which schedule identifies the Seller(s) to which
such claims relate.

 

5.2  Transfer of Employees. In addition to the employment of the Mack Barclay
Directors pursuant to the applicable Director 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 one or more Sellers
with titles, responsibilities, compensation and benefits comparable to those
currently provided by the applicable Seller to each such employee or independent
contractor, subject to adjustment as necessary to conform to Purchaser’s
customary and usual employment practices and policies; 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 Sellers with a list of
the Hired Employees no later than ten (10) days before the Closing. On the
Closing Date, each Seller, as applicable, will terminate all of the Hired
Employees employed by such Seller 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. Sellers 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. Sellers are solely responsible for any
liability that 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 any Seller prior to the Closing Date, or the transactions
contemplated by this Agreement, and will indemnify, defend and hold Purchaser
harmless from and against any and all such liabilities in accordance with
Section 14.1 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 7.20.
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 Sellers will be an Excluded Liability to be
indemnified against by Sellers in accordance with Section 14.1 hereof.

 

6.             The Closing.

 

6.1  The Closing. The “Closing” means the time at which Sellers will effect the
sale and transfer of the Purchased Assets in exchange for the Purchase Price to
be delivered by Purchaser pursuant to Section 3 hereof. The Closing is expected
to occur on May 9, 2006 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.

 

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6.2  Seller Entity Deliveries at Closing. Subject to fulfillment or waiver of
the conditions set forth in Section 11, at the Closing the Seller Entities, as
applicable, will execute and/or deliver to Purchaser all of the following:

 

6.2.1  A Certificate of Seller dated the Closing Date for each Seller, in form
and substance reasonably satisfactory to Purchaser (i) attaching a true and
correct copy of an action of such Seller authorizing the execution and
performance of this Agreement and the other Transaction Documents to which such
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 such Seller and
authorized to give instructions and directions on such Seller’s behalf;

 

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

 

6.2.3  An Assignment and Assumption Agreement for each Seller, if applicable,
duly executed by such Seller;

 

6.2.4  An opinion of counsel to the Seller Entities in substantially the form
attached hereto as Exhibit E;

 

6.2.5  The closing certificate contemplated by Section 11 hereof;

 

6.2.6  An Assignment of Lease in substantially the form attached hereto as
Exhibit F for each of the Office Leases (each, a “Lease Assignment”) together
with a consent to each Assignment of Lease from the respective landlord under
each of the Office Leases;

 

6.2.7  The Director Agreements, each duly executed by the applicable Mack
Barclay Director; and

 

6.2.8  All other such executed endorsements, assignments and other instruments
of transfer and conveyance consistent with the terms of this Agreement and as
may reasonably be 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 the Sellers, as applicable, in the Purchased
Assets, free and clear of all Liens (other than 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 12, at the Closing Purchaser will execute and/or
deliver (or cause Parent to deliver) to Sellers all of the following:

 

6.3.1  The Closing Payment in accordance with Section 3.1;

 

6.3.2  An Officer’s Certificate of Parent, dated the Closing Date, in form and
substance reasonably satisfactory to Sellers (i) attaching a true and correct
copy

 

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of an action of Parent, acting on its own behalf and in its capacity as the sole
member and manager of Purchaser, authorizing the execution and performance of
this Agreement and the other Transaction Documents by Parent and by Purchaser,
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 and Parent;

 

6.3.3  The Assignment and Assumption Agreements, each duly executed by
Purchaser;

 

6.3.4  The closing certificate contemplated by Section 12 hereof;

 

6.3.5  The Lease Assignments, each duly executed by Purchaser;

 

6.3.6  The Director Agreements, each duly executed by Purchaser; and

 

6.3.7  All offer letters for Hired Employees, each duly executed by Purchaser.

 

7.             Representations And Warranties Of Seller Entities.

 

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

 

7.1  Financial Statements. Sellers have delivered to Purchaser Sellers’
consolidated, audited financial statements for the 2003 and 2004 fiscal years
and their consolidated, unaudited financial statements for the 2005 fiscal year
(collectively, the “Year-End Financial Statements”). The Year-End Financial
Statements present fairly the financial condition of Sellers on a consolidated
basis and the results of Sellers’ operations for the periods indicated. Sellers
have also delivered to Purchaser balance sheets and the statements of income of
Sellers for the 2-month period ended February 28, 2006 (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 Sellers on a consolidated basis as of the Interim Financial
Statement Date, and the results of Sellers’ operations for the period ended the
Interim Financial Statement Date on a cash basis; provided, however, that the
Interim Financial Statement (i) is subject to normal year-end adjustments,
including uncollectible accounts, 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 attached hereto as Exhibit
G.

 

7.2  Taxes. Except as otherwise indicated in Schedule 7.2, 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 due and required to be filed by them
as of the date hereof. Sellers

 

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have 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 Seller has at any time during such Seller’s
existence owned any subsidiaries.

 

7.3  Brokers. No Seller Entity 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.

 

7.4  1933 Act Matters. Each Seller and each Principal, if a distributee of the
Parent Stock from any Seller (each, a “Distributee”), will acquire the shares of
Parent Stock to be acquired pursuant to this Agreement either (i) for investment
for such 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”). Each 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 each Distributee’s representations
herein. Each 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.

 

7.5  Information, Experience, and Ability to Bear Risk. Each Distributee
acknowledges receipt of all the information requested from Parent by such
Distributee and considered by such 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 8.8). Each 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 such Distributee
is capable of evaluating the merits and risks of, and such Distributee is able
to bear the economic risk of, his, her or its acquisition of such shares of
Parent Stock pursuant to this Agreement. Each Distributee has had the
opportunity to ask questions and receive answers regarding the terms and
conditions of such acquisition of shares of Parent Stock.

 

7.6  Accuracy of Disclosure. No representation or warranty made by a Seller
Entity in this Section 7, and no exhibit, certificate, schedule, list or
instrument 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 any
untrue statement of a Material fact or omits or will omit to state a Material
fact necessary to make the statements contained here in and therein not
misleading.

 

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7.7  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.

 

7.8  Organization and Valid Existence of BMB. BMB is a corporation duly
organized and validly existing under the laws of the State of California. BMB
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. BMB
is duly qualified to do business as a foreign corporation and is in good
standing 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.

 

7.9  Organization and Valid Existence of SCA and CD-LIT. SCA and CD-LIT, and
each of them, is a duly formed limited liability company and is existing in good
standing under the laws of the State of California. Each has the limited
liability company power and authority to enter into the Transaction Documents.
Each has all requisite limited liability company 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. Each is duly qualified to do business as a foreign limited liability
company and is in good standing 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.

 

7.10  Authority of Sellers. The Transaction Documents have been duly authorized
by all necessary corporate or limited liability company action, as applicable,
on the part of each Seller and have been duly executed and delivered by each
Seller. The execution and delivery of this Agreement and the other Transaction
Documents by each Seller and the consummation by each Seller of the transactions
contemplated hereby and thereby have been duly authorized such Seller and its
shareholders or members, as applicable, and no other shareholder or member
consents or approvals are required. This Agreement and the other Transaction
Documents constitute the valid and legally binding obligations of each Seller,
enforceable against such Seller in accordance with their respective terms,
except as may be limited by the Enforceability Limitations.

 

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7.11  Ownership of Seller Equity. The shareholders or members of each Seller, as
applicable, own, beneficially or of record, one hundred percent (100%) of the
issued and outstanding equity interests of such Seller, free and clear of all
Liens, in the percentages shown in Schedule 3.1.2, and no Seller Entity is aware
of any pending or threatened claim regarding the ownership of such Seller.

 

7.12  Authority of the Seller Shareholders or Members. Each shareholder or
member of each Seller, as applicable, has the requisite power and authority to
execute and deliver this Agreement and the Transaction Documents to which such
shareholder or member is a party, and to consummate the transactions
contemplated hereby and thereby to be consummated by such shareholder or member,
as applicable. This Agreement has been duly and validly executed and delivered
by each shareholder or member, as applicable, of each Seller in his or her
capacity as a shareholder or member, respectively, of such Seller. 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 each shareholder or member, as
applicable, of each Seller, enforceable against each such shareholder or member,
respectively, in accordance with their respective terms, except as may be
limited by the Enforceability Limitations.

 

7.13  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 the bylaws of BMB or
any other agreement between or among BMB and any of the shareholders of BMB,
(ii) will violate or conflict with the Articles of Organization or operating
agreement of SCA or CD-LIT, respectively, or any other agreement between or
among SCA or CD-LIT and any of their respective members,  (iii) to the Knowledge
of any Seller Entity, 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 (iv) to the Knowledge of any
Seller Entity, will result in a Material violation of any statutes, laws,
ordinances, rules, regulations or requirements of Governmental Bodies having
jurisdiction over the Business or any Seller; provided, however, that the Seller
Entities make no representation with respect to Purchaser’s ability to conduct
business without operating as a professional corporation in compliance with the
State Board of Accountancy of California. Schedule 7.16 identifies all
Contracts, the assignment of which requires novation or court approval.

 

7.14  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 7.14, since the Interim Financial Statement Date,
no Seller, as applicable, has:

 

7.14.1  Had any Material Adverse Change in the Business of such Seller;

 

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7.14.2  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;

 

7.14.3  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;

 

7.14.4  Increased, or agreed to increase, the compensation or bonuses or special
compensation of any kind of any Hired Employee of such Seller 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 such Seller, and adjustments in
certain Hired Employees’ compensation, consistent with Purchaser’s compensation
structure for comparable positions, that will take effect as of the Closing
Date, and no such increases are required by written agreement or, to the
Knowledge of such Seller, 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;

 

7.14.5  Had any strike or work stoppage;

 

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

 

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

 

7.15  Title to and Condition of Purchased Assets. Each Seller has good and valid
title to, or a valid leasehold interest in, or license to use, all of the
Purchased Assets applicable to it, free and clear of all Liens, except for the
Permitted Liens.

 

7.16  Contracts. To the Knowledge of the Seller Entities, Schedule 7.16 contains
a complete list (and, in the case of oral agreements, contracts or leases, a
summary of the material terms) of all Contracts to which any Seller is a party.
In the case of client engagement letters, retainer letters and fee agreements,
all such client agreements are, to the Knowledge of the Seller Entities, listed
on Schedule 7.16, regardless of whether they are Material. To the Knowledge of
the Seller Entities, no Contract contains any provision pursuant to which the
assignment of such Contract to Purchaser will result in a loss or limitation of
rights with respect to Purchaser under such Contract. To the Knowledge of the
Seller Entities, the Contracts are valid, binding and enforceable by the
applicable Seller in accordance with their respective terms and are in full
force and effect, except as may be limited by the Enforceability Limitations.
The Sellers have provided access to or delivered to Purchaser true and complete
copies of the Contracts listed in Schedule 7.16 and all amendments thereto,
other than those oral agreements summarized on Schedule 7.16. To the Knowledge
of the Seller Entities, the Sellers, as applicable, have complied in all
Material respects with all of the Contracts and are not in Material default

 

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under any of the Contracts. To the Knowledge of the Seller Entities, and except
as included in the Accounts Receivable, 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 7.16.

 

7.17  Litigation. Except as described on Schedule 7.17, there is no litigation,
proceeding (arbitral or otherwise), or investigation of any nature, and of which
any Seller Entity has received notice, pending or, to the Knowledge of the
Seller Entities, threatened against any Seller relating to either the Business
or the Purchased Assets. Except as described on Schedule 7.17, there are no
writs, injunctions, decrees, arbitration decisions, unsatisfied judgments or
similar orders outstanding against any Seller, and of which any Seller Entity
has received notice, relating to either the Business or the Purchased Assets.

 

7.18  Intellectual Property.

 

7.18.1  Schedule 2.1.3 contains a true and complete list of the IP Assets. Each
Seller, as applicable, has delivered to Purchaser copies of all documents (if
any) establishing such Seller’s ownership of or rights to use the IP Assets.

 

7.18.2  The Sellers own, or use pursuant to valid licenses, the IP Assets.
Without limiting the foregoing, each Seller, as applicable, has a sufficient
number of licenses for the Third Person Licenses for each of such Seller’s
current employees, independent contractors and/or items of equipment.

 

7.18.3  There are no third Person claims or demands pending or, to the Knowledge
of the Seller Entities, 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.

 

7.18.4  Each Seller’s rights, as applicable, in and to the IP Assets are freely
assignable, including the right to create derivative works, and no Seller is
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 Sellers in the IP Assets are free and clear of
all Liens, other than Permitted Liens, and to the Knowledge of the Seller
Entities, are not currently 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 7.16 or Schedule 2.1.3, no current licenses
or other rights for the use of the IP Assets have been granted by any Seller to
any third Persons, no Seller has any obligation to grant any such licenses or
rights, and to the Knowledge of the Seller Entities, none of the IP Assets is
being used by any other Person.

 

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7.18.5  To the Knowledge of the Seller Entities, no employee or independent
contractor of any Seller has any valid claim or right to any of the IP Assets.
No employee or independent contractor of any 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.

 

7.18.6  The Seller Entities do not make any representation and warranty
regarding the performance or functionality of the IP Assets other than the
Observation Management System being transferred to Purchaser hereunder by
CD-LIT.

 

7.19  Compliance with Laws. Except to the extent otherwise specifically referred
to herein, each 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 such Seller, the Business
and the applicable Purchased Assets, except where the failure to comply will not
have a Material Adverse Effect.

 

7.20  Employee Benefit Plans. Schedule 7.20 contains a true and complete list of
all Employee Benefit Plans maintained by Sellers. Except as identified in
Schedule 7.20, to the Knowledge of the Seller Entities, 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.

 

7.21  Insurance. Schedule 7.21 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 each Seller.
All such policies will remain in full force and effect up to and inclusive of
the Closing Date.

 

7.22  Employees; Employment Matters.

 

7.22.1  No Seller has any unsatisfied liability to any previously terminated
employee or independent contractor. Sellers have disclosed all written employee
handbooks, policies, programs and arrangements to Purchaser.

 

7.22.2  Except as otherwise indicated in Schedule 7.22, no key employee or
independent contractor or group of employees or independent contractors has
informed any Seller of any plans to terminate their employment with such Seller
for any reason, including as a result of the transactions contemplated by this
Agreement.

 

7.22.3  With the exception of the Principals, all persons employed by any Seller
are employees at will.

 

7.23  Business Relations. Except as otherwise indicated in Schedule 7.23, no
Seller has received any written notice or, to the Knowledge of such Seller, any
oral notice

 

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that any client, supplier or vendor engaged in or doing business with such
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 except as may
occur in the ordinary course of business. Within the last twelve (12) months,
and except as may have occurred in the ordinary course of business, 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 any Seller
from any client of such Seller. To the Knowledge of Sellers, the consummation of
the transactions contemplated by this Agreement will not have a Material Adverse
Effect on any relationships with any clients of Sellers.

 

7.24  Warranty; Nonbillable Work. To the Knowledge of the Seller Entities, all
services rendered by each Seller have been in Material conformity with all
applicable contractual commitments and all warranties, and no Seller has any
Material liability for damages in connection therewith. To the Knowledge of the
Seller Entities, and except as set forth in Schedule 7.24, no Seller is
obligated to perform nonbillable client service work under the terms of any
Contract in order to correct work previously performed that was incorrect or
deficient, to complete work in excess of the fixed fee 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. To
the Knowledge of the Seller Entities, and except as set forth in Schedule 7.24,
no Seller is a party to any fixed fee or capped price contracts or engagement
arrangements involving work that if billed at such Seller’s normal hourly rates
would exceed $10,000 in annual revenues, nor does any 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 a Seller may provide 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.

 

7.25  Consents. The execution, delivery and performance of this Agreement and
all ancillary agreements, documents, instruments and schedules executed in
connection herewith by any Seller Entity do not require the consent, approval
authorization or act of, or the making by any Seller Entity of any declaration,
filing or registration with, any Governmental Body or any other Person,
including, in the case of the Principals, each Principal’s spouse, as
applicable, that applies to or binds any Seller Entity that has not been
obtained or made or that will not have been obtained or made as of the Closing
Date. Notwithstanding the foregoing, Sellers have not sought the consent of the
California State Board of Accountancy.

 

7.26  Accuracy of Disclosure. No representation or warranty made by a Seller
Entity in this Section 7, and no exhibit, certificate, schedule, list or
instrument prepared, made or delivered, or to be prepared, made or delivered, by
or on behalf of a Seller Entity

 

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pursuant hereto contains or will contain any untrue statement of a Material fact
or omits or will omit to state a Material fact necessary to make the statements
contained here in and therein not misleading.

 

8.             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:

 

8.1  Organization and Authority. Purchaser is a duly formed limited liability
company and is existing in good standing under the laws of the State of
California. Purchaser has all requisite limited liability company power and
authority 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 Parent and Purchaser is duly
qualified to do business as a foreign corporation or limited liability company,
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.

 

8.2  Authorization of Agreement. Purchaser and Parent each have the requisite
power and authority to execute and deliver this Agreement and to consummate the
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 each in accordance with
their respective terms, except as may be limited by the Enforceability
Limitations.

 

8.3  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 is a party or by which Purchaser or Parent is 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.

 

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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.

 

8.4  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, or under federal
and applicable state securities laws. Assuming the representations and
warranties of each Distributee set forth in Sections 7.4 and 7.5 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 California Corporate Securities Law of 1968,
as amended.

 

8.5  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 and not otherwise disclosed in the Parent SEC Reports, 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.

 

8.6  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”).

 

8.7  No Finder. Except for  ***, neither Purchaser 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. Purchaser acknowledges that it is responsible for payment of any
finder fee.

 

8.8  Consents. All consents, approvals, authorizations or acts of, or the making
by Purchaser of any declaration, filing or registration with, any Governmental
Body or any other Person that apply to or bind 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.

 

8.9  Accuracy of Disclosure. No representation or warranty made by either Parent
or Purchaser in this Section 8, and no exhibit, certificate, schedule, list or
instrument prepared, made or delivered, or to be prepared, made or delivered, by
or on behalf of Parent or Purchaser pursuant hereto contains or will contain any
untrue

 

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statement of a Material fact or omits or will omit to state a Material fact
necessary to make the statements contained herein and therein not misleading.

 

9.             Pre-Closing Covenants.

 

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

 

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

 

9.1.2  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
Sellers when due and will not become an Assumed Liability);

 

9.1.3  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

 

9.1.4  Make a good faith effort to obtain the written consent of the  landlords
under the San Diego Lease and the Costa Mesa Lease, respectively, to the
assignment of each such Office Lease to Purchaser.

 

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

 

9.2.1  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 such 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 such Seller;

 

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

 

9.2.3  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;

 

9.2.4  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, that Sellers, as
applicable, may enter into (a) new client engagements subject to compliance with
Purchaser’s conflict

 

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check procedure, (b)  an agreement with 600 Anton Boulevard Associates, as
landlord under the Costa Mesa Lease, to assign the Costa Mesa Lease to Purchaser
effective as of the Closing Date, (c) an agreement with 400 West Broadway LLC,
as landlord under the San Diego Lease, to assign the San Diego Lease to
Purchaser effective as of the Closing Date, and (d) an agreement with Broadway
Tower 655, LLC, as landlord under the New San Diego Lease, to assign the New San
Diego Lease to Purchaser effective as of the Closing Date.

 

9.2.5  Violate any legal requirement applicable to such Seller;

 

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

 

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

 

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

 

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

 

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

 

9.2.11  Agree, in writing or otherwise, to take any of the actions proscribed by
this Section 9.2, 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.

 

9.3  Certain Notifications by Seller Entities. From the date of this Agreement
until the Closing, the Seller Entities, as applicable, will promptly notify
Purchaser in writing regarding any:

 

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

 

9.3.2  Fact, circumstance, event, or action by any Seller (i) which, if known on
the date of this Agreement, 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 the Seller
Entities contained in this Agreement or in any agreement entered into in
connection herewith not being true and correct when made or at Closing;

 

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9.3.3  Breach of any covenant or obligation of any Seller Entity hereunder;

 

9.3.4  Circumstance or event which will result in, or could reasonably be
expected to result in, the failure of any Seller to timely satisfy any of the
closing conditions specified in Section 11 of this Agreement;

 

9.3.5  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;

 

9.3.6  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;
and

 

9.3.7  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.

 

9.4  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 Sellers at all times prior to the Closing
Date.

 

9.5  Updating the Disclosure Schedules. If any event, condition, fact or
circumstance that is required to be disclosed pursuant to Section 7 would
require a change to the schedules referenced therein if such schedules were
dated as of the date of the occurrence, existence or discovery of such event,
condition, fact or circumstance, then the Seller Entities will promptly deliver
to Purchaser an update to the applicable schedule specifying such change,
provided, however, that, unless such update is delivered to Purchaser before
Closing, no such update will be deemed to supplement or amend the applicable
schedule for the purpose of (a) determining the accuracy of any of the
representations and warranties made by the Seller Entities in this Agreement or
(b) determining whether any of the conditions set forth in Section 11 have been
satisfied.

 

9.6  Access to Information. From the date of this Agreement until the Closing,
the Seller Entities 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

 

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Section 9.6 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 transactions contemplated in this Agreement. Any such access by
Purchaser will not materially interfere with the normal operation of the
Business.

 

10.          Affirmative Covenants.

 

10.1  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 or other applicable law, 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 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.

 

10.2  Public Announcements.

 

10.2.1  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 the Seller Entities
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 the Seller Entities, except as may be required
by applicable law, court process or by obligations pursuant to any listing
agreement with any securities exchange.

 

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10.2.2  If any Seller Entity discloses, or has disclosed prior to the date of
this Agreement, to any employee(s) of any Seller any information regarding the
transactions contemplated by this Agreement, the Seller Entities will use their
best efforts to ensure that such employee(s) do not disclose such information to
any third party, including without limitation any Governmental Body, prior to
the public announcement by Purchaser and Parent of the transactions contemplated
by this Agreement. The Seller Entities will indemnify Purchaser and Parent in
accordance with Section 14.1 for any loss, damage or expense that Purchaser or
Parent may incur, suffer or become liable to a third party for as a result of or
in connection with any such disclosure.

 

10.3  Taxes.

 

10.3.1  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 any Seller intends to dissolve or be wound up, the applicable
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 10.3, 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.

 

10.3.2  Notwithstanding Section 10.3.1, any sales Tax, use Tax or similar Tax
attributable to the sale or transfer of the Purchased Assets will be shared
evenly between Purchaser and Sellers. 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.

 

10.3.3  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
responsibility of another party in accordance with the terms of this Section
10.3. 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.

 

10.4  Further Assurances.

 

10.4.1  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

 

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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.

 

10.4.2  To the extent any Seller receives any funds or other assets that are
part of the Purchased Assets (the “Purchaser Funds”) after the Closing Date,
such 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. Each 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
such Seller in connection with the Purchaser Funds. Each 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.

 

10.4.3  Subject to Section 10.4.2, 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 the
applicable Seller and will take all steps necessary to vest title to such funds
and assets in such Seller. Purchaser hereby designates BMB as its true and
lawful attorney-in-fact, with full power of substitution, to execute or endorse
for the benefit of Sellers 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 Sellers from time
to time any documents or instruments reasonably requested by Purchaser to
evidence such power of attorney.

 

10.4.4  Within ten (10) days after the Closing Date, BMB will take all actions
and make all filings necessary to change its name to a name that does not
include the name “Mack Barclay.”  Notwithstanding the foregoing, Purchaser
hereby grants BMB the right to use the name “Mack Barclay” for such period of
time after the Closing as is reasonably necessary for the purpose of collecting
Accounts Receivable and winding up its affairs. After the Closing, Purchaser
will maintain the brand identity of BMB, including the use of the name “Mack
Barclay,” for so long as Purchaser believes in its sole discretion that it is
commercially productive to do so; however, as of the Closing Date, such brands
will be associated with Purchaser’s brand in such manner as Purchaser deems
reasonably appropriate. Purchaser may at its sole option register “Mack Barclay”
as a fictitious business name and/or as a division of Purchaser to maintain such
brand.

 

10.4.5  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.

 

10.5  Retained Information. For a period of five (5) years following the
Closing, to the extent not prohibited by law or restricted by applicable ethical
rules, Purchaser will make available to the Seller Entities any business records
related to the

 

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operations of Sellers prior to the Closing that are transferred to Purchaser at
the Closing (the “Transferred Business Records”) for inspection and copying to
the extent the Seller Entities require access to such records in response to tax
audits or other reasonable business necessity. The Seller Entities’ access to
the Transferred Business Records is subject to the confidentiality obligations
of the Seller Entities under Section 10.1 hereof. For a period of three (3)
years following the Closing, Sellers, to the extent not prohibited by law or
restricted by applicable ethical rules, will make available to Purchaser any
business records related to client matters that were open at any time within the
two (2) year period immediately preceding the Closing that 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 10.1
hereof.

 

10.6  Updated Financial Statements. Within sixty (60) days after the Closing,
Sellers will prepare and deliver to the Purchaser unaudited consolidated balance
sheets and statements of income of Sellers, prepared by Sellers consistent with
the Interim Financial Statement as set forth in Section 7.1, for the period
beginning the day after the Interim Financial Statement Date and ending the day
immediately preceding the Closing Date. The preparation of these financial
statements may be performed by Hired Employees without chargeback or offset to
Sellers.

 

10.7  Reimbursement of Pre-Paid Expenses. Prior to the Closing Date, Sellers
will have paid certain expenses as set forth in Schedule 10.7 (the “Reimbursable
Expenses”)¸ the benefits of which will accrue to Purchaser after the Closing.
Accordingly, no later than five (5) business days after the Closing, Purchaser
will reimburse the applicable Seller for each Reimbursable Expense the amount of
which, pursuant to Schedule 10.7, has been mutually determined by the parties as
of the date hereof. In addition, no later than thirty (30) days after the
Closing, Sellers will deliver to Purchaser documentation of all other
Reimbursable Expenses set forth in Schedule 10.7, the amount of which has not
been determined as of the date hereof. Within fifteen (15) days after receipt of
such documentation, which documentation will be subject to Purchaser’s
reasonable approval, Purchaser will reimburse each Seller, as applicable, for
such Reimbursable Expenses.

 

10.8 Distribution of Payments. Notwithstanding anything in this Agreement to the
contrary, the distribution of proceeds under this Agreement by any Seller to any
Principal, whether with respect to the Purchase Price or the Additional Payments
(if any), will be made solely in proportion to the respective Principal
Percentage Interest of such Principal with respect to such Seller. Any
distribution of proceeds that is made contrary to the provisions of this Section
10.8 will be immediately reversed.

 

10.9  Court Approvals and Novations of Contract Assignments. Promptly after the
Closing, and at Purchaser’s expense, the parties, as applicable, will execute
and deliver documents and take all other actions necessary to obtain any court
approvals and novations that are required to complete the assignment to
Purchaser of any Contracts identified in Schedule 7.16.

 

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10.10  Shared Services Agreement. As soon as reasonably practical after the
Closing, Purchaser and CTAS, LLC, a California limited liability company, will
enter into a mutually agreeable form of shared services agreement, in accordance
with the summary of terms attached hereto as Schedule 10.10, regarding the
administration of certain client trust accounts.

 

10.11  Errors and Omissions Insurance. Within thirty (30) days after the Closing
Date, each Seller, as applicable, will obtain an extension of its existing
errors and omissions insurance coverage for the twelve (12) months immediately
following the Closing Date (the “Errors and Omissions Tail Policy”).

 

11.          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. Sellers 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 11. 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 Director Agreements or otherwise.

 

11.1  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,
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.

 

11.2  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.

 

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

 

11.4   Director Agreements. Each of the Mack Barclay Directors will have
delivered his or her duly executed Director Agreement to Purchaser.

 

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11.5  Landlord Consents. The parties will have obtained the written consent of
each respective landlord to the assignment of each Office Lease to Purchaser.

 

12.          Conditions Precedent 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
the Seller Entities. Purchaser and Parent must execute and deliver a certificate
in substantially the form attached hereto as Exhibit I and Exhibit J,
respectively, 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 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 will have no further rights or obligations under this Agreement, the
Director Agreements or otherwise.

 

12.1  Continued Truth of Representations and Warranties; No Breach. The
representations and warranties made by Purchaser and Parent in this Agreement
will be true in all Material respects on and as of the Closing Date, 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.

 

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 Governmental Body for the stated purpose of enjoining or
preventing the consummation of this Agreement and the transactions contemplated
hereby.

 

12.3  Director Agreements. Purchaser will have delivered to each of the Mack
Barclay Directors his or her Director Agreement, duly executed by Purchaser.

 

13.          Survival of Representations and Warranties; Contractual Limitations
Period.

 

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 eighteen (18) month anniversary
of the Closing Date. The parties intend that this eighteen (18) month period
will serve as a private contractual limitations period during which any claim by
any party that arises solely out of a breach of any representation or warranty
contained in this Agreement must be initiated or forever lost. Notwithstanding
the foregoing, the limitation period for the survival of representations and
warranties set forth in this Section 13 will not apply to (a) any breach

 

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of a representation or warranty as a result of fraud; or (b) any breach of the
representations and warranties contained in Section 7.11.

 

14.          Indemnification.

 

14.1  Indemnification by Seller Entities.

 

14.1.1  The Seller Entities, jointly and severally, agree to indemnify, defend
and hold harmless each of Purchaser, Parent and their respective members,
shareholders, officers, directors, employees, agents, affiliates, successors or
assigns (each, a “Purchaser Party”) from any loss, damage or expense (including
reasonable attorneys’ fees) (collectively, “Losses”) that a Purchaser Party may
incur, suffer or become liable to a third party for as a result of or in
connection with (a) the breach of any representation or warranty of any Seller
Entity 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 eighteen (18)-month
survival period; (b) the breach of any covenant of any Seller Entity contained
in this Agreement or the other Transaction Documents; or (c) 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 Sellers, 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
10.3.2, 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 Director 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.

 

14.1.2  Except as hereinafter provided and except where an actual conflict of
interest between a 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,
which consent shall not be unreasonably withheld or delayed, 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.

 

14.2  Indemnification by Purchaser.

 

14.2.1  Purchaser and Parent, jointly and severally, agree to indemnify, defend
and hold harmless the Seller Entities, and their respective 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 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 10.3, 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
Director Agreements. The Representative, on behalf of each Seller Party, will
give Purchaser prompt written notice of any claim, suit or demand that Seller
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.

 

14.2.2  Except as hereinafter provided and except where an actual 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
of 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 such Seller Party,
provided that Purchaser will not, without the Seller Party’s written consent,
which consent shall not be unreasonably withheld or delayed, 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.

 

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[g154711kmi001.gif]

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.

 

14.2.3  ***

 

14.3  Limitations.

 

14.3.1  The indemnification provided for in Section 14.1 will be subject to the
following limitations: the Seller Entities will have no obligation to pay any
indemnification amounts (a) for any Loss in an amount less than *** with respect
to each such individual Loss, and (b) until the aggregate amount of all Losses
pursuant thereto exceeds an aggregate deductible of *** (the “Basket”),
whereupon the Purchaser Parties will be entitled to indemnification thereunder
for all such Losses (back to the first dollar of the Basket). Notwithstanding
the foregoing, any Losses resulting from or in connection with (i) a breach of
the representations and warranties contained in Section 7.11 or (ii) the
flexible spending account plan identified in Section 2.4(e) will not be subject
to the Basket.

 

14.3.2  The indemnification provided for in Section 14.2 will be subject to the
following limitations: Purchaser and Parent will have no obligation to pay any
indemnification amounts (a) for any Loss in an amount less than *** with respect
to each such individual Loss, and (b) until the aggregate amount of all Losses
pursuant thereto exceeds the amount of the Basket, whereupon the Seller Parties
will be entitled to indemnification thereunder for all such Losses (back to the
first dollar of the Basket).

 

14.4  Insurance and Tax Effect.

 

14.4.1  The amount of any Loss for which indemnification is provided under any
of Sections 14.1 or 14.2 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”).

 

14.4.2  Any payments made pursuant to the provisions of this Section 14 will be
treated as an adjustment to the total consideration payable to Sellers 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.

 

15.          Right Of Offset.

 

Purchaser will be entitled, but not obligated, to offset any portion of the
unpaid Additional Payments against any Loss for which Purchaser is entitled to
indemnification from the Seller Entities under Section 14, provided the
underlying matter establishing such Loss has proceeded to final judgment.

 

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16.          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.

 

17.          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

 

Carol Kerr, Esq.

Folger Levin & Kahn, LLP

1900 Avenue of the Stars, Suite 2800

Los Angeles, California 90067

Fax:  (310) 556-3770

 

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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.

 

In the case of the Seller Entities, to:

 

Cary Mack
***

 

with a copy to:

 

Donald A. English, Esq.

English & Gloven, a Professional Corporation

550 West C Street, Suite 1800

San Diego, California 92101
Fax:  (619) 338-6657

 

18.          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.

 

19.          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.

 

20.          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).

 

21.          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)

 

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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.

 

22.          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 February 24, 2006, 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.

 

23.          Survival.

 

The respective rights and obligations of the parties set forth in Sections 1, 3,
4, 5, 10, and 13 through 23 (inclusive)of this Agreement will survive the
Closing.

 

24.          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]

 

44

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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:

 

SELLER ENTITIES:

 

 

 

LECG, LLC,

 

BMB Mack Barclay, Inc.,

a California limited liability company

 

a California corporation

 

 

 

By:

LECG Corporation,

 

 

 

a Delaware corporation

 

By:

 

 

Its:

Sole Manager

 

 

Cary P. Mack

 

 

 

Its:

President

 

By:

/s/ John C. Burke

 

 

 

 

 

 

 

 

 

 

Its:

CFO

 

 

 

 

 

 

 

 

 

 

 

PARENT:

 

Southern California Assets LLC,

 

 

a California limited liability company

LECG Corporation,

 

 

a Delaware corporation

 

By:

CTAS, LLC,

 

 

 

a California limited liability company

By:

/s/ John C. Burke

 

 

Its:

Sole Manager

 

 

 

 

By:

BMB Mack Barclay, Inc.,

Its:

CFO

 

 

 

 

a California corporation

 

 

 

 

Its:

Sole Manager

 

 

 

 

 

 

 

 

 

 

 

By:

 

 

 

 

 

 

 

 

Cary P. Mack

 

 

 

 

 

Its:

President

 

 

 

 

 

CD-LIT Solutions LLC,
a California limited liability company

 

 

 

 

 

By:

 

 

 

 

 

Cary P. Mack

 

 

 

Its:

Sole Manager

 

 

 

 

 

 

 

 

 

 

Cary P. Mack

 

 

 

 

 

 

 

 

 

Christopher R. Barclay

 

 

 

 

 

 

 

 

 

Patrick F. Kennedy

 

i

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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:

 

SELLER ENTITIES:

 

 

 

LECG, LLC,

 

BMB Mack Barclay, Inc.,

a California limited liability company

 

a California corporation

 

 

 

By:

LECG Corporation,

 

 

 

a Delaware corporation

 

By:

/s/ Cary P. Mack

 

Its:

Sole Manager

 

 

Cary P. Mack

 

 

 

Its:

President

 

By:

 

 

 

 

 

 

 

 

 

 

 

Its:

 

 

 

 

 

 

 

 

 

 

 

 

PARENT:

 

Southern California Assets LLC,

 

 

a California limited liability company

LECG Corporation,

 

 

a Delaware corporation

 

By:

CTAS, LLC,

 

 

 

a California limited liability company

By:

 

 

 

Its:

Sole Manager

 

 

 

 

By:

BMB Mack Barclay, Inc.,

Its:

 

 

 

 

 

a California corporation

 

 

 

 

Its:

Sole Manager

 

 

 

 

 

 

 

 

 

 

 

By:

/s/ Cary P. Mack

 

 

 

 

 

 

 

Cary P. Mack

 

 

 

 

 

Its:

President

 

 

 

 

 

CD-LIT Solutions LLC,
a California limited liability company

 

 

 

 

 

By:

/s/ Cary P. Mack

 

 

 

 

Cary P. Mack

 

 

 

Its:

Sole Manager

 

 

 

 

 

 

/s/ Cary P. Mack

 

 

 

Cary P. Mack

 

 

 

 

 

/s/ Christopher R. Barclay

 

 

 

Christopher R. Barclay

 

 

 

 

 

/s/ Patrick F. Kennedy

 

 

 

Patrick F. Kennedy

 

ii

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

 

 

/s/ Michael R. Bandemer

 

 

Michael R. Bandemer

 

 

 

 

 

 

 

 

/s/ Brian J. Bergmark

 

 

Brian J. Bergmark

 

 

 

 

 

 

 

 

/s/ Laura Fuchs Dolan

 

 

Laura Fuchs Dolan

 

 

 

 

 

 

 

 

/s/ Stacy Elledge Chiang

 

 

Stacy Elledge Chiang

 

 

 

 

 

 

 

 

/s/ Heather H. Xitco

 

 

Heather H. Xitco

 

 

 

 

 

 

 

 

/s/ Cary P. Mack

 

 

Cary P. Mack, Trustee of the Mack Family
Trust dated April 21, 1999

 

 

 

 

 

 

 

 

/s/ Christopher R. Barclay

 

 

Christopher R. Barclay, Trustee of the 2000
Barclay Family Trust dated January 27, 2000

 

 

iii

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TABLE OF CONTENTS

 

 

 

Page

 

 

 

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

Additional Payments

 

 

3.4

Operational Impact on Additional Payments

 

 

3.5

Accounts Receivable

 

4.

COVENANT NOT TO COMPETE; NON-SOLICITATION

 

 

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 Entity Deliveries at Closing

 

 

6.3

Purchaser Deliveries at Closing

 

7.

REPRESENTATIONS AND WARRANTIES OF SELLER ENTITIES

 

 

7.1

Financial Statements

 

 

7.2

Taxes

 

 

7.3

Brokers

 

 

7.4

1933 Act Matters

 

 

7.5

Information, Experience, and Ability to Bear Risk

 

 

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7.6

Accuracy of Disclosure

 

 

7.7

No Other Warranties or Representations

 

 

7.8

Organization and Valid Existence of BMB

 

 

7.9

Organization and Valid Existence of SCA and CD-LIT

 

 

7.10

Authority of Sellers

 

 

7.11

Ownership of Seller Equity

 

 

7.12

Authority of the Seller Shareholders or Members

 

 

7.13

No Violations

 

 

7.14

Absence of Certain Changes

 

 

7.15

Title to and Condition of Purchased Assets

 

 

7.16

Contracts

 

 

7.17

Litigation

 

 

7.18

Intellectual Property

 

 

7.19

Compliance with Laws

 

 

7.20

Employee Benefit Plans

 

 

7.21

Insurance

 

 

7.22

Employees; Employment Matters

 

 

7.23

Business Relations

 

 

7.24

Warranty; Nonbillable Work

 

 

7.25

Consents

 

 

7.26

Accuracy of Disclosure

 

8.

REPRESENTATIONS OF PURCHASER AND PARENT

 

 

8.1

Organization and Authority

 

 

8.2

Authorization of Agreement

 

 

8.3

No Violations

 

 

8.4

Capital Stock

 

 

8.5

Litigation; Compliance with Law

 

 

8.6

SEC Filings

 

 

8.7

No Finder

 

 

8.8

Consents

 

 

8.9

Accuracy of Disclosure

 

9.

PRE-CLOSING COVENANTS

 

 

9.1

Affirmative Covenants

 

 

ii

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

 

 

9.2

Restrictions on Conduct of the Business Prior to Closing

 

 

9.3

Certain Notifications by Seller Entities

 

 

9.4

Risk of Loss

 

 

9.5

Updating the Disclosure Schedules

 

 

9.6

Access to Information

 

10.

AFFIRMATIVE COVENANTS

 

 

10.1

Confidentiality

 

 

10.2

Public Announcements

 

 

10.3

Taxes

 

 

10.4

Further Assurances

 

 

10.5

Retained Information

 

 

10.6

Updated Financial Statements

 

 

10.7

Reimbursement of Pre-Paid Expenses

 

 

10.8

Distribution of Payments

 

 

10.9

Court Approvals and Novations of Contract Assignments

 

 

10.10

Shared Services Agreement

 

 

10.11

Errors and Omissions Insurance

 

11.

CONDITIONS PRECEDENT TO OBLIGATIONS OF PURCHASER AND PARENT

 

 

11.1

Continued Truth of Representations and Warranties; No Breach

 

 

11.2

Absence of Litigation

 

 

11.3

No Material Adverse Change

 

 

11.4

Director Agreements

 

 

11.5

Landlord Consents

 

12.

CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLER ENTITIES

 

 

12.1

Continued Truth of Representations and Warranties; No Breach

 

 

12.2

Absence of Litigation

 

 

12.3

Director Agreements

 

13.

SURVIVAL OF REPRESENTATIONS AND WARRANTIES; CONTRACTUAL LIMITATIONS PERIOD

 

14.

INDEMNIFICATION

 

 

14.1

Indemnification by Seller Entities

 

 

14.2

Indemnification by Purchaser

 

 

iii

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14.3

Limitations

 

 

14.4

Insurance and Tax Effect

 

15.

RIGHT OF OFFSET

 

16.

EXPENSES

 

17.

NOTICES

 

18.

SUCCESSORS

 

19.

ARTICLE AND SECTION HEADINGS

 

20.

GOVERNING LAW; CONSENT TO SERVICE

 

21.

DISPUTE RESOLUTION

 

22.

ENTIRE AGREEMENT

 

23.

SURVIVAL

 

24.

COUNTERPARTS

 

 

iv

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LIST OF EXHIBITS(1)

 

Exhibit A-1

Form of Director Agreement (Mack)

Exhibit A-2

Form of Director Agreement (Barclay)

Exhibit A-3

Form of Director Agreement (Kennedy)

Exhibit A-4

Form of Director Agreement (Bandemer)

Exhibit A-5

Form of Director Agreement (Bergmark)

Exhibit A-6

Form of Director Agreement (Dolan)

Exhibit A-7

Form of Director Agreement (Chiang)

Exhibit A-8

Form of Director Agreement (Xitco)

Exhibit B

Purchaser’s Corporate Code of Conduct

Exhibit C

Form of Assignment and Assumption Agreement

Exhibit D

Form of Bill of Sale

Exhibit E

Form of Opinion of Counsel to Seller Entities

Exhibit F

Form of Lease Assignment

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

Additional Payment Calculation Example

 

LIST OF SCHEDULES(2)

 

Schedule 2.1.1

Fixed Assets (By Each Seller)

Schedule 2.1.3

IP Assets

Schedule 2.1.5

Deposits and Prepayments

Schedule 2.1.6

Cash

Schedule 2.3

Assumed Liabilities

Schedule 2.4

Excluded Contractual Obligations

Schedule 3.1.1

Seller Percentages

Schedule 3.1.2

Principal Percentage Interests

Schedule 3.5

Accounts Receivable

Schedule 5.1

Workers’ Compensation

Schedule 7.2

Taxes

Schedule 7.14

Absence of Certain Changes (By Each Seller)

Schedule 7.15

Permitted Liens (By Each Seller)

Schedule 7.16

Contracts (By Each Seller)

Schedule 7.17

Litigation (By Each Seller)

Schedule 7.20

Employee Benefit Plans (By Each Seller)

Schedule 7.21

Insurance Policies (By Each Seller)

Schedule 7.22

Employees (By Each Seller)

Schedule 7.23

Business Relations (By Each Seller)

Schedule 7.24

Fixed Fee Contracts (By Each Seller)

Schedule 10.7

Reimbursable Expenses (By Each Seller)

Schedule 10.10

Services Agreement Summary of Terms

Schedule 14.2.3

Aggregate Principal Percentage Interest

 

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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 10.62 furnished in connection with LECG
Corporation’s electronic filing of Form 10-Q on August 7, 2006.  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 10.62 furnished in connection with LECG
Corporation’s electronic filing of Form 10-Q on August 7, 2006.  LECG
Corporation agrees to furnish a copy of any omitted Schedule to the Securities
and Exchange Commission upon request.

 

v

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