**Exhibit2.1**

** **

**MEMBERSHIP INTERESTPURCHASE AGREEMENT**

** **

**BY**

 

**AND AMONG**

 

***SOURCECORP,*INCORPORATED,**

 

**KEYPOINT I ACQUISITION CORP.,**

 

**KEYPOINT CONSULTING LLC**

 

**AND**

 

**THE MEMBERS OF**

 

**KEYPOINT CONSULTING LLC**

 

**EXECUTED APRIL 15, 2004**

 

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**TABLE OF CONTENTS**

** **
| ARTICLE I   | PURCHASE AND SALE                                                          |   |
|-------------|----------------------------------------------------------------------------|--------|
| 1.1         | Purchase and  Sale of Membership Interests                                 |   |
| 1.2         | Purchase Price Adjustment                                                  |   |
| 1.3         | Segregation  of Specified Assets and Liabilities; Post-Closing Adjustment. |   |
| 1.4         | Effective Date Balance  Sheet                                              |   |
| 1.5         | Earnings  Treatment                                                        |   |
| 1.6         | Recovery  by Buyer for Section 1.3 Payment                            |   |
| 1.7         | Recovery  by Buyer of Closing Price Adjustment                             |   |
|        |                                                                       |   |
| ARTICLE  II | REPRESENTATIONS  AND WARRANTIES OF THE COMPANY AND THE MEMBERS             |   |
| 2.1         | Authorization                                                              |   |
| 2.2         | Organization, Existence and Good Standing  of the Company                  |   |
| 2.3         | Capitalization of the  Company.                                            |   |
| 2.4         | Subsidiaries                                                               |   |
| 2.5         | Financial  Statements.                                                     |   |
| 2.6         | Accounts and Notes Receivable                                              |   |
| 2.7         | Permits  and Intangibles                                                   |   |
| 2.8         | Tax Matters.                                                               |   |
| 2.9         | Assets  and Properties.                                                    |   |
| 2.10        | Real Property Leases; Options                                              |   |
| 2.11        | Environmental Laws  and Regulations.                                       |   |
| 2.12        | Contracts.                                                                 |   |
| 2.13        | No Violations                                                              |   |
| 2.14        | Government  Contracts                                                      |   |
| 2.15        | Consents                                                                   |   |
| 2.16        | Litigation and Related  Matters                                            |   |
| 2.17        | Compliance  with Laws                                                      |   |
| 2.18        | Intellectual Property  Rights                                              |   |
| 2.19        | Employee  Benefit Plans.                                                   |   |
| 2.20        | Employees; Employee  Relations.                                            |   |
| 2.21        | Insurance                                                                  |   |
| 2.22        | Interests in Customers, Suppliers, Etc                                     |   |
| 2.23        | Business  Relations                                                        |   |
| 2.24        | Officers  and Directors                                                    |   |
| 2.25        | Bank Accounts and Powers of Attorney                                       |   |
| 2.26        | Absence of Certain Changes or  Events                                      |   |
| 2.27        | Document Management  Services and Storage.                                 |   |
| 2.28        | No  Brokers or Agents                                                      |   |
| 2.29        | Disclosure                                                                 |   |

 

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| 2.30         | Authority; Ownership;  Other Interests                           |   |
|--------------|------------------------------------------------------------------|--------|
| 2.31         | Preemptive Rights                                                |   |
| 2.32         | Validity  of Obligations                                         |   |
| 2.33         | Absence of Claims  Against the Company                           |   |
|         |                                                             |   |
| ARTICLE  III | REPRESENTATIONS  AND WARRANTIES OF PARENT AND BUYER              |   |
| 3.1          | Organization and  Authorization                                  |   |
| 3.2          | No Violations                                                    |   |
| 3.3          | Consents                                                         |   |
| 3.4          | No Brokers or Agents                                             |   |
|         |                                                             |   |
| ARTICLE IV   | COVENANTS OF THE  PARTIES                                        |   |
| 4.1          | Records Pertaining to  the Company.                              |   |
| 4.2          | Preparation and  Filing of Tax Returns.                          |   |
| 4.3          | Loan Agreement and  Other Obligations.                           |   |
| 4.4          | Guarantors on Real  Estate Leases                                |   |
|         |                                                             |   |
| ARTICLE  V   | CONDITIONS  TO OBLIGATIONS OF PARENT AND BUYER                   |   |
| 5.1          | Absence  of Litigation                                           |   |
| 5.2          | Consents  and Approvals                                          |   |
| 5.3          | Certificates                                                     |   |
| 5.4          | Estoppel  Certificates                                           |   |
| 5.5          | Members’ Release                                            |   |
| 5.6          | Final Financial Statements                                       |   |
| 5.7          | Opinion of Counsel                                               |   |
| 5.8          | No Material Adverse Effect                                       |   |
| 5.9          | Repayment of  Affiliate Indebtedness; No Transfers to Affiliates |   |
| 5.10         | Due  Diligence Review.                                           |   |
| 5.11         | Employment  Agreements                                           |   |
| 5.12         | Independent  Contractor and Noncompetition Agreements            |   |
| 5.13         | Termination  of Related Party Agreements and Benefit Plans       |   |
| 5.14         | Release of Financing  Statements                                 |   |
| 5.15         | Certificates                                                     |   |
| 5.16         | Resignations and Releases  of Managers                           |   |
|         |                                                             |   |
| ARTICLE  VI  | CONDITIONS  TO OBLIGATIONS OF THE MEMBERS                        |   |
| 6.1          | Absence of Litigation                                            |   |
| 6.2          | Consents and Approvals                                           |   |
| 6.3          | Certificates                                                     |   |
| 6.4          | Delivery of Consideration                                        |   |
| 6.5          | Employment Agreements                                            |   |
| 6.6          | Independent  Contractor Agreements; Noncompetition Agreement     |   |
| 6.7          | Opinion of Counsel                                               |   |

 

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| ARTICLE VII  | CLOSING                                                             |   |
|--------------|---------------------------------------------------------------------|--------|
| 7.1          | Closing                                                             |   |
| 7.2          | Delivery of the  Company Interests                                  |   |
| 7.3          | Payment to the  Members at Closing                                  |   |
|         |                                                                |   |
| ARTICLE VIII | [INTENTIONALLY  LEFT BLANK.]                                        |   |
|         |                                                                |   |
| ARTICLE IX   | INDEMNIFICATION                                                     |   |
| 9.1          | Buyer’s Losses.                                                |   |
| 9.2          | Environmental  Indemnity.                                           |   |
| 9.3          | Employee  Compensation and Benefits                                 |   |
| 9.4          | Seller Losses.                                                      |   |
| 9.5          | Indemnification  for Certain Tax Matters                            |   |
| 9.6          | Notice of Loss                                                      |   |
| 9.7          | Right to Defend                                                     |   |
| 9.8          | Cooperation                                                         |   |
| 9.9          | Timing and Treatment  of Payments.                                  |   |
| 9.10         | Limitations on  Indemnification                                     |   |
|         |                                                                |   |
| ARTICLE X    | MISCELLANEOUS                                                       |   |
| 10.1         | Entire Agreement                                                    |   |
| 10.2         | Successors  and Assigns                                             |   |
| 10.3         | Counterparts;  Facsimile Signatures                                 |   |
| 10.4         | Headings                                                            |   |
| 10.5         | Construction                                                        |   |
| 10.6         | Modification  and Waiver                                            |   |
| 10.7         | Schedules, Etc                                                      |   |
| 10.8         | Notices                                                             |   |
| 10.9         | GOVERNING LAW;  CONSENT TO JURISDICTION                             |   |
| 10.10        | Survival  of Covenants, Agreements, Representations and Warranties. |   |
| 10.11        | Confidentiality; Publicity                                          |   |
| 10.12        | Expenses                                                            |   |
| 10.13        | Third Party Beneficiaries                                           |   |
| 10.14        | Number and Gender of Words                                          |   |
| 10.15        | Specific  Performance; Other Rights and Remedies                    |   |
| 10.16        | Cumulative  Remedies; Calculation of Damages                        |   |
| 10.17        | Prorations                                                          |   |
| 10.18        | Further  Assurances                                                 |   |
| 10.19        | Mail Received After Closing                                         |   |
| 10.20        | Community  Property                                                 |   |
|              |                                                                     |        |  |

 

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**MEMBERSHIP INTEREST PURCHASEAGREEMENT**

 

THIS MEMBERSHIP INTERESTPURCHASE AGREEMENT (this “Agreement”) is made and entered into April 15, 2004by and among *SOURCECORP,* Incorporated,a Delaware corporation with its principal offices at 3232 McKinney Avenue,Suite 1000, Dallas, Texas 75204 (“Parent”), KeyPoint I Acquisition Corp.,a Delaware corporation with its principal offices at 3232 McKinney Avenue,Suite 1000, Dallas, Texas 75204 (“Buyer”), KeyPoint Consulting LLC, aCalifornia limited liability company with its principal offices at 2000 PowellStreet, Suite 500, Emeryville, California 94608 (the “Company”),Michael J. Doane, Marc Vellrath, Michael A. Williams, Brett L.Reed, R. Preston McAfee, David S. Sibley, Alan C. Hess andJames A. Wilcox (each of Mr. Doane, Mr. Vellrath,Mr. Williams and Mr. Reed, a “Primary Equity Member,” and each ofMr. McAfee, Mr. Sibley, Mr. Hess and Mr. Wilcox, an “AcademicMember” and all collectively, the “Members”).

 

**WITNESSETH:**

 

WHEREAS, the Members ownall of the issued and outstanding membership interests of the Company;

 

WHEREAS, the Membersdesire to sell and convey to Buyer, and Buyer desires to purchase from theMembers, all of the outstanding membership interests of the Company; and

 

WHEREAS, in connection with the purchase by Buyer from the Members of allof the outstanding membership interests in the Company and all agreements andrelationships contemplated by this Agreement, (i) Buyer will cause theCompany to enter into employment agreements with each of the Primary EquityMembers in the form attached hereto as Exhibit A (collectively, the“Employment Agreements”) and (ii) Buyer will cause the Company to enterinto independent contractor agreements in the form attached hereto as Exhibit B(collectively, the “Independent Contractor Agreements”) and noncompetition,nonsolicitation and confidentiality agreements with each of the AcademicMembers in the form attached hereto as Exhibit C (collectively, the“Noncompetition Agreements”).

 

NOW, THEREFORE, for andin consideration of the premises and of the mutual representations, warranties,covenants and agreements contained herein, and of other good and valuableconsideration, the receipt and sufficiency of which are hereby acknowledged,and upon the terms and subject to the conditions hereinafter set forth, theparties do hereby agree as follows:

 

# **ARTICLE IPURCHASE AND SALE**

# ** **

## 1.1           Purchase and Sale of MembershipInterests.  Upon the terms andsubject to the conditions of this Agreement, on the Closing Date (as definedbelow), Buyer agrees to purchase from the Members, and the Members agree tosell to Buyer, all of the issued and outstanding membership interests of theCompany, including without limitation, the goodwill of the businesses of theCompany (the “Company Interests”), for a total consideration of $15,000,000

 

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## (as set forth on Schedule1.1) (subject to the terms and conditions and Buyer’s right of offset, eachas described below, the “Total Consideration”) consisting of:

##  

#### (i)            $13,500,000 payable tothe Members in cash at the Closing, as such amount may be adjusted pursuant tothe Closing Price Adjustment set forth in Section 1.2; and

####  

#### (ii)           $1,500,000 in cash (the“Holdback Amount”), to be held by Buyer for a period of one hundred twenty(120) days from the date of Closing as security and as a nonexclusive offsetfor any breach of the representations, warranties, covenants and agreements ofthe Company and the Members, and for the Members’ indemnification obligations,each as set forth herein, to be released by Buyer to the Members in accordancewith the terms and conditions set forth herein less the amount of any claimsthen asserted by Buyer under this Agreement. Without limiting Buyer’s remedies as set forth elsewhere in thisAgreement, Buyer may offset against the Holdback Amount amounts payable to itor the Company by the Members with respect to Buyer’s Losses pursuant to theprovisions of Article IX below.

####  

## 1.2           Purchase Price Adjustment.  The Total Consideration shall be adjusted(a) downward at Closing on a dollar-for-dollar basis to the extent of anydistributions of property of the Company to the Members from and afterJanuary 1, 2004 and prior to the Closing Date (and not to include theSegregated Accounts described in Section 1.3(a) below), and(b) upward or downward twelve (12) months following the Closing to theextent that the Modified Tangible Net Worth of the Company as reflected on thebalance sheet of the Company at the close of business on the Effective Datedefined in Section 1.5 below (the “Effective Date Balance Sheet”),after segregating from the Effective Date Balance Sheet the Segregated Accounts(as defined in Section 1.3(a) below) to be held by the Company on behalfof the Members (and therefore excluding the same from the Modified Tangible NetWorth calculation), is above or below $0, as determined in accordance withgenerally accepted accounting principles consistently applied (“GAAP”).  In calculating Modified Tangible Net Worth,no effect shall be given to, and no asset shall be deemed to exist as a resultof, the right of the Company or any of its affiliates to receive a percentageof the Company’s accounts receivable as of the Closing Date (the “KeyPointReceivables”) pursuant to Section 1.3 hereof.  The aggregate adjustments to the TotalConsideration made pursuant to this Section 1.2 are referred to as the“Closing Price Adjustment.”

##  

## 1.3           Segregation of Specified Assets andLiabilities; Post-Closing Adjustment.

##  

### (a)           Prior to orconcurrently with the Closing, the Company keep and track separately from otheraccounts the following accounts on behalf of the Members: (i) theCompany’s accounts receivable as of the Closing Date (which as ofFebruary 29, 2004 was approximately $3,097,257), together with anycollections thereof from the Effective Date through the Closing Date (the“KeyPoint Receivables”), (ii) the Company’s obligations to pay Members anyand all compensation that is contingent upon collection of any of theReceivables (which as of February 29, 2004 was approximately $2,232,286),(iii) the Company’s obligations to pay affiliates of the Company and third

 

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### parties any and allcompensation that is contingent upon collection of any of the Receivables(which as of February 29, 2004 was approximately $236,564),(iv) compensation receivable from Jeffrey D. Redman (which is as ofFebruary 29, 2004 was approximately $94,873); and (v) the Company’s obligationsto make any and all payments and contributions to the KeyPoint Consulting LLCDefined Benefit Pension Plan and related trust (all such assets and liabilitiesdescribed in this Section 1.3(a) being collectively referred toherein as the “Segregated Accounts”). The items included in the Segregated Accounts shall be set forth on Schedule 1.3.

###  

### (b)           The Company shall trackand report to the Members all receipts from collection of the KeyPointReceivables from the Effective Date forward. Buyer’s portion of any receipts from collections of the KeyPointReceivables shall be seventy percent (70%) of all such receipts, up to anaggregate amount of $1,000,000.  Buyer’sportion of receipts from collections of the KeyPoint Receivables and theaggregate amount set forth in this Section 1.3(b) may be adjustedpursuant to the provisions of Section 1.6 below.

###  

### (c)           On or before thefifteenth day of each month, commencing with the first calendar month followingthe Closing, the Company shall deposit into a separate KeyPoint bank account(the “KeyPoint Distribution Account”) all receipts from the collection ofKeyPoint Receivables in the preceding month, less Buyer’s portion of theKeyPoint Receivables described in Section 1.3(b) above.

###  

### (d)           Distributions from theKeyPoint Distribution Account shall be made in the following order:  (i) first, to Buyer of any amounts thendue and payable to it in accordance with this Section 1.3;(ii) second, to pay to third parties and to affiliates of the Company anyand all compensation that is contingent upon collection of any of the KeyPointReceivables included in the Segregated Accounts to the extent that such amountsare due and payable as a consequence of the collection of such KeyPointReceivables; (iii) third, to pay expenses incurred in connection with thetransactions contemplated by this Agreement for which the Members are or maybecome liable under Section 2.8(i) hereof (not to exceed $350,000); and(iv) fourth, as described below in this Section 1.3(d).  Any balance in the KeyPoint DistributionAccount shall be distributed as provided below upon the first to occur of (i)the first anniversary of the Closing and (ii) such time as all ofCompany’s payment obligations included within the Segregated Accounts and Schedule 1.3have been fully satisfied or funds have been reserved in the appropriateaccounts that in the reasonable judgment of the Company and Buyer aresufficient to fully satisfy such payment obligations evidenced by suchSegregated Accounts (and with any such amounts set aside in this fashion to beexcluded from the distribution from the KeyPoint Distribution Account describedbelow in this Section 1.3(d)). Prior to the distribution of the applicable balance in the KeyPointDistribution Account, the Members shall provide to Buyer a DistributionAllocation Schedule executed by each of the Members instructing the Company howit is to distribute among the Members the balance in the KeyPoint DistributionAccount that includes a waiver by each Member of any claim thereof against theCompany, Buyer or Parent with respect to the amount so distributed to suchMember in accordance with such schedule. Buyer will distribute any balance then remaining in the KeyPointDistribution

 

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### Account in accordancewith the Distribution Allocation Schedule through the normal payroll process tothe Members, if such Members are employees of Company, and through theCompany’s accounts payable process, with respect to the Members who are IndependentContractors; provided, that no amount shall be paid from the KeyPointDistribution Account directly or indirectly to a Member (including, withoutlimitation, any payment with respect to the Company’s obligations to payMembers and other affiliates of the Company any and all compensation that iscontingent upon collection of any of the Receivables), unless the Company’sliabilities and obligations with respect to the Defined Benefit Pension Planand related trust have been fully extinguished.  In the event of any change in the amount of the distribution tobe made from the KeyPoint Distribution Account, Buyer may at its option requirethe Members to execute an updated Distribution Allocation Schedule as acondition to effecting the distribution.

###  

### (e)           In the event that acontribution to the Defined Benefit Pension Plan trust becomes due and payablebefore the KeyPoint Distribution Account has accumulated sufficient funds tocover the required contribution, the Company may make such payment and may recoverand/or set-off such amount in the manner described in Section 1.6below.

###  

### (f)            Upon closure of theDefined Benefit Pension Plan, any deficit, penalties or contributions owed inrespect of the Defined Benefit Pension Plan, and any fees associated with filingany previously required Defined Benefit Pension Plan filings (including withoutlimitation the required Economic Growth and Tax Relief Reconciliation Act of2001 amendment), shall be paid by the Members or, if paid by the Company, theCompany may recover and/or set-off such amount in the manner described in Section 1.6below, and any surplus with respect to the Defined Benefit Pension Plan, afterappropriate deduction for any assorted Taxes and penalties, shall be paid intothe KeyPoint Distribution Account for distribution to and at the direction ofMarc Vellrath as representative of the Members.

###  

### (g)           In the event that anyclaim arising from the Segregated Liabilities other than compensation payableto Members is not timely paid from the KeyPoint Distribution Account, theCompany may make such payment, and may recover and/or set-off such amount inthe manner described in Section 1.6 below; provided, that in noevent shall the Company have any obligation to pay any compensation payable toa Member arising from the Segregated Liabilities.

###  

### (h)           In the event that theCompany has not received an aggregate amount of $1,000,000 (as such amount maybe adjusted pursuant to the provisions of Section 1.6 below) withrespect to collected KeyPoint Receivables as described in this Section 1.3by December 31, 2004, the Company may recover and/or set-off the aggregateamount of the difference between the amount collected and retained by theCompany as of such date and $1,000,000 as described in Section 1.6below.

###  

## 1.4           Effective Date Balance Sheet.  The Effective Date Balance Sheet shall beprepared by the Company in accordance with GAAP, except as noted on Schedule 1.4.  Such Schedule 1.4 shall specifywhether and to what extent the scheduled deviations from GAAP shall

 

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## impact thefinancial information included in the Effective Date Balance Sheet, but shallnot otherwise affect the Effective Date Balance Sheet or be included in thecalculation of the Modified Tangible Net Worth of the Company.  Buyer shall have reasonable input into thepreparation and verification of such Effective Date Balance Sheet.  The Company and the Members shall promptlydeliver a copy of the Effective Date Balance Sheet to Buyer after the completionthereof, but not less than two (2) business days prior to the Closing.

##  

## 1.5           Earnings Treatment.  All billings, revenues, receipts, earnings, losses, costs,expenses (including Taxes other than those Taxes arising as a result of theconsummation of the purchase and sale of the Company Interests) and cash flowof the Company for the period from and after March 1, 2004 (the “EffectiveDate”) through the Closing Date, other than receipts from collections of theKeyPoint Receivables, which shall be treated in the manner set forth in Section 1.3,shall be for the benefit of Buyer and shall be acquired by Buyer at theClosing.

##  

## 1.6           Recovery by Buyer forSection 1.3 Payment.  Inthe event that Buyer or the Company makes any payment described under Section 1.3that is required to be made (other than from the KeyPoint DistributionAccount), Buyer or the Company shall, without prejudice to its rights of offsetand recovery otherwise set forth in this Agreement, be entitled to recover anysuch amount from the following sources in the order set forth below:(i) first, by recovery of such amount from the KeyPoint DistributionAccount then available after the receipt by the Company of Buyer’s portion ofthe KeyPoint Receivables, to be effected by corresponding increases in thepercentage and the amount of Buyer’s portion of collected KeyPoint Receivablesfrom the percentage and amount presently set forth in Section 1.3(b)equal to the amount owed to Buyer or the Company as a result of the payment byBuyer or the Company of any amount described in Section 1.3 hereofthat is required to be made by the Members; (ii) second, to the extentthat the KeyPoint Distribution Account does not have sufficient funds to coverthe amount owed to Buyer or the Company under Section 1.3 hereof (afterthe receipt by the Company of Buyer’s portion of the KeyPoint Receivables), byreduction of the Company’s indebtedness to certain of the Members under theloans made by such Members as set forth on Schedule 4.3 equal tosuch amount still owed to Buyer or the Company and on a proportionate basisamong such Members; and (iii) third, to the extent that the foregoing sourcesare not sufficient to satisfy the Members’ obligations to Buyer or the Companyunder Section 1.3, each Member shall be liable to Buyer and the Companyon a joint and several basis for such amount without application of any Basketor offset thereby.

##  

## 1.7           Recovery by Buyer of Closing PriceAdjustment.  In the event Buyeris due monies as a result of the Closing Price Adjustment described in Section 1.2(b)hereof, Buyer or the Company shall, without prejudice to its rights of offsetand recovery otherwise set forth in this Agreement, be entitled to recover anysuch amount from the following sources in the order set forth below:(i) first, by recovery of such amount from the KeyPoint DistributionAccount then available after the receipt by the Company of Buyer’s portion ofthe KeyPoint Receivables, to be effected by corresponding increases in thepercentage and the amount of Buyer’s portion of collected KeyPoint Receivablesfrom the percentage and amount presently set forth in Section 1.3(b)equal to the amount owed to Buyer or the Company as a result of any ClosingPrice Adjustment under Section 1.2(b) hereof; (ii) second, to the extentthat the KeyPoint Distribution Account does not have sufficient funds to coverthe amount owed to Buyer or the

 

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## Company under Section 1.2(b)(after the receipt by the Company of Buyer’s portion of the KeyPointReceivables), by reduction of the Company’s indebtedness to certain of theMembers under the loans made by such Members as set forth on Schedule 4.3equal to such amount still owed to Buyer or the Company and on a proportionatebasis among such Members; and (iii) third, to the extent that the foregoingsources are not sufficient to satisfy the Members’ obligations to Buyer and theCompany under Section 1.2(b), each Member shall be liable to Buyer andthe Company on a joint and several basis for such amount without application ofany Basket or offset thereby.

##  

# **ARTICLEIIREPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE MEMBERS**

# ** **

**(A)****          Representations andWarranties of the Company and the Members.**

 

Each of theCompany and the Members, jointly and severally, represent and warrant that allof the following representations and warranties with respect to the Company andits business and operations set forth in this Section 2(A) are true andcorrect at the time of this Agreement and at the time of the Closing.

 

## 2.1           Authorization.  This Agreement has been duly executed anddelivered by the Company and the Members and constitutes the valid and bindingobligation of each such party, enforceable in accordance with its terms, exceptthat (i) such enforcement may be subject to bankruptcy, insolvency,reorganization, moratorium or similar laws affecting creditors’ rightsgenerally, (ii) the remedies of specific performance and injunctive relief aresubject to certain equitable defenses and to the discretion of the court beforewhich any proceedings may be brought and (iii) rights to indemnificationhereunder may be limited under applicable securities laws (the “EquitableExceptions”).  The Company has fulllimited liability company power, capacity and authority to execute thisAgreement and all other agreements and documents contemplated hereby.

##  

## 2.2           Organization,Existence and Good Standing of the Company.  The Company is a limited liability company duly organized,validly existing and in good standing under the laws of the state of itsorganization with all requisite limited liability company power and authorityto own, lease or operate its properties and to carry on its business as nowbeing conducted and in the place where such properties are owned, leased oroperated.  The Company is duly qualifiedor licensed as a foreign limited liability company and in good standing in eachjurisdiction in which the character or location of the property owned, leasedor operated by it or the nature of the business conducted by it makes suchqualification necessary.  Set forth on Schedule2.2 is a list of the jurisdictions in which the Company is qualified orlicensed to do business as a foreign limited liability company.  Set forth on Schedule 2.2 is alisting of all names of all predecessor companies for the past five (5) yearsof the Company, including the names of any entities from whom the Companypreviously acquired material assets during such period (and, in the event ofany such acquisitions, copies of the related purchase agreements), and of allnames under which the Company does or has done business since itsorganization.  Except as disclosed on Schedule 2.2,the Company has not been a subsidiary or division of another business

 

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## organization or apart of an acquisition that was later rescinded.  True, complete and correct copies of the Certificate of Formationof the Company certified by the Secretary of State of the applicable state oforganization as of the date not more than thirty (30) days prior to the Closingand of the Operating Agreement of the Company are all attached hereto on Schedule2.2 (the “Charter Documents”). Except as set forth on Schedule 2.2 the minute books of theCompany, as heretofore made available to Buyer, are correct and complete in allrespects.

##  

## 2.3           Capitalization of the Company.

##  

### (a)           The Company’soutstanding membership interests are held by the Members as described on Schedules1.1 and 2.3.  All of theCompany Interests have been validly issued and are fully paid and nonassessableand no holder thereof is entitled to any preemptive rights (except anystatutory preemptive rights, which the Members hereby waive).  There are no outstanding conversion or exchangerights, subscriptions, options, warrants or other arrangements or commitmentsobligating the Company to issue any membership interests or other securities orto purchase, redeem or otherwise acquire any membership interests or othersecurities, or to pay any dividend or make any distribution in respect thereof,except as set forth on Schedule 2.3.

###  

### (b)           The Members (i) own ofrecord and beneficially (subject to the community property interest of anyMember’s spouse) and have good and marketable title to all of the issued andoutstanding Company Interests, free and clear of any and all liens, mortgages,security interests, encumbrances, pledges, charges, adverse claims, options,buy-sell agreements, rights of first refusal agreements, property settlement ormarital dissolution agreements, rights or restrictions of any characterwhatsoever other than standard state and federal securities law privateoffering legends and restrictions (collectively, “Liens”), and (ii) have theright to vote the Company Interests on any matters as to which any outstandingmembership interests of the Company are entitled to be voted under the laws ofthe state of organization of the Company and the Company’s Charter Documents,free of any right of any other person.

###  

## 2.4           Subsidiaries.  The Company does not presently own, ofrecord or beneficially, or control, directly or indirectly, any limitedliability company interest, capital stock, securities convertible into theforegoing, or any other equity interest in any limited liability company,corporation, association or business entity, nor is the Company, directly orindirectly, a participant in any joint venture, partnership or othernon-corporate entity.

##  

## 2.5           Financial Statements.

##  

### (a)           The Company haspreviously furnished to Buyer the unaudited balance sheet of the Company as ofDecember 31, 2003 and the related unaudited statements of operations, members’equity and cash flows for the three (3) fiscal years then ended, together withthe Effective Date Balance Sheet (collectively, the “Financial Statements”).  The Financial Statements (i) have beenprepared in accordance with, and are consistent with, the accounting methods ofthe Company and commercially reasonable accounting practices and with theCompany’s books and records and any work papers pertaining to such FinancialStatements, (ii) present fairly and on a basis consistent with the

 

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### Company’s historicalpractice the financial position and results of operations, members’ equity andcash flows of the Company as of the indicated dates and for the indicatedperiods and (iii) solely with respect to the Effective Date Balance Sheet(after segregating from the Effective Date Balance Sheet and disregarding theSegregated Accounts to be held by the Company on behalf of the Members), andexcept as set forth on Schedule 1.4 and Schedule 2.5,have been prepared in accordance with GAAP consistently applied.  Any such deviations from GAAP on theEffective Date Balance Sheet shall be quantified to the extent practicable on Schedules 1.4and 2.5.  Such deviations fromGAAP on the Effective Date Balance Sheet, including without limitation suchdeviations set forth on the foregoing Schedule 1.4 and 2.5,shall not entitle Buyer or the Company to recover Buyer’s Losses pursuant tothe indemnification provisions of Article IX hereof unless and tothe extent such deviations (i) constitute “Buyer’s GAAP Losses” and (ii) causethe total amount of such Buyer’s GAAP Losses to exceed $50,000 (and uponreaching such amount, Buyer and the Company shall be entitled to assert a claimfor indemnification under Article IX with respect to amounts inexcess of such $50,000 threshold applicable to Buyer’s GAAP Losses).

###  

### (b)           Except to the extent(and not in excess of the amounts) reflected in the Effective Date BalanceSheet or as disclosed on Schedule 2.5, the Company has no liabilities orobligations (including, without limitation, Taxes (as defined in Section 2.8)payable and deferred Taxes or interest accrued since December 31, 2003)required to be reflected in the Financial Statements (or the notes thereto) inaccordance with GAAP other than current liabilities incurred in the ordinarycourse of business, consistent with past good business practices, subsequent tothe Effective Date.  The Company has noobligation or liability with respect to the indebtedness, obligations andliabilities included within the Segregated Accounts.  The Company has also disclosed to Buyer on Schedule 2.5,in the case of any and all liabilities that are contingent, a reasonableestimate of the maximum amount that may be payable.  For each such contingent liability, the Company has provided toBuyer the following information:

###  

#### (i)            A summary descriptionof the liability together with the following:

####  

##### (A)          Copies of all relevant documentationrelating thereto;

#####  

##### (B)           Amounts claimed and anyother action or relief sought; and

#####  

##### (C)           Name of claimant andall other parties to the claim, suit or proceeding.

#####  

#### (ii)           The name of each courtor agency before which such claim, suit or proceeding is pending;

####  

#### (iii)          The date such claim,suit or proceeding was instituted; and

####  

#### (iv)          A reasonable bestestimate by the Company of the maximum amount, if any, that is likely to becomepayable with respect to each such liability.

 

8

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#### If no estimate isprovided, the Company’s best estimate shall for purposes of this Agreement bedeemed to be zero.

####  

### (c)           The books of accountand other books and records of the Company are accurate and complete in allrespects, have been maintained in accordance with good business practicesconsistently applied and the matters contained therein are fairly presented in,and are consistent with, the Financial Statements.  The Company’s internal structures and procedures for financial reportinghave been established and are evaluated periodically by the Company’smanagement and, to the best knowledge of the Company and the Members, areeffective and there are no material weaknesses therein.

###  

## 2.6           Accounts and Notes Receivable.  Set forth on Schedule 2.6 is anaccurate list of the accounts and notes receivable, contract rights, commercialpaper, debt securities and other rights to receive money of the Company as ofDecember 31, 2003 included within the Financial Statements, and including receivablesfrom and advances to employees and the Members.  The Company shall provideBuyer with an aging of all accounts and notes receivable showing amounts due inthirty (30) day aging categories. Except to the extent reflected on Schedule 2.6, all such accountsand notes are legal, valid and binding obligations of the obligors not subjectto setoff or counterclaim and are collectible in their recorded amounts shownon Schedule 2.6, net of reserves reflected in such balance sheet.  The Company’s invoices to customers areaccurate in respect to services provided, except for matters that areimmaterial as to each customer and in the aggregate.  Since December 31, 2003, the Company has not (i) written off,cancelled, committed or become obligated to cancel or write off any suchaccounts or notes, disposed of or transferred any such accounts or notes exceptthrough the collection thereof in accordance with their terms or (ii) acquiredor permitted to be created any such accounts or notes except in the ordinarycourse of its business consistent with past good business practices.

##  

## 2.7           Permits and Intangibles.  To the best knowledge of the Company and theMembers, the Company holds all licenses, franchises, permits, orders,approvals, variances and other governmental authorizations, includingcertificates, permits or titles (including motor vehicle titles and currentregistrations) necessary or required for its business (the “MaterialPermits”).  An accurate list and summarydescription is set forth on Schedule 2.7 hereto of all such MaterialPermits.  Except as set forth on Schedule2.7, the Material Permits are valid, and the Company has not received anynotice that any governmental authority intends to cancel, terminate, not renewor to materially modify or limit any such Material Permit.  The Company has conducted and is conductingits business in compliance with the requirements, standards, criteria andconditions set forth in applicable licenses, franchises, permits, orders,approvals, variances, rules and regulations and is not in violation of any ofthe foregoing.  Except as specificallyprovided on Schedule 2.7, the transactions contemplated by thisAgreement will not result in a default under or a breach or violation of, oradversely affect the rights and benefits afforded to the Company by, any suchMaterial Permits.

##  

## 2.8           TaxMatters.

##  

### (a)           The Company has filedall income Tax returns required to be filed by the Company or the appropriateextensions therefor required to be filed by it and all returns, reports andforms of other Taxes (as defined below) required to be filed or furnished by

 

9

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### the Company prior to thedate of this Agreement, and has paid or provided for all Taxes shown to be dueon such returns and all such returns, reports and forms are accurate andcorrect in all respects.  Except as setforth on Schedule 2.8, (i) no action or proceeding for the assessment orcollection of any Taxes is pending against the Company and no notice of anyclaim for Taxes, whether pending or threatened, has been received; (ii) nodeficiency, assessment or other formal claim for any Taxes has been asserted ormade against the Company that has not been fully paid or finally settled; and(iii) no issue has been formally raised by any Taxing authority in connectionwith an audit or examination of any return of Taxes.  Except as set forth on Schedule 2.8, no federal, state orforeign income tax returns of the Company have been examined, and there are nooutstanding agreements or waivers extending the applicable statutory periods oflimitation for such Taxes for any period. All Taxes that the Company has been required to collect or withhold havebeen duly withheld or collected and, to the extent required, have been paid tothe proper Taxing authority, including without limitation with respect to orbased upon the Company’s properties described in Section 2.9.  Except as set forth on Schedule 2.8,no Taxes will be assessed on or after the Effective Date against the Companyfor any Tax period ending on or prior to the Effective Date other than forTaxes disclosed on Schedule 2.8. For purposes of this Agreement, “Taxes” (including with correlativemeaning, the terms “Tax” and “Taxable”) shall mean all taxes, duties, charges,fees, levies, imposts, deductions, withholdings or other assessments including,without limitation, income, gross receipts, ad valorem, excise, property,withholding, sales, use, franchise, transfer, license, stamp, occupation,employment, payroll, asset, capital, net worth, social security, workerscompensation, utility, transfer and gain, and any other governmental charges ofany nature whatsoever, imposed by the United States, or any state, county,local or foreign government or subdivision or agency or authority thereof, andincluding any interest, penalties or additions attributable thereto.

###  

### (b)           The Company is not aparty to any Tax allocation or sharing agreement.

###  

### (c)           None of the assets ofthe Company constitutes Tax-exempt bond financed property or Tax-exempt useproperty, within the meaning of Section 168 of the Internal Revenue Code of1986, as amended (the “Code”).  TheCompany is not a party to any “safe harbor lease” that is subject to theprovisions of Section 168(f)(8) of the Code as in effect prior to the TaxReform Act of 1986, or to any “long-term contract” within the meaning ofSection 460 of the Code.

###  

### (d)           The Company is not aninvestment company as defined in Section 368(a)(2)(F)(iii) and (iv) of theCode.

###  

### (e)           The Company is notunder jurisdiction of a court in a Title 11 or similar case within the meaningof Section 368(a)(3)(A) of the Code.

###  

### (f)            The liabilities of theCompany were incurred by the Company in the ordinary course of its trade orbusiness.

 

10

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### (g)           The Company has notentered into and has not agreed to enter into any transactions that would leadto the non-preservation of a proprietary interest under Treasury regulationsSection 1.368-1(e)(1)(ii).

###  

### (h)           Neither the Company nora “Related Corporation” has within the last two (2) years redeemed or acquiredany membership interests of the Company or entered into any agreement,arrangement or understanding to redeem or acquire any membership interests ofthe Company, nor will it redeem or acquire, or enter into any such agreement,arrangement or understanding to redeem or acquire, any membership interests ofthe Company at any time through the Closing Date.  For purposes of this Section 2.8(h), a “RelatedCorporation” means (i) a corporation that is a member of the same “affiliatedgroup” as determined under Section 1504(a) of the Code without regard toSection 1504(b), or (ii) a corporation that owns, or in which the othercorporation owns, directly or indirectly, stock possessing at least fiftypercent (50%) of the total combined voting power of all classes of stockentitled to vote, or at least fifty percent (50%) of the total value of sharesof all classes of stock (determined by taking into account the constructiveownership of stock rules under Code Section 318(a) as modified by CodeSection 304(c)).  For purposes ofthe foregoing, a corporation will be considered as acquiring shares of stockacquired by a partnership (as determined for federal income tax purposes) inwhich it is a partner (as determined for federal income tax purposes).

###  

### (i)            The Company and theMembers will pay its or their respective expenses, if any, incurred inconnection with the transactions contemplated under this Agreement.

###  

### (j)            There is nointercorporate indebtedness existing between Parent or Buyer and the Companythat was issued, acquired or will be settled at a discount.

###  

### (k)           The Company is alimited liability company characterized as a corporation for Federal Taxpurposes.

###  

### (l)            The Company is not a“consenting corporation” within the meaning of Section 341(f)(1) of the Code,or comparable provisions of any state statutes, and none of the assets of theCompany are subject to an election under Section 341(f) of the Code orcomparable provisions of any state statutes.

###  

### (m)          The Company is not aparty to any joint venture, partnership or other arrangement that is treated asa partnership for federal income Tax purposes.

###  

### (n)           There are no accountingmethod changes of the Company that could give rise to an adjustment underSection 481 of the Code for periods after the Closing Date other than thosetaken into account for purposes of determining tangible net worth under clause(b) of Section 1.2.

###  

### (o)           The Company hassubstantial authority for the treatment of, or has disclosed (in accordancewith Section 6662(d)(2)(B)(ii) of the Code) on its Federal income returns, allpositions taken therein that could give rise to a substantial understatement ofFederal income Tax within the meaning of Section 6662(d) of the

 

11

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### Code.  Except as set forth on Schedule 2.8,the Company has not made any Tax elections that will affect its Taxable incomefor 2003 or any subsequent periods.

###  

### (p)           The Company has notbeen a member of an affiliated group filing a consolidated federal income taxreturn and does not have any liability for Taxes for any Person other than theCompany (i) under Section 1.1502-6 of the Treasury regulations (or any similarprovision of state, local or foreign law), (ii) as a transferee or successor,(iii) by contract or (iv) otherwise.

###  

### (q)           The Company’s Tax basisin its assets for purposes of determining its future amortization, depreciationand other federal income Tax deductions is accurately reflected on the Company’sTax books and records.

###  

### (r)            The Company is not,and has not been at any time, a “United States real property holdingcorporation” within the meaning of Section 897(c)(2) of the Code.

###  

### (s)           At the end of the lasttaxable year, the Company did not have aggregate Tax Losses for federal incomeTax purposes except as set forth on Schedule 2.8.

###  

## 2.9           Assets and Properties.

##  

### (a)           Real Property.  The Company does not own or hold anyinterest in real property other than as set forth in Schedule 2.10 (the“Real Property”).  Except as set forthon such schedule, the Company has good and marketable title to all RealProperty and none of the Real Property is subject to any Lien.

###  

### (b)           Personal Property.  Except as set forth on Schedule 2.9and except for inventory, supplies and other personal property disposed of orconsumed, and accounts receivable collected or written off, and cash utilized,all in the ordinary course of business consistent with past good businesspractices, the Company owns all of its inventory, equipment and other personalproperty (both tangible and intangible) reflected on the latest balance sheetincluded in the Financial Statements or acquired since December 31, 2002, freeand clear of any Liens, except for statutory Liens for current taxes, assessmentsor governmental charges or levies on property not yet due and payable.  None of such tangible properties or assetsis obsolete, dangerous or in need of repair, renewal or replacement, except forordinary and routine maintenance and repairs and renewal in the ordinary courseof business consistent with past good business practices, in each case whichare not material in nature or cost and not such as to affect the operation ofthe business of the Company or its properties.

###  

### (c)           Condition ofProperties.  The Real Property andthe leasehold estates the subject of the Real Property Leases (as defined in Section2.10) and the tangible personal property owned or leased by the Company arein good operating condition and repair, ordinary wear and tear excepted; and,to the best knowledge of the Company and the Members, there is no condition notdisclosed herein of any such Real Property or leasehold estate that wouldmaterially, negatively affect the fair market value, use or

 

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### operation of any RealProperty or leasehold estate or otherwise have a Material Adverse Effect.

###  

### (d)           Compliance.  The continued ownership, operation, use andoccupancy of the Real Property and the improvements thereto, and the continuedoperation, use and occupancy of the leasehold estates that are the subject ofthe Real Property Leases as currently operated, used and occupied will notviolate any zoning, building, health, flood control, fire or other law,ordinance, order or regulation or any restrictive covenant.  There are no violations of any federal,state, county or municipal law, ordinance, order, regulation or requirementaffecting any portion of Real Property or the leasehold estates the subject ofthe Real Property Leases, and no written notice of any such violation has beenissued by any governmental authority.

###  

## 2.10         Real Property Leases; Options.  Schedule 2.10 sets forth a list(summarizing the parties, lessor addresses, monthly rentals, square footages,the terms and any extensions and the function of any such property) and copiesof (i) all leases and subleases under which the Company is lessor or lessee(whether by assignment or otherwise) or sublessor or sublessee of any realproperty, together with all amendments, supplements, nondisturbance agreements,brokerage and commission agreements and other agreements pertaining thereto(“Real Property Leases”), (ii) all options held by the Company or contractualobligations on the part of the Company to purchase or acquire any interest inreal property, and (iii) all options granted by the Company or contractualobligations on the part of the Company to sell or dispose of any interest inreal property.  Copies of all RealProperty Leases and such options and other real estate contractual obligationshave been delivered to Buyer.  TheCompany has not assigned any Real Property Leases or any such options orobligations.  There are no disputes,oral agreements or forbearance programs in effect as to any Real PropertyLease; all facilities leased under the Real Property Leases (includingalterations constructed by the Company) have received all approvals ofgovernmental authorities (including licenses and permits) required inconnection with the operation thereof; and all facilities leased under the RealProperty Leases are supplied with utilities and other services necessary forthe operation of said facilities.  Thereare no Liens on the interest of the Company in the Real Property Leases,subject only to (i) Liens for Taxes and assessments not yet due and payable and(ii) those matters set forth on Schedule 2.10.  The Real Property Leases and options and contractual obligationslisted on Schedule 2.10 are in full force and effect and constitutebinding obligations of the Company and the other parties thereto, and (x) thereare no defaults thereunder and (y) no event has occurred that with notice,lapse of time or both would constitute a default by the Company or, to the bestknowledge of the Company and the Members, by any other party thereto.

##  

## 2.11         Environmental Laws and Regulations.

##  

### (a)           (i) During theoccupancy and operation of the “Subject Property” (as defined below) by theCompany and, to the best knowledge of the Company and the Members, prior to itsoccupancy and operation, the operations of the Subject Property and any use,storage, treatment, disposal or transportation of “Hazardous Substances” (asdefined below) that has occurred in, on, to, from or under the Subject Propertyprior to the date of this Agreement have been in compliance with all“Environmental

 

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### Requirements” (as definedbelow); (ii) during the occupancy and operation of the Subject Property by theCompany and, to the best knowledge of the Company and the Members, prior to itsoccupancy or operation thereby, no release, leak, discharge, spill, disposal oremission of Hazardous Substances has occurred in, on, to, from or under theSubject Property in a quantity or manner that violates or requires furtherinvestigation or remediation under Environmental Requirements or as required bygovernmental authorities; (iii) the Subject Property is free of HazardousSubstances as of the date of this Agreement, except for the presence of smallquantities of Hazardous Substances utilized by the Company or other tenants ofthe Subject Property in compliance with and in the ordinary course of theirbusiness consistent with past good business practices; (iv) there is no pendingor threatened litigation or administrative investigation or proceedingconcerning the Subject Property or the Company or the Members relating to orregarding Hazardous Substances or Environmental Requirements; (v) there are noasbestos-containing materials or above-ground or underground storage tanksystems located at the Subject Property; (vi) except as set forth on Schedule2.11, the Company has never owned, operated or leased any real propertyother than the Subject Property; (vii) the Company’s transportation to ordisposal at any off-site location of any Hazardous Substances from property nowor formerly owned, operated or leased by the Company at the time of theCompany’s ownership, operation or lease thereof was conducted in fullcompliance with applicable Environmental Requirements; and (viii) neither the Companynor the Members are aware of any facts, conditions or circumstances that couldreasonably be expected to form the basis for a claim against the Company orParent or Buyer of or relating to the Company’s compliance or failure to complywith any Environmental Requirements.

###  

### (b)           Definitions.  As used in this Agreement, the followingterms shall have the following meanings:

###  

“EnvironmentalRequirements” means all laws, statutes, rules, regulations, ordinances,permits, guidance documents, judgments, decrees, orders, agreements and otherrestrictions and requirements (whether now or hereafter in effect) of anygovernmental authority, including, without limitation, federal, state and localauthorities, relating to the regulation or protection of human health andsafety, worker health and safety, natural resources, conservation, theenvironment, or the storage, treatment, disposal, transportation, handling orother management of industrial or solid waste, hazardous waste, hazardous ortoxic substances or chemicals, pollutants or Hazardous Substances, includingwithout limitation, CERCLA (as defined below); the Resource Conservation andRecovery Act, as amended, 42 U.S.C. §6901 etseq.; the FederalWater Pollution Control Act, as amended, 33 U.S.C. §1251 etseq.;the Toxic Substances Control Act, 15 U.S.C. §2601 etseq.; theClean Air Act, 42 U.S.C. §7401 etseq.; the Safe Drinking WaterAct, 42 U.S.C. 300f etseq.; the Federal Insecticide andRodenticide Act, 7 U.S.C. §121 etseq.; the 0.1 Pollution Act of1990, 33 U.S.C. §2701 etseq.; and their state and localcounterparts and equivalents.

 

“HazardousSubstance” means any “hazardous substance” as defined in §101(14) of theComprehensive Environmental Response, Compensation, and Liability Act of 1980,as amended from time to time (42 U.S.C. §§ 9601 et seq.) (“CERCLA”) or anyregulations

 

14

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promulgated thereunder,or the Occupational Safety and Health Act of 1970, as amended from time to time(29 U.S.C. § 651 et seq.), or any regulations promulgated thereunder, anypollutants, contaminants, toxic or hazardous or extremely hazardous substances,materials, wastes, constituents, compounds, chemicals, natural or man-madeelements or forces (including, without limitation, petroleum or any by-productsor fractions thereof, any form of natural gas, Bevill Amendment materials,lead, asbestos and asbestos-containing materials, building constructionmaterials and debris, polychlorinated biphenyls (“PCBs”) and PCB-containing equipment,radon and other radioactive elements, ionizing radiation, electromagnetic fieldradiation and other non-ionizing radiation, sonic forces and other naturalforces, infectious, carcinogenic, mutagenic, or etiologic agents, pesticides,defoliants, explosives, flammables, corrosives and urea formaldehyde foaminsulation) that are regulated by, or may now or in the future form the basisof liability under, any Environmental Requirements.

 

“SubjectProperty” means all Real Property, all property subject to the RealProperty Leases and any properties listed on Schedules 2.10 and 2.11.

 

## 2.12         Contracts.

##  

### (a)           Set forth on Schedule2.12(a) is a list of all contracts, leases, agreements, arrangements andcommitments (whether oral (summaries only) or written) to which the Company isa party or by which its assets or business are bound (the following,“Contracts”), including, without limitation, contracts, leases, agreements,arrangements or commitments that relate to (i) the sale, lease or otherdisposition by the Company of all or any substantial part of its business orassets or the purchase by the Company of a substantial amount of assets (ineach event other than in the ordinary course of business consistent with pastgood business practices), (ii) the employment of any person other thanpersonnel employed at the pleasure of the Company in the ordinary course of itsbusiness at rates of compensation and on terms consistent with past goodbusiness practices; (iii) collective bargaining with, or any representation ofany employees by, any labor union or association; (iv) the acquisition ofservices, supplies, equipment or other personal property involving more than$5,000 or that is not terminable by the Company upon not more than thirty (30)days’ notice without obligation on the part of the Company; (v) noncompetition,exclusivity or nondisclosure; (vi) the purchase or sale of real property or anyinterest therein; (vii) distribution, agency or construction; (viii) lease ofreal or personal property as lessor or lessee or sublessor or sublessee; (ix)lending or advancing of funds other than the extension of credit to tradepurchasers in the ordinary course of the Company’s business consistent withpast good business practices; (x) borrowing of funds or receipt of creditother than by the Company in the ordinary course of business consistent withpast good business practices and except for trade payables in amounts and onterms consistent with past good business practices; (xi) incurring of anyobligation or liability except for transactions engaged in by the Company inthe ordinary course of business consistent with good business practices; (xii)the sale of personal property (other than sales of inventory in the ordinarycourse of business consistent with past good business practices) or servicesunder which payments due after the date of this Agreement exceed $5,000; and(xiii) any matter or transaction not in the

 

15

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### ordinary course of thebusiness of the Company or that is inconsistent with past good businesspractices of the Company.  The Companyhas provided Buyer or its representatives with true and complete copies of allwritten Contracts and a summary of all of the material terms of each oralContract.  The Company has no agreementswith customers or other parties that (i) require the Company to provide goodsor services at no charge or at rates significantly below the average of ratesfor such goods or services set forth in the Company’s written customer contracts,except for immaterial discounts and/or free services provided as incentives tocertain accounts, or (ii) contain a “most-favored” nation clause (*i.e.,*obligating the Company to providegoods or services upon terms more favorable to the other party than those setforth in the agreement upon the occurrence of certain specifiedconditions).  Except as set forth on Schedule2.12(a), the Company has delivered invoices to its customers or receivedmonies therefrom only with respect to completed work.

###  

### (b)           Except as set forth on Schedule2.12(b), each Contract is in full force and effect on the date hereof andwill continue to be in full force and effect on substantially identical termsfollowing the Closing; the Company is not in default under any Contract and hasnot given or received notice of any default under any Contract; to the bestknowledge of the Company and the Members, no other party to any Contract is indefault hereunder and such Contracts are legal, valid and binding obligationsof the respective parties thereto in accordance with their terms and, except tothe extent reflected on Schedule 2.12(b), have not been amended;invoices with respect to Contracts have been disseminated only with respect tocompleted work; and no defenses, offsets or counterclaims thereto have beenasserted or, to the best knowledge of the Company and the Members, may be madeby any party thereto other than the Company nor has the Company waived anysubstantial rights thereunder.

###  

## 2.13         NoViolations.  The execution, deliveryand performance of this Agreement by the Company and the Members and the otheragreements and documents contemplated hereby by the Company and the Members andthe consummation of the transactions contemplated hereby will not (i) violateany provision of any Charter Document, (ii) violate any statute, rule,regulation, order or decree of any public body or authority by which theCompany or the Members or its or their respective properties or assets arebound, or (iii) result in a violation or breach of, or constitute a defaultunder, or result in the creation of any Lien upon, or create any rights oftermination, cancellation or acceleration in any person with respect to anyContract, any Real Property Lease or any material license, franchise or permitof the Company or any other agreement, contract, indenture, mortgage orinstrument to which the Company is a party or by which any of its properties orassets is bound.

##  

## 2.14         Government Contracts.  Except as set forth on Schedule 2.14,the Company is not now and has not been a party to any governmental contract.

##  

### (a)           The Company has notbeen suspended or debarred from bidding on contracts or subcontracts for anyAgency or instrumentality of the United States Government or any state, nor, tothe best knowledge of the Company and the Members, has any suspension ordebarment action been threatened or commenced. There is no

 

16

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### valid basis for theCompany’s suspension or debarment from bidding on contracts or subcontracts forany Agency of the United States Government or any state.

###  

### (b)           Except as set forth on Schedule 2.14,the Company has not been, nor is it now being, audited or investigated by anygovernment Agency or the inspector general or auditor general or similarfunctionary of any Agency or instrumentality, nor, to the best knowledge of theCompany and the Members, has such audit or investigation been threatened.

###  

### (c)           The Company has nodispute pending before a contracting office of, nor any current claim (otherthan any accounts receivable) pending against, any Agency or instrumentality ofthe United States Government or any state, relating to a contract.

###  

### (d)           The Company has not,with respect to any contract, received a cure notice advising the Company thatit is or was in default or would, if it failed to take remedial action, be indefault under such contract.

###  

### (e)           The Company has notsubmitted any inaccurate, untruthful or misleading cost or pricing data,certification, bid, proposal, report, claim or any other information relatingto a contract to any Agency or instrumentality of the United States Governmentor any state.

###  

### (f)            Neither the Companynor any Member or, to the best knowledge of the Company and the Members, anyemployee, agent, consultant, representative or affiliate of the Company is inreceipt or possession of any competitor or government proprietary orprocurement sensitive information related to the Company’s business undercircumstances where there is reason to believe that such receipt or possessionis unlawful or unauthorized.

###  

### (g)           Each of the Company’scontracts has been issued, awarded or novated to the Company in the Company’sname.

###  

### (h)           The Company has notmade, offered or agreed to offer anything of value to any governmental official,political party or candidate for government office nor has it otherwise takenany action that would cause the Company to be in violation of the ForeignCorrupt Practices Act of 1977, as amended, or any law of similar effect.

###  

## 2.15         Consents.  Except as set forth on Schedule 2.15,no consent, approval, notice to, registration or filing with, authorization ororder, of any Agency or under any Contract, Real Property Lease or otheragreement or commitment to which the Company or the Members are parties or bywhich its or their respective assets are bound is required as a result of or inconnection with the execution or delivery of this Agreement and the otheragreements and documents to be executed by the Company and the Members or theconsummation by the Company and the Members of the transactions contemplatedhereby.

##  

## 2.16         Litigation and Related Matters.  Set forth on Schedule 2.16 is a listof all actions, suits, proceedings, examinations, complaints, claims,investigations or grievances pending

 

17

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## against theCompany or its officers or directors in their capacities as such or, to thebest knowledge of the Company and the Members, threatened against the Company,the business or any property or rights of the Company, at law or in equity,before or by any arbitration board or panel, court or federal, state, municipalor other governmental department, commission, board, bureau, agency orinstrumentality, domestic or foreign (“Agencies”).  None of the actions, suits, proceedings or investigations listedon Schedule 2.16 either (i) results in or could, if adverselydetermined, be reasonably expected to have an adverse effect on the Company(other than to the extent specifically and fully reserved for on the EffectiveDate Balance Sheet) or result in the Members (prior to the Closing) holdingless than one hundred percent (100%) of the Company Interests or in any thirdparty having the right to acquire any membership interests or assets of theCompany or (ii) affects or could, if adversely determined, affect the right orability of the Company to carry on its business substantially as nowconducted.  The Company is not subjectto any continuing court or Agency order, writ, injunction or decree applicablespecifically to its business, operations or assets or its employees, nor indefault with respect to any order, writ, injunction or decree of any court orAgency with respect to its assets, business, operations or employees.  Schedule 2.16 lists (x) all worker’scompensation claims outstanding against the Company as of the date hereof and(y) all actions, suits or proceedings filed by or against the Company sinceDecember 31, 2000.  Except as set forthon Schedule 2.16, (i) neither the Company nor its insurers have duringthe last two (2) years been required to make any indemnification payment as aresult of any actual or alleged act or omission of the Company or any personunder its control, and (ii) there has been no settlement agreement entered intowithin the last five (5) years by or on behalf of the Company resolving,compromising or settling any action, suit, proceeding, complaint, claim orgrievance of the type described in the first sentence of this Section 2.16.

##  

## 2.17         Compliance with Laws.  The Company is in compliance with allapplicable laws, regulations (including federal, state and local procurementregulations), orders, judgments and decrees, including without limitationCalifornia SB 1386: Personal Information: Privacy and its resulting amendmentsto California Civil Code §§1798.29, and 1798.82 through 1798.84, and hasadopted adequate internal controls and processes to ensure continued compliancewith the provisions of California SB 1386.

##  

## 2.18         Intellectual Property Rights.  Schedule 2.18 lists all of the domesticand foreign trade names, trademarks, trade dress, service marks, trademarkregistrations and applications, service mark registrations and applications,domain names, mask works, patents, patent applications, patent licenses, tradesecrets, algorithms, inventions, computer software and firmware, softwarelicenses, copyrights and copyright registrations and applications owned by theCompany or used thereby in the operation of its business, and any and allwebsites (including such sites’ home page addresses) and intranets owned,licensed to or otherwise or used by the Company (collectively, the“Intellectual Property”), which schedule indicates (i) the term and exclusivityof its rights with respect to the Intellectual Property and (ii) whether each itemof Intellectual Property is owned or licensed by the Company, and if licensed,the licensor and the license fees therefor. Unless otherwise indicated on Schedule 2.18, the Company hasthe right to use and license the Intellectual Property, and the consummation ofthe transactions contemplated hereby will not result in the loss or materialimpairment of any rights of the Company in the Intellectual Property.  Each item constituting part of theIntellectual Property has been, to the

 

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## extent indicatedon Schedule 2.18, registered with, filed in or issued by, as thecase may be, the United States Patent and Trademark Office or such othergovernment entity, domestic or foreign, as is indicated on Schedule 2.18;all such registrations, filings and issuances remain in full force and effect;and all fees and other charges with respect thereto are current.  Except as stated on Schedule 2.18,there are no pending proceedings or adverse claims made or, to the best knowledgeof the Company and the Members, threatened against the Company with respect tothe Intellectual Property; there has been no litigation commenced or threatenedin writing within the past five (5) years with respect to the IntellectualProperty or the rights of the Company therein; the Intellectual Propertyperforms in all respects in the manner described or represented in allproposals, bids, specifications, documentation, promotional materials and salesliterature prepared by the Company or delivered on behalf of it and performs inall respects the functions necessary for the conduct of the Company’s businessand operations, free of any deficiency, imperfection or insufficiency thatcould reasonably be expected to have a Material Adverse Effect; and to the bestknowledge of the Company and the Members, (i) the Intellectual Property or theuse thereof by the Company does not conflict with any trade names, trademarks,trade dress, service marks, trademark or service mark registrations orapplications, domain names, mask works, patents, patent applications, patentlicenses, trade secrets, algorithms, inventions, computer software andfirmware, software licenses, copyrights, copyright registrations orapplications of others (“Third Party Intellectual Property”), and (ii) suchThird Party Intellectual Property or its use by others or any other conduct ofa third party does not conflict with or infringe upon the Intellectual Propertyor its use by the Company.

##  

## 2.19         Employee Benefit Plans.

##  

### (a)           Each employee benefit,membership interest or compensation plan, including without limitation employeebenefit plans within the meaning of Section 3(3) of the Employee RetirementIncome Security Act of 1974, as amended (“ERISA”), maintained or contributed toby the Company or any of its Group Members (as defined below) (collectively,the “Plans”) is listed on Schedule 2.19, is in compliance withapplicable law and has been administered and operated in accordance with itsterms.  Each Plan that is intended to be“qualified” within the meaning of Section 401(a) of the Code (i) has beentimely amended to reflect the changes required by the Economic Growth and TaxRelief Reconciliation Act of 2001, the Department of Labor’s final regulationsfor claims procedures, the Internal Revenue Service’s (the “IRS”) finalregulations for minimum distributions, and the correct mortality table asprescribed in Revenue Ruling 2001-62, and (ii) has received a favorabledetermination letter, opinion letter, advisory letter or notification letter,as applicable, from the IRS regarding its qualified status under the Code, hastime remaining to apply under applicable Treasury regulations or IRSpronouncements for a letter and to make any amendments necessary to obtain afavorable letter or, if reliance is permitted under IRS Announcement 2001-77,relies on the favorable opinion letter or advisory letter of the master andprototype or volume submitter plan sponsor of such plan and no event hasoccurred and no condition exists that could be expected to result in therevocation of any such determination or letter.  No event that constitutes a “reportable event” (within themeaning of Section 4043(b) of ERISA) for which the thirty (30) noticerequirement has not been waived by the Pension Benefit Guaranty Corporation(the “PBGC”) has occurred or

 

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### could be expected tooccur with respect to any Plan.  Forpurposes of this Agreement, the term “Plan” shall include each bonus, incentiveor deferred compensation, severance, termination, retention, change of control,option, membership interest appreciation, membership interest purchase,ownership, SEPP, phantom membership interest or equity-based, performance orother employee or retiree benefit or compensation plan, welfare benefitprogram, arrangement, agreement, policy or understanding, whether written orunwritten.

###  

### (b)           Except as set forth onSchedule 2.19, neither the Company nor any Group Member (nor any of theirrespective predecessors) has ever, whether directly or indirectly, made anycontributions to or been required to contribute to or participated in orotherwise been liable with respect to any employee benefit plan subject toSection 412 of the Code, Section 302 of ERISA or Title IV of ERISA, including,without limitation, any “multiple employer plan” (within the meaning of theCode or ERISA) or “multi-employer plan” (as defined in Section 4001(a)(3) ofERISA).  Full payment has been made ofall amounts that the Company was required under the terms of the Plans to havepaid as contributions to such Plans on or prior to the date hereof (excludingany amounts not yet due) and all amounts properly accrued to date asliabilities of the Company that have not been paid have been properly recordedon the Financial Statements.  No Planthat is subject to Section 302 of ERISA or Section 412 of the Code has incurredor could be expected to incur any “accumulated funding deficiency” (within themeaning of Section 302 of ERISA or Section 412 of the Code), whether or notwaived, and no excise or other Taxes have been or could be expected to beincurred or are due and owing with respect to such Plan because of any failureto comply with the minimum funding standards of the Code and ERISA.  Neither the Company or, to the bestknowledge of the Company and the Members, any other “disqualified person” or“party in interest” (within the meaning of Section 4975(e)(2) of the Code andSection 3(14) of ERISA, respectively) has engaged in any transactions inconnection with any Plan that could be expected to result in the imposition ofa penalty pursuant to Section 502(i) of ERISA, damages pursuant to Section 409of ERISA or a tax pursuant to Section 4975(a) of the Code.  No claim, action, proceeding or litigationhas been made, commenced or, to the best knowledge of the Company and theMembers, threatened with respect to any Plan (other than for benefits payablein the ordinary course).  No Plan orrelated trust owns any securities in violation of Section 407 of ERISA.  Neither the Company nor any Group Member hasincurred any liability or taken any action, or has any knowledge of any actionor event, that could cause it to incur any liability (i) under Section 412 ofthe Code or Title IV of ERISA with respect to any “single employer plan”(within the meaning of Section 4001(a)(15) of ERISA), (ii) on account of apartial or complete withdrawal (within the meaning of Section 4205 and 4203 ofERISA, respectively) with respect to any “multi-employer plan” (within themeaning of Section 3(37) of ERISA), (iii) on account of unpaid contributions toany such multi-employer plan, (iv) to provide health benefits or othernon-pension benefits to retired or former employees, except as specificallyrequired by Section 4980B(f) of the Code, or (v) to the PBGC, other thanpayment of premiums that have become due (all of which have been fully paid ona timely basis).  As of the most recentvaluation date, the fair value of the assets of each Plan subject to Title IVof ERISA equals or exceeds the liabilities of such Plan on a

 

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### termination basis (*i.e.*, on an accumulated benefit obligationbasis) and on an ongoing basis (*i.e.*,on a projected benefit obligation basis) based on the actuarial assumptionsused for funding purposes, which assumptions are reasonable, and no amendmentsor other modifications to such Plan or its actuarial assumptions were adoptedsince the date of such Plan’s most recent actuarial report.  With respect to any Plan subject to Section412 of the Code, Section 302 of ERISA or Title IV of ERISA, there is no“unfunded liability” (within the meaning of Section 4001(a)(18) of ERISA) andno proceeding has been or is expected to be initiated by the PBGC to terminatesuch Plan.

###  

### (c)           Except as set forth on Schedule2.19, neither the execution and delivery of this Agreement by the Companynor the consummation of the transactions contemplated hereby will (i) entitleany current or former employee of the Company to severance pay, unemploymentcompensation or any similar payment, (ii) accelerate the time of payment orvesting, or increase the amount of, any compensation due to any such employeeor former employee, or (iii) directly or indirectly result in any payment madeor to be made to or on behalf of any person to constitute a “parachute payment”(within the meaning of Section 280G of the Code).  For purposes of this Agreement, “Group Member” shall mean anymember of any “controlled group” or “affiliated service group” as defined in Sections414(b) and 414(m) of the Code that includes the Company, any member of any“controlled group of corporations” as defined in Section 1563 of the Code thatincludes the Company or any member of any group of “trades or businesses undercommon control” as defined by Section 414(c) of the Code that includes theCompany.

###  

### (d)           With respect to eachPlan, the Company has delivered or will upon request deliver to Buyer a trueand complete copy of such plan document, including any amendments, and a copyof any related trust agreement or insurance contract, the most recent summaryplan description, together with any summaries of material modifications, themost recently filed Form 5500, as applicable, and other material relateddocuments.

###  

## 2.20         Employees; Employee Relations.

##  

### (a)           Schedule 2.20sets forth (i) the name, job title and current annual salary (or rate of pay)and other compensation (including, without limitation, normal bonus,profit-sharing and other compensation) now payable by the Company to (A) eachemployee (which for all purposes of this Agreement shall include employeesleased by the Company from a third party) whose current total annualcompensation or estimated compensation is $80,000****or more and (B) each relative of any of the Members (whetherrelated by blood, marriage, adoption or otherwise), (ii) any increase to becomeeffective after the date of this Agreement in the total compensation or rate oftotal compensation payable by the Company to each such person, (iii) anyincrease to become payable after the date of this Agreement by the Company toemployees other than those specified in clause (i) of this Section 2.20(a),(iv) all presently outstanding loans and advances (other than routine traveladvances to be repaid or formally accounted for within sixty (60) days) made bythe Company to, or made to the Company by, any director, officer or employee,(v) all other transactions between the Company and any director, officer oremployee thereof from and after January 1, 2003, (vi) all accrued but unpaidvacation pay

 

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### owing to any officer oremployee that is not disclosed on the Financial Statements, (vii) anyengagement or use by the Company in any material manner of the employees ofanother entity or the engagement or use of the Company’s employees in anymaterial manner by another entity from and after January 1, 2003 or anyoutstanding obligations of the Company to engage any such third-party employeesor make available its employees (setting forth a list of the applicableemployees (whether of the Company or such other entity), their job positionsand current annual salaries (or rate of pay) and other compensation and thepercentage of time of employment allocable to the Company over (A) the precedingtwelve (12) months and (B) the preceding six (6) months), and (viii) thewritten or oral personnel policies, rules and procedures applicable toemployees from and after January 1, 2003 (of which true and completecopies of such written personnel policies shall heretofore have been deliveredby the Company to Buyer).  Except asdisclosed on Schedule 2.20, no relative of any Member is employed orretained by or receives benefits from the Company.

###  

### (b)           Except as disclosed on Schedule2.20, the Company is not a party to, or bound by, the terms of anycollective bargaining agreement, and the Company has not experienced anymaterial labor disputes or difficulties during the last five (5) years and,during the last five (5) years, none of the employees of the Company has beenrepresented by any labor union or other employee collective bargainingorganization, was a party to, or bound by, any labor or other collectivebargaining agreement in connection with such employment or has been subject toor involved in or, to the best knowledge of the Company and the Members,threatened with, any union elections, petitions or other organizational orrecruiting activities.  Attached to Schedule2.20 are true and complete copies of any labor or collective bargaining agreementsto which the Company has been a party or bound during the last five (5)years.  Except as set forth on Schedule2.20, there are no labor disputes existing, or to the best knowledge of theCompany and the Members, threatened involving, by way of example, strikes, workstoppages, slowdowns, picketing, or any other interference with work orproduction, or any other concerted action by employees.  No charges or proceedings before theNational Labor Relations Board or similar Agency exist, or to the bestknowledge of the Company and the Members, are threatened.

###  

### (c)           The relationshipsenjoyed by the Company with its employees are good and neither the Company andthe Members have any knowledge of any facts that would indicate that theemployees of the Company will not continue in the employ thereof following theClosing on a basis similar to that existing on the date of this Agreement.  From and after December 31, 2003, except asdisclosed on Schedule 2.20, the Company has not experienced anydifficulties in obtaining any qualified personnel necessary for the operationsof its business and, to the best knowledge of the Company and the Members, nosuch shortage of qualified personnel is threatened or pending.  Except as disclosed on Schedule 2.20,the Company is not a party to any employment contract with any individual oremployee, either express or implied.  Nolegal proceedings, charges, complaints or similar actions exist under anyfederal, state or local laws affecting the employment relationship including,but not limited to: (i) anti-discrimination statutes such as Title VII of theCivil Rights Act of 1964, as amended (or similar state or local

 

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### laws prohibitingdiscrimination because of race, sex, religion, national origin, age and thelike); (ii) the Fair Labor Standards Act or other Federal, state or local lawsregulating hours of work, wages, overtime and other working conditions; (iii)requirements imposed by Federal, state or local governmental contracts such asthose imposed by Executive Order 11246; (iv) state laws with respect totortious employment conduct, such as slander, harassment, false light, invasionof privacy, negligent hiring or retention, intentional infliction of emotionaldistress, assault and battery or loss of consortium; or (v) the OccupationalSafety and Health Act, as amended, as well as any similar state laws, or otherregulations respecting safety in the workplace; and to the best knowledge ofthe Company and the Members, no proceedings, charges or complaints arethreatened under any such laws or regulations and no facts or circumstancesexist that would give rise to any such proceedings, charges, complaints orclaims, whether valid or not.  TheCompany is not subject to any settlement or consent decree with any present orformer employee, employee representative or any government or Agency relatingto claims of discrimination or other claims in respect to employment practicesand policies; and no government or Agency has issued a judgment, order, decreeor finding with respect to the labor and employment practices (includingpractices relating to discrimination) of the Company or any of itsaffiliates.  Since December 31, 2001 theCompany has not incurred any liability or obligation under the WorkerAdjustment and Retraining Notification Act or similar state laws; and theCompany has not laid off more than ten percent (10%) of its employees at anysingle site of employment in any ninety (90) day period during the twelve (12)month period ending at the Closing Date.

###  

### (d)           The Company is incompliance in all material respects with the provisions of the Americans withDisabilities Act.

###  

## 2.21         Insurance.  The Company has taken all necessary steps toidentify and evaluate business and other risks applicable to its operations andproperties and is insured with responsible insurers in respect of itsoperations and properties against such risks and against those risks normallyinsured against by companies in similar lines of business.  Schedule 2.21 contains an accuratelist and description of all policies and contracts for fire, casualty,production, liability, errors and omissions, business interruption and otherforms of insurance and all fidelity bonds held or maintained by or for the benefitof the Company (including insurer, named insured, type of coverage, limits ofinsurance and retention amounts, required deductibles or co-payments, annualpremiums and expiration dates).  Allsuch policies are in full force and effect and shall remain in full force andeffect through the Closing Date. Neither the Company nor the Members have received any notice ofcancellation or non-renewal or of significant premium increases with respect toany such policy.  Except as disclosed onSchedule 2.21, no pending claims made by or on behalf of the Companyunder such policies have been denied or are being defended against thirdparties under a reservation of rights by an insurer thereof.  All premiums due prior to the date hereoffor periods prior to the date hereof with respect to such policies andcontracts have been timely paid.  Duringthe last three (3) years, the Company has not been refused any insurance withrespect to its assets or operations, nor has its coverage been limited, by anyinsurance carrier to which it has applied for any such insurance or with whichit has carried insurance.

 

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## 2.22         Interestsin Customers, Suppliers, Etc. Except as set forth on Schedule 2.22, no Member, officer,director or affiliate of the Company possesses, directly or indirectly, anyfinancial interest in, or is a director, officer, employee or affiliate of, anycorporation, firm, association or business organization that is a client,supplier, customer, lessor, lessee, subcontractor or competitor of theCompany.  The terms and conditions underwhich the Company has a business relationship with any of the entities setforth on Schedule 2.22 are no less favorable to the Company than thosethat could be obtained from an unaffiliated third party negotiating on an arm’slength basis.  Ownership of securitiesof a business entity whose securities are registered under the SecuritiesExchange Act of 1934 not in excess of five percent (5%) of any class of suchsecurities shall not be deemed to be a financial interest for purposes of this Section2.22.

##  

## 2.23         Business Relations.  Schedule 2.23 contains an accurate list (under appropriateheadings) of all significant customers and suppliers of the Company (*i.e.*,those customers representing five percent (5%) or more of the Company’srevenues for the twelve (12) months ended December 31, 2003 as well as the ten(10) largest revenue-generating customers, and those suppliers representingfive percent (5%) or more of the operating expenses for the twelve (12) monthsended December 31, 2003 as well as the ten (10) suppliers with the largestaggregate invoice amounts submitted to the Company with respect to suchperiod).  Except as set forth on Schedule2.23, to the best knowledge of the Company and the Members, no customer orsupplier of the Company has or will cease to do business therewith after theconsummation of the transactions contemplated hereby.  Except as set forth on Schedule 2.23, since January 1,2003, the Company has not experienced any difficulties in obtaining anyinventory items necessary to the operation of its business, and, to the bestknowledge of the Company and the Members, no such shortage of supply ofinventory items is threatened or pending. The Company conducts its business directly and not, in whole or in part,by or through any other entity.  TheCompany is not required to provide any bonding or other financial securityarrangements in any material amount in connection with any transactions withany of its customers or suppliers. Except as set forth on Schedule 2.23, no customer records havebeen lost or improperly destroyed.

##  

## 2.24         Officers and Directors.  Set forth on Schedule 2.24 is a listof the current officers and managers of the Company.

##  

## 2.25         BankAccounts and Powers of Attorney.  Schedule 2.25 sets forth each bank, savings institutionand other financial institution with which the Company has an account or safedeposit box and the names of all persons authorized to draw thereon or to haveaccess thereto.  Each person holding apower of attorney or similar grant of authority on behalf of the Company is identifiedon Schedule 2.25.  Except as disclosedon such Schedule, the Company has not given any revocable or irrevocable powersof attorney to any person, firm or organization relating to its business forany purpose whatsoever.  The credit,debit, gas and other cards issued to or otherwise payable by the Company havenot been used except as reasonably required for the conduct of the business ofthe Company.

##  

## 2.26         Absenceof Certain Changes or Events. Except as set forth on Schedule 2.26 or as otherwise contemplatedby this Agreement, since December 31, 2003, there has not been (a) anydamage, destruction or casualty loss to the physical properties of the Companyor to the physical

 

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## properties of anythird parties that are located on the Company’s premises or within theCompany’s control (whether or not covered by insurance), (b) any event orcircumstance that could reasonably be expected to have a Material AdverseEffect, (c) any entry into any transaction, commitment or agreement (including,without limitation, any borrowing) material to the Company, excepttransactions, commitments or agreements in the ordinary course of businessconsistent with past good business practices, (d) any declaration, settingaside or payment of any dividend or other distribution in cash, securities orproperty with respect to the membership interests or other securities of theCompany, any repurchase, redemption or other acquisition by the Company of anymembership interests or other securities, or any agreement, arrangement orcommitment by the Company to do so, (e) any increase that is material in thecompensation payable or to become payable by the Company to its managers,officers, employees or agents or any increase in the rate or terms of any Planor similar plan, payment or arrangement made to, for or with any such managers,officers, employees or agents, (f) any sale, transfer or other disposition of,or the creation of any Lien upon, any part of the assets of the Company,tangible or intangible, except for sales of inventory and use of supplies andcollections of accounts receivables in the ordinary course of businessconsistent with past good business practices, or any cancellation orforgiveness of any debts or claims by the Company, (g) any change in the relationsof the Company with or loss of its customers or suppliers, or any loss ofbusiness or increase in the cost of inventory items or change in the termsoffered to customers, that could reasonably be expected to have a MaterialAdverse Effect, (h) any capital expenditure (including any capital leases) orcommitment therefor by the Company in excess of $10,000 in the aggregate, or(i) any action the purpose of which is to shift income from post-Effective Dateperiods to the pre-Effective Date period or to defer or delay expenses from thepre-Effective Date period to post-Effective Date periods other than in theordinary course of business consistent with past good business practices.

##  

## 2.27         Document Management Services and Storage.

##  

### (a)           Since January 1, 2002,the Company has not in any material respect lost, destroyed or mutilated anydata, charts, records or other materials received by it or left in its charge,possession or control by customers.  Nomaterial documents have been released without the prior receipt by the Companyof an executed authorization form in accordance with the Company’s customercontract and no material information has been released by the Company inviolation of any applicable law.

###  

### (b)           The Company has notviolated any confidentiality provisions of any customer contract and theCompany has complied in all respects with all rules, regulations, policies andprocedures of such customers.  TheCompany has policies in place and has consistently followed such policies toinsure confidentiality of customer records. Other than items withdrawn or destroyed at the respective customers’request, all items received and stored by the Company on behalf of each of theCompany’s customers are held in storage by the Company (except to the extent suchstorage has been subcontracted in the ordinary course of business) and arelocatable and accessible without extraordinary effort, except for (i) itemswithdrawn or destroyed at the applicable customer’s request and (ii) suchfailures to be held in storage and such failures to be able to locate andaccess as could not reasonably be expected to have a Material Adverse

 

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### Effect.  Since January 1, 2002, except as set forthon Schedule 2.27, to the best knowledge of the Company and theMembers, no amount of customer records in storage have suffered damage(including damage from water) or been lost or improperly destroyed.

###  

## 2.28         No Brokers or Agents.  Except as set forth on Schedule 2.28,neither the Company nor any Member has employed, engaged or otherwise made anyagreement with any person or taken any action that would cause any person tobecome entitled to a broker’s, agent’s or finder’s fee or commission inconnection with the transactions contemplated hereby.

##  

## 2.29         Disclosure.  All of the representations and warranties bythe Members and the Company contained in this Agreement, in the schedules andexhibits attached hereto and in the certificates furnished or to be furnishedby the Company and the Members to Parent or to Buyer in connection herewith orpursuant hereto are complete and accurate in all material respects and do notcontain any untrue statement of a material fact or omit to state any materialfact necessary in order to make any statement contained herein or therein notmisleading.  There is no fact known tothe Company or any Member that has specific application to the Company (otherthan general economic or industry conditions) and that adversely affects or, asfar as the Company or such Member can reasonably foresee, threatens, theassets, business, financial condition, or the results of operations of theCompany that has not been set forth in this Agreement or any schedulehereto.  The Company has not enteredinto any letter of intent, preliminary agreement or other contract with anyother party that would be inconsistent with the terms of this Agreement.

##  

**(B)****          Representations andWarranties of the Members.**

 

Each Memberseverally represents and warrants as more specifically set forth hereafter thatthe representations and warranties in this Section 2(B) as they apply tosuch Member are true and correct as of the date of this Agreement and at thetime of the Closing.

 

## 2.30         Authority; Ownership; Other Interests.  The Member has the full legal right, powerand authority to enter into this Agreement (subject to the community propertyinterest of any Member’s spouse).  TheMember owns beneficially and of record the Company Interests set forth oppositethe Member’s name on Schedule 1.1 and Schedule 2.3 (subject tothe community property interest of any Member’s spouse); such CompanyInterests, together with the other Company Interests set forth on Schedule1.1 and 2.3, constitute all of the outstanding membership interestsof the Company, and, except as set forth on Schedule 2.30 hereof, suchCompany Interests owned by the Member are owned free and clear of all Liensother than standard state and federal securities laws private offeringrestrictions.  The Member has owned theCompany Interests set forth opposite such Member’s name since the date(s) setforth on Schedule 1.1.  Except asset forth on Schedule 2.30, each Nonacademic Member does not have anyownership interest in, or act as a principal, officer, director, agent,manager, employer, employee or consultant of or for, any entity other than theCompany; provided, however, that the ownership of up to 5.0% inthe aggregate of any class of securities listed on a national securitiesexchange or reported on Nasdaq shall not be deemed to violate this representation.

 

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## 2.31         PreemptiveRights.  The Member does nothave, or hereby waives, any preemptive or other right to acquire CompanyInterests that the Member has or may have had.

##  

## 2.32         Validity of Obligations.  This Agreement and the Employment Agreementor Independent Contractor Agreement and Noncompetition Agreement have each beenduly executed and delivered and are the legal, valid and binding obligations ofthe Member that is a party thereto in accordance with their respective terms.

##  

## 2.33         Absence of Claims Against the Company.  The Member does not have any claims againstthe Company other than as disclosed herein.

##  

# **ARTICLEIIIREPRESENTATIONS AND WARRANTIES OF PARENT AND BUYER**

# ** **

Parent and Buyer,jointly and severally, represents and warrants to the Company and the Membersthat all of the following representations and warranties with respect to Parentand Buyer are true and correct at the time of this Agreement and at the time ofthe Closing:

 

## 3.1           Organization and Authorization.  Each of Parent and Buyer is a corporationduly organized, validly existing and in good standing under the laws of theState of Delaware with all requisite corporate power and authority to own,lease and operate its properties and to carry on its business as now beingconducted.  Buyer is a wholly-ownedsubsidiary of Economic Research Services, Inc., a Florida corporation that is adirect wholly-owned subsidiary of Parent. Each of Parent and Buyer has all requisite corporate power, capacity andauthority to execute and deliver this Agreement and all other agreements anddocuments contemplated hereby.  Theexecution and delivery of this Agreement and the Employment Agreements and theNoncompetition Agreements and such other agreements and documents by Parent andBuyer (to the extent a party thereto) and the consummation by each of Parentand Buyer of the transactions contemplated hereby have been duly authorized byParent and by Buyer and no other corporate action on the part of Parent orBuyer is necessary to authorize the transactions contemplated hereby.  This Agreement and the Employment Agreementsand the Noncompetition Agreements have each been duly executed and delivered byParent and Buyer (to the extent a party thereto) and constitute the valid andbinding obligation of Parent and Buyer, enforceable in accordance with theirrespective terms, subject to the Equitable Exceptions.

##  

## 3.2           NoViolations.  Theexecution and delivery of this Agreement and the other agreements and documentscontemplated hereby by Parent and Buyer and the consummation of thetransactions contemplated hereby will not (a) violate any provision of theAmended and Restated Certificate of Incorporation or By-laws of Parent or theCertificate of Incorporation or By-laws of Buyer, (b) violate any materialstatute, rule, regulation, order or decree of any public body or authority bywhich either of Parent or Buyer or their respective properties or assets arebound, or (c) result in a violation or breach of, or constitute a default underor result in the creation of any encumbrance upon, or create any rights oftermination, cancellation or acceleration in any person with respect to anymaterial agreement, contract, indenture, mortgage or instrument to which eitherof Parent or Buyer are parties or any of their respective properties

 

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## or assets is boundwhich in any such event could reasonably be expected to have a *SOURCECORP*Material Adverse Effect.

##  

## 3.3           Consents. No consent, approval or otherauthorization of any governmental authority or third party is required as aresult of or in connection with the execution and delivery of this Agreementand the other agreements and documents to be executed by Parent or Buyer or theconsummation by Parent or Buyer of the transactions contemplated hereby.

##  

## 3.4           NoBrokers or Agents. Except as set forth on Schedule 3.4, neither Parent nor Buyer hasemployed, engaged or otherwise made any agreement with any person or taken anyaction that would cause any person to become entitled to a broker’s, agent’s orfinder’s fee or commission in connection with the transactions contemplatedhereby.

##  

# **ARTICLE IVCOVENANTS OF THE PARTIES**

# ** **

## 4.1           Records Pertaining to the Company.

##  

### (a)           Turnover of Records.  At the Closing, the Members will deliver orcause to be delivered to the Company any records (i) in the possession of theMembers, (ii) applicable primarily to the Company, and (iii) of which theCompany does not already have copies.

###  

### (b)           Retention of Records.  The Members shall, for a period of six (6)years after the Closing Date, neither dispose of nor destroy any of thebusiness records or files of the Members that pertain in whole or in part tothe Company without first offering to turn over possession of copies thereof tothe Company at the Company’s expense, by written notice to the Company, atleast thirty (30) days prior to the proposed date of such disposition ordestruction.

###  

### (c)           Access to Records.  From and after the Closing, the Membersshall allow the Company and its representatives access to all business recordsand files of the Members that pertain in whole or in part to the Company,during normal working hours at the principal place of business of the Members,or at any locations where such records are stored, and the Company shall havethe right, at its own expense, to make copies of any such records and files.

###  

### (d)           Assistance withRecords.  From and after the ClosingDate, the Members shall make available to Buyer, upon written request,(i) personnel of the Members to assist Buyer in locating and obtainingrecords and files maintained by the Members as described above, and(ii) personnel whose assistance or participation is reasonably required byBuyer in anticipation of, or preparation for, any existing or future thirdparty actions, Tax or other matters in which the Company or any of its past,present or future affiliates is involved and which relate to the business ofthe Company.

 

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### (e)           Accountants’ WorkPapers.  The Members shall use theirrespective best efforts (including, without limitation, furnishing anycertificates reasonably requested, and complying with other reasonable requestsas a prerequisite to availability) to cause Sweeney Kovar, LLP, and any otherindependent accounting firm that has reviewed or prepared a report on theFinancial Statements or any other financial statements of the Company or anyconsolidated financial statements for any consolidated group that included theCompany with respect to any financial accounting period commencing on or afterJanuary 1, 2000 to make available to Buyer for inspection and copying, atBuyer’s expense and upon its written request therefor, such accounting firm’swork papers with respect to any such Financial Statements or other financialstatements and any general ledger and bank reconciliation materials in thepossession of such accounting firm, and shall take all such actions as requiredby any such accounting firm in connection with such request.  The Members covenant and agree that from andafter the Closing all rights and title to any such accounting or audit workpapers and ledger and reconciliation materials shall remain with the Company.

###  

## 4.2           Preparation and Filing of Tax Returns.

##  

### (a)           The Company hashistorically prepared its Federal income Tax returns utilizing the cash basisof accounting, and has informed Buyer that it will elect to convert to theaccrual method of accounting on its 2003 Federal income Tax return.  The Company will utilize the accrual methodof accounting after the consummation of the transactions set forth herein.  The Members shall prepare, execute on behalfof the Company and timely file or cause to be prepared and timely filed, allfederal and state income Tax returns for all taxable periods of the Companyending on or prior to the Effective Date and all Tax returns due prior to theEffective Date and all such returns shall be accurate and correct in allrespects.  The Members shall beresponsible for the payment of all income Taxes attributable to the incomereported on such Tax returns and with respect to all Tax liabilities incurredor accrued prior to the Effective Date, all liabilities for Taxes caused by theconversion of the Company from a cash basis of accounting to an accrual basisof accounting after the Closing (net of any Tax benefits actually received orrealized by the Company as a result of such conversion and with such netting oroffset to be effective following the Company’s receipt or realization thereofand expiration of any statutes of limitation applicable to such Taxes) and allliabilities for Taxes attributable to the Segregated Accounts.  Such Tax returns shall be prepared on abasis consistent with past practice. Buyer shall provide the Members with reasonable access to the books andrecords of the Company following the Closing for the purpose of preparing suchTax Returns.  The Members shall provideto Buyer drafts of all such Tax returns required to be prepared and filed by theMembers pursuant to this Section 4.2(a) at least thirty (30) days priorto the due date (including extensions) for the filing of such Tax returns.  Buyer shall prepare all Tax returnsattributable to the year of the Effective Date other than those Tax returnsdescribed in the second sentence of this Section 4.2(a).  Buyer shall be responsible for the paymentof all amounts (other than income Taxes) due on such other Tax returns to theextent they were reserved for on the Financial Statements, with the Membersresponsible to the extent not so reserved. The Members shall cooperate withBuyer in the filing of such Tax returns. Buyer shall be

 

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### responsible for thepreparation of all Tax returns of the Company for all taxable periods endingafter the Effective Date.  The Companyshall be responsible for the payment of all amounts due on such Tax returns.

###  

### (b)           The Members shall haveresponsibility for the conduct of any audit of the Company of any Taxable periodending on or prior to the Effective Date; provided, however, thatin the event that a Member receives notice of a claim from the IRS or any otherTaxing authority such Member shall promptly, but in any event within five (5)business days, notify Buyer of such claim and of any action taken or proposedto be taken.  In the event Buyer wishesto participate in such audit it may do so at its own cost and expense.  Notwithstanding any indication in thisAgreement to the contrary, the Members shall not agree to an adjustment in afederal or state income Tax audit, appeals procedure or judicial proceedingthat will adversely impact the Company in Tax periods after the Effective Datewithout the prior written consent of Buyer, which consent shall not be unreasonablywithheld.

###  

## 4.3           Loan Agreement and Other Obligations.

##  

### (a)           Simultaneous with theClosing, any loan agreement with respect to which the Company is a debtor,obligor or guarantor and all obligations of the Company thereunder, includingwithout limitation indebtedness of the Company to the Members, existing at theClosing Date shall, except as set forth on Schedule 4.3 or includedwithin the Segregated Accounts, have been terminated by the Company and thereshall be no continuing obligations of the Company thereunder.  The Members shall provide evidencereasonably satisfactory to Buyer of the release of all of each such lender’ssecurity interests in the membership interests and assets of the Company.  The Company shall have obtained and preparedfor filing in the appropriate jurisdictions Termination Statements properlyexecuted by any parties holding a Lien with respect to the Company, the CompanyInterests or the assets of the Company as identified by lien searches conductedwith respect to the Company.

###  

### (b)           The Members acknowledgeand agree that all of the outstanding indebtedness and financial obligations ofthe Company, including without limitation indebtedness of the Company to theMembers not included in the Segregated Accounts and the Company’s capitalizedlease obligations existing at the Closing Date, shall be taken into account inthe calculation of the Company’s Modified Tangible Net Worth and, except for(i) the indebtedness, liabilities and obligations set forth on Schedule4.3 or included within the Segregated Accounts and (ii) trade accountspayable, accrued expenses and other liabilities as recorded in accounts 2100,2210, 2220 and 2600 on the Financial Statements, shall be satisfied anddischarged prior to or at the Closing Date and that Buyer may direct that aportion of the Total Consideration payable at the Closing be paid directly tothe parties to whom such indebtedness, liabilities or obligations are owed tothe extent necessary to satisfy and discharge the same.

###  

### (c)           The Members covenantand agree that they, and not the Company, shall be responsible for theindebtedness, liabilities and obligations included in the Segregated Accounts.

 

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## 4.4           Guarantors on Real Estate Leases.  Following the Closing, the Company and Buyershall use their reasonable business efforts to cooperate with the efforts ofthe former Members of the Company to be released from any guaranties by suchformer Members of the Company’s obligations arising from and after the Closingunder the Real Estate Leases.

##  

# **ARTICLEVCONDITIONS TO OBLIGATIONS OF PARENT AND BUYER**

# ** **

The obligations ofParent and Buyer to purchase the Company Interests and to cause the othertransactions contemplated hereby to occur at the Closing shall be subject,except as Parent and Buyer may waive in writing, to the satisfaction of each ofthe following conditions at or prior to the Closing, except that no such waivershall be deemed to affect the survival of the representations and warranties ofthe Company and the Members contained in Article II hereof:

 

## 5.1           Absence of Litigation.  No inquiry, action, suit or proceeding shallhave been asserted, threatened or instituted (i) in which it is sought torestrain, invalidate, set aside or obtain damages in respect of theconsummation of the purchase and sale of the Company Interests or the othertransactions contemplated by this Agreement, (ii) that could, if adverselydetermined, be reasonably expected to have an adverse effect on the Company(other than to the extent specifically and fully reserved for on the EffectiveDate Balance Sheet) or result in the Members (prior to the Closing) holdingless than one hundred percent (100%) of the Company Interests or in any thirdparty having the right to acquire any membership interests or assets of theCompany or (iii) as a result of which, in the reasonable judgment of Parent andBuyer, Buyer would be deprived of the material benefits of the ownership of theCompany Interests.

##  

## 5.2           Consents and Approvals.  The Company and the Members shall haveobtained all authorizations, consents, approvals, waivers and releases, if any,necessary for the Members and the Company to consummate the transactionscontemplated hereby, and copies thereof shall be delivered to Buyer.

##  

## 5.3           Certificates.  The Company and the Members shall havedelivered to Buyer (i) certificates of the appropriate governmentalauthorities, dated as of a date not more than thirty (30) days prior to theClosing Date, attesting to the existence and good standing of the Company inthe States****of California and Texas****and attesting to the payment of all franchise Taxes owed thereby;(ii) a copy, certified by the Secretary of State of California as of a date notmore than twenty (20) days prior to the Closing Date, of the Company’sCertificate of Formation and all amendments thereto; (iii) a copy, certified bya Co-Managing Principal of the Company, dated the Closing Date, of theOperating Agreement of the Company; and (iv) certificates, dated theClosing Date, of a Co-Managing Principal of the Company, relating to theincumbency and limited liability company proceedings in connection with theconsummation of the transactions contemplated hereby.

##  

## 5.4           Estoppel Certificates.  The Members shall have delivered to Buyer dulyexecuted estoppel certificates in form and substance satisfactory to Buyer fromthe lessors under the Real Property Leases.

 

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## 5.5           Members’Release.  Each of the Membersshall have executed and delivered to Buyer immediately prior to the ClosingDate an instrument dated the Closing Date in the form of Exhibit Dhereto (the “Members’ Release”) releasing the Company from any and all claimsof the Members against the Company and obligations of the Company to theMembers, except for indebtedness of the Company to the Members as set forth on Schedule 4.3and items specifically identified thereon and on Schedule 5.5 hereto asbeing claims of or obligations to the Members.

##  

## 5.6           Final Financial Statements.  Prior to the Closing Date, Buyer shall havehad sufficient time to review the unaudited balance sheets, statements ofincome, cash flows and retained earnings of the Company for the fiscal monthended December 31, 2003, disclosing no material adverse change in thefinancial condition thereof or the results of its operations from the financialstatements as of November 30, 2003.

##  

## 5.7           Opinion of Counsel.  Parent andBuyer shall have received an opinion of Gibson,Dunn & Crutcher LLP, counsel to the Members and the Company, datedthe Closing Date and in form and substance satisfactory to Buyer, to the effectthat: (a) the Company is a limited liability company duly organized, validlyexisting and in good standing under the laws of the State of California and is qualified to carryon its business and in standing in the State of Texas; (b) to counsel’sknowledge: (i) the equity of the Company consists of the membershipinterests set forth on Schedule 1.1; (ii) all of such membershipinterests are validly issued, fully paid and nonassessable and were not issuedin violation of any preemptive rights of any Member or former member of theCompany; (iii) such membership interests are owned of record as set forthin Schedules 1.1 and 2.3; and (iv) no securities areconvertible into, exchangeable for or carrying the right to acquire membershipinterests of the Company, or any subscriptions, warrants, options, rights orother arrangements or commitments obligating the Company to issue or dispose ofany membership interests or any ownership therein; (c) upon endorsement by theMembers of the Company Interests and delivery of the certificates representingthe Company Interests in accordance with the terms of this Agreement, Buyerwill be vested with good and marketable title to the Company Interests, freeand clear of any adverse claim other than caused by Buyer; (d) the executionand delivery of this Agreement and all other agreements and documentscontemplated hereby by the Company and the Members and the performance by theCompany and the Members of their respective obligations under this Agreementand such other agreements and documents do not constitute a violation of or adefault under its Charter Documents or any agreements, arrangements,commitments, orders, judgments or decrees to which the Company or any Member isa party or by which it or its respective assets are bound of which such counselhas knowledge; (e) the Company has the limited liability company power andauthority to execute, deliver and perform its obligations under this Agreementand the other agreements and documents contemplated hereby (to the extent aparty thereto); (f) the execution and delivery of this Agreement and the otheragreements and documents by the Company and the Members and the performance bythe Company and the Members of its or their respective obligations hereunderand under the other agreements and documents contemplated hereby (to the extenta party thereto) have been duly authorized by all requisite limited liabilitycompany action on the part of the Company and all necessary actions of theMembers; (g) this Agreement and each other agreement and document contemplatedhereby is a valid and binding obligation of the Company and each Member,respectively, enforceable against the Company and each Member (to the extent aparty thereto) in accordance with their respective terms, except that (i)

 

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## such enforcementmay be subject to bankruptcy, insolvency, reorganization, moratorium or similarlaws affecting creditors’ rights generally, (ii) the remedy of specificperformance and injunctive relief are subject to certain equitable defenses andto the discretion of the court before which any proceedings may be brought,(iii) rights to indemnification hereunder may be limited under applicablesecurities laws, and (iv) no opinion is to be rendered with respect to thevalidity or enforceability of Section 5 of the Employment Agreements orSection 2 of the Noncompetition Agreements; (h) to such counsel’s knowledge,there are no actions, suits or proceedings pending or threatened that arerequired by the terms of Section 2.16 to be described on Schedule2.16 that are not described therein; and (i) no consent, approval,authorization or other action by, or filing with, any governmental authority,regulatory body or other person is required to be obtained by the Company orthe Members in connection with the execution, delivery or performance by themof their respective obligations under this Agreement, except for such as havebeen duly obtained or made.

##  

## 5.8           No Material Adverse Effect.  There shall not have occurred any MaterialAdverse Effect.

##  

## 5.9           Repayment of Affiliate Indebtedness; NoTransfers to Affiliates.  Prior oron to the Closing Date, the Members shall have repaid the Company in full allamounts owing by the Members to the Company. Except as otherwise expressly contemplated by this Agreement, theCompany shall not have distributed or transferred any of its assets orproperties, or made any payments, to or for the benefit of any of itsaffiliates.

##  

## 5.10         Due Diligence Review.

##  

### (a)           The due diligencereview of the Company (including, without limitation, legal, financial,operational and environmental matters) to be conducted by or on behalf of Buyershall have been completed in a manner satisfactory to Buyer and shall notreveal or produce adverse facts with respect to the Company, its premises,business, operations, financial condition or prospects which are not otherwisedisclosed in this Agreement or any Schedule attached.

###  

### (b)           No condition shallexist that was not disclosed in writing to Buyer prior to the date hereof thatcould reasonably be expected to have a Material Adverse Effect.

###  

## 5.11         Employment Agreements.  Each of the Primary Equity Members shallhave executed and delivered to the Company an Employment Agreement in the formattached hereto as Exhibit A.

##  

## 5.12         Independent Contractor andNoncompetition Agreements.  Eachof the Academic Members shall have executed and delivered to the Company(i) an Independent Contractor Agreement in the form attached hereto as Exhibit Band (ii) a Noncompetition Agreement in the form attached hereto as Exhibit C.

##  

## 5.13         Termination of Related PartyAgreements and Benefit Plans. All existing Tax-sharing agreements or arrangements to which the Companyis a party, all existing agreements between the Company and the Members orbusiness or personal affiliates of the Company or the

 

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## Members, allexisting employment agreements and letters, offer letters, independentcontractor agreements and affiliate agreements to which the Company is a partyand all existing bonus and incentive plans and arrangements of the Company andthe Members, other than those set forth on Schedule 5.13 or asspecifically referenced below, shall have been cancelled or terminated with nofurther obligations on the part of the Company arising after the ClosingDate.  The Company shall cause to beterminated, with such effective date of termination to be at or immediatelyprior to the Closing Date, all of such Plans of the Company, with no furtherliability or obligation with respect thereto on the part of the Company andwith all of the costs and expenses of transferring any assets of such Plans toplans to be provided to the Company’s employees by Buyer and/or terminatingsuch Plans, including without limitation applications to the IRS fortermination, to be borne by either the respective Plan or the Members but notthe Company or Buyer; and the Company shall have delivered to Buyer evidencereasonably satisfactory to Buyer of the occurrence of such actions.  The parties agree that the Company’s DefinedBenefit Pension Plan shall continue in effect until not later thanDecember 31, 2004 at the sole cost and expense of the former Members, andshall be terminated effective as of such date; provided, that Parent and theCompany will not object to the termination of the Defined Benefit Pension Planupon the Members’ election effective at any time prior to such date.

##  

## 5.14         Releaseof Financing Statements. The Company shall have obtained and prepared for filing in theappropriate jurisdictions Termination Statements properly executed by anyparties holding a security interest or other Lien with respect to the Company,the Company Interests or the assets of the Company as identified by liensearches conducted with respect to the Company.

##  

## 5.15         Certificates.  The Members shall have tendered to Buyercertificates representing the Company Interests, duly endorsed in blank oraccompanied by appropriate membership interest powers, in proper form fortransfer, with all transfer taxes paid.

##  

## 5.16         Resignations and Releases of Managers.  Buyer shall have received the resignationsof and releases from each of the Co-Managing Principals and any other managersof the Company, effective as of the Closing.

##  

# **ARTICLEVICONDITIONS TO OBLIGATIONS OF THE MEMBERS**

# ** **

The obligations ofthe Members to sell the Company Interests and to cause the other transactionscontemplated hereby to occur at the Closing shall be subject, except as theMembers may waive in writing, to the satisfaction of each of the followingconditions at or prior to the Closing, except that no such waiver shall bedeemed to affect the survival of the representations and warranties of Parentand Buyer contained in Article III hereof:

 

## 6.1           Absenceof Litigation.  Noinquiry, action, suit or proceeding shall have been asserted, threatened orinstituted in which it is sought to restrain or prohibit the carrying out of thetransactions contemplated by this Agreement or to challenge the validity ofsuch transactions or any part thereof.

 

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## 6.2           Consentsand Approvals.  Allmaterial authorizations, consents, approvals, waivers and releases, if any,necessary for Parent and Buyer to consummate the transactions contemplatedhereby shall have been obtained and delivered to the Members.

##  

## 6.3           Certificates.  Parent and Buyer shall have delivered to theMembers (i) certificates of the appropriate governmental authority, datedas of a date not more than forty-five (45) days prior to the Closing Date,attesting to the existence and good standing of Buyer in the State of Delaware;(ii) copies, certified by the Secretary of Parent, of the Amended and RestatedCertificate of Incorporation of Parent and the By-laws of Parent and copies,certified by the Secretary of Buyer, of the Certificate of Incorporation ofBuyer and the By-laws of Buyer, each as amended to date and each dated the ClosingDate; and (iii) certificates, each dated the Closing Date, of theSecretary of Parent and of the Secretary of Buyer relating to the incumbencyand corporate proceedings in connection with the consummation of thetransactions contemplated hereby.

##  

## 6.4           Delivery of Consideration.  Buyer shall have delivered to the Membersthe amount of the Total Consideration required to be paid at the Closingpursuant to Section 7.3.

##  

## 6.5           EmploymentAgreements.  Buyer shallhave caused the Company to execute and deliver to the Primary Equity Membersthe Employment Agreements.

##  

## 6.6           Independent Contractor Agreements;Noncompetition Agreement.  Buyershall have caused the Company to execute and deliver to the Academic Membersthe Independent Contractor Agreements and the Noncompetition Agreements.

##  

## 6.7           Opinionof Counsel.  The Membersshall have received an opinion of Locke Liddell & Sapp LLP, counsel toParent and Buyer, dated the Closing Date and in form and substance satisfactoryto the Members, to the effect that: (a) Parent and Buyer is a corporationduly incorporated, validly existing and in good standing under the laws of theState of Delaware; (b) the execution and delivery of this Agreement and allother agreements and documents contemplated hereby by Parent and Buyer and theperformance by Parent and Buyer of their respective obligations under thisAgreement and such other agreements and documents (to the extent a partythereto) does not constitute a violation of or a default under their respectivecertificates of incorporation or bylaws, each as amended, or any agreements,arrangements, commitments, orders, judgments or decrees to which either ofParent or Buyer is a party or by which it or its assets are bound of which suchcounsel has knowledge; (c) Parent and Buyer has the corporate power andauthority to execute, deliver and perform their respective obligations underthis Agreement and the other agreements and documents contemplated hereby (tothe extent a party thereto); (d) the execution and delivery of this Agreementand the other agreements and documents by Parent and Buyer and the performanceby Parent and Buyer of their respective obligations hereunder and under theother agreements and documents (to the extent a party thereto) have been dulyauthorized by all requisite corporate action on the part of Parent and Buyer;(e) this Agreement and each other agreement and document contemplatedhereby (to the extent a party thereto) is a valid and binding obligation ofParent and Buyer, enforceable against Parent and Buyer (to the extent a partythereto) in accordance with their respective terms, except that (i) suchenforcement may be subject to bankruptcy, insolvency, reorganization,moratorium or similar laws affecting creditors’ rights generally, (ii) theremedy

 

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## of specificperformance and injunctive relief are subject to certain equitable defenses andto the discretion of the court before which any proceedings may be brought, and(iii) rights to indemnification hereunder may be limited under applicablesecurities laws; and (f) no consent, approval, authorization or other actionby, or filing with, any governmental authority, regulatory body or other personis required to be obtained by Parent or Buyer in connection with the execution,delivery or performance by it of its obligations under this Agreement, exceptfor such as have been duly obtained or made.

##  

# **ARTICLE VIICLOSING**

# ** **

## 7.1           Closing.  Unless this Agreement is first terminated asprovided in Section 8.1, and subject to the satisfaction or waiver ofall the conditions set forth in Articles V and VI, the closing ofthe transactions contemplated hereby (the “Closing”) shall take place at theoffices of Locke Liddell & Sapp LLP in Dallas, Texas, or such other placeand by such other means (*e.g.,*facsimile and overnight delivery of original execution materials) as is agreedto by Buyer, the Company and the Members, at 10:00 a.m., Dallas, Texas time, onApril 15, 2004, or such other date as the parties may agree upon in writing(the “Closing Date”).

##  

## 7.2           Delivery of the Company Interests.  At the Closing, each of the Members shalldeliver or cause to be delivered to Buyer the certificate(s) evidencing all ofthe Company Interests owned by such Member, duly endorsed or accompanied byduly executed membership interest powers assigning the Company Interests toBuyer in the respective amounts set forth on Schedule 1.1 andotherwise in good form for transfer.

##  

## 7.3           Payment to the Members at Closing.  At the Closing, Buyer shall deliver to theMembers, by wire transfer of immediately available funds to the account(s)designated by the Members, the cash portion of the Total Consideration payableat the Closing (as determined in the manner set forth in Schedule 1.1)****(as adjusted pursuant to Section 1.2(a)hereof).

##  

# **ARTICLEVIII[Intentionally left blank.]**

# ** **

# **ARTICLE IXINDEMNIFICATION**

# ** **

## 9.1           Buyer’sLosses.

##  

### (a)           Each of the Members,jointly and severally, agrees to indemnify and hold harmless Parent, Buyer, theCompany and their respective directors, managers, officers, employees,representatives, agents and attorneys from, against and in respect of any andall Buyer’s Losses (as defined below) suffered, sustained, incurred or requiredto be paid by any of them by reason of (i) any representation or warranty madeby the Company or the Members in or pursuant to this Agreement (including,without limitation, the

 

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### representations andwarranties contained in any schedule or exhibit to this Agreement or anycertificate delivered pursuant hereto) being untrue or incorrect in any respectand without regard to any “materiality,” “material adverse effect,” “MaterialAdverse Effect,” “substantial compliance,” “knowledge” or similar exception orqualifier; (ii) any liability, cost or expense arising from or based upon theoperation of the Company through the Closing Date that is not reflected orreserved for on the Effective Date Balance Sheet or otherwise disclosed withspecificity on a Schedule delivered by the Company pursuant to this Agreement;(iii) the termination of or withdrawal by the Company or any Group Member fromany employee pension benefit plan, as defined in Section 3(2)(A) of ERISA;(iv) the items described in Schedule 2.8, Schedule 2.11 or Schedule 2.16hereof except in any instance and to the extent Buyer’s Losses result from thenegligence or misconduct of Parent or Buyer; (v) any violation or allegedviolation by the Company or any Member of his covenants and agreements set forthin this Agreement or in any other agreement or document executed by it or himin connection with the transactions contemplated hereby; (vi) liabilities forTaxes as a result of the conversion of the Company from a cash basis ofaccounting to an accrual basis of accounting in connection with theconsummation of the transactions described herein, as described in Section 4.2(a)hereof; (vii) any liability arising from or based upon the engagement by theCompany or the Members of any broker or agent, whether or not disclosedpursuant to this Agreement; (viii) any liability arising from or based upon therequired consents set forth in Schedule 2.15 hereof and not obtainedprior to the Closing; (ix) any indebtedness, liability or obligationincluded within the Segregated Accounts; or (x) any indebtedness, liability orobligation with respect to the Company’s Defined Benefit Pension Plan.

###  

### (b)           “Buyer’s Losses” shallmean all damages (including, without limitation, amounts paid in settlementwith the Members’ consent, which consent may not be unreasonably withheld),losses, obligations, liabilities, claims, deficiencies, costs and expenses(including, without limitation, reasonable attorneys’ fees), penalties, fines,interest and monetary sanctions, including, without limitation, reasonableattorneys’ fees and costs incurred to comply with injunctions and other courtand Agency orders, and other costs and expenses incident to any suit, action,investigation, claim or proceeding or to establish or enforce the rights ofParent or Buyer or such other persons to indemnification hereunder.

###  

## 9.2           Environmental Indemnity.

##  

### (a)           Each of the Members,jointly and severally, agrees to indemnify and hold harmless Parent, Buyer, theCompany and their respective directors, managers, officers, employees,representatives, agents and attorneys from, against and in respect of any andall Environmental Costs (as defined below), arising in any manner in connectionwith: (i) the presence at or on any Subject Property of any Hazardous Substancesor the release, leak, discharge, spill, disposal, migration or emission ofHazardous Substances from any such Subject Property; (ii) the failure of theCompany to comply with any applicable Environmental Requirements prior to theClosing Date; or (iii) the transportation to or disposal of any HazardousSubstances from any Subject Property by or on behalf of the Company at or priorto the Closing, whether or not the transportation or disposal was

 

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### conducted in fullcompliance with Environmental Requirements, or the migration onto or intoadjacent property or any offsite location of any Hazardous Substances existingat or prior to the time of the Closing from any Subject Property.

###  

### (b)           The obligations of thisSection 9.2 shall include the obligation to defend the IndemnifiedParties (as defined below) against any claim or demand for Environmental Costs,the obligation to pay and discharge any Environmental Costs imposed onIndemnified Parties, and the obligation to reimburse Indemnified Parties forany Environmental Costs incurred or suffered, provided in each instance thatthe claim for Environmental Costs arises in connection with a matter for whichIndemnified Parties are entitled to indemnification under this Agreement.  The obligation to reimburse the IndemnifiedParties shall also include the costs and expenses (including, withoutlimitation, reasonable attorneys’ fees) to establish or enforce the rights of Parent,Buyer, the Company or such other persons to indemnification hereunder.

###  

### (c)           “Environmental Costs”shall mean any of the following that arise in any manner regardless of whetherbased in contract, tort, implied or express warranty, strict liability,Environmental Requirements or otherwise: all liabilities, losses, judgments,damages, punitive damages, consequential damages, treble damages, costs andexpenses (including, without limitation, reasonable attorneys’ fees and theallocable cost of in-house counsel and fees and disbursements of environmentalconsultants or other experts, all costs related to the performance of anyrequired or necessary assessment, investigation, remediation, response,containment, closure, restoration, repair, cleanup or detoxification of anyimpacted property, the preparation and implementation of any maintenance,monitoring, closure, remediation, abatement or other plans required by anyAgency or by Environmental Requirements and any other costs recovered orrecoverable under any Environmental Requirement), fines, penalties, or monetarysanctions.  Environmental Costs shallinclude without limitation: (i) damages for personal injury or death, or injuryto property or to natural resources; (ii) damage to real property or damageresulting from the loss of the use of all or any part of the property,including but not limited to business loss; and (iii) the cost of anydemolition, rebuilding or repair of any property required by EnvironmentalRequirements or necessary to restore such property to its condition prior to damagecaused by an environmental condition or by the remediation of an environmentalcondition.

###  

## 9.3           Employee Compensation and Benefits.  Each of the Members, jointly and severally,agrees to indemnify and hold Parent, Buyer, the Company and their respectivedirectors, managers, officers, employees, representatives, agents and attorneysharmless from, against and in respect of any and all claims made by employeesof the Company, regardless of when made, for wages, salaries, bonuses, pension,workmen’s compensation, medical insurance, disability, vacation, severance, payin lieu of notice, sick benefits or other compensation or benefit arrangementsto the extent the same are based on employment service rendered to the Companyon or prior to the Closing Date or injury or sickness occurring on or prior tothe Closing Date and are not reserved for on the Financial Statements(collectively, “Employee Claims”).

 

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## 9.4           SellerLosses.

##  

### (a)           Parent and Buyer,jointly and severally, agrees to indemnify and hold harmless the Members andtheir respective agents and attorneys from, against and in respect of any andall Seller Losses (as defined below) suffered, sustained, incurred or requiredto be paid by any of them by reason of (i) any representation or warranty madeby Parent or Buyer in or pursuant to this Agreement (including, withoutlimitation, the representations and warranties contained in any schedule orexhibit to this Agreement or any certificate delivered pursuant hereto) beinguntrue or incorrect in any respect and without regard to any “materiality,”“material adverse effect,” “*SOURCECORP*Material Adverse Effect,” “substantial compliance,” “knowledge” or similarexception or qualifier; (ii) any failure by Parent or Buyer to observe orperform its covenants and agreements set forth in this Agreement or in anyother agreement or document executed by it and described herein in connectionwith the transactions contemplated hereby; or (iii) any liability arising fromor based upon the engagement by Parent or Buyer of any broker or agent, whetheror not disclosed pursuant to this Agreement;

###  

### (b)           “Seller Losses” shallmean all damages (including, without limitation, amounts paid in settlementwith the consent of Parent and Buyer, which consent may not be unreasonablywithheld), losses, obligations, liabilities, claims, deficiencies, costs andexpenses (including, without limitation, reasonable attorneys’ fees),penalties, fines, interest and monetary sanctions, including, withoutlimitation, reasonable attorneys’ fees and costs incurred to comply withinjunctions and other court and Agency orders, and other costs and expensesincident to any suit, action, investigation, claim or proceeding or toestablish or enforce the right of the Members or such other persons toindemnification hereunder.

###  

## 9.5           Indemnification for Certain TaxMatters.  Each of the Members,jointly and severally, agrees to indemnify and hold harmless Parent, Buyer, theCompany and their respective directors, managers, officers, employees,representatives, agents and attorneys from, against and in respect of any andall Tax liabilities of the Company incurred or accrued prior to the EffectiveDate and not reserved for on the Effective Date Balance Sheet.

##  

## 9.6           Noticeof Loss.  Except to the extentset forth in the next sentence, a party to the Agreement will not have anyliability under the indemnity provisions of this Agreement with respect to aparticular matter unless a notice setting forth in reasonable detail the breachor other matter which is asserted has been given to the Indemnifying Party (asdefined below) and, in addition, if such matter arises out of a suit, action,investigation, proceeding or claim, such notice is given promptly, but in any eventwithin thirty (30) days after the Indemnified Party (as defined below) is givennotice of the claim or the commencement of the suit, action, investigation orproceeding.  Notwithstanding thepreceding sentence, failure of the Indemnified Party to give notice hereundershall not release the Indemnifying Party from its obligations under this Article IX,except to the extent the Indemnifying Party is actually prejudiced by suchfailure to give notice.  With respect toBuyer’s Losses, Environmental Costs, Employee Claims and the matters describedin Section 9.5, the Members (jointly and severally and in each eventsubject to the limitations on indemnification set forth in Section 9.10hereof) shall be the Indemnifying

 

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## Party and Parent,Buyer, the Company and their respective directors, officers, employees,representatives, agents and attorneys shall be the Indemnified Party.  With respect to Seller Losses, Parent andBuyer (jointly and severally and in each event subject to the limitations onindemnification set forth in Section 9.10 hereof) shall be theIndemnifying Party and the Members and their respective agents and attorneysshall be the Indemnified Party.

##  

## 9.7           Rightto Defend.  Upon receipt ofnotice of any suit, action, investigation, claim or proceeding for whichindemnification might be claimed by an Indemnified Party, the Indemnified Partyshall have the option of electing to defend, contest or otherwise protectagainst such suit, action, investigation, claim or proceeding, with the costsand expenses of such defense to be borne by the Indemnifying Party, and theIndemnifying Party must cooperate in any such defense or other action.  The Indemnifying Party shall have the right,but not the obligation, to participate at its own expense in a defense thereofby counsel of its own choosing, but the Indemnified Party shall be entitled tocontrol the defense unless otherwise determined by the Indemnified Party or ifthe Indemnified Party fails to assume defense of the matter.  In the event the Indemnified Party shallfail to defend, contest or otherwise protect in a timely manner against anysuch suit, action, investigation, claim or proceeding, the Indemnifying Partyshall defend, contest or otherwise protect against the same and make anycompromise or settlement thereof, and shall pay all costs thereof, including,without limitation, reasonable attorneys’ fees, disbursements and all amountspaid as a result of such suit, action, investigation, claim or proceeding orthe compromise or settlement thereof; provided, however, that the IndemnifyingParty must send a written notice to the Indemnified Party of any such proposedsettlement or compromise, which settlement or compromise the Indemnified Partymay reject, in its reasonable judgment, within thirty (30) days of receipt ofsuch notice.  Failure to reject suchnotice within such thirty (30) day period shall be deemed an acceptance of suchsettlement or compromise.  TheIndemnified Party shall have the right to effect a settlement or compromiseover the objection of the Indemnifying Party; provided, that if theIndemnifying Party has assumed the defense from the Indemnified Party upon theelection of the Indemnified Party, the Indemnified Party waives any right toindemnity therefor.  If the IndemnifyingParty undertakes the defense of such matters upon the election of theIndemnified Party, the Indemnified Party shall not, so long as the IndemnifyingParty does not abandon the defense thereof, be entitled to recover from theIndemnifying Party any legal or other expenses subsequently incurred by theIndemnified Party in connection with the defense thereof other than thereasonable costs of investigation undertaken by the Indemnified Party with theprior written consent of the Indemnifying Party.

##  

## 9.8           Cooperation.  Each of Parent, Buyer, the Members and theCompany, and each of their affiliates, successors and assigns, shall cooperatewith each other in the defense of any suit, action, investigation, proceeding orclaim by a third party and, during normal business hours, shall afford eachother access to their books and records and employees relating to such suit,action, investigation, proceeding or claim and shall furnish each other allsuch further information that they have the right and power to furnish as mayreasonably be necessary to defend such suit, action, investigation, proceedingor claim, including, without limitation, reports, studies, correspondence andother documentation relating to the Environmental Protection Agency,Occupational Safety and Health Administration and Equal Employment OpportunityCommission matters.

 

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## 9.9           Timing and Treatment of Payments.

##  

### (a)           With respect to thirdparty claims for which indemnification is payable hereunder, suchindemnification shall be paid by the Indemnifying Party promptly upon theearlier of (i) the entry of a judgment against the Indemnified Party andthe expiration of any applicable appeal period without any appeal being filedon behalf of the Indemnified Party; (ii) the entry of a non-appealablejudgment or final appellate decision against the Indemnified Party; (iii) thedate by which the Indemnified Party is required to post any bond or incur anysimilar financial obligation; (iv) the closing under any settlementagreement; or (v) ten (10) days prior to the date on which the liability uponwhich the indemnity is based is required to be satisfied by the IndemnifiedParty.  Notwithstanding the foregoing,expenses of the Indemnified Party for which the Indemnifying Party isresponsible under this Article IX shall be reimbursed on a current basisby the Indemnifying Party.  With respectto direct claims for which indemnification is payable hereunder, the IndemnifyingParty shall promptly pay the amount of the losses for which indemnification isrequired.

###  

### (b)           Buyer and the Membersagree to treat all payments made pursuant to this Article IX asadjustments to the Total Consideration or as capital contributions for Taxpurposes, except to the extent that the laws of a relevant jurisdiction provideotherwise, in which case such payments shall be made in an amount to indemnifythe relevant party on an after-Tax basis.

###  

## 9.10         Limitations on Indemnification.  The persons or entities indemnified pursuantto this Article IX shall not assert any claim for indemnificationhereunder, except with respect to (i) any claim based upon fraud,(ii) any claim based upon a breach of any representation or warrantycontained in Sections 2.1, 2.2, 2.3 and 2.5(a)(iii) (with respect to Section2.5(a)(iii), relating to any Buyer’s GAAP Losses in excess of $50,000), 2.8,2.30, 2.31 or 2.32 or in Section 2.19 (insofar as suchclaim is based upon a breach of the representations and warranties thereinrelating to the Company’s Defined Benefit Pension Plan), or (iii) anyclaim for Buyer’s Losses described in clauses (vi), (ix) or (x) of Section 9.1(a)(and with any such claim under Section 9.1(a)(vi) being satisfiedfirst by recovery from the Holdback Amount), until such time as and solely tothe extent that the aggregate of all claims that such persons may have againstthe Indemnifying Parties shall exceed $150,000 with respect to all claims (the“Basket”), but upon reaching the amount of the Basket, from the first dollar ofall claims.  Claims described in clauses(i) through (iii) of the foregoing sentence may be made under this Article IXon a first dollar basis and without reference to the Basket.  Notwithstanding any other provision of thisAgreement, except with respect to any claims (a) based upon fraud or (b) forBuyer’s Losses described in clauses (vi), (ix) or (x)****of Section 9.1(a), noIndemnifying Party shall be obligated to indemnify, defend and hold harmless anIndemnified Party with respect to any claim for indemnification hereunder inexcess of the Total Consideration, as adjusted pursuant to Section 1.2,received by such Indemnifying Party as set forth on Schedule 9.10.  The parties agree that neither the Basketnor the cap on the maximum amount of the Members’ indemnification obligationsset forth above in this Section 9.10 shall be applicable to(i) any claim based upon fraud, (ii) any claim based upon a breach ofany representation or warranty contained in Sections 2.1, 2.2, 2.3,2.8, 2.30, 2.31 or 2.32 or in Section 2.19 (insofar assuch

 

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## claim is basedupon a breach of the representations and warranties therein relating to theCompany’s Defined Benefit Pension Plan), and that such claims shall not beincluded for purposes of calculating the Basket or the maximum amount of theMembers’ indemnification obligations (*i.e*.,as to whether or not the Basket amount has been reached or whether the Members’indemnification obligations are limited by the amount of Total Considerationreceived thereby) with respect to any claims for Buyer’s Losses subject to suchlimitations.  The parties further agreethat (i) claims for a breach of the representations and warranties set forth inSection 2.5(a)(iii) shall be limited to claims for Buyer’s GAAPLosses in excess of $50,000, (ii) the Basket shall not be applicable to anysuch claims and (iii) such claims shall not be included for purposes ofcalculating the Basket (*i.e*., asto whether or not the Basket amount has been reached).

##  

# **ARTICLE XMISCELLANEOUS**

# ** **

## 10.1         EntireAgreement.  This Agreement(including the exhibits and schedules hereto) constitutes the entire agreementand supersedes all prior agreements and understandings, both written and oral, betweenthe parties hereto with respect to the subject matter hereof, and no partyshall be liable or bound to the other in any manner by any representations orwarranties not set forth herein.

##  

## 10.2         Successors and Assigns.  The terms and conditions of this Agreementshall inure to the benefit of and be binding upon the parties hereto and theirrespective successors and permitted assigns. Neither this Agreement nor any rights, interests or obligationshereunder may be assigned by any party hereto without the prior written consentof all other parties hereto, and any purported assignment in violation of this Section 10.2shall be null and void.

##  

## 10.3         Counterparts; Facsimile Signatures.  This Agreement may be executed in one ormore counterparts, each of which shall for all purposes be deemed to be anoriginal and all of which shall constitute the same instrument.  This Agreement, to the extent signed anddelivered by means of a facsimile machine, shall be treated in all manner andrespects as an original agreement or instrument and shall be considered to havethe same binding legal effect as if it were the original signed version thereofdelivered in person At the request of any party, the other party or partiesshall re-execute original forms thereof and deliver them to the otherparty.  No party shall raise the use ofa facsimile machine to deliver a signature or the fact that any signature oragreement or instrument was transmitted or communicated through the use of afacsimile as a defense to the formation of a contract and each such partyforever waives any such defense.

##  

## 10.4         Headings.  The headings of the articles and sections ofthis Agreement are inserted for convenience only and shall not be deemed toconstitute part of this Agreement or to affect the construction hereof.

##  

## 10.5         Construction.  As used in this Agreement, the words“herein,” “hereof” and “hereunder” and other words of similar import refer tothis Agreement as a whole and not to any particular article, section, paragraphor other subdivision.  Whenever thesingular number is

 

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## used, the sameshall include the plural where appropriate, and words of any gender shallinclude the other gender where appropriate. No party shall be entitled to have any wording of this Agreementconstrued against the other party as the drafter of the Agreement in the eventof any controversy or claim in connection with this Agreement.

##  

## 10.6         Modification and Waiver.  Any of the terms or conditions of thisAgreement may be waived in writing at any time by the party which is entitledto the benefits thereof, and this Agreement may be modified or amended by awritten instrument executed by Parent, Buyer, the Company and each Member.  No supplement, modification or amendment ofthis Agreement shall be binding unless executed in writing by all of theparties hereto.  No waiver of any of theprovisions of this Agreement shall be deemed or shall constitute a waiver ofany other provision hereof (whether or not similar) nor shall such waiverconstitute a continuing waiver.

##  

## 10.7         Schedules,Etc.  All exhibits and schedulesannexed hereto are expressly made a part of this Agreement as though fully setforth herein.

##  

## 10.8         Notices.  All notices of communication required orpermitted hereunder shall be in writing and shall be deemed given and received(a) four (4) business days after mailing, if such notice is deposited in theUnited States mail, postage prepaid and registered or certified with returnreceipt requested, addressed to the party to be notified, (b) the next businessday, if such notice is delivered by reputable overnight courier, (c) the sameday, if such notice is delivered in person to an officer or agent of suchparty, and (d) upon electronic confirmation of receipt, if such notice isdelivered by facsimile.

##  

(i)            If to Parent and/orBuyer, addressed to either or both of such parties at:

 

*SOURCECORP*,Incorporated

KeyPoint IAcquisition Corp.

3232 McKinney Avenue,Suite 1000

Dallas, Texas  75204

Facsimile No.:  (214) 740-6589

Attn:  General Counsel

 

with copies to:

 

Locke Liddell & SappLLP

2200 Ross Avenue, Suite2200

Dallas, Texas  75201-6776

Facsimile No.:  (214) 740-8800

Attn:  Kent Jamison , Esq.

 

43

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(ii)                                  Ifto the Members, addressed thereto at their respective addresses set forth on Schedule1.1, with copies to counsel as set forth below:

 

Gibson, Dunn &Crutcher LLP

2029 Century Park East

Los Angeles, California90067-3026

Attn: Robert Montgomery,Esq.

Facsimile No.: (310)552-7021

 

(iii)          If to the Company,addressed to it at:

 

KeyPoint Consulting LLC

2000 Powell Street, Suite500

Emeryville, California94608

FacsimileNo.:(510) 594-8105

Attn:       Messrs. Michael J.Doane and Marc Vellrath

 

and marked “Personal andConfidential”

 

with copies to:

 

Gibson, Dunn &Crutcher LLP

2029 Century Park East

Los Angeles, California90067-3026

Attn: Robert Montgomery,Esq.

Facsimile No.: (310)552-7021

 

or to such other addressor counsel as any party hereto shall specify pursuant to this Section 10.8from time to time.

 

## 10.9         **GOVERNINGLAW; CONSENT TO JURISDICTION****.  THIS AGREEMENT SHALL BECONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS (WITHOUT REGARD TOITS CONFLICTS OF LAW PROVISIONS).  THEPARTIES HERETO EXPRESSLY CONSENT AND AGREE THAT ANY DISPUTE, CONTROVERSY, LEGALACTION OR OTHER PROCEEDING THAT ARISES UNDER, RESULTS FROM, CONCERNS OR RELATESTO THIS AGREEMENT SHALL BE BROUGHT IN THE FEDERAL OR STATE COURTS IN AND OFDALLAS COUNTY, TEXAS, AND ACKNOWLEDGE THAT THEY WILL ACCEPT SERVICE OF PROCESSBY REGISTERED OR CERTIFIED MAIL OR THE EQUIVALENT DIRECTED TO THEIR LAST KNOWNADDRESS AS DETERMINED BY THE OTHER PARTY IN ACCORDANCE WITH THIS AGREEMENT ORBY WHATEVER OTHER MEANS ARE PERMITTED BY SUCH COURTS.  THE PARTIES HERETO HEREBY ACKNOWLEDGE THAT SAID COURTS HAVEJURISDICTION OVER ANY SUCH DISPUTE OR CONTROVERSY, AND THAT THEY HEREBY WAIVEANY OBJECTION TO PERSONAL JURISDICTION OR VENUE IN THESE COURTS OR THAT SUCHCOURTS ARE AN**

 

44

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## **INCONVENIENTFORUM.  ALL REMEDIES AT LAW, IN EQUITY,BY STATUTE OR OTHERWISE SHALL BE CUMULATIVE AND MAY BE ENFORCED CONCURRENTLY ORFROM TIME TO TIME AND, SUBJECT TO THE EXPRESS TERMS OF THIS AGREEMENT, THEELECTION OF ANY REMEDY OR REMEDIES SHALL NOT CONSTITUTE A WAIVER OF THE RIGHTTO PURSUE ANY OTHER AVAILABLE REMEDIES.**

##  

## 10.10       Survival of Covenants, Agreements,Representations and Warranties.

##  

### (a)           Covenants andAgreements.  All covenants andagreements made hereunder or pursuant hereto or in connection with thetransactions contemplated hereby shall survive the Closing and shall continuein full force and effect thereafter according to their terms without limit asto duration.

###  

### (b)           Representations andWarranties.  All representations andwarranties contained herein shall survive the Closing and shall continue infull force and effect thereafter for a period of eighteen (18) months followingthe Closing, except that (a) the representations and warranties contained in Section 2.8hereof shall survive until the earlier of (i) the expiration of the applicableperiods (including any extensions) of the respective statutes of limitationapplicable to the payment of the Taxes to which such representations andwarranties relate without an assertion of a deficiency in respect thereof bythe applicable Taxing authority or (ii) the completion of the final audit anddeterminations by the applicable Taxing authority and final disposition of anydeficiency resulting therefrom, (b) the representations and warrantiescontained in Section 2.11 hereof shall serve for a period of five (5)years following the Closing, (c) the representations and warranties containedin Section 2.19 hereof shall survive until the expiration of theapplicable period of the statutes of limitation applicable to ERISA matters,and (d) the representations and warranties contained in Sections 2.1,2.2 and 2.3 shall survive indefinitely.

###  

### (c)           Claims Made Prior toExpiration.  Notwithstanding theforegoing survival periods set forth in this Section 10.10, thetermination of a survival period shall not affect the rights of an IndemnifiedParty in respect of any claim made by such party with specificity, in goodfaith and in writing to the Indemnifying Party in accordance with Sections 9.6and 10.8 hereof prior to expiration of the applicable survival period.

###  

## 10.11       Confidentiality; Publicity.  Except as required by law, no party heretoshall issue any press release or make any public statement, in either caserelating to or in connection with or arising out of this Agreement or thematters contained herein without obtaining the prior written approval of theother parties to the content and manner of presentation and publicationthereof, which consent shall not be unreasonably withheld or delayed.  Notwithstanding anything set forth in thisAgreement to the contrary (including the foregoing provisions of this Section10.11) or in any other agreement to which a party hereto is bound, theparties hereto (and any employee, representative or other agent of any of theparties) are hereby expressly authorized to disclose the “tax treatment” or“tax structure” (as those terms are defined in Treas. Reg.§§ 1.6011-4(c)(8) and (9), respectively) of the transactions evidenced bythis Agreement and all materials of any kind (including opinions or other taxanalyses) that are provided to the parties relating to such

 

45

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## “tax treatment” or“tax structure” of such transactions, except that “tax structure” or “tax treatment”shall not include the identity of any existing or future party or itsaffiliates.

##  

## 10.12       Expenses.  The Members, on the one hand, and Parent andBuyer, on the other hand, shall be solely responsible for their respectivecosts and expenses incurred in connection with the preparation of thisAgreement, and the consummation of the transactions contemplated hereby.

##  

## 10.13       Third Party Beneficiaries.  Except as otherwise specifically provided inArticle IX, no individual or firm, corporation, limited liabilitycompany, partnership or other entity shall be a third-party beneficiary of therepresentations, warranties, covenants and agreements made by any party hereto.

##  

## 10.14       Number and Gender of Words.  Whenever the singular number is used, thesame shall include the plural where appropriate, and words of any gender shallinclude each other gender where appropriate.

##  

## 10.15       Specific Performance; Other Rightsand Remedies.  Each partyrecognizes and agrees that in the event the other party or parties should refuseto perform any of its or their obligations under this Agreement, the remedy atlaw would be inadequate and agrees that for breach of such provisions eachparty shall, in addition to such other remedies as may be available to it atlaw or in equity, be entitled to injunctive relief and to enforce its rights byan action for specific performance to the extent permitted by applicablelaw.  Each party hereby waives anyrequirement for security or the posting of any bond or other surety inconnection with any temporary or permanent award of injunctive, mandatory orother equitable relief.

##  

## 10.16       Cumulative Remedies; Calculation ofDamages.

##  

### (a)           All rights, powers,remedies, benefits and privileges available under any provision of thisAgreement to any party hereunder are in addition to and cumulative of any andall rights, powers, remedies, benefits and privileges available to such partyunder all other provisions of this Agreement, and the election of a remedy by aparty under any provision of this Agreement does not preclude such party frompursuing any other remedies available to it hereunder, whether concurrentlytherewith or from time to time.  By wayof illustration only, in the event that Buyer believes that there have beenbreaches of the representations and warranties in both Section 2.5(a)(iii)and Section 2.5(c), it may elect to pursue its claim with respectto either or both of such provisions, concurrently or otherwise.  Nothing in this section shall be read orinterpreted to provide any party with a “double recovery” with respect to anylosses or damages suffered thereby.

###  

### (b)           The parties to thisAgreement acknowledge and agree that the mechanism for determining the amountof “Buyer’s GAAP Losses” as set forth in the definition thereof is unique to Buyer’sGAAP Losses and that neither Buyer, the Company nor the Members shall belimited by such mechanism as to the appropriate measure, methodology ofcalculation or amount of losses (whether Seller Losses or Buyer’s Losses otherthan Buyer’s GAAP Losses) under any other provision of this Agreement.

 

46

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## 10.17       Prorations.  Any amounts prepaid by the Members under theReal Property Leases and Contracts with respect to any period after theEffective Date shall be reimbursed to the Members at the Closing or as soonthereafter as practicable.  At theClosing or as soon thereafter as practicable, the Members shall reimburse Buyerfor any amounts due under such Real Property Leases and Contracts with respectto any period before the Effective Date and paid by Buyer.

##  

## 10.18       FurtherAssurances.  From time to timeafter the Closing, at the request of any other party but at the expense of therequesting party, Parent, Buyer, the Company or the Members, as the case may be,will execute and deliver any such other instruments of conveyance, assignmentand transfer, and take such other action as the other party may reasonablyrequest in order to consummate or evidence the transactions contemplatedhereby.

##  

## 10.19       Mail Received After Closing.  Following the Closing, Buyer may receive andopen all mail addressed to the Members at the Company’s address (unless suchmail is clearly and prominently marked “confidential” or “to be opened only byaddressee” or with similar instructions) and deal with the contents thereof inits discretion to the extent that such mail and the contents thereof relate tothe business, operations, assets and/or properties of the Company.

##  

## 10.20       Community Property.  Ifany of the Company Interests are owned at the Closing by any Member ascommunity property with his or her spouse, the sale of the Company Interestsunder this Agreement shall include the Member’s interest and the communityproperty interest of the Member’s spouse. The spouse of the respective Member joins in this Agreement, asevidenced by his or her signature hereto, to acknowledge his or her consent tothis Agreement and to the sale of any community property interest that he orshe might have in the Company Interests held by his or her spouse.

##  

**[Balance of page intentionally left blank.]**

 

47

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IN WITNESSWHEREOF, the parties have executed and delivered this Agreement as of the datefirst above written.

 
| PARENT:                     |                 | BUYER:                        |          |
|-----------------------------|----------------------|-------------------------------|---------------|
|                        |                 |                          |          |
| *SOURCECORP,*  INCORPORATED |                 | KEYPOINT I ACQUISITION  CORP. |
|                        |                 |                          |          |
| By:                         | /s/Thomas  C. Walker |                          | By:           | /s/Barry  L. Edwards |   |
| Printed Name:               | Thomas C. Walker     |                          | Printed Name: | Barry L. Edwards |   |
| Title:                      | Chairman  & CDO  |                          | Title:        | Vice  President |   |
|                             |                      |                               |               |  |  |  |  |  |  |  |  |

 

 
|                    | THE COMPANY:              |                    |
|-------------------------|---------------------------|-------------------------|
|                    |                      |                    |
|                    | KEYPOINT CONSULTING LLC   |                    |
|                    |                      |                    |
|                    |                      |                    |
|                    | By:                       | /s/Michael  A. Williams |   |
|                    | Printed Name:             | Michael A. Williams     |   |
|                    | Title:                    | Co-Managing  Principal  |   |
|                    |                      |                    |
|                    |                      |                    |
|                    | THE MEMBERS:              |                    |
|                    |                      |                    |
|                    |                      |                    |
| /s/Kimberley  Doane     |                      | /s/Michael  J. Doane    |   |
| Spouse                  | Michael J. Doane          |                    |
|                    |                      |                    |
|                    |                      |                    |
| /s/Michele  P. Vellrath |                      |                    | /s/Marc  Vellrath |   |
| Spouse                  | Marc Vellrath             |                    |
|                    |                      |                    |
|                    |                      |                    |
| /s/Sheila  Williams     |                      |                    | /s/Michael  A. Williams |   |
| Spouse                  | Michael A.  Williams |                    |
|                    |                      |                    |
|                    |                      |                    |
| /s/Danielle  Caluwaerts |                      |                    | /s/Brett  L. Reed |   |
| Spouse                  | Brett L. Reed        |                    |
|                    |                      |                    |
|                    |                      |                    |
| /s/Kristin  McAfee      |                      |                    | /s/R.  Preston McAfee |   |
| Spouse                  | R. Preston McAfee         |                    |
|                         |                           |                         |  |  |  |  |  |

 

----

 
| N/A                |            |   | /s/David  S. Sibley |   |
|--------------------|-----------------|--------|---------------------|--------|
| Spouse             | David S. Sibley |   |
|               |            |   |
|               |            |   |
| N/A                |            |   | /s/Alan  C. Hess    |   |
| Spouse             | Alan C. Hess    |   |
|               |            |   |
|               |            |   |
| /s/Azin  H. Wilcox |            |   | /s/James  A. Wilcox |   |
| Spouse             | James A. Wilcox |   |

 

----

 

**ANNEX I**

 

**TO THAT CERTAIN**

**MEMBERSHIP INTEREST PURCHASEAGREEMENT**

**EXECUTED APRIL 15, 2004**

**BY AND AMONG**

***SOURCECORP,*INCORPORATED,**

**KEYPOINT I ACQUISITION CORP.,**

**KEYPOINT CONSULTING LLC**

**AND**

**THE MEMBERS NAMED THEREIN**

 

**DEFINITIONS**

 

In this Agreement,the following terms shall have the meanings set forth below unless the contextrequires otherwise.

 

“Academic Member”has the meaning given in the introductory paragraph of this Agreement.

 

“Agencies” has themeaning given in Section 2.16.

 

“Buyer” shall meanKeyPoint I Acquisition Corp., a Delaware corporation.

 

“Buyer’s GAAPLosses” means that portion of Buyer’s Losses arising from the exceptions to ordeviations from GAAP reflected on the Effective Date Balance Sheet, whether ornot set forth on Schedules 1.4 and 2.5, which (i) have anaggregate net adverse or negative effect upon the Effective Date Balance Sheetand (ii) are determined in the manner set forth in the example contained belowin this definition of “Buyer’s GAAP Losses”, with such GAAP exceptions or deviationsthat have a positive dollar effect on the Effective Date Balance Sheet appliedagainst GAAP exceptions or deviations that have an adverse or negative dollareffect on the Effective Date Balance Sheet, and with GAAP exceptions ordeviations that do not have an effect (*i.e.*,neither negative or positive) on the Effective Date Balance Sheet not includedin such calculation.  By way of example,if (i) certain of the Company’s scheduled GAAP exceptions or deviations resultin a cumulative overstatement of assets of $60,000 on the Effective DateBalance Sheet and a cumulative understatement of liabilities of $5,000 on theEffective Date Balance Sheet (*i.e.*,an aggregate adverse or negative dollar effect on the Effective Date BalanceSheet of $65,000), and (ii) certain GAAP exceptions or deviations on theEffective Date Balance Sheet that are not set forth on Schedules 1.4 and2.5 are discovered, which result in a cumulative understatement ofassets of $7,000 on the Effective Date Balance Sheet and a cumulativeoverstatement of liabilities of $2,000 on the Effective Date Balance Sheet (*i.e.*, an aggregate positive dollar effecton the Effective Date Balance Sheet of $9,000), Buyer’s GAAP Losses shall be$56,000 and Buyer and the Company shall be entitled to recover $6,000 withrespect thereto pursuant to Article IX hereof.

 

“Buyer’s Losses”has the meaning given in Section 9.1(b).

 

1

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“CharterDocuments” means the true, complete and correct copies of the Company’sCertificate of Formation and its Operating Agreement, as described in Section2.2.

 

“Closing” meansthe closing of the transactions contemplated by this Agreement, as described inSection 7.1.

 

“Closing Date”shall mean the date of the Closing, as described in Section 7.1.

 

“Closing PriceAdjustment” has the meaning given in Section 1.2.

 

“Code” means theInternal Revenue Code of 1986, as amended, as described in Section 2.8(c).

 

“Company” shallmean KeyPoint Consulting LLC, a Californialimited liability company.

 

“CompanyInterests” means the issued and outstanding membership interests of theCompany, as described in Section 1.1.

 

“Contracts” hasthe meaning given in Section 2.12(a).

 

“Effective Date”means March 1, 2004, as described in Section 1.5.

 

“Effective DateBalance Sheet” means the balance sheet of the Company at the close of businesson the Effective Date, as described in Sections 1.2 and 1.4.

 

“Employee Claims”has the meaning given in Section 9.3.

 

“EmploymentAgreements” means the Employment Agreements to be entered into between theCompany and each of the Primary Equity Members at the Closing and attached tothis Agreement as Exhibit A, as described in Section 5.11.

 

“EnvironmentalCosts” has the meaning given in Section 9.2(c).

 

“EnvironmentalRequirements” has the meaning given in Section 2.11(b).

 

“EquitableExceptions” has the meaning given in Section 2.1.

 

“ERISA” means theEmployee Retirement Income Security Act of 1974, as amended, as described in Section2.19(a).

 

“FinancialStatements” has the meaning given in Section 2.5(a).

 

“GAAP” meansgenerally accepted accounting principles consistently applied, as described in Section1.2.

 

“Group Member” hasthe meaning given in Section 2.19(c).

 

“HazardousSubstance” has the meaning given in Section 2.11(b).

 

2

----

 

“Holdback Amount”has the meaning given in Section 1.1.

 

“IndependentContractor Agreements” means the Independent Contractor Agreements to beentered into between the Company and each of the Academic Members at theClosing and attached to this Agreement as Exhibit B, as described in Section5.12.

 

“IntellectualProperty” has the meaning given in Section 2.18.

 

“IRS” means theUnited States Internal Revenue Service, as described in Section 2.19(a).

 

“KeyPointDistribution Account” has the meaning given in Section 1.3(c).

 

“KeyPointReceivables” has the meaning given in Section 1.2.

 

“Liens” has themeaning given in Section 2.3(b).

 

“Material AdverseEffect” means a material adverse effect on the business, operations,properties, assets or condition (financial or otherwise), results of operationsor prospects of the Company.

 

“Material Permits”has the meaning given in Section 2.7.

 

“Members” shallmean Michael J. Doane, Marc Vellrath, Michael A. Williams,Brett L. Reed, R. Preston McAfee, David S. Sibley, Alan C.Hess and James A. Wilcox.

 

“Members’ Release”means the Members’ Release to be executed by the Members and attached as ExhibitD, as described in Section 5.5.

 

“Modified TangibleNet Worth” means the net worth of the Company (as determined in accordance withGAAP) as determined by reference to the Effective Date Balance Sheet(a) less the value of the Company’s accounts receivable as of theEffective Date (the “KeyPoint Receivables”) and (b) plus the value of theliability accounts set forth on Schedule 1.3 hereto (the“Segregated Liabilities”) as described in Section 1.3.  Modified Tangible Net Worth shall becalculated in a manner consistent with the accounting methods of the Companyemployed in preparing the Effective Date Balance Sheet (*i.e.,* such calculation will be made inaccordance with GAAP); provided, however, that the effects of any GAAPexceptions or deviations that impact the determination of Modified Tangible NetWorth shall not be recoverable pursuant to the purchase price adjustment setforth in Section 1.2, but shall instead be determined and addressedunder Article IX of the Agreement.

 

“NoncompetitionAgreements” means the Noncompetition Agreements to be entered into between theCompany and each of the Academic Members at the Closing and attached to thisAgreement as Exhibit C, as described in Section 5.12.

 

“Parent” shallmean *SOURCECORP,*Incorporated, aDelaware corporation.

 

“PBGC” means thePension Benefit Guaranty Corporation, as described in Section 2.19(a).

 

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“Plans” has themeaning given in Section 2.19(a).

 

“Post-ClosingAdjustment” has the meaning given in Section 1.3(b).

 

“Primary EquityMembers” has the meaning given in the introductory paragraph of this Agreement.

 

“Real Property”has the meaning given in Section 2.9(a).

 

“Real PropertyLeases” has the meaning given in Section 2.10.

 

“RelatedCorporation” has the meaning given in Section 2.8(h).

 

“SegregatedAccounts” has the meaning given in Section 1.3(a).

 

“SegregatedLiabilities” has the meaning given in “Modified Tangible Net Worth” above.

 

“Seller Losses”has the meaning given in Section 9.4(b).

 

“*SOURCECORP*Material Adverse Effect” meansa material adverse effect on the business, operations, affairs, properties,assets or condition (financial or otherwise) of Parent and the subsidiaries ofParent taken as a whole.

 

“Subject Property”has the meaning given in Section 2.11(b).

 

“Taxes” has themeaning given in Section 2.8(a).

 

“Third PartyIntellectual Property” has the meaning given in Section 2.18.

 

“TotalConsideration” has the meaning given in Section 1.1.

 

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