Exhibit 10.59


 


EXECUTION VERSION


 


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


 


ASSET PURCHASE AGREEMENT


 


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


 


RECITALS


 


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


 


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


 


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


 


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


 


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


 


1





















 


TABLE OF CONTENTS


 


	
  1.

  	
  CERTAIN DEFINITIONS

  	
   

  
	
   

  	
   

  	
   

  
	
  2.

  	
  SALE AND PURCHASE OF ASSETS

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  2.1

  	
  Purchased
  Assets

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  2.2

  	
  Excluded
  Assets

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  2.3

  	
  Assumed
  Liabilities

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  2.4

  	
  Excluded
  Liabilities

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  3.

  	
  CONSIDERATION

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  3.1

  	
  Purchase
  Price and Payment

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  3.2

  	
  Allocation
  of Purchase Price

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  3.3

  	
  Earn
  Out Payments

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  3.4

  	
  Operational
  Impact on Earn Out Payments

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  3.5

  	
  Accounts
  Receivable

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  4.

  	
  COVENANT NOT TO COMPETE

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  4.1

  	
  Covenant
  Not to Compete

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  4.2

  	
  Non-Solicitation

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  4.3

  	
  Separate
  Covenants

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  5.

  	
  TRANSFER OF EMPLOYEES AND EMPLOYEE BENEFITS

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  5.1

  	
  Workers’
  Compensation

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  5.2

  	
  Transfer
  of Employees

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  5.3

  	
  Employee
  Benefit Plans

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  6.

  	
  THE CLOSING

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  6.1

  	
  The
  Closing

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  6.2

  	
  Seller
  Deliveries at Closing

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  6.3

  	
  Purchaser
  Deliveries at Closing

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  7.

  	
  REPRESENTATION AND WARRANTIES OF SELLER ENTITIES

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  7.1

  	
  Organization
  and Valid Existence

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  7.2

  	
  Corporate
  Authority

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  7.3

  	
  No
  Violations

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  7.4

  	
  Financial
  Statements

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  7.5

  	
  Absence
  of Certain Changes

  	
   

  



 


i





















 


	
   

  	
  7.6

  	
  Title
  to and Condition of Purchased Assets

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  7.7

  	
  Real
  Estate

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  7.8

  	
  Contracts

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  7.9

  	
  Litigation

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  7.10

  	
  Intellectual
  Property

  	
   

  



 


	
   

  	
  7.11

  	
  Compliance
  with Laws

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  7.12

  	
  Employee
  Benefit Plans

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  7.13

  	
  Taxes

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  7.14

  	
  Insurance

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  7.15

  	
  Employees;
  Employment Matters

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  7.16

  	
  Brokers

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  7.17

  	
  Business
  Relations

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  7.18

  	
  Warranty;
  Nonbillable Work

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  7.19

  	
  Consents

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  7.20

  	
  Schedules

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  7.21

  	
  1933
  Act Matters

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  7.22

  	
  Information,
  Experience, and Ability to Bear Risk

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  7.23

  	
  Accuracy
  of Disclosure

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  7.24

  	
  No
  Other Warranties or Representations

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  8.

  	
  REPRESENTATIONS AND WARRANTIES OF THE PRINCIPALS

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  8.1

  	
  Ownership
  of Seller Equity

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  8.2

  	
  Authority
  of Principals

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  8.3

  	
  Consents

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  8.4

  	
  No
  Other Warranties or Representations

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  9.

  	
  REPRESENTATIONS OF PURCHASER AND PARENT

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  9.1

  	
  Organization
  and Authority

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  9.2

  	
  Authorization
  of Agreement

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  9.3

  	
  No
  Violations

  	
   

  



 


ii





















 


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


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


 


	
   

  	
  9.4

  	
  Capital
  Stock

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  9.5

  	
  Litigation;
  Compliance with Law

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  9.6

  	
  SEC
  Filings

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  9.7

  	
  No
  Finder

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  9.8

  	
  Consents

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  9.9

  	
  ***

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  10.

  	
  PRE-CLOSING COVENANTS

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  10.1

  	
  Affirmative
  Covenants

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  10.2

  	
  Restrictions
  on Conduct of the Business Prior to Closing

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  10.3

  	
  Certain
  Notifications by Seller Entities

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  10.4

  	
  Risk
  of Loss

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  10.5

  	
  Updating
  the Seller Disclosure Schedule

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  10.6

  	
  Access
  to Information

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  11.

  	
  ADDITIONAL COVENANTS

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  11.1

  	
  Confidentiality

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  11.2

  	
  Public
  Announcements

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  11.3

  	
  Taxes

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  11.4

  	
  Further
  Assurances

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  11.5

  	
  Retained
  Information

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  11.6

  	
  Escrow
  Terms

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  12.

  	
  CONDITIONS PRECEDENT TO OBLIGATIONS OF PURCHASER AND
  PARENT

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  12.1

  	
  Continued
  Truth of Representations and Warranties; No Breach

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  12.2

  	
  Absence
  of Litigation

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  12.3

  	
  Landlord
  Consent

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  12.4

  	
  No
  Material Adverse Change

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  12.5

  	
  Dissolution
  of Bates Private Capital Advisors

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  12.6

  	
  Errors
  and Omissions Insurance

  	
   

  



 


iii





















 


	
  13.

  	
  CONDITIONS TO OBLIGATIONS OF SELLER ENTITIES

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  13.1

  	
  Continued
  Truth of Representations and Warranties; No Breach

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  13.2

  	
  Absence
  of Litigation

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  13.3

  	
  Landlord
  Consent

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  13.4

  	
  No
  Material Adverse Change

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  14.

  	
  SURVIVAL OF REPRESENTATIONS AND WARRANTIES

  	
   

  
	
   

  	
   

  	
   

  
	
  15.

  	
  INDEMNIFICATION

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  15.1

  	
  Indemnification
  By Seller Entities

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  15.2

  	
  Indemnification
  by Purchaser and Parent

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  15.3

  	
  Limitations

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  15.4

  	
  Insurance
  and Tax Effect

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  16.

  	
  RIGHT OF OFFSET

  	
   

  
	
   

  	
   

  	
   

  
	
  17.

  	
  TERMINATION OF AGREEMENT

  	
   

  
	
   

  	
   

  	
   

  
	
  18.

  	
  EFFECT OF TERMINATION

  	
   

  
	
   

  	
   

  	
   

  
	
  19.

  	
  EXPENSES

  	
   

  
	
   

  	
   

  	
   

  
	
  20.

  	
  NOTICES

  	
   

  
	
   

  	
   

  	
   

  
	
  21.

  	
  SUCCESSORS

  	
   

  
	
   

  	
   

  	
   

  
	
  22.

  	
  ARTICLE AND SECTION HEADINGS

  	
   

  
	
   

  	
   

  	
   

  
	
  23.

  	
  GOVERNING LAW; CONSENT TO SERVICE

  	
   

  
	
   

  	
   

  	
   

  
	
  24.

  	
  DISPUTE RESOLUTION

  	
   

  
	
   

  	
   

  	
   

  
	
  25.

  	
  ENTIRE AGREEMENT

  	
   

  
	
   

  	
   

  	
   

  
	
  26.

  	
  SURVIVAL

  	
   

  
	
   

  	
   

  	
   

  
	
  27.

  	
  PARENT GUARANTY

  	
   

  
	
   

  	
   

  	
   

  
	
  28.

  	
  COUNTERPARTS

  	
   

  



 


iv





















 


LIST OF
EXHIBITS(1)


 


	
  Exhibits A-1 through A-5

  	
   

  	
  Forms of Expert Agreements

  
	
  Exhibit B

  	
   

  	
  Purchaser’s Code of Conduct

  
	
  Exhibit C

  	
   

  	
  Form of Assignment and Assumption
  Agreement

  
	
  Exhibit D

  	
   

  	
  Form of Bill of Sale

  
	
  Exhibit E-1

  	
   

  	
  Form of Opinion of Counsel to Seller

  
	
  Exhibit E-2

  	
   

  	
  Form of Opinion of Counsel to
  Principals

  
	
  Exhibit F-1

  	
   

  	
  Form of Assignment of Subleases

  
	
  Exhibit F-2

  	
   

  	
  Form of Assignment of Lease

  
	
  Exhibit G

  	
   

  	
  Financial Statements

  
	
  Exhibit H

  	
   

  	
  Form of
  Seller Closing Certificate

  
	
  Exhibit I

  	
   

  	
  Form of
  Purchaser Closing Certificate

  
	
  Exhibit J

  	
   

  	
  Form of
  Parent Closing Certificate

  
	
  Exhibit K

  	
   

  	
  Form of
  Escrow Agreement

  



 


LIST OF SCHEDULES(2)


 


	
  Allocation Schedule

  	
   

  	
   

  
	
  Schedule 2.1.1

  	
   

  	
  Fixed Assets

  
	
  Schedule 2.1.5

  	
   

  	
  Deposits and Prepayments

  
	
  Schedule 2.1.6

  	
   

  	
  Cash

  
	
  Schedule 3.1.2

  	
   

  	
  Parent Stock; Principal Percentage Interest

  
	
  Schedule 3.3.6

  	
   

  	
  Corporate Support Services

  
	
  Schedule 3.5

  	
   

  	
  Accounts Receivable

  
	
  Schedule 5.1

  	
   

  	
  Workers’ Compensation

  
	
  Schedule 7.5

  	
   

  	
  Absence of Certain Changes

  
	
  Schedule 7.6

  	
   

  	
  Permitted Liens

  
	
  Schedule 7.8

  	
   

  	
  Contracts

  
	
  Schedule 7.9

  	
   

  	
  Litigation

  
	
  Schedule 7.10

  	
   

  	
  Intellectual Property

  
	
  Schedule 7.10.2

  	
   

  	
  Third Person Licenses

  
	
  Schedule 7.12

  	
   

  	
  Employee Benefit Plan

  
	
  Schedule 7.14

  	
   

  	
  Insurance Policies

  
	
  Schedule 7.15

  	
   

  	
  Employees

  
	
  Schedule 7.17

  	
   

  	
  Business Relations

  



 










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


 


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


 


v





















 


AGREEMENT


 


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


 


1.                                      Certain Definitions.


 


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


 


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


 


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


 


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


 


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


 


“Accounts Receivable” has the meaning
given in Section 2.2.6


 


“Agreement” has the meaning given in
the Preamble.


 


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


 


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


 


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


 


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


 


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


 


“Basket” has the meaning given in Section 15.3.1.


 


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


 


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


 


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


 


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


 


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


 


2





















 


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


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


 


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


 


“Closing” has the meaning given in Section 6.1.


 


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


 


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


 


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


 


“Contracts” has the meaning given in Section 7.8.


 


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


 


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


 


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


 


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


 


“Dispute” has the meaning given in Section 24.


 


“Distributee” has the meaning given
in Section 7.21.


 


“Documents” has the meaning given in Section 2.1.10.


 


3





















 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


“Escrow” has the meaning given in Section 6.3.2.


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


4





















 


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


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


5





















 


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


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


 


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


 


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


 


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


 


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


 


“Liens” has the meaning given in Section 7.6.


 


“Losses”
has the meaning given in Section 15.1.


 


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


 


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


 


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


 


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


 


“Mediator” has the meaning given in Section 24.


 


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


 


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


 


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


 


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


 


6





















 


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


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


 


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


 


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


 


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


 


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


 


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


 


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


 


“Principal Restrictive Period” means ***.


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


“Recipient” has the meaning given in Section 11.1.


 


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


 


7





















 


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


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


“Seller Restrictive Period” means ***.


 


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


 


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


 


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


 


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


 


8





















 


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


 


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


 


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


 


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


 


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


 


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


 


2.                                      Sale And Purchase Of Assets.


 


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


 


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


 


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


 


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


 


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


 


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


 


9





















 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


2.2.2                        All
taxpayer and other identification numbers;


 


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


 


10





















 


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


 


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


 


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


 


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


 


2.2.8                        All rights
of Seller under this Agreement;


 


2.2.9                        All
Retained Business Records; and


 


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


 


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


 


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


 


11





















 


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


 


3.                                      Consideration.


 


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


 


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


 


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


 


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


 


12





















 


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


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


 


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


 


3.3                      Earn
Out Payments.


 


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


 


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


 


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


 


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


 


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


 


13





















 


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


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


 


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


 


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


 


3.4                               Operational
Impact on Earn Out Payments.  ***


 


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


 


14





















 


4.                                      Covenant Not To
Compete.


 


4.1                      Covenant
Not to Compete.


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


15





















 


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


 


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


 


4.2                      Non-Solicitation.


 


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


 


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


 


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


 


16





















 


5.                                      Transfer Of
Employees And Employee Benefits.


 


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


 


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


 


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


 


6.                                      The Closing.


 


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


 


17





















 


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


 


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


 


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


 


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


 


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


 


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


 


6.2.5                        The
closing certificate contemplated by Section 12 hereof;


 


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


 


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


 


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


 


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


 


18





















 


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


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


6.3.6                        The Lease
Assignment, duly executed by Purchaser; and


 


6.3.7                        The Expert
Agreements, duly executed by Purchaser.


 


7.                                      Representation
and Warranties of Seller Entities.


 


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


 


19





















 


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


 


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


 


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


 


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


 


20





















 


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


 


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


 


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


 


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


 


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


 


7.5.5                        Had any
strike or work stoppage;


 


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


 


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


 


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


 


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


 


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


 


21





















 


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


 


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


 


7.10                        Intellectual Property.


 


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


 


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


 


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


 


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


 


22





















 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


23





















 


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


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


 


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


 


7.15        Employees;
Employment Matters.


 


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


 


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


 


7.15.3      All
persons employed by Seller are employees at will.


 


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


 


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


 


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


 


24





















 


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


 


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


 


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


 


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


 


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


 


25





















 


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


 


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


 


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


 


8.             Representations
and Warranties of the Principals.


 


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


 


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


 


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


 


26





















 


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


 


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


 


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


 


9.             Representations
of Purchaser and Parent.


 


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


 


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


 


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


 


27





















 


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


 


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


 


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


 


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


 


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


 


28





















 


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


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


 


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


 


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


 


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


 


9.9       ***


 


10.          Pre-Closing
Covenants.


 


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


 


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


 


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


 


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


 


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


 


29





















 


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


 


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


 


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


 


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


 


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


 


10.2.5      Violate
any legal requirement applicable to Seller;


 


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


 


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


 


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


 


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


 


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


 


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


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


11.          Additional
Covenants.


 


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


 


32





















 


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


 


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


 


11.3        Taxes.


 


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


 


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


 


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


 


33





















 


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


 


11.4     Further Assurances.


 


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


 


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


 


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


 


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


 


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


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


 


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


 


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


 


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


 


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


 


12.          Conditions
Precedent To Obligations Of Purchaser and Parent.


 


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


 


35





















 


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


 


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


 


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


 


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


 


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


 


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


 


13.          Conditions
To Obligations Of Seller Entities.


 


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


 


36





















 


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


 


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


 


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


 


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


 


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


 


14.          Survival
Of Representations And Warranties.


 


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


 


15.          Indemnification


 


15.1     Indemnification By Seller
Entities.


 


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


 


37





















 


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


 


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


 


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


 


38





















 


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


 


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


 


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


 


39





















 


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


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


 


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


 


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


 


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


 


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


 


15.4     Insurance and Tax Effect.


 


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


 


40





















 


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


 


16.          Right
of Offset.


 


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


 


17.          Termination
of Agreement.


 


The parties may
terminate this Agreement as provided below:


 


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


 


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


 


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


 


41





















 


18.          Effect
of Termination.


 


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


 


19.          Expenses.


 


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


 


20.          Notices.


 


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


 


In the case of
Purchaser, to:


 


LECG, LLC

2000 Powell Street, Suite 600

Emeryville, California  94608

Attention:  Chief Financial Officer

Fax:  (510) 653-9898


 


In the case of
Parent, to:


 


LECG
Corporation

2000 Powell Street, Suite 600

Emeryville, California  94608

Attention:  Chief Financial Officer

Fax:  (510) 653-9898


 


with copies of
notices to Purchaser or Parent to:


 


Marvin A.
Tenenbaum, Esq.

General Counsel

LECG, LLC

33 West Monroe Street, Suite 1850

Chicago, IL 60603

Fax:  (312) 267-8220


 


and


 


42





















 


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


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


 


Carol Kerr, Esq.


Folger Levin &
Kahn, LLP


1900 Avenue of
the Stars, Suite 2800


Los Angeles,
California 90067


Fax:  (310) 556-3770


 


In the case of
Seller or Principals, to:


 


Mr. John
E. Bates


***


 


and


 


Mr. Rob
Lee


5005 SW
Meadows Road, Suite 300


Lake Oswego,
OR 97035


Fax: (503) 639-2539


 


with a copy to:


 


Ronald L.
Greenman

Tonkon Torp, LLP

888 SW Fifth Avenue

1600 Pioneer Tower

Portland, Oregon 97204

Fax:  (503) 972-3743


 


and


 


Mr. Ronald
K. Ragen


Davis Wright
Tremaine LLP


Suite 2300


1300 SW 5th
Avenue


Portland, OR
97201


Fax: (503) 778-5299


 


21.          Successors.


 


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


 


43





















 


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


 


22.          Article and
Section Headings.


 


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


 


23.          Governing
Law; Consent To Service.


 


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


 


24.          Dispute
Resolution.


 


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


 


44





















 


25.          Entire
Agreement.


 


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


 


26.          Survival.


 


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


 


27.          Parent
Guaranty.


 


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


 


28.          Counterparts.


 


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


 


[Remainder
of this Page Intentionally Left Blank]


 


45





















 


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


 


 


	
  PURCHASER:

  	
  PARENT:

  
	
   

  	
   

  
	
  LECG, LLC 

  A California limited liability company

  	
  LECG Corporation, 

  A Delaware corporation

  
	
   

  	
   

  
	
  By:

  	
  LECG Corporation

  	
  By:

  	
  /s/ John C. Burke

  
	
  Its:

  	
  Sole Manager

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By: 

  	
  /s/ John C. Burke

  	
   

  	
  Its: 

  	
  CFO

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Its: 

  	
  CFO

  	
   

  	
   

  
	
   

  	
  SELLER ENTITIES:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Bates Private Capital, Incorporated 

  an Oregon corporation

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Rob J. Lee

  
	
   

  	
   

  	
   

  
	
   

  	
  Its:

  	
  President

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/ John E.Bates 

  
	
   

  	
  John E. Bates

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/ Rob J. Lee 

  
	
   

  	
  Rob J. Lee

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/ Nancy S. Ranchel 

  
	
   

  	
  Nancy S. Ranchel

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/ Michael D. Weiner 

  
	
   

  	
  Michael D. Weiner

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/ Jennifer L. Stout 

  
	
   

  	
  Jennifer L. Stout

  
							



 


 


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Asset Purchase Agreement