Document:

www.EXFILE.com 888.775-4789 -- GMX RESOURCES, INC. -- EXHIBIT 4.1 TO FORM 8-A12B

    EXHIBIT
      4.1

     

    CERTIFICATE
      OF DESIGNATION

    OF
      THE

    9.25%
      SERIES B CUMULATIVE PREFERRED STOCK

    $0.001
      PAR VALUE

    OF

    GMX
      RESOURCES INC.

     

    Pursuant
      to Section 1032 of the Oklahoma General Corporation Act,

     

    The
      undersigned, the Chief Executive Officer of GMX
      Resources Inc.,
      an
      Oklahoma corporation (the "Corporation"), does hereby certify that the following
      resolution was duly adopted by the Board of Directors of the Corporation on
      August 7, 2006, pursuant to the provisions of Section 1032.A of the Oklahoma
      General Corporation Act (the "Act"):

     

    RESOLVED,
      that pursuant to authority expressly granted to and vested in the Board of
      Directors by the provisions of the Certificate
      of Incorporation of the Corporation (the "Certificate of Incorporation"), the
      issuance of a series of the preferred stock, par value $0.001 per share, of
      the
      Corporation to be designated "9.25% Series B Cumulative Preferred Stock," which
      shall consist of 3,000,000 shares of preferred stock that the Corporation now
      has authority to issue, be, and the same hereby is, authorized, and the powers,
      designations, preferences and rights, and the qualifications, limitations or
      restrictions of the shares of such series (in addition to the rights and
      limitations set forth in the Certificate of Incorporation that may be applicable
      to such series) are fixed as follows:

     

    Section
      1.  Number
      of Shares and Designation. 
      This series of Preferred Stock shall be designated as 9.25% Series B Cumulative
      Preferred Stock, $0.001 par value per share (the "Series B Preferred Shares"),
      and the number of shares which shall constitute such series shall be
      3,000,000.

     

    Section
      2.  Definitions.  
      For purposes of the Series B Preferred Shares, the following terms shall have
      the meanings indicated:

     

    "Board
      of Directors"
      shall
      mean the Board of Directors of the Corporation or any committee authorized
      by
      such Board of Directors to perform any of its responsibilities with respect
      to
      the Series B Preferred Shares.

     

    "Business
      Day"
      shall
      mean any day other than a Saturday, Sunday or a day on which state or federally
      chartered banking institutions in New York, New York are not required to be
      open.

     

    "Call
      Date"
      shall
      mean the date fixed for redemption of the Series B Preferred Shares and
      specified in the notice to holders required under paragraph (f)
      of
Section
      5
      as the
      Call Date.

     

    A
      "Change
      of Ownership or Control"
      shall
      be deemed to have occurred on the date (i) that a "person" or "group"
      (within the meaning of Sections 13(d) and 14(d) of the Exchange Act)
      becomes the ultimate "beneficial owner" (as defined in Rules 13d-3 and 13d-5
      under the Exchange Act, except that a person or group shall be deemed to have
      beneficial ownership of all

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    shares
      of
      Voting Stock that such person or group has the right to acquire regardless
      of
      when such right is first exercisable), directly or indirectly, of Voting Stock
      representing more than 50% of the total voting power of the total Voting Stock
      of the Corporation; (ii) that the Corporation sells, transfers or otherwise
      disposes of all or substantially all of its assets; (iii) that the
      Corporation permits or suffers a change in its key management, meaning the
      continued active full time employment of each of Ken Kenworthy, Jr. (as Chief
      Executive Officer) and Ken Kenworthy, Sr. (as Chief Financial Officer);
      provided, however, that the cessation of active employment of one such officer
      due to death or disability, or the retirement of Ken Kenworthy, Sr. (as Chief
      Financial Officer), shall not be a Change of Ownership or Control so long as
      the
      Corporation hires or promotes a replacement officer within four months; or
      (iv) of the consummation of a merger or share exchange of the Corporation
      with another entity where the Corporation's shareholders immediately prior
      to
      the merger or share exchange would not beneficially own, immediately after
      the
      merger or share exchange, shares representing 50% or more of the outstanding
      Voting Stock of the corporation issuing cash or securities in the merger or
      share exchange (without consideration of the rights of any class of stock to
      elect directors by a separate group vote), or where members of the Board of
      Directors immediately prior to the merger or share exchange would not,
      immediately after the merger or share exchange, constitute a majority of the
      board of directors of the corporation issuing cash or securities in the merger
      or share exchange.

     

    "Common
      Shares"
      shall
      mean the shares of Common Stock, par value $0.001 per share, of the
      Corporation.

     

    "Dividend
      Payment Date"
      shall
      have the meaning set forth in paragraph (a)
      of
Section
      3.

     

    "Dividend
      Periods"
      shall
      mean quarterly dividend periods commencing on January 1, April 1, July 1 and
      October 1 of each year and ending on and including the day preceding the first
      day of the next succeeding Dividend Period (other than the initial Dividend
      Period, which shall commence on the Issue Date and end on and include September
      30, 2006); provided, however, that any Dividend Period during which any Series
      B
      Preferred Shares shall be redeemed pursuant to Section
      5
      shall
      end on and include the Call Date only with respect to the Series B Preferred
      Shares being redeemed).

     

    "Dividend
      Rate"
      shall
      mean the dividend rate accruing on the Series B Preferred Shares, as applicable
      from time to time pursuant to the terms hereof.

     

    "EBITDA(X)"
      shall
      mean the sum of: (i) net income for the period, plus (ii) any
      extraordinary loss and other expenses not considered to be operating in nature
      reflected in such net income, minus (iii) any extraordinary gain, interest
      income and other income not considered operating in nature reflected in such
      net
      income, plus (iv) depreciation, depletion, amortization and all other
      non-cash expenses for that period, plus (v) all interest, fees, charges and
      related expenses paid or payable (without duplication) for that period to a
      lender in connection with borrowed money or the deferred purchase price of
      assets that are considered "interest expense" under generally accepted
      accounting principles, together with the portion of rent paid or payable
      (without duplication) for that period under capital lease obligations that
      should be treated as interest
      in accordance with Financial Accounting Standards Board Statement No. 13, plus
      (vi) the aggregate amount of federal and state taxes on or measured by
      income for that period

    
       

      
        
          
          

        

        
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    (whether
      or not payable during that period), plus (vii) the amounts classified as
      exploration expense and dry hole costs for a company following the successful
      efforts method of accounting.

     

    "Exchange
      Act"
      shall
      mean the Securities Exchange Act of 1934, as amended.

     

    "Fully
      Junior Shares"
      shall
      mean the Common Shares, the Corporation's authorized Series A Junior
      Participating Preferred Stock and any other class or series of shares of stock
      of the Corporation now or hereafter issued and outstanding over which the Series
      B Preferred Shares have preference or priority in both (i) the payment of
      dividends and (ii) the distribution of assets on any liquidation,
      dissolution or winding up of the Corporation.

     

    "Issue
      Date"
      shall
      mean August 11, 2006.

     

    "Junior
      Shares"
      shall
      mean the Common Shares and any other class or series of shares of stock of
      the
      Corporation now or hereafter issued and outstanding over which the Series B
      Preferred Shares have preference or priority in the payment of dividends or
      in
      the distribution of assets on any liquidation, dissolution or winding up of
      the
      Corporation and, unless the context clearly indicates otherwise, shall include
      Fully Junior Shares.

     

    "Market
      Value"
      of a
      given security shall mean the average of the daily Trading Price per share
      of
      such security for the ten consecutive Trading Days immediately prior to the
      date
      in question.

     

    "National
      Market Listing"
      shall
      mean the listing or quotation, as applicable, of securities on or in the New
      York Stock Exchange, American Stock Exchange LLC, The NASDAQ Global Market,
      The
      NASDAQ Global Select Market or The NASDAQ Capital Market or any comparable
      national securities exchange or national securities market.

     

    "Qualifying
      Public Company"
      shall
      mean a company with Voting Stock that is subject to a National Market Listing
      and that, on a pro-forma combined basis with the Corporation, had an
      EBITDA(X)-to-interest expense plus preferred dividends ratio of at least
      2.0-to-1.0 for the 12-month period ending as of the end of the company's fiscal
      quarter immediately preceding the subject Change of Ownership or
      Control.

     

    "Parity
      Shares"
      shall
      have the meaning set forth in paragraph (b)
      of
Section
      7.

     

    "Penalty
      Rate"
      shall
      mean twelve percent (12%) per annum.

     

    "Person"
      shall
      mean any individual, firm, partnership, limited liability company, corporation
      or other entity, and shall include any successor (by merger or otherwise) of
      such entity.

     

    "SEC"
      shall
      have the meaning set forth in Section
      9.

     

    "Series
      B Preferred Shares"
      shall
      have the meaning set forth in Section
      1.

     

    "set
      apart for payment"
      shall
      be deemed to include, without any action other than the following: the recording
      by the Corporation in its accounting ledgers of any accounting or 

    
       

      
        
          
          

        

        
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    bookkeeping
      entry which indicates, pursuant to an authorization by the Board of Directors
      and a declaration of dividends or other distribution by the Corporation, the
      initial and continued allocation of funds to be so paid on any series or class
      of shares of stock of the Corporation; provided, however, that if any funds
      for
      any class or series of Junior Shares or any class or series of shares of stock
      ranking on a parity with the Series B Preferred Shares as to the payment of
      dividends are placed in a separate account of the Corporation or delivered
      to a
      disbursing, paying or other similar agent, then "set apart for payment" with
      respect to the Series B Preferred Shares shall mean irrevocably placing such
      funds in a separate account or irrevocably delivering such funds to a
      disbursing, paying or other similar agent.

     

    "Stated
      Rate"
      shall
      mean 9.25% per annum.

     

    "Trading
      Day"
      shall
      mean, if a security is listed or admitted to trading on The NASDAQ Stock Market,
      the New York Stock Exchange, the American Stock Exchange LLC or another national
      securities exchange or national securities market, a full day on which The
      NASDAQ Stock Market or such other national securities exchange or national
      securities market on which the security is traded is open for business and
      on
      which trades may be made thereon.

     

    "Trading
      Price"
      of a
      security on any Trading Day (excluding any after-hours trading as of such date)
      shall mean:

     

    (a)  the
      last
      sale price, regular way, or, in case no such sale takes place on such day,
      the
      average of the closing bid and ask prices, regular way, in either case as
      reported by the principal consolidated transaction reporting system with respect
      to securities listed or admitted to trading or quoted on The NASDAQ Stock Market
      or, if such security is not listed or admitted to trading or quoted on The
      NASDAQ Stock Market, as reported in the principal consolidated transaction
      reporting system with respect to securities listed on the principal national
      securities exchange or national securities market on or in which such security
      is listed or admitted to trading;

     

    (b)  if
      such
      security is not listed on, admitted to trading or quoted on The NASDAQ Stock
      Market or a national securities exchange or national securities market on that
      date, the last price quoted by Interactive Data Corporation for that security
      on
      the date, or if Interactive Data Corporation is not quoting such price, a
      similar quotation service selected by the Corporation;

     

    (c)  if
      such
      security is not so quoted, the average mid-point of the last bid and ask prices
      for such security on that date from at least two dealers recognized as
      market-makers for such security selected by the Corporation for this purpose;
      or

     

    (d)  if
      such
      security is not so quoted, the average of the last bid and ask prices for such
      security on that date from a dealer engaged in the trading of such securities
      selected by the Corporation for such purpose.

     

    "Transfer
      Agent"
      means
      UMB Bank, n.a., or such other agent or agents of the Corporation as may be
      designated by the Board of Directors or its duly authorized designee as the
      transfer agent, registrar and dividend disbursing agent for the Series B
      Preferred Shares.

    
       

      
        
          
          

        

        
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    "Voting
      Preferred Shares"
      shall
      have the meaning set forth in Section
      8.

     

    "Voting
      Stock"
      shall
      mean stock of any class or kind having the power to vote generally for the
      election of directors.

     

    Section
      3.  Dividends.

     

    (a)  Holders
      of Series B Preferred Shares shall be entitled to receive, when and as declared
      by the Board of Directors out of funds of the Corporation legally available
      for
      the payment of distributions, cumulative preferential cash dividends at a rate
      per annum equal to the Dividend Rate of the $25.00 per share stated liquidation
      preference of the Series B Preferred Shares (equivalent to $2.3125 per Series
      B
      Preferred Share per annum). Except as otherwise provided in paragraphs
(b)
      and
(c)
      of this
Section
      3,
      the
      Dividend Rate shall be equal to the Stated Rate. Such dividends shall accrue
      and
      accumulate on each issued and outstanding share of the Series B Preferred Shares
      on a daily basis from (but excluding) the original date of issuance of such
      share and shall be payable quarterly in equal amounts in arrears on the last
      calendar day of each Dividend Period, beginning on September 30, 2006 (each
      such
      day being hereinafter called a "Dividend Payment Date"); provided that if any
      Dividend Payment Date is not a Business Day, then the dividend which would
      otherwise have been payable on such Dividend Payment Date may be paid on the
      next succeeding Business Day with the same force and effect as if paid on such
      Dividend Payment Date, and no interest or additional dividends or other sums
      shall accrue on the amount so payable from such Dividend Payment Date to such
      next succeeding Business Day. Any dividend payable on the Series B Preferred
      Shares for any partial dividend period shall be prorated and computed on the
      basis of a 360-day year consisting of twelve 30-day months. Dividends shall
      be
      payable to holders of record as they appear in the stock records of the
      Corporation at the close of business on the applicable record date, which shall
      be the tenth day preceding the applicable Dividend Payment Date, or such other
      date designated by the Board of Directors or an officer of the Corporation
      duly
      authorized by the Board of Directors for the payment of dividends that is not
      more than 30 nor less than ten days prior to such Dividend Payment
      Date.
      The
      initial dividend on the Series B Preferred Shares for the first Dividend Period
      ending on and including September 30, 2006, will be $0.3212 per Series B
      Preferred Share, payable on the first Dividend Payment Date.

     

    (b)  If
      the
      Corporation fails to pay cash dividends on the Series B Preferred Shares in
      full
      for any four Dividend Periods, whether consecutive or non-consecutive (a
      "Dividend Default"), then:

     

    (i)  the
      Dividend Rate shall increase to the Penalty Rate, commencing on the first day
      after the Dividend Payment Date on which the Dividend Default occurs and for
      each subsequent Dividend Payment Date thereafter until the second consecutive
      Dividend Payment Date following such time as the Corporation has paid all
      accumulated accrued and unpaid dividends on the Series B Preferred Shares in
      full in cash, at which time the Dividend Rate shall revert to the Stated
      Rate;

     

    (ii)  On
      the
      next Dividend Payment Date following the Dividend Payment Date on which the
      Dividend Default occurs, and continuing until the second consecutive Dividend
      Payment Date following such time as the Corporation has paid all 

     

    
       

      
        
          
          

        

        
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    accumulated
      accrued and unpaid dividends on the Series B Preferred Shares in full in cash,
      the Corporation shall pay all dividends on the Series B Preferred Shares,
      including all accumulated accrued and unpaid dividends, on each Dividend Payment
      Date either in cash or, if not paid in cash, by issuing to the holders thereof
      (A) if the Common Shares are then subject to a National Market Listing,
      fully-tradable, registered Common Shares with a value equal to the amount of
      dividends being paid, calculated based on the then current Market Value of
      the
      Common Shares, plus cash in lieu of any fractional Common Share; or (B) if
      the
      Common Shares are not then subject to a National Market Listing, additional
      shares of Series B Preferred Shares with a value equal to the amount of
      dividends being paid, calculated based on the stated $25.00 liquidation
      preference of the Series B Preferred Shares, plus cash in lieu of any fractional
      Series B Preferred Share (and dividends on any such Series B Preferred Shares
      upon issuance shall accrue at the Penalty Rate and accumulate until such time
      as
      the Dividend Rate shall revert to the Stated Rate in accordance with
      subparagraph (i)
      of this
      paragraph (b));

     

    (iii)  until
      such time as the Dividend Rate reverts to the Stated Rate pursuant to
      subparagraph (i)
      of this
      paragraph (b),
      the
      holders of Series B Preferred Shares will have the voting rights described
      below
      in Section
      8;
      and

     

    (iv)  to
      the
      extent that the Corporation determines a shelf registration statement to cover
      resales of Common Shares or Series B Preferred Shares is required in connection
      with the issuance of, or for resales of such Common Shares or Series B Preferred
      Shares issued as payment of a dividend, the Corporation will use its reasonable
      best efforts to file and maintain the effectiveness of such a shelf registration
      statement until such time as all sales of such stock have been resold
      thereunder.

     

    Following
      any Dividend Default that has been cured by the Corporation as provided above
      in
      subparagraph (i)
      of this
      paragraph (b),
      if the
      Corporation subsequently fails to pay cash dividends on the Series B Preferred
      Shares in full for any Dividend Period, such subsequent failure shall constitute
      a separate Dividend Default, and the foregoing provisions of subparagraphs
      (i),
      (ii),
      (iii)
      and
(iv)
      of this
      paragraph (b)
      shall
      immediately apply until such subsequent Dividend Default is cured as so
      provided.

     

    (c)  If
      the
      Corporation fails to maintain a National Market Listing for the Series B
      Preferred Shares for 180 days or longer (a "Listing Default"),
      then:

     

    (i)  the
      Dividend Rate shall increase to the Penalty Rate, commencing on the day after
      the Listing Default and continuing until such time as the Corporation has cured
      the Listing Default by again subjecting the Series B Preferred Shares to a
      National Market Listing, at which time the Dividend Rate shall revert to the
      Stated Rate; and

     

    (ii)  until
      such time as the Dividend Rate reverts to the Stated Rate pursuant to
      subparagraph (i)
      of this
      paragraph (c),
      the
      holders of Series B Preferred Shares will have the voting rights described
      below
      in Section
      8.

     

    Following
      any 180-day Listing Default that has been cured by the Corporation as provided
      above in subparagraph (i)
      of this
      paragraph (c),
      if the
      Series B Preferred Shares subsequently cease to 

    
       

      
        
          
          

        

        
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    be
      subject to a National Market Listing, such event shall constitute a separate
      Listing Default, and the foregoing provisions of subparagraphs (i)
      and
(ii)
      of this
      paragraph (c)
      shall
      immediately apply until such time as the Series B Preferred Shares are again
      subject to a National Market Listing.

     

    (d)  The
      Corporation shall at all times keep reserved a sufficient number of Common
      Shares or Series B Preferred Shares for the payment of dividends on the Series
      B
      Preferred Shares as described above in paragraphs (b)
      and
(c)
      of this
Section
      3,
      and if
      a dividend is paid in shares of stock, an amount equal to the aggregate par
      value of the shares issued shall be designated as capital in respect of such
      shares in accordance with Section 1052 of the Act. For purposes of calculating
      the amount of capital of the Corporation under the Act with respect to the
      Corporation's ability to pay dividends on, or to repurchase or redeem shares
      of
      any other class or series of its capital stock, the Board of Directors shall
      take into consideration its reasonable estimate of the amount of capital
      represented by Common Shares or Series B Preferred Shares (which shall equal
      the
      par value thereof) that may be issued as dividends on the Series B Preferred
      Shares as described in this Section
      3
      as if
      such Common Shares or Series B Preferred Shares were issued and
      outstanding.

     

    (e)  No
      dividend on the Series B Preferred Shares will be declared by the Corporation
      or
      paid or set apart for payment by the Corporation at such time as the terms
      and
      provisions of any agreement of the Corporation, including any agreement relating
      to its indebtedness, prohibit such declaration, payment or setting apart for
      payment or provide that such declaration, payment or setting apart for payment
      would constitute a breach thereof or a default thereunder, or if such
      declaration, payment or setting aside of funds is restricted or prohibited
      by
      law;
      provided, however, notwithstanding anything to the contrary contained herein,
      dividends on the Series B Preferred Shares shall continue to accrue and
      accumulate regardless of whether: (i) any or all of the foregoing
      restrictions exist; (ii) the Corporation has earnings or profits;
      (iii) there are funds legally available for the payment of such dividends;
      or (iv) such dividends are authorized by the Board of Directors. Accrued
      and unpaid dividends on the Series B Preferred Shares will accumulate as of
      the
      Dividend Payment Date on which they first become payable or on the date of
      redemption as the case may be.

     

    (f)  Except
      as
      provided in the next sentence, if any Series B Preferred Shares are outstanding,
      no dividends will be declared or paid or set apart for payment on any Parity
      Shares or Junior Shares ranking, as to dividends, on a parity with or junior
      to
      the Series B Preferred Shares unless all accumulated accrued and unpaid
      dividends are contemporaneously declared and paid in cash or declared and a
      sum
      of cash sufficient for the payment thereof set apart for such payment on the
      Series B Preferred Shares for all past Dividend Periods with respect to which
      full dividends were not paid on the Series B Preferred Stock either in cash
      or
      in Common Shares or Series B Preferred Shares. When dividends are not paid
      in
      full (or a sum sufficient for such full payment is not so set apart for payment)
      upon the Series B Preferred Shares and upon all Parity Shares ranking, as to
      dividends, on a parity with the Series B Preferred Shares, all dividends
      declared, paid or set apart for payment upon the Series B Preferred Shares
      and
      all such Parity Shares shall be declared and paid pro rata or declared and
      set
      apart for payment pro rata so that the amount of dividends declared per share
      of
      Series B Preferred Shares and per share of such Parity Shares shall in all
      cases
      bear to each other the same ratio that accumulated dividends per share of Series
      B Preferred Shares and such other Parity

     

    
      
        
        

      

      
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    Shares
      (which shall not include any accumulation in respect of unpaid dividends for
      prior dividend periods if such other Parity Shares do not bear cumulative
      dividends) bear to each other. No interest, or sum of money in lieu of interest,
      shall be payable in respect of any dividend payment or payments on Series B
      Preferred Shares which may be in arrears, whether at the Stated Rate or at
      the
      Penalty Rate.

     

    (g)  Except
      as
      provided in paragraph (f)
      of this
Section
      3,
      unless
      all accumulated accrued and unpaid dividends on the Series B Preferred Shares
      are contemporaneously declared and paid in cash or declared and a sum of cash
      sufficient for the payment thereof is set apart for payment for all past
      Dividend Periods with respect to which full dividends were not paid on the
      Series B Preferred Stock either in cash or in Common Shares or Series B
      Preferred Shares, no dividends (other than in shares of Common Shares or Junior
      Shares ranking junior to the Series B Preferred Shares as to dividends and
      upon
      liquidation) may be declared or paid or set apart for payment, nor shall any
      other dividend be declared or made upon the Common Shares or any Junior Shares
      or Parity Shares, nor shall any Common Shares or any Junior Shares or Parity
      Shares be redeemed, purchased or otherwise acquired directly or indirectly
      for
      any consideration (or any monies be paid to or made available for a sinking
      fund
      for the redemption of any such stock) by the Corporation (except by conversion
      into or exchange for Junior Shares or by redemption, purchase or acquisition
      of
      stock under any employee benefit plan of the Corporation).

     

    (h)  Holders
      of Series B Preferred Shares shall not be entitled to any dividend, whether
      payable in cash, property or shares, in excess of all accumulated accrued and
      unpaid dividends on the Series B Preferred Shares as described in this
Section
      3.
      Any
      dividend payment made on the Series B Preferred Shares shall first be credited
      against the earliest accumulated accrued and unpaid dividend due with respect
      to
      such shares which remains payable at the time of such payment.

     

    (i)  In
      determining whether a distribution (other than upon voluntary or involuntary
      liquidation, dissolution or winding up of the Corporation) by dividend,
      redemption or otherwise is permitted under Oklahoma law, no effect shall be
      given to amounts that would be needed, if the Corporation were to be dissolved
      at the time of the distribution, to satisfy the preferential rights upon
      dissolution of shareholders whose preferential rights on dissolution are
      superior to those receiving the distribution.

     

    Section
      4.  Liquidation
      Preference.

     

    (a)  In
      the
      event of any liquidation, dissolution or winding up of the Corporation, whether
      voluntary or involuntary, before any payment or distribution of the assets
      of
      the Corporation (whether capital or surplus) shall be made to or set apart
      for
      the holders of Junior Shares, as to the distribution of assets on any
      liquidation, dissolution or winding up of the Corporation, each holder of the
      Series B Preferred Shares shall be entitled to receive an amount of cash equal
      to $25.00 per Series B Preferred Share plus an amount in cash equal to all
      accumulated accrued and unpaid dividends thereon (whether or not earned or
      declared) to the date of final distribution to such holders. If, upon any
      liquidation, dissolution or winding up of the Corporation, the assets of the
      Corporation, or proceeds thereof, distributable among the holders of the Series
      B Preferred Shares shall be insufficient to pay in full the preferential

     

    
      
        
        

      

      
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    amount
      aforesaid and liquidating payments on any other shares of any class or series
      of
      Parity Shares as to the distribution of assets on any liquidation, dissolution
      or winding up of the Corporation, then such assets, or the proceeds thereof,
      shall be distributed among the holders of Series B Preferred Shares and any
      such
      other Parity Shares ratably in accordance with the respective amounts that
      would
      be payable on such Series B Preferred Shares and any such other Parity Shares
      if
      all amounts payable thereon were paid in full. For the purposes of this
Section
      4,
      none of
      (i) a consolidation or merger of the Corporation with one or more
      corporations or other entities, (ii) a sale, lease or transfer of all or
      substantially all of the Corporation's assets or (iii) a statutory share
      exchange shall be deemed to be a liquidation, dissolution or winding up,
      voluntary or involuntary, of the Corporation.

     

    (b)  Subject
      to the rights of the holders of shares of any series or class or classes of
      shares of stock ranking on a parity with or prior to the Series B Preferred
      Shares upon liquidation, dissolution or winding up, upon any liquidation,
      dissolution or winding up of the Corporation, after payment shall have been
      made
      in full to the holders of the Series B Preferred Shares, as provided in this
      Section
      4,
      any
      other series or class or classes of Junior Shares shall, subject to the
      respective terms and provisions (if any) applying thereto, be entitled to
      receive any and all assets remaining to be paid or distributed, and the holders
      of the Series B Preferred Shares shall not be entitled to share
      therein.

     

    Section
      5.  Redemption.

     

    (a)  The
      Series B Preferred Shares shall not be redeemable by the Corporation prior
      to
      September 30, 2011, except following a Change of Ownership or Control as
      provided below in paragraphs (b)
      and
(c)
      of this
Section
      5.
      On and
      after September 30, 2011, the Corporation, at its option, may redeem the Series
      B Preferred Shares, in whole at any time or from time to time in part at the
      option of the Corporation at a redemption price of $25.00 per Series B Preferred
      Share, plus the amounts indicated in paragraph (d)
      of this
Section
      5.

     

    (b)  Following
      a Change of Ownership or Control other than a Change of Ownership or Control
      with, to or involving a Qualifying Public Company, within 90 days following
      the
      date on which the Change of Ownership or Control has occurred, the Corporation
      or the acquiring entity in such Change of Ownership or Control shall redeem
      the
      Series B Preferred Shares, in whole and not in part, for cash at the following
      price per Series B Preferred Share, plus the amounts indicated in paragraph
      (d)
      of this
Section
      5:

     

    (i)  if
      the
      Call Date is on or before September 30, 2007, $26.00;

     

    (ii)  if
      the
      Call Date is after September 30, 2007, but on or before September 30, 2008,
      $25.75;

     

    (iii)  if
      the
      Call Date is after September 30, 2008, but on or before September 30, 2009,
      $25.50;

     

    (iv)  if
      the
      Call Date is after September 30, 2009, but on or before September 30, 2010,
      $25.25; and

     

    
      (v)  if
        the
        Call Date is after September 30, 2010, $25.00.

    

     

    
      
        
        

      

      
        –9–

        
          

        

      

      
        
        

      

    

    (c)  Following
      a Change of Ownership or Control with, to or involving a Qualifying Public
      Company, for a period of 90 days following the date on which the Change of
      Ownership or Control has occurred, such Qualifying Public Company will have
      the
      right, but not the obligation, to redeem the Series B Preferred Shares, in
      whole
      but not in part, for cash at the applicable price determined pursuant to the
      schedule provided in subparagraphs (i)
      through
(v)
      of
      paragraph (b)
      of this
Section
      5,
      plus
      the amounts indicated in paragraph (d)
      of this
Section
      5.

     

    (d)  Upon
      any
      redemption of Series B Preferred Shares pursuant to this Section
      5,
      the
      Corporation (or, if applicable, the Qualifying Public Company) shall, subject
      to
      the next sentence, pay any accumulated accrued and unpaid dividends in arrears
      for any Dividend Period ending on or prior to the Call Date. If the Call Date
      falls after a dividend payment record date and prior to the corresponding
      Dividend Payment Date, then each holder of Series B Preferred Shares at the
      close of business on such dividend payment record date shall be entitled to
      the
      dividend payable on such shares on the corresponding Dividend Payment Date
      notwithstanding the redemption of such shares before such Dividend Payment
      Date.
      Except as provided above, the Corporation shall make no payment or allowance
      for
      unpaid dividends, whether or not in arrears, on Series B Preferred Shares called
      for redemption.

     

    (e)  If
      all
      accumulated accrued and unpaid dividends on the Series B Preferred Shares and
      any other class or series of Parity Shares of the Corporation have not been
      paid
      in cash, Common Shares or Series B Preferred Shares, or declared and set apart
      for payment in cash, the Series B Preferred Shares shall not be redeemed under
      this Section
      5
      in part
      and the Corporation shall not purchase or acquire Series B Preferred Shares,
      otherwise than pursuant to a purchase or exchange offer made on the same terms
      to all holders of Series B Preferred Shares and Parity Shares.

     

    (f)  Notice
      of
      the redemption of any Series B Preferred Shares under this Section
      5
      shall be
      mailed by first class mail to each holder of record of Series B Preferred Shares
      to be redeemed at the address of each such holder as shown on the Corporation's
      records, not less than 30 nor more than 60 days prior to the Call Date. Neither
      the failure to mail any notice required by this paragraph (f),
      nor any
      defect therein or in the mailing thereof, to any particular holder, shall affect
      the sufficiency of the notice or the validity of the proceedings for redemption
      with respect to the other holders. Any notice which was mailed in the manner
      herein provided shall be conclusively presumed to have been duly given on the
      date mailed whether or not the holder receives the notice. Each such mailed
      notice shall state, as appropriate: (1) the Call Date; (2) the number
      of Series B Preferred Shares to be redeemed and, if fewer than all the shares
      held by such holder are to be redeemed, the number of such shares to be redeemed
      from such holder; (3) the redemption price per Series B Preferred Share
      (determined as set forth in paragraph (a)
      or
(b)
      of this
Section
      5,
      as
      applicable) plus accumulated accrued and unpaid dividends through the Call
      Date
      (determined as set forth in paragraph (d)
      of this
Section
      5);
      (4) the place or places at which certificates for such shares are to be
      surrendered; (5) that dividends on the shares to be redeemed shall cease to
      accrue on such Call Date except as otherwise provided herein; and (6) any
      other information required by law or by the applicable rules of any exchange
      or
      national securities market upon which the Series B Preferred Shares may be
      listed or admitted for trading. Notice having been mailed as aforesaid, from
      and
      after the Call Date (unless the Corporation (or, if applicable, the Qualifying
      Public Company) shall fail to make available an amount of cash necessary to
      effect such redemption), (i) except as otherwise provided herein, dividends
      on the 

     

    
      
        
        

      

      
        –10–

        
          

        

      

      
        
        

      

    

    Series
      B
      Preferred Shares so called for redemption shall cease to accrue, (ii) said
      shares shall no longer be deemed to be outstanding, and (iii) all rights of
      the holders thereof as holders of Series B Preferred Shares shall cease (except
      the right to receive cash payable upon such redemption, without interest
      thereon, upon surrender and endorsement of their certificates if so required
      and
      to receive any dividends payable thereon).

     

    (g)  The
      Corporation's (or, if applicable, the Qualifying Public Company's) obligation
      to
      provide cash in accordance with the preceding sentence shall be deemed fulfilled
      if, on or before the Call Date, the Corporation (or such Qualifying Public
      Company) shall irrevocably deposit funds necessary for such redemption, in
      trust, with a bank or trust company that has, or is an affiliate of a bank
      or
      trust company that has, capital and surplus of at least $50,000,000, with
      irrevocable instructions that such cash be applied to the redemption of the
      Series B Preferred Shares so called for redemption, in which case the notice
      to
      holders of the Series B Preferred Shares will (i) state the date of such
      deposit, (ii) specify the office of such bank or trust company as the place
      of payment of the redemption price and (iii) require such holders to
      surrender the certificates representing such shares at such place on or about
      the date fixed in such redemption notice (which may not be later than the Call
      Date) against payment of the redemption price (including all accumulated accrued
      and unpaid dividends to the redemption date). No interest shall accrue for
      the
      benefit of the holders of Series B Preferred Shares to be redeemed on any cash
      so set aside by the Corporation (or such Qualifying Public Company). Subject
      to
      applicable escheat laws, any such cash unclaimed at the end of six months from
      the Call Date shall revert to the general funds of the Corporation (or such
      Qualifying Public Company), after which reversion the holders of such shares
      so
      called for redemption shall look only to the general funds of the Corporation
      (or such Qualifying Public Company) for the payment of such cash.

     

    (h)  As
      promptly as practicable after the surrender in accordance with said notice
      of
      the certificates for any such shares so redeemed (properly endorsed or assigned
      for transfer, if the Corporation (or, if applicable, the Qualifying Public
      Company) shall so require and if the notice shall so state), such shares shall
      be exchanged for any cash (without interest thereon) for which such shares
      have
      been redeemed. If fewer than all the outstanding Series B Preferred Shares
      are
      to be redeemed, shares to be redeemed shall be selected by the Corporation
      from
      outstanding Series B Preferred Shares not previously called for redemption
      by
      lot or pro rata (as nearly as may be) or by any other method determined by
      the
      Corporation in its sole discretion to be equitable. If fewer than all the Series
      B Preferred Shares represented by any certificate are redeemed, then new
      certificates representing the unredeemed shares shall be issued without cost
      to
      the holder thereof.

     

    Section
      6.  Shares
      to Be Retired.  
      All Series B Preferred Shares which shall have been issued and redeemed by
      the
      Corporation in accordance with Section
      5
      above
      shall be restored to the status of undesignated, authorized but unissued shares
      of Preferred Stock of the Corporation.

     

    Section
      7.  Ranking.  
      Any class or series of shares of stock of the Corporation shall be deemed to
      rank:

     

    (a)  prior
      to
      the Series B Preferred Shares, as to the payment of dividends and as to
      distribution of assets upon liquidation, dissolution or winding up, if the
      holders of such

     

    
       

      
        
          
          

        

        
          –11–

          
            

          

        

        
          
          

        

      

    

    class
      or
      series shall be entitled to the receipt of dividends or of amounts distributable
      upon liquidation, dissolution or winding up, as the case may be, in preference
      or priority to the holders of Series B Preferred Shares;

     

    (b)  on
      a
      parity with the Series B Preferred Shares, as to the payment of dividends and
      as
      to distribution of assets upon liquidation, dissolution or winding up, whether
      or not the dividend rates, dividend payment dates or redemption or liquidation
      prices per share thereof be different from those of the Series B Preferred
      Shares, if the holders of such class or series and the Series B Preferred Shares
      shall be entitled to the receipt of dividends and of amounts distributable
      upon
      liquidation, dissolution or winding up in proportion to their respective amounts
      of accrued and unpaid dividends per share or liquidation preferences, without
      preference or priority one over the other ("Parity Shares");

     

    (c)  junior
      to
      the Series B Preferred Shares, as to the payment of dividends or as to the
      distribution of assets upon liquidation, dissolution or winding up, if such
      class or series shall be Junior Shares; and

     

    (d)  junior
      to
      the Series B Preferred Shares, as to the payment of dividends and as to the
      distribution of assets upon liquidation, dissolution or winding up, if such
      class or series shall be Fully Junior Shares.

     

    Section
      8.  Voting.   
      In the circumstances identified in subparagraphs (b)
      and
(c)
      of
Section
      3
      hereof,
      the number of directors then constituting the Board of Directors shall be
      increased by two, and the holders of Series B Preferred Shares, together with
      the holders of shares of every other series of Parity Shares upon which like
      voting rights have been conferred and are exercisable (any such other series,
      the "Voting Preferred Shares"), voting as a single class regardless of series,
      shall be entitled to elect two additional directors at any annual meeting of
      shareholders or special meeting held in place thereof, or at a special meeting
      of the holders of the Series B Preferred Shares and the Voting Preferred Shares
      called as hereinafter provided. Such voting rights shall continue until
      terminated as provided in subparagraph (b)
      or
(c)
      of
Section
      3
      hereof,
      as applicable, whereupon the terms of all persons elected as directors by the
      holders of the Series B Preferred Shares and the Voting Preferred Shares shall
      terminate and the number of directors constituting the Board of Directors,
      shall
      be reduced accordingly. At any time after such voting power shall have been
      so
      vested in the holders of Series B Preferred Shares and the Voting Preferred
      Shares, the Secretary of the Corporation may, and upon the written request
      of
      any holder of Series B Preferred Shares (addressed to the Secretary at the
      principal office of the Corporation) shall, call a special meeting of the
      holders of the Series B Preferred Shares and of the Voting Preferred Shares
      for
      the election of the two directors to be elected by them as herein provided,
      such
      call to be made by notice similar to that provided in the Bylaws of the
      Corporation for a special meeting of the shareholders or as required by law.
      If
      any such special meeting required to be called as above provided shall not
      be
      called by the Secretary within 20 days after receipt of any such request, then
      any holder of Series B Preferred Shares may call such meeting, upon the notice
      above provided, and for that purpose shall have access to the share records
      of
      the Corporation. The directors elected at any such special meeting shall serve
      until the next annual meeting of the shareholders or special meeting held in
      lieu thereof and until their successors are duly elected and qualified, if
      such
      term shall not have previously terminated as above provided. If any vacancy
      shall occur among the directors elected by the 

     

    
      
        
        

      

      
        –12–

        
          

        

      

      
        
        

      

    

    holders
      of the Series B Preferred Shares and the Voting Preferred Shares, a successor
      shall be elected by the Board of Directors, upon the nomination of the
      then-remaining director elected by the holders of the Series B Preferred Shares
      and the Voting Preferred Shares or the successor of such remaining director,
      if
      any, to serve until the next annual meeting of the shareholders or special
      meeting held in place thereof and until their successors are duly elected and
      qualified, if such term shall not have previously terminated as provided
      above.

     

    So
      long
      as any Series B Preferred Shares are outstanding, the affirmative vote of the
      holders of at least 66-2/3% of the Series B Preferred Shares and the Voting
      Preferred Shares at the time outstanding, acting as a single class regardless
      of
      series, given in person or by proxy, either in writing without a meeting or
      by
      vote at any meeting called for the purpose, shall be necessary for effecting
      or
      validating:

     

    (a)  Any
      amendment, alteration or repeal of any of the provisions of the Certificate
      of
      Incorporation or this Certificate of Designation of the Series B Preferred
      Shares that materially and adversely affects the rights, preferences or voting
      power of the Series B Preferred Shares or the Voting Preferred Shares; provided,
      however, that the amendment of the provisions of the Certificate of
      Incorporation so as to authorize or create, or to increase the authorized amount
      of, the Series B Preferred Shares, any Fully Junior Shares, Junior Shares that
      are not senior in any respect to the Series B Preferred Shares or the Voting
      Preferred Shares, or any shares of any class ranking, as to receipt of dividends
      or distribution of assets upon liquidation, dissolution or winding up of the
      Corporation, on a parity with the Series B Preferred Shares or the Voting
      Preferred Shares shall not be deemed to materially or adversely affect the
      rights, preferences or voting power of the Series B Preferred Shares or the
      Voting Preferred Shares, and provided, further, that if any such amendment,
      alteration or repeal would materially and adversely affect any voting powers,
      rights or preferences of the Series B Preferred Shares or another series of
      Voting Preferred Shares that are not enjoyed by some or all of the other series
      otherwise entitled to vote in accordance herewith, the affirmative vote of
      at
      least 66-2/3% of the votes entitled to be cast by the holders of all series
      similarly affected, similarly given, shall be required in lieu of the
      affirmative vote of at least 66-2/3% of the votes entitled to be cast by the
      holders of the Series B Preferred Shares and the Voting Preferred Shares
      otherwise entitled to vote in accordance herewith;

     

    (b)  A
      statutory share exchange that affects the Series B Preferred Shares, a
      consolidation with or merger of the Corporation into another entity, or a
      consolidation with or merger of another entity into the Corporation, unless
      in
      each such case each Series B Preferred Share (i) shall remain outstanding
      without a material and adverse change to its terms, voting powers, preferences
      and rights or (ii) shall be converted into or exchanged for preferred
      shares of the surviving entity having preferences, conversion or other rights,
      voting powers, restrictions, limitations as to dividends or distributions,
      qualifications and terms or conditions of redemption thereof identical to that
      of a Series B Preferred Share (except for changes that do not materially and
      adversely affect the Series B Preferred Shares); provided, however, that if
      any
      such share exchange, consolidation or merger would materially and adversely
      affect any voting powers, rights or preferences of the Series B Preferred Shares
      or another series of Voting Preferred Shares that are not enjoyed by some or
      all
      of the other series otherwise entitled to vote in accordance herewith, the
      affirmative vote of at least 66-2/3% of the votes entitled to be cast by the
      holders of all series similarly affected, similarly given, shall be required
      in
      lieu of the 

     

    
      
        
        

      

      
        –13–

        
          

        

      

      
        
        

      

    

    affirmative
      vote of at least 66-2/3% of the votes entitled to be cast by the holders of
      the
      Series B Preferred Shares and the Voting Preferred Shares otherwise entitled
      to
      vote in accordance herewith; or

     

    (c)  The
      authorization, reclassification or creation of, or the increase in the
      authorized amount of, any shares of any class or any security convertible into
      or exchangeable for shares of any class ranking prior to the Series B Preferred
      Shares or the Voting Preferred Shares in the distribution of assets on any
      liquidation, dissolution or winding up of the Corporation or in the payment
      of
      dividends;

     

    provided,
      however, that no such vote of the holders of Series B Preferred Shares shall
      be
      required after September 30, 2011, or in connection with a Change of Ownership
      or Control if, at or prior to the time when such amendment, alteration, repeal,
      share exchange, consolidation, merger or conversion is to take effect, or when
      the issuance of any such prior shares or convertible security is to be made,
      as
      the case may be, a deposit is made for the redemption in cash of all Series
      B
      Preferred Shares at the time outstanding as provided in paragraph (g)
      of
Section
      5
      hereof
      for a redemption price determined under the appropriate paragraph of
Section
      5.

     

    For
      purposes of the foregoing provisions of this Section
      8,
      each
      Series B Preferred Share shall have one vote per share, except that when any
      other series of Voting Preferred Shares shall have the right to vote with the
      Series B Preferred Shares as a single class on any matter, then the Series
      B
      Preferred Shares and such other series shall have with respect to such matters
      one vote per $25.00 of stated liquidation preference. Except as set forth
      herein, the Series B Preferred Shares shall not have any relative,
      participating, optional or other special voting rights and powers other than
      as
      set forth herein, and the consent of the holders thereof shall not be required
      for the taking of any corporate action.

     

    No
      amendment to this Certificate of Designation shall require the vote of the
      holders of Common Shares or any series of Preferred Stock other than the Voting
      Preferred Shares.

     

    Section
      9.  Information
      Rights.  
      During any period in which the Corporation is not subject to Section 13 or
      15(d)
      of the Exchange Act and any Series B Preferred Shares are outstanding, the
      Corporation shall (a) transmit by mail to all holders of Series B Preferred
      Shares, as their names and addresses appear in the Corporation's record books
      and without cost to such holders, copies of the annual reports and quarterly
      reports that the Corporation would have been required to file with the
      Securities and Exchange Commission (the "SEC") pursuant to Section 13 or 15(d)
      of the Exchange Act if the Corporation was subject to such Sections (other
      than
      any exhibits that would have been required), and (b) promptly upon written
      request, supply copies of such reports to any prospective holder of Series
      B
      Preferred Shares. The Corporation shall mail the reports to the holders of
      Series B Preferred Shares within 15 days after the respective dates by which
      the
      Corporation would have been required to file the reports with the SEC if the
      Corporation were then subject to Section 13 or 15(d) of the Exchange
      Act.

     

    Section
      10.  Record
      Holders. 
      The Corporation and the Transfer Agent shall deem and treat the record holder
      of
      any Series B Preferred Shares as the true and lawful owner thereof for all
      purposes, and neither the Corporation nor the Transfer Agent shall be affected
      by any notice to the contrary.

     

    
      
        
        

      

      
        –14–

        
          

        

      

      
        
        

      

    

    Section
      11.  Sinking
      Fund. 
      The Series B Preferred Shares shall not be entitled to the benefits of any
      retirement or sinking fund.

     

    Section
      12.  Conversion.  
      The Series B Preferred Shares shall not be convertible into or exchangeable
      for
      any stock or other securities or property of the Corporation.

     

    Section
      13.  Book
      Entry. 
       The Series B Preferred Shares shall be issued initially in the form of one
      or more fully registered global certificates ("Global Preferred Shares"), which
      shall be deposited on behalf of the purchasers represented thereby with the
      Transfer Agent, as custodian for a securities depositary (the "Depositary")
      that
      is a clearing agency under Section 17A of the Exchange Act (or with such other
      custodian as the Depositary may direct), and registered in the name of the
      Depositary or its nominee, duly executed by the Corporation and authenticated
      by
      the Transfer Agent. The number of Series B Preferred Shares represented by
      Global Preferred Shares may from time to time be increased or decreased by
      adjustments made on the records of the Transfer Agent and the Depositary as
      hereinafter provided. Members of, or participants in, the Depositary ("Agent
      Members") shall have no rights under this Certificate of Designation with
      respect to any Global Preferred Shares held on their behalf by the Depositary
      or
      by the Transfer Agent as the custodian of the Depositary or under such Global
      Preferred Shares, and the Depositary may be treated by the Corporation, the
      Transfer Agent and any agent of the Corporation or the Transfer Agent as the
      absolute owner of such Global Preferred Shares for all purposes whatsoever.
      Notwithstanding the foregoing, nothing herein shall prevent the Company, the
      Transfer Agent or any agent of the Company or the Transfer Agent from giving
      effect to any written certification, proxy or other authorization furnished
      by
      the Depositary or impair, as between the Depositary and its Agent Members,
      the
      operation of customary practices of the Depositary governing the exercise of
      the
      rights of a holder of a beneficial interest in any Global Preferred
      Shares.

     

    IN
      WITNESS WHEREOF, the Corporation has caused this Certificate of Designation
      to
      be executed on this 8th day of August, 2006.

     

     

    
      	 	 	 
	 	
              GMX
                RESOURCES INC.

            
	 
 	 
 	 
 
	
            	By:  	/s/ Ken
              L. Kenworthy, Jr.
	 	
              
Ken
              L. Kenworthy, Jr.
	 	Chief
              Executive Officer

    

     

     

     

    
      	
              ATTEST:

               

               

            	 	 	 
	/s/
              Ken L.
              Kenworthy	 	 	
            
	
              
Ken
              L. Kenworthy	 	 	
            
	Secretary	 	 	 

    

     

     

     

     

     

     

     

     

    
      
        
        

      

      
        –15–Exhibit 10.62

 

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

 

RECITALS

 

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

 

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

 

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

 

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

 

1

 

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

 

AGREEMENT

 

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

 

1.             Certain
Definitions.

 

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

 

“1933 Act” has the meaning given in
Section 7.4.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

2

 

“Basket” has the meaning given in
Section 14.3.1.

 

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

 

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

 

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

 

“Cause” means any of the following
grounds for termination by Purchaser of the employment of any Mack Barclay
Director: (i) commission of a felony, as determined by a court of competent
jurisdiction; (ii) the commission of any willful act or omission involving
dishonesty or fraud with respect to Purchaser or Parent or involving harassment
of or discrimination against any employee of Purchaser or Parent; (iii) willful
misappropriation of funds or assets of Purchaser or Parent for personal use;
(iv) failure to perform material duties (an incapacity due to physical or
mental illness lasting not more than 120 days in any 12-month period or an
excused absence will not constitute such a failure) under such Mack Barclay
Director’s Director Agreement that is not cured within 30 days after written
notice from Purchaser describing such failure to perform and demanding
immediate performance; provided, however, that if a cure is not
practical within 30 days, and such Mack Barclay Director commences to effect a
cure within the foregoing 30-day period, he or she will be permitted reasonable
additional time to cure so long as he or she diligently continues to seek to
effect a cure; (v) gross negligence or willful misconduct in the performance of
material duties under such Mack Barclay Director’s Director Agreement that is
capable of cure and is not cured within 10 days after written notice from
Purchaser describing such negligence or misconduct; provided, however,
that if a cure is not practical within 10 days, and such Mack Barclay Director
commences to effect a cure within the foregoing 10-day period, he or she will
be permitted reasonable additional time to cure so long as he or she diligently
continues to seek to effect a cure; (vi) a breach of this Agreement that
involves fraud, or a material breach of Section 4 of this Agreement that is not
cured within 30 days after written notice from Purchaser describing such
breach; or (vii) a material, willful breach of Purchaser’s Corporate Code of
Conduct, as may be amended by Purchaser from time to time. A copy of Purchaser’s
Corporate Code of Conduct is attached hereto as Exhibit B.

 

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

 

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

 

“Closing” has the meaning given in
Section 6.1.

 

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

 

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

 

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

 

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

 

3

 

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

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

 

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

 

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

 

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

 

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

 

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

 

“Director  Restrictive
Period” means ***.

 

“Dispute” has
the meaning given in Section 21.

 

“Distributee” has the meaning given
in Section 7.4.

 

“Documents” has the meaning given in
Section 2.1.10.

 

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

 

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

 

“Employee Benefit Plan” means all
plans, contracts, schemes, programs, funds, commitments or arrangements
providing money, services, property, or other benefits, whether written or
oral, formal or informal, qualified or non-qualified, funded or unfunded and
including any that have been frozen or terminated, which pertain to any
employee, former employee, partner, consultant or independent contractor of Seller
and identified on Schedule 7.20.

 

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

 

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

 

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

 

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

 

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

 

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

 

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.

 

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

 

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

 

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

 

“Gross Profit” means ***.

 

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

 

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

 

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

 

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

 

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

 

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

 

“Knowledge” of any Seller Entity means
(i) facts or matters actually known by the applicable Principals holding equity
interests in such Seller Entity, and (ii) facts or matters that such Principals
should know or could be reasonably expected to discover following a reasonable inquiry
with respect to such matter.

 

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

 

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

 

“Losses” has the meaning given in Section
14.1.

 

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.

 

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

 

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

 

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

 

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

 

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

 

“Material Adverse Change” or “Material Adverse Effect” means a
Material adverse change in, or effect on, the business, assets (including
intangible assets), financial condition or results of operations of a Seller,
Purchaser or Parent, as applicable.

 

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

 

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

 

“Mediator” has the meaning given in
Section 21.

 

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

 

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

 

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

 

“Parent” has the meaning given in the
Preamble.

 

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

 

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

 

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

 

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

 

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.

 

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

 

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

 

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

 

***

 

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

 

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

 

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

 

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

 

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

 

“Purchaser Funds” has the meaning
given in Section 10.4.2.

 

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

 

“Recipient” has the meaning given in
Section 10.1.

 

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

 

“Representative” means the Person
authorized by the Seller Entities to give instructions, take actions, perform
duties, respond to inquiries from Purchaser or Parent, and otherwise represent
the interests of the Seller Entities for purposes of this Agreement. The
Representative will be Mack until changed by advance written notice to
Purchaser. All acts taken by the Representative after the Closing will be
binding on the Seller Entities for all purposes, and Purchaser and Parent may
rely on the authority of the Representative for all purposes.

 

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

 

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.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

“Seller Restrictive Period” means ***.

 

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

 

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

 

8

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

2.             Sale And Purchase Of Assets.

 

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

 

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

 

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

 

2.1.3  All Intellectual Property Rights owned and
used by Sellers in connection with the Business as currently conducted that are
capable of assignment and that are listed on Schedule 2.1.3 (“IP Assets”) and the goodwill
associated therewith, including, without limitation, the trade name “Mack
Barclay.”

 

9

 

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

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

 

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

 

2.1.5  All rights to payment as a consequence of (i)
deposits and prepayments listed on Schedule 2.1.5 attached hereto and
incorporated herein by this reference, which schedule will detail the
applicable Seller(s) for each deposit or prepayment, and (ii) refunds, rights
of set off, rights of recovery, rights to payment or proceeds under contracts
of insurance to the extent applicable to an Assumed Liability, and claims or
causes of action relating to the Purchased Assets that arise on or after the
Closing (except for refunds of Taxes to the extent provided in Section 10.3);
provided, however, that nothing in the foregoing will be construed to prevent Seller
from asserting any such rights, claims or causes of action as a defense in any
legal proceeding;

 

2.1.6  Cash in an amount equal to the sum of (a) all
client retainer balances that have been paid but not applied as of the Closing
Date, as set forth in Schedule 2.1.6, and (b) payments received from
clients for services that have not been rendered as of the Closing Date, as set
forth in Schedule 2.1.6, which schedule will detail the applicable
Seller(s) for each such client retainer or payment;

 

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

 

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

 

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

 

2.1.10  Except for the Retained Business Records, all
files, documents, correspondence, studies, reports, books and records of Sellers
(including all data and other information stored on discs, tapes or other
media), client lists, client records and credit data, computer programs,
software, and hardware owned and used by Sellers in connection with client
matters of the Business that are open as of the Closing Date (collectively, the
“Documents”), and

 

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

 

10

 

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

 

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

 

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

 

2.2.2  All taxpayer and other identification
numbers;

 

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

 

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

 

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

 

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

 

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

 

2.2.8  All rights of Sellers under this Agreement;

 

2.2.9  All Retained Business Records;

 

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

 

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

 

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

 

11

 

applicable, pursuant to which each
Seller will assign, and Purchaser will assume and agree to perform, discharge
and satisfy, in accordance with their respective terms and subject to the
respective conditions thereof, only the following obligations and liabilities
of such Seller, as applicable (the “Assumed Liabilities”):
(a) all liabilities and obligations of such Seller incurred, attributable to
or otherwise arising
under the Contracts and Office Leases on or after the Closing Date; (b)
obligations and liabilities relating to client retainer balances that are
transferred to Purchaser under Section 2.1.6, (c) the obligations and
liabilities set forth on Schedule 2.3; (d) all other liabilities and
obligations incurred on or after the Closing Date in connection with or arising
from the conduct of the Business by Purchaser; and (e) the obligation to
transfer to Purchaser’s benefit plans any participants in any Seller’s benefit
plans who are receiving, or will elect to receive, benefits under their COBRA
rights.

 

2.4  Excluded
Liabilities. Notwithstanding anything to the
contrary contained in this Agreement, Purchaser will not assume or be liable for, and
Sellers will retain and remain responsible for, all of Sellers’ respective
debts, liabilities and obligations, of any nature whatsoever, other than the
Assumed Liabilities, whether accrued, absolute or contingent, whether known or
unknown, whether due or to become due, whether related to the Purchased Assets, the Business, or
otherwise, and regardless of when asserted (the “Excluded
Liabilities”). Without limiting the scope of Excluded
Liabilities under this Section 2.4, Excluded Liabilities will specifically
include (a) any
liabilities with respect to Taxes for which any Seller is liable pursuant to
Section 10.3 hereof, (b) all
liabilities and obligations of each Seller arising out of any actions or
omissions of employees, consultants, independent contractors and experts of any
kind, including, without limitation, in connection with the performance of
services for clients of such Seller prior to the Closing Date, and unlawful
discrimination or harassment, (c) any costs and expenses incurred
by the Seller Entities incident to the negotiation and preparation of this
Agreement and their performance and compliance with the agreements and
conditions contained herein; (d) any obligations of any Seller pursuant to any
contract listed on Schedule 2.4; and (e) any obligations or liabilities
arising out of or related to any failure by the BMB Flexible Spending Account
Plan identified in Schedule 7.20 to comply with applicable laws pursuant
to Section 7.20.

 

3.             Consideration.

 

3.1  Purchase
Price and Payment. The purchase price for the
Purchased Assets (the “Purchase Price”)
is Thirteen Million Two
Hundred Thousand Dollars ($13,200,000) (the “Closing
Payment”) plus an amount equal to the Additional Payments, if
any, made to Sellers under Section 3.3. As partial consideration for the sale,
assignment, transfer and delivery of the Purchased Assets, the assumption of
the Assumed Liabilities, and the execution and delivery of this Agreement and
any related documents referenced herein (collectively, the “Transaction Documents”) by Sellers to
Purchaser, Purchaser will make the Closing Payment at the Closing as follows:

 

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

 

12

 

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

 

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

 

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

 

3.2  Allocation
of Purchase Price. The Seller Percentage of the
Purchase Price for the Assets with respect to each Seller will be allocated in accordance with
an independent fair market value appraisal to be performed by a valuation firm
of Purchaser’s choosing (each, an “Allocation Schedule”).
After the Closing, Purchaser and each Seller will each file Internal Revenue
Service Form 8594, and all federal, state, local and foreign Tax returns, in
accordance with the applicable Allocation Schedule. Purchaser and each Seller each
agrees to provide the other promptly with any other information required to
complete Form 8594. With respect to any Tax returns filed by the Seller
Entities, Purchaser or Parent, (i) no party will take a position on any Tax
return (including IRS Form 8594), before any Tax Authority or in any judicial
proceeding, that is in any way inconsistent with the applicable Allocation
Schedule without the written consent of both the applicable Seller and the
Purchaser or unless specifically required pursuant to a determination by an
applicable Tax Authority; (ii) the parties will cooperate with each other in
connection with the preparation, execution and filing of all Tax returns
related to the applicable Allocation Schedule; and (iii) the parties will
promptly advise each other regarding the existence of any Tax audit,
controversy or litigation related to such allocation.

 

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.

 

3.3  Additional
Payments.

 

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

 

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

 

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

 

3.3.4  Additional Payment Factor.

 

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

 

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

 

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

 

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

 

14

 

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

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

 

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

 

3.4  Operational
Impact on Additional Payments. ***

 

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

 

4.             Covenant Not To
Compete; Non-Solicitation

 

4.1  Covenant
Not to Compete.

 

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

 

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

 

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

 

15

 

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

 

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

 

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

 

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

 

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

 

Each Seller, Mack Trustee
and Barclay Trustee acknowledges that the provisions of this Section 4.1.2 are
reasonable and necessary to protect and preserve Purchaser’s legitimate
business interests and the value of the Purchased Assets and to prevent any
unfair advantage being conferred on Sellers. Notwithstanding anything to the
contrary contained herein, each Seller, Mack Trustee and Barclay Trustee may
own up to 1% of

 

16

 

the capital stock of any
entity engaged in any Restricted Activities that is publicly traded, provided
that it does not control, directly or indirectly, through one or more entities
or groups (whether formal or informal), the voting or disposition of greater
than 1% of the aggregate beneficial ownership interest of any such entity.

 

4.2  Non-Solicitation.

 

4.2.1  Each Mack Barclay Director will not, directly
or indirectly, during the period commencing on the Closing Date and ending on
the second anniversary of the termination of his or her employment with
Purchaser, solicit, hire, retain or attempt to hire or retain any other
Director, including without limitation any other Mack Barclay Director,
employed or engaged as an independent contractor by Purchaser or Parent. Each Mack
Barclay Director acknowledges that this Section 4.2.1 is reasonable and
necessary to protect and preserve Purchaser’s legitimate business interests and
the value of the Purchased Assets and to prevent any unfair advantage being
conferred on the Mack Barclay Directors.

 

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

 

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

 

5.             Transfer Of
Employees And Employee Benefits.

 

5.1  Workers’ Compensation.
Without limiting the scope of Excluded Liabilities under Section 2.4 hereof,
each Seller, as applicable,
will be responsible for any workers’ compensation claims based on injuries
initially occurring prior to the Closing Date regardless of the date on which
the claim was filed and for subsequent re-injuries if a claim for the initial
injury was made prior to the Closing Date. Each Seller, as applicable, will
indemnify and hold Purchaser harmless against any and all losses, damages,
costs and expenses (including, without limitation, reasonable attorneys’ fees
and related expenses) arising out of or relating to all such claims in
accordance with Section 14.1 hereof. All workers’ compensation claims currently
filed against any Sellers

 

17

 

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

 

5.2  Transfer of Employees.
In addition to the employment of the Mack Barclay Directors pursuant to the applicable
Director Agreements, as
a condition of the Closing, Purchaser will have the right, but not the
obligation, to offer employment to other employees and independent contractors
of one or more Sellers with titles, responsibilities, compensation and benefits
comparable to those currently provided by the applicable Seller to each such
employee or independent contractor, subject to adjustment as necessary to
conform to Purchaser’s customary and usual employment practices and policies; provided,
however, that Purchaser will have no continuing obligation as of the
Closing Date to continue the employment of any employee or to maintain the
compensation of any employee at any particular level. Those employees hired by
Purchaser will be referred to herein as the “Hired
Employees.”  Purchaser
will provide Sellers with a list of the Hired Employees no later than ten (10)
days before the Closing. On the Closing Date, each Seller, as applicable, will
terminate all of the Hired Employees employed by such Seller and will ensure
full and final payment to such Hired Employees of all salary, commissions,
accrued bonuses, any severance payments and benefits (including accrued
vacation and personal time off) payable as of the close of business on the day
preceding the Closing Date. Sellers and Purchaser will cooperate to transition
the Hired Employees to Purchaser’s benefit programs so as to minimize (to the
extent reasonably possible) the loss of benefits of the Hired Employees. Sellers
are solely responsible for any liability that may arise under the Worker
Adjustment and Retraining Notification Act, 29 U.S.C. § 2102 et  seq.
(the “WARN  Act”)
as a result of any acts or omissions of any Seller prior to the Closing Date,
or the transactions contemplated by this Agreement, and will indemnify, defend
and hold Purchaser harmless from and against any and all such liabilities in
accordance with Section 14.1 hereof.

 

5.3  Employee Benefit Plans.
The parties hereto agree that Purchaser will not have any liability or
obligation to continue or to
make any contribution or payment with respect to any Employee Benefit Plan
identified in Schedule 7.20. Any and all losses, damages, costs and
expenses (including, without limitation, reasonable attorneys’ fees and related
expenses) arising out of or relating to any Employee Benefit Plan of Sellers
will be an Excluded Liability to be indemnified against by Sellers in
accordance with Section 14.1 hereof.

 

6.             The Closing.

 

6.1  The Closing.
The “Closing” means the time at which Sellers
will effect the sale and transfer of the Purchased Assets in exchange for the Purchase
Price to be delivered by Purchaser pursuant to Section 3 hereof. The Closing is
expected to occur on May 9, 2006 at the offices of Folger Levin & Kahn,
LLP, 1900 Avenue of the Stars, Suite 2800, Los Angeles, California 90067, or at
such other place as the parties may mutually agree. The “Closing
Date” will be the date on which the Closing occurs. The Closing
will be effective for all purposes under this Agreement as of 12:01 a.m. local
time on the Closing Date.

 

18

 

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

 

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

 

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

 

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

 

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

 

6.2.5  The closing certificate contemplated by
Section 11 hereof;

 

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

 

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

 

6.2.8  All other such executed endorsements,
assignments and other instruments of transfer and conveyance consistent with
the terms of this Agreement and as may reasonably be requested by Purchaser, in
form and substance reasonably satisfactory to counsel for Purchaser, to
effectively vest in Purchaser all of the right, title and interest of the Sellers,
as applicable, in the Purchased Assets, free and clear of all Liens (other than
Permitted Liens) including, without limitation, releases of the Purchased
Assets from any lending arrangements and any related bank consents.

 

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

 

6.3.1  The Closing Payment in accordance with
Section 3.1;

 

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

 

19

 

of an action of Parent, acting on
its own behalf and in its capacity as the sole member and manager of Purchaser,
authorizing the execution and performance of this Agreement and the other
Transaction Documents by Parent and by Purchaser, and the transactions
contemplated hereby and thereby; and (ii) containing incumbency certificates
for the individuals authorized to execute this Agreement and all related agreements
on behalf of Purchaser and Parent;

 

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

 

6.3.4  The closing certificate contemplated by
Section 12 hereof;

 

6.3.5  The Lease Assignments, each duly executed by
Purchaser;

 

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

 

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

 

7.             Representations And
Warranties Of Seller Entities.

 

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

 

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

 

7.2  Taxes. Except
as otherwise indicated in Schedule 7.2, there are no Tax liens on any of
the Purchased Assets. The Seller Entities have paid all
Taxes that are due from them with respect to the Business and the Purchased
Assets and have duly filed all Tax returns and reports due and required to be
filed by them as of the date hereof. Sellers

 

20

 

have withheld and paid all
Taxes required to have been withheld and paid in connection with amounts paid
or owing to any employee, independent contractor, creditor or other Person. No Seller
has at any time during such Seller’s existence owned any subsidiaries.

 

7.3  Brokers.
No Seller Entity nor any Person acting on their behalf has paid or become
obligated to pay, any fee or commission
to any broker, finder or intermediary for or on account of the transactions
contemplated by this Agreement.

 

7.4  1933
Act Matters. Each Seller and each Principal, if a
distributee of the Parent Stock from any Seller (each, a “Distributee”),
will acquire the shares of Parent Stock to be acquired pursuant to this
Agreement either (i) for investment for such Distributee’s own account and not
with a view to or for offer or sale in connection with any distribution
thereof, or (ii) for resale solely pursuant to an effective registration
statement or applicable exemption under Securities Act of 1933, as amended, and
the respective rules and regulations thereunder (the “1933
Act”). Each Distributee understands that the shares of Parent
Stock to be acquired pursuant to this Agreement will not have been registered
under the 1933 Act with respect to such transaction by reason of a specific
exemption or exception from the registration requirements of the 1933 Act which
depend upon, among other things, the accuracy of each Distributee’s
representations herein. Each Distributee understands that, until such time as a
registration statement for the resale of such shares of Parent Stock is
effective, each certificate evidencing such shares will bear a legend
substantially to the effect that the shares represented by such certificate
have not been registered or qualified under the 1933 Act or the securities or
blue sky laws of any state and may be offered and sold only if registered and
qualified pursuant to the relevant provisions of the 1933 Act and applicable
state securities or blue sky laws or upon delivery to Parent of an opinion of
counsel that an exemption from such registration or qualification is
applicable.

 

7.5  Information,
Experience, and Ability to Bear Risk. Each
Distributee acknowledges receipt of all the information requested from Parent by
such Distributee and considered by such Distributee to be necessary or
appropriate for deciding whether to acquire the shares of Parent Stock to be
acquired pursuant to this Agreement, including, without limitation, the Parent
SEC Reports (as defined in Section 8.8). Each Distributee is an “accredited
investor” within the meaning of Rule 501(a) under the 1933 Act and has such
knowledge and experience in financial and business matters that such
Distributee is capable of evaluating the merits and risks of, and such
Distributee is able to bear the economic risk of, his, her or its acquisition
of such shares of Parent Stock pursuant to this Agreement. Each Distributee has
had the opportunity to ask questions and receive answers regarding the terms
and conditions of such acquisition of shares of Parent Stock.

 

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

 

21

 

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

 

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

 

7.9  Organization
and Valid Existence of SCA and CD-LIT. SCA and CD-LIT, and each
of them, is a duly formed limited liability company and is
existing in good standing under the laws of the State of California. Each has
the limited liability company power and authority to enter into the Transaction
Documents. Each has all requisite limited liability company power and authority
to own and operate its properties and assets, to enter into and perform this
Agreement and the other Transaction Documents, and to carry on the Business as
currently conducted. Each is duly qualified to do business as a foreign limited
liability company and is in good standing in all jurisdictions wherein the
character of the property owned or leased or the nature of the activities
conducted by it makes such qualification necessary, except where the failure to
so qualify could not reasonably be expected to have a Material Adverse Effect.

 

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

 

22

 

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

 

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

 

7.13  No Violations.
Neither the execution and delivery of this Agreement or the other Transaction
Documents, the consummation
of any of the transactions contemplated hereby or thereby, nor the fulfillment
of any of the terms hereof, except to the extent disclosed herein or in any
Schedule hereto, (i) will violate or conflict with the Articles of Incorporation or the bylaws of BMB or any other
agreement between or among BMB and any of the shareholders of BMB, (ii) will
violate or conflict with the Articles of Organization or operating agreement of
SCA or CD-LIT, respectively, or any other agreement between or among SCA or
CD-LIT and any of their respective members,  (iii) to the Knowledge of any Seller Entity, will
result in any Material breach of or any Material default (including events of
acceleration, termination or cancellation or loss of rights) under any
provision of any Contract, or (iv) to the Knowledge of any Seller Entity, will
result in a Material violation of any statutes, laws, ordinances, rules,
regulations or requirements of Governmental Bodies having jurisdiction over the
Business or any Seller; provided, however, that the Seller Entities make
no representation with respect to Purchaser’s ability to conduct business
without operating as a professional corporation in compliance with the State
Board of Accountancy of California. Schedule 7.16 identifies all
Contracts, the assignment of which requires novation or court approval.

 

7.14  Absence of Certain Changes.
Except (i) as disclosed in the Financial Statements or in any Schedule
delivered pursuant hereto;
(ii) for the execution and delivery of this Agreement and any applicable
Transaction Document; and (iii) as set forth in Schedule 7.14, since the
Interim Financial Statement Date, no Seller, as applicable, has:

 

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

 

23

 

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

 

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

 

7.14.4  Increased, or agreed to increase, the
compensation or bonuses or special compensation of any kind of any Hired
Employee of such Seller over the rate being paid to them on the Interim
Financial Statement Date, other than merit, incentive, and/or cost-of-living
increases made in the ordinary course of business consistent with past practices
of such Seller, and adjustments in certain Hired Employees’ compensation,
consistent with Purchaser’s compensation structure for comparable positions,
that will take effect as of the Closing Date, and no such increases are
required by written agreement or, to the Knowledge of such Seller, oral
understanding; or adopted or increased any benefit under any insurance, pension
or other employee benefit plan, program or arrangement made to, for, or with
any such Hired Employee;

 

7.14.5  Had any strike or work stoppage;

 

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

 

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

 

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

 

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

 

24

 

under any of the Contracts. To
the Knowledge of the Seller Entities, and except as included in the Accounts
Receivable, no other party is in default in the observance or the performance
of any Material term or obligation to be performed by it under any Contract
listed in Schedule 7.16.

 

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

 

7.18  Intellectual
Property.

 

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

 

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

 

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

 

7.18.4  Each Seller’s rights, as applicable, in and
to the IP Assets are freely assignable, including the right to create
derivative works, and no Seller is under any obligation to pay any royalty or
other compensation to any third Person or to obtain approval or consent for use
of licensing any of the IP Assets. All of the interests of Sellers in the IP
Assets are free and clear of all Liens, other than Permitted Liens, and to the
Knowledge of the Seller Entities, are not currently being challenged or
infringed in any way or involved in any pending legal or administrative
proceeding before any Governmental Body or court. Except for licenses to
clients in the ordinary course of business or as otherwise disclosed in Schedule
7.16 or Schedule 2.1.3, no current licenses or other rights for the
use of the IP Assets have been granted by any Seller to any third Persons, no
Seller has any obligation to grant any such licenses or rights, and to the
Knowledge of the Seller Entities, none of the IP Assets is being used by any
other Person.

 

25

 

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

 

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

 

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

 

7.20  Employee Benefit Plans.
Schedule 7.20 contains a true and complete list of all Employee Benefit
Plans maintained by Sellers.
Except as identified in Schedule 7.20, to the Knowledge of the Seller
Entities, there has been no failure by such Employee Benefit Plans to comply
with any applicable laws relating to labor and employee benefits, including,
without limitation, any applicable provisions of ERISA and the Code, any laws
relating to wages, termination pay, vacation pay, fringe benefits, collective
bargaining and the payment and/or accrual of the same and all taxes, insurance
and other costs and expenses applicable thereto, for which such failure
Purchaser would be liable in any Material amount.

 

7.21  Insurance.
Schedule 7.21 contains a complete description of all material policies
of fire, liability, workmen’s compensation, directors and officers,
errors and omissions and other forms of insurance owned or held by each Seller.
All such policies will remain in full force and effect up to and inclusive of
the Closing Date.

 

7.22  Employees;
Employment Matters.

 

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

 

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

 

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

 

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

 

26

 

that any client, supplier or vendor
engaged in or doing business with such Seller will cease to do business (other
than due solely to completion of engagements or assignments commenced prior to
the Closing Date) with Purchaser after the consummation of the transactions
contemplated hereby except as may occur in the ordinary course of business. Within
the last twelve (12) months, and except as may have occurred in the ordinary
course of business, no Seller Entity has received any notice of cancellation of
any Contract or Material business arrangement with any Person and no Seller Entity
has Knowledge of any facts that could lead it to believe that the Business will
be subject to cancellation of any such Contract or Material business
arrangement. Within the last twelve (12) months, no Seller Entity has received
a written or oral notice of a Material dispute or problem, or Material
dissatisfaction with any Seller from any client of such Seller. To the
Knowledge of Sellers, the consummation of the transactions contemplated by this
Agreement will not have a Material Adverse Effect on any relationships with any
clients of Sellers.

 

7.24  Warranty; Nonbillable
Work. To the
Knowledge of the Seller Entities, all services rendered by each Seller
have been in Material
conformity with all applicable contractual commitments and all warranties, and no
Seller has any Material liability for damages in connection therewith. To the
Knowledge of the Seller Entities, and except as set forth in Schedule 7.24,
no Seller is obligated to perform nonbillable client service work under the
terms of any Contract in order to correct work previously performed that was
incorrect or deficient, to complete work in excess of the fixed fee with
respect to a particular project or otherwise, other than reasonable and customary
efforts to maintain client satisfaction consistent with the size and scope of a
particular project and consistent with maintaining the profitability of such
project. To the Knowledge of the Seller Entities, and except as set forth in Schedule
7.24, no Seller is a party to any fixed fee or capped price contracts or
engagement arrangements involving work that if billed at such Seller’s normal
hourly rates would exceed $10,000
in annual revenues, nor does any Seller have any outstanding offers, bids or
proposals to perform any services on a fixed fee or capped basis exceeding such
amount; provided, however, that Purchaser acknowledges that from
time to time a Seller may provide estimated budgets to clients in connection
with engagements and that the incurrence of fees and expenses beyond such
estimated budgets are subject to client approval.

 

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

 

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

 

27

 

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

 

8.             Representations Of
Purchaser And Parent.

 

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

 

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

 

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

 

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

 

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.

 

8.4  Capital
Stock. The shares of Parent Stock to be issued
pursuant to this Agreement, when issued in accordance with this Agreement, will be duly
authorized, validly issued, fully paid and nonassessable, and free and clear
from any Liens in respect of the issuance thereof, except as provided in this
Agreement and except for Liens created by or imposed upon the holder of such
shares. Such shares of Parent Stock will not be subject to any preemptive
rights or other restrictions, except as provided in this Agreement, or under
federal and applicable state securities laws. Assuming the representations and
warranties of each Distributee set forth in Sections 7.4 and 7.5 are true and
correct, the shares of Parent Stock to be issued pursuant to this Agreement
will be issued in compliance with applicable federal or state securities laws,
including, without limitation, the California Corporate Securities Law of 1968,
as amended.

 

8.5  Litigation; Compliance with
Law. There is no litigation, proceeding (arbitral or
otherwise), claim or investigation of any nature, pending, or to
Purchaser’s or Parent’s actual knowledge, threatened, against Purchaser or
Parent and not otherwise disclosed in the Parent SEC Reports, that could
reasonably be expected to have a Material Adverse Effect on Purchaser’s or
Parent’s ability to perform in accordance with the terms of this Agreement.

 

8.6  SEC Filings. Parent
has filed, and has made available to the Seller Entities, true and complete
copies of, all forms, reports,
schedules, statements, and other documents required to be filed by it under the
1933 Act and the Securities Exchange Act of 1934, as amended, and the
respective rules and regulations thereunder (the “1934
Act”) (such forms, reports, schedules, statements and other
documents are each referred to as a “Parent SEC Report”).

 

8.7  No Finder.
Except for  ***, neither Purchaser nor
any Person acting on its behalf has paid or become obligated to pay, any fee or commission to
any broker, finder or intermediary for or on account of the transactions contemplated
by this Agreement. Purchaser acknowledges that it is responsible for payment of
any finder fee.

 

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

 

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

 

29

 

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

 

9.             Pre-Closing
Covenants.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

9.2.4  Enter into any Material contracts or
commitments with another Person, other than such contracts approved in advance
by Purchaser or that can be canceled on less than 30 days written notice,
provided such approval will not be unreasonably withheld or delayed; provided,
however, that Sellers, as applicable, may enter into (a) new client
engagements subject to compliance with Purchaser’s conflict

 

30

 

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

 

9.2.5  Violate any legal requirement applicable to such
Seller;

 

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

 

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

 

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

 

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

 

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

 

9.2.11  Agree, in writing or otherwise, to take any of
the actions proscribed by this Section 9.2, or any action that would make any
of its representations or warranties contained in this Agreement untrue or
incorrect in any Material respect or prevent it from performing or cause it not
to perform its covenants hereunder.

 

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

 

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

 

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

 

31

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

9.6  Access to Information.
From the date of this Agreement until the Closing, the Seller Entities will
(a) permit Purchaser and
its representatives to have reasonable access during regular business hours,
and in a manner so as not to interfere with the normal operations associated
with the Business, to all premises, properties, personnel, books, records,
Contracts, and Documents of or pertaining to the Business; (b) furnish
Purchaser with all financial, operating and other data and information related
to the Business (including copies thereof), as Purchaser may reasonably
request; and (c) otherwise cooperate and assist, to the extent reasonably
requested by Purchaser, with Purchaser’s investigation of the Business, the
Purchased Assets and the Assumed Liabilities. No information or knowledge
obtained in any investigation pursuant to this

 

32

 

Section 9.6 will affect or be
deemed to modify any representation or warranty contained herein or the
conditions to the obligations of the parties to consummate the transactions
contemplated in this Agreement. Any such access by Purchaser will not
materially interfere with the normal operation of the Business.

 

10.          Affirmative
Covenants.

 

10.1  Confidentiality. Both before and after the Closing,
each of the parties hereto agrees that it will treat in confidence this Agreement and all documents,
materials and other information that it may have obtained regarding the other
party during the course of the negotiations leading to the preparation of this
Agreement and other related documents. If a party (the “Recipient”)
is requested or required (by deposition questions, interrogatories, requests
for information or documents, subpoena, civil investigative demand or similar
process) to disclose the confidential information of another party (the “Protected Party”), the Recipient
must provide the Protected Party with prompt notice of such request(s), except
under the Patriot Act or other applicable law, so the Protected Party may seek
an appropriate protective order or other appropriate remedy and/or waive
compliance with the confidentiality provisions of this Agreement. (The preceding sentence will not
apply to public disclosures by a Recipient that the Recipient believes in good
faith to be required by federal securities laws or any listing or trading
agreement concerning the Recipient’s publicly-traded securities, after
reasonable advance notice to the Protected Party.)  In the event that such
protective order or other remedy is not obtained, or the Protected Party grants
a waiver hereunder, the Recipient may furnish that portion (and only that
portion) of the confidential information that it is legally compelled to
disclose and must exercise its reasonable efforts to obtain reliable assurance
that confidential treatment will be accorded any confidential information so
furnished. The obligation of each party to treat such documents, materials and
other information in confidence will not apply to any information (i) that is
or becomes available to such party from a source other than the Protected Party,
unless the source is bound by a confidentiality agreement with respect to the
information, (ii) that is or becomes available to the public other than as a
result of improper disclosure by such party or its agents, or (iii) the disclosure of which such
party reasonably deems to be necessary
in order to obtain any of the consents or approvals contemplated hereby, provided such party obtains the prior
written consent of the Protected Party.

 

10.2  Public
Announcements.

 

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

 

33

 

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

 

10.3  Taxes.

 

10.3.1  The Seller Entities will be solely liable for
and will pay all Taxes (whether assessed or unassessed) applicable to the
Business and the Purchased Assets, in each case attributable to any period (or
portions thereof) ending prior to the Closing Date, including all income or
franchise Taxes arising in connection with the consummation of the transactions
contemplated by this Agreement. If any Seller intends to dissolve or be wound
up, the applicable Seller Entities will promptly file any final Tax returns in
connection with such dissolution or winding up. Purchaser will be liable for
and will pay all Taxes (whether assessed or unassessed) applicable to the
Business and the Purchased Assets, in each case attributable to periods (or
portions thereof) beginning on or after the Closing Date. For purposes of this
Section 10.3, any period beginning before and ending after the Closing Date
will be treated as two partial periods, one ending prior to the Closing Date
and the other beginning on the Closing Date except that Taxes (such as property
Taxes) imposed on a periodic basis will be allocated on a daily basis.

 

10.3.2  Notwithstanding Section 10.3.1, any sales
Tax, use Tax or similar Tax attributable to the sale or transfer of the
Purchased Assets will be shared evenly between Purchaser and Sellers. Purchaser
agrees to timely sign and deliver such certificates or forms as may be
necessary or appropriate to establish an exemption from (or otherwise reduce)
or make a report with respect to such Taxes.

 

10.3.3  The Seller Entities or Purchaser, as the case
may be, will provide reimbursement for any Tax paid by one party all or a
portion of which is the responsibility of another party in accordance with the
terms of this Section 10.3. Within a reasonable time prior to the payment of
any said Tax, the party paying such Tax will give notice to the other parties
of the Tax payable and the portion which is the liability of each party,
although failure to do so will not relieve the other party from its liability
hereunder.

 

10.4  Further
Assurances.

 

10.4.1  From and after the Closing Date, the Seller
Entities will take all such steps as may be necessary to put Purchaser in
actual possession and operating control of the Purchased Assets, and the Seller
Entities agree that at any time or from time to time (without further cost or
expense to Purchaser) after the Closing Date, upon the reasonable request of
Purchaser, the Seller Entities will execute, acknowledge and

 

34

 

deliver such other instruments
of conveyance and transfer and take such other action as may be reasonably
required to vest in Purchaser good title to any of the Purchased Assets.

 

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

 

10.4.3  Subject to Section 10.4.2, to the extent
Purchaser receives any funds or other assets that are Excluded Assets (the “Seller Funds”) after the Closing
Date, Purchaser will, as soon as practicable, deliver such Seller Funds to the
applicable Seller and will take all steps necessary to vest title to such funds
and assets in such Seller. Purchaser hereby designates BMB as its true and
lawful attorney-in-fact, with full power of substitution, to execute or endorse
for the benefit of Sellers any checks, notes or other documents received by
Purchaser in connection with the Seller Funds. Purchaser hereby acknowledges
and agrees that the power of attorney set forth in the preceding sentence is
coupled with an interest, and further agrees to execute and deliver to Sellers from
time to time any documents or instruments reasonably requested by Purchaser to
evidence such power of attorney.

 

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

 

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

 

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

 

35

 

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

 

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

 

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

 

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

 

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

 

36

 

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

 

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

 

11.          Conditions Precedent To Obligations Of
Purchaser And Parent.

 

The obligations of Purchaser
and Parent under this Agreement are subject to the fulfillment of all of the
following conditions precedent on or before the Closing Date, each of which may
be waived in writing at the sole discretion of Purchaser. Sellers must execute
and deliver a certificate in substantially the form attached hereto as Exhibit
H certifying the satisfaction of all of the conditions precedent set forth
in this Section 11. If any of the conditions precedent to the obligations of
Purchaser and Parent are not satisfied or waived on the Closing Date, Purchaser
will have the right to elect not to proceed with the Closing and the parties
will have no further rights or obligations under this Agreement, the Director
Agreements or otherwise.

 

11.1  Continued
Truth of Representations and Warranties; No Breach. The representations and warranties made by
the Seller Entities in
this Agreement will be true and correct in all Material respects on and as of
the Closing Date, and the Seller Entities will have performed and complied in
all Material respects with all terms, conditions, obligations, agreements and
restrictions required by this Agreement to be performed or complied with by
them prior to or on the Closing Date, including making the deliveries required
under Section 6.2 hereof.

 

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

 

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

 

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

 

37

 

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

 

12.          Conditions Precedent To Obligations Of
Seller Entities.

 

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

 

12.1  Continued
Truth of Representations and Warranties; No Breach. The representations and warranties made by Purchaser and Parent in
this Agreement will be true in all Material respects on and as of the Closing
Date, and Purchaser and Parent will have performed and complied in all Material
respects with all terms, conditions, obligations, agreements and restrictions
required by this Agreement to be performed or complied with by it prior to or
on the Closing Date, including making the deliveries required under Section 6.3
hereof.

 

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

 

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

 

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

 

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

 

38

 

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

 

14.          Indemnification.

 

14.1  Indemnification
by Seller Entities.

 

14.1.1  The Seller Entities, jointly and severally,
agree to indemnify, defend and hold harmless each of Purchaser, Parent and
their respective members, shareholders, officers, directors, employees, agents,
affiliates, successors or assigns (each, a “Purchaser Party”) from any loss, damage
or expense (including reasonable attorneys’ fees) (collectively, “Losses”) that a
Purchaser Party may incur, suffer or become liable to a third party for as a
result of or in connection with (a) the breach of any representation or
warranty of any Seller Entity contained in this Agreement, including any
Exhibit or Schedule hereto, occurring or developing during the period of
survival of such representation or warranty, provided that the Purchaser Party
makes a written claim for indemnification against the Seller Entities within
the eighteen (18)-month survival period; (b) the breach of any covenant of any
Seller Entity contained in this Agreement or the other Transaction Documents;
or (c) any assertion against a Purchaser Party of any claim or liability
constituting an Excluded Liability, including, without limitation, the
assertion against a Purchaser Party by any Person of any obligation or
liability relating to the Purchased Assets, the conduct of the Business by
Sellers, or the conduct of any Seller Entity prior to the Closing Date,
including, without limitation, Tax claims or liabilities. Notwithstanding the
foregoing, other than as set forth in Section 10.3.2, the Seller Entities will
have no indemnification, defense or hold harmless obligation to any Purchaser
Party with respect to the liability of any Purchaser Party for Taxes as a
result of the transactions contemplated by this Agreement or the Director
Agreements. Purchaser, acting on behalf of a Purchaser Party, will give the
Seller Entities prompt written notice of any claim, suit or demand that
Purchaser believes will give rise to indemnification by the Seller Entities
under this section stating in reasonable detail the nature and basis of such
claim, suit or demand, provided, however, that, the failure to give such notice
will not affect the obligations of the Seller Entities hereunder, except to the
extent they are prejudiced by such failure.

 

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

 

39

 

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

 

14.2  Indemnification
by Purchaser.

 

14.2.1  Purchaser and Parent, jointly and severally,
agree to indemnify, defend and hold harmless the Seller Entities, and their
respective employees, agents, affiliates, successors or assigns (each, a “Seller Party”) from
any Losses that a Seller Party may incur, suffer or become liable for as a result
of or in connection with (a) the breach of any representation or warranty of
Purchaser or Parent contained in this Agreement, including any Exhibit or
Schedule hereto, occurring or developing during the period of survival of such
representation or warranty; (b) the breach of any agreement of Purchaser or
Parent contained in this Agreement or the other Transaction Documents; or (c)
any assertion against a Seller Party of any claim or liability constituting an
Assumed Liability or relating to the Purchased Assets or the conduct of the
Business by Purchaser or Parent on or after the Closing Date, including,
without limitation, Tax claims or liabilities. Notwithstanding the foregoing,
other than as set forth in Section 10.3, Purchaser will have no indemnification,
defense or hold harmless obligation to any Seller Party with respect to the
liability of any Seller Party for Taxes as a result of the transactions
contemplated by this Agreement or the Director Agreements. The Representative,
on behalf of each Seller Party, will give Purchaser prompt written notice of
any claim, suit or demand that Seller believes will give rise to
indemnification by Purchaser under this paragraph stating in reasonable detail
the nature and basis of such claim, suit or demand; provided, however, that,
the failure to give such notice will not affect the obligations of Purchaser
hereunder, except to the extent it is prejudiced by such failure.

 

14.2.2  Except as hereinafter provided and except
where an actual conflict of interest between a Seller Party and Purchaser and
Parent suggests separate counsel is appropriate, Purchaser will have the right
to defend and to direct the defense against any such claim, suit or demand, in
its name or in the name of the Seller Party at Purchaser’s expense and with
outside counsel of Purchaser’s own choosing. Each Seller Party will, at
Purchaser’s expense, cooperate reasonably in the defense of any such claim,
suit or demand. If Purchaser, within reasonable time after notice of a claim,
fails to defend a Seller Party, such Seller Party will be entitled to undertake
the defense, compromise or settlement of such claim at the expense of and for
the account and risk of Purchaser subject to the right of Purchaser to assume
the defense of such claim at any time prior to the settlement, compromise or
final determination thereof if the only issues remaining therein involve
liability for, or the amount of, money damages to be assessed against such
Seller Party, provided that Purchaser will not, without the Seller Party’s
written consent, which consent shall not be unreasonably withheld or delayed,
settle or compromise any claim or consent to any entry of judgment which does
not include as an unconditional term thereof the giving by the claimant or the
plaintiff to the Seller Party a release from all liability in respect of such
claim.

 

40

 

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

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

 

14.2.3  ***

 

14.3  Limitations.

 

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

 

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

 

14.4  Insurance and
Tax Effect.

 

14.4.1  The amount of any Loss for which
indemnification is provided under any of Sections 14.1 or 14.2 will be net of
any amounts (net of the costs of recovery of such amounts) recoverable by the
indemnified party under insurance policies, indemnification agreements or
similar arrangements with respect to such Loss (collectively, a “Net Loss”).

 

14.4.2  Any payments made pursuant to the provisions
of this Section 14 will be treated as an adjustment to the total consideration
payable to Sellers under this Agreement. The amount of any Loss will be reduced
to take account of any net Tax benefit (if any) actually realized by the
indemnified party arising from the incurrence or payment of any such Net Loss.

 

15.          Right Of Offset.

 

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

 

41

 

16.          Expenses.

 

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

 

17.          Notices.

 

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

 

In the case of Purchaser,
to:

 

LECG, LLC

2000 Powell Street, Suite 600

Emeryville, California  94608

Attention:  Chief Financial Officer

Fax:  (510) 653-9898

 

In the case of Parent, to:

 

LECG Corporation

2000 Powell Street, Suite 600

Emeryville, California  94608

Attention: Chief Financial Officer

Fax:  (510) 653-9898

 

with copies of notices to
Purchaser or Parent to:

 

Marvin A. Tenenbaum, Esq.

General Counsel

LECG, LLC

33 West Monroe Street, Suite 1850

Chicago, IL 60603

Fax:  (312) 267-8220

 

and

 

Carol Kerr, Esq.

Folger Levin & Kahn, LLP

1900 Avenue of the Stars,
Suite 2800

Los Angeles, California
90067

Fax:  (310) 556-3770

 

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.

 

In the case of the Seller
Entities, to:

 

Cary Mack

***

 

with a copy to:

 

Donald A. English, Esq.

English & Gloven, a
Professional Corporation

550 West C Street, Suite
1800

San Diego, California 92101

Fax:  (619) 338-6657

 

18.          Successors.

 

This Agreement will be
binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns, except that no party may assign its rights
or obligations hereunder (directly or indirectly or as a matter of law) without
the prior written consent of all of the other parties.

 

19.          Article And Section Headings.

 

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

 

20.          Governing Law; Consent To Service.

 

This Agreement will be
governed by and construed in accordance with the laws of the State of
California applicable to agreements made and to be performed therein (without
giving effect to the conflict of law provisions of such jurisdiction).

 

21.          Dispute Resolution.

 

In the event of any dispute
or disagreement arising out of or relating to this Agreement (a “Dispute”), the
parties will attempt to resolve such Dispute by good faith negotiation prior to
resorting to mediation or litigation. In the event such Dispute is not resolved
by means of such good faith negotiation, any party (the “Proposing Party”) may
require the Dispute to be referred to the non-binding mediation of a single
mediator (the “Mediator”)
to be appointed jointly by the parties. The Proposing Party will give written
notice to the other parties of the Proposing Party’s intention to refer the
Dispute to mediation (the “Mediation
Notice”). Such Mediation Notice will specify in reasonable
detail the nature of the issue giving rise thereto and nominate a single
mediator to co-appoint, along with the other party’s selection of mediator, the
Mediator. Within ten (10)

 

43

 

days after the delivery of
the Mediation Notice, the other party to the Dispute will nominate in writing
to the Proposing Party a second mediator. The two mediators so chosen will,
within ten (10) days after the second mediator’s selection, jointly appoint a
single mediator to serve as the Mediator. The Mediator will conduct the
mediation in accordance with the guidelines set by the parties to the Dispute.
In the event such guidelines cannot be agreed upon, the mediation will be
governed by the Rules of Practice and Procedure of Judicial Arbitration &
Mediation Services, Inc. (JAMS), or its successor entity. The costs of engaging
the Mediator will be borne equally by the Proposing Party and the other party
to the Dispute and each party will bear its own costs of preparing the
materials for and making presentations to the Mediator. The mediation will be
held in Emeryville, California.

 

22.          Entire Agreement.

 

This Agreement and the other
Transaction Documents, including all schedules and exhibits hereto and thereto
represent the entire understanding and agreement between the parties hereto
with respect to the subject matter hereof and thereof and supersede all prior
negotiations between the parties including, without limitation, that certain Term
Sheet dated February 24, 2006, and cannot be amended, supplemented or changed
orally, but may only be so modified by an agreement in writing, which makes
specific reference to this Agreement or the applicable Transaction Document
delivered pursuant hereto, and which is signed by the party against whom
enforcement of any such amendment, supplement or modification is sought.

 

23.          Survival.

 

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

 

24.          Counterparts.

 

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

 

[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]

 

44

 

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

 

	
  PURCHASER:

  	
   

  	
  SELLER
  ENTITIES:

  
	
   

  	
   

  	
   

  
	
  LECG, LLC, 

  	
   

  	
  BMB Mack Barclay, Inc., 

  
	
  a California limited liability company 

  	
   

  	
  a California corporation 

  
	
   

  	
   

  	
   

  
	
  By:

  	
  LECG Corporation,

  	
   

  	
   

  
	
   

  	
  a Delaware corporation 

  	
   

  	
  By:

  	
   

  	
   

  
	
  Its:

  	
  Sole Manager 

  	
   

  	
   

  	
  Cary P. Mack 

  
	
   

  	
   

  	
   

  	
  Its:

  	
  President

  
	
   

  	
  By:

  	
  /s/ John C. Burke 

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Its:

  	
  CFO

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  PARENT:
  

  	
   

  	
  Southern
  California Assets LLC, 

  
	
   

  	
   

  	
  a California
  limited liability company 

  
	
  LECG
  Corporation, 

  	
   

  	
   

  
	
  a Delaware
  corporation 

  	
   

  	
  By:

  	
  CTAS, LLC, 

  
	
   

  	
   

  	
   

  	
  a California
  limited liability company 

  
	
  By:

  	
  /s/ John C.
  Burke 

  	
   

  	
   

  	
  Its:

  	
  Sole Manager 

  
	
   

  	
   

  	
   

  	
   

  	
  By:

  	
  BMB Mack
  Barclay, Inc.,

  
	
  Its:

  	
  CFO

  	
   

  	
   

  	
   

  	
   

  	
  a California
  corporation 

  
	
   

  	
   

  	
   

  	
   

  	
  Its:

  	
  Sole Manager 

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  Cary P. Mack 

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
  Its:

  	
  President

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  CD-LIT Solutions
  LLC,

  a California limited liability company 

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Cary P. Mack 

  	
   

  
	
   

  	
   

  	
  Its:

  	
  Sole Manager

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Cary P. Mack

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Christopher R. Barclay

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Patrick F. Kennedy

  
														

 

i

 

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

 

	
  PURCHASER:

  	
   

  	
  SELLER
  ENTITIES:

  
	
   

  	
   

  	
   

  
	
  LECG, LLC,

  	
   

  	
  BMB Mack Barclay, Inc.,

  
	
  a California limited liability company

  	
   

  	
  a California corporation

  
	
   

  	
   

  	
   

  
	
  By:

  	
  LECG Corporation,

  	
   

  	
   

  
	
   

  	
  a Delaware corporation

  	
   

  	
  By:

  	
  /s/ Cary P. Mack

  	
   

  
	
  Its:

  	
  Sole Manager

  	
   

  	
   

  	
  Cary P. Mack

  
	
   

  	
   

  	
   

  	
  Its:

  	
  President

  
	
   

  	
  By:

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Its:

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  PARENT:

  	
   

  	
  Southern
  California Assets LLC,

  
	
   

  	
   

  	
  a California
  limited liability company

  
	
  LECG
  Corporation,

  	
   

  	
   

  
	
  a Delaware
  corporation

  	
   

  	
  By:

  	
  CTAS, LLC,

  
	
   

  	
   

  	
   

  	
  a California
  limited liability company

  
	
  By:

  	
   

  	
   

  	
   

  	
  Its:

  	
  Sole Manager

  
	
   

  	
   

  	
   

  	
   

  	
  By:

  	
  BMB Mack
  Barclay, Inc.,

  
	
  Its:

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  a California
  corporation

  
	
   

  	
   

  	
   

  	
   

  	
  Its:

  	
  Sole Manager 

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
  By:

  	
  /s/ Cary P. Mack

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  Cary P. Mack

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
  Its:

  	
  President

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  CD-LIT Solutions
  LLC,

  a California limited liability company

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Cary P. Mack

  	
   

  
	
   

  	
   

  	
   

  	
  Cary P. Mack

  	
   

  
	
   

  	
   

  	
  Its:

  	
  Sole Manager

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  /s/ Cary P. Mack

  	
   

  
	
   

  	
   

  	
  Cary P. Mack

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  /s/ Christopher R. Barclay

  	
   

  
	
   

  	
   

  	
  Christopher R. Barclay

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  /s/ Patrick F. Kennedy

  	
   

  
	
   

  	
   

  	
  Patrick F. Kennedy

  
														

 

ii

 

	
   

  	
  /s/ Michael R. Bandemer 

  	
   

  
	
   

  	
  Michael R. Bandemer

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  /s/ Brian J. Bergmark 

  	
   

  
	
   

  	
  Brian J. Bergmark

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  /s/ Laura Fuchs Dolan 

  	
   

  
	
   

  	
  Laura Fuchs Dolan

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  /s/ Stacy Elledge Chiang 

  	
   

  
	
   

  	
  Stacy Elledge Chiang

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  /s/ Heather H. Xitco 

  	
   

  
	
   

  	
  Heather H. Xitco

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  /s/ Cary P. Mack 

  	
   

  
	
   

  	
  Cary P. Mack, Trustee of the Mack Family

  Trust dated April 21, 1999

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  /s/ Christopher R. Barclay 

  	
   

  
	
   

  	
  Christopher R. Barclay, Trustee of the 2000

  Barclay Family Trust dated January 27, 2000

  	
   

  

 

iii

 

TABLE OF CONTENTS

 

	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  
	
  1.

  	
  CERTAIN
  DEFINITIONS

  	
   

  
	
  2.

  	
  SALE AND
  PURCHASE OF ASSETS

  	
   

  
	
   

  	
  2.1

  	
  Purchased Assets

  	
   

  
	
   

  	
  2.2

  	
  Excluded Assets

  	
   

  
	
   

  	
  2.3

  	
  Assumed
  Liabilities

  	
   

  
	
   

  	
  2.4

  	
  Excluded
  Liabilities

  	
   

  
	
  3.

  	
  CONSIDERATION

  	
   

  
	
   

  	
  3.1

  	
  Purchase
  Price and Payment

  	
   

  
	
   

  	
  3.2

  	
  Allocation
  of Purchase Price

  	
   

  
	
   

  	
  3.3

  	
  Additional
  Payments

  	
   

  
	
   

  	
  3.4

  	
  Operational
  Impact on Additional Payments

  	
   

  
	
   

  	
  3.5

  	
  Accounts Receivable

  	
   

  
	
  4.

  	
  COVENANT NOT TO COMPETE;
  NON-SOLICITATION

  	
   

  
	
   

  	
  4.1

  	
  Covenant
  Not to Compete

  	
   

  
	
   

  	
  4.2

  	
  Non-Solicitation

  	
   

  
	
   

  	
  4.3

  	
  Separate
  Covenants

  	
   

  
	
  5.

  	
  TRANSFER OF EMPLOYEES AND
  EMPLOYEE BENEFITS

  	
   

  
	
   

  	
  5.1

  	
  Workers’
  Compensation

  	
   

  
	
   

  	
  5.2

  	
  Transfer
  of Employees

  	
   

  
	
   

  	
  5.3

  	
  Employee
  Benefit Plans

  	
   

  
	
  6.

  	
  THE
  CLOSING

  	
   

  
	
   

  	
  6.1

  	
  The
  Closing

  	
   

  
	
   

  	
  6.2

  	
  Seller
  Entity Deliveries at Closing

  	
   

  
	
   

  	
  6.3

  	
  Purchaser
  Deliveries at Closing

  	
   

  
	
  7.

  	
  REPRESENTATIONS AND
  WARRANTIES OF SELLER ENTITIES

  	
   

  
	
   

  	
  7.1

  	
  Financial
  Statements

  	
   

  
	
   

  	
  7.2

  	
  Taxes

  	
   

  
	
   

  	
  7.3

  	
  Brokers

  	
   

  
	
   

  	
  7.4

  	
  1933
  Act Matters

  	
   

  
	
   

  	
  7.5

  	
  Information,
  Experience, and Ability to Bear Risk

  	
   

  

 

i

 

	
   

  	
  7.6

  	
  Accuracy
  of Disclosure

  	
   

  
	
   

  	
  7.7

  	
  No
  Other Warranties or Representations

  	
   

  
	
   

  	
  7.8

  	
  Organization
  and Valid Existence of BMB

  	
   

  
	
   

  	
  7.9

  	
  Organization
  and Valid Existence of SCA and CD-LIT

  	
   

  
	
   

  	
  7.10

  	
  Authority of Sellers

  	
   

  
	
   

  	
  7.11

  	
  Ownership of Seller Equity

  	
   

  
	
   

  	
  7.12

  	
  Authority
  of the Seller Shareholders or Members

  	
   

  
	
   

  	
  7.13

  	
  No
  Violations

  	
   

  
	
   

  	
  7.14

  	
  Absence
  of Certain Changes

  	
   

  
	
   

  	
  7.15

  	
  Title
  to and Condition of Purchased Assets

  	
   

  
	
   

  	
  7.16

  	
  Contracts

  	
   

  
	
   

  	
  7.17

  	
  Litigation

  	
   

  
	
   

  	
  7.18

  	
  Intellectual
  Property

  	
   

  
	
   

  	
  7.19

  	
  Compliance
  with Laws

  	
   

  
	
   

  	
  7.20

  	
  Employee
  Benefit Plans

  	
   

  
	
   

  	
  7.21

  	
  Insurance

  	
   

  
	
   

  	
  7.22

  	
  Employees;
  Employment Matters

  	
   

  
	
   

  	
  7.23

  	
  Business
  Relations

  	
   

  
	
   

  	
  7.24

  	
  Warranty;
  Nonbillable Work

  	
   

  
	
   

  	
  7.25

  	
  Consents

  	
   

  
	
   

  	
  7.26

  	
  Accuracy
  of Disclosure

  	
   

  
	
  8.

  	
  REPRESENTATIONS OF PURCHASER
  AND PARENT

  	
   

  
	
   

  	
  8.1

  	
  Organization
  and Authority

  	
   

  
	
   

  	
  8.2

  	
  Authorization
  of Agreement

  	
   

  
	
   

  	
  8.3

  	
  No
  Violations

  	
   

  
	
   

  	
  8.4

  	
  Capital
  Stock

  	
   

  
	
   

  	
  8.5

  	
  Litigation;
  Compliance with Law

  	
   

  
	
   

  	
  8.6

  	
  SEC
  Filings

  	
   

  
	
   

  	
  8.7

  	
  No
  Finder

  	
   

  
	
   

  	
  8.8

  	
  Consents

  	
   

  
	
   

  	
  8.9

  	
  Accuracy of Disclosure

  	
   

  
	
  9.

  	
  PRE-CLOSING COVENANTS

  	
   

  
	
   

  	
  9.1

  	
  Affirmative
  Covenants

  	
   

  

 

ii

 

	
   

  	
  9.2

  	
  Restrictions
  on Conduct of the Business Prior to Closing

  	
   

  
	
   

  	
  9.3

  	
  Certain
  Notifications by Seller Entities

  	
   

  
	
   

  	
  9.4

  	
  Risk
  of Loss

  	
   

  
	
   

  	
  9.5

  	
  Updating
  the Disclosure Schedules

  	
   

  
	
   

  	
  9.6

  	
  Access
  to Information

  	
   

  
	
  10.

  	
  AFFIRMATIVE COVENANTS

  	
   

  
	
   

  	
  10.1

  	
  Confidentiality

  	
   

  
	
   

  	
  10.2

  	
  Public
  Announcements

  	
   

  
	
   

  	
  10.3

  	
  Taxes

  	
   

  
	
   

  	
  10.4

  	
  Further
  Assurances

  	
   

  
	
   

  	
  10.5

  	
  Retained
  Information

  	
   

  
	
   

  	
  10.6

  	
  Updated
  Financial Statements

  	
   

  
	
   

  	
  10.7

  	
  Reimbursement
  of Pre-Paid Expenses

  	
   

  
	
   

  	
  10.8

  	
  Distribution
  of Payments

  	
   

  
	
   

  	
  10.9

  	
  Court
  Approvals and Novations of Contract Assignments

  	
   

  
	
   

  	
  10.10

  	
  Shared
  Services Agreement

  	
   

  
	
   

  	
  10.11

  	
  Errors and Omissions Insurance

  	
   

  
	
  11.

  	
  CONDITIONS PRECEDENT TO
  OBLIGATIONS OF PURCHASER AND PARENT

  	
   

  
	
   

  	
  11.1

  	
  Continued
  Truth of Representations and Warranties; No Breach

  	
   

  
	
   

  	
  11.2

  	
  Absence
  of Litigation

  	
   

  
	
   

  	
  11.3

  	
  No
  Material Adverse Change

  	
   

  
	
   

  	
  11.4

  	
  Director
  Agreements

  	
   

  
	
   

  	
  11.5

  	
  Landlord
  Consents

  	
   

  
	
  12.

  	
  CONDITIONS PRECEDENT TO
  OBLIGATIONS OF SELLER ENTITIES

  	
   

  
	
   

  	
  12.1

  	
  Continued
  Truth of Representations and Warranties; No Breach

  	
   

  
	
   

  	
  12.2

  	
  Absence
  of Litigation

  	
   

  
	
   

  	
  12.3

  	
  Director Agreements

  	
   

  
	
  13.

  	
  SURVIVAL OF REPRESENTATIONS
  AND WARRANTIES; CONTRACTUAL LIMITATIONS PERIOD

  	
   

  
	
  14.

  	
  INDEMNIFICATION

  	
   

  
	
   

  	
  14.1

  	
  Indemnification
  by Seller Entities

  	
   

  
	
   

  	
  14.2

  	
  Indemnification
  by Purchaser

  	
   

  

 

iii

 

	
   

  	
  14.3

  	
  Limitations

  	
   

  
	
   

  	
  14.4

  	
  Insurance
  and Tax Effect

  	
   

  
	
  15.

  	
  RIGHT OF OFFSET

  	
   

  
	
  16.

  	
  EXPENSES

  	
   

  
	
  17.

  	
  NOTICES

  	
   

  
	
  18.

  	
  SUCCESSORS

  	
   

  
	
  19.

  	
  ARTICLE AND SECTION HEADINGS

  	
   

  
	
  20.

  	
  GOVERNING LAW; CONSENT TO
  SERVICE

  	
   

  
	
  21.

  	
  DISPUTE RESOLUTION

  	
   

  
	
  22.

  	
  ENTIRE AGREEMENT

  	
   

  
	
  23.

  	
  SURVIVAL

  	
   

  
	
  24.

  	
  COUNTERPARTS

  	
   

  

 

iv

 

LIST OF EXHIBITS(1)

 

	
  Exhibit A-1

  	
  Form of Director Agreement (Mack)

  
	
  Exhibit A-2

  	
  Form of Director Agreement (Barclay)

  
	
  Exhibit A-3

  	
  Form of Director Agreement (Kennedy)

  
	
  Exhibit A-4

  	
  Form of Director Agreement (Bandemer)

  
	
  Exhibit A-5

  	
  Form of Director Agreement (Bergmark)

  
	
  Exhibit A-6

  	
  Form of Director Agreement (Dolan)

  
	
  Exhibit A-7

  	
  Form of Director Agreement (Chiang)

  
	
  Exhibit A-8

  	
  Form of Director Agreement (Xitco)

  
	
  Exhibit B

  	
  Purchaser’s Corporate Code of Conduct

  
	
  Exhibit C

  	
  Form of Assignment and Assumption Agreement

  
	
  Exhibit D

  	
  Form of Bill of Sale

  
	
  Exhibit E

  	
  Form of Opinion of
  Counsel to Seller Entities

  
	
  Exhibit F

  	
  Form of
  Lease Assignment

  
	
  Exhibit G

  	
  Financial Statements

  
	
  Exhibit H

  	
  Form of Seller Closing Certificate

  
	
  Exhibit I

  	
  Form of Purchaser Closing Certificate

  
	
  Exhibit J

  	
  Form of Parent Closing Certificate

  
	
  Exhibit K

  	
  Additional Payment Calculation Example

  

 

LIST OF SCHEDULES(2)

 

	
  Schedule 2.1.1

  	
  Fixed Assets (By Each Seller)

  
	
  Schedule 2.1.3

  	
  IP Assets

  
	
  Schedule 2.1.5

  	
  Deposits and Prepayments

  
	
  Schedule 2.1.6

  	
  Cash

  
	
  Schedule 2.3

  	
  Assumed Liabilities

  
	
  Schedule 2.4

  	
  Excluded Contractual Obligations

  
	
  Schedule 3.1.1

  	
  Seller Percentages

  
	
  Schedule 3.1.2

  	
  Principal Percentage Interests

  
	
  Schedule 3.5

  	
  Accounts Receivable

  
	
  Schedule 5.1

  	
  Workers’ Compensation

  
	
  Schedule 7.2

  	
  Taxes

  
	
  Schedule 7.14

  	
  Absence of Certain Changes (By Each Seller)

  
	
  Schedule 7.15

  	
  Permitted Liens (By Each Seller)

  
	
  Schedule 7.16

  	
  Contracts (By Each Seller)

  
	
  Schedule 7.17

  	
  Litigation (By Each Seller)

  
	
  Schedule 7.20

  	
  Employee Benefit Plans (By Each Seller)

  
	
  Schedule 7.21

  	
  Insurance Policies (By Each Seller)

  
	
  Schedule 7.22

  	
  Employees (By Each Seller)

  
	
  Schedule 7.23

  	
  Business Relations (By Each Seller)

  
	
  Schedule 7.24

  	
  Fixed Fee Contracts (By Each Seller)

  
	
  Schedule 10.7

  	
  Reimbursable Expenses (By Each Seller)

  
	
  Schedule 10.10

  	
  Services Agreement Summary of Terms

  
	
  Schedule 14.2.3

  	
  Aggregate Principal Percentage Interest

  

 

(1) Pursuant
to Item 601(b)(2) of Subpart § 229.601 of Regulation S-K, the Exhibits to this
Asset Purchase Agreement briefly described in this Table of Contents have been
omitted from Exhibit 10.62 furnished in connection with LECG Corporation’s
electronic filing of Form 10-Q on August 7, 2006.  LECG Corporation agrees to furnish a copy of
any omitted Exhibit to the Securities and Exchange Commission upon request.

 

(2) Pursuant
to Item 601(b)(2) of Subpart § 229.601 of Regulation S-K, the Schedules to this
Asset Purchase Agreement briefly described in this Table of Contents have been
omitted from Exhibit 10.62 furnished in connection with LECG Corporation’s
electronic filing of Form 10-Q on August 7, 2006.  LECG Corporation agrees to furnish a copy of
any omitted Schedule to the Securities and Exchange Commission upon request.

 

v

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