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Exhibit 10.38    
    

 
 

DIRECTOR PRACTICE PURCHASE AGREEMENT    
    

        This Director Practice Purchase Agreement (the "Agreement") is made effective as of August 1, 2003 by and
between LECG, LLC, a California limited liability company ("LECG"), LECG Holding Company, LLC, a California limited liability company
("Parent"), Dr. Bernard R. Siskin, Dr. Leonard A. Cupingood, Dr. David W. Griffin and Dr. Samuel J. Kursh (each a
"BLDS Director" and collectively the "BLDS Directors"). 

 
 

RECITALS    
    

        A.    LECG, Parent, BLDS, LLC, a Delaware limited liability company ("Seller"), and the BLDS Directors
are parties to that certain Asset Purchase Agreement dated as of the date hereof pursuant to which LECG will purchase certain of the operating assets of CFES (the "Asset
Purchase Agreement"). Terms not otherwise defined herein will have the meanings given in the Asset Purchase Agreement. 

        B.    LECG
and the BLDS Directors are also parties to that certain Director Service Agreement dated as of the date hereof pursuant to which LECG will retain the services of the
BLDS Directors as employees of LECG (the "Director Service Agreement"). 

        C.    In
connection with the purchase of certain operating assets, the employment of the BLDS Directors by LECG, and on the terms and conditions set forth herein, each BLDS
Director desires to sell to LECG, and LECG desires to purchase from each BLDS Director, the goodwill associated with the personal and business relationships developed by each BLDS Director as a result
of the skill, ability, integrity, reputation and personal characteristics of each BLDS Director (the "Personal Goodwill"). 

        D.    Entering
into this Agreement is a condition precedent to the closing of the Asset Purchase Agreement and LECG is proceeding with the transactions described in the Asset
Purchase Agreement in reliance on the terms and conditions of this Agreement. 

 
 

AGREEMENT

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

1.    Sale and Purchase of Personal Goodwill  

        1.1    Sale and Purchase.    Subject to the terms and conditions of
this Agreement, on the Closing Date, the BLDS Directors will each sell, and LECG will purchase from each BLDS Director, all of the Personal Goodwill belonging to that BLDS Director. 

        1.2    Amount and Timing of Goodwill Payment.    The aggregate
purchase price for the Personal Goodwill of all BLDS Directors will be $8,500,000 (the "Goodwill Payment"). The Goodwill Payment will be paid in five
installments, with the first installment of $2,100,000 being paid by LECG in cash or by wire transfer of immediately available funds on the Closing Date. The initial Goodwill Payment will be allocated
to each BLDS Director as set forth below. Subject to Section 1.3 below, subsequent installments of the Goodwill Payment, plus simple interest on each installment which shall accrue at a rate of
four percent (4%) from the Closing Date through the date on which the applicable Goodwill Payment is made ("Interest"), will be paid by LECG to the BLDS
Directors on each anniversary of the 

1

 

Closing
Date (each, a "Payment Date") in cash or by wire transfer of immediately available funds as follows: 

	Name
 
	 	Initial

Goodwill

Payment
	 	First Goodwill

Payment incl.

4% interest

(08/01/2004)
	 	Second Goodwill

Payment incl.

4% interest

(08/01/2005)
	 	Third Goodwill

Payment incl.

4% interest (08/01/2006)
	 	Fourth Goodwill

Payment incl.

4% interest

(08/01/2007)

	Siskin	 	$	1,131,060	 	$	896,231	 	$	930,699	 	$	965,170	 	$	999,641
	Cupingood	 	$	322,980	 	$	255,923	 	$	265,767	 	$	275,610	 	$	285,453
	Griffin	 	$	322,980	 	$	255,923	 	$	265,767	 	$	275,610	 	$	285,453
	Kursh	 	$	322,980	 	$	255,923	 	$	265,767	 	$	275,610	 	$	285,453
	TOTAL	 	$	2,100,000	 	$	1,664,000	 	$	1,728,000	 	$	1,792,000	 	$	1,856,000

        1.3    Performance Criteria for Goodwill Payment.    The BLDS
Directors must earn the Goodwill Payment (other than the installment of the Goodwill Payment due and payable on the Closing Date) by achieving the performance objectives set forth in Section 3
below, and specifically agree to potential reductions (each a "Payment Reduction") in the Goodwill Payment in the event such performance objectives are
not met. Notwithstanding the foregoing, the Goodwill Payment will become a fixed obligation of LECG payable without regarding to the performance objectives in Section 3 below in the event that
LECG either (a) terminates the employment of Dr. Siskin for convenience, or (b) terminates the employment of any two (2) of Drs. Cupingood, Griffen or Kursh for
convenience. 

2.    Bonus Payment.  

        2.1    Amount and Timing.    The BLDS Directors will be entitled to
received bonus payments in the aggregate amount of $2,000,000 (the "Bonus Payment"). The Bonus Payment will be paid in four installments, with the first
installment of the Bonus Payment plus Interest being paid by LECG in cash or by wire transfer of immediately available funds on the first anniversary of the Closing Date. The initial Bonus Payment
will be allocated to each BLDS Director as set forth below. Subject to Section 2.2 below, subsequent installments of the Bonus Payment, plus Interest, will be paid by LECG to the BLDS Directors
on each Payment Date in cash or by wire transfer of immediately available funds as follows: 

	Name
 
	 	First Bonus

Payment incl.

4% interest

(08/01/2004)
	 	Second Bonus

Payment incl.

4% interest

(08/01/2005)
	 	Third Bonus Payment incl.

4% interest (08/01/2006)
	 	Fourth Bonus

Payment incl.

4% interest

(08/01/2007)

	Siskin	 	$	280,072	 	$	290,844	 	$	301,616	 	$	312,388
	Cupingood	 	$	79,796	 	$	83,052	 	$	86,128	 	$	89,204
	Griffin	 	$	79,796	 	$	83,052	 	$	86,128	 	$	89,204
	Kursh	 	$	79,796	 	$	83,052	 	$	86,128	 	$	89,204
	TOTAL	 	$	520,000	 	$	540,000	 	$	560,000	 	$	580,000

        2.2    Performance Criteria for Bonus Payments.    The BLDS Directors
must earn the Bonus Payments by being employees of LECG on the Payment Date and by achieving the performance objectives set forth in Section 3 below. The BLDS Directors specifically agree to a
Payment Reduction in the Bonus Payment in the event such employment requirement and performance objectives are not met. Notwithstanding the foregoing, the Bonus Payment will become a fixed obligation
of LECG in the event that LECG either (a) terminates the employment of Dr. Siskin not "for Cause" (as defined in Section 3.5 below), or (b) terminates the employment of any
two (2) of Drs. Cupingood, Griffen or Kursh not for Cause. 

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3.    Performance Objectives.  

        3.1    Revenue Objective.    During the period from August 1,
2003 through July 31, 2008, the BLDS Directors must meet the following cumulative net revenue objectives as of each applicable measurement date (each, a "Revenue
Objective"), based on the method of calculating "Cumulative BLDS Revenue" set forth on Schedule 1 attached hereto and
incorporated herein by this reference: 

	Measurement Period
 
	 	Cumulative BLDS

Revenue

	from August 1, 2003 to December 31, 2003	 	$	2,770,833
	

from August 1, 2003 to December 31, 2004	
 	
$	

9,420,833
	

from August 1, 2003 to December 31, 2005	
 	
$	

16,070,833
	

from August 1, 2003 to December 31, 2006	
 	
$	

22,720,833
	

from August 1, 2003 to December 31, 2007	
 	
$	

29,370,833

        3.1.1    Impact of Revenue Objective on Goodwill Payment.    If the BLDS Directors fail to meet the applicable Revenue
Objective, the succeeding installment of the Goodwill Payment will be reduced as follows: 

        (a)   If
the BLDS Directors achieve 80% or less of the applicable Revenue Objective, the succeeding Goodwill Payment installment will be reduced by a Payment Reduction of
$530,000 (pro-rated to $220,834 for the first Measurement Period), irrespective of any possible reduction under Section 3.2 below. 

        (b)   If
the BLDS Directors achieve more than 80% of the Revenue Objective, but less than 100% of the Revenue Objective, the succeeding Goodwill Payment installment will be  reduced under this Section 3.1.1
(b) by a Payment Reduction equal to the product of (i) $530,000 (pro-rated to $220,834 for the
first Measurement Period) multiplied by (ii) the sum of 1 minus the percentage of the Revenue Objective actually achieved, irrespective of any possible reduction under Section 3.2 below.
For example, if the BLDS Directors achieve 94% of the Revenue Objective, the Payment Reduction under this Section 3.1.1(b) will be $31,800 (i.e.,
[$530,000 × (1-0.94)] = $31,800). 

        3.1.2    Impact of Revenue Objective on Bonus Payment.    If the BLDS Directors fail to meet the applicable Revenue
Objective, the succeeding installment of the Bonus Payment will be reduced as follows: 

        (a)   If
the BLDS Directors achieve 80% or less of the applicable Revenue Objective, the succeeding Bonus Payment installment will be reduced by a Payment Reduction of
$165,000 (pro-rated to $68,750 for the first Measurement Period), irrespective of any possible reduction under Section 3.2. 

        (b)   If
the BLDS Directors achieve more than 80% of the Revenue Objective, but less than 100% of the Revenue Objective, the succeeding Bonus Payment installment will be  reduced under this Section 3.1.2(b)
by a Payment Reduction equal to the product of (i) $165,000 (pro-rated to $68,750 for the
first Measurement Period) multiplied by (ii) the sum of 1 minus the percentage of the Revenue Objective actually achieved, irrespective of any possible reduction under Section 3.2. For
example, if the BLDS Directors achieve 94% of the Revenue Objective, the Payment Reduction under this Section 3.1.2(b) will be $9,900 (i.e.,
[$165,000 × (1-0.94)] = $9,900). 

        3.1.3    Future Achievement of Revenue Objective.    Since the Revenue Objective is cumulative in nature, if the BLDS
Directors meet or exceed any Revenue Objective, any Payment Reductions imposed pursuant to Sections 3.1.1 or 3.1.2 will be returned to the BLDS Directors as an 

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additional
payment on the Payment Date immediately following the end of the measurement period in which the cumulative Revenue Objective was achieved. For example, if Cumulative BLDS Revenue
calculated in accordance with Schedule 1 as of December 31, 2004 is only $7,536,665 (80% of the Revenue Objective), there will be an
aggregate Payment Reduction of $695,000 from the Anniversary Payment due on August 1, 2005. If Cumulative BLDS Revenue calculated in accordance with  Schedule 1 as of December 31, 2005 is
$17 million (above the applicable Revenue Objective), the BLDS Directors will receive the
full amount of the succeeding Anniversary Payment payable on August 1, 2006, plus an additional $695,000 representing a return of the previously
imposed Payment Reduction. 

        3.2    EBITDA Objectives.    During the period from August 1,
2003 through July 31, 2008, the BLDS Directors must meet the following cumulative EBITDA objectives as of each applicable measurement date (each, an "EBITDA
Objective"), based on the method of calculating "Cumulative EBITDA" set forth on Schedule 2 attached hereto and
incorporated herein by this reference: 

	Measurement Period
 
	 	Cumulative EBITDA

	from August 1, 2003 to December 31, 2003	 	$	1,125,000
	

from August 1, 2003 to December 31, 2004	
 	
$	

3,825,000
	

from August 1, 2003 to December 31, 2005	
 	
$	

6,525,000
	

from August 1, 2003 to December 31, 2006	
 	
$	

9,225,000
	

from August 1, 2003 to December 31, 2007	
 	
$	

11,925,000

        3.2.1    Impact of EBITDA Objective on Goodwill Payment.    If the BLDS Directors fail to meet the applicable EBITDA
Objective, the succeeding Goodwill Payment installment will be reduced as follows: 

        (a)   If
the BLDS Directors achieve 50% or less of the applicable EBITDA Objective, the succeeding Goodwill Payment installment will be reduced by $1,070,000
(pro-rated to $445,834 for the first Measurement Period), irrespective of any possible reduction made under Section 3.1. 

        (b)   If
the BLDS Directors achieve more than 50% of the applicable EBITDA Objective, but less than 100% of the EBITDA Objective, the succeeding Goodwill Payment installment
will be reduced under this Section 3.2.1(b) by an amount equal to the product of (i) $1,070,000 (pro-rated to $445,834 for the
first Measurement Period) multiplied by (ii) the sum of 1 minus the percentage of the EBITDA Objective actually achieved, irrespective of any possible reduction under Section 3.1 above.
For example, if the BLDS Directors achieve 75% of the EBITDA Objective, the succeeding Goodwill Payment installment will be reduced under this Section 3.2.1(b) by $267,500 (i.e.,
[$1,070,000 × (1-0.75)] = $267,500). 

        3.2.2    Impact of EBITDA Objective on Bonus Payment.    If the BLDS Directors fail to meet the applicable EBITDA
Objective, the succeeding Bonus Payment installment will be reduced as follows: 

        (a)   If
the BLDS Directors achieve 50% or less of the applicable EBITDA Objective, the succeeding Bonus Payment installment will be reduced by $335,000 (pro-rated
to $139,584 for the first Measurement Period), irrespective of any possible reduction made under Section 3.1. 

        (b)   If
the BLDS Directors achieve more than 50% of the applicable EBITDA Objective, but less than 100% of the EBITDA Objective, the succeeding Bonus Payment installment will
be reduced under this Section 3.2.2(b) by an amount equal to the product of (i) $335,000 (pro-rated to $139,584 for the first
Measurement Period) multiplied by (ii) the sum of 1 minus the percentage of the EBITDA Objective actually achieved, irrespective of any possible reduction under Section 3.1 

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above.
For example, if the BLDS Directors achieve 75% of the EBITDA Objective, the succeeding Bonus Payment installment will be reduced under this Section 3.2.2(b) by $83,750 (i.e.,
[$335,000 × (1-0.75)] = $83,750). 

        3.2.3    Future Achievement of EBITDA Objective.    Since the EBITDA Objective is cumulative in nature, if the BLDS
Directors meet or exceed any EBITDA Objective, any Payment Reductions imposed pursuant to Sections 3.2.1 or 3.2.2 will be returned to the BLDS Directors as an additional payment on the Payment Date
immediately following the end of the measurement period in which the cumulative EBITDA Objective was achieved. 

        3.3    Revising Performance Objectives.    From time to time, if there
is a material change in the circumstances from those existing on the date of this Agreement, LECG and the BLDS Directors may negotiate in good faith for appropriate modifications to the Revenue
Objectives, the EBITDA Objectives, the Goodwill Payments and the Bonus Payments; provided, however, that no modifications will be made unless acceptable to all of the parties. 

        3.4    Accounting.    Within thirty (30) days after the end of
each month (and within sixty (60) days after the end of each fiscal quarter), LECG will issue a report to each of the BLDS Directors that details the Cumulative BLDS Revenue and Cumulative
EBITDA relative to the Revenue Objective and the EBITDA Objective, all in accordance with the methodology set forth in Schedules 1 and  2 (each such
report, a "Objective Accounting"). If the BLDS Directors disagree with an Objective
Accounting, then the Managing Director will issue a written statement to LECG's Chief Financial Officer that describes the nature of the disagreement. LECG's Chief Financial Officer and the Managing
Director will attempt, in good faith, to resolve the disagreement. If the disagreement cannot be resolved to the reasonable satisfaction of LECG and the BLDS Directors within thirty (30) days
from the date of the Objective Accounting, then the Managing Director and LECG's Chief Financial Officer will jointly designate an independent accountant to review the Objective Accounting. Such
review must be completed within ten (10) business days and must be accomplished in a manner designed to avoid disruption of LECG's accounting function. The expenses of the independent
accountant and the cost of the review of the Objective Accounting will be paid by the BLDS Directors; provided, however, that if the independent accountant identifies a material adjustment to the
Objective Accounting in the favor of
the BLDS Directors, then the expenses of the accountant and the cost of the review will be paid by LECG. 

        3.5    Definition of Cause.    For purposes of this Section 3,
the phrase "for Cause" means any of the following grounds for termination of employment: (i) commission of a felony or a crime involving moral turpitude or the commission of any other act or
omission involving dishonesty or fraud with respect to LECG or Parent or involving harassment of or discrimination against any employee of LECG or Parent; (ii) misappropriation of funds or
assets of LECG or Parent for personal use; (iii) substantial and repeated neglect of material duties (other than as a result of incapacity due to physical or mental illness lasting not more
than 90 days in any 12 month period) that is not cured within 30 days after written notice from LECG describing such neglect and demanding immediate performance; (iv) gross
negligence or willful misconduct in the performance of material duties that is not cured within 10 days after written notice from LECG describing such negligence or misconduct; or
(iv) engaging in conduct that is a breach of Section 5 hereof. 

4.    Equity Consideration.  

        4.1    Issuance of Restricted Units.    In consideration of the
agreements and covenants of the BLDS Directors set forth in this Agreement, which agreements and covenants directly benefit LECG and 

5

 

Parent,
Parent will issue to the BLDS Directors on the Closing Date an aggregate of 225,000 common membership units of Parent (the "Restricted Units")
as follows: 

	BLDS Director
 
	 	Number of

Restricted Units

	Siskin	 	121,185
	

Cupingood	
 	

34,605
	

Griffin	
 	

34,605
	

Kursh	
 	

34,605

        In
connection with the issuance of the Restricted Units, each BLDS Director will need to execute and deliver to Parent signatures pages to those documents that are required to be
executed and delivered by the current unitholders of Parent, including (i) that certain Limited Liability Company Agreement dated as of September 29, 2000, as amended, (ii) that
certain Securityholders' Agreement dated as of September 29, 2000, as amended, (iii) that certain Buy Sell Agreement dated as of September 29, 2000, as amended and
(iv) that certain Registration Rights Agreement dated as of September 29, 2000, as amended. 

        4.2    Vesting of Restricted Units.    So long as a BLDS Director is
still an employee of LECG (i) eighty percent (80%) of the BLDS Director's Restricted Units will vest on August 1, 2007; and (ii) the remaining twenty percent (20%) of each BLDS
Director's Restricted Units will vest on August 1, 2008. The BLDS Directors will have no voting rights or rights to distributions with respect to their Restricted Units until such Restricted
Units vest. Unvested Restricted Units will not participate in any distributions on Parent's common membership units and will not be entitled to vote on matters requiring the vote of Parent's common
membership units. If a BLDS Director's employment with LECG is terminated as a result of such BLDS Director's voluntary resignation or termination by LECG "for cause," prior to August 1, 2008,
any Restricted Units which have not yet fully vested as of the date of such termination will be immediately forfeited and the terminated BLDS Director will have no further rights to such forfeited
Restricted Units. If a BLDS Director's employment with LECG is terminated as a result of the BLDS Director's death, permanent disability or termination by LECG for convenience, the BLDS Director will
be entitled to retain all of the Restricted Units and such Restricted Units will continue to vest in accordance with the schedule above (if not already fully vested). Each BLDS Director acknowledges
(i) that neither Parent nor LECG has provided any tax advice to him concerning the tax consequences of his receipt of Restricted Units including, but not limited to, any recommendation as to
whether it would be advisable for the BLDS Director to file an election described in Section 83(b) of the Internal Revenue Code of 1986, as amended; and (ii) that the BLDS Director has
been advised to consult with his own tax and legal advisors with respect to such tax consequences. 

        4.3    Representations and Warranties of BLDS Directors.    In
connection with the issuance of the Restricted Units and solely for purposes of determining whether an exemption from registration is available for issuance of the Restricted Units, each BLDS Director
makes the following representations and warranties to Parent: 

        4.3.1 The
BLDS Director understands that the Restricted Units are being issued under one or more of the exemptions from registration provided for in Sections 4(2) and/or
3(b) of the Securities Act of 1933, as amended, including Regulation D promulgated thereunder (the "Securities Act"), and that Parent's reliance
upon such exemption(s) is predicated upon the BLDS Director's representations set forth in this Section 4.3. The Investor also understands that the issuance of the Restricted Units has not been
examined by the Commission or by any administrative agency charged with the administration of the securities laws of any state. 

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        4.3.2 The
BLDS Director is an "accredited investor," as such term is defined in Rule 501(a) of Regulation D promulgated under the Securities Act. 

        4.3.3 The
BLDS Director has such knowledge and experience in financial and business matters, alone or together with its professional advisors, as to be capable of evaluating
the risks of an investment in the Restricted Units and understands that there are substantial restrictions on the transferability of the Restricted Units and there is no public market for the Shares
(and no such market may ever exist); accordingly, it may not be possible for the BLDS Director to liquidate the Restricted Units, even in case of emergency. 

        4.3.4 The
BLDS Director has the financial ability to (1) bear the economic risk of an investment in the Restricted Units, (2) hold the Restricted Units for an
indefinite period of time, and (3) currently afford a complete loss of the Restricted Units without experiencing any undue financial difficulties; and the BLDS Director's commitment to any and
all speculative investments is reasonable in relation to the BLDS Director's financial capabilities and circumstances. 

        4.3.5 The
BLDS Director and its professional advisors, if any, have been given the opportunity to ask questions of, and to receive answers from, officers of Parent
concerning the business and affairs of Parent. 

        4.3.6 The
BLDS Director is acquiring the Restricted Units in good faith solely for its own account, for investment purposes only, and the Restricted Units are not being
purchased with a view to or for sale in connection with distribution of the Restricted Units. 

        4.3.7 The
BLDS Director confirms that its representations, declarations and warranties contained herein are true and accurate, and the BLDS Director understands that Parent
is relying on the truth and accuracy of such representations, declarations and warranties in issuing the Restricted Units without having first registered the Restricted Units under the Securities Act. 

        4.3.8 The
BLDS Director realizes that, in the absence of registration under the Securities Act, any disposition of the Restricted Units by the BLDS Director may require
compliance with an exemption under the Securities Act, and that Parent is under no obligation to take any action to make any such exemption so available; the BLDS Director has been advised or is aware
of the provisions of Rule 144 promulgated under the Securities Act, which permits limited resale of restricted securities purchased in a private placement subject to the satisfaction of certain
conditions as set forth in Rule 144. 

        4.3.9 The
BLDS Director acknowledges that all certificates representing any of the Restricted Units issued pursuant to this Agreement will have endorsed thereon restrictive
legend(s) required by the Securities Act and by applicable state securities laws. These legends will be placed on any new certificates issued upon presentment by the undersigned of certificates for
the Shares for transfer. 

        4.3.10 The
BLDS Director acknowledges that in evaluating the suitability of an investment in the Company, and other than as set forth in the Asset Purchase Agreement, there
have been no representations, guarantees or warranties (whether oral or written) made to the BLDS Director or its representatives by Parent, LECG, its agents or employees, or by any other person,
expressly or by implication, including any representations, guarantees or warranties with respect to (1) the approximate length of time that the BLDS Director will be required to remain as the
owner of the Restricted Units, or (2) the percentage of profit and/or amount of or type of consideration, profit or loss to be realized, if any, as a result of his ownership of the Restricted
Units. 

        4.3.11 The
BLDS Director will indemnify and hold harmless Parent, LECG, and their respective officers, employees, registered representatives, directors, or control persons
who was or is a party, or is threatened to be made a party, to any threatened, pending or completed action, 

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suit
or proceeding, whether civil, criminal, administrative or investigative, by reason of or arising from any actual or alleged misrepresentation or misstatement of facts or omission to represent or
state facts made by the BLDS Director to Parent concerning itself or its financial position in connection with the issuance of the Restricted Units, against losses, liabilities and expenses for which
such indemnified person has not otherwise been reimbursed (including attorneys' fees, judgments, fines and amounts paid in settlement) as actually and reasonably incurred by such person or entity in
connection with such action, suit or proceeding. 

        4.3.12 The
BLDS Director understands that any information provided by Parent regarding Parent and LECG is confidential and nonpublic, and the BLDS Director represents,
warrants and guarantees that all such information will be kept in confidence by the BLDS Director and will neither be used by the BLDS Director for his personal benefit (other than in connection with
his ownership of the Restricted Units) nor disclosed to any third party (other than personal tax and financial advisors) for any reason; provided, that this obligation shall not apply to information
which (1) is part of the public knowledge or literature and readily accessible at the date hereof, (2) becomes part of the public knowledge or literature and readily accessible by
publication (except as a result of a breach of these provisions), (3) is received from third parties (except third parties who disclose such information in violation of any confidentiality
agreements they may have with Parent), or (4) is required to be disclosed pursuant to an order of a court of competent jurisdiction. 

5.    Non Solicitation and Non-Competition  

        5.1    Non-Solicitation.    Except as provided in
Section 5.3 below, each BLDS Director further agrees that for a period equal to the longer of either (i) the duration of his employment with LECG plus one (1) year, or
(ii) seven (7) years from the date hereof (the "Non-Solicitation Period"), he will not directly or indirectly, on his own behalf or on behalf of any other party, solicit or
induce, or cause others to solicit or induce, any person employed by, affiliated with, or acting as an independent contractor to LECG, its subsidiaries or affiliated entities, to terminate his/her
relationship with LECG, its subsidiaries or affiliated entities. Each BLDS Director further agrees that during the Non-Solicitation Period, he will not directly or indirectly, on his own
behalf or on behalf of any other party, solicit or induce, or cause others to solicit or induce, any clients of LECG to terminate such client's business relationship with LECG or to do business with
him or any other party. Notwithstanding anything contained in this Agreement, after a BLDS Director's employment with LECG is terminated, the BLDS Director may mail a professional announcement to
clients of LECG for whom the BLDS Director performed services while an employee of LECG. 

        5.2    Non-Competition Covenant.    In consideration of
the Goodwill Payments and in connection with the sale of Personal Goodwill by the BLDS Directors and the sale of assets under the Asset Purchase Agreement, and except as provided in Section 5.3
below, each BLDS Director agrees that for a period of seven (7) years from the Closing Date, and excluding his employment by LECG and his ownership of the Restricted Units, he will not directly
or indirectly engage in, or have any interest in any Person (whether as a securityholder, creditor or otherwise) that engages in any activity in the Territory that is the same as, similar to or
competitive with LECG's business, including the Business (the "Restricted Activities"). Notwithstanding the foregoing, Restricted Activities will not
include services provided by a BLDS Director as an employee of a government agency, a university or academic institution, a non-profit organization or a "think-tank" so long as
such services are for the internal benefit of the employer and are not services furnished to clients of the employer on a consulting basis that are comparable to services that could also be furnished
by LECG. Each BLDS Director acknowledges that the provisions of this Section 5.2 are reasonable and necessary to protect and preserve LECG's legitimate business interests and the value of the
Personal Goodwill and the Purchased Assets and to prevent any unfair advantage being conferred on the BLDS Director. 

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        5.3    Termination not for Cause of Certain Directors.    In the event
of a termination not for Cause of a BLDS Director who does not obtain full payment of his pro rata share of the Goodwill Payment and the Bonus Payment, then the non-solicitation period
(for purposes of Section 5.1) and the non-competition period (for purposes of Section 5.2) shall be limited to one (1) year from the date of his termination. 

        5.4    Separate Covenants.    The covenants contained in Sections 5.1
and 5.2 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 Sections 5.1 and 5.2. If, in any judicial proceeding, a court refused to enforce any of the separate covenants, the unenforceable covenant will be eliminated from this
Section 5 for the purpose of those proceedings to the extent necessary to permit the remaining separate covenants to be enforced. 

        5.5    Certain Definitions.    For purposes of this Section 5,
the following terms shall have the meanings set forth below: 

        5.5.1 "Client"
means any person or entity who, at the time of the termination of a BLDS Director's relationship with LECG, (i) has LECG under retainer,
(ii) has received a written proposal and is actively considering retaining or otherwise engaging LECG on a project or matter, or (iii) has LECG working on a matter or project without a
formal retainer arrangement. A "client" does not mean a person or entity (i) who has rejected a proposal from LECG to work on a particular matter
or project, (ii) for whom LECG has refused to do work for, or (iii) with respect to whom LECG has a conflict of interest that precludes LECG from accepting a project for such person or
entity. 

        5.5.2 "Solicit"
means, but is not limited to, any contact initiated by or at the direction, urging or suggestion, whether directly or indirectly, of a BLDS Director with an
employee or client of LECG for the purpose of or with the intended effect of inducing a change in their business relationship with LECG. With respect to solicitation of clients, "solicit" includes,
but is not limited to, contacting a client with respect to performing work that LECG could be expected to perform for clients including, but not limited to, under existing proposals or retainer
agreements (express or implied) or work that LECG could reasonably expect to obtain from extensions or follow-ons of existing proposals and retainer agreements (express or implied). 

6.    Entire Agreement.  

        This Agreement, together with the Asset Purchase Agreement and the Director Service Agreement, supersedes all previous and contemporaneous oral negotiations,
writings and understandings between the parties concerning the subject matter of this Agreement (including, without limitation, that certain Term Sheet dated July 15, 2003), and this Agreement
constitutes the entire agreement between LECG, Parent and the BLDS Directors. 

        [Signatures follow on the next page]

9

 

        IN
WITNESS WHEREOF, LECG, Parent and the BLDS Directors have executed this Agreement on the date first above written. 

	LECG, LLC,

a California limited liability company	 	 
	

By:	
 	

LECG Holding Company, LLC	
 	

 
	Its:	 	Sole Member and Manager	 	 
	

By:	
 	

/s/  ILLEGIBLE      
	
 	

 
	Its:	 	President	 	 
	

LECG HOLDING COMPANY, LLC,

a California limited liability company	
 	

 
	By:	 	/s/  JOHN C. BURKE      
	 	 
	Its:	 	CFO	 	 
	

Dated: 8/22/03	
 	

/s/  BERNARD R. SISKIN      
 Dr. Bernard R. Siskin
	

Residence Address:
	
 	

 
	

	
 	

 
	

Dated: 8/22/03	
 	

/s/  LEONARD A. CUPINGOOD      
 Dr. Leonard A. Cupingood
	

Residence Address:
	
 	

 
	

	
 	

 
	

Dated: 8/22/03	
 	

/s/  DAVID W. GRIFFIN      
 Dr. David W. Griffin
	

Residence Address:
	
 	

 
	

	
 	

 

10

 

	

Dated: 8/22/03	
 	

/s/  SAMUEL J. KURSH      
 Dr. Samuel J. Kursh
	

Residence Address:
	
 	

 
	

	
 	

 

Signature Page to Director Practice Purchase Agreement

11

QuickLinks

Exhibit 10.38

DIRECTOR PRACTICE PURCHASE AGREEMENT

RECITALS

AGREEMENTQuickLinks
 -- Click here to rapidly navigate through this document

 
 

Exhibit 10.39    
    

 
 

BUSINESS DEVELOPMENT AGREEMENT    
    

        This Business Development Agreement ("Agreement") is made and entered into on this 10th day of December, 2002, by and between LECG, LLC, a California limited
liability company with a business address of 2000 Powell Street, Suite 600, Emeryville, California 94608 ("LECG") and Enterprise Research, Inc., a California corporation with a
business address of 2000 Powell Street, Suite 510, Emeryville, California 94608 ("ERI"). 

RECITALS 

        A.    ERI
is in the business of providing consulting, research, and market development services and is able to source business opportunities for LECG from time to time, and has
been sourcing business opportunities for LECG since January 1, 2002. 

        B.    Commencing
effective as of January 1, 2002, LECG wishes to compensate ERI for its services in sourcing business opportunities for LECG from time to time on the
terms and conditions set forth herein. 

        NOW,
THEREFORE, inconsideration of the premises and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, LECG and ERI agree as follows: 

        1.    Term.    The term of this Agreement will commence retroactively effective as of January 1, 2002 and will
continue for a period of two (2) years (the "Initial Term"). Upon the expiration of the Initial Term, this Agreement will automatically renew for additional consecutive terms of two (2) years each
(each, a "Subsequent Term") unless, at least sixty (60) days prior to the expiration of the then current term, either party gives notice to the other party that such party does not wish for the
Agreement to renew for a Subsequent Term. For purposes of this Agreement, the Initial Term and each Subsequent Term
are referred to herein collectively as the "Term." Notwithstanding the foregoing, this Agreement may be terminated by either party on sixty (60) days advance written notice to the other party. Upon
termination of this Agreement, ERI may not state on any marketing materials or otherwise imply any association with LECG. 

        2.    Business Development Services.    In consideration of the payments to be made by LECG in accordance with
Section 3 below, ERI agrees to use commercially reasonable efforts to identify and source, for the benefit of LECG, professional consulting and expert services engagements with private or
governmental persons and entities to be performed by Dr. David J. Teece, LECG staff and, as appropriate, other Principals and Directors of LECG (the "Sourced Engagements'). The Sourced
Engagements will utilize the services of Dr. Teece, LECG staff and, as appropriate, other principals and Directors of LECG, save and except reasonable and customary outsourcing of specific
services not generally offered by LECG. 

        3.    Project Origination Fee.    In consideration of the referral by ERI of the Sourced Engagements, LECG agrees to
pay ERI 14% of the total collected professional staff billings on all Sourced Engagements, net of all project expenses, expert fees payable to Dr. Teece, and the fees of any other Principals,
Directors or Affiliated of LECG, in accordance with LECG's standard project origination fee policy (the "Project Origination Fee"). For example, on a $500,000 project in which there was $100,000 in
travel, telephone, copying and other expenses including expert fees payable to Dr. Teece, ERI would receive a $56,000 Project Origination Fee ($400,000 x 0.14). Project Origination Fees will be
payable by LECG quarterly in a manner consistent with LECG's standard policy (as such policy may be amended by LECG from time to time with reasonable advance notice to ERI), with the Project
Origination Fees for each calendar year being finally calculated and paid by LECG on January 15th of the following year. 

        4.    Confidentiality.    Eri acknowledges that, during the Term of this Agreement, ERI may have access to, or may
otherwise obtain, Proprietary Information (as hereinafter defined) of LECG. ERI 

 

may
not, directly or indirectly, at any time during the Term or thereafter, disclose or permit to be disclosed to any person or entity any Proprietary Information for any reason whatsoever without the
prior written consent of LECG in each instance, unless and to the extent that the Proprietary Information become generally known to and available for use by the public other than as a direct result of
ERI's breach of its obligations under this Agreement. ERI must deliver to LECG, as applicable, at the expiration of the Term, as a condition to receipt of any final payment of Project Origination
Fees, or at any other time as LECG may request in writing (whether during or after the Term) all Proprietary Information which ERI may then possess or have under its control. ERI further acknowledges
and agrees that because of technological advances, LECG's products and services can be developed and marketed anywhere in the world, and that the market in which LECG competes is worldwide. ERI
further acknowledges and agrees that all information concerning the work conducted by LECG and any potential products of LECG are and constitute exceptionally valuable trade secrets of LECG. That
information includes, without limitation, the facts that any particular Sourced Engagement is planned, under consideration, or in production, as well as any description of any existing, pending or
proposed Sourced Engagement. ERI further agrees to use its best efforts to prevent inadvertent disclosure of any Proprietary Information and/or other confidential information or trade secrets of LECG
to any third party by using the same care and discretion that ERI uses with similar data ERI designates as confidential or as a trade secret. 

        For
purposes of this Section 4, the term "Proprietary Information" means any and all data and information concerning the business affairs of LECG and not generally known in the
industry in which LECG is or may become engaged, and any other information concerning any matters affecting or relating to the business of LECG, and, in any event, includes, without limitation,
(i) all of LECG's past, present or prospective business opportunities, including information concerning acquisition opportunities in or reasonably related to LECG's business and industry,
(ii) LECG's clients, client lists, and pricing information with respect to past or present clients, and (iii) any other information concerning the business of LECG, its manner of
operation, its plans, processes, figures, sales figures, projections, estimates, tax records, personnel history, accounting procedures, promotions, supply sources, contracts, know-how, trade secrets,
information relating to research, development, inventions, technology, manufacture, purchasing, engineering, marketing, merchandising or selling, or other data without regard to whether all of the
foregoing matters will be deemed confidential, material or important. 

        5.    Ownership of Property.    Unless LECG determines otherwise, in its sole discretion, and notwithstanding ERI's
role in identifying or obtaining a Sourced Engagement, all inventions, innovations, improvements, developments, methods, processes programs, designs, analyses, drawings, reports and all similar or
related information (whether or not patentable) that relate to any Sourced Engagement and that is conceived, developed, contributed to, made or reduced to practice by Dr. Teece (either solely
or jointly with others) while employed by LECG on a Sourced Engagement (including any of the foregoing that constitutes any Proprietary Information) ("Work Product") belongs to LECG and ERI hereby
assigns, and agrees to assign, all of the above Work Product to LECG. Any copyrightable work prepared by Dr. Teece in the course of his work for LECG on a Sourced Engagement shall be deemed a
"work made for hire" under the copyright laws and LECG shall own all rights therein. To the extent that any such copyrightable work is not a "work made for hire," ERI agrees to assign, upon the
request of LECG, all right, title and interest, including, without limitation, copyright in and to such copyrightable work to LECG. ERI shall promptly disclose such Work Product and copyrightable work
to LECG and perform all actions reasonably requested by LECG (whether during or after the Term) to establish and
confirm LECG's ownership (including, without limitation, execution of assignments, consents, powers of attorney and other instruments). 

        6.    Compelled Disclosure.    If ERI is required by law or governmental regulation or by subpoena or other valid
legal process to disclose any Proprietary Information to any person or entity, ERI will 

2

 

immediately
provide LECG with written notice of the applicable law, regulation or process so that LECG may seek a protective order or other appropriate remedy. ERI will cooperate fully with LECG and
LECG's representatives or counsel in any attempt by LECG to obtain a protective order or other remedy. If LECG elects not to seek, or is unsuccessful in obtaining, any such protective order or other
remedy in connection with any requirement that ERI disclose Proprietary Information, and if ERI furnishes LECG with a written opinion of reputable legal counsel acceptable to LECG confirming that the
disclosure of such Proprietary Information is legally required, then ERI may disclose such Proprietary Information to the extent legally required; provided, however, that ERI will use its reasonable
best efforts to ensure that such Proprietary Information is treated confidentially by the person or entity to whom it is disclosed. 

        7.    Additional Provisions.    

        (a)    Notices.    Any notice provided for in this Agreement must be in writing and must either be personally
delivered, sent by facsimile or sent by reputable overnight courier service (charges prepaid) to the recipient at the address given in the preamble hereof or such other address or to the attention of
such other person as the recipient party shall have specified by prior written notice to the sending party. Any notice under this Agreement will be deemed to have been given when so delivered
personally or sent by facsimile, and one day after deposit with a reputable overnight courier service. 

        (b)    Expenses.    Each of ERI and LECG will bear its own legal, accounting and other expenses incurred in connection
with the negotiation, execution and performance of this Agreement. 

        (c)    Severability.    Whenever possible, each provision of this Agreement will be interpreted in such manner as to
be effective and valid under applicable law, but if any provision of this Agreement is held to be invalid, illegal or unenforceable in any respect under any applicable law or rule in any jurisdiction,
such invalidity, illegality or unenforceability will not affect any other provision or any other jurisdiction, but this Agreement will be reformed, construed and enforced in such jurisdiction as if
such invalid, illegal or unenforceable provision had never been contained herein. 

        (d)    Complete Agreement.    This Agreement, those documents expressly referred to herein and other documents of even
date herewith embody the complete agreement and understanding among the
parties and supersede and preempt any prior understandings, agreement or representation by or among the parties, written or oral, which may have related to the subject matter hereof in any way. 

        (e)    Counterparts; Facsimile Execution.    This Agreement may be executed in multiple counterparts, each of which is
deemed to be an original and all of which taken together constitute one and the same agreement. This Agreement may be executed by delivery of an original executed counterpart signature page by
facsimile transmission. 

        (f)    Successors and Assigns.    Except as otherwise provided herein, this Agreement shall bind and inure to the
benefit of and be enforceable by ERI and LECG, and their respective successors and assigns. 

        (g)    Choice of Law; Jurisdiction.    All questions concerning the construction, validity and interpretation of this
Agreement will be governed by and construed in accordance with the internal laws of the State of California, without giving effect to any choice of law or conflict of law provision or rule (whether of
the State of California or any other jurisdiction) that would cause the application of the laws of any jurisdiction other that the State of California. The parties hereby: (i) submit to the
jurisdiction of any state or federal court sitting within the State of California in any action or proceeding arising out of or relating to Agreement; (ii) agree that all claims in 

3

 

respect
of such action or proceeding may be heard or determined in any such court; and (iii) agree not to bring any action or proceeding arising out of or relating to this Agreement in any
other court. The parties hereby agrees that a final judgment in any action or proceeding so brought shall be conclusive and may be enforced by suit on the judgment or any other manner provided by law. 

        (h)    Remedies.    Each of the parties to this Agreement will be entitled to enforce its rights under this Agreement
specifically, to recover damages and costs (including attorney's fees) caused by any breach of any provision of this Agreement and to exercise all other rights existing in its favor. The parties
hereto agree and acknowledge that money damages may not be an adequate remedy for any breach of the provisions of this Agreement and that any party may in its sole discretion apply to any court of law
or equity of competent jurisdiction (without posting any bond or deposit) for specific performance and/or other injunctive relief in order to enforce or prevent any violations of the provisions of
this Agreement. 

        (i)    No Waiver.    A waiver by any party hereto of any right or remedy hereunder on any one occasion shall not be
construed as a bar to any right or remedy which such party would otherwise have on any future occasion. No failure to exercise nor any delay in exercising on the part of any party hereto, any right,
power or privilege hereunder shall preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies herein provided are cumulative and may
be exercised singly or concurrently, and are not exclusive of any rights or remedies provided by law. 

        (j)    Attorneys' Fees.    In the event of any action or proceeding arising out of this Agreement or to seek the
enforcement thereof, the prevailing party will be entitled to recover from the other party its reasonable attorneys fees and court costs incurred by the prevailing party in such action or proceeding,
as well as any costs of collection and enforcement of any judgment rendered in favor of such prevailing party in such action or proceeding. 

        (k)    No Partnership or Agency.    This Agreement establishes and constitutes only a business development agreement
between the parties. The parties hereto are not joint venturers or partners of each other, and ERI is not an employee or agent of LECG. ERI shall at all times during the Term be an independent
contractor. 

        IN
WITNESS WHEREOF, LECG and ERI have executed this AGreement effective on the date first above written. 

	LECG, LLC,

a California limited liability company	 	 
	

By:	
 	

/s/  DAVID KAPLAN      
 David Kaplan	
 	

 
	Its:	 	President	 	 
	
Enterprise Research, Inc.,

a California corporation	
 	

 
	

By:	
 	

/s/  LEIGH TEECE      
 Leigh Teece	
 	

 
	Its:	 	President	 	 

4

QuickLinks

Exhibit 10.39

BUSINESS DEVELOPMENT AGREEMENT

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