<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
Current Report Pursuant
to Section l3 or l5(d) of the
Securities Exchange Act of l934
Date of report (date of earliest event reported): August 19, 1998
The Metzler Group, Inc.
-----------------------
(Exact Name of Registrant as Specified in Its Charter)
Delaware
--------
(State or Other Jurisdiction of Incorporation)
0-28830 36-4094854
------- ----------
(Commission File Number) (IRS Employer Identification No.)
615 N. Wabash, Chicago, Illinois 60015
- ---------------------------------------- ----------
(Address of Principal Executive Offices) (Zip Code)
(312) 573-5600
--------------
(Registrant's Telephone Number, Including Area Code)
520 Lake Cook Road, Suite 500, Deerfield, Illinois
--------------------------------------------------
(Former Address)
<PAGE>
Item 2. Acquisition or Disposition of Assets.
Effective August 19, 1998 (the "LECG Effective Date"), The Metzler Group,
Inc. (the "Company") completed the acquisition of all of the outstanding
securities of LECG, Inc. ("LECG"), an economic services consulting firm
organized under the laws of California. Pursuant to a Merger Agreement dated
July 1, 1998 (attached hereto as Exhibit 2.1), a wholly owned subsidiary of the
Company, MGI Acquisition Corp., merged with and into LECG on the LECG Effective
Date. Consequently, LECG is now a wholly owned subsidiary of the Company. LECG
stockholders received Company common stock valued at approximately $238 million,
calculated by using the final closing bid for the Company's common stock on the
LECG Effective Date, in exchange for substantially all outstanding LECG shares.
The Company exchanged 7.6 million shares of its common stock for substantially
all of the outstanding common stock of LECG. The transaction will be accounted
for by the pooling of interests method of accounting and will qualify as a tax-
free reorganization. Following the combination with LECG, the Company had 30.3
million issued and outstanding shares.
Effective August 31, 1998 (the "PCLLC Effective Date"), the Company
completed the acquisition of all of the outstanding securities of Peterson
Consulting L.L.C. ("PCLLC"), an Illinois Limited Liability Company doing
business as Peterson Worldwide LLC. Pursuant to a Merger Agreement dated August
20, 1998 (attached hereto as Exhibit 2.2), a wholly owned subsidiary of the
Company, MGI Acquisition II L.L.C., merged with and into PCLLC on the PCLLC
Effective Date. Consequently, PCLLC is now a wholly owned subsidiary of the
Company. PCLLC stockholders received Company common stock valued at
approximately $157 million calculated by using the final closing bid for the
Company's common stock on the PCLLC Effective Date, in exchange for
substantially all outstanding PCLLC shares. The Company exchanged 5.6 million
shares of its common stock for substantially all of the outstanding common stock
of PCLLC. The transaction will be accounted for by the pooling of interests
method of accounting and will qualify as a tax-free reorganization. As a result
of the combination with PCLLC, the Company will have 35.9 million issued and
outstanding shares.
Item 7. Financial Statements and Exhibits.
(a) Financial Statements of Businesses Acquired
1. The audited financial statements of LECG, Inc. as of December 31,
1997 and 1996 and for the years ended December 31, 1997, 1996 and
1995 have been previously filed with the Securities and Exchange
Commission as part of the Company's Registration Statement on Form
S-4 dated July 24, 1998.
2. The following Condensed Consolidated Financial Statements of LECG,
Inc. are attached:
Condensed Consolidated Balance Sheet as of June 30, 1998
(unaudited)
2
<PAGE>
Condensed Consolidated Statements of Operations for the six
months ended June 30, 1998 and 1997 (unaudited)
Condensed Consolidated Statements of Cash Flows for the six
months ended June 30, 1998 and 1997 (unaudited)
Notes to the June 30, 1998 Condensed Consolidated Financial
Statements (unaudited)
3. It is impracticable for the Company to file the required
financial information for Peterson Worldwide LLC as of the date
hereof. The required financial information shall be filed by the
Company as soon as practicable, but in no event shall such
financial information be filed later than 60 days after the due
date of this Form 8-K.
(b) Pro forma financial information
1. The unaudited Pro Forma Condensed Combined Balance Sheet as of
March 31, 1998 and the unaudited Pro Forma Condensed Combined
Statements of Income for the three months ended March 31, 1998 and
1997 and for the years ended December 31, 1997, 1996 and 1995 have
been previously filed with the Securities and Exchange Commission
as part of the Company's Registration Statement on Form S-4 dated
July 24, 1998.
2. The following unaudited Pro Forma Condensed Combined Financial
Statements are attached:
Pro Forma Condensed Combined Balance Sheet as of June 30, 1998
(unaudited)
Pro Forma Condensed Combined Statements of Operations for the six
months ended June 30, 1998 and 1997 (unaudited)
Notes to Pro Forma Condensed Combined Financial Statements
(unaudited)
3. It is impracticable for the Company to file the required pro forma
financial information for Peterson Worldwide LLC as of the date
hereof. The required pro forma financial information shall be
filed by the Company as soon as practicable, but in no event shall
such pro forma financial information be filed later than 60 days
after the due date of this Form 8-K.
(c) Exhibits
2.1 Agreement dated as of July 1, 1998 among The Metzler Group, Inc.,
MGI Acquisition Corp. and LECG, Inc. together with a list of
Exhibits and Schedules thereto. Such Exhibits and Schedules are
not filed, but the
3
<PAGE>
registrant undertakes to furnish supplementary a copy of any such
Exhibit or Schedule to the Commission upon request.
2.2 Agreement dated as of July 1, 1998 among The Metzler Group, Inc.,
MGI Acquisition II L.L.C. and Peterson Consulting L.L.C. together
with a list of Exhibits and Schedules thereto. Such Exhibits and
Schedules are not filed, but the registrant undertakes to furnish
supplementary a copy of any such Exhibit or Schedule to the
Commission upon request.
4
<PAGE>
Item 7 (a) Financial Statements of Business Acquired
LECG, INC. Condensed Consolidated Balance Sheet as of June 30, 1998 (unaudited)
(in thousands)
<TABLE>
<CAPTION>
ASSETS
<S> <C>
Current assets:
Cash............................................................. $17,013
Accounts receivable, net......................................... 25,902
Prepaid expenses................................................. 1,485
-------
Total current assets............................................... 44,400
Property and equipment, net........................................ 5,173
Other assets....................................................... 260
-------
Total assets.............................................. $49,833
=======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable and accrued liabilities......................... $ 2,517
Accrued compensation and project-related costs................... 11,159
Deferred tax liability........................................... 703
Other current liabilities........................................ 1,502
-------
Total current liabilities.......................................... 15,881
Deferred tax liability........................................... 1,496
-------
Total liabilities.................................................. 17,377
-------
Shareholders' equity:
Common shares..................................................... 13
Additional paid-in capital........................................ 29,193
Notes receivable from shareholders................................ (611)
Retained earnings................................................. 3,861
-------
Total shareholders' equity......................................... 32,456
-------
Total liabilities and shareholders' equity................ $49,833
=======
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
statements.
5
<PAGE>
Item 7 (a) Financial Statements of Business Acquired
LECG, INC. Condensed Consolidated Statements of Operations for the six months
ended June 30, 1998 and 1997 (unaudited) (in thousands, except per share data)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
-----------------
1998 1997
-------- --------
<S> <C> <C>
Revenues...................................................... $ 32,055 $ 20,786
Cost of services.............................................. 20,186 13,740
-------- --------
Gross profit............................................... 11,869 7,046
General and administrative expenses........................... 6,078 3,302
-------- --------
Income from operations........................................ 5,791 3,744
Other income.................................................. 384 852
-------- --------
Income before income taxes.................................... 6,175 4,596
Income taxes.................................................. 2,516 179
-------- --------
Net income.................................................... $ 3,659 $ 4,417
======== ========
Pro forma income data:
Net income as reported...................................... $ 4,417
Pro forma adjustments....................................... (1,705)
--------
Pro forma net income.......................................... $ 2,712
========
Net income or pro forma net income per basic share............ $ 0.28 $ 0.27
======== ========
Net income or pro forma net income per diluted share.......... $ 0.28 $ 0.27
======== ========
Basic shares used in computing net income or pro forma net
income per share............................................. 13,028 10,129
Diluted shares used in computing net income or pro forma net
income per share............................................. 13,197 10,206
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
statements.
6
<PAGE>
Item 7 (a) Financial Statements of Business Acquired
LECG, INC. Condensed Consolidated Statements of Cash Flows for the six months
ended June 30, 1998 and 1997 (unaudited) (in thousands)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
-----------------
1998 1997
------- -------
<S> <C> <C>
Cash flows from operating activities:
Net income............................................................ $ 3,659 $ 4,417
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization....................................... 512 296
Expiration of deferred purchase option.............................. -- (852)
Loss on disposal of property and equipment.......................... 5 --
Increase in accounts receivable..................................... (9,622) (3,997)
Increase in prepaid expenses and other assets....................... (718) (16)
Increase in accounts payable and accrued liabilities................ 301 686
Increase in accrued compensation and related costs.................. 4,653 2,666
Decrease in deferred tax liability.................................. (504) --
Decrease in income taxes payable.................................... (262) --
Increase in other current liabilities............................... 127 258
------- -------
Net cash (used in) provided by operating activities................ (1,849) 3,458
------- -------
Cash flows from investing activities:
Purchase of property and equipment.................................. (2,107) (971)
Proceeds from the disposal of property and equipment................ 1 --
------- -------
Net cash used in investing activities............................. (2,106) (971)
------- -------
Cash flows from financing activities:
Net borrowing under line of credit.................................. -- 607
Sale of common shares............................................... -- 380
Shareholder advances................................................ (168) (173)
Collection of notes receivable from shareholders.................... 664 120
Distributions to former S-corporation shareholders.................. (3,693) (3,050)
------- -------
Net cash used in financing activities............................. (3,197) (2,116)
------- -------
Net (decrease) increase in cash........................................ (7,152) 371
Cash at beginning of period............................................ 24,165 3
------- -------
Cash at end of period.................................................. $17,013 $ 374
======= =======
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
statements.
7
<PAGE>
Item 7 (a) Financial Statements of Business Acquired
LECG, Inc. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
1. Basis of Presentation
The accompanying Consolidated Financial Statements have been prepared
pursuant to the rules and regulations of the Securities and Exchange
Commission ("SEC") and, in management's opinion, include all adjustments
necessary for a fair statement of results for such interim periods. Certain
information and note disclosures normally included in annual financial
statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to SEC rules or
regulations; however, the Company believes that the disclosures made are
adequate to make the information presented not misleading.
The interim results for the six-month periods ended June 30, 1998
and 1997 are not necessarily indicative of results for the full year. It is
suggested that these consolidated financial statements be read in conjunction
with the consolidated financial statements and notes thereto included in the
Company's Registration Statement on Form S-4 dated July 24, 1998.
<PAGE>
2. Pro Forma Adjustments to Consolidated Financial Statements
The pro forma consolidated statements of income have been adjusted to
reflect a provision for income taxes assuming an effective tax rate of 41
percent that would have been recorded had the Company been a C Corporation.
Item 7 (b) Pro Forma Financial Information
The Company completed its acquisition of LECG on August 19, 1998 by exchanging
7.6 million shares of the Company's common stock for substantially all of the
outstanding common stock of LEGG. The accompanying unaudited pro forma condensed
combined balance sheet combines the Company's historical consolidated balance
sheet and the balance sheet of LECG as if the transaction had been consummated
on June 30, 1998, and the unaudited pro forma condensed combined statement of
operations for the six month periods ended June 30, 1999 and 1997 reflects the
merger with LECG, applying the pooling-of-interests method of accounting. The
unaudited pro forma condensed combining financial statements give effect to the
issuance of the Company's common stock in exchange for substantially all the
outstanding shares of common stock of LECG.
The unaudited pro forma condensed combining financial statements are presented
for illustrative purposes only and do not purport to represent what the
Company's results of operations or financial position would have been had the
merger with LECG occurred on the dates indicated or for any future period or
date, and are therefore qualified in their entirety by reference to and should
be read in conjunction with the historical financial statements of the Company
and LECG.
8
<PAGE>
ITEM 7(b) Pro Forma Financial Information
Pro Forma Condensed Combined Balance Sheet as of June 30, 1998 (Unaudited)
(In thousands)
<TABLE>
<CAPTION>
Pro
ASSETS Metzler LECG Adjustment Forma
------- ------ ---------- -------
<S> <C> <C> <C> <C>
Current Assets:
Cash and cash equivalents 55,603 17,013 - 72,616
Accounts receivable 25,092 25,902 50,994
Prepaid expenses and other current assets 2,078 1,485 - 3,563
------ ------ ------ -------
Total current assets 82,773 44,400 - 127,173
Property and equipment, net 5,551 5,173 - 10,724
Other assets 1,346 260 - 1,606
------ ------ ------ -------
Total assets 89,670 49,833 - 139,503
====== ====== ====== =======
LIABILITIES AND STOCKHOLDERS EQUITY
Current liabilities
Accounts payable and accrued liabilities 4,480 2,517 - 6,997
Accrued compensation and project-related costs 2,162 11,159 - 13,321
Income taxes payable 1,855 - - 1,855
Deferred income taxes 354 703 - 1,057
Other current liabilities 866 1,502 - 2,368
------ ------ ------ -------
Total current liabilities 9,717 15,881 - 25,598
Deferred income taxes 1,068 1,496 - 2,564
Other non-current liabilities 182 - - 182
------ ------ ------ -------
Total liabilities 10,967 17,377 - 28,344
------ ------ ------ -------
Stockholders' equity:
Preferred stock - - - -
Common stock 23 13 (5) 31
Additional paid-in capital 58,008 29,193 5 87,206
Notes receivable from shareholders - (611) - (611)
Retained Earnings 20,738 3,861 - 24,599
Accumulated other comprehensive income (66) - - (66)
------ ------ ------ -------
Total Stockholders' Equity 78,703 32,456 - 111,159
------ ------ ------ -------
Total liabilities and stockholders' equity 89,670 49,833 - 139,503
====== ====== ====== =======
</TABLE>
The accompanying notes are an integral part of these pro forma condensed
combining financial statements.
<PAGE>
<TABLE>
<CAPTION>
Item 7(b) Pro Forma Financial Information
Pro Forma Condensed Combined Statements of Operations
For the Six Months Ended June 30, 1998
(Unaudited)
(In thousands, except share data)
Pro
Metzler LECG Adjustment Forma
------ ---- ---------- -----
<S> <C> <C> <C> <C>
Revenues........................................... 53,050 32,055 85,105
Cost of services................................... 29,829 20,186 50,015
---------- ---------- ---------- ----------
Gross profit..................................... 23,221 11,869 - 35,090
Selling, general and administrative expenses...... 10,316 6,078 16,394
---------- ---------- ---------- ----------
Operating income................................. 12,905 5,791 - 18,696
Other income, net.................................. (1,260) (384) (1,644)
---------- ---------- ---------- ----------
Income before provision for income taxes........... 14,165 6,175 20,340
Provision for income taxes....................... 5,508 2,516 8,024
---------- ---------- ---------- ----------
Net income......................................... 8,657 3,659 - 12,316
========== ========== ========== ==========
Net income per basic share......................... 0.40 0.28 - 0.42
========== ========== ========== ==========
Net income per diluted share....................... 0.38 0.28 - 0.40
========== ========== ========== ==========
Basic shares used in computing net income
per share......................................... 21,838 13,028 (5,211) 29,655
Diluted shares used in computing net income
per share......................................... 22,706 13,197 (5,279) 30,625
</TABLE>
The accompanying notes are an integral part of these pro forma condensed
combining financial statements.
<PAGE>
<TABLE>
<CAPTION>
Pro Forma Financial Information
Pro Forma Condensed Combined Statements of Operations
For the Six Months Ended June 30, 1997
(Unaudited)
(In thousands, except share data)
Pro
Metzler LECG Adjustment Forma
------ ---- ---------- -----
<S> <C> <C> <C> <C>
Revenues........................................... 38,278 20,786 59,064
Cost of services................................... 23,102 13,740 36,842
---------- ---------- ---------- ----------
Gross profit..................................... 15,176 7,046 - 22,222
Selling, general and administrative expenses....... 8,937 3,302 12,239
---------- ---------- ---------- ----------
Operating income................................. 6,239 3,744 - 9,983
Other income, net.................................. (429) (852) (1,281)
---------- ---------- ---------- ----------
Income before provision for income taxes........... 6,668 4,596 11,264
Provision for income taxes ...................... 2,525 179 2,704
---------- ---------- ---------- ----------
Net income......................................... 4,143 4,417 - 8,560
========== ========== ========== ==========
Pro forma net income............................... 4,143 2,712 - 6,855
========== ========== ========== ==========
Pro forma or net income per basic share............ 0.21 0.27 0.33
========== ========== ========== ==========
Pro forma or net income per diluted share.......... 0.21 0.27 0.33
========== ========== ========== ==========
Basic shares used in computing pro
forma or net income per share..................... 19,926 10,129 (4,052) 26,003
Diluted shares used in computing pro
forma or net income per share..................... 20,209 10,206 (4,082) 26,333
</TABLE>
The accompanying notes are an integral part of these pro forma condensed
combining financial statements.
Item 7 (b) Notes to Unaudited Pro Forma Condensed Combining Financial Statements
Note A - Description of Business Combination
The accompanying unaudited condensed combining financial statements reflect all
adjustments which, in the opinion of management, are necessary for fair
presentation. All adjustments are of a normal recurring nature. All intercompany
accounts and transactions have been eliminated. On July 31, 1997, the Company
issued 7.6 million shares of common stock for substantially all the outstanding
common stock of LECG. Because this acquisition is being treated as a pooling of
interests for accounting purposes, the Company's consolidated financial
statements as of June 30, 1998 and for the six months ended June 30, 1998 and
1997 are being restated to include LECG's assets, liabilities and operating
results.
Note B - Pro Forma Income per Share
The calculation of basic and diluted net income per share for the pro forma
financial statements uses the applicable weighted average number of outstanding
shares of LECG adjusted to equivalent shares of the Company's common stock.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
THE METZLER GROUP, INC.
Date: September 3, 1998 By: /s/ James Hillman
--------------------------------------
James Hillman, Chief Financial Officer
(Signature)
<PAGE>
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of July 1, 1998 (this "AGREEMENT") by
and among The Metzler Group, Inc., a Delaware Corporation ("METZLER"), MGI
Acquisition Corp., a Delaware corporation and a wholly-owned subsidiary of
Metzler ("SUB"), and LECG, Inc. a California corporation ("LECG").
RECITALS
A. The Boards of Directors of Metzler, Sub and LECG deem it advisable and in
the best interests of each corporation and its respective stockholders or
shareholders, as applicable, that Metzler and LECG combine in order to advance
the long-term business strategies, goals and interests of Metzler and LECG;
B. The combination of Metzler and LECG shall be effected by the terms of
this Agreement through a transaction in which Sub will merge with and into
LECG, LECG will be the surviving corporation and will become a wholly-owned
subsidiary of Metzler, and the shareholders of LECG will become shareholders
of Metzler (the "MERGER");
C. The parties mutually intend that this Agreement will constitute a plan of
reorganization within the meaning of Section 368 of the Internal Revenue Code
of 1986, as amended (the "CODE"), and mutually intend for the Merger to
qualify as a reorganization under the provisions of Section 368 of the Code;
and
D. The parties intend to cause the Merger to be accounted for as a pooling
of interests pursuant to APB Opinion No. 16, Staff Accounting Series Releases
130, 135 and 146 and Staff Accounting Bulletins Topic Two.
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth below, the
parties agree as follows:
DEFINITIONS
"BUSINESS DAY" means a Monday through Friday on which banks are generally
open for business in Illinois and California.
"ERISA AFFILIATE" shall mean any corporation or other business entity that
is included in a controlled group of corporations within which LECG is also
included, as provided in Section 414(b) of the Code; or which is a trade or
business under common control with LECG, as provided in Section 414(c) of the
Code; or which constitutes a member of an affiliated service group within
which LECG is also included, as provided in Section 414(m) of the Code; or
which is required to be aggregated with LECG pursuant to regulations issued
under Section 414(o) of the Code. All ERISA Affiliates are listed in the LECG
Disclosure Schedule.
"GAAP" means generally accepted accounting principles as in effect from time
to time, applied consistently with the principles used in preparing financial
statements of the respective party.
"INDEBTEDNESS" of any Person means all obligations of such Person which in
accordance with GAAP should be classified upon a balance sheet of such Person
as liabilities of such Person, and in any event, regardless of how classified
in accordance with GAAP, shall include: (i) all obligations of such Person for
borrowed money or which have been incurred in connection with the purchase of
property or assets; (ii) obligations secured by any Security Interest upon
property or assets owned by such Person, even though such Person has not
assumed or become liable for the payment of such obligations; (iii)
obligations created or arising under any conditional sale or other title
retention agreement with respect to property acquired by such Person,
notwithstanding the fact that the rights and remedies of the seller, lender or
lessor under such agreement in the event of default are limited to
repossession or sale of the property; and (iv) that portion of capitalized
lease obligations properly classified as a liability on a balance sheet in
accordance with GAAP.
A-1
<PAGE>
"LECG MATERIAL ADVERSE EFFECT" means a material adverse effect on the
business, operations, employee or client relations, properties, assets
(including intangible assets), liabilities (contingent or otherwise),
financial condition or results of operations of LECG and its Subsidiaries
taken as a whole.
"LIABILITY" means any liability (whether known or unknown, whether absolute
or contingent, whether liquidated or unliquidated, and whether due or to
become due), obligation or Indebtedness, including, any liability for Taxes.
"METZLER MATERIAL ADVERSE EFFECT" means a material adverse effect on the
business, operations, employee or client relations, properties, assets
(including intangible assets), liabilities (contingent or otherwise),
financial condition or results of operations of Metzler.
"ORDINARY COURSE OF BUSINESS" means the ordinary course of business of LECG
and its Subsidiaries, consistent with past custom and practice of LECG and its
Subsidiaries (including with respect to quantity and frequency).
"PERSON" means any individual, trust, corporation, partnership, limited
partnership, limited liability company or other business association or
entity, court, governmental body or governmental agency.
"PLANS" means: (i) all employee benefit plans as defined in Section 3(3) of
the Employee Retirement Income Security Act of 1974, as amended ("ERISA");
(ii) all other severance pay, deferred compensation, excess benefit, vacation,
stock, stock option, fringe benefit and incentive plans, contracts, schemes,
programs, funds, commitments, or arrangements of any kind; and (iii) all other
plans, contracts, schemes, programs, funds, commitments, or arrangements
providing money, services, property, or other benefits, whether written or
oral, formal or informal, qualified or nonqualified, funded or unfunded, and
including any that have been frozen or terminated, which pertain to any
employee, former employee, director, officer, shareholder, consultant, or
independent contractor of LECG or any ERISA Affiliate of LECG and (i) to which
LECG or any ERISA Affiliate of LECG is or has been a party or by which any of
them is or has been bound or (ii) with respect to which LECG or any ERISA
Affiliate of LECG has made any payments or contributions since December 31,
1987 or (iii) to which LECG or any ERISA Affiliate of LECG may otherwise have
any Liability (including any such plan or arrangement formerly maintained by
LECG or any ERISA Affiliate of LECG).
"SECURITY INTEREST" means any mortgage, pledge, security interest, charge,
lien or other encumbrance or right of any third party.
"SUBSIDIARY" means, with respect to any Person, any corporation or other
entity, whether incorporated or unincorporated, of which (i) such Person or
any other Subsidiary of such Person is a general partner (excluding
partnerships, the general partnership interests of which held by such Person
or any Subsidiary of such Person do not have a majority of the voting interest
in such partnership) or (ii) at least a majority of the securities or other
interests having by their terms ordinary voting power to elect a majority of
the Board of Directors or others performing similar functions with respect to
such corporation or other organization is directly or indirectly owned or
controlled by such Person or by any one or more of its Subsidiaries, or by
such Person and one or more of its Subsidiaries.
"TAX" or "TAXES" means any and all federal, state, local and foreign taxes,
assessments and other governmental charges, duties, impositions and
liabilities, including taxes based upon or measured by gross receipts, income,
profits, sales, use and occupation, and value added, ad valorem, transfer,
franchise, withholding, payroll, recapture, employment, excise and property
taxes, together with all interest, penalties and additions imposed with
respect to such amounts and any obligations under any agreements or
arrangements with any other person with respect to such amounts and including
any Liability for taxes of a predecessor entity.
"TAX RETURN" means any return, declaration, report, claim for refund, or
information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.
A-2
<PAGE>
TABLE OF DEFINED TERMS
<TABLE>
<CAPTION>
CROSS REFERENCE
TERMS IN AGREEMENT
----- ---------------
<S> <C>
Affiliate....................................................... Section 6.12
Affiliate Letter ............................................... Section 6.12
Alternative Transaction......................................... Article 8
Approval........................................................ Section 6.6
Assumed Option.................................................. Section 2.1(d)
California Department........................................... Section 1.1
Certificate(s).................................................. Section 2.2(b)
Certificates of Merger.......................................... Section 1.1
CGCL............................................................ Section 1.1
Closing......................................................... Section 1.2
Closing Date.................................................... Section 1.2
Cobra........................................................... Article 3
Competing Offer................................................. Section 6.1
Confidentiality Agreement....................................... Section 6.1
Constituent Corporations........................................ Section 1.3
Delaware Department............................................. Section 1.1
DGCL............................................................ Section 1.1
Dissenters' Shares.............................................. Section 2.3
Dissenting Shareholders......................................... Section 2.3
Effective Time.................................................. Section 1.1
Exchange Act.................................................... Section 3.4(b)
Exchange Agent.................................................. Section 2.2(a)
Exchange Fund................................................... Section 2.2(a)
Existing Option................................................. Section 2.1(d)
Final LECG Purchase Date........................................ Article 2
Government Entity............................................... Section 3.4(b)
Include......................................................... Section 9.3
Include without Limitation...................................... Section 9.3
Indemnified Parties............................................. Section 6.16
Latest Balance Sheet............................................ Section 3.5(c)
LECG Balance Sheet.............................................. Section 3.5(b)
LECG Common Stock............................................... Section 3.2(a)
LECG Disclosure Schedule........................................ Article 3
LECG Expenses................................................... Section 8.3(d)
LECG Insiders................................................... Section 6.20
LECG Intellectual Property Rights............................... 3.10(a)
LECG Preferred Stock............................................ Section 3.2(a)
LECG SEC Reports................................................ Section 3.5(a)
LECG Shareholders Meeting....................................... Section 3.23
LECG Stock Option Plan.......................................... Section 2.1(d)
LECG Stock Purchase Plan........................................ Article 2
Made Available.................................................. Section 9.3
Material Contracts.............................................. Article 3
Material Fix-Rate Engagements................................... Article 3
Metzler Balance Sheet........................................... Section 4.4(b)
Metzler Common Stock............................................ Section 4.2
Metzler Disclosure Schedule..................................... Article 4
Metzler Expenses................................................ Section 8.3(c)
</TABLE>
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<TABLE>
<CAPTION>
CROSS REFERENCE
TERMS IN AGREEMENT
----- ---------------
<S> <C>
Metzler Option Plans............................................ Section 4.2
Metzler Preferred Stock......................................... Section 4.2
Metzler SEC Reports............................................. Section 4.4(a)
Metzler Stockholders Meeting.................................... Section 3.23
Preferred Proposal.............................................. Section 6.1
Proxy Statement................................................. Section 3.23
Registration Statement.......................................... Section 3.23
Rule 145........................................................ Section 6.12
SEC............................................................. Section 3.4(b)
Securities Act.................................................. Section 3.2(b)
Stockholders Meetings........................................... Section 3.23
Surviving Corporation........................................... Section 1.3
Systems......................................................... Section 3.28
The Date hereof................................................. Section 9.3
The Date of this Agreement...................................... Section 9.3
Third Party..................................................... Article 8
Y-2000 Compliant................................................ Section 3.28
</TABLE>
ARTICLE 1.
The Merger
1.1. Effective Time of The Merger. Subject to the provisions of this
Agreement, an abbreviated version of this Agreement meeting the requirements
of Section 1101 of the California General Corporation Law ("CGCL"), certified
by the president or any vice president and the secretary or assistant
secretary of each of Sub and LECG in accordance with Section 1103 of the CGCL,
and a certificate of merger prepared in accordance with Section 252 of the
Delaware General Corporation Law ("DGCL") (collectively, the "CERTIFICATES OF
MERGER") shall be duly prepared, executed and acknowledged by the Surviving
Corporation, (as defined in Section 1.3), Sub and such other parties as may be
appropriate, and thereafter the applicable Certificate of Merger shall be
delivered to the Secretary of State of the State of California (the
"CALIFORNIA DEPARTMENT"), as provided in Section 1103 of the CGCL, and the
Secretary of State of the State of Delaware ("DELAWARE DEPARTMENT"), in each
case for filing as soon as practicable on or after the date on which the
Closing (as defined in Section 1.2) occurs. The Merger shall become effective
on the date and at the time of the acceptance of the respective Certificates
of Merger by the California Department and the Delaware Department or at such
time thereafter as is provided in the Certificate of Merger (the "EFFECTIVE
TIME").
1.2. Closing. The closing of the Merger (the "CLOSING") will take place at
10:00 a.m., Central Time, on a date to be specified by Metzler and LECG, which
shall be no later than August 31, 1998 (the "CLOSING DATE"), at the offices of
Sachnoff & Weaver, Ltd., 30 South Wacker Drive, Suite 2900, Chicago, Illinois
60606, unless another date or place is agreed to in writing by Metzler and
LECG.
1.3. Effects of the Merger.
(a) At the Effective Time, (i) the separate existence of Sub shall cease
and Sub shall be merged with and into LECG (Sub and LECG are sometimes
referred to herein as the "CONSTITUENT CORPORATIONS" and LECG is sometimes
referred to herein as the "SURVIVING CORPORATION"), (ii) the Articles of
Incorporation of LECG as in effect immediately prior to the Effective Time
shall remain the Articles of Incorporation of the Surviving Corporation,
and (iii) the Bylaws of LECG as in effect immediately prior to the
Effective Time shall remain the Bylaws of the Surviving Corporation.
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(b) At and after the Effective Time, the effects of the Merger shall be
as provided in the applicable provisions of the CGCL and the DGCL. Without
limiting the generality of the foregoing, and subject thereto, the
Surviving Corporation shall possess all the rights, privileges, powers and
franchises of a public as well as of a private nature, and be subject to
all the restrictions, disabilities and duties of each of the Constituent
Corporations; and all and singular rights, privileges, powers and
franchises of each of the Constituent Corporations, and all property, real,
personal and mixed, and all debts due to either of the Constituent
Corporations on whatever account, as well as for stock subscriptions and
all other things in action or belonging to each of the Constituent
Corporations, shall be vested in the Surviving Corporation, and all
property, rights, privileges, powers and franchises, and all and every
other interest shall be thereafter as effectually the property of the
Surviving Corporation as they were of the Constituent Corporations, and the
title to any real estate vested by deed or otherwise, in either of the
Constituent Corporations, shall not revert or be in any way impaired; but
all rights of creditors and all liens upon any property of either of the
Constituent Corporations shall be preserved unimpaired, and all debts,
liabilities and duties of the Constituent Corporations shall thereafter
attach to the Surviving Corporation, and may be enforced against it to the
same extent as if such debts and liabilities had been incurred by it.
1.4. Directors and Officers. The directors of Sub immediately prior to the
Effective Time shall be the initial directors of the Surviving Corporation,
each to hold office in accordance with the Articles of Incorporation and
Bylaws of the Surviving Corporation, and the officers of the Surviving
Corporation shall initially be the persons set forth on Schedule 1.4 hereto,
and all other officers of the Surviving Corporation as of the Effective Time,
in each case until their respective successors are duly elected or appointed.
ARTICLE 2.
Conversion of Securities
2.1. Conversion of Capital Stock. As of the Effective Time, by virtue of the
Merger and without any action on the part of the holders of any shares of LECG
Common Stock (as defined in Section 3.2) or capital stock of Sub:
(a) Capital Stock of Sub. Each issued and outstanding share of the
capital stock of Sub shall be converted into and become one fully paid and
nonassessable share of common stock, $.01 per share, of the Surviving
Corporation.
(b) Cancellation of Treasury Stock and Metzler-Owned Stock. Any shares of
LECG Common Stock that are owned by Metzler, Sub or any other wholly-owned
Subsidiary of Metzler shall be canceled and retired and shall cease to
exist and no stock of Metzler or other consideration shall be delivered in
exchange therefor.
(c) Conversion of LECG Common Stock. Subject to Section 2.3, each issued
and outstanding share of LECG Common Stock (other than shares to be
canceled in accordance with Section 2.1(b)) shall be converted into the
right to receive 0.6 fully paid and nonassessable shares of Metzler Common
Stock (as defined in Section 4.2) (adjusted for any stock split or stock
dividend effected between the date of this Agreement and the Effective
Time). All shares of LECG Common Stock, when converted, shall no longer be
outstanding and shall automatically be canceled and retired and shall cease
to exist, and each holder of a certificate representing any such shares
shall cease to have any rights with respect thereto, except the right to
receive the shares of Metzler Common Stock and any cash in lieu of
fractional shares of Metzler Common Stock to be issued or paid in
consideration therefor upon the surrender of such certificate in accordance
with Section 2.2, without interest.
(d) LECG Stock Plans and Options. At the Effective Time, Metzler shall
assume LECG's rights and obligations under each of the outstanding options
previously granted under the stock option plan of LECG, as amended and
dated as of October, 1997 (the "LECG STOCK OPTION PLAN") (each such option
existing immediately prior to the Effective Time being called an "EXISTING
OPTION," and each such option so
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assumed by Metzler being called an "ASSUMED OPTION"), by which assumption
the optionee shall have the right to purchase that number of shares of
Metzler Common Stock (with any fractional share to be rounded down to the
nearest whole share) into which the number of shares of LECG Stock subject
to purchase under the Existing Option would be converted pursuant to the
terms of the Merger as described in Section 2.1(c) hereof. Each Assumed
Option shall constitute a continuation of the Existing Option, substituting
Metzler for LECG as issuer. The aggregate exercise price for the total
number of shares of Metzler Common Stock subject to the Assumed Option
shall be the aggregate exercise price at which the Existing Option was
exercisable for the total number of shares of LECG Common Stock, and the
purchase price per share of Metzler Common Stock thereunder shall be such
aggregate exercise price divided by the total number of whole shares of
Metzler Common Stock covered thereby (with any fraction of a cent to be
rounded up to the nearest whole cent); provided, however, that in the case
of any Existing Option to which Section 422 of the Code applies, the option
price, the number of shares purchasable pursuant to such option and the
terms and conditions of exercise of such option shall be determined in
order to comply with Section 424(a) of the Code. The assumption of the
Assumed Options by Metzler as provided in this Section 2.1(d) shall not,
except as provided herein, provide the holders thereof additional benefits
which they did not have immediately prior to the Effective Time or relieve
the holders thereof of any obligations or restrictions applicable to the
Assumed Options or the shares of Metzler Common Stock obtainable upon
exercise of the Assumed Options. Metzler shall take all corporate action
necessary to reserve and make available for issuance a sufficient number of
shares of Metzler Common Stock for delivery under the Assumed Options.
LECG shall take such action as is necessary to cause the ending date of the
then current offering period under the LECG Stock Purchase Plan (the "LECG
STOCK PURCHASE PLAN") to be the last trading day on which the LECG Common
Stock is traded on The New York Stock Exchange immediately prior to the
Effective Time (the "FINAL LECG PURCHASE DATE"); provided, that, such change
in the offering period shall be conditioned upon the consummation of the
Merger. On the Final LECG Purchase Date, LECG shall apply the funds credited
as of such date under the LECG Stock Purchase Plan within each participant's
payroll withholding account to the purchase of whole shares of LECG Common
Stock in accordance with the terms of the LECG Stock Purchase Plan.
Employees of LECG as of the Effective Time shall be permitted to participate
in the Metzler Stock Purchase Plan commencing on the first enrollment date of
such plan following the Effective Time, subject to the eligibility provisions
of such plan (with employees receiving credit, for purposes of such
eligibility provisions, for service with LECG or Sub).
2.2. Exchange of Certificates. The procedures for exchanging outstanding
shares of LECG Common Stock for Metzler Common Stock pursuant to the Merger
shall be as follows:
(a) Exchange Agent. As of the Effective Time, Metzler shall deposit with
American Stock Transfer and Trust Company (the "EXCHANGE AGENT"), for the
benefit of the holders of shares of LECG Common Stock, certificates
representing the shares of Metzler Common Stock issuable pursuant to
Section 2.1 in exchange for outstanding shares of LECG Common Stock (such
shares of Metzler Common Stock, together with any dividends or
distributions with respect thereto, being hereinafter referred to as the
"EXCHANGE FUND").
(b) Exchange Procedures. As soon as reasonably practicable after the
Effective Time, the Exchange Agent shall mail to each holder of record of a
certificate or certificates which immediately prior to the Effective Time
represented outstanding shares of LECG Common Stock (each a "CERTIFICATE"
and, collectively, the "CERTIFICATES") and which shares were converted
pursuant to Section 2.1 into the right to receive shares of Metzler Common
Stock (i) a letter of transmittal (which shall specify that delivery shall
be effected, and risk of loss and title to the Certificates shall pass,
only upon delivery of the Certificates to the Exchange Agent and shall be
in such form and have such other provisions as Metzler and LECG may
reasonably specify), (ii) instructions for use in effecting the surrender
of the Certificates in exchange for certificates representing shares of
Metzler Common Stock and (iii) the notice of approval of the Merger and
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accompanying statutory materials, information and instruction as required
by Section 1301(a) of the CGCL). Upon surrender of a Certificate for
cancellation to the Exchange Agent or to such other agent or agents as may
be appointed by Metzler, together with such letter of transmittal, duly
executed, the holder of such Certificate shall be entitled to receive in
exchange therefor a certificate representing that number of whole shares of
Metzler Common Stock which such holder has the right to receive pursuant to
the provisions of this Section 2.2(b), and the Certificate so surrendered
shall immediately be canceled. In the event of a transfer of ownership of
LECG Common Stock which is not registered in the transfer records of LECG,
a certificate representing the proper number of shares of Metzler Common
Stock may be issued to a transferee if the Certificate representing such
LECG Common Stock is presented to the Exchange Agent, accompanied by all
documents required to evidence and effect such transfer and by evidence
that any applicable stock transfer taxes have been paid. Until surrendered
as contemplated by this Section 2.2, each Certificate shall be deemed at
any time after the Effective Time to represent only the right to receive
upon such surrender the certificate representing shares of Metzler Common
Stock and cash in lieu of any fractional shares of Metzler Common Stock as
contemplated by this Section 2.2. The instructions for effecting the
surrender of the Certificates shall set forth procedures that must be taken
by the holder of any Certificate that has been lost, destroyed or stolen.
It shall be a condition to the right of such holder to receive a
certificate representing shares of Metzler Common Stock that the Exchange
Agent shall have received, along with the letter of transmittal, a duly
executed lost certificate affidavit, including an agreement to indemnify
Metzler, signed exactly as the name or names of the registered holder or
holders appeared on the books of LECG immediately prior to the Effective
Time, together with a customary bond and such other documents as Metzler or
the Exchange Agent may reasonably require in connection therewith.
(c) Distributions with Respect to Unexchanged Shares. No dividends or
other distributions declared or made after the Effective Time with respect
to Metzler Common Stock with a record date after the Effective Time shall
be paid to the holder of any unsurrendered Certificate with respect to the
shares of Metzler Common Stock represented thereby and no cash payment in
lieu of fractional shares shall be paid to any such holder pursuant to
subsection (e) below until the holder of such Certificate shall surrender
such Certificate. Subject to the effect of applicable laws, following
surrender of any such Certificate, there shall be paid to the holder of the
certificates representing whole shares of Metzler Common Stock issued in
exchange therefor, without interest, (i) at the time of such surrender, the
amount of any cash payable in lieu of a fractional share of Metzler Common
Stock to which such holder is entitled pursuant to subsection (e) below and
the amount of dividends or other distributions with a record date after the
Effective Time previously paid with respect to such whole shares of Metzler
Common Stock, and (ii) at the appropriate payment date, the amount of
dividends or other distributions with a record date after the Effective
Time but prior to surrender and a payment date subsequent to surrender
payable with respect to such whole shares of Metzler Common Stock.
(d) No Further Ownership Rights in LECG Common Stock. All shares of
Metzler Common Stock issued upon the surrender for exchange of shares of
LECG Common Stock in accordance with the terms hereof (including any cash
paid pursuant to subsection (c) or (e) of this Section 2.2) shall be deemed
to have been issued in full satisfaction of all rights pertaining to such
shares of LECG Common Stock, subject, however to the Surviving
Corporation's obligation to pay any dividends or make any other
distributions with a record date prior to the Effective Time which may have
been declared or made by LECG on such shares of LECG Common Stock in
accordance with the terms of this Agreement on or prior to the date hereof
and which remain unpaid at the Effective Time and there shall be no further
registration of transfers on the stock transfer books of the Surviving
Corporation of the shares of LECG Common Stock which were outstanding
immediately prior to the Effective Time. If, after the Effective Time,
Certificates are presented to the Surviving Corporation, they shall be
canceled and exchanged as provided in this Section 2.2.
(e) No Fractional Shares. No certificate or scrip representing fractional
shares of Metzler Common Stock shall be issued upon the surrender for
exchange of Certificates, and such fractional share interests will not
entitle the owner thereof to vote or to exercise any rights of a
stockholder of Metzler. Notwithstanding any other provision of this
Agreement, each holder of shares of LECG Common Stock exchanged pursuant to
the Merger who would otherwise have been entitled to receive a fraction of
a share
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of Metzler Common Stock (after taking into account all Certificates
delivered by such holder) shall receive, in lieu thereof, cash (without
interest) in an amount equal to such fractional part of a share of Metzler
Common Stock multiplied by the last reported sale price of Metzler Common
Stock, as reported on the Nasdaq National Market, on the trading day
immediately preceding the date of the Effective Time.
(f) Termination of Exchange Fund. Any portion of the Exchange Fund which
remains undistributed to the shareholders of LECG for one year after the
Effective Time shall be delivered to Metzler, and any shareholders of LECG
who have not previously complied with this Section 2.2 shall thereafter
look only to Metzler for payment of their claim for Metzler Common Stock,
any cash in lieu of fractional shares of Metzler Common Stock, and any
dividends or distributions with respect to LECG Common Stock or Metzler
Common Stock.
(g) No Liability. Neither Metzler nor LECG shall be liable to any holder
of shares of LECG Common Stock or Metzler Common Stock, as the case may be,
for such shares (or dividends or distributions with respect thereto)
delivered to a public official as required by any applicable abandoned
property, escheat or similar law.
2.3. Dissenters' Rights. The shares of LECG Common Stock ("DISSENTERS'
SHARES") held by any shareholder of LECG who has exercised dissenters' rights
pursuant to the CGCL (a "DISSENTING SHAREHOLDER") shall not be converted
pursuant to the Merger unless and until the holder thereof shall have failed
to perfect or shall have effectively withdrawn or lost such holder's rights to
dissent from the Merger under the CGCL, and shall be entitled to receive only
the payment provided for by the CGCL. If any such holder shall fail to perfect
or shall have effectively withdrawn or lost the right to dissent, the
Dissenters' Shares held by such Dissenting Shareholder shall thereupon be
treated as though such shares had been converted into shares of Metzler Common
Stock pursuant to the terms hereof.
ARTICLE 3.
Representations and Warranties of LECG
LECG represents and warrants to Metzler and Sub that the statements
contained in this Article 3 are true and correct, except as set forth in the
disclosure schedule delivered by LECG to Metzler (the "LECG DISCLOSURE
SCHEDULE"). The LECG Disclosure Schedule shall be arranged in paragraphs
corresponding to the numbered and lettered paragraphs contained in this
Article 3, and the disclosure in any paragraph shall qualify only the
corresponding paragraph in this Article 3.
3.1. Organization. Each of LECG and its Subsidiaries is a corporation duly
organized, validly existing and in good standing under the laws of the
respective jurisdiction of its incorporation, has all requisite corporate
power to own, lease and operate its property and to carry on its business as
now being conducted and as proposed to be conducted, and is duly qualified
and/or licensed to do business and is in good standing as a foreign
corporation in each jurisdiction in which the failure to be so qualified would
have a LECG Material Adverse Effect. Except as set forth on the LECG
Disclosure Schedule, neither LECG nor any of its Subsidiaries directly or
indirectly owns any equity or similar interest in, or any interest convertible
into or exchangeable or exercisable for, any corporation, partnership, joint
venture or other business association or entity, excluding securities in any
publicly traded company held for investment by LECG and comprising less than
one percent (1%) of the outstanding stock of such company.
3.2. LECG Capital Structure.
(a) The authorized capital stock of LECG consists of 40,000,000 shares of
common stock, par value $0.001 per share ("LECG COMMON STOCK"), and
5,000,000 shares of Preferred Stock, par value $0.001 per share ("LECG
PREFERRED STOCK"). As of June 30, 1998, (i) 13,027,867 shares of LECG
Common Stock were issued and outstanding, all of which are duly authorized,
validly issued, fully paid and nonassessable, (ii) there were options
outstanding under the LECG Stock Option Plans, entitling the
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optionees thereunder upon valid exercise to acquire in the aggregate
608,300 shares of LECG Common Stock at a weighted average exercise price of
$9.00 per share and (iii) no shares of LECG Common Stock were held by any
Subsidiary of LECG. No change in such capitalization has occurred since
such date other than the exercise and termination of stock options
outstanding. No shares of LECG Preferred Stock were issued and outstanding.
All shares of LECG Common Stock subject to issuance as specified above,
upon issuance on the terms and conditions specified in the instruments
pursuant to which they are issuable, shall be duly authorized, validly
issued, fully paid and nonassessable. There are no obligations, contingent
or otherwise, of LECG or any of its Subsidiaries to repurchase, redeem or
otherwise acquire any shares of LECG Common Stock or the capital stock of
any LECG Subsidiary or make any investment (in the form of a loan, capital
contribution or otherwise) in any such Subsidiary or any other entity. All
of the outstanding shares of capital stock of each of LECG's Subsidiaries
are duly authorized, validly issued, fully paid and nonassessable and all
such shares are owned by LECG free and clear of all Security Interests,
agreements, preemptive rights, and/or limitations in LECG's voting rights,
charges or other restrictions of any nature.
(b) Except as set forth in this Section 3.2 or as reserved for future
grants of options under the LECG Stock Option Plan or reserved for issuance
pursuant to LECG's Stock Purchase Plan, there are no equity securities of
any class of LECG or any of its Subsidiaries, or any security exchangeable
into or exercisable for such equity securities, issued, reserved for
issuance or outstanding. Except as set forth in this Section 3.2, there are
no options, warrants, equity securities, calls, rights, commitments or
agreements of any character to which LECG or any of its Subsidiaries is a
party or by which any of them are bound obligating LECG or any of its
Subsidiaries to issue, deliver or sell, or cause to be issued, delivered or
sold, additional shares of capital stock of LECG or any of its Subsidiaries
or obligating LECG or any of its Subsidiaries to grant, extend, accelerate
the vesting of or enter into any such option, warrant, equity security,
call, right, commitment or agreement. None of the Existing Options that are
not currently exercisable shall become exercisable as a result of the
consummation of the Merger. To the knowledge of LECG, there are no voting
trusts, proxies or other agreements or understandings with respect to the
shares of capital stock of LECG. All of the outstanding LECG Common Stock,
options or warrants were either registered under the Securities Act of
1933, as amended (the "SECURITIES ACT") or were issued pursuant to valid
exemptions from registration. LECG has taken all actions necessary such
that after the Effective Time there will not exist any rights of any nature
granting any Person a right to acquire the securities of LECG and/or its
Subsidiaries.
3.3. Authority and Status.
(a) The execution, delivery and performance by LECG of this Agreement and
each and every other agreement, document and instrument provided for herein
have been duly authorized and approved by the Board of Directors of LECG
subject only to the approval of the Merger by LECG's shareholders under
applicable provisions of LECG's Articles of Incorporation and the CGCL. The
Board of Directors of LECG has (i) determined that the Merger is fair to
and in the best interests of the shareholders of LECG and (ii) resolved to
submit the Merger to and recommend approval of the Merger by the
shareholders of LECG.
(b) LECG has the corporate power and authority to execute and deliver
this Agreement, to perform hereunder and, upon approval of the transactions
provided for herein by the shareholders of LECG, to consummate the
transactions contemplated hereby without any other corporate or shareholder
approval. Assuming this Agreement and each and every agreement, document or
instrument to be executed, delivered and performed by LECG in connection
herewith are valid and legally binding obligations of Metzler and Sub, this
Agreement and each and every agreement, document and instrument to be
executed, delivered and performed by LECG in connection herewith constitute
or will, when executed and delivered, constitute the valid and legally
binding obligation of LECG enforceable against it in accordance with their
respective terms, except as enforceability may be limited by applicable
equitable principles or by bankruptcy, insolvency, reorganization,
moratorium, or similar laws from time to time in effect affecting the
enforcement of creditors' rights generally. Attached hereto on the LECG
Disclosure Schedule are true, correct and complete copies of the current
Articles of Incorporation and Bylaws of LECG and each of its Subsidiaries.
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3.4. No Conflict; Required Filings and Consents.
(a) The execution and delivery of this Agreement by LECG does not, and
the consummation of the transactions contemplated by this Agreement will
not, (i) conflict with, or result in any violation or breach of, any
provision of the Articles of Incorporation or Bylaws of LECG; (ii) result
in any violation or breach of, require any consent or approval under, or
constitute (with or without notice or lapse of time, or both) a default (or
give rise to a right of termination, cancellation or acceleration of any
obligation or loss of any material benefit) under any of the terms,
conditions or provisions of any material note, bond, mortgage, indenture,
lease, contract or other agreement, instrument or obligation to which LECG
or any of its Subsidiaries is a party or by which any of them or any of
their properties or assets may be bound; or (iii) subject to the consents,
approvals, orders, authorizations, filings and registrations specified in
Section 3.4(b), conflict with or violate any permit, concession, franchise,
license, judgment, order, decree, statute, law, ordinance, rule or
regulation applicable to LECG or any of its Subsidiaries or any of their
properties or assets.
(b) Based on the representation of Metzler that neither the execution and
delivery of this Agreement, nor the consummation of the transactions
contemplated hereby would require Metzler to file a pre-merger notification
report under the Hart-Scott Rodino Antitrust Improvements Act of 1976, as
amended, no consent, approval, order or authorization of, or registration,
declaration or filing with, any court, administrative agency or commission
or other governmental authority or instrumentality ("GOVERNMENTAL ENTITY")
is required by or with respect to LECG or any of its Subsidiaries in
connection with the execution and delivery of this Agreement or the
consummation of the transactions contemplated hereby, except for (i) the
filing and declaration of effectiveness of the Registration Statement (as
defined in Section 3.23) with the Securities and Exchange Commission (the
"SEC") in accordance with the Securities Act; (ii) the filing of the
applicable Certificates of Merger with the California Department and the
Delaware Department; (iii) the filing of the Proxy Statement (as defined in
Section 3.23) with the SEC in accordance with the Securities Exchange Act
of 1934, as amended (the "EXCHANGE ACT"); and (iv) such consents,
approvals, orders, authorizations, registrations, declarations and filings
as may be required under applicable federal and state securities laws.
3.5. SEC Filings; Financial Statements.
(a) LECG has filed and made available to Metzler all forms, each
registration statement, schedule, report, proxy statement and document
required to be filed by LECG with the SEC since October 16, 1997
(collectively, the "LECG SEC REPORTS"). The LECG SEC Reports (i) at the
time filed, complied in all material respects with the applicable
requirements of the Securities Act and the Exchange Act, as the case may
be, and (ii) did not at the time they were filed (or if amended or
superseded by a filing prior to the date of this Agreement, then on the
date of such filing) contain any untrue statement of a material fact or
omit to state a material fact required to be stated in the LECG SEC Reports
or necessary in order to make the statements in the LECG SEC Reports, in
the light of the circumstances under which they were made, not misleading.
None of LECG's Subsidiaries is required to file any forms, reports or other
documents with the SEC. Since October 16, 1997, LECG has made all filings
with the SEC in a timely manner as required by law and no event has
occurred that requires an additional filing or any amendment to a prior
filing.
(b) Each of the consolidated financial statements (including, in each
case, any related notes) contained in the LECG SEC Reports, including any
LECG SEC Reports filed after the date of this Agreement until the Closing,
complied or will comply as to form in all material respects with the
applicable published rules and regulations of the SEC with respect thereto,
was or will be prepared in accordance with generally accepted accounting
principles applied on a consistent basis throughout the periods involved
(except as may be indicated in the notes to such financial statements or,
in the case of unaudited statements, as permitted for presentation in
Quarterly Reports on Form 10-Q), and fairly presented or will fairly
present the consolidated financial position of LECG and its Subsidiaries as
at the respective dates and the consolidated results of their operations
and cash flows for the periods indicated, except that the unaudited interim
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financial statements were or are subject to normal and recurring year-end
adjustments which were not or are not material in amount. The audited
balance sheet of LECG as of December 31, 1997 is referred to herein as the
"LECG BALANCE SHEET."
(c) LECG has provided Metzler with a consolidated balance sheet and
related statements of income, changes in shareholder's equity and cash
flows for LECG and each of its Subsidiaries as of and for the three month
period ended March 31, 1998 ("LATEST BALANCE SHEET"). The Latest Balance
Sheet and the related statement of income and cash flows are consistent
with the accounting policies used in preparing the consolidated financial
statements attached to the LECG SEC Reports and fairly present the results
for the interim period presented thereby, except that such financial
statements are subject to normal and recurring year-end adjustments which
are not material in amount.
3.6. Intentionally Omitted.
3.7. Absence of Certain Changes or Events. Since the date of the LECG
Balance Sheet, LECG and its Subsidiaries have conducted their businesses only
in the ordinary course and in a manner consistent with past practice and,
since such date, there has not been (i) any material damage, destruction or
loss (whether or not covered by insurance) with respect to LECG or any of its
Subsidiaries; (ii) any change by LECG in its accounting methods, principles or
practices; (iii) any increase in dividends or employee compensation or
benefits payable by LECG, except for normal increases in compensation
consistent, in amounts and timing, with historical practices; (iv) any
revaluation by LECG of any of its assets, including, without limitation,
writing down the value of capitalized software or inventory or writing off
notes or accounts receivable other than in the Ordinary Course of Business;
(v) any change in any material respect in which the business of LECG and its
Subsidiaries has been conducted, including, without limitation, billing of
clients or collection of accounts receivable, purchases of goods and services
or payment of accounts payable; (vi) any agreement and/or understanding
entered into which alters or amends any licensing or contractual arrangements
with respect to any LECG Intellectual Property Rights, other than in the
Ordinary Course of Business; (vii) any loss or change in the relationships
with any client, contractor or supplier that would constitute a LECG Material
Adverse Effect; or (viii) any other transaction, commitment, dispute, or any
other action or event or condition that would be reasonably likely to have a
LECG Material Adverse Effect.
3.8. Restrictions on Business Activities. There is no agreement, judgment,
injunction, order or decree binding upon LECG or any of its Subsidiaries which
has the effect of prohibiting or materially impairing any current or future
business practice of LECG or any of its Subsidiaries, any acquisition of
property by LECG or any of its Subsidiaries or the conduct of business by LECG
or any of its Subsidiaries as currently conducted or as proposed to be
conducted by LECG or any of its Subsidiaries.
3.9. Taxes.
(a) LECG and its Subsidiaries have, as of the date hereof, and will prior
to the Effective Time have, timely and accurately filed all federal, state,
foreign and local income, franchise, sales, real and personal property and
other tax returns and reports required to be filed by them prior to such
dates and have timely paid, or will prior to the Effective Time timely pay,
all taxes shown on such returns as owed for the periods of such returns,
including all withholding or other payroll related taxes shown on such
returns. The tax basis of all assets of LECG and the Subsidiaries as
reflected on their books and records is correct and accurate in all
material aspects. Except as described on the LECG Disclosure Schedule,
neither LECG nor any Subsidiary is, nor will any of them become, subject to
any additional taxes, interest, penalties or other similar charges with
respect to the tax returns and reports referred to in the first sentence of
this Section 3.9(a) that would individually or in the aggregate have a LECG
Material Adverse Effect. No assessments or notices of deficiency or other
communications have been received by LECG, nor have any been threatened,
with respect to any such tax return that has not been paid, discharged or
fully reserved on the LECG Balance Sheet, and no amendments or applications
for refund have been filed or are planned with respect to any such return.
LECG does not have any material liabilities for Taxes that have not been
accrued for or reserved on the LECG Balance Sheet, whether asserted or
unasserted, contingent or otherwise. Except as
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set forth on the LECG Disclosure Schedule, there are no agreements between
LECG or any Subsidiary and any taxing authority, including, without
limitation, the IRS, waiving or extending any statute of limitations with
respect to any tax return, and neither LECG nor any of its Subsidiaries has
filed any consent or election under the Code, including, without
limitation, any election under Section 341(f) of the Code.
(b) Neither LECG nor any of its Subsidiaries has made any payments and
none of them is obligated to make any payments, and none of them is a party
to any agreement that under certain circumstances could obligate it, or any
successor in interest, to make any parachute payments that will not be
deductible under Section 280G of the Code.
(c) LECG and its Subsidiaries (i) have withheld proper and accurate
amounts in compliance with the tax withholding provisions of all applicable
laws for all compensation paid to the officers and employees of LECG and
its Subsidiaries, (ii) have correctly and properly prepared and duly and
timely filed all returns and reports relating to those amounts withheld
from their officers and employees and to their employer liability for
employment taxes under the Tax Code and applicable state and local laws and
(iii) have duly and timely paid and remitted to the appropriate taxing
authorities the amounts withheld from their officers and employees and any
additional amounts that represent their employer liability under applicable
law for employment taxes.
(d) To the knowledge of LECG, no issue has been raised by the IRS, any
state or local taxing authority, or any other investigation or audit, that
will have, or can be expected to have, a LECG Material Adverse Effect.
(e) Neither LECG nor any of its Subsidiaries is a "United States real
property holding corporation" as defined in Section 897(c)(2) of the Code.
3.10. Intellectual Property.
(a) LECG and its Subsidiaries own or use under valid fully paid licenses
all patents, trademarks, trade names, service marks, copyrights and mask
works, all applications for and registrations of such patents, trademarks,
trade names, service marks, copyrights and mask works, and all processes,
formulae, methods, schematics, technology, know-how, computer software
programs or applications, algorithms, routines, and source code, and
tangible or intangible proprietary information or material that are
necessary to conduct the business of LECG and its Subsidiaries as currently
conducted or planned to be conducted, excluding commercially available
"shrink-wrap" and office automation software (the "LECG INTELLECTUAL
PROPERTY RIGHTS").
(b) There are no claims or demands, and to the knowledge of LECG no
reasonable basis for any such claim or demand, of any Person that any of
the LECG Intellectual Property Rights, or any processes or equipment used
by LECG, any of the services of LECG or its Subsidiaries or any of the
software or other proprietary rights or intellectual property developed by
LECG or its Subsidiaries, infringes or conflicts in any way with 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. LECG or its Subsidiaries own all right,
title and interest in and to the LECG Intellectual Property Rights, other
than the items expressly identified as such on the LECG Disclosure
Schedule, as to which LECG or its Subsidiaries has a valid, assignable
license. Each of LECG's and its Subsidiaries' rights in and to such LECG
Intellectual Property Rights are freely assignable in their respective own
names, as applicable, including the right to create derivatives, and
neither LECG nor any of its Subsidiaries is under any obligation to pay any
royalty or other compensation to any third party or to obtain any approval
or consent for use of licensing of any of the LECG Intellectual Property
Rights. All of the interests of LECG and its Subsidiaries in the LECG
Intellectual Property Rights are free and clear of all Security Interests,
and are not currently being challenged or, to the knowledge of LECG
infringed in any way or involved in any pending legal or
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administrative proceedings before any court or governmental agency. Except
for licenses to clients in the Ordinary Course of Business, no current
licenses for the use of any such rights have been granted by LECG or its
Subsidiaries to any third parties, and to the knowledge of LECG none of the
LECG Intellectual Property Rights is being used by any other Person.
(c) It is the policy of LECG and its Subsidiaries to have each of their
employees sign an employee nondisclosure and work-for-hire agreements
substantially in the form attached to the LECG Disclosure Schedule. No
employees or independent contractors of either LECG or any of its
Subsidiaries have any valid claims or rights to any of the LECG
Intellectual Property Rights. To the knowledge of LECG and its
Subsidiaries, no employee of either LECG or any of its Subsidiaries 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 of such employee to LECG
or its Subsidiaries under any agreement to which currently he or she is a
party or otherwise.
(d) Neither LECG nor any of its Subsidiaries is or will be, as a result
of the execution and delivery of this Agreement or the performance of its
obligations under this Agreement, in breach of any license, sublicense or
other agreement relating to the LECG Intellectual Property Rights or any
license, sublicense or other agreement pursuant to which LECG or any of its
Subsidiaries is authorized to use any third party patents, trademarks or
copyrights, including software, which are used in the manufacture of,
incorporated in, or form a part of any product of LECG or any of its
Subsidiaries.
(e) All patents, trademarks, service marks, copyrights, trade secrets and
other proprietary rights held by LECG or any of its Subsidiaries which LECG
considers to be material to its business are valid and enforceable. Neither
LECG nor any of its Subsidiaries (i) is a party to any suit, action or
proceeding which involves a claim of infringement of any patent, trademark,
service mark or copyright or the violation of any trade secret or other
proprietary right of any third party; or (ii) has any knowledge that the
marketing, licensing, sale, offer for sale, or use of any of its services
or products infringes any patent, trademark, service mark, copyright, trade
secret or other proprietary right of any third party.
3.11. Agreements, Contracts and Commitments. The LECG Disclosure Schedule
contains a true and complete list of all contracts, agreements, commitments
and other instruments (identified by title, date and parties) (whether oral or
written), excluding customer engagement contracts that are terminable by
either party upon reasonable notice, to which LECG or its Subsidiaries is a
party that involve a receipt or an expenditure by LECG or its Subsidiaries or
require the performance of services or delivery of goods to, by, through, on
behalf of or for the benefit of LECG or its Subsidiaries, which in each case
relates to a contract, agreement, commitment or instrument that requires
payments in excess of $100,000 per year or provides for receipts in excess of
$100,000 per year. The LECG Disclosure Schedule also identifies (identified by
title, date and parties) (whether oral or written) all:
(a) leases, rental agreements or other contracts or commitments affecting
the ownership or leasing of, title to or use of any interest in real or
personal property with payments equal to or greater than $8,000 per month
and all maintenance or service agreements relating to any real or personal
property with payments equal to or greater than $8,000 per month;
(b) contracts or commitments providing for payments by LECG or its
Subsidiaries based in any manner upon the sales, purchases, receipts,
income or profits of LECG or its Subsidiaries other than those entered into
in the Ordinary Course of Business between LECG and the principals and
experts servicing LECG clients;
(c) franchise agreements, marketing agreements or royalty agreements;
(d) employment contracts or commitments regarding employees or
independent contractors (except to the extent listed pursuant to Section
3.15) (including without limitation any standard form contracts such as
employee nondisclosure agreements, provided that to the extent
substantially all employees have executed any such standard form, a copy of
such form is attached in lieu of each individual contract and LECG
represents and warrants that substantially all employees have executed such
form), and any other contracts,
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plans or commitments providing for any continuing payment of any type or
nature, including, without limitation, any severance, termination,
parachute, or other payments (whether due to a change in control,
termination or otherwise) and bonuses and vested commissions.
(e) instruments or arrangements evidencing or related to Indebtedness for
money borrowed or to be borrowed, whether directly or indirectly, by way of
purchase-money obligation, guaranty, subordination, conditional sale,
lease-purchase or otherwise;
(f) joint product development agreements with any party other than
Metzler;
(g) any written arrangement concerning non-competition;
(h) written arrangements not disclosed on the LECG Disclosure Schedule
pursuant to any other provision in this Section 3.11 under which the
consequences of a default or termination could have a LECG Material Adverse
Effect;
(i) agreements with any employee, the benefits of which are contingent
on, or the terms of which are materially altered upon, the occurrence of a
transaction of the nature contemplated by this Agreement involving LECG or
its Subsidiaries; and
(j) agreements or Plans the benefits of which will be increased or
accelerated by the occurrence of the transactions contemplated by this
Agreement.
The contracts, agreements, commitments and other instruments listed or
required to be listed on the LECG Disclosure Schedule are herein referred to
as the "MATERIAL CONTRACTS."
All the Material Contracts are valid and binding upon LECG or the applicable
Subsidiary and upon the other parties thereto and are in full force and effect
and enforceable in accordance with their terms, except as enforceability may
be affected by bankruptcy, insolvency, moratorium or similar laws affecting
creditors rights generally and general principles of equity relating to the
availability of equitable remedies. Except as set forth on the LECG Disclosure
Schedule, none of LECG, the applicable Subsidiary and any other party to any
such contract, commitment or arrangement has breached any provision of, or is
in default under, the terms thereof; and except as set forth on the LECG
Disclosure Schedule, there are no existing facts or circumstances that would
prevent the work in process of LECG or its Subsidiaries or their contracts and
agreements from maturing upon performance by LECG or its Subsidiaries into
accounts receivable collectible in the aggregate in amounts consistent in all
material respects with historical experience. Except as set forth on the LECG
Disclosure Schedule, there are no material contracts or commitments that
require the performance of services or provision of products by LECG at a
direct cost for each such contract or commitment reasonably expected to be in
excess of the revenue to be derived pursuant to the terms of such contract or
commitment. Except for terms specifically described on the LECG Disclosure
Schedule, neither LECG nor any Subsidiary has received any payment from any
contracting party in connection with or as an inducement for entering into any
contract, agreement, policy or instrument except for payment for actual
services rendered or to be rendered by LECG or its Subsidiaries consistent
with amounts historically charged for such services. Except for those Material
Contracts set forth on the LECG Disclosure Schedule and identified as "Fixed-
Rate Engagements" (the "MATERIAL FIXED-RATE ENGAGEMENTS"), neither LECG nor
its Subsidiaries is a party to any fixed fee or capped price contracts or
engagement arrangements involving work which if billed at LECG's normal hourly
rates would exceed $250,000 in annual revenues, nor does LECG or its
Subsidiaries have any outstanding offers, bids or proposals to perform any
services on a fixed fee or capped basis exceeding such amount. The LECG
Disclosure Schedule identifies each Material Fixed-Rate Engagement and sets
forth the number of hours remaining to complete the work required thereunder
and the amount of fees uncollected with respect thereto. The LECG Disclosure
Schedule also sets forth the amount of client payments to LECG or its
Subsidiaries through the date hereof with respect to services not yet
performed by LECG or its Subsidiaries, which payments individually or in the
aggregate exceed $100,000.
3.12. Ownership of Assets. LECG and its Subsidiaries have title to all of
their respective properties and assets used or useful in their respective
businesses, other than leased property, licensed property and immaterial items
of personal property, in each case free and clear of any liens or Security
Interests, except as disclosed or
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reserved against in the Latest Balance Sheet and except for liens arising from
current taxes not yet due and payable and other immaterial liens. Except as
disclosed on the LECG Disclosure Schedule, all material assets owned or leased
by LECG or any Subsidiary are in good operating condition and reasonable state
of repair, subject only to ordinary wear and tear. Neither LECG nor any
Subsidiary has received any notice of violation of any applicable zoning
regulation, ordinance or other law, regulation or requirement relating to
their operations and properties, whether owned or leased. All of the accounts
receivable of LECG and its Subsidiaries as of the Effective Time will reflect
actual transactions and will have arisen in the Ordinary Course of Business.
3.13. Litigation. The LECG Disclosure Schedule sets forth each instance in
which LECG or any of its Subsidiaries (i) is subject to any unsatisfied
judgment, order, decree, stipulation, injunction or charge or (ii) is a party
to or, is threatened to be made a party to, any charge, complaint, action,
suit, proceeding, hearing, or investigation of or in any court or quasi-
judicial or administrative agency of any Federal, state, local, or foreign
jurisdiction or before any arbitrator. None of the charges, complaints,
actions, suits, proceedings, hearings, and investigations set forth on the
LECG Disclosure Schedule could reasonably be expected to result in any LECG
Material Adverse Effect. LECG has no knowledge of any basis on which such
charge, complaint, action, suit, proceeding, hearing, or investigation may be
brought or threatened against LECG or its Subsidiaries.
3.14. Intentionally Omitted.
3.15. Employees; Employment Matters.
(a) Except as disclosed on the LECG Disclosure Schedule, neither LECG nor
its Subsidiaries have any unsatisfied Liability to any previously
terminated employee or independent contractor. LECG and its Subsidiaries
have disclosed all written employee handbooks, policies, programs and
arrangements to Metzler.
(b) No key employee or group of employees has informed LECG and its
Subsidiaries of any plans to terminate their employment with LECG or its
Subsidiaries as a result of the transactions contemplated hereby or
otherwise. Neither LECG nor its Subsidiaries are a party to or bound by any
collective bargaining agreement and neither LECG nor its Subsidiaries have
experienced any strikes, grievances, other collective bargaining disputes
or claims of unfair labor practices. Neither LECG nor its Subsidiaries have
any knowledge of any organizational effort presently being made or
threatened by or on behalf of any labor union with respect to employees of
LECG and its Subsidiaries.
(c) All persons employed by LECG and its Subsidiaries are employees at
will or otherwise employed such that LECG and its Subsidiaries may
terminate their employment at any time, with or without cause, without
creating any material cause of action against LECG and its Subsidiaries or
otherwise giving rise to any material liability of LECG and its
Subsidiaries for wrongful discharge, breach of contract or tort.
(d) Except as disclosed on the LECG Disclosure Schedule, LECG and its
Subsidiaries have complied in all material respects with all applicable
laws relating to labor, including, without limitation, any requirements of
the Immigration and Nationalization Act of 1952, as amended by the
Immigration Reform and Control Act of 1986 and the regulations promulgated
thereunder, any provisions thereof relating to wages, termination pay,
vacation pay, fringe benefits, collective bargaining and the payment and/or
accrual of the same and all insurance and all other costs and expenses
applicable thereto, and neither LECG nor its Subsidiaries are liable for
any arrearage, or any costs or penalties for failure to comply with any of
the foregoing. Without limiting the generality of the foregoing, neither
LECG nor its Subsidiaries have incurred a violation of Part 6 of Subtitle B
of Title I of ERISA ("COBRA") or other applicable state insurance
continuation law. No COBRA or other state insurance continuation law
violation exists or will exist with respect to any employees of either LECG
and its Subsidiaries prior to and including the Effective Time, nor will
any such violation occur as a result of the transactions contemplated
hereby.
(e) Each Person whom LECG or its Subsidiaries has retained as an
independent contractor during the past three years qualifies as an
independent contractor and not as an employee of LECG or its Subsidiaries
under the Code and all applicable state laws. Neither the execution of this
Agreement nor the consummation of the transactions contemplated hereby
shall cause LECG or its Subsidiaries to be in breach of any
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agreement with any employment, contractor or consultant or cause LECG or
its Subsidiaries to be liable to pay any severance or other amount to any
employee, contractor or consultant of LECG or its Subsidiaries.
3.16. Employee Benefit Plans. LECG and each of its Plans have at all times
complied in all material respects with all applicable laws relating to labor
and employee benefits, including without limitation, all 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 all other costs and expenses applicable
thereto.
3.17. Licenses and Permits; Compliance with Law. LECG and its Subsidiaries
hold all licenses, certificates, permits, franchises and rights from all
appropriate federal, state or other public authorities necessary for the
conduct of their respective businesses and the use of their respective assets,
except for such licenses, certificates, permits, franchises and rights the
absence of which would not individually or in the aggregate have a LECG
Material Adverse Effect. Except for any matters which will not have a LECG
Material Adverse Effect, LECG and its Subsidiaries presently are conducting
their respective businesses so as to comply with all applicable statutes,
ordinances, rules, regulations and orders of any governmental authority.
Further, LECG and its Subsidiaries are not presently charged with, or under
governmental investigation with respect to, any actual or alleged violation of
any statute, ordinance, rule or regulation, or presently the subject of any
pending or, to the knowledge of LECG, threatened adverse proceeding by any
regulatory authority having jurisdiction over their respective businesses,
properties or operations. Neither the execution and delivery of this Agreement
nor the consummation of the transactions contemplated hereby will result in
the termination of any license, certificate, permit, franchise or right held
by LECG or any of its Subsidiaries, and all such licenses, certificates,
permits, franchises and rights will inure to the benefit of the Surviving
Corporation after the consummation of the transactions contemplated by this
Agreement.
3.18. Intentionally Omitted.
3.19. Related Parties.
(a) Except as set forth on the LECG Disclosure Schedule or in the LECG
SEC Reports, to the knowledge of LECG, no shareholder owning greater than a
five-percent (5%) interest in LECG, no Affiliate or member of the immediate
family of any such shareholder, and no officer or director or member of the
immediate family of such officer or director of LECG or any Subsidiary
possesses, directly or indirectly, any beneficial interest in, or is a
director, officer or employee of, or member of the immediate family of a
director, officer or employee of, any corporation, partnership, firm,
association or business organization that is a client, supplier, customer,
lessor, lessee, lender, creditor, borrower, debtor or contracting party
with or of LECG or any Subsidiary (except as a shareholder holding less
than a one-percent (1%) interest in a corporation whose shares are traded
on a national or regional securities exchange or in the over-the-counter
market), other than arrangements with LECG principals and experts in the
Ordinary Course of Business.
(b) LECG has provided to each of its "Affiliates" as identified in
Section 6.12 a copy of the Affiliates Letter and has obtained their
agreement to execute and provide the Affiliates Letter to Metzler 31 days
prior to the date of the LECG Shareholder Meeting.
3.20. Pooling of Interests. LECG is not aware of any facts or circumstances
in respect of it or its accounting procedures, or transactions in its capital
stock, which would have the effect of precluding accounting for the
transactions contemplated hereby as a "pooling of interests."
3.21. Complete Disclosure. No statement contained herein or in any
certificate, schedule, list, exhibit or other instrument furnished or required
to be furnished to Metzler pursuant to the provisions hereof contains, or will
at the time it is furnished contain, any untrue statement of any material fact
or omits or will omit to state any fact necessary to make the statements
herein or therein not false or misleading. As used in this Section, "material"
means material to the financial condition, business, properties, rights or
operations of LECG and its Subsidiaries, taken as a whole.
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3.22. No Special Shareholder Rights. Except as disclosed on the LECG
Disclosure Schedule, LECG has no agreement with any individual or entity that
grants such person any rights as a shareholder of LECG Common Stock that are
in addition to such holder's rights under LECG's Articles of Incorporation or
Bylaws (including, without limitation, registration rights, preemptive rights,
put rights, rights of co-sale or rights to Board representation).
3.23. Registration Statement; Proxy Statement/Prospectus. The information
supplied by LECG for inclusion in the registration statement on Form S-4
pursuant to which shares of Metzler Common Stock issuable in the Merger will
be registered with the SEC (the "REGISTRATION STATEMENT") shall not at the
time the Registration Statement is declared effective by the SEC contain any
untrue statement of a material fact or omit to state any material fact
required to be stated in the Registration Statement or necessary in order to
make the statements in the Registration Statement, not misleading. The
information supplied by LECG for inclusion in the joint proxy
statement/prospectus (the "PROXY STATEMENT") to be sent to the shareholders of
LECG and the stockholders of Metzler in connection with the meetings of their
shareholders and stockholders, respectively, to consider this Agreement and
the Merger (the "LECG SHAREHOLDERS MEETING" and the "METZLER STOCKHOLDERS
MEETING," respectively, and, collectively, the "STOCKHOLDERS MEETINGS") shall
not, on the date the Proxy Statement is first mailed to shareholders of LECG
and the stockholders of Metzler, at the time of the Stockholders Meetings and
at the Effective Time, contain any statement which, at such time and in light
of the circumstances under which it was made, is false or misleading with
respect to any material fact, or omit to state any material fact necessary in
order to make the statements made in the Proxy Statement not false or
misleading, or omit to state any material fact necessary to correct any
statement in any earlier communication with respect to the solicitation of
proxies for the Stockholders Meetings which has become false or misleading. If
at any time prior to the Effective Time any event relating to LECG or any of
its Affiliates, officers or directors should be discovered by LECG which
should be set forth in an amendment to the Registration Statement or a
supplement to the Proxy Statement, LECG shall promptly inform Metzler.
3.24. Intentionally Omitted.
3.25. Intentionally Omitted.
3.26. Suppliers and Clients. LECG shall provide Metzler with a true and
accurate list of (i) all of the clients that generated at least $250,000 in
revenues to LECG in any of the last three calendar years with whom LECG and
its Subsidiaries have had engagements since December 31, 1995 and (ii) a list
of all LECG clients with billings in 1998 in excess of $100,000. Since the
date of the LECG Latest Balance Sheet, no client of LECG and its Subsidiaries
accounting for more than 5% of LECG's revenues in fiscal 1997, has canceled,
materially reduced the scope of, or otherwise adversely modified its
relationship with LECG or its Subsidiaries and, no such Person has any
intention to do so, and there are no disputes or problems or notices of
dissatisfaction with or from any such client of LECG or its Subsidiaries and
the consummation of the transactions contemplated hereby will not, to the
knowledge of LECG, adversely affect any relationships with such clients.
3.27. Warranty; Unbillable Work. All services rendered by LECG and its
Subsidiaries have been in material conformity with all applicable contractual
commitments and all warranties, and LECG and its Subsidiaries have no
Liability for damages in connection therewith, subject to the reserve for
client claims set forth on the face of the LECG Balance Sheet. LECG and its
Subsidiaries are not obligated to perform nonbillable client service work
(under the terms of the client agreement or necessary in order to maintain the
client relationship), in order to correct work previously performed that was
incorrect or deficient, to complete work in excess of the fixed rate limit
with respect to a particular project or otherwise, other than reasonable and
customary efforts to maintain client satisfaction consistent with the size and
scope of a particular project and consistent with maintaining the reasonable
profitability of such project.
3.28. Year 2000 Compliance. LECG and its Subsidiaries have conducted a
reasonable review of all operating codes, programs, utilities and other
software as well as all hardware and systems utilized by LECG and its
Subsidiaries (collectively, "SYSTEMS") to determine whether such Systems are
designed to record, store,
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process, and present calendar dates falling on or after January 1, 2000 in the
same manner, and with the same functionality, as provided on or before
December 31, 1999, and are designed to not lose functionality or degrade in
performance as a consequence of such software operating at a date later than
December 31, 1999 (such design and performance being referred to as "Y-2000
COMPLIANT"). To the extent such review identified Systems that are not Y-2000
Compliant, LECG and its Subsidiaries have taken, or are planning to take,
appropriate corrective action with respect to such Systems, and the costs of
such corrective action will not exceed, in the aggregate, $250,000.
ARTICLE 4.
Representations and Warranties of Metzler and Sub
Metzler and Sub represent and warrant to LECG that the statements contained
in this Article 4 are true and correct, except as set forth in the disclosure
schedule delivered by Metzler to LECG (the "METZLER DISCLOSURE SCHEDULE"). The
Metzler Disclosure Schedule shall be arranged in paragraphs corresponding to
the numbered and lettered paragraphs contained in this Article 4, and the
disclosure in any paragraph shall qualify only the corresponding paragraph in
this Article 4.
4.1. Organization. Each of Metzler, Sub and Metzler's other Subsidiaries is
a corporation duly organized, validly existing and in good standing under the
laws of the jurisdiction of its incorporation, has all requisite corporate
power to own, lease and operate its property and to carry on its business as
now being conducted and as proposed to be conducted, and is duly qualified to
do business and is in good standing as a foreign corporation in each
jurisdiction in which the failure to be so qualified would have a Metzler
Material Adverse Effect. Except as set forth in the Metzler SEC Reports (as
defined in Section 4.4) or the Metzler Disclosure Schedule, neither Metzler
nor any of its Subsidiaries directly or indirectly owns any equity or similar
interest in, or any interest convertible into or exchangeable or exercisable
for, any corporation, partnership, joint venture or other business association
or entity, excluding securities in any publicly traded company held for
investment by Metzler or any of its Subsidiaries and comprising less than one
percent (1%) of the outstanding stock of such company.
4.2. Metzler Capital Structure.
(a) The authorized capital stock of Metzler consists of 75,000,000 shares of
Metzler Common Stock $0.001 par value ("METZLER COMMON STOCK") and 3,000,000
shares of Preferred Stock, $0.001 par value ("METZLER PREFERRED STOCK"). As of
June 30, 1998, (i) approximately 22,450,000 shares of Metzler Common Stock
were issued and outstanding, all of which are validly issued, fully paid and
nonassessable, (ii) no shares of Metzler Common Stock were held in the
treasury of Metzler or by Subsidiaries of Metzler and (iii) an amount equal to
25% of the outstanding shares of Metzler Common Stock were reserved for future
issuance pursuant to stock options granted and outstanding under Metzler's
stock option plans (the "METZLER OPTION PLANS"). As of the date of this
Agreement, no shares of Metzler Preferred Stock are issued and outstanding.
All shares of Metzler Common Stock subject to issuance as specified above,
upon issuance on the terms and conditions specified in the instruments
pursuant to which they are issuable, shall be duly authorized, validly issued,
fully paid and nonassessable. There are no obligations, contingent or
otherwise, of Metzler or any of its Subsidiaries to repurchase, redeem or
otherwise acquire any shares of Metzler Common Stock or the capital stock of
any Metzler Subsidiary. All of the outstanding shares of capital stock of each
of Metzler's Subsidiaries are duly authorized, validly issued, fully paid and
nonassessable and all such shares are owned by Metzler or a Subsidiary of
Metzler free and clear of all Security Interests, agreements, limitations in
Metzler's voting rights, charges or other restrictions of any nature.
(b) Except as set forth in this Section 4.2 or as reserved for future grants
of options under the Metzler Option Plans or future sales under the Metzler
Purchase Plan, there are no equity securities of any class of Metzler or any
of its respective Subsidiaries, or any security exchangeable into or
exercisable for such equity securities, issued, reserved for issuance or
outstanding. Except as set forth in this Section 4.2 or in the Metzler
Disclosure
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Schedule, there are no options, warrants, equity securities, calls, rights,
commitments or agreements of any character to which Metzler or any of its
respective Subsidiaries is a party or by which any of them are bound
obligating Metzler or any of its respective Subsidiaries to issue, deliver or
sell, or cause to be issued, delivered or sold, additional shares of capital
stock of Metzler or any of its respective Subsidiaries or obligating Metzler
or any of its respective Subsidiaries to grant, extend, accelerate the vesting
of or enter into any such option, warrant, equity security, call, right,
commitment or agreement. To the knowledge of Metzler, there are no voting
trusts, proxies or other agreements or understandings with respect to the
shares of capital stock of Metzler.
4.3. Authority; No Conflict; Required Filings and Consents.
(a) Metzler and Sub have all requisite corporate power and authority to
enter into this Agreement and to consummate the transactions contemplated by
this Agreement. The execution and delivery of this Agreement and the
consummation of the transactions contemplated by this Agreement have been duly
authorized by all necessary corporate action on the part of Metzler and Sub,
subject only to the approval of the shares to be issued in the Merger by
Metzler's shareholders under applicable provisions of the By-Laws of the
National Association of Securities Dealers, as amended. This Agreement has
been duly executed and delivered by Metzler and Sub and constitutes the valid
and binding obligation of Metzler and Sub, enforceable in accordance with its
terms, except as such enforceability may be limited by (i) bankruptcy laws and
other similar laws affecting creditors' rights generally and (ii) general
principles of equity, regardless of whether asserted in a proceeding in equity
or at law.
(b) The execution and delivery of this Agreement by Metzler and Sub does
not, and the consummation of the transactions contemplated by this Agreement
will not, (i) conflict with, or result in any violation or breach of any
provision of the Certificate of Incorporation or Bylaws of Metzler or
certificate or Bylaws of Sub, (ii) result in any violation or breach of, or
constitute (with or without notice or lapse of time, or both) a default (or
give rise to a right of termination, cancellation or acceleration of any
obligation or loss of any material benefit) under any of the terms, conditions
or provisions of any note, bond, mortgage, indenture, lease, contract or other
agreement, instrument or obligation to which Metzler or any of its respective
Subsidiaries is a party or by which any of them or any of their properties or
assets may be bound, or (iii) subject to the consents, approvals, orders,
authorizations, filings and registrations specified in Section 4.3.(c),
conflict with or violate any permit, concession, franchise, license, judgment,
order, decree, statute, law, ordinance, rule or regulation applicable to
Metzler or any of its respective Subsidiaries or any of their properties or
assets, except in the case of clause (ii) for any such violations, breaches,
defaults, terminations, cancellations or accelerations which in the aggregate
would not be reasonably likely to have a Metzler Material Adverse Effect, or a
material adverse effect on the ability of Metzler or Sub to consummate the
transactions contemplated by this Agreement.
(c) No consent, approval, order or authorization of, or registration,
declaration or filing with, any Governmental Entity is required by or with
respect to Metzler or any of its Subsidiaries in connection with the execution
and delivery of this Agreement or the consummation of the transactions
contemplated hereby, except for (i) the filing of the Registration Statement
with the SEC in accordance with the Securities Act, (ii) the filing of the
Certificates of Merger with the California Department and the Delaware
Department, (iii) the filing of the Proxy Statement with the SEC in accordance
with the Exchange Act, (iv) such consents, approvals, orders, authorizations,
registrations, declarations and filings as may be required under applicable
federal and state securities laws and the laws of any foreign country, (v)
applicable Blue Sky laws and (vi) such other consents, authorizations,
filings, approvals and registrations which in the aggregate, if not obtained
or made, would not be reasonably likely to have a Metzler Material Adverse
Effect or a material adverse effect on the parties' ability to consummate the
transactions contemplated by this Agreement.
4.4. Sec Filings; Financial Statements.
(a) Metzler has filed and made available to LECG all forms, reports and
documents required to be filed by Metzler with the SEC since July 26, 1996,
(collectively, the "METZLER SEC REPORTS"). The Metzler SEC Reports (i) at the
time filed, complied in all material respects with the applicable requirements
of the Securities
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Act and the Exchange Act, as the case may be, and (ii) did not at the time
they were filed (or if amended or superseded by a filing prior to the date of
this Agreement, then on the date of such filing) contain any untrue statement
of a material fact or omit to state a material fact required to be stated in
the Metzler SEC Reports or necessary in order to make the statements in the
Metzler SEC Reports, in the light of the circumstances under which they were
made, not misleading.
(b) Each of the consolidated financial statements (including, in each case,
any related notes) contained in the Metzler SEC Reports, including any Metzler
SEC Reports filed after the date of this Agreement until the Closing, complied
or will comply as to form in all material respects with the applicable
published rules and regulations of the SEC with respect thereto, was or will
be prepared in accordance with generally accepted accounting principles
applied on a consistent basis throughout the periods involved (except as may
be indicated in the notes to such financial statements or, in the case of
unaudited statements, as permitted for presentation in Quarterly Reports on
Form 10-Q), and fairly presented or will fairly present the consolidated
financial position of Metzler and its Subsidiaries as at the respective dates
and the consolidated results of its operations and cash flows for the periods
indicated, except that the unaudited interim financial statements were or are
subject to normal and recurring year-end adjustments which were not or are not
expected to be material in amount. The audited balance sheet of Metzler as of
December 31, 1997 is referred to herein as the "METZLER BALANCE SHEET."
4.5. Absence of Certain Changes or Events. Since the date of the Metzler SEC
Reports there has not been any transaction, commitment, dispute or any other
event or condition that individually or in the aggregate constitutes a Metzler
Material Adverse Effect.
4.6. Litigation. Except as described in the Metzler Disclosure Schedule,
there is no action, suit or proceeding, claim, arbitration or, to the
knowledge of Metzler, investigation against Metzler or any of its Subsidiaries
pending or as to which Metzler or any Subsidiary has received any written
notice of assertion. Except as disclosed in the Metzler Disclosure Schedule,
neither Metzler nor any of its Subsidiaries is subject to any outstanding
order, writ, injunction or decree which, insofar as can be reasonably
foreseen, individually or in the aggregate, would have a Metzler Material
Adverse Effect.
4.7. Licenses and Permits; Compliance with Law. Metzler and its Subsidiaries
hold all licenses, certificates, permits, franchises and rights from all
appropriate federal, state or other public authorities necessary for the
conduct of their respective businesses and the use of their respective assets,
except for such licenses, certificates, permits, franchises and rights the
absence of which would not individually or in the aggregate have a Metzler
Material Adverse Effect. Except for any matters which will not have a Metzler
Material Adverse Effect, Metzler and its Subsidiaries presently are conducting
their respective businesses so as to comply with all applicable statutes,
ordinances, rules, regulations and orders of any governmental authority.
Further, Metzler and its Subsidiaries are not presently charged with, or under
governmental investigation with respect to, any actual or alleged violation of
any statute, ordinance, rule or regulation, or presently the subject of any
pending or, to the knowledge of Metzler, threatened adverse proceeding by any
regulatory authority having jurisdiction over their respective businesses,
properties or operations. Neither the execution and delivery of this Agreement
nor the consummation of the transactions contemplated hereby will result in
the termination of any license, certificate, permit, franchise or right held
by Metzler or any of its Subsidiaries, and all such licenses, certificates,
permits, franchises and rights will inure to the benefit of the Surviving
Corporation after the consummation of the transactions contemplated by this
Agreement.
4.8. Pooling of Interests. Metzler is not aware of any facts or
circumstances in respect of it or its accounting procedures which would have
the effect of precluding accounting for the transactions contemplated hereby
as a "pooling of interests."
4.9. Registration Statement; Proxy Statement/Prospectus. The information
supplied by Metzler (including information concerning Sub) for inclusion in
the Registration Statement shall not at the time the Registration Statement is
declared effective by the SEC contain any untrue statement of a material fact
or omit to state any material fact required to be stated in the Registration
Statement or necessary in order to make the statements in
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the Registration Statement, not misleading. The information supplied by
Metzler (including information concerning Sub) for inclusion in the Proxy
Statement shall not, on the date the Proxy Statement is first mailed to the
shareholders of LECG and the stockholders of Metzler, at the time of the
Stockholders' Meetings and at the Effective Time, contain any statement which,
at such time and in light of the circumstances under which it was made, is
false or misleading with respect to any material fact, or omit to state any
material fact necessary in order to make the statements made in the Proxy
Statement not false or misleading, or omit to state any material fact
necessary to correct any statement in any earlier communication with respect
to the solicitation of proxies for the Stockholders' Meetings which has become
false or misleading. If at any time prior to the Effective Time any event
relating to Metzler or any of its Affiliates, officers or directors should be
discovered by Metzler which should be set forth in an amendment to the
Registration Statement or a supplement to the Proxy Statement, Metzler shall
promptly inform LECG.
4.10. Complete Disclosure. No statement contained herein or in any
certificate, schedule, list, exhibit or other instrument furnished or required
to be furnished to LECG pursuant to the provisions hereof contains, or will at
the time it is furnished contain, any untrue statement of any material fact or
omits or omit to state any fact necessary to make the statements herein or
there not false or misleading. As used in this Section, "material" means
material to the financial condition, business, properties, rights or
operations of Metzler and its Subsidiaries, taken as a whole.
ARTICLE 5.
Conduct of Business
5.1. Covenants of LECG. During the period from the date of this Agreement
and continuing until the earlier of the termination of this Agreement or the
Effective Time, LECG agrees as to itself and its Subsidiaries (except to the
extent that Metzler shall otherwise consent in writing), to carry on its
business in the usual, regular and ordinary course in substantially the same
manner as previously conducted, to pay its debts and taxes when due, subject
to good faith disputes over such debts or taxes, to pay or perform its other
obligations when due, and, to the extent consistent with such business, to use
all reasonable efforts consistent with past practices and policies to (i)
preserve intact its present business organization, (ii) keep available the
services of its present officers and key employees, (iii) maintain its
properties, (iv) keep its insurance in force, and (v) preserve its
relationships with clients, suppliers, distributors, licensors, licensees, and
others having business dealings with it. LECG shall promptly notify Metzler of
any event or occurrence not in the Ordinary Course of Business of LECG or its
Subsidiaries, where such event or occurrence would result in a breach of any
covenant of LECG or its Subsidiaries, set forth in this Agreement or cause any
representation or warranty of LECG, set forth in this Agreement to be untrue
as of the date of, or giving effect to, such event or occurrence. Except as
expressly contemplated by this Agreement, LECG shall not, without the prior
written consent of Metzler which shall not be unreasonably withheld:
(a) Accelerate, amend or change the period of exercisability of options
or restricted stock granted under any employee stock plan of such party or
authorize cash payments in exchange for any options granted under any of
such plans except as required by the terms of such plans or any related
agreements in effect as of the date of this Agreement;
(b) Transfer or license to any Person or otherwise extend, amend or
modify any material rights to the LECG Intellectual Property Rights, other
than the grant of non-exclusive licenses in the Ordinary Course of Business
substantially consistent with past practices; issue any shares of LECG
capital stock or capital stock of any Subsidiary, or any securities which
may be exchanged or exercised for or converted into LECG capital stock or
the capital stock of any Subsidiary (including, without limitation, any
options or warrants) other than shares of LECG Common Stock issuable upon
exercise of Existing Options;
(c) Declare or pay any dividends on or make any other distributions
(whether in cash, stock or property) in respect of any of its capital
stock, or split, combine or reclassify any of its capital stock or issue or
authorize the issuance of any other securities in respect of, in lieu of or
in substitution for shares of
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its capital stock, or purchase or otherwise acquire, directly or
indirectly, any shares of its capital stock, provided however that LECG may
grant options under the terms of its existing plans to newly hired or newly
promoted employees in the Ordinary Course of Business;
(d) Acquire or agree to acquire by merging or consolidating with, or by
purchasing any equity interest in or assets of, or by any other manner, any
business or any corporation, partnership or other business organization or
division, or otherwise acquire or agree to acquire any assets;
(e) Sell, lease, license or otherwise dispose of any of its properties or
assets which are material, individually or in the aggregate, to its
business and that of its Subsidiaries, taken as a whole, except for
transactions entered into in the Ordinary Course of Business;
(f) (i) Increase or agree to increase the compensation payable or to
become payable to its officers or employees, except for increases in salary
or wages of employees in the ordinary course in accordance with past
practices, (ii) grant any additional severance or termination pay to, or
enter into any employment or severance agreements with, officers, (iii)
grant any severance or termination pay to, or enter into any employment or
severance agreement with, any employee, except in settlement of dispute
with terminated employees, (iv) enter into any collective bargaining
agreement, or (v) establish, adopt, enter into or amend in any material
respect any bonus, profit sharing, thrift, compensation, stock option,
restricted stock, pension, retirement, deferred compensation, employment,
termination, severance or other plan, trust, fund, policy or arrangement
for the benefit of any directors, officers or employees;
(g) Revalue any material amount of its assets, including writing down the
value of inventory or writing off notes or accounts receivable other than
in the Ordinary Course of Business;
(h) Incur any Indebtedness for borrowed money or guarantee any such
Indebtedness or issue or sell any debt securities or warrants or rights to
acquire any debt securities or guarantee any debt securities of others,
other than Indebtedness incurred under outstanding lines of credit in the
Ordinary Course of Business;
(i) Incur or commit to incur aggregate capital expenditures in an amount
in excess of $1,000,000;
(j) Change or take any action with respect to accounting policies or
procedures, other than actions in the Ordinary Course of Business and
consistent with past practice;
(k) Waive, release, assign, settle or compromise any material claims or
litigation;
(l) Change the amortization or capitalization policies or otherwise make
any changes in the accounting policies of LECG and its Subsidiaries;
(m) Except as described on the LECG Disclosure Schedule, make any tax
election or settle or compromise any material federal, state, local or
foreign tax liability; or
(n) Take, or agree in writing or otherwise to take, any of the actions
described in Sections (a) through (m) above, or any action which is
reasonably likely to make any of such party's representations or warranties
contained in this Agreement untrue or incorrect in any material respect on
the date made (to the extent so limited) or as of the Effective Time.
5.2. Cooperation. Subject to compliance with applicable law, from the date
hereof until the Effective Time, each of Metzler and LECG shall confer on a
regular and frequent basis with one or more representatives of the other party
to report operational matters of materiality and the general status of ongoing
operations and shall promptly provide the other party or its counsel with
copies of all filings made by such party with any Governmental Entity in
connection with this Agreement, the Merger and the transactions contemplated
hereby.
5.3. Pooling Treatment. Neither Metzler nor LECG, nor any of their
respective Subsidiaries, shall take any action that would adversely affect the
ability of the parties hereto to account for the business combination to be
effected by the Merger as a pooling of interests.
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ARTICLE 6.
Additional Agreements
6.1. No Solicitation.
(a) LECG shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly, through any officer, director, employee,
representative, agent or affiliate, (i) solicit, initiate, or encourage
(including by way of furnishing information) any inquiries or proposals that
constitute, or could reasonably be expected to lead to, a proposal or offer
for a merger, consolidation, business combination, sale of substantial assets,
sale of shares of capital stock (including without limitation by way of a
tender offer) or similar transactions involving LECG, other than the
transactions contemplated or permitted by this Agreement (any of the foregoing
inquiries or proposals being referred to in this Agreement as a "COMPETING
OFFER"), (ii) engage in negotiations or discussions concerning, or provide any
non-public information to any Person relating to, any Competing Offer, or
(iii) agree to, approve or recommend any Competing Offer. Neither the Board of
Directors of LECG, nor any committee thereof, shall (a) withdraw or modify, or
propose to withdraw or modify, in any manner adverse to Metzler, the approval
or recommendation of the Board of Directors of LECG of the Merger or this
Agreement, or (b) approve or recommend, or propose to approve or recommend,
any Competing Offer or any other acquisition of outstanding shares of LECG,
other than pursuant to the Merger or this Agreement. Notwithstanding the
foregoing, nothing contained in this Agreement shall prevent LECG or its Board
of Directors from (A) furnishing non-public information to, or entering into
discussions or negotiations with, any Person in connection with an unsolicited
bona fide written Competing Offer by such Person (including a new and
unsolicited Competing Offer received by LECG after the execution of this
Agreement from a Person whose initial contact with LECG may have been
solicited by such party prior to the execution of this Agreement) or
recommending such an unsolicited bona fide written Competing Offer to its
shareholders, if and only to the extent that (1) (x) the LECG Board of
Directors determines in good faith (after consultation with and based upon the
written advice of its financial advisor, if any) that such Competing Offer
would, if consummated, result in a transaction more favorable to LECG's
shareholders than the transaction contemplated by this Agreement and that the
Person making such Preferred Proposal has the financial means, or the ability
to obtain the necessary financing, to conclude such transaction, and (y) the
Board of Directors of LECG determines in good faith (after consultation with
and based upon the written advice of its outside legal counsel) that the
failure to take such action would be inconsistent with the fiduciary duties of
the Board of Directors to its shareholders under applicable law (any such more
favorable Competing Offer being referred to in this Agreement as a "PREFERRED
PROPOSAL"); and (2) prior to furnishing such non-public information to, or
entering into discussions or negotiations with, such Person, the Board of
Directors receives from such Person an executed confidentiality agreement with
confidentiality provisions not materially less favorable to such Person than
those contained in the Confidentiality Agreement dated as of May 15, 1998
between Metzler and LECG (the "CONFIDENTIALITY AGREEMENT") or (B) complying
with Rule 14e-2 promulgated under the Exchange Act with regard to a Competing
Offer. LECG shall take no action with respect to the Competing Offer until 48
hours after notice is received by Metzler as required under Section 6.1(b)
below.
(b) LECG shall notify Metzler orally and in writing no later than 24 hours
after receipt by LECG (or its advisors) of any Competing Offer or any request
for nonpublic information in connection with a Competing Offer or for access
to the properties, books or records of such party by any Person that informs
such party that it is considering making, or has made, a Competing Offer. Such
notice to Metzler shall be made orally and in writing and shall indicate in
reasonable detail the identity of the offeror and the terms and conditions of
such proposal, inquiry or contact.
6.2. Proxy Statement/Prospectus; Registration Statement
(a) As promptly as practicable after the execution of this Agreement,
Metzler and LECG shall prepare and file with the SEC the Proxy Statement, and
Metzler shall prepare and file with the SEC the Registration Statement in
which the Proxy Statement will be included. Metzler and LECG shall use their
best efforts to cause the Registration Statement to become effective as soon
after such filing as practicable, and the parties shall promptly
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furnish a copy of the Proxy Statement/prospectus included in the Registration
Statement to each of its shareholders or stockholders, as applicable, after
the Registration Statement has become effective.
(b) Metzler and LECG shall make all necessary filings with respect to the
Merger under the Securities Act and the Exchange Act and applicable state blue
sky laws and the rules and regulations thereunder.
6.3. Consents. Each of Metzler and LECG shall use all reasonable efforts to
obtain all necessary consents, waivers and approvals under their respective
material agreements, contracts, licenses or leases as may be necessary or
advisable to consummate the Merger and the other transactions contemplated by
this Agreement.
6.4. Access to Information. Upon reasonable notice and subject to applicable
law and other legal obligations, LECG shall afford to the officers, employees,
accountants, counsel and other representatives of Metzler, access, during
normal business hours during the period prior to the Effective Time, to all
its properties, books, contracts, commitments, personnel and records and,
during such period, LECG shall furnish promptly to Metzler (a) a copy of each
report, schedule, registration statement and other document filed or received
by it during such period pursuant to the requirements of federal securities
laws and (b) all other information concerning its business, properties and
personnel as Metzler may reasonably request. Unless otherwise required by law,
the parties will hold any such information which is nonpublic in confidence in
accordance with the Confidentiality Agreement. No information or knowledge
obtained in any investigation pursuant to this Section 6.4 shall affect or be
deemed to modify any representation or warranty contained in this Agreement or
the conditions to the obligations of the parties to consummate the Merger.
6.5. Stockholders Meetings. LECG and Metzler shall each call a meeting of
their respective shareholders and stockholders, as applicable, to be held as
promptly as practicable for the purpose of voting upon this Agreement and the
Merger, with respect to LECG, and the issuance of the shares of Metzler Common
Stock contemplated hereunder, with respect to Metzler. Subject to Sections 6.1
and 6.2, LECG and Metzler will, through their respective Boards of Directors,
recommend to their respective shareholders and stockholders, as applicable,
approval of such matters and will coordinate and cooperate with respect to the
timing of such meetings and shall use their best efforts to hold such meetings
on the same day and as soon as practicable after the date hereof.
6.6. Legal Conditions to Merger. Each of Metzler and LECG will take all
reasonable actions necessary to comply promptly with all legal requirements
which may be imposed on itself with respect to the Merger (which actions shall
include, without limitation, furnishing all information required in connection
with approvals of or filings with any Governmental Entity) and will promptly
cooperate with and will use their best efforts to furnish information to each
other in connection with any such requirements imposed upon any of them in
connection with the Merger. Each of Metzler and LECG will: (i) take all
reasonable actions necessary to obtain (and will cooperate with each other in
obtaining) any consent, authorization, order or approval of, or any exemption
by, any Governmental Entity or other third party, required to be obtained or
made by LECG or Metzler in connection with the Merger (any of the foregoing an
"APPROVAL") or the taking of any action contemplated thereby or by this
Agreement; (ii) diligently oppose or pursue any rehearing, appeal or other
challenge which may be available to it of any refusal to issue any Approval or
of any order or ruling of any Governmental Entity which may adversely affect
the ability of the parties hereto to consummate the Merger or to take any
action contemplated by any Approval or by this Agreement until such time as
such refusal to issue any Approval or any order or ruling has become final and
non-appealable; and (iii) diligently oppose any objections to, appeals from or
petitions to reconsider or reopen any Approval or the taking of any action
contemplated thereby or by this Agreement.
6.7. Public Disclosure. In the event that either party proposes to issue,
make or distribute any press release, public announcement or other written
publicity or disclosure prior to the Closing Date that refers to the
transactions contemplated herein, the party proposing to make such disclosure
shall provide a copy of such disclosure to the other parties and shall afford
the other parties reasonable opportunity (subject to any legal obligation of
prompt disclosure) to comment on such disclosure or the portion thereof which
refers to the transactions contemplated herein prior to making such
disclosure.
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6.8. Tax-Free Reorganization. Metzler and LECG shall each use its best
efforts to cause the Merger to be treated as a reorganization within the
meaning of Section 368(a) of the Code and in connection therewith shall
deliver at the Closing the Tax Representation Letters (as defined in Section
7.3(d), required for the opinion of counsel contemplated by Sections 7.2(d)
and 7.3(d), respectively. For federal and state tax purposes, Metzler and LECG
shall report the transactions contemplated by this Agreement as a
reorganization within the meaning of Sections 368(a)(1)(A) and 368(a)(2)(E) of
the Tax Code and similar state laws.
6.9. Pooling Accounting. Metzler and LECG shall each use its best efforts to
cause the business combination to be effected by the Merger to be accounted
for as a pooling of interests. Each of Metzler and LECG shall use its best
efforts to cause its respective Affiliates (as defined in Section 6.12) to
avoid any action that would adversely affect the ability of Metzler to account
for the business combination to be effected by the Merger as a pooling of
interests.
6.10. Letters from Accountants.
(a) LECG shall use its best efforts to cause to be delivered to Metzler
"cold comfort" letters of Arthur Andersen LLP, its independent public
accountants, dated the date on which the Registration Statement shall become
effective and as of the Effective Time, respectively, and addressed to
Metzler, in form and substance reasonably satisfactory to Metzler, and
comparable in scope and substance to letters customarily delivered by
independent public accountants in connection with registration statements
similar to the Registration Statement and transactions such as those
contemplated by this Agreement.
(b) Metzler shall use its best efforts to cause to be delivered to LECG
"cold comfort" letters of KPMG Peat Marwick LLP, its independent public
accountants, dated the date on which the Registration Statement shall become
effective and as of the Effective Time, respectively, and addressed to LECG in
form and substance reasonably satisfactory to LECG and comparable in scope and
substance to letters customarily delivered by independent public accountants
in connection with registration statements similar to the Registration
Statement and transactions such as those contemplated by this Agreement.
6.11. Update Disclosure; Breaches. From and after the date of this Agreement
until the Effective Time, each party hereto shall promptly notify the other
party, by written update to its Disclosure Schedule, of (i) the occurrence or
non-occurrence of any event which would be likely to cause any condition to
the obligations of any party to effect the Merger and the other transactions
contemplated by this Agreement not to be satisfied, or (ii) the failure of
Metzler or LECG to comply with or satisfy any covenant, condition or agreement
to be complied with or satisfied by it pursuant to this Agreement which would
be likely to result in any condition to the obligations of any party to effect
the Merger and the other transactions contemplated by this Agreement not to be
satisfied. The delivery of any notice pursuant to this Section 6.11 shall not
cure any breach of any representation or warranty requiring disclosure of such
matter prior to the date of this Agreement or otherwise limit or affect the
remedies available hereunder to the party receiving such notice, provided that
such party, within ten (10) Business Days after receipt of such notice,
advises the other party of its objection to the matter disclosed in such
notice and the nature of such objection.
6.12. Affiliate Letter. Upon the execution of this agreement, Metzler and
LECG will provide each other with a list of those persons who are, in
Metzler's or LECG's respective reasonable judgment, "affiliates" of Metzler or
LECG, respectively, within the meaning of Rule 145 under the Securities Act
("RULE 145"). Each such person who is an "affiliate" of Metzler or LECG within
the meaning of Rule 145 is referred to herein as an "AFFILIATE." Metzler and
LECG shall provide each other such information and documents as LECG or
Metzler shall reasonably request for purposes of reviewing such list and shall
notify the other party in writing regarding any change in the identity of its
Affiliates prior to the Closing Date. LECG shall use its best efforts to
deliver or cause to be delivered to Metzler by July 30, 1998 from each of the
Affiliates of LECG, an executed agreement, in the form attached hereto as
Exhibit A ("AFFILIATE LETTER"). Metzler shall be entitled to place appropriate
legends on the certificates evidencing any Metzler Common Stock to be received
by Affiliates of LECG pursuant to the terms of this Agreement, and to issue
appropriate stop transfer instructions to the transfer agent for the Metzler
Common Stock, consistent with the terms of the Affiliate Letter.
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6.13. NASDAQ Quotation. Metzler shall use its best efforts to cause the
shares of Metzler Common Stock to be issued in the Merger to be listed or
approved for listing on The Nasdaq National Market, subject to official notice
of issuance, prior to the Closing Date.
6.14. Employees. Upon the request of Metzler, LECG shall provide Metzler,
within three (3) business days of such request, a true, correct and complete
list setting forth the names and current salaries or rates of compensation and
current bonus plans and bonus compensation structure of all current employees
of LECG and its Subsidiaries and current independent contractors who render
services to LECG and its Subsidiaries on more than a single occasion.
6.15. Brokers or Finders. Each of Metzler and LECG represents, as to itself,
its Subsidiaries and its Affiliates, that no agent, broker, investment banker,
financial advisor or other firm or person is or will be entitled to any
broker's or finder's fee or any other commission or similar fee in connection
with any of the transactions contemplated by this Agreement except Legg Mason
Wood Walker, whose fees and expenses (not to exceed $255,000) will be paid by
LECG in accordance with LECG's agreement with such firm (a copy of which has
been delivered by LECG to Metzler prior to the date of this Agreement), and
Donaldson Lufkin & Jenrette Securities Corporation, whose fees and expenses
will be paid by Metzler in accordance with Metzler's agreement with such firm
(a copy of which has been delivered by Metzler prior to the date of this
Agreement), and each of Metzler and LECG agrees to indemnify and hold the
other harmless from and against any and all claims, liabilities or obligations
with respect to any other fees, commissions or expenses asserted by any person
on the basis of any act or statement alleged to have been made by such party
or its Affiliate.
6.16. Indemnification of Directors and Officers.
(a) After the Effective Time, the Surviving Corporation shall, to the
fullest extent permitted under applicable law, indemnify and hold harmless,
each present and former director or officer of LECG and each Subsidiary of
LECG (collectively, the "INDEMNIFIED PARTIES") against all costs and expenses
(including reasonable attorneys' fees), judgments, fines, losses, claims,
damages, liabilities and settlement amounts paid in connection with any claim,
action, suit, proceeding or investigation (whether arising before or after the
Effective Time), whether civil, administrative or investigative, arising out
of or pertaining to any action or omission in their capacity as an officer or
director to whom this Section 6.16 applies, in each case occurring before the
Effective Time (including the transactions contemplated by this Agreement).
(b) In the event the Surviving Corporation or its successors or assigns (i)
consolidates with or merges into any other Person and shall not be the
continuing or surviving corporation or entity in such consolidation or merger
or (ii) transfers all or substantially all its properties and assets to any
Person, then, and in each case, proper provision shall be made so that the
successors and assigns of the Surviving Corporation, as the case may be, honor
the indemnification obligations set forth in this Section 6.16.
(c) The Surviving Corporation shall, for a period of at least three (3)
years from the Effective Time, retain LECG's existing Director and Officer
insurance or obtain "claims made" tail coverage with respect to LECG's
existing Director and Officer insurance.
(d) The provisions contained in this Section 6.16 shall not limit any of the
rights that an Indemnified Party may have under any current indemnification
agreement between the Indemnified Party and LECG. The Indemnified Parties
shall be considered to be third party beneficiaries with respect to this
Section 6.16.
6.17. Additional Agreements; Reasonable Efforts. Subject to the terms and
conditions of this Agreement, each of the parties hereto agrees to use all
reasonable efforts to take, or cause to be taken, all action and to do, or
cause to be done, all things necessary, proper or advisable under applicable
laws and regulations to consummate and make effective the transactions
contemplated by this Agreement, subject to the appropriate vote of the
shareholders of LECG and the stockholders of Metzler described in Section 6.5,
including cooperating fully with the other party. In case at any time after
the Effective Time any further action is necessary or desirable to carry
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out the purposes of this Agreement or to vest the Surviving Corporation with
full title to all properties, assets, rights, approvals, immunities and
franchises of either of the Constituent Corporations, the proper officers and
directors of each party to this Agreement shall take all such necessary
action.
6.18. Stock Option Agreements. LECG and Metzler agree to fully perform their
respective obligations under the Stock Option Agreements.
6.19. Trading Prohibitions. Each of Metzler, Sub and LECG hereby
acknowledges that as a result of disclosures by Metzler, Sub and LECG
contemplated under this Agreement, Metzler, Sub, LECG and its Subsidiaries and
their respective Affiliates may, from time to time, have material, non-public
information concerning each other. Each of Metzler, Sub and LECG confirms that
it and its respective Affiliates are aware, and that it has advised such
persons that, (i) the United States securities laws may prohibit a Person who
has material, non-public information from purchasing or selling securities of
any company to which such information relates, and (ii) material non-public
information shall not be communicated to any other Person except as permitted
herein.
6.20. Voting Agreement and Registration Rights Agreement. Contemporaneously
with the execution of this Agreement David J. Teece, Thomas M. Jorde, Robert
G. Harris and Richard J. Gilbert have executed, and LECG will use its best
efforts to cause Gordon C. Rausser (collectively "LECG INSIDERS") to execute a
voting agreement whereby each party to such agreement has agreed to vote in
favor of the Merger. In addition, Metzler has entered into a Registration
Rights Agreement with the LECG Insiders, contemporaneously with this
Agreement.
6.21. Reserving of Metzler Common Stock. Metzler agrees to reserve, in the
aggregate, 1,200,000 shares of Metzler Common Stock for issuance (i) pursuant
to the Assumed Options under Section 2.1(d) of this Agreement and (ii)
pursuant to options granted under The Metzler Group, Inc. Long-Term Incentive
Plan, as amended, specifically for current and future employees of LECG.
6.22. Delivery of LECG Disclosure Schedule. LECG shall deliver the LECG
Disclosure Schedule to Metzler by no later than the 5:00 p.m., Central
Daylight Time, on July 2, 1998 or such later date agreed to by the parties. If
either (i) LECG fails to deliver the LECG Disclosure Schedule to Metzler by
such time, or (ii) Metzler objects in writing to the matters disclosed on the
LECG Disclosure Schedule within three (3) business days of its receipt of the
LECG Disclosure Schedule and the Parties do not reach a mutually acceptable
resolution with respect to such objections within three (3) business days
thereafter, then, notwithstanding any other provision of this Agreement to the
contrary, either Party may terminate this Agreement by written notice without
further obligation.
ARTICLE 7.
Conditions to Merger
7.1. Conditions to Each Party's Obligation to Effect the Merger. The
respective obligations of each party to this Agreement to effect the Merger
shall be subject to the satisfaction prior to the Closing Date of the
following conditions:
(a) Stockholder Approval. This Agreement and the Merger shall have been
approved by the affirmative vote of the holders of a majority of the
outstanding shares of LECG Common Stock entitled to vote thereon and the
issuance of the shares of Metzler Common Stock pursuant to this Agreement
shall have been approved by the affirmative vote of the holders of a
majority of the outstanding shares of Metzler Common Stock, entitled to
vote thereon, present at a meeting at which a quorum is present in person
or by proxy.
(b) Intentionally Omitted.
(c) Approvals. Other than the filing provided for by Section 1.1, all
authorizations, consents, orders or approvals of, or declarations or
filings with, or expirations of waiting periods imposed by, any
Governmental Entity the absence or nonoccurrence of which would be
reasonably likely to have a LECG
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Material Adverse Effect or a Metzler Material Adverse Effect shall have
been filed, occurred or been obtained.
(d) Registration Statement. The Registration Statement shall have become
effective under the Securities Act and shall not be the subject of any stop
order or proceedings seeking a stop order.
(e) No Injunctions or Restraints; Illegality. No temporary restraining
order, preliminary or permanent injunction or other order issued by any
court of competent jurisdiction or other legal or regulatory restraint or
prohibition preventing the consummation of the Merger or limiting or
restricting the conduct or operation by Metzler of the business of Metzler
or the Surviving Corporation after the Merger shall have been issued,
except for any such order, injunction restraint or prohibition which would
not be reasonably likely to have a material adverse effect on Metzler; nor
shall there be any action taken, or any statute, rule, regulation or order
enacted, entered, enforced or deemed applicable to the Merger by any
Governmental Entity which makes the consummation of the Merger illegal.
(f) Pooling Letters. Metzler and LECG shall have received letters from
KPMG Peat Marwick LLP and Arthur Andersen LLP, respectively, each dated the
date of the Proxy Statement and confirmed in writing as of the Closing Date
and addressed to Metzler and LECG, respectively, stating that the Merger
may be accounted for as a pooling of interests transaction.
(g) NASDAQ Approval. The shares of Metzler Common Stock to be issued in
the Merger shall have been listed or approved for listing on The Nasdaq
National Market.
(h) Appraisal Rights. The holders of the issued and outstanding shares of
LECG Common Stock shall not have effectively exercised dissenters' rights
pursuant to the CGCL in an amount that would cause the Merger, after taking
into consideration all other elements of consideration which may be deemed
payable, to not be eligible for accounting as a pooling-of-interest
transaction.
7.2. Additional Conditions to Obligations of Metzler. The obligations of
Metzler to effect the Merger are subject to the satisfaction of each of the
following conditions, any of which may be waived in writing exclusively by
Metzler:
(a) Representations and Warranties. The representations and warranties of
LECG set forth in this Agreement shall be (i) true and correct as of the
date of this Agreement; and (ii) true and correct as of the Closing Date as
though made on and as of the Closing Date, except in the case of this
clause (ii) to the extent such representations and warranties speak as of
an earlier date, and except (with respect to all representations and
warranties other than those in Section 3.23) for such inaccuracies which
would not reasonably be expected to result in a LECG Material Adverse
Effect (reading all such representations and warranties without giving
effect to qualifications based on materiality therein); and Metzler shall
have received a certificate signed on behalf of LECG by the chief executive
officer and the chief financial officer of LECG to such effect.
(b) Performance of Obligations of LECG. LECG shall have performed in all
material respects all material obligations required to be performed by it
under this Agreement at or prior to the Closing Date; and Metzler shall
have received a certificate signed on behalf of LECG by the chief executive
officer and the chief financial officer of LECG to such effect.
(c) Opinion of LECG's Counsel. Metzler and Sub shall have received an
opinion of counsel for LECG covering such matters as is customary in a
transaction of this type and in form and substance reasonably satisfactory
to Metzler and Sub.
7.3. Additional Conditions to Obligations of LECG. The obligation of LECG to
effect the Merger is subject to the satisfaction of each of the following
conditions, any of which may be waived, in writing, exclusively by LECG:
(a) Representations and Warranties. The representations and warranties of
Metzler set forth in this Agreement shall be (i) true and correct in all
material respects as of the date of this Agreement; and (ii) true and
correct as of the Closing Date as though made on and as of the Closing
Date, except in the clause of
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this clause (ii) to the extent such representations and warranties speak as
of an earlier date, and except (with respect to all representations and
warranties other than those in Section 4.9) for such inaccuracies which
would not reasonably be expected to result in a Metzler Material Adverse
Effect (reading all such representations and warranties without giving
effect to qualifications based on materiality therein); and LECG shall have
received a certificate signed on behalf of Metzler by the chief executive
officer and the chief financial officer of Metzler to such effect
(b) Performance of Obligations of Metzler. Metzler shall have performed
in all material respects all material obligations required to be performed
by them under this Agreement at or prior to the Closing Date; and LECG
shall have received a certificate signed on behalf of Metzler by the chief
executive officer and the chief financial officer of Metzler to such
effect.
(c) Opinion of Metzler's Counsel. LECG shall have received an opinion of
counsel for Metzler and Sub covering such matters as is customary in a
transaction of this type and in form and substance reasonably satisfactory
to LECG.
(d) Tax Opinion. LECG shall have received the opinion of Wilson Sonsini
Goodrich & Rosati, P.C., counsel to LECG, to the effect that the Merger
will be treated for federal income tax purposes as a reorganization within
the meaning of Section 368(a) of the Code. In rendering such opinions, such
counsel may rely upon the representations contained in the certificates of
Metzler and LECG in substantially the form attached hereto as Exhibits B
and C, respectively (the "Tax Representation Letters") and Metzler; and
LECG and Metzler will make, and each of them agrees to use reasonable
efforts to cause such of its respective shareholders and stockholders, as
applicable, to make, such representations and deliver such certificates.
7.4. Closing.
(a) Transactions at Closing. At the Closing, each of the following
transactions shall occur:
(b) LECG's Performance. At the Closing, LECG shall deliver to Metzler the
following:
(i) copies of the consents described in Section 3.4(b);
(ii) satisfactory evidences of the approvals described in Section 7.1(a);
(iii) the certificate described in Section 7.2(a) and (b);
(iv) certificates of compliance or certificates of good standing of LECG
and its Subsidiaries, as of the most recent practicable date, from the
appropriate governmental authority of the jurisdiction of their respective
incorporation and any other jurisdiction that is set forth on the LECG
Disclosure Schedule;
(v) certified copies of resolutions of the Board of Directors and
shareholders of LECG approving the transactions set forth in this
Agreement;
(vi) certificates of incumbency for the officers of LECG;
(vii) Certificates of Merger, each in form and content that complies with
the CGCL and the DGCL, executed by LECG;
(viii) the opinion of counsel for LECG, referenced in Section 7.2(c);
(ix) the Affiliate Letter and Voting and Registration Rights Agreements
described in Sections 6.12 and 6.20, respectively;
(x) the letters described in Section 6.8;
(xi) such other evidence of the performance of all covenants and
satisfaction of all conditions required of LECG by this Agreement, at or
prior to the Closing, as Metzler or its counsel may reasonably require.
(c) Performance by Metzler. At the Closing, Metzler shall deliver to LECG
the following:
(i) the certificate described in Section 7.3 (a) and (b);
(ii) certificates of incumbency of the officers of Metzler who are
executing this Agreement and the other documents contemplated hereunder;
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(iii) certified copies of resolutions of the Boards of Directors of
Metzler approving the transactions set forth in this Agreement;
(iv) Certificates of Merger, each in form and content that complies with
the CGCL and the DGCL, executed by Metzler;
(v) the opinion of counsel for Metzler referenced in Section 7.3(c); and
(vi) such other evidence of the performance of all the covenants and
satisfaction of all of the conditions required of Metzler by this Agreement
at or before the Closing as LECG or its counsel may reasonably require.
ARTICLE 8.
Termination and Amendment
8.1. Termination. This Agreement may be terminated at any time prior to the
Effective Time (with respect to Sections 8.1(b) through 8.1(h), by written
notice by the terminating party to the other party), whether before or after
approval of the matters presented in connection with the Merger by the
stockholders of Metzler or the shareholders of LECG, as follows:
(a) by mutual written consent of Metzler and LECG; or
(b) by either Metzler or LECG if the Merger shall not have been
consummated by October 31, 1998 (provided, however, that the right to
terminate this Agreement under this Section 8.1(b) shall not be available
to any party whose failure to fulfill any obligation under this Agreement
has been the cause of or resulted in the failure of the Merger to occur on
or before such date; or
(c) by either Metzler or LECG if a court of competent jurisdiction or
other Governmental Entity shall have issued a final order, decree or
ruling, or taken any other action, having the effect of permanently
restraining, enjoining or otherwise prohibiting the Merger, and all appeals
with respect to such order or action have been exhausted or the time for
appeal of such order, decree, ruling or action shall have expired; or
(d) by either Metzler or LECG if, at the LECG Shareholders' Meeting or
the Metzler Stockholders Meeting to be held in due course (including any
adjournment or postponement thereof), the requisite vote of shareholders of
LECG or stockholders of Metzler in favor of this Agreement and the Merger
shall not have been obtained (provided, that the right to terminate this
Agreement under this Section 8.1(d) shall not be available to any party
which has not complied with its obligations hereunder in all material
respects; or
(e) by Metzler if (i) the Board of Directors of LECG shall have withdrawn
or modified its recommendation of this Agreement or the Merger in a manner
adverse to Metzler or shall have resolved or publicly announced or
disclosed to any third party its intention to do so; (ii) an Alternative
Transaction (as defined below) involving LECG shall have taken place or the
Board of Directors of LECG shall have recommended such an Alternative
Transaction to the shareholders of LECG or shall have resolved or publicly
announced its intention to recommend or engage in such an Alternative
Transaction; or (iii) a tender offer or exchange offer for forty percent
(40%) or more of the outstanding shares of LECG Common Stock shall have
been commenced or a registration statement with respect thereto shall have
been filed (other than by Metzler or an affiliate thereof), and the Board
of Directors of LECG shall have (A) recommended (or shall have resolved or
publicly announced its intention to recommend) that the shareholders of
LECG tender their shares in such tender or exchange offer or (B) resolved
or publicly announced its intention to take no position with respect to
such tender or exchange offer; or
(f) by Metzler if a breach of any representation, warranty, covenant or
agreement on the part of LECG set forth in this Agreement shall have
occurred which would cause the conditions set forth in Sections 7.2(a) or
7.2(b) not to be satisfied, and, that with respect to any breach of a
covenant or agreement hereunder, such covenant or agreement is incapable of
being cured or, if capable of being cured, shall not have been cured within
twenty (20) Business Days following receipt by LECG of written notice of
such breach from Metzler; or
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(g) by LECG, (i) the Board of Directors of Metzler shall have withdrawn
or modified its recommendation of this Agreement or the Merger in a manner
adverse to LECG or shall have resolved or publicly announced or disclosed
to any third party its intention to do so, or (ii) if the Board of
Directors of LECG shall have determined to recommend a Competing Offer to
its shareholders after determining, pursuant to Section 6.1, that such
Competing Offer constitutes a Preferred Proposal, provided, however, that
the Board of Directors of LECG shall provide Metzler with 48 hours prior
written notice before recommending such Competing Offers to its
shareholders; or
(h) by LECG, if a breach of any representation, warranty, covenant or
agreement on the part of Metzler set forth in this Agreement shall have
occurred which would cause the conditions set forth Sections 7.3(a) or
7.3(b) not to be satisfied, and, with respect to any breach of a covenant
or agreement hereunder, such covenant or agreement is incapable of being
cured or, if capable of being cured, shall not have been cured within
twenty (20) Business Days following receipt by LECG of written notice of
such breach from Metzler; or
(i) by Metzler if LECG's revenues, margins and earnings per share, as
reported for the three months ended June 30, 1998, shall be less than the
estimates for such period previously provided to Metzler by LECG, or by
LECG if Metzler's revenues, margins and earnings per share, as reported for
the three months ended June 30, 1998, shall be less than the estimates for
such period previously provided to LECG by Metzler. Metzler or LECG must
exercise their respective right to terminate this Agreement pursuant to
this Section 8.1(i), if at all, within the ten (10) business days following
the public disclosure of other party's second quarter financial results.
For purposes of this Section 8.1, an "ALTERNATIVE TRANSACTION" involving a
specified party to this Agreement means: (i) a transaction or series of
transactions pursuant to which any person or group (as such term is defined
under the Exchange Act) other than Metzler, LECG or Sub, or any affiliate
thereof, (a "THIRD PARTY") acquires or would acquire (upon completion of such
transaction or series of transactions) shares (or securities exercisable for
or convertible into shares) representing more than forty percent (40%) of the
outstanding shares of LECG's common stock, pursuant to a tender offer or
exchange offer or otherwise; (ii) a merger, consolidation, share exchange or
other business combination involving LECG or any of its material Subsidiaries
if, upon consummation of such merger, consolidation, share exchange or other
business combination such Third Party owns or would own more than forty
percent (40%) of the outstanding equity securities of LECG or any of its
material Subsidiaries or the entity surviving such merger or business
combination or resulting from such consolidation; (iii) any other transaction
or series of transactions pursuant to which any Third Party acquires or would
acquire (upon completion of such transaction or series of transactions)
control of assets of LECG or any of its material Subsidiaries (including, for
this purpose, outstanding equity securities of Subsidiaries of such party)
having a fair market value equal to more than forty percent (40%) of the fair
market value of all the consolidated assets of such party immediately prior to
such transaction or series of transactions; or (iv) any transaction or series
of transactions pursuant to which any Third Party acquires or would acquire
(upon completion of such transaction or series of transactions) control of the
Board of Directors of LECG or by which nominees of any Third Party are (or
would be) elected or appointed to a majority of the seats on the Board of
Directors of LECG.
8.2. Effect of Termination. In the event of termination of this Agreement
pursuant to Section 8.1, there shall be no Liability or obligation on the part
of Metzler, LECG, or their respective officers, directors, stockholders or
Affiliates, except as set forth in Section 8.3 and further except to the
extent that such termination results from the willful breach by a party of any
of its representations, warranties, covenants or agreements in this Agreement;
and provided, that the provisions of Section 8.3 of this Agreement and the
Confidentiality Agreement shall remain in full force and effect and survive
any termination of this Agreement.
8.3. Fees and Expenses.
(a) Except as set forth in this Section 8.3, all fees and expenses incurred
in connection with this Agreement and the transactions contemplated hereby
shall be paid by the party incurring such expenses, whether or not the Merger
is consummated; provided, however, that Metzler and LECG shall share equally
all fees and expenses,
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other than attorneys', financial advisors and accounting fees and expenses,
incurred in relation to the printing and filing of the Proxy Statement
(including any related preliminary materials) and the Registration Statement
(including financial statements and exhibits) and any amendments or
supplements thereto in connection with the transactions contemplated by this
Agreement.
(b) Intentionally Omitted.
(c) If this Agreement is terminated (i) by Metzler pursuant to Section
8.1(e), (ii) by LECG pursuant to Section 8.1(d) as a result of the failure to
receive the requisite vote for approval of this Agreement and the Merger by
the shareholders of LECG at the LECG Shareholders' Meeting, (iii) by LECG
pursuant to Section 8.1(g), (iv) by Metzler pursuant to Section 8.1(f) as a
result of a breach by LECG of any of its representations, warranties or
covenants, or (v) by Metzler pursuant to Section (8.1(i), LECG shall pay to
Metzler all fees and expenses incurred by Metzler relating to this Agreement
and the transactions contemplated hereby ("METZLER EXPENSES") within five
business days after receipt of such request.
(d) If this Agreement is terminated (i) by LECG if the Board of Directors of
Metzler shall have withdrawn or modified its recommendation of this Agreement
or the Merger in a manner adverse to Metzler or shall have resolved or
publicly announced or disclosed to any third party its intention to do so,
(ii) by Metzler pursuant to Section 8.1(d) as a result of the failure to
receive the requisite vote for approval of this Agreement and the Merger by
the stockholders of Metzler at the Metzler Stockholders' Meeting, (iii) by
LECG pursuant to Section 8.1(h), or (iv) by LECG pursuant to Section 8.1(i),
Metzler shall pay to LECG all fees and expenses incurred by LECG relating to
this Agreement and the transactions contemplated hereby ("LECG EXPENSES")
within five business days after receipt of such request.
(e) Intentionally Omitted.
(f) If LECG fails to promptly pay to Metzler any fee or expense due
hereunder, LECG shall pay the costs and expenses (including reasonable legal
fees and expenses) in connection with any action, including the filing of any
lawsuit or other legal action, taken to collect payment, together with
interest on the amount of any unpaid fee at the publicly announced prime rate
as reported in the Wall Street Journal from the date such fee was required to
be paid.
8.4. Amendment. This Agreement may be amended by the parties hereto, by
action taken or authorized by their respective Boards of Directors, at any
time before or after approval of the matters presented in connection with the
Merger by the shareholders of LECG or the stockholders of Metzler, but, after
any such approval, no amendment shall be made which by law requires further
approval by such shareholders or stockholders, as applicable, without such
further approval. This Agreement may not be amended except by an instrument in
writing signed on behalf of each of the parties hereto.
8.5. Extension; Waiver. At any time prior to the Effective Time, the parties
hereto may, to the extent legally allowed, (i) extend the time for the
performance of any of the obligations or other acts of the other parties
hereto, (ii) waive any inaccuracies in the representations and warranties
contained herein or in any document delivered pursuant hereto and (iii) waive
compliance with any of the agreements or conditions contained herein. Any
agreement on the part of a party hereto to any such extension or waiver shall
be valid only if set forth in a written instrument signed on behalf of such
party.
ARTICLE 9.
Miscellaneous
9.1. Nonsurvival of Representations, Warranties and Agreements. None of the
representations, warranties and agreements in this Agreement or in any
instrument delivered pursuant to this Agreement shall survive the Closing and
the Effective Time, except for covenants and agreements which, by their terms,
are to be performed after the Effective Time and the agreements of the
Affiliates of LECG delivered pursuant hereto. The Confidentiality Agreement
shall survive the execution and delivery of this Agreement.
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9.2. Notices. All notices, requests and demands, and other communications
hereunder shall be in writing and shall be deemed given if delivered
personally, telecopied (which is confirmed) or mailed by registered or
certified mail (return receipt requested), or sent by Federal Express or
similar overnight delivery service, to the parties at the following addresses
(or at such other address for a party as shall be specified by like notice):
(a) if to Metzler or Sub, to: The Metzler Group, Inc. 615 N. Wabash,
Chicago, Illinois, 60611, Attention: Robert P. Maher, Facsimile No.: (312)
573-5676, with a copy to Sachnoff & Weaver, Ltd., 30 South Wacker Drive,
Suite 2900, Chicago, IL 60606, Attention: Douglas R. Newkirk, Facsimile
No.: (312) 207-6400; and
(b) if to LECG, Inc. to: LECG 2000 Powell Street, Emeryville, California
94608, Attention: Thomas M. Jorde, Facsimile No.: (510)653-9693, with a
copy to Wilson Sonsini Goodrich & Rosati, Professional Corporation, 650
Page Mill Road, Palo Alto, California 94304, Attention: Michael J. Danaher,
Facsimile No.: (650) 493-6811.
If delivered personally, the date on which a notice, request, instruction or
document is delivered shall be the date on which such delivery is made and, if
delivered by mail or by overnight delivery service, the date on which such
notice, request, instruction or document is received shall be the date of
delivery. In the event any such notice, request, instruction or document is
mailed or shipped by overnight delivery service to a party in accordance with
this Section 9.2 and is returned to the sender as nondeliverable, then such
notice, request, instruction or document shall be deemed to have been
delivered or received on the fifth day following the deposit of such notice,
request, instruction or document in the United States mails or the delivery to
the overnight delivery service.
Any party hereto may change its address specified for notices herein by
designating a new address by notice in accordance with this Section 9.2.
9.3. Interpretation. The parties have jointly participated in the
negotiation and drafting of this Agreement. In the event of an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the parties and no presumptions or burdens of proof
shall arise favoring any party by virtue of the authorship of any of the
provisions of this Agreement. Any reference to any Federal, state, local, or
foreign statute or law shall be deemed also to refer to all rules and
regulations promulgated thereunder, unless the context requires otherwise. The
parties intend that each representation, warranty and covenant contained
herein shall have independent significance. If any party has breached any
representation, warranty or covenant contained herein in any respect, the fact
that there exists another representation, warranty or covenant relating to the
same subject matter (regardless of the relative levels of specificity) which
the party has not breached shall not detract from or mitigate the fact that
the party is in breach of the first representation, warranty, or covenant.
Each defined term used in this Agreement has a comparable meaning when used in
its plural or singular form. Each gender-specific term used herein has a
comparable meaning whether used in a masculine, feminine or gender-neutral
form. The term "INCLUDE" and its derivatives shall have the same construction
as the phrase "INCLUDE, WITHOUT LIMITATION," and its derivatives. The section
headings contained in this Agreement are inserted for convenience or reference
only and shall not affect in any way the meaning or interpretation of this
Agreement. When a reference is made in this Agreement to a section, such
reference shall be to a Section of this Agreement unless otherwise indicated.
The table of contents and headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. The phrase "MADE AVAILABLE" in this
Agreement shall mean that the information referred to has been made available
if requested by the party to whom such information is to be made available.
The phrases "THE DATE OF THIS AGREEMENT", "THE DATE HEREOF," and terms of
similar import, unless otherwise specified, shall be deemed to refer to July
1, 1998, and all representations made herein, unless otherwise specified.
9.4. Counterparts. This Agreement may be executed in two or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when two or more counterparts have been signed by each
of the parties and delivered to the other parties, it being understood that
all parties need not sign the same counterpart.
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<PAGE>
9.5. Governing Law. This Agreement shall be governed and construed in
accordance with the laws of the State of Delaware without regard to any
applicable conflicts of law rules. If any provision of this Agreement is held
to be unenforceable for any reason, it shall be modified rather than voided,
if possible, in order to achieve the intent of the parties to the extent
possible. In any event, all other provisions of this Agreement shall be deemed
valid and enforceable to the extent possible.
9.6. Assignment. Neither this Agreement nor any of the rights, interests or
obligations hereunder shall be assigned by any of the parties hereto (whether
by operation of law or otherwise) without the prior written consent of the
other parties, and any attempted assignment thereof without such consent shall
be null and void. Subject to the preceding sentence, this Agreement will be
binding upon, inure to the benefit of and be enforceable by the parties and
their respective successors and assigns.
9.7. Entire Agreement; No Third Party Beneficiaries. This Agreement and all
agreements referenced specifically in this Agreement and executed as required
by this Agreement constitute the entire agreement among the parties hereto and
supersede and cancel any prior agreements, representations, warranties, or
communications, whether oral or written, among the parties hereto relating to
the transactions contemplated hereby or the subject matter herein. Neither
this Agreement nor any provision hereof may be changed, waived, discharged or
terminated orally, but only by an agreement in writing signed by the party
against whom or which the enforcement of such change, waiver, discharge or
termination is sought. This Agreement is not intended to confer upon any
person other than the parties hereto any rights or remedies hereunder.
9.8. No Agreement Until Executed. This Agreement shall not constitute or be
deemed to evidence a contract or agreement among the parties hereto unless and
until executed by all parties hereto, irrespective, of negotiations among the
parties or the exchanging of drafts of this Agreement.
9.9. Severability. In the event that any court or any governmental authority
or agency declares all or any part of any Section of this Agreement to be
unlawful or invalid, such unlawfulness or invalidity shall not serve to
invalidate any other Section of this Agreement, and in the event that only a
portion of any Section is so declared to be unlawful or invalid, such
unlawfulness or invalidity shall not serve to invalidate the balance of such
Section.
9.10. Exhibits and Schedules Incorporated. All Exhibits and Schedules
attached hereto are an integral part of this Agreement.
9.11. Time of Essence. Time is of the essence in this Agreement.
In Witness Whereof, Metzler, Sub and LECG have caused this Agreement to be
signed by their respective officers thereunto duly authorized as of the date
first written above.
The Metzler Group, Inc.
LECG, Inc.
/s/ Robert P. Maher
/s/ Thomas M. Jorde By: _________________________________
By: _________________________________ Chief Executive Officer and
President President
Title: ______________________________ Title: ______________________________
MGI Acquisition Corp.
/s/ Robert P. Maher
By: _________________________________
Chief Executive Officer and
President
Title: ______________________________
[Signature page to the Agreement and plan of Merger by and among Metzler, Sub
and LECG]
A-34
<PAGE>
PLAN AND AGREEMENT OF MERGER
----------------------------
THIS PLAN AND AGREEMENT OF MERGER (this "Agreement") is made and entered
into as of August 20, 1998 by and among The Metzler Group, Inc., a Delaware
corporation ("Metzler"), MGI Acquisition II, L.L.C., an Illinois limited
liability company and wholly-owned, direct subsidiary of Metzler ("Acquisition
Sub"), Peterson Consulting L.L.C., an Illinois limited liability company doing
business as Peterson Worldwide LLC, (the "Company"), and each of the members of
the Company's Board of Managers (individually a "Company Manager" and
collectively, the "Company Managers"). Metzler, Acquisition Sub, the Company and
the Company Managers are sometimes referred to herein individually as a "Party"
and collectively as the "Parties."
RECITALS
A. The managers of Acquisition Sub and the Company Managers have approved
the transactions contemplated hereby and have determined that it is advisable
and in their respective best interests to consummate the merger described in
Article 2 hereof (the "Acquisition").
B. As a result of the Acquisition, Acquisition Sub will be merged with
and into the Company, all of the outstanding membership interests of the Company
will be converted into common stock of Metzler, and the Company will be the
surviving corporation, all on the terms and subject to the conditions set forth
in this Agreement.
C. For Federal income tax purposes, the Parties intend that the
Acquisition shall qualify as a reorganization within the meaning of Section
368(a) of the Code (as defined herein).
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing Recitals, and the mutual
promises herein made, and in consideration of the representations, warranties
and covenants herein contained, the Parties hereby agree as follows:
1. DEFINITIONS
1.1 Definitions. The following terms, when used herein and unless the
context clearly requires otherwise, shall have the following meanings:
"Affiliate" means, with respect to any particular Person, any Person
controlling, controlled by or under common control with such Person, whether by
ownership or control of voting securities, by contract or otherwise. Affiliates
of Metzler include the Surviving Entity (as defined in Section 2.3(a)).
<PAGE>
"Affiliated Group" means any affiliated group within the meaning of Section
1504 of the Code.
"Adverse Consequences" means all charges and write-offs permitted to be
taken for GAAP, Security Interests, and out-of-pocket losses, expenses and fees,
(including all attorneys' fees and court costs) relating to complaints, actions,
suits, proceedings, hearings, investigations, claims, demands, costs of defense,
judgments, orders, decrees, stipulations, injunctions, damages, dues, penalties,
fines, costs, amounts paid in settlement, Liabilities, Taxes, Security
Interests, it being understood that Adverse Consequences shall take into account
and be net of any insurance recoveries.
"Basis" means any past or present fact, situation, circumstance, status,
condition, activity, practice, plan, occurrence, event, incident, action,
failure to act, or transaction that forms or could form the basis for any
specified consequence.
"Code" means the Internal Revenue Code of 1986, as amended.
"Commission" means the Securities and Exchange Commission or any successor
agency.
"Confidential Information" means any information concerning the businesses
and affairs of a Party other than any such information that (i) is generally
available to or known by the public immediately prior to the time of disclosure
(except through the actions or inaction of the Person to whom disclosure has
been made by or on behalf of such Party) or (ii) has been acquired or developed
independent from such Party.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA Affiliate" means any corporation or other business entity that is
included in a controlled group of corporations within which the Company is also
included, as provided in Section 414(b) of the Code; or which is a trade or
business under common control with the Company, as provided in Section 414(c) of
the Code; or which constitutes a member of an affiliated service group within
which the Company is also included, as provided in Section 414(m) of the Code;
or which is required to be aggregated with the Company pursuant to regulations
issued under Section 414(o) of the Code.
"Escrow Agreement" means that certain Escrow Agreement to be mutually
agreed upon by the Parties and the Escrow Agent prior to the Merger Time.
"Escrow Agent" means the Person acting as the escrow agent under the Escrow
Agreement.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
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<PAGE>
"Existing Company Documents" means, collectively, the Operating Agreement
and all agreements between the Company and the Members and all options,
warrants, and other agreements or documents relating to the issuance or possible
issuance of Membership Interests, each as in existence as of the date hereof.
"GAAP" means generally accepted accounting principles as in effect from
time to time, applied on a consistent basis.
"HSR Act" means the Hart Scott Rodino Antitrust Improvements Act of 1976,
as amended.
"IDR" means Insurance Data Resources, Inc., a Florida corporation, and
wholly-owned subsidiary of the Company.
"ILLCA" means the Illinois Limited Liability Company Act, as amended.
"Indebtedness" of any Person means all obligations of such Person which in
accordance with GAAP should be classified upon a balance sheet of such Person as
liabilities of such entity; and in any event, regardless of how classified in
accordance with GAAP, shall include (i) all obligations of such Person for
borrowed money or obligations of such Person evidenced by notes or similar
instruments which have been incurred in consideration for the acquisition of
property or assets, (ii) obligations secured by any Security Interest upon
property or assets owned by such Person, even though such Person has not assumed
or become liable for the payment of such obligations, (iii) obligations created
or arising under any conditional sale or other title retention agreement with
respect to property acquired by such Person, notwithstanding the fact that the
rights and remedies of the seller, lender or lessor under such agreement in the
event of default are limited to repossession or sale of the property, and (iv)
capitalized lease obligations.
"Intellectual Property" means any and all of the following which is owned
by, licensed by, licensed to, used or held for use by the Company and/or any of
its Subsidiaries (including all copies and embodiments thereof, in electronic,
written or other media): (i) all registered and unregistered trademarks, trade
dress, service marks, logos, trade names, internet domain names, corporate names
(including the names "Peterson Consulting L.L.C., Peterson Worldwide L.L.C." and
all derivations thereof) and all applications to register the same (the
"Trademarks"); (ii) all issued U.S. and foreign patents and pending patent
applications, patent disclosures and improvements thereto (the "Patents"); (iii)
all registered and unregistered copyrights, mask work rights and all
applications to register the same (the "Copyrights"); (iv) all computer software
and databases owned or used (excluding software and databases licensed to the
Company under standard, non-exclusive software licenses granted to end-user
customers by third parties in the ordinary course of such third parties'
business) by the Company or under development for the Company by third parties
(the "Software"); (v) all categories of trade secrets, know-how, inventions
(whether or not patentable and whether or not reduced to practice), processes,
procedures, drawings, specifications, designs, plans, proposals, technical data,
copyrightable works, financial, marketing, and business data, pricing
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<PAGE>
and cost information, business and marketing plans, client and supplier lists
and information and other confidential and proprietary information ("Proprietary
Rights"); (vi) all licenses and agreements pursuant to which the Company has
acquired rights in or to any of the Trademarks, Patents, Copyrights, Software or
Proprietary Rights (excluding software and databases licensed to the Company
under standard, non-exclusive software licenses granted to end-user customers by
third parties in the ordinary course of such third parties' business)
("Licenses-In"); and (vii) all licenses and agreements pursuant to which the
Company has licensed or transferred any rights to any of the Trademarks,
Patents, Copyrights, Software or Proprietary Rights ("Licenses-Out").
"Knowledge" means, (i) in the case of any individual, the actual knowledge
of such person, and (ii) in the case of a corporation, limited liability company
or other entity, the actual knowledge of the directors and officers (including
the Members) or managers of such corporation, limited liability company or other
entity, as appropriate.
"Liability" means any liability (whether known or unknown, whether absolute
or contingent, whether liquidated or unliquidated, and whether due or to become
due), obligation or Indebtedness, including without limitation, any liability
for Taxes.
"Material Adverse Effect" means a material adverse effect or impact upon
the assets, financial condition, results of operations or business of the
Company and its Subsidiaries (taken as a single enterprise), or on the ability
of the Parties to consummate the transactions contemplated hereby.
"Member" means, with respect to the Company, each person who is a "member"
thereof within the meaning of the ILLCA.
"Membership Interest" means the aggregate capital contributions of a Member
in the Company at a particular time, and the right of such Member to any and all
benefits to which a Member may be entitled pursuant to the Operating Agreement
of the Company and under the ILLCA, together with all obligations of such Member
to comply with the terms and provisions of the Operating Agreement and the
ILLCA. A Membership Interest may be expressed as a percentage, which percentage
shall be based on the ratio which a Member's capital contributions bear to the
aggregate capital contributions of all Members.
"Metzler Common" means the Common Stock, par value $0.001 per share, of
Metzler.
"Metzler Common Value" means the average of the closing price of Metzler
Common as reported by the Nasdaq National Market for the 3 consecutive trading
days selected by Metzler commencing no earlier than August 19, 1998 and ending
no later than August 27, 1998 as such three day period is set forth in writing
by Metzler and delivered to the Company on the day following the third day of
such period.
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<PAGE>
"Operating Agreement" means the Amended and Restated Limited Liability
Company Operating Agreement of the Company dated as of June 28, 1996 and
effective as of January 15, 1997.
"Ordinary Course of Business" means the ordinary course of business of the
Company and its Subsidiaries consistent with past custom and practice of the
Company and its Subsidiaries, respectively, as the context herein may require
(including with respect to quantity and frequency).
"Person" means any individual, trust, corporation, partnership, limited
partnership, limited liability company or other business association or entity,
court, governmental body or governmental agency.
"Plans" means: (i) all employee benefit plans as defined in Section 3(3) of
ERISA; (ii) all other severance pay, deferred compensation, excess or
supplemental benefit, vacation, stock, stock option, and incentive plans,
contracts, schemes, programs, funds, commitments, or arrangements of any kind;
and (iii) all other plans, contracts, schemes, programs, funds, commitments, or
arrangements providing money, services, property, or other benefits, whether
written or oral, qualified or nonqualified, funded or unfunded, and including
any that have been frozen or terminated, which pertain to any employee, former
employee, director, officer, member, consultant, or independent contractor of
the Company or any ERISA Affiliate of the Company and (a) to which the Company
or any ERISA Affiliate of the Company is or within the last six years has been a
party or by which any of them is or within the last six years has been bound or
(b) with respect to which the Company or any ERISA Affiliate of the Company has
made any payments or contributions since December 31, 1991 or (c) to which the
Company or any ERISA Affiliate of the Company may otherwise currently have any
liability (including any such plan or arrangement formerly maintained by the
Company or any ERISA Affiliate of the Company).
"Pro Rata Percentage" means, with respect to each Member, the percentage
set forth opposite such Member's name on Section 3.1(d) of the Disclosure
Schedule.
"Securities Act" means the Securities Act of 1933, as amended.
"Security Interest" means any mortgage, pledge, security interest, lien or
other similar encumbrance or right of any third party.
"Subsidiary" means any corporation, limited liability company, limited
partnership, partnership, trust or other entity with respect to which another
Person has the power, directly or indirectly through one or more intermediaries,
to vote or direct the voting of sufficient securities or interests to elect a
majority of the directors or management committee or similar governing body.
"Tax" or "Taxes" means any Federal, state, local, or foreign income, gross
receipts, sales, licenses, payroll, employment, excise, severance, stamp,
occupation, premium, windfall
5
<PAGE>
profits, environmental (including taxes under Section 59A of the Code), customs
duties, capital stock, franchise, profits, withholding, social security (or
similar), unemployment, disability, real property, personal property, sales,
use, transfer, value added, alternative or add-on minimum, estimated, or other
tax of any kind whatsoever, including any interest, penalty, or addition
thereto, whether disputed or not.
"Tax Proceeding" means, with respect to Taxes, any proceeding, judicial or
administrative, civil or criminal, including, without limitation, any audit or
investigation.
"Tax Return" means any return, declaration, report, claim for refund, or
information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.
"Total Transaction Value" means $191,000,000; provided, however, that the
Total Transaction Value shall be adjusted as set forth in Section 2.6 herein.
1.2 Principles of Construction.
(a) In this Agreement, unless otherwise stated or the context
otherwise requires, the following usage apply: (i) unless otherwise provided
herein, actions permitted, but not required, under this Agreement may be taken
at any time and from time to time in the actor's sole discretion; (ii) in
computing periods from a specified date to a later specified date, the words
"from" and "commencing on" (and the like) mean "from and including," and the
words "to," "until" and "ending on" (and the like) mean "to, but excluding";
(iii) the captions and headings of articles, sections, schedules and exhibits
appearing in or attached to this Agreement have been inserted for convenience of
reference only and are not a part of, nor shall they affect any construction or
interpretation of this Agreement or any of its provisions; (iv) unless otherwise
specified, indications of time of day mean Chicago, Illinois time; (v) all
references to articles, sections, schedules and exhibits are to articles,
sections, schedules and exhibits in or to this Agreement unless otherwise
specified; (vi) references to a statute shall refer to the statute as amended
from time to time and any successor statute, and to all rules and regulations
promulgated under or implementing the statute or successor, as in effect at the
relevant time; (vii) references to a governmental or quasi-governmental agency,
authority or instrumentality shall also refer to a regulatory body that succeeds
to the functions of the agency, authority or instrumentality; (viii) "including"
means "including, but not limited to"; (ix) unless the context requires
otherwise, all words used in this Agreement in the singular number shall extend
to and include the plural, all words in the plural number shall extend to and
include the singular and all words in any gender shall extend to and include all
genders; and (x) any reference to a document or set of documents in this
Agreement, and the rights and obligations of the parties under any such
documents, shall mean such document or documents as amended or otherwise
modified from time to time, and any and all extensions, renewals, substitutions
or replacements thereof.
(b) Except as otherwise expressly provided in this Agreement, all
accounting terms not specifically defined herein shall be construed in
accordance with United States GAAP applied on a consistent basis.
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<PAGE>
2. THE MERGER
----------
In connection with the Acquisition, the respective managers of Acquisition
Sub and the Company have, by resolutions duly adopted and approved the following
provisions of this Article 2 as the Plan of Reorganization within the meaning of
Code Section 368(a)(1)(B) and as a "Plan of Merger" within the meaning of
Section 37-20 of the ILLCA:
2.1. Articles of Merger. Subject to the provisions of this Agreement, a
Plan of Merger as required by Section 37-20 of the ILLCA, together with Articles
of Merger signed on behalf of each of Acquisition Sub and the Company, shall be
duly prepared, executed and acknowledged by the Company, Acquisition Sub and
such other parties as may be appropriate, and thereafter such Articles of Merger
shall be delivered to the Secretary of State of the State of Illinois (the
"Illinois Department") for filing on the date of Closing (as hereinafter
defined). The Acquisition shall become effective for corporate law issues at
5:00 p.m. Chicago time on the date such filings occur (the "Merger Time"). The
date on which the Merger Time occurs is referred to herein as the "Merger Date".
2.2. Closing. The closing of the transactions contemplated hereby (the
"Closing") will take place at the offices of Barack Ferrazzano Kirschbaum
Perlman & Nagelberg, 333 West Wacker Drive, Suite 2700, Chicago, Illinois 60606,
on August 31, 1998, to the extent that the conditions set forth in Sections 4.5
and 4.6 have been satisfied or waived (where permissible), unless another time
or place is agreed to by the Parties. The effective date of this transaction
will be the date of Closing (the "Effective Date"). At the Closing, the Parties
shall make delivery of those materials set forth, respectively, in Sections 4.5
and 4.6 hereof.
2.3. Effects of the Merger.
(a) At the Merger Time, the separate legal existence of Acquisition
Sub shall cease and Acquisition Sub shall be merged with and into the Company
and the Company, as the surviving entity in the Acquisition (the "Surviving
Entity"), shall continue its legal existence under the laws of the State of
Illinois under the name "Peterson Consulting L.L.C." doing business as "Peterson
Worldwide L.L.C."
(b) At and after the Merger Time, the Acquisition will have the
effects set forth in Article 37 of the ILLCA.
2.4. Articles of Organization and Operating Agreement. The Articles of
Organization and the Operating Agreement of Acquisition Sub, in substantially
the form set forth as Exhibit A hereto, each as in effect immediately prior to
the Merger Time, shall respectively become the Articles of Organization and the
Operating Agreement of the Surviving Entity immediately after the Merger Time
and shall thereafter continue to be its Articles of Organization and the
Operating Agreement until amended as provided therein and under the ILLCA.
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<PAGE>
2.5. Directors and Officers. The manager of Acquisition Sub holding
office immediately prior to the Merger Time shall be the manager of the
Surviving Entity immediately after the Merger Time. Immediately after the Merger
Time, the officers of the Surviving Entity shall be the officers of Acquisition
Sub holding office immediately prior to the Merger Time and the officers listed
on Schedule 2.5 hereto.
2.6. Conversion of Securities. At the Merger Time, by virtue of the
Acquisition and without any action on the part of Acquisition Sub, the Company
or the Members, (x) the outstanding interests in equity securities of
Acquisition Sub held by Metzler immediately prior to the Merger Time shall be
converted into a 100% membership interest in the Company, and (y) the Membership
Interest held by the Members immediately prior to the Merger Time shall be
converted into shares of Metzler Common based on the Metzler Common Value as set
forth on Schedule 2.6 attached hereto; provided, however, that those Members who
dissent from the Acquisition shall receive, in lieu of Metzler Common, cash in
an amount equal to their Pro Rata Percentage of the Total Transaction Value;
and, further, provided, that if as the result of the conversion of any Member's
Membership Interests upon consummation of the Acquisition, a fractional interest
in a share of Metzler Common would be deliverable under this Section 2.6, in
lieu of a fractional share being delivered therefor, such fractional interest
shall automatically be converted into the right to receive an amount in cash
(without interest) equal to the product of the Metzler Common Value multiplied
by the amount of such fractional interest. No such holder will be entitled to
dividends, voting rights or any other rights as a shareholder of Metzler in
respect of any fractional share. For all purposes of this Agreement (including
all computations pursuant to Schedule 2.6, the Total Transaction Value shall be
adjusted in accordance with the following provisions:
(a) Closing Balance Sheet. As soon as practicable but no later than
45 days following the Closing Date, the Company Managers shall deliver to
Metzler a balance sheet (the "Closing Balance Sheet") for the Company dated as
of the close of business the day prior to the date of Closing (the "Closing
Balance Sheet Date"), which Closing Balance Sheet shall be prepared by the
Company and reviewed by Crowe Chizek and Company LLP ("Crowe Chizek") and shall
set forth the assets and liabilities of the Company as of the close of business
on the Closing Balance Sheet Date. The Closing Balance Sheet shall present
fairly the financial position of the Company as of the Closing Balance Sheet
Date, in accordance with GAAP (the "Interim Financial Statement Standards").
(i) If Metzler determines to dispute in good faith that the
Closing Balance sheet has not been prepared in accordance with the Interim
Financial Statement Standards, Metzler shall notify the Member's
Representative in writing thereof (the "Metzler Notice") within 14 days
after delivery to the Metzler of the Closing Balance Sheet (the "Notice
Period"). The Metzler Notice shall set forth in reasonable detail the
alleged non-conformance and the amount(s) being disputed. If Metzler does
not deliver the Metzler Notice within the Notice Period, the Closing
Balance Sheet shall become final and binding upon all parties.
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(ii) If the Metzler Notice is delivered within the Notice Period,
the Members' Representative and Metzler shall attempt in good faith to
resolve all dispute(s). If Metzler and the Members are unable to resolve
any disputed item within 14 days after receipt of the Metzler Notice, such
disputed item(s), together with each party's calculation of the Company's
Working Capital, Total Assets and Net Members' Capital (in each case, as
defined below) as of the Closing Balance Sheet Date, shall be submitted to
a nationally recognized "Big Five" accounting firm or its successor (other
than the Company's or Metzler's regular auditors or their successors)
chosen by lot, which accounting firm shall be instructed to arbitrate such
disputed item(s) and determine the Company's Working Capital, Total Assets
and Net Members' Capital as of the Closing Balance Sheet Date. The
resolution of disputes by the accounting firm so selected shall be set
forth in writing and shall be conclusive and binding upon all parties and
adjustment may be entered thereon by any court having jurisdiction over the
parties. The costs of such resolution by such accounting firm shall be
borne one half by the Members, in proportion to their respective Pro Rata
Percentages, on the one hand, and one half by Metzler, on the other hand.
(A) The term "Working Capital" means the excess of the Company's
current assets over its current liabilities as of the Closing Balance
Sheet Date, calculated in accordance with the Interim Financial
Statement Standards, all as finally determined in accordance with this
Section 2.6(a).
(B) The term "Total Assets" means the Company's total assets,
calculated in accordance with the Interim Financial Statement
Standards, all as finally determined in accordance with this Section
2.6(a).
(C) The term "Net Members' Capital" means the excess of the
Company's total assets over its total liabilities as of the Closing
Balance Sheet Date, calculated in accordance with the Interim
Financial Statement Standards, all as finally determined in accordance
with this Section 2.6(a).
(b) Adjustment. The Total Transaction Value shall be adjusted
downward, on a dollar-for-dollar basis and in accordance with this paragraph
(b), to account for the negative differential (the "Target Differential"), if
any, between Target Working Capital, Target Total Assets, and Target Net
Members' Capital (as each such term is hereafter defined) and each of,
respectively, Working Capital, Total Assets, and Net Members' Capital. For
purposes hereof, the Target Differential shall be the greater of the respective
differentials between (a) Target Working Capital and Working Capital, (b) Target
Total Assets and Total Assets, and (c) Target Net Members' Capital and Net
Members' Capital. Target Working Capital shall be $11,000,000, Target Total
Assets shall be $39,000,000, and Target Net Members' Capital shall be
$20,000,000. As of the Merger Date, an amount of shares of Metzler Common equal
to 10% of the number of shares of Metzler Common issued pursuant to the
Acquisition shall be deposited with the Escrow Agent and held in a segregated
escrow account (the "Adjustment Escrow") in accordance with the terms of the
Escrow Agreement. Within three days following the determination of the Target
Differential, if any, the Escrow Agent shall return to Metzler the
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number of shares valued at the Metzler Common Value equal to the Target
Differential and shall promptly distribute to the Members the remaining shares
held in the Adjustment Escrow to the Members, pro rata in respect of their
respective Pro Rata Percentages.
2.7. Closing of Company Transfer Books. As of the Closing, no transfer of
Membership Interests shall thereafter be made or recognized.
2.8. Delivery of Stock Certificates. At the Merger Time, Metzler shall
issue and deliver (or deliver irrevocable instructions to its Transfer Agent to
issue and deliver), as applicable, to such holder of Membership Interests a
certificate or certificates representing the shares of Metzler Common to be
issued to such holder pursuant to Section 2.6 less the shares of Metzler Common
to be deposited in the Adjustment Escrow and to be deposited in the escrow for
"Indemnification Escrow Shares" pursuant to the Consent, Indemnification and
Noncompete Agreement (as hereinafter defined), and, in the case of payment for
any fractional interest in Metzler Common, a check payable to the holder. From
and after the date of the Closing, each Member shall for corporate law purposes
only (including, without limitation, voting rights, dividends and other
distributions) be deemed to be a record and beneficial holder of the Metzler
Common issuable to such Member pursuant to Schedule 2.6 after giving effect to
the adjustment contemplated by Section 2.6(b) hereof.
2.9. Rights of the Company Members. From and after the Merger Time, the
holders of Membership Interests as of the Merger Time shall have no rights with
respect to such Membership Interests.
2.10. Taking of Necessary Action; Further Action. Metzler and Acquisition
Sub on the one hand, and the Company and the Members, on the other hand, shall
use reasonable efforts to take all such action (including action to cause the
satisfaction of the conditions precedent to the Acquisition) as may be necessary
or appropriate in order to effectuate the Acquisition as promptly as possible.
If, at any time after the Merger Time, any further action is necessary or
desirable to vest the Surviving Entity with full possession of all the rights,
privileges, immunities and franchises of the Company and Acquisition Sub, the
officers of the Surviving Entity are fully authorized in the name of either the
Company or Acquisition Sub or otherwise to take, and shall take, all such
action.
3. REPRESENTATIONS AND WARRANTIES
------------------------------
3.1. Representations and Warranties Concerning the Company. As a material
inducement to Metzler and Acquisition Sub to enter into this Agreement and
consummate the transactions contemplated hereby, the Company and the Company
Managers hereby jointly and severally represent and warrant to Metzler and
Acquisition Sub that all of the statements contained in this Section 3.1 are
correct and complete as of the date of this Agreement, and hereby covenant that
said statements will be correct and complete as of the Merger Date (as though
made as of the Merger Date and as though the Merger Date were substituted for
the date of this Agreement throughout such statements), except, in each case, as
set forth in the schedule attached to this Agreement setting forth exceptions to
the representations and
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warranties set forth herein (the "Disclosure Schedule"). The Disclosure Schedule
will be arranged in sections corresponding to the numbered and lettered sections
contained in this Section 3.1, and no matter disclosed with respect to one
section shall be deemed to be an exception to another section unless the
applicability of such item to such other section is reasonably apparent.
Notwithstanding anything herein to the contrary, the disclosure of any contract
agreement, arrangement or understanding herein shall not affect or qualify any
representation with respect to the effectiveness or enforceability of such
contract, agreement, arrangement or understanding or the absence of breaches or
defaults thereunder, unless otherwise specifically disclosed.
(a) Organization, Qualification and Corporate Power. The Company is
a limited liability company duly organized, validly existing and in good
standing under the laws of the State of Illinois. Each Subsidiary of the
Company, as identified in Section 3.1(a) of the Disclosure Schedule, is duly
organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation, as identified in Section 3.1(a) of the Disclosure
Schedule. Each of the Company and its Subsidiaries has all requisite limited
liability company or corporate power, as the case may be, and authority to carry
on the business in which it is engaged and to own and use the properties owned
and used by it. True and correct copies of the Company's Articles of
Organization and Operating Agreement, in each case as amended to date, have been
delivered to Metzler. Each of the Company and its Subsidiaries is qualified to
conduct business and is in good standing under the laws of each jurisdiction
wherein the nature of its business or its ownership of property requires it to
be so qualified, except where the failure to be so qualified, would not
individually or in the aggregate, have a Material Adverse Effect. Section 3.1(a)
of the Disclosure Schedule lists all jurisdictions in which the Company and each
of its Subsidiaries is qualified to do business.
(b) Authorization of Transaction. The Company has all requisite
limited liability company power and authority to execute and deliver this
Agreement and to perform its obligations hereunder. Without limiting the
generality of the prior sentence, the Board of Managers of the Company have duly
authorized the execution, delivery and performance of this Agreement and the
consummation of the Acquisition. This Agreement constitutes the valid and
legally binding obligation of the Company enforceable against the Company in
accordance with its terms, except as enforceability may be limited by (i)
bankruptcy, insolvency, reorganization, moratorium, or other similar laws now or
hereafter in effect relating to the rights and remedies of creditors generally
or (ii) general principles of equity.
(c) Noncontravention. Subject to compliance with the HSR Act and
except as set forth on Section 3.1(c) of the Disclosure Schedule, neither the
execution and the delivery of this Agreement, nor the consummation of the
transactions contemplated hereby will (i) violate any applicable statute,
regulation, law, rule or common law doctrine, (ii) violate any judgment, order,
decree, stipulation, injunction, or other restriction of any governmental body,
governmental agency or court to which the Company is subject, (iii) breach any
provision of the Articles of Organization or Operating Agreement of the Company,
or (iv) conflict with, result in a breach of, constitute a default under (with
or without notice or lapse of time, or both), result in the acceleration of,
create in any party the right to accelerate, terminate,
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modify or cancel, or require any notice under, or result in the creation of any
Security Interest upon any of the Company's (or any of its Subsidiaries') assets
pursuant to the terms of, any contract, agreement, lease, sublease, license,
sublicense, franchise, permit, indenture, agreement for borrowed money,
instrument of indebtedness, Security Interest or other binding arrangement to
which the Company (or any of its Subsidiaries) is a party or by which it is
bound or to which any of its assets are subject, except, in the case of clauses
(i) and (iv) above, for those violations or breaches which would not,
individually or in the aggregate, have a Material Adverse Effect. Except
pursuant to the HSR Act and as set forth on Section 3.1(c) of the Disclosure
Schedule, the Company is not required to give any notice to, make any material
filing with, or obtain any authorization, consent, or approval of any
government, governmental agency or court, or any other Person in order for the
parties to consummate the Acquisition and the transactions contemplated by this
Agreement or in order that the Acquisition and such transactions not constitute
a breach or violation of, or result in a right of termination or acceleration or
any encumbrance on any of the Company's (or any of its Subsidiaries') assets,
pursuant to the provisions of any material agreement, arrangement or
understanding or any material license, franchise or permit.
(d) Capitalization. The authorized equity of the Company consists
solely of the Membership Interests, all of which are owned by the Members. Set
forth on Section 3.1(d) of the Disclosure Schedule is a true and correct
description of (i) the full legal names, current address and social security
number of each owner of Membership Interests, (ii) the Pro Rata Percentage of
each of the Members, and (iii) all of the current managers and officers of the
Company. None of the Membership Interests are evidenced or represented by any
certificate or comparable writing. The Company has never authorized, offered,
sold or issued any securities other than Membership Interests. All offerings,
sales and issuances by the Company of any Membership Interests have been
conducted in compliance with and in accordance with or in reliance upon
exemptions from all applicable Federal and state securities laws and all other
applicable state laws. Except as set forth on Section 3.1(d) of the Disclosure
Schedule, there are no currently outstanding or authorized options, warrants,
rights, contracts, rights of first refusal or first offer, calls, puts, rights
to subscribe, conversion rights, or other agreements or commitments to which the
Company is a party or which are binding upon the Company or any of the Members
providing for the issuance, disposition, or acquisition of any Membership
Interests or securities convertible into or exchangeable for Membership
Interests. There are no voting trusts, proxies, or any other agreements,
restrictions or understandings with respect to the voting of any of the
Membership Interests, except for those agreements expressly contemplated hereby.
(e) No Subsidiaries. Except as set forth in Section 3.1(e) of the
Disclosure Schedule, the Company does not own or control any direct or indirect
equity interest or equity participation in any corporation, partnership, limited
liability company, trust, or other business association or Subsidiary.
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(f) Financial Statements; Books and Records.
(i) The Company has provided Metzler with the following financial
statements, correct and complete copies of which are set forth on Section
3.1(f) of the Disclosure Schedule (collectively the "Financial
Statements"): (A) consolidated and consolidating balance sheet and related
statements of income and changes in members' equity for the Company as of
and for the fiscal years ended December 31, 1997, 1996 and 1995 (December
31, 1997 being the "Most Recent Fiscal Year End"), each audited by Crowe
Chizek and (B) unaudited consolidated and consolidating balance sheet and
related statements of income for the Company as of and for the three months
ended June 30, 1998 and year to date (the "Latest Financials"). The
Financial Statements are correct and complete in all material respects and
have been prepared in accordance with GAAP, except, in the case of the
Latest Financials, for the absence of footnotes and normal year-end
adjustments. The Financial Statements fairly present, on such basis, the
consolidated financial condition and results of operations of the Company
and its Subsidiaries as of the times and for the periods referred to
therein.
(ii) The Company's and its Subsidiaries' books and records are
and have been properly prepared and maintained in form and substance
adequate for preparing audited financial statements in accordance with
GAAP, and fairly and accurately reflect in all material respects all of the
assets and Liabilities of the Company and its Subsidiaries and all
contracts and transactions to which the Company or any of its Subsidiaries
is or was a party or by which the Company or any of its Subsidiaries or any
of their respective business or assets is or was affected. The minute books
and related records of the Company and its Subsidiaries, correct and
complete copies of which have been made available to Metzler, correctly
reflect in all material respects all resolutions adopted and all other
material corporate actions taken at all meetings or through consents of the
managers or directors (including committees thereof) and the members or
shareholders.
(g) Recent Events. Except as set forth in Section 3.1(g) of the
Disclosure Schedule, since June 30, 1998, neither the Company nor any of its
Subsidiaries has experienced or suffered any Material Adverse Effect. Without
limiting the generality of the foregoing, except as set forth on the Latest
Financials or Section 3.1(g) of the Disclosure Schedule, since June 30, 1998,
neither the Company nor any of its Subsidiaries:
(i) sold, leased, transferred or assigned any of its assets,
tangible or intangible, with an aggregate value greater than $100,000,
other than in the Ordinary Course of Business;
(ii) accelerated, terminated, modified, canceled or committed any
breach of any contract, lease, sublease, license, or sublicense (or series
of related contracts, leases, subleases, licenses, and sublicenses) either
involving more than $50,000 or otherwise outside of the Ordinary Course of
Business;
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(iii) canceled, compromised, waived, or released any right or
claim (or series of related rights and claims) either involving more than
$50,000 or outside of the Ordinary Course of Business;
(iv) experienced any damage, destruction, or loss to its property
in excess of $50,000 (whether or not covered by insurance);
(v) created or suffered to exist any Security Interest upon any
of its assets, tangible or intangible, outside the Ordinary Course of
Business or securing any Liabilities in the aggregate in excess of
$100,000;
(vi) issued, sold, or otherwise disposed of any of its Membership
Interests or other equity securities, or granted any options, warrants, or
other rights to purchase or obtain (including upon conversion or exercise)
any interest in the Company or any of its equity securities, or any
securities convertible or exchangeable into any of its Membership Interests
or other equity securities;
(vii) declared, set aside, or paid any dividend or distribution
with respect to the Membership Interests or any of its equity securities
(whether in cash or in kind) or redeemed, purchased, or otherwise acquired
any of the Membership Interests or any of its equity securities;
(viii) entered into any transaction, arrangement or contract
with, or distributed or transferred any property or other assets to, any
officer, director, Member or other insider or Affiliate of the Company or
any of its Subsidiaries (other than salaries and employee benefits in the
Ordinary Course of Business and the contemplated sale of IDR);
(ix) made or committed to make any capital expenditures or
entered into any other material transaction outside the Ordinary Course of
Business involving an expenditure in excess of $50,000;
(x) amended or modified in any material respect any Plan (beyond
any amendments and modifications reflected in true and complete copies of
such Plans delivered to Metzler);
(xi) entered into any employment agreement for a base salary in
excess of $250,000 or collective bargaining agreement or granted any
increase in excess of $25,000 in the salary of any officer or management
employee of the Company (or increase in excess of $15,000 in the case of
any non-management employee) or paid or committed to pay any bonus to any
officer or employee;
(xii) changed in any material respect the manner in which the
business has been conducted, including, without limitation, billing of
clients or collection of accounts receivable, purchases of goods and
services or payment of accounts payable;
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(xiii) changed the accounting principles, methods or practices or
any change in the depreciation or amortization policies or rates, except in
each case as required by GAAP other than applying SOP 98-1 and other
related pronouncements to 1998 Financial Statements;
(xiv) changed the relationships with any client, contractor or
supplier which might reasonably be expected to result in a Material Adverse
Effect; or
(xv) entered into any binding commitment (orally or in writing)
to do any of the foregoing.
(h) Undisclosed Liabilities. Neither the Company nor any of its
Subsidiaries has any Liability (and there is no Basis for any present or future
charge, complaint, action, suit, proceeding, hearing, investigation, claim, or
demand against the Company or any of its Subsidiaries giving rise to any
Liability), except for (i) Liabilities set forth on the face of the Latest
Financials, (ii) Liabilities (since June 30, 1998) in the Ordinary Course of
Business (none of which relates to any breach of contract, breach of warranty,
tort, infringement, or violation of law or arose out of any charge, complaint,
action, suit, proceeding, hearing, investigation, claim, or demand), (iii)
Liabilities in an aggregate amount of less than $10,000, and (iv) Liabilities
otherwise expressly disclosed in this Agreement or on the Disclosure Schedule
(it being understood that except as set forth in Section 3.1(f) no
representation or warranty is being made regarding the revenues or results of
operations of the Company).
(i) Tax Matters.
(i) Each of the Company and its Subsidiaries (including IDR) has
filed all Tax Returns that it was required to file on or prior to the date
hereof. All such Tax Returns were true, correct and complete in all
material respects and accurately reflected all Liability for Taxes for the
periods covered thereby and, with respect to any Member, accurately
reflected information necessary for such Member to determine his, her, or
its Liability for unpaid Taxes. The Liability of the Company and its
Subsidiaries for unpaid Taxes, whether to any governmental authority or to
another Person such as under a tax sharing agreement, for all periods
ending on or before the Merger Date do not exceed the amount of the
Liability accruals for Taxes (excluding reserves for deferred Tax assets or
deferred Tax Liabilities) on the Latest Financials. To the Knowledge of the
Company, neither the Company nor any of the Subsidiaries have received
notice of any claim made by an authority in a jurisdiction where the
Company or any of its Subsidiaries do not file Tax Returns that any of the
Company and its Subsidiaries is or may be subject to taxation by that
jurisdiction. There are no Security Interests on any of the assets of the
Company that arose in connection with any failure (or alleged failure) to
pay any Tax when due.
(ii) The Company and its Subsidiaries have withheld and paid when
due all Taxes required to have been withheld and paid in connection with
amounts paid or owing to any employee, creditor, independent contractor, or
other third party.
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(iii) The Company has no Knowledge of any Basis on which any
taxing authority could assess any additional Taxes for any period for which
Tax Returns have been filed. There is no dispute or claim concerning any
Tax Liability of the Company, of any of its Subsidiaries or of any Member
relating to the Company or any of its Subsidiaries either (A) claimed or
raised by any taxing authority in writing or (B) as to which the Company
has Knowledge. The Company has previously provided to Metzler correct
copies of all Federal, state, local, and foreign Tax Returns filed with
respect to the Company and its Subsidiaries for the prior three year end
periods. None of such Tax Returns have been audited by a government or
taxing authority, nor is subject to any audit or other Tax Proceeding in
process, pending, or threatened (either in writing, or verbally, formally
or informally) or are expected to be asserted with respect to Taxes (or the
collection of Taxes) of any of the Company, its Subsidiaries, or a Member
(to the extent such Taxes relate to the Company or any of its
Subsidiaries). There are no examination reports or statements of
deficiencies assessed against or agreed to by the Company, any of its
Subsidiaries or any of its Members relating to the Company or any of its
Subsidiaries for such taxable periods.
(iv) Neither the Company nor any of its Subsidiaries has filed a
consent under Section 341(f) of the Code concerning collapsible
corporations. Neither the Company nor any of its Subsidiaries has made any
material payments, is obligated to make any material payments, or is a
party to any agreement that would obligate it to make any material payments
that will not be deductible under Section 280G of the Code. Neither the
Company nor any of its Subsidiaries has been a United States real property
holding corporation within the meaning of Section 897(c)(2) of the Code
during the applicable period specified in Section 897(c)(A)(ii) of the
Code. Neither the Company nor any of its Subsidiaries is a party to any tax
allocation or sharing agreement. Neither the Company nor any of its
Subsidiaries has been a member of an Affiliated Group which filed federal
income tax returns, other than a group of which the Company was the common
parent. Neither the Company nor any of its Subsidiaries has any Liability
for Taxes owed by any Person (other than the Company), including without
limitation, (A) as a transferee, assignee or other successor or (B)
pursuant to a Tax sharing agreement or other contract.
(v) Neither the Company nor any of its Subsidiaries has waived
any statute of limitations in respect of Taxes or agreed to any extension
of time with respect to any Tax assessment or deficiency.
(j) Title and Condition of Properties.
(i) Neither the Company nor any of its Subsidiaries owns any real
property.
(ii) The leases described in Section 3.1(j) of the Disclosure
Schedule (the "Property Leases") cover all of the real estate leased, used
or occupied by the Company or any of its Subsidiaries. Each of the Property
Leases is in full force and
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effect and the Company or one of its Subsidiaries holds a valid and
existing leasehold or subleasehold interest under each of such Property
Leases. The Company has delivered to Metzler complete and accurate copies
of each of the Property Leases and none of such Property Leases has been
modified in any material respect, except to the extent that such
modifications are disclosed by the copies delivered to Metzler. Neither the
Company nor any of its Subsidiaries is in default, and to the Knowledge of
the Company no circumstances exist which would result in such default
(including upon the giving of notice or the passage of time, or both),
under any of such Property Leases, and no other party thereto has the right
to terminate, accelerate performance under or otherwise modify any of such
leases. To the Knowledge of the Company, no lessor under any such lease is
in default under any of such leases in its duties to the lessee. Except as
set forth in Section 3.1(j) of the Disclosure Schedule, neither the Company
nor any of its Subsidiaries has assigned, transferred, conveyed, subjected
to a Security Interest, or otherwise encumbered any interest in any of the
Property Leases.
(iii) The Company or one of its Subsidiaries owns good and
marketable title, free and clear of all Security Interests, to all of the
personal property and assets reflected on the Latest Financials or acquired
after June 30, 1998, except for (A) assets with an aggregate original
purchase price of less than $100,000 which have been disposed of to non-
affiliated third parties since June 30, 1998, in the Ordinary Course of
Business, (B) Security Interests securing liabilities reflected on the
Latest Financials and (C) Security Interests for current Taxes not yet due
and payable.
(iv) The Company's computer hardware, equipment and other
tangible personal property and assets are in good condition and repair,
except for ordinary wear and tear not caused by neglect, and are useable
for their respective intended purposes in the Ordinary Course of Business.
The personal property and assets shown on the Latest Financials or acquired
after June 30, 1998, the lease rights under the Property Leases and leases
of personal property and the Intellectual Property owned or used by the
Company or any of its Subsidiaries under valid license, collectively
include all assets necessary to the conduct of the Company's and its
Subsidiaries business as presently conducted. None of the Members, other
employees or independent contractors of the Company or their respective
Affiliates owns any rights, other than as would exist upon liquidation or
distribution of the Company, in any material assets, real or personal,
which are used by the Company or any of its Subsidiaries in its business.
(k) Intellectual Property.
(i) Section 3.1(k) of the Disclosure Schedule contains a complete
list and an accurate functional description by category and indication of
status (completed or in process) of all Patents, Trademarks, Copyrights,
Software, Licenses-In, Licenses-Out and other material items of
Intellectual Property which are owned, licensed by, licensed to, used or
held for use in or necessary for the conduct of the business of the Company
or any of its Subsidiaries as such business is currently conducted and
presently contemplated
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to be conducted, or as to which the Company or any of its Subsidiaries has
a contractual right to an assignment.
(ii) No Person has any Security Interest (other than the right to
use Software under license) in the Company's or any of its Subsidiaries'
interest in any Intellectual Property owned by the Company or any of its
Subsidiaries. The Company and each of its Subsidiaries has all rights to
use the Intellectual Property owned or used by it in the manner in which
such Intellectual Property is currently being used. Neither the Company nor
any of its Subsidiaries is under any obligation to pay any royalty or other
compensation to any third party or to obtain any approval for use of any of
the Intellectual Property. To the Knowledge of the Company, none of the
Intellectual Property is subject to any outstanding judgment, order,
decree, stipulation, injunction or charge; no charge, complaint, action,
suit, proceeding, hearing, investigation, claim, or demand is pending or,
to the Knowledge of the Company, threatened, which challenges the legality,
validity, enforceability, use or ownership of any of the Intellectual
Property.
(iii) No breach or default (or event which with notice or lapse
of time or both would result in a breach or default) by the Company or any
of its Subsidiaries exists or has occurred under any material License-In or
other material agreement pursuant to which the Company or any of its
Subsidiaries uses any Intellectual Property, and the consummation of the
transactions contemplated by this Agreement will not violate or conflict
with or constitute a breach or default (or an event which, with notice or
lapse of time or both, would constitute a breach or default) or result in a
forfeiture under, or constitute a Basis for termination of, any such
License-In or such other agreement or impair the Company's or any of its
Subsidiaries' ability after consummation of the Acquisition to use the
Software in the same manner as such Software is currently used by the
Company or such Subsidiary, except where such breaches, defaults,
violations, conflicts or other events which would not, individually or in
the aggregate, result in a Material Adverse Effect.
(iv) Each of the Company and its Subsidiaries owns or has the
right to use all the Intellectual Property necessary to provide, produce,
sell and license the services and products currently provided, produced,
sold and licensed by the Company or any of its Subsidiaries, and to conduct
the Company's or any of its Subsidiaries' business as presently conducted,
and the consummation of the transactions contemplated hereby will not alter
or impair any such rights, including any right of the Company or any of its
Subsidiaries to use or sublicense any Intellectual Property owned by
others. The Intellectual Property includes all patents, trademarks, trade
names, service marks, copyrights, mask work rights and trade secrets, and
the Software includes all software, which are necessary to operate the
business of the Company and each of its Subsidiaries as it is presently
conducted and to satisfy and perform the contracts, commitments,
arrangements and understandings with customers of the Company and each of
its Subsidiaries. The Company has no Knowledge of any reason the Company
and each of its Subsidiaries will not be able to continue to own, possess
or have access to, and to use, license and sub-license as applicable, on
reasonable terms, all Intellectual Property and
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other proprietary rights necessary for the lawful conduct of its business
as presently conducted and currently contemplated to be conducted, without
any infringement or conflict with the rights of others.
(v) No Intellectual Property owned by the Company or any of its
Subsidiaries, and no product or service practiced, offered, licensed or
sold by the Company or any of its Subsidiaries, infringes or, to the
Knowledge of the Company, is being infringed by any trademark, trade name,
copyright, trade secret, patent, right of publicity, right of privacy or
other proprietary right of any Person or would give rise to an obligation
to render an accounting to any Person as a result of co-authorship, co-
invention or an express or implied contract for any use or transfer.
Neither the Company nor any of its Subsidiaries has received notice of any
adversely held patent, invention, trademark, copyright, service mark, trade
name or trade secret of any other Person alleging or threatening to assert
that the Company's or any of its Subsidiaries' use of any of the
Intellectual Property infringes upon or is in conflict with any
intellectual property or proprietary rights of any third party. The
Company, has no Knowledge of any Basis for any claim, threatened claim or
any suit or action asserting any such infringement or conflict or asserting
that the Company or any of its Subsidiaries does not have the legal right
to own, enforce, sell, license, sublicense, lease or otherwise use any such
Intellectual Property, process, product or service, and the Company has no
Knowledge of any facts which should give such Person reason to believe that
there exists any Basis for such claim, threatened claim or suit or that any
such claim, threatened claim or suit may be asserted or instituted in the
future.
(vi) Neither the Company nor any of its Subsidiaries has sent or
otherwise communicated to any other Person any notice, charge, claim or
assertion of, and the Company has no Knowledge of any present, impending or
threatened infringement by any other Person of any Intellectual Property
owned by the Company or any of its Subsidiaries.
(vii) Except as disclosed in Section 3.1(k) of the Disclosure
Schedule, all the Company's and each of its Subsidiaries' Patents,
Trademarks and Copyrights listed in Section 3.1(k) of the Disclosure
Schedule as having been issued by, registered with or filed with the United
States Patent and Trademark Office or Register of Copyrights or the
corresponding offices of other countries identified in Section 3.1(k) of
the Schedule have been so duly registered, filed in or issued, as the case
may be, and have been properly maintained and renewed in accordance with
all applicable provisions of law and administrative regulations in the
United States and each such other country. The Company and each of its
Subsidiaries has used reasonable efforts to protect its rights in the
Intellectual Property. The Company or one of its Subsidiaries owns all
right, title and interest in and to the Intellectual Property, other than
the Software listed on Exhibit 2 to Section 3.1(k) Disclosure Schedule, as
to which the Company has a valid license. No current licenses for the use
of the Intellectual Property requires the Company or any of its
Subsidiaries to apply for or enforce appropriate legal protection of such
licensed Intellectual Property.
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(viii) Each of the Company's and each of its Subsidiaries'
current or former employees and those current or former independent
contractors retained by the Company or any of its Subsidiaries who, either
alone or in concert with others, created or creates, developed or develops,
invented or invents, discovered or discovers, derived or derives,
programmed or programs or designed or designs any of the Intellectual
Property, has entered into a written agreement with the Company or any of
its Subsidiaries, copies of which have heretofore been furnished to
Metzler. No former employees or independent contractors of the Company or
any of its Subsidiaries have any claims or rights to any of the
Intellectual Property necessary for the conduct of the Company's or any of
its Subsidiaries' business as now conducted. To the Knowledge of the
Company, no employee of the Company or any of its Subsidiaries 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 of such employee to the
Company or one of its Subsidiaries under any agreement to which currently
he or she is a party or otherwise.
(ix) Exhibit 3 to Section 3.1(k) of the Disclosure Schedule
identifies each Person to whom the Company or any of its Subsidiaries has
sold, licensed, leased or otherwise transferred or granted any interest or
rights to any Intellectual Property, other than Intellectual Property
licensed to end users pursuant to standard, non-exclusive "shrink wrap"
license agreements in the Ordinary Course of Business, none of which is a
license of any source code ("Shrink Wrap Licenses"). The Company has
previously delivered to Metzler complete and accurate copies of all
agreements relating to each such sale, license, lease or other transfer or
grant. The Company has delivered to Metzler copies of all copyright and
trademark registration certificates and all letters patent.
(x) The Company has documented all of the Software owned by it or
any of its Subsidiaries and used in its or any of its Subsidiaries'
business in sufficient detail that a reasonably competent computer
professional conversant with the language in which such Software written
using such documentation alone, would be able to understand, support and
modify such Software. To the Knowledge of the Company and the Members, all
of the data used in the Software was obtained from public sources and is
not subject to any confidentiality obligation imposed on the Company.
(xi) To its Knowledge, neither the Company nor any of its
Subsidiaries has not taken any actions under the law of any applicable
foreign jurisdictions where the Company or any of its Subsidiaries has
marketed or licensed Software that would restrict or limit the ability of
the Company or any of its Subsidiaries to protect, or prevent it from
protecting, its ownership interests in, confidentiality rights of, and
rights to market, license, modify or enhance the Software.
(xii) Neither the Company nor any of its Subsidiaries has
granted any third party the right to market the Company's or any of its
Subsidiaries' Software.
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(l) Contracts. Except as set forth on Schedule 3.1(l), with respect
to each written agreement that would be material to the Company and its
Subsidiaries as a whole (a "Material Contract"): (A) the Material Contract is
in full force and effect; (B) the Material Contract will continue to be in full
force and effect on identical terms immediately after the Merger Date; (C)
neither the Company nor any of its Subsidiaries (nor, to the Knowledge of the
Company, any other party) is in material breach or default (including, with
respect to any express or implied warranty), and no event has occurred which
with notice or lapse of time or both would constitute a material breach or
default or permit termination, modification, or acceleration, under any Material
Contract, except for any breaches, defaults, terminations, modifications or
accelerations which have been cured or waived; and (D) to the Knowledge of the
Company, no party has repudiated any material provision of any such Material
Contract. To the Knowledge of the Company, neither the Company nor any of its
Subsidiaries is a party to any verbal contract, agreement, or other arrangement
which, if reduced to written form, would be a Material Contract. Correct and
complete copies of the general forms of client engagement and services used by
the Company and each of its Subsidiaries have been made available to Metzler.
Except for those Material Contracts set forth on Section 3.1(l) of the
Disclosure Schedule, neither the Company nor any of its Subsidiaries is a party
to any fixed fee or capped price contracts or engagement arrangements (the
"Fixed Rate Engagements"), nor does the Company nor any of its Subsidiaries have
any outstanding offers, bids or proposals to perform any services on a fixed fee
or capped basis in an amount in excess of $1,500,000 per year. With respect to
the Company's Fixed Rate Engagements, the ratio of the amount of revenues
recognized to date (in the aggregate) by the Company compared to the amount of
revenues payable thereunder is reasonably proportionate to the ratio of the
amount of work completed under such Fixed Rate Engagements to the work required
thereunder.
(m) Notes and Accounts Receivable. All notes and accounts receivable
of the Company and each of its Subsidiaries are reflected properly on its books
and records, such receivables are valid receivables subject to no set-offs or
counterclaims, are current and collectible in the aggregate amount shown, and
will be collected in accordance with their terms at their recorded amounts,
subject only to the reserve for bad debts set forth on the face of the Latest
Financials, as adjusted for operations and transactions through the Merger Date
in accordance with the past custom and practice of the Company and its
Subsidiaries. Since June 30, 1998, there has not been an adverse change of more
than 10% in the aggregate amount of the accounts receivable of the Company or
any of its Subsidiaries or an increase of the average age of such receivables of
15 days.
(n) Intentionally Omitted.
(o) Litigation. Section 3.1(o) of the Disclosure Schedule sets forth
each instance in which the Company or any of its Subsidiaries (i) is subject to
any unsatisfied judgment, order, decree, stipulation or injunction or (ii) is a
party to or, to the Knowledge of the Company, is threatened to be made a party
to, any complaint, action, suit, proceeding, hearing, or investigation of or in
any court or quasi-judicial or administrative agency of any Federal, state,
local, or foreign jurisdiction or before any arbitrator for an amount in
controversy in excess of $100,000 individually or $250,000 in the aggregate.
None of the
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complaints, actions, suits, proceedings, hearings, and investigations set forth
in Section 3.2(o) of the Disclosure Schedule could reasonably be expected to
result in any Material Adverse Effect. To the Knowledge of the Company, there
does not exist a Basis on which any such complaint, action, suit, proceeding,
hearing, or investigation may be brought or threatened against the Company or
any of its Subsidiaries that could have a Material Adverse Effect on the
Company.
(p) Employees; Employment Matters.
(i) Except as set forth in Section 3.1(p) of the Disclosure
Schedule, to the Knowledge of the Company, no employee or group of
employees of the Company or any of its Subsidiaries who have in the last
twelve months generated more than $500,000 in revenues of the Company and
its Subsidiaries has notified the Company that they intend to terminate
their employment with the Company or any of its Subsidiaries generally or
as a result of the transactions contemplated hereby or otherwise. Neither
the Company nor any of its Subsidiaries is a party to or bound by any
collective bargaining agreement, and neither the Company nor any of its
Subsidiaries has experienced any strikes, grievances, other collective
bargaining disputes or, to the Knowledge of the Company, claims of unfair
labor practices. The Company has no Knowledge of any organizational effort
presently being made or threatened by or on behalf of any labor union with
respect to employees of the Company or any of its Subsidiaries.
(ii) Section 3.1(p) of the Disclosure Schedule contains a true,
correct and complete list setting forth the names and current salaries or
rates of compensation of all employees of the Company and each of the
Subsidiaries with an annual base salary of at least $50,000 and independent
contractors who render services to the Company or any of its Subsidiaries
on more than a single occasion who are expected to be paid at least $50,000
in 1998. Except as disclosed on Section 3.1(p) of the Disclosure Schedule,
neither the Company nor any of its Subsidiaries has any unsatisfied
Liability to any previously terminated employee or independent contractor.
The Company has made available all written (and summarized all oral)
employee handbooks, policies, programs and arrangements to Metzler.
(iii) Except as set forth in Section 3.1(p) of the Disclosure
Schedule, all Persons employed by the Company and each of its Subsidiaries
are employees at will. Except as set forth in Section 3.1(p) of the
Disclosure Schedule, none of the employees of the Company or any of its
Subsidiaries are subject to noncompete/nonsolicitation covenants in favor
of the Company.
(iv) The Company and each of its Subsidiaries has materially
complied with all applicable laws relating to labor, including, without
limitation, any provisions thereof 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 all other costs and
expenses applicable thereto, and neither the Company
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nor any of its Subsidiaries is liable for any material arrearage, or any
Taxes, costs or penalties for failure to comply with any of the foregoing.
Without limiting the generality of the foregoing, neither the Company nor
any of its Subsidiaries has incurred a violation of Part 6 of Subtitle B of
Title I of ERISA ("COBRA") or other applicable state insurance continuation
law. No material COBRA or other state insurance continuation law violation
exists or will exist with respect to any employees of the Company or any of
its Subsidiaries prior to the Merger Date.
(v) To the Knowledge of the Company, each Person whom the Company
or any of its Subsidiaries currently retains as an independent contractor
or previously retained as an independent contractor qualifies, or at all
times while performing services for the Company or any of its Subsidiaries
qualified, as an independent contractor and not as an employee of the
Company or any of its Subsidiaries, under the Code and all applicable state
laws. Neither the execution of this Agreement nor the consummation of the
Acquisition shall cause the Company or any of its Subsidiaries to be in
breach of any agreement with any employee, contractor or consultant or
cause the Company or any of its Subsidiaries to be liable to pay any
severance or other amount to any of its employees, contractors or
consultants.
(q) Employee Benefit Plans.
(i) All Plans of the Company and each of its Subsidiaries which
are "employee benefit plans" within the meaning of Section 3(3) of ERISA
are listed in Section 3.1(q) of the Disclosure Schedule. Each Plan is in
material compliance with its terms and with ERISA and other applicable laws
(including, without limitation, compliance with the health care
continuation requirements of COBRA and any proposed regulations promulgated
thereunder), and all agreements and instruments applicable to any Plan.
Section 3.1(q) of the Disclosure Schedule sets forth each former employee
of the Company or any of its Subsidiaries entitled to COBRA benefits and
the remaining period of such benefits. The Company has received favorable
determination letters as to the qualification under the Code of each Plan
which is a pension plan, as defined in Section 3(2) of ERISA ("Pension
Plan"), and, to the Company's Knowledge, there have been no amendments or,
to the Company's Knowledge, other developments since the date of such
determination letters which would cause the loss of such qualified status.
No material violation of ERISA has occurred within the last 6 years in
connection with the administration of any of the Plans, and there are no
actions, suits, or claims (other than routine, non-contested claims for
benefits) pending or threatened against the Plans, or any administrator or
fiduciary thereof, which could result in any material Liability.
(ii) With respect to all present Plans, the Company has
heretofore made available to Metzler true and complete copies of each of
the following to the extent such documents exist or are applicable:
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(A) the Plan documents (and any applicable trust agreement
or insurance contract and including descriptions of vacation,
severance pay, sickness, and separation policies);
(B) the most recent Internal Revenue Service determination
letter request relating to each of the Pension Plans;
(C) the summary plan description (as currently in effect)
and any summary of material modification for each of the Plans;
(D) the most recent Annual Report (Form 5500 Series), and
accompanying schedules, filed for each of the Plans, and the most
recent summary annual report furnished for each of the Plans;
(E) the most recent actuarial valuations, and latest
financial statements for each of the Plans; and
(F) all documents filed with the Internal Revenue Service,
Department of Labor or Pension Benefit Guaranty Corporation since
January 1, 1992.
There is and has been no material violation of ERISA known to the Company with
respect to the filing of applicable reports, documents, and notices regarding
such past or present Plans with the Secretary of Labor or the Secretary of the
Treasury or the furnishing of such documents to the participants or
beneficiaries of such Plans.
(iii) Except as disclosed in Section 3.1(g) of the Disclosure
Schedule, each Plan maintained by the Company is maintained under a plan
document which does not provide for other participating employers except
for the Company or any ERISA Affiliate of the Company and no Plan provides
or has provided credit with respect to service other than with the Company
or any ERISA Affiliate of the Company.
(iv) Neither the Company nor any ERISA Affiliate of the Company
nor any of their employees, shareholders, or directors has engaged in any
transaction in connection with which any of them would be subject either to
a civil penalty assessed pursuant to Section 502 of ERISA or a tax imposed
by Section 4975 of the Code, other than transactions which would not,
individually or in the aggregate, have a Material Adverse Effect on the
Company. The execution and performance of this Agreement will not involve
any prohibited transaction within the meaning of Section 406 of ERISA,
other than transactions which would not, individually or in the aggregate,
have a Material Adverse Effect on the Company.
(v) None of the assets of any of the Plans is or has been
invested in any property constituting employer real property or any
employer security within the meaning of Section 407(d) of ERISA.
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(vi) Intentionally Omitted.
(vii) Full payment as of the Merger Date will have been made of
all amounts which the Company and any ERISA Affiliate of the Company are
required, under the terms of all Plans, to have paid as contributions to
such Plans as of the last day of the most recent fiscal year prior to the
Merger Date.
(viii) The execution and performance of this Agreement will not
constitute a stated triggering event under any Plan or employment agreement
that will result in any material payment (whether of severance pay or
otherwise) becoming due to any employee of the Company or ERISA Affiliate
of the Company.
(ix) Neither the Company nor any ERISA Affiliate of the Company
provides, nor have they at any time provided, coverage under any welfare
plan (a Welfare Plan (as defined in Section 3(l) of ERISA) (including, but
not limited to, life insurance, disability, medical, dental, prescription
drugs, or accidental death or dismemberment) to any of their retirees,
other than any continuation or conversion coverage which any such retiree
may have purchased at his own expense, or a defined benefit plan (as
defined in Section 3(35) of ERISA).
(x) The financial statements of each Pension Plan as of the end
of the most recent plan year for which such statements are available, and
the list of the investments of such Pension Plan as of the most recent plan
year end for which such statements are available, accurately reflect the
financial conditions of the Pension Plans as of the date of such
statements, and there have been no material changes in such investments
between such date and the Merger Date.
(xi) To the Company's Knowledge, there have been no statements,
either written or oral, or communications made or materials provided to any
employee or former employee of the Company or any ERISA Affiliate of the
Company by any officer, director, employee, agent or representative of the
Company that provide for or could be construed as a contract or promise by
the Company or any ERISA Affiliate of the Company to provide for any
pension, welfare, or other insurance-type benefits to such employee or
former employee, whether before or after retirement, other than benefits
under the Plans.
(xii) Neither the Company nor any ERISA Affiliate of the Company
currently contributes, or at any time in the past has contributed to a
defined benefit plan (as defined in Section 3(35) of ERISA), including, but
not limited to, each multiemployer plan, as defined in Section 3(37) of
ERISA.
(r) Licenses, Permits and Approvals. Section 3.1(r) of the Disclosure
Schedule lists all material governmental and regulatory licenses, permits and
approvals necessary to the conduct of the Company's and each of its
Subsidiaries' business. All such licenses, permits and approvals are in full
force and effect. There are no violations by the
25
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Company or any of its Subsidiaries of, or any claims or proceedings, pending or,
to the Knowledge of the Company, threatened, challenging the validity of or
seeking to discontinue, any such licenses, permits or approvals, except for such
violations, claims or proceedings which would not, individually or in the
aggregate, have a Material Adverse Effect.
(s) Unlawful Payments. No payments of either cash or other
consideration have been made to any Person by the Company, any of its
Subsidiaries or the Members or, to the Knowledge of the Company, on behalf of
the Company by any agent, employee, officer, director, shareholders or other
Person, that were unlawful under the laws of the United States or any state or
any other foreign or municipal government authority having appropriate
jurisdiction over the Company.
(t) Compliance with Laws. The Company and each of its Subsidiaries
and each of their respective facilities are in compliance in all material
respects with and have not in the past violated any applicable law, rule or
regulation of any Federal, state, local or foreign government or agency thereof,
including without limitation, environmental laws and laws relating to labor and
employment, and no notice, claim, complaint, action, suit, proceeding,
investigation or hearing has been received by the Company or any of its
Subsidiaries or filed, commenced or, to the Knowledge of the Company threatened
against the Company or any of its Subsidiaries alleging any such violation,
except in each instance for such failures to comply and such notices, claims,
complaints, actions, suits, proceedings, investigations or hearings which would
not, individually or in the aggregate, have a Material Adverse Effect.
(u) Suppliers and Clients. During the past twelve months, no material
licensor, vendor, supplier or licensee, or any client of the Company or any of
its Subsidiaries accounting for more than 1% of the Company's or any of its
Subsidiaries' revenues during such period, has canceled or otherwise materially
adversely modified its relationship with the Company or any of its Subsidiaries
and, to the Knowledge of the Company, no such Person has any intention to do so,
and, to the Knowledge of the Company, there are no disputes or notices of
dissatisfaction with or from any such client of the Company or any of its
Subsidiaries, which is reasonably likely to result in a cancellation,
termination or materially adverse modification of any such relationship and, to
the Knowledge of the Company, the consummation of the transactions contemplated
hereby shall not adversely affect any relationships with such clients.
(v) Insurance.
---------
(i) Attached as Schedule 3.1(v) is a list of each insurance
policy (including policies providing property, casualty, Liability, and
workers' compensation coverage and bond and surety arrangements) currently
carried by the Company or any of its Subsidiaries.
(ii) With respect to each such insurance policy: (A) the
consummation of the Acquisition will not cause a default or require any
consent under any such policy; (B) to the Knowledge of the Company, all
such insurance is in full force and effect, and the Company and the
Companies' Subsidiaries are in compliance
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with all requirements and provisions thereof. The Company has not suffered
any adverse loss experience which could reasonably be expected to cause its
insurance coverage not to be renewed upon the expiration thereof at
premiums substantially equivalent to those currently being paid or
otherwise at commercially reasonable rates.
(w) Warranty. All services previously rendered by the Company and
each of its Subsidiaries have been in material conformity with all applicable
contractual commitments and all express and implied warranties, and the Company
and each of its Subsidiaries has no Liability (and the Company has no Knowledge
of any Basis for any present or future action, suit, proceeding, hearing,
investigation, charge, complaint, claim, or demand giving rise to any Liability)
for damages in connection therewith, subject only to the reserve for customer
claims set forth on the face of the Latest Financials as adjusted for the
passage of time through the Merger Date in accordance with the past custom and
practice of the Company and its Subsidiaries. No services provided by the
Company or any of its Subsidiaries are subject to any contractual guaranty,
warranty, or other indemnity beyond the Company's or any of its Subsidiaries'
applicable standard terms and conditions of engagement. Neither the Company nor
any of its Subsidiaries is obligated to perform services or client work for
which it will not be paid in order to correct work previously performed that was
incorrect or deficient, complete work in excess of the fixed rate limit with
respect to a particular project or otherwise, other than reasonable and
customary efforts to maintain client satisfaction consistent with the size and
scope of a particular project and consistent with maintaining the reasonable
profitability of such project.
(x) Transaction-Related Accounting Matters. Neither the Company nor
any of its Subsidiaries has taken or agreed to take any action that it knows or
has been advised would prevent the transactions contemplated hereby from being
accounted for as a pooling of interests in accordance with GAAP.
(y) Brokers' Fees. None of the Company or the Company Managers has
any Liability or obligation to pay any fees or commissions to any broker or
finder with respect to the transactions contemplated by this Agreement for which
Metzler could become liable or otherwise obligated, except for the fees and
expenses, not to exceed $3,000,000 in aggregate, of Donaldson, Lufkin & Jenrette
Securities Corporation, pursuant to its engagement Letter with the Company,
which letter has previously been delivered to Metzler.
(z) Potential Conflicts of Interest. Except as set forth on Schedule
3.1(z) hereof, no officer, manager, director or member of the Company or any of
its Subsidiaries: (i) owns, directly or indirectly, any interest in (excepting
not more than 5% stock holdings for investment purposes in securities of
publicly held and traded companies) or is a shareholder, officer, director,
employee or consultant of any Person which is a competitor, lessor, lessee,
customer or supplier of the Company or any of its Subsidiaries; (ii) owns,
directly or indirectly, in whole or in part, any interest in Intellectual
Property which the Company or any of its Subsidiaries is using or the use of
which is necessary for the business of the Company or any of its Subsidiaries;
(iii) has any loan outstanding to or, to the Knowledge of the Company, any cause
of action or other claim whatsoever against the Company or any of its
Subsidiaries,
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except for claims in the Ordinary Course of Business, such as for accrued
salary, bonus, vacation pay and benefits under Benefit Plans and similar matters
and agreements existing on the date hereof; (iv) has made, on behalf of the
Company or any of its Subsidiaries, any payment or commitment to pay any
commission, fee or other amount to, or purchase or obtain or otherwise contract
to purchase or obtain any goods or services from, any corporation or other
Person of which any officer, manager or director of the Company or any of its
Subsidiaries, or, a relative of any of the foregoing, is a partner or
shareholder (except stock holdings solely for investment purposes in securities
of publicly held and traded companies). No Affiliate of any Member has any claim
against the Company, other than for wages for services performed and related
business expenses incurred in the Ordinary Course of Business.
(aa) Disclosure. None of the representations and warranties of the
Company contained in this Agreement or the Disclosure Schedule contains any
untrue statement of a material fact or omits a material fact necessary to make
the statements contained herein or therein, in light of the circumstances in
which they were made, not misleading. There is no material fact which has not
been disclosed to Metzler which results in, or could reasonably be anticipated
to result in, a Material Adverse Effect on the Company (it being understood that
except as set forth in Section 3.1(f) no representation or warranty is being
made regarding the revenues or results of operations of the Company).
3.2. Representations and Warranties of Metzler and Acquisition Sub. As a
material inducement to the Company and the Company Managers to enter into this
Agreement and consummate the transactions contemplated hereby, Metzler and
Acquisition Sub hereby jointly and severally represent and warrant to the
Company and to the Members that all of the statements contained in this Section
3.2 are correct and complete as of the date of this Agreement and Metzler and
Acquisition Sub covenant that said statements will be correct and complete as of
the Merger Date (as though made as of the Merger Date and as though the Merger
Date were substituted for the date of this Agreement throughout this Section
3.2).
(a) Organization. Metzler is a corporation and Acquisition Sub is a
limited liability company duly incorporated or organized, as the case may be,
validly existing, and in good standing (i) in the case of Metzler, under the
laws of the State of Delaware and (ii) in the case of Acquisition Sub, under the
laws of the State of Illinois. Metzler is qualified to do business in and is in
good standing under the laws of each jurisdiction wherein the nature of its
business or its ownership of property requires it to be so qualified, except
where the failure to be so qualified would not, in the aggregate, have a
material adverse effect or impact upon the assets, business, financial condition
or results of operations of Metzler and its Subsidiaries, taken as a whole (a
"Metzler Adverse Effect").
(b) Authorization of Transaction. Metzler and Acquisition Sub have
all requisite corporate or limited liability company, as the case may be, power
and authority to execute and deliver this Agreement and to perform their
respective obligations hereunder. The Board of Directors of Metzler and the
Manager of Acquisition Sub have duly authorized the execution, delivery and
performance of this Agreement by Metzler and Acquisition Sub. This Agreement
constitutes the valid and legally binding obligation of Metzler and Acquisition
Sub,
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enforceable against them in accordance with its terms, except as enforceability
may be limited by (i) bankruptcy, insolvency, reorganization, moratorium or
other similar laws now or hereafter in effect relating to the rights and
remedies of creditors generally or (ii) general principles of equity.
(c) Noncontravention. Subject to compliance with the HSR Act,
neither the execution and the delivery of this Agreement, nor the consummation
of the transactions contemplated hereby will (i) violate or conflict in any way
with any statute, regulation, law, rule or common law doctrine, (ii) violate or
conflict in any way with any judgment, order, decree, stipulation, injunction or
other restriction of any government, governmental agency or court, to which
Metzler or Acquisition Sub is subject (iii) breach any provision of the
Certificate of Incorporation or By-Laws of Metzler or the Articles of
Organization or Operating Agreement of Acquisition Sub or (iv) conflict with,
result in a breach of, constitute a default under (with or without notice or
lapse of time, or both), result in the acceleration of, create in any party the
right to accelerate, terminate, modify or cancel, or require any notice under,
or result in the creation of any Security Interest upon any of Metzler's or
Acquisition Sub's assets pursuant to the terms of, any contract, agreement,
lease, sublease, license, sublicense, franchise, permit, indenture, agreement
for borrowed money, instrument of indebtedness, Security Interest or other
arrangement to which Metzler or Acquisition Sub is a party or by which it is
bound or to which any of its assets are subject, except where such violations,
conflicts, breaches, defaults or other events would not, individually or in the
aggregate, result in a Metzler Adverse Effect or prevent or materially delay the
consummation of the transactions contemplated hereby. Except pursuant to the HSR
Act, neither Metzler nor Acquisition Sub is required to give any notice to, make
any filing with, or obtain any authorization, consent, or approval of any
government, governmental agency or court, or any other Person in order for the
parties to consummate the transactions contemplated by this Agreement and in
order that the Acquisition and such transactions shall not constitute a breach
or violation of, or result in a right of termination or acceleration or any
encumbrance on any of Metzler's or Acquisition Sub's assets pursuant to the
provisions of, any agreement, arrangement or understanding or any license,
franchise or permit.
(d) Metzler Common. Metzler has taken all actions necessary to
authorize and approve the issuance of the Metzler Common, and as of the Merger
Date the Metzler Common will, when issued in accordance herewith, be duly
authorized, validly issued, fully paid and nonassessable. There are no
statutory or contractual shareholders' preemptive rights or rights of refusal
with respect to the issuance of the Metzler Common upon consummation of the
Acquisition.
(e) Brokers' Fees. Subject to Section 3.1(y) hereof, neither Metzler
nor Acquisition Sub has any Liability or obligation to pay any fees or
commissions to any broker, finder, or agent with respect to the transactions
contemplated by this Agreement for which the Member is or could become liable or
obligated.
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(f) Capital Structure.
(i) The authorized capital stock of Metzler consists of
75,000,000 shares of Metzler Common and 3,000,000 shares of preferred
stock, par value $0.001 per share ("Metzler Preferred Stock"). As of
August 20, 1998, approximately 30,424,000 shares of Metzler Common and no
shares of Metzler Preferred Stock were issued and outstanding. All
outstanding shares of Metzler's outstanding capital stock are duly
authorized, validly issued, fully paid and nonassessable and not subject to
preemptive rights.
(ii) Except for options granted in the normal course pursuant to
Metzler's stock option plans and employee stock purchase plan, as described
in Metzler SEC Reports (as defined below), and except as contemplated
herein, there are no options, warrants, calls, rights, commitments or
agreements of any character to which Metzler or any Subsidiary of Metzler
is a party or by which any of them is bound obligating Metzler or any
Subsidiary of Metzler or any securities or rights convertible into or
exchangeable for any such capital stock.
(g) Commission Filings. Metzler has made available to the Company
and the Members (on a non-confidential basis) and has filed all forms, reports
and documents required to be filed by Metzler with the Commission under the
Exchange Act and the Securities Act since October 4, 1996 (collectively, the
"Metzler SEC Reports"). The Metzler SEC Reports (i) at the time filed, complied
in all material respects with the applicable requirements of the Exchange Act,
or Securities Act, as applicable, and (ii) did not at the time they were filed
(or if amended or superseded by a filing prior to the date of this Agreement,
then on the date of such filing) contain any untrue statement of a material fact
or omit to state a material fact required to be stated in such Metzler SEC
Reports or necessary in order to make the statements in such Metzler SEC
Reports, in the light of the circumstances under which they were made, not
misleading. As of their respective dates, the financial statements of Metzler
included in the Metzler SEC Reports (the "Metzler Financial Statements")
complied when filed as to form in all material respects with applicable
accounting requirements and with the published rules and regulations of the SEC
with respect thereto, and were, when filed, in accordance with the books and
records of Metzler, complete and accurate in all material respects, and
presented fairly the consolidated financial position and the consolidated
results of operations, changes in stockholders' equity and cash flows of Metzler
and its Subsidiaries as of the dates and for the periods indicated, in
accordance with generally accepted accounting principles, consistently applied,
subject in the case of interim financial statements to normal year-end
adjustments and the absence of certain footnote information.
(h) No Material Adverse Changes. Since June 30, 1998, to the
Knowledge of Metzler, no event has occurred which has had a Metzler Adverse
Effect and no action, suit, claim or proceeding has been filed, or threatened in
writing, which if adversely determined, would result in a Metzler Adverse
Effect.
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(i) Transaction-Related Tax Matters. Metzler has not taken or agreed
to take any action that would prevent the transactions contemplated hereby from
qualifying as a reorganization within the meaning of Section 368(a) of the Code.
(j) Disclosure. None of the representations or warranties of Metzler
and Acquisition Sub contained herein contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading, as of the Merger Date.
(k) Representations and Warranties of the Company. To the Knowledge
of Metzler, none of the representations, warranties or covenants of the Company
made in this Agreement are untrue or have been breached as of the date hereof.
4. PRE-CLOSING COVENANTS AND CONDITIONS
------------------------------------
4.1. Pre-closing Covenants.
(a) Conduct of Business. Except as set forth in Section 4.1(a) of the
Disclosure Schedule, from the date hereof until the Merger Date, the Company and
its Subsidiaries will carry on its business (the "Business") and operations in
the usual, regular and ordinary manner and, absent the prior written consent of
Metzler, which consent shall not be unreasonably withheld or delayed, or unless
expressly contemplated by this Agreement, neither the Company nor any of its
Subsidiaries will:
(i) change, alter or make any employment contracts or
arrangements with any of its management personnel or make, adopt, alter,
revise or amend any pension and/or profit sharing, bonus, stock option or
other employee benefit plan, except as may be required by law;
(ii) pay any bonuses to or increase the compensation (including
benefits) of any officer of the Company other than accrued 1997 bonuses;
(iii) declare or make any distribution (whether in cash or other
property) with respect to the Membership Interests of the Company;
(iv) issue, sell or become contractually committed to issue or
sell any Membership Interests, other membership interests, shares or other
securities, including derivative securities of the Company or any of its
Subsidiaries;
(v) sell or acquire property subject to, or create or assume,
any Security Interest except in the Ordinary Course of Business;
(vi) lend any money to or guaranty the debts of any Person;
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<PAGE>
(vii) incur outside the Ordinary Course of Business (I) any
indebtedness for borrowed money, (II) obligations evidenced by bonds,
debentures, notes or other similar instruments, (III) obligations to pay
the deferred purchase price of property or services in excess of $100,000,
and (IV) obligations under direct or indirect guaranties in respect of, and
obligations to purchase or otherwise acquire, or otherwise to assure a
creditor against loss in respect of, indebtedness or obligations of others
of the kinds referred to in clauses (I) through (III) above;
(viii) enter into any lease obligation with respect to equipment
that provides for payments in excess of $50,000 per month or enter into any
lease obligation with respect to real property;
(ix) make any equity investment in any Person or make any
capital expenditures in excess of $50,000;
(x) compromise any debt or claim except for adjustments made
with respect to contracts for the purchase of supplies and materials or for
the sale of products or services in the Ordinary Course of Business, which
in the aggregate are not material;
(xi) other than in the Ordinary Course of Business, enter into
any transaction, sell any assets, incur any obligation, or incur or make
any payment in respect of any Liabilities, in each case for an amount not
in excess of $50,000 and in the aggregate for an amount not to exceed
$250,000;
(xii) enter into or modify in any material respect any fixed fee
or capped price contract or other client engagement involving more than
$100,000;
(xiii) except for the payment of normal salaries in the Ordinary
Course of Business, enter into or engage in any transaction with any member
or shareholder of the Company or any of its Subsidiaries;
(xiv) alter or amend in any manner the Operating Agreement of
the Company;
(xv) alter, amend or enter into any licensing or contractual
arrangements with respect to any Intellectual Property of the Company,
other than in the Ordinary Course of Business; or
(xvi) take or permit any other action of the type referred to in
Section 3.1(g).
(b) Unless otherwise specifically provided in this Agreement or
consented to in writing and in advance by Metzler, the Company and each of the
Company's Subsidiaries shall (i) maintain its current insurance coverage
described on Schedule 3.1(v), or insurance in
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<PAGE>
amounts and kinds of a comparable nature to those so described, and pay all
premiums on such policies when due; (ii) use reasonable best efforts to preserve
its present business organization intact, keep available the services of its
present officers and employees, preserve its good will and preserve its present
relationships with Persons having business dealings with it; (iii) maintain its
books, accounts and records in a regular and ordinary manner, on a basis
consistent with GAAP; (iv) comply in all material respects with all legal
requirements applicable to it and to the conduct of its business; (v) file in a
timely manner all required filings with all governmental authorities and cause
such filings to be true and correct in all material respects; and (vi) comply in
all material respects with all contracts, agreements and documents listed (or
required to be listed) on the Disclosure Schedule.
4.2. Access to Records and Premises. From and after the date of this
Agreement, the Company shall, and shall cause each of the Company's Subsidiaries
to, give to Metzler, Metzler's counsel, accountants and other representatives,
full access during normal business hours and upon reasonable notice to all
offices, clients, suppliers, personnel or properties (including the right to
conduct an inventory) and other books and records, of the Business, so that
Metzler may, at its expense, investigate and inspect them, and the Company will
furnish to Metzler copies of all documents and information concerning the
Business as Metzler may reasonably request (except that, in each case, documents
and materials relating to the possible sale, merger or other business
combination involving the Company need not be delivered until after the Merger
Date). All information obtained shall be held subject to that certain
Confidentiality Agreement (the "Confidentiality Agreement") by and between
Metzler and the Company.
4.3. Notice of Changes. Between the date of this Agreement and the Merger
Date, the Company and Metzler agree to notify the other party in writing
promptly of any occurrence or state of facts that makes any representation or
warranty of the Company or Metzler, as the case may be, under this Agreement
untrue or misleading in any material respect, or any covenant of the Company or
Metzler, as the case may be, under this Agreement incapable of being performed
in any material respect, it being understood that the obligation to provide
notice under this Section 4.3 shall in no way relieve the Company or Metzler, as
the case may be, of any liability for a breach by the Company or Metzler, as the
case may be, under this Agreement or otherwise impair any cure period of the
Company or Metzler, as the case may be, set forth herein.
4.4. Exclusivity. Neither the Company, nor any of its Subsidiaries, nor
any officer, director, employee or agent acting for any of them (collectively,
the "Restricted Persons"), shall, directly or indirectly, (a) solicit, encourage
or initiate any discussion with, (b) negotiate or otherwise deal with, (c)
accept any offer from, or provide any information to, any Person, other than
Metzler, concerning any disposition or sale of the Company or any of its
Subsidiaries, any material portion of the Company's assets or any portion of the
Business, whether by sale of Membership Interests, sale of other equity
interests, sale of assets, merger or otherwise, or any proposed debt or equity
investment in the Company or any of its Subsidiaries (any of the foregoing, a
"Transaction"), and none of the Restricted Persons shall
33
<PAGE>
enter into any agreement concerning any such Transaction. The Company shall
forward to Metzler any third party offer or proposal with respect to any such
Transaction.
4.5. Conditions to Obligation of Metzler. The obligations of Metzler and
Acquisition Sub to effect the Acquisition are also subject to satisfaction at or
prior to the Closing of the following conditions. Metzler, on behalf of itself
and Acquisition Sub, may waive any condition, in whole or in part, specified in
this Section 4.5 in writing at or prior to the Closing.
(a) Accuracy of Representations and Warranties. The representations
and warranties set forth in Sections 3.1 shall be true and correct at and as of
the Merger Date with the same effect as though such representations and
warranties had been made or given at and as of the Merger Date, except for
changes contemplated by this Agreement and except for breaches which would not,
individually or in the aggregate, have a Material Adverse Effect on the Company.
(b) Compliance with Agreement. The Company shall have performed and
complied in all material respects with all of its respective covenants,
agreements and other obligations under this Agreement which are to be performed
or complied with prior to or at the Merger Date.
(c) Absence of Certain Claims. There shall not have been, since June
30, 1998, any change in or effect on the Company or any of its Subsidiaries
which results in or may reasonably be expected to result in a Material Adverse
Effect, in each case other than the events set forth on Section 4.5(c) of the
Disclosure Schedule.
(d) Closing Deliveries.
(i) The Company shall have delivered to Metzler a certificate
of the Secretary of the Company and a certificate of the Secretary of each
of its Subsidiaries dated the Merger Date certifying (i) a copy of the text
of the resolutions by which the action on the part of the Company or such
Subsidiary, as the case may be, necessary to approve this Agreement and the
Acquisition were taken, (ii) incumbency of each officer executing this
Agreement or any other agreement, certificate or other instrument executed
pursuant hereto, (iii) the Operating Agreement or other governing document
of the Company or such Subsidiary, as the case may be, and (iv) a list of
Members or other equity holders, as the case may be, as of the Merger Date;
(ii) The Company shall have delivered to Metzler a certificate
signed by an executive officer of the Company to the effect that each of
the conditions set forth in Section 4.5(a), (b) and (c) are satisfied in
all respects;
(iii) A copy of the Company's Articles of Organization, as
amended to date, certified as of a recent date prior to the Merger Date by
the State Secretary of the State of Illinois;
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<PAGE>
(iv) Good standing certificates for the Company issued by the
State Secretary of the State of Illinois, and for each Subsidiary issued by
the applicable secretary of state (or other state agency) of the state or
organization of such Subsidiary, in each case dated as of a recent date
prior to the Merger Date; and
(v) Metzler shall have received (A) from each of the Members,
executed counterparts to the Registration Agreement substantially in the
form of Exhibit B hereto (the "Registration Agreement"), (B) from the
Company, each of the Members and the "Members' Representative" (as such
term is defined thereunder), executed counterparts of that certain Consent,
Indemnification and Noncompete Agreement between the foregoing parties,
Metzler and Acquisition Sub in the form attached hereto as Exhibit C (the
"Consent, Indemnification and Noncompete Agreement"), and (C) from the
Members' Representative and the Escrow Agent, executed counterparts of the
Escrow Agreement.
(e) Accounting Opinion. Metzler shall have received an opinion or
other advice, in form and substance satisfactory to Metzler, from its accounting
professionals that the Acquisition may be accounted for as a "pooling of
interests," in accordance with GAAP and all rules, regulations and policies of
the SEC.
(f) No Prohibitions. No court or other governmental entity having
jurisdiction over the Company or Metzler, or any of their respective
Subsidiaries, shall have enacted, issued, promulgated, enforced or entered any
law, rule, regulation, executive order, decree, injunction or other order
(whether temporary, preliminary or permanent) which is then in effect and has
the effect of making the Acquisition or any of the transactions contemplated
hereby illegal.
(g) No Demands. There shall not have been any perfected demand for
appraisal remedies or dissent with respect to the Acquisition representing more
than 5% of the Total Transaction Value.
(h) Termination of Existing Documents. The Existing Company
Documents (other than the Operating Agreement) shall have been terminated.
(i) HSR Act. The applicable waiting period, if any, under the HSR
Act shall have expired or been terminated.
4.6. Conditions to Obligations of the Company. The obligations of the
Company to effect the Acquisition are subject to the satisfaction at or prior to
the Merger Date of the following conditions. The Company may waive, in whole or
in part, any condition specified in this Section 4.6 in writing at or prior to
the Merger Date.
(a) Accuracy of Representations and Warranties. The representations
and warranties set forth in Section 3.2 above shall be true and correct at and
as of the date of the Merger Date with the same effect as though such
representations and warranties had been made
35
<PAGE>
or given at and as of the Merger Date, except for changes contemplated by this
Agreement, and except for breaches which would not, individually or in the
aggregate, have a Metzler Material Adverse Effect.
(b) Compliance with Agreement. Metzler and Acquisition Sub shall
have performed and complied in all material respects with all of their
respective covenants, agreements and other obligations under this Agreement
which are to be performed or complied with prior to or at the Merger Date.
(c) Closing Deliveries.
(i) Metzler shall have delivered to the Company a certificate
signed by an officer of Metzler to the effect that each of the conditions
specified above in Sections 4.6(a) and (b) are satisfied in all respects;
(ii) Metzler shall have delivered to the Company a certificate of
the Secretary or any Assistant Secretary of Metzler dated the Merger Date
certifying (A) a copy of the text of the director resolutions by which the
corporate action on the part of Metzler necessary to approve this Agreement
and the Acquisition were taken; and (B) incumbency of each officer
executing this Agreement or any other agreement, certificate or other
instrument executed pursuant hereto; and
(iii) Metzler shall have delivered to each of the Members the
Registration Agreement, the Escrow Agreement, and the Consent,
Indemnification and Noncompete Agreement.
(e) No Prohibitions. No court or other governmental entity having
jurisdiction over the Company or Metzler, or any of their respective
Subsidiaries, shall have enacted, issued, promulgated, enforced or entered any
law, rule, regulation, executive order, decree, injunction or other order
(whether temporary, preliminary or permanent) which is then in effect and has
the effect of making the Acquisition or any of the transactions contemplated
hereby illegal.
(f) HSR Act. The applicable waiting period, if any, under the HSR
Act shall have expired or been terminated.
(g) Nasdaq listing. The shares of Metzler Common issuable pursuant
to the Acquisition shall have been authorized for listing on the Nasdaq
Stock Market, subject to notice of issuance.
4.7. Tax Matters. Neither Metzler, Acquisition Sub nor any direct or
indirect Subsidiary of Metzler shall take any action or agree to take any action
that would prohibit or impair the treatment of the Merger as a reorganization
within the meaning of Section 368(a) of the Code.
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<PAGE>
4.9. ILLCA Election. The Company has made or shall make prior to Closing,
a valid and effective election pursuant to Section 55-15 of ILLCA to be governed
by the Amendatory Act of 1997 relating to the ILLCA.
5. ADDITIONAL AGREEMENTS
---------------------
5.1. Post-Acquisition Covenants. The Parties agree as follows with
respect to the period following the Merger Date:
(a) General. In case at any time after the Merger Date any further
action is necessary or desirable to carry out the purposes of this Agreement,
each of the Parties will take such further action (including the execution and
delivery of such further instruments and documents, and in the case of Metzler,
using its reasonable efforts to cause the listing of the shares of Metzler
Common issuable in the Acquisition on Nasdaq) as any other Party reasonably may
request, at the sole cost and expense of the requesting Party (unless the
requesting Party is entitled to indemnification with respect to such matter
under Section 5.4).
(b) Tax Matters. Metzler and the Company Managers shall cooperate
fully, as and to the extent reasonably requested by the other Party, in
connection with the filing of Tax Returns of the Company and its Subsidiaries
and any audit, litigation or other proceeding with respect to any Taxes of the
Company or any of its Subsidiaries or any Taxes incurred in connection with any
of the transactions contemplated by this Agreement.
(c) Indemnification of Managers and Officers. The Surviving Entity
shall indemnify, defend, hold harmless and advance expenses to the individuals
who are the Company Managers and officers of the Company as of the date of this
Agreement to the same extent, if any, that such Managers and officers are
indemnified under the terms of the Operating Agreement or otherwise in respect
of any claims brought after the date of this Agreement relating to events
occurring on or prior to the date of this Agreement. In the event the Surviving
Entity or its successors or assigns (i) consolidates with or merges into any
other Person and shall not be the continuing or surviving corporation or entity
in such consolidation or merger or (ii) transfers all or substantially all its
properties and assets to any Person, then, and in each case, proper provision
shall be made so that the successors and assigns of the Surviving Entity, as the
case may be, honor the indemnification obligations set forth in this Section (it
being understood that the amount of such indemnification and expenses shall
constitute Metzler Indemnifiable Losses to the extent they relate to a breach of
a representation or warranty by the Company).
6. TERMINATION
-----------
6.1. Termination. This Agreement may be terminated at any time prior to
the Effective Date (by written notice by the terminating party to the other
party) only as follows:
(a) Consent. By mutual written consent of Metzler and the Company;
or
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<PAGE>
(b) Failure to Close. By either Metzler or the Company if the
Closing shall not have occurred by September 1, 1998 (provided, however, that
the right to terminate this Agreement under this Section 6.1(b) shall not be
available to any party whose failure to fulfill any obligation under this
Agreement has been the cause of or resulted in the failure of the Merger to
occur on or before such date); or
(c) Breach. By either party if a breach of any representation or
warranty on the part of the other party set forth in this Agreement was
inaccurate or untrue as of the time made or re-made, other than an inaccuracy or
untruth which would not, individually or in the aggregate, result in a Material
Adverse Effect on the breaching party; or
(d) Intentionally Omitted.
6.2. Effect of Termination. In the event of termination of this Agreement
pursuant to Section 6.1, there shall be no Liability or obligation on the part
of Metzler, the Company, or their respective officers, directors, managers,
stockholders, Members or Affiliates, except to the extent that such termination
results from the willful breach by a party of any of its representations,
warranties, covenants or agreements in this Agreement; and provided, that the
provisions of the confidentiality agreements contained or referred to herein
shall remain in full force and effect and survive any termination of this
Agreement.
7. MISCELLANEOUS
-------------
7.1. Press Releases and Announcements. No Party shall issue any press
release or announcement relating to the subject matter of this Agreement without
the prior written approval of the other Party (for purposes hereof, Metzler and
the Acquisition Sub shall be deemed one party and the Company and the Members
collectively shall be deemed another Party); provided, however, that any Party
may make any public disclosure it believes in good faith is required by law or
regulation, including, without limitation, any disclosures made necessary by
Metzler's status as a public company (in which case the disclosing Party will
advise the other Party prior to making the disclosure).
7.2. No Third Party Beneficiaries. Except for Section 5.1(c), this
Agreement shall not confer any rights or remedies upon any Person other than the
Parties and their respective successors and permitted assigns.
7.3. Entire Agreement. This Agreement (including the other documents
referred to herein) constitutes the entire agreement between the Parties and
supersedes any prior understandings, agreements, or representations by or
between the Parties, written or oral, that may have related in any way to the
subject matter hereof.
7.4. Succession and Assignment. This Agreement shall be binding upon and
inure to the benefit of the Parties named herein and their respective successors
and permitted assigns. No Party may assign this Agreement or any of such Party's
rights, interests, or obligations
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hereunder without the prior written approval of the other Parties.
Notwithstanding the foregoing, Metzler may (i) cause the stock of the Company to
be acquired by a wholly owned subsidiary of Metzler and/or (ii) merge the
Company with or into a wholly-owned direct or indirect subsidiary of Metzler, in
either case without affecting its rights hereunder; provided that any such
actions shall not affect the tax treatment of the Acquisition.
7.5. Survival. All of the representations and warranties of the Company
and the Company Managers contained in Section 3.1 hereof (the "Company
Representations"), shall survive the consummation of the Acquisition (regardless
of any Knowledge or investigation of Metzler, Acquisition Sub or the Surviving
Entity) and shall continue in full force and effect until April 30, 1999 (the
"Survival Period"). All of the representations and warranties of Metzler
contained in Section 3.2 (the "Metzler Representations") shall survive the
consummation of the Acquisition (regardless of any Knowledge or investigation of
the Members or the Company) and shall continue in full force and effect until
the expiration of the Survival Period. All covenants (as opposed to
representations and warranties) of the Parties in this Agreement shall survive
the consummation of the Acquisition and shall continue in full force
notwithstanding the expiration of the Survival Period.
7.6. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
7.7. Notices. All notices, requests, demands, claims, and other
communications hereunder will be in writing. Any notice, request, demand, claim,
or other communication hereunder shall be deemed duly given (i) three (3)
business days after it is sent by registered or certified mail, return receipt
requested, postage prepaid, (ii) one day after receipt is electronically
confirmed, if sent by fax (provided that a hard copy shall be promptly sent by
first class mail), or (iii) one (1) business day following deposit with a
recognized national overnight courier service for next day delivery, charges
prepaid, and addressed to the intended recipient as set forth below or in the
case of the Member on the signature pages hereto:
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<TABLE>
<S> <C>
If to the Company: With a Copy To:
------------------ ---------------
Peterson Consulting, L.L.C. Sidley & Austin
One Mid America Plaza One First National Plaza
Suite 300 Chicago, Illinois 60603
Oakbrook Terrace, Illinois 60181 Attn: Michael I Miller, Esq.
Attn: Marvin A. Tennenbaum Fax: (312) 853-7036
Fax: (630) 586-8500
If to Metzler or Acquisition Sub: Copy to:
--------------------------------- --------
The Metzler Group, Inc. Barack Ferrazzano Kirschbaum
615 North Wabash Avenue Perlman & Nagelberg
Chicago, Illinois 60015 333 West Wacker Drive, Suite 2700
Attn: General Counsel Chicago, Illinois 60606
Fax: (312) 573-5676 Attn: Michael J. Legamaro, Esq.
Fax: (312) 984-3150
</TABLE>
Any Party may give any notice, request, demand, claim, or other communication
hereunder using any other means (including personal delivery, expedited courier,
messenger service, telecopy, telex, ordinary mail, or electronic mail), but no
such notice, request, demand, claim, or other communication shall be deemed to
have been duly given unless and until it actually is delivered to the individual
for whom it is intended. Any Party may change the address to which notices,
requests, demands, claims, and other communications hereunder are to be
delivered by giving the other Parties notice in the manner herein set forth.
7.8. Governing Law. This Agreement shall be governed by and construed in
accordance with the domestic laws of the State of Illinois, without giving
effect to any choice of law or conflict of law provision or rule (whether of the
State of Illinois, any other jurisdiction) that would cause the application of
the laws of any jurisdiction other than the State of Illinois. Each party hereto
(a) agrees that any suit, action or other legal proceeding relating hereto may
be brought in state court sitting in the County of Cook, Illinois or the United
States District Court for the Northern District of Illinois, as applicable; and
(b) consents to the jurisdiction of each such court in any such suit, action or
proceeding; and (c) waives any objection said party may have to the laying of
venue in any such suit, action or proceeding in either such court; and (d)
consents to service of process by U.S. mail.
7.9. Amendments and Waivers. No amendment of any provision of this
Agreement shall be valid unless the same shall be in writing and signed by
Metzler, the Company and the Members. No waiver by any Party of any default,
misrepresentation or breach of warranty or covenant hereunder, whether
intentional or not, shall be deemed to extend to any prior or subsequent
default, misrepresentation or breach of warranty or covenant hereunder or affect
in any way any rights arising by virtue of any prior or subsequent occurrence of
such kind.
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7.10. Severability. Any term or provision of this Agreement that is
invalid or unenforceable in any situation in any jurisdiction shall not affect
the validity or enforceability of the remaining terms and provisions hereof or
the validity or enforceability of the invalid or unenforceable term or provision
in any other situation or in any other jurisdiction. If a final judgment of a
court of competent jurisdiction declares that any term or provision hereof is
invalid or unenforceable, the Parties agree that the court making the
determination of invalidity or unenforceability shall have the power to reduce
the scope, duration, or area of the term or provision, to delete specific words
or phrases, or to replace any invalid or unenforceable term or provision with a
term or provision that is valid and enforceable and that comes closest to
expressing the intention of the invalid or unenforceable term or provision, and
this Agreement shall be enforceable as so modified after the expiration of the
time within which the judgment may be appealed.
7.11. Expenses. Each of Metzler and the Company will bear its own direct
and indirect costs and expenses (including fees and expenses of legal counsel,
investment bankers, brokers, accountants or other representatives or
consultants) incurred in connection with the negotiation, preparation and
execution of this Agreement and the consummation of the transactions
contemplated hereby, whether or not such transactions are consummated. If the
Acquisition is consummated, then expenses paid or accrued by the Company to
effect the Acquisition shall be paid by the Company, except that Metzler shall
pay such fees and expenses of each of (i) Donaldson, Lufkin and Jenrette
Securities Corporation (not to exceed $3,000,000); (ii) $25,000 of the fees and
expenses of Sidley & Austin; and (iii) the Company's independent auditors
incurred in connection with the Company's participation in the Acquisition,
which costs and expenses shall in no event include costs and expenses incurred
in connection with the personal accounting and tax planning of individual
Members.
7.12. Construction. The Parties have jointly participated in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the Parties and no presumptions or burdens of proof
shall arise favoring any Party by virtue of the authorship of any of the
provisions of this Agreement. Any reference to any Federal, state, local, or
foreign statute or law shall be deemed also to refer to all rules and
regulations promulgated thereunder, unless the context requires otherwise. The
Parties intend that each representation, warranty and covenant contained herein
shall have independent significance. If any Party has breached any
representation, warranty or covenant contained herein in any respect, the fact
that there exists another representation, warranty or covenant relating to the
same subject matter (regardless of the relative levels of specificity) which the
Party has not breached shall not detract from or mitigate the fact that the
Party is in breach of the first representation, warranty, or covenant.
7.13. Incorporation of Exhibits and Schedules. The Exhibits and Schedules
identified in this Agreement are incorporated herein by reference and made a
part hereof.
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7.14. Directly or Indirectly. Where any provision in this Agreement
refers to action to be taken by any Person, or which such Person is prohibited
from taking, such provision shall be applicable whether the action in question
is taken directly or indirectly by such Person.
* * * * *
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IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as of
the date first above written.
METZLER: THE COMPANY:
- ------- -----------
THE METZLER GROUP, INC., PETERSON CONSULTING L.L.C.,
a Delaware corporation an Illinois limited liability company
By:_______________________________ By:_________________________________
Robert P. Maher, President and
Chief Executive Officer
By:_______________________________ By:_________________________________
Charles A. Demirjian, Secretary
ACQUISITION SUB:
- ---------------
MGI ACQUISITION II, L.L.C., an
Illinois limited liability company
By:_______________________________
Robert P. Maher, President and
Chief Executive Officer
By:_______________________________
Charles A. Demirjian, Secretary
[Company Managers' Signature Page Follows]
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COMPANY MANAGERS:
__________________________________________
JAMES F. BEEDIE
__________________________________________
MARTHA WILKE MURRAY
__________________________________________
DOUGLAS A. REICHERT
__________________________________________
DAVID TORTORELLO
__________________________________________
EDWARD MUHL
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List of Exhibits and Schedules
------------------------------
Exhibit A - Operating Agreement of Acquisition Sub
Exhibit B - Form of Registration Agreement
Exhibit C - Consent, Indemnification and Noncompete Agreement
Schedule 2.5 - Additional Officers of Surviving Entity
Schedule 2.6 - Conversion of Securities
Index to Disclosure Schedule
----------------------------
Section 3.1(a) - Organization, Qualification and Corporate Power
Section 3.1(d) - Capitalization
Section 3.1(c) - Consents
Section 3.1(f) - Financial Statements
Section 3.1(g) - Recent Events
Section 3.1(h) - Undisclosed Liabilities
Section 3.1(j) - Leased Real Property
Section 3.1(k) - Intellectual Property
Section 3.1(l) - Contracts
Section 3.1(n) - Bank Accounts
Section 3.1(o) - Litigation
Section 3.1(p) - Employment Matters
Section 3.1(q) - Employee Benefit Plans
Section 3.1(r) - Licenses, Permits and Approvals
Section 3.1(u) - Termination of Employment
Section 3.1(v) - Insurance
Section 4.1(a) - Conduct of Business
Section 4.5(c) - Absence of Certain Claims
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EXHIBIT A
OPERATING AGREEMENT OF ACQUISITION SUB
--------------------------------------
See attached.
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EXHIBIT B
FORM OF REGISTRATION AGREEMENT
------------------------------
See attached.
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EXHIBIT C
CONSENT, INDEMNIFICATION
AND NONCOMPETE AGREEMENT
------------------------
See attached.
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SCHEDULE 2.5
ADDITIONAL OFFICERS OF SURVIVING ENTITY
---------------------------------------
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SCHEDULE 2.6
CONVERSION OF SECURITIES
------------------------
See attached.
