<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 3, 1998
REGISTRATION NO. 333-
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- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------
THE METZLER GROUP, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<CAPTION>
<S> <C> <C>
DELAWARE 8742 36-4094854
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
</TABLE>
615 NORTH WABASH, CHICAGO, ILLINOIS 60611, (312) 573-5600
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
ROBERT P. MAHER
PRESIDENT, CHIEF EXECUTIVE OFFICER AND CHAIRMAN
THE METZLER GROUP, INC.
615 NORTH WABASH, CHICAGO, ILLINOIS 60611, (312) 573-5600
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
----------------
COPIES TO:
WILLIAM E. DORAN, ESQ. ROBERT F. WALL, ESQ.
SACHNOFF & WEAVER, LTD. R. CABELL MORRIS, JR., ESQ.
30 SOUTH WACKER DR., 29TH FLOOR WINSTON & STRAWN
CHICAGO, ILLINOIS 60606 35 WEST WACKER DR., SUITE 4200
TELEPHONE: (312) 207-1000 CHICAGO, ILLINOIS 60601
TELEPHONE: (312) 558-5600
----------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, check the following
box. [_]
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box. [_]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration number of the earlier effective registration statement for the
same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
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PROPOSED PROPOSED
TITLE OF EACH CLASS OF AMOUNT MAXIMUM MAXIMUM AMOUNT
SECURITIES TO BE TO BE OFFERING PRICE AGGREGATE OF
REGISTERED REGISTERED(1) PER SHARE(2) OFFERING PRICE(2) REGISTRATION FEE
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock,
par value $.001 per 4,887,500
share................ shares $40 3/8 $197,332,813 $54,859
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</TABLE>
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(1) Includes 637,500 shares that are subject to an over-allotment option
granted to the Underwriters.
(2) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(c) under the Securities Act of 1933 on the basis of
the average high and low sale prices of the common stock on the Nasdaq
National Market on October 28, 1998.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION,
ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
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<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+WE WILL AMEND AND COMPLETE THE INFORMATION IN THIS PROSPECTUS. ALTHOUGH WE +
+ARE PERMITTED BY US FEDERAL SECURITIES LAWS TO OFFER THESE SECURITIES USING +
+THIS PROSPECTUS, WE MAY NOT SELL THEM OR ACCEPT YOUR OFFER TO BUY THEM UNTIL +
+THE DOCUMENTATION FILED WITH THE SEC RELATING TO THESE SECURITIES HAS BEEN +
+DECLARED EFFECTIVE BY THE SEC. THIS PROSPECTUS IS NOT AN OFFER TO SELL THESE +
+SECURITIES OR OUR SOLICITATION OF YOUR OFFER TO BUY THESE SECURITIES IN ANY +
+JURISDICTION WHERE THAT WOULD NOT BE PERMITTED OR LEGAL. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION--NOVEMBER 3, 1998
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- --------------------------------------------------------------------------------
PROSPECTUS
, 1998
4,250,000 SHARES OF COMMON STOCK
- --------------------------------------------------------------------------------
THE COMPANY: THE OFFERING:
. We are a leading . The Company is
nationwide provider offering 1,000,000
of consulting of the shares and
services to energy existing
based and other stockholders are
network and offering 3,250,000
regulated of the shares.
industries.
. The underwriters
. The Metzler Group, have an option to
Inc. purchase an
615 North Wabash additional 637,500
Avenue shares from the
Chicago, IL 60611 Company and selling
(312) 573-5600 stockholders to
cover over-
allotments.
. NASDAQ SYMBOL:
METZ
. There is an
existing trading
market for these
shares. The reported
last sales price on
November 2, 1998 was
$42 1/8/share.
. We plan to use the
proceeds from this
offering for
expansion of
operations and
general corporate
purposes. We will
not receive any
proceeds from the
shares sold by the
selling
stockholders.
. Closing: ,
1998.
---------------------------------------------
<TABLE>
<CAPTION>
Per Share Total
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<S> <C> <C>
Public offering price: $ $
Underwriting fees:
Proceeds to Company:
Proceeds to selling stockholders:
--------------------------------------------------------------------
</TABLE>
THIS INVESTMENT INVOLVES RISK. SEE "RISK FACTORS" BEGINNING ON PAGE 6.
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Neither the SEC nor any state securities commission has determined whether this
prospectus is truthful or complete. Nor have they made, nor will they make, any
determination as to whether anyone should buy these securities. Any
representation to the contrary is a criminal offense.
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DONALDSON, LUFKIN & JENRETTE
BANCBOSTON ROBERTSON STEPHENS
LEHMAN BROTHERS
MERRILL LYNCH & CO.
<PAGE>
TABLE OF CONTENTS
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Page
----
<S> <C>
Prospectus Summary....................................................... 3
Risk Factors............................................................. 6
Use of Proceeds.......................................................... 13
Price Range of Common Stock and Dividend Policy.......................... 14
Summary Consolidated Financial Data...................................... 15
Management's Discussion and Analysis of Financial Condition and Results
of Operations.......................................................... 16
Business................................................................. 23
</TABLE>
<TABLE>
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Page
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Management................................................................. 29
Selling Stockholders....................................................... 31
Underwriting............................................................... 32
Incorporation of Certain Documents by Reference............................ 34
Available Information...................................................... 35
Legal Matters.............................................................. 35
Experts.................................................................... 36
</TABLE>
<PAGE>
PROSPECTUS SUMMARY
This summary is qualified by more detailed information appearing in other
sections of this prospectus. The other information is important, so please read
this entire prospectus carefully. Unless otherwise indicated, the information
in this prospectus: (1) has been restated to give effect to the pooling of
interests acquisitions of LECG, Inc. and Peterson Worldwide, L.L.C. on August
19, 1998 and August 31, 1998, respectively, for all periods presented; (2)
gives effect to the three-for-two stock split that was effected on April 2,
1998; and (3) assumes the over-allotment option is not exercised.
The Metzler Group is a leading nationwide provider of consulting services to
energy based and other network and regulated industries. We offer a wide range
of consulting services designed to assist our clients as they face changing
regulations, increasing competition and evolving technology. Our clients
include the 50 largest investor-owned utilities, the 20 largest gas
distribution companies and the 12 largest local exchange telecommunications
companies in the United States, as well as other Fortune 100 companies.
Our services include: (1) management consulting; (2) information technology;
and (3) litigation support. Since our initial public offering in October 1996,
we have increased the scope and size of our business and expanded our service
offerings through a series of strategic acquisitions and internal growth. We
have also expanded our domestic presence on the east and west coasts, expanded
our base of non-utility energy clients and established a presence in Europe,
Asia and Australia.
We are organized as a holding company that manages independent operating
subsidiaries. We currently have seven principal subsidiaries: Metzler &
Associates, RMI, Bookman-Edmonston, Reed, Sterling, LECG and Peterson. This
organizational structure allows us to rapidly expand our breadth of service
offerings, increase our client base and add highly skilled professionals
through acquisitions, and then integrate these acquisitions to achieve
operational synergies and cost benefits.
We believe that several competitive factors distinguish us from other
participants in the consulting industry, including:
. Established, recognized expertise and academic reputation of our
consultants and affiliated experts;
. Deep-rooted client relationships supporting multiple engagements; and
. A wide range of industry-specific services that enable us to be a single-
source provider of consulting services while maintaining advanced skill
sets in each area.
Our growth strategy is to:
. Continue to build a complementary spectrum of consulting services;
. Leverage vertical focus to capitalize on current industry dynamics;
. Leverage existing relationships and expand client base in both domestic
and international markets;
. Continue to recruit and retain highly skilled professionals; and
. Continue to acquire consulting companies that provide complementary
services or geographic presence.
3
<PAGE>
THE OFFERING
<TABLE>
<S> <C>
Common stock offered:
By the Company............ 1,000,000 shares
By the selling
stockholders............. 3,250,000 shares
Total.................. 4,250,000 shares
Common stock to be
outstanding after
the offering.............. 37,123,781 shares(a)
Use of proceeds............ We intend to use the estimated net proceeds of $37
million that we will receive from this offering
for expansion of existing operations, including
development of new service offerings and possible
acquisitions of related businesses; and general
corporate purposes, including working capital. We
will not receive any proceeds from the shares sold
by the selling stockholders.
</TABLE>
- --------------------
(a) The number of shares of common stock outstanding excludes: (1) options
outstanding as of September 30, 1998 to purchase 4,105,960 shares of common
stock at a weighted average exercise price of $23.26 per share; and (2)
4,981,160 shares of common stock reserved as of September 30, 1998 for
issuance upon exercise of options that may be granted in the future under
our Long-Term Incentive Plan.
4
<PAGE>
SUMMARY CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEARS ENDED DECEMBER 31, SEPTEMBER 30,
-------------------------- ------------------
1995 1996 1997 1997 1998
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA:
Revenues...................... $130,909 $151,889 $196,780 $142,096 $193,983
Cost of services.............. 79,056 89,410 115,122 83,214 112,358
-------- -------- -------- -------- --------
Gross profit.................. 51,853 62,479 81,658 58,882 81,625
General and administrative
expenses..................... 46,443 47,028 54,151 39,179 46,938
Merger-related costs.......... -- -- 1,312 1,312 12,778
-------- -------- -------- -------- --------
Operating income.............. 5,410 15,451 26,195 18,391 21,909
Other expense (income)........ 340 285 (1,305) (1,232) (1,878)
-------- -------- -------- -------- --------
Income before provision for
income taxes................. 5,070 15,166 27,500 19,623 23,787
Provision for income
taxes(a)..................... 476 9 9,081 4,196 18,444
-------- -------- -------- -------- --------
Net income.................... $ 4,594 $ 15,157 $ 18,419 $ 15,427 $ 5,343
======== ======== ======== ======== ========
Pro forma net income(b)....... $ 2,991 $ 8,952 $ 16,225 $ 11,578 $ 14,810
======== ======== ======== ======== ========
Pro forma net income per
dilutive share(b)............ $ 0.10 $ 0.29 $ 0.50 $ 0.36 $ 0.41
======== ======== ======== ======== ========
Diluted weighted average
shares outstanding........... 30,404 31,262 32,288 32,098 36,540
</TABLE>
<TABLE>
<CAPTION>
AS OF
SEPTEMBER 30, 1998
-----------------------
ACTUAL AS ADJUSTED(C)
<S> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents....................... $ 70,197 $107,197
Working capital................................. 80,563 117,563
Total assets.................................... 176,054 213,054
Long-term debt, less current portion............ -- --
Total stockholders' equity...................... 97,817 134,817
</TABLE>
- --------
(a) During the periods presented, certain of our operating subsidiaries were
entities not subject to federal income taxation. Peterson became taxable as
a C corporation upon our acquisition on August 31, 1998 and the provision
for income taxes for the nine months ended September 30, 1998 reflects the
recording of a deferred tax liability of $7.2 million as a result of the
acquisition.
(b) Pro forma net income and net income per dilutive share: (1) for all periods
presented have been adjusted to reflect a provision for income taxes
assuming a tax rate of 41% that would have been recorded had all
subsidiaries been taxable C corporations during those periods; and (2) for
the nine months ended September 30, 1998 have been increased by $2.3
million to reflect the impact of a new executive compensation plan adopted
by Peterson and increased by $7.2 million to reflect the effect of a one-
time, non-cash charge to income tax expense which resulted from its
conversion to a taxable C corporation as a result of the acquisition. See
Note 1 of Notes to Metzler's Consolidated Financial Statements, which are
separately filed and incorporated by reference in this prospectus, for a
more detailed discussion of these adjustments.
(c) As adjusted to give effect to the sale by the Company of 1,000,000 shares
of common stock and the receipt of the estimated net proceeds from such
sale. See "Use of Proceeds."
5
<PAGE>
RISK FACTORS
Before you invest in our common stock, you should be aware that there are
various risks, including those described below. You should carefully consider
these risk factors, together with all of the other information included in this
prospectus, before you decide whether to purchase shares of our common stock.
Some of the information in this prospectus contains forward-looking
statements that involve substantial risks and uncertainties. You can identify
these statements by forward-looking words such as "may," "will," "expect,"
"anticipate," "believe," "estimate," and "continue" or similar words. You
should read statements that contain these words carefully because they: (1)
discuss our future expectations; (2) contain projections of our future results
of operations or of our financial condition; or (3) state other "forward-
looking" information. We believe it is important to communicate our
expectations to our investors. However, there may be events in the future that
we are not able to accurately predict or over which we have no control. The
risk factors listed in this section, as well as any cautionary language in this
prospectus, provide examples of risks, uncertainties and events that may cause
our actual results to differ materially from the expectations we describe in
our forward-looking statements. Before you invest in our common stock, you
should be aware that the occurrence of the events described in these risk
factors and elsewhere in this prospectus could have a material adverse effect
on our business, operating results and financial condition.
RISKS OF ACQUISITION STRATEGY
Since our initial public offering in October 1996, we have completed four
major acquisitions. Through these and other acquisitions, we have expanded our
geographic presence and our breadth of service offerings. We expect to continue
to acquire companies as an element of our growth strategy. Acquisitions involve
certain risks that could cause our actual growth to differ from our
expectations. For example:
. We may not be able to continue to identify suitable acquisition
candidates or to acquire additional consulting firms on favorable terms.
. We compete with other companies to acquire consulting firms. We cannot
predict whether this competition will increase. If competition does
increase, there may be fewer suitable consulting firms available to be
acquired and the price for suitable acquisitions may increase.
. We may not be able to integrate the operations (accounting and billing
functions, for example) of businesses we acquire to realize the economic,
operational and other benefits we anticipate.
. We may not be able to successfully integrate acquired businesses in a
timely manner or we may incur substantial costs, delays or other
operational or financial problems during the integration process.
. It may be difficult to integrate a business with personnel who have
different business backgrounds and corporate cultures.
6
<PAGE>
RISKS OF INTEGRATING COMPLETED ACQUISITIONS
We acquired LECG and Peterson in August 1998. These acquisitions are the
largest we have made to date and we are in the process of integrating these
companies, including their accounting and billing functions, into our
operations.
An inability to effectively integrate these or any companies acquired in the
future may adversely affect our ability to bid successfully on engagements and
to grow our business. Performance problems or dissatisfied clients at one
company could have an adverse effect on our reputation as a whole. If our
reputation were damaged, this could make it more difficult to market our
services or to acquire additional companies in the future. In addition,
acquired companies may not operate profitably. Acquisitions also involve a
number of additional risks, including, among others, the following:
. Diversion of management's attention,
. Potential loss of key clients or personnel,
. Risks associated with unanticipated assumed liabilities and problems, and
. Risks of managing businesses or entering markets in which we have limited
or no direct expertise.
MANAGEMENT OF GROWTH
We are growing rapidly. In the past, our growth has strained our internal
resources, and this strain could continue in the future. We attempt to manage
the strain on our resources by: (1) continuing to improve our internal systems;
and (2) adopting programs to attract and retain our employees. Our rapid growth
has presented numerous operational challenges, such as integration of financial
reporting systems and increased pressure on our senior management. These
challenges may continue in the future, and our rapid growth may increase the
demands on our systems and internal controls. Our inability to manage growth or
to achieve anticipated performance or employee utilization levels could
adversely affect our business.
PROJECT AND SERVICE RISKS
Clients engage us on an assignment-by-assignment basis, and a client can
generally terminate an assignment at any time without penalty. Projects could
also terminate because of the settlement of litigation or the abandonment of a
merger. Our typical engagement cycle causes our active clients, absent project
carryovers, to change from year to year. The early termination or loss of
significant clients could have an adverse effect on our business.
Many of our engagements involve projects that are critical to our clients'
businesses and provide benefits that may be difficult to measure, including
advice on engineering matters, potential mergers and acquisitions and other
financial advisory and restructuring matters. Many of our engagements also
involve projects that have the potential to have a large financial impact on
our clients' businesses. Our inability to meet a client's expectations could
damage our reputation and adversely affect our business. In addition, if our
work contains any errors, we could incur substantial costs and
7
<PAGE>
expend significant resources correcting those errors and could become liable
for damage caused by such errors. We may provide strategic assistance to
clients in evaluating Year 2000 compliance. The occurrence of Year 2000 related
systems failures in the information systems of our clients could involve us in
disputes and negatively impact our client relationships, whether or not we bear
any responsibility for the occurrence of such problems.
Our services may involve risks of certain professional, fiduciary and other
liabilities, particularly when we are engaged to provide engineering services,
merger and acquisition consulting and other financial services. Claims that we
or one of our independent contractors were negligent or breached our
obligations or duties could result in significant liabilities and expenses and
could adversely impact our reputation. Engineering engagements pose special
risks because these consulting services include construction project budgeting
and supervision and studies of critical project areas such as structural or
stress analysis. As a result, we are exposed to damage claims if a construction
project experiences time or budget overruns, fails to achieve a client's
expectations or suffers a catastrophic failure. We currently maintain
professional liability insurance in an aggregate maximum of approximately $10
million.
A portion of our projects is billed on a fixed-bid basis, as opposed to our
general method of billing on a time-and-expenses basis. If we fail to
accurately estimate the resources and related expenses required for these
fixed-bid projects or fail to accurately define the scope of our engagement,
such projects could prove to be unprofitable.
ATTRACTION AND RETENTION OF EMPLOYEES
We derive our revenues almost exclusively from services performed by our
professional consultants. Our future performance will continue to depend in
large part upon our ability to attract and retain highly-skilled professionals
possessing appropriate skills and senior academics with superior professional
reputations. Qualified professional consultants are in great demand and are
likely to remain a limited resource for the foreseeable future. We may not be
able to retain a substantial majority of our existing or future consultants for
the long term. The loss of the services of, or the failure to recruit, a
significant number of consultants could adversely affect our ability to secure
and complete engagements and could have an adverse effect on our business.
CONCENTRATION OF REVENUES
We currently derive a significant portion of our revenues from consulting
engagements with electric utility companies and substantially all of our
revenues are from engagements with energy based and other network and regulated
industries. Much of our recent growth has arisen from the business
opportunities presented by the current trend to deregulate these industries. If
the current trend towards deregulation in the utility industry is abandoned,
the demand for consulting work from utilities is likely to decrease. Moreover,
as a result of deregulation, many companies in these industries are
consolidating, which could have the effect of reducing the number of our
current or potential clients or create conflicts of interest among our clients
that might cause us to lose assignments or prevent us from obtaining new
assignments. The number of potential clients in the utilities industry may
decrease, and current and future economic pressures may limit spending by
8
<PAGE>
utilities for the types of services we offer. Similarly, changes in politics or
economics could significantly reduce the need for certain of our consulting
services such as antitrust or merger and acquisition services, which would have
an adverse effect on our business.
BENEFITS OF THE OFFERING TO SELLING STOCKHOLDERS
The stockholders who are selling our common stock in this offering will
receive substantial proceeds. Many of the selling stockholders are officers or
key employees of our operating subsidiaries. We will pay the offering expenses
of the stockholders who are selling in this offering, other than underwriting
discounts and commissions. After deduction of estimated underwriting discounts
and commissions, the aggregate net proceeds to the selling stockholders (at an
assumed price of $42 1/8 per share) will be approximately $127 million ($
million if the underwriters exercise their over-allotment option in full). See
"Use of Proceeds" and "Selling Stockholders."
RELIANCE ON KEY PERSONNEL
Our success is highly dependent upon the efforts and skills of our executive
officers, consultants, senior managers, and affiliated experts. With limited
exceptions, we do not have any shareholder or employment agreements with any of
these individuals. Some of the experts who are affiliated with us are employees
of universities or other institutions, and their ability to perform consulting
services is often limited by university policies. If we lose the services of
any of these key persons it could have a negative impact on our business,
including our ability to secure and complete engagements. With the exception of
LECG (which was a publicly traded company), we have obtained non-compete
agreements from the principal stockholders in each acquisition. We generally do
not have non-compete or employment agreements with key employees who were not
equity holders of acquired companies. We do not maintain key-man life insurance
policies on any of our executive officers or senior managers.
VARIABILITY OF QUARTERLY OPERATING RESULTS
Variations in our revenues and operating results can occur from quarter to
quarter as a result of a number of factors, including:
. Client engagements commenced and completed during a quarter,
. The number of business days in a quarter,
. Employee hiring and billing and utilization rates,
. The consummation of acquisitions,
. The length of the sales cycle on new business,
. The ability of clients to terminate engagements without penalty,
. The size and scope of assignments, and
. General economic conditions.
Because a significant portion of our expenses are relatively fixed, differences
in the number of engagements or the beginning or ending of an engagement can
cause significant variations in revenues and consequently in operating results
from quarter to quarter and could result in losses.
9
<PAGE>
INTENSE COMPETITION
The market for our consulting services is intensely competitive, highly
fragmented and subject to rapid change. The market includes a large number of
participants from a variety of market segments, including:
. General management or marketing consulting firms,
. Economic consulting firms,
. Consulting practices of national accounting firms,
. Technical and economic advisory firms,
. Regional and specialty consulting firms, and
. Individual academic and local or regional firms specializing in utility
services.
Many information technology consulting firms also maintain significant
practice groups devoted to the utilities industry. Many of our competitors are
national and international companies that have greater personnel, financial,
technical and marketing resources than we have. We can offer no assurance that
we will compete successfully with our existing competitors or with any new
competitors.
VOLATILITY OF OUR STOCK PRICE
The trading price of our common stock has fluctuated widely. In addition, in
recent years the stock market has experienced extreme price and volume
fluctuations. The overall market and the price of our common stock may continue
to fluctuate greatly in the future.
Our common stock was originally offered in our initial public offering on
October 4, 1996 at a price of $10 43/64 per share. Between October 4, 1996 and
November 2, 1998, the closing sale price has ranged from a low of $13 21/64 per
share to a high of $42 1/8 per share. The market price of our common stock
could continue to fluctuate substantially due to a variety of factors,
including:
. Quarterly fluctuations in results of operations,
. Loss of key personnel,
. Changes in the regulatory environment or market conditions affecting the
utilities industry,
. Announcement and market acceptance of acquisitions,
. Changes in earnings estimates by analysts,
. Changes in accounting principles,
. Sales of common stock by existing stockholders,
. Adverse circumstances affecting the introduction or market acceptance of
new services offered by us, and
. Announcements of key developments by competitors.
10
<PAGE>
The market price for our common stock may also be affected by our ability to
meet analysts' expectations. Failure to meet such expectations, even slightly,
could have an adverse effect on the market price of our common stock. In
addition, stock market volatility has had a significant effect on the market
prices of securities issued by many companies for reasons unrelated to the
operating performance of these companies. In the past, following periods of
volatility in the market price of a company's securities, securities class
action litigation has often been instituted against such a company. If similar
litigation were instituted against us, it could result in substantial costs and
a diversion of our management's attention and resources, which could have an
adverse effect on our business. See "Price Range of Common Stock and Dividend
Policy."
INTERNATIONAL OPERATIONS
We operate offices in nine foreign countries and are engaged in projects in
approximately 30 foreign countries. We expect to continue to expand our
international operations and offices. Expansion into new geographic regions
requires considerable management and financial resources and may negatively
affect our near-term results of operations. Our international operations are
subject to numerous potential challenges and risks that could have a negative
impact on our business, including war, civil disturbances, varying political,
regulatory and economic conditions, longer accounts receivable collection
cycles, fluctuations in currency and potentially adverse tax consequences.
LIMITED PROTECTION OF PROPRIETARY SYSTEMS AND PROCEDURES
Our performance depends in part upon our information and communication
systems, databases and tools, and the methods and procedures that we have
developed to serve our clients. We rely on a combination of nondisclosure and
other contractual arrangements and copyright, trademark and trade secret laws
to protect our intellectual property. We can offer no assurance that the steps
we have taken to protect these rights will be adequate to prevent theft or to
detect unauthorized use. We believe that our systems and procedures and other
proprietary rights do not infringe upon the rights of third parties. However,
if a party sues us in the future claiming that our business or systems infringe
on their intellectual property, we may have to enter into expensive litigation
regardless of the merits of such claims.
SIGNIFICANT UNALLOCATED NET PROCEEDS
None of the estimated net proceeds of this offering have been designated for
specific uses. Therefore, our board of directors will have broad discretion
with respect to the use of the net proceeds of this offering. See "Use of
Proceeds."
SHARES ELIGIBLE FOR FUTURE SALE
Immediately after completion of this offering, there will be approximately
37,150,000 shares of our common stock outstanding, of which the 4,250,000
shares sold pursuant to this offering and the approximately 22,800,000 shares
issued in our prior public offerings and the acquisition of LECG (excluding
shares held by former affiliates of LECG) will generally be freely tradable
without restriction or further registration under the Securities Act. All of
the remaining approximately
11
<PAGE>
10,100,000 shares of our common stock constitute "restricted securities" under
Rule 144 or Rule 145 under the Securities Act. Of these restricted securities,
approximately 5,300,000 are eligible for sale, subject to the volume
restrictions, manner of sale and other requirements of Rule 144 and Rule 145.
The approximately remaining 4,800,000 restricted securities will become
eligible for sale under Rule 144 at various times between December 1, 1998 and
September 1, 1999.
We will enter into a restrictive sale agreement with the underwriters of this
offering and our executive officers and directors and the stockholders who are
selling in this offering will enter into similar agreements. These agreements
give us and Donaldson, Lufkin & Jenrette the ability to prevent such people
from offering, selling, transferring or registering our common stock, or other
securities convertible into our common stock, for a period of 90 days after the
date of this prospectus. However, we and Donaldson, Lufkin & Jenrette may waive
these restrictions, in whole or in part, with or without a public announcement.
The sale of a substantial number of shares of our common stock, or the
perception that such sales could occur, could adversely affect prevailing
market prices for our common stock.
IMPACT OF ANTI-TAKEOVER PROVISIONS ON OUR STOCK PRICE
Our certificate of incorporation and by-laws and the Delaware General
Corporation Law include provisions that may be deemed to have anti-takeover
effects and may delay or prevent a takeover attempt that stockholders might
consider in their best interests. Directors are divided into three classes and
are elected to serve staggered three-year terms and cannot be removed (other
than for cause) until the end of their terms. Our board of directors is
authorized to issue, without obtaining stockholder approval, up to 3,000,000
shares of preferred stock and to determine the price, rights, preferences and
privileges of such shares, without any further stockholder action. The
existence of this "blank-check" preferred stock could make more difficult or
discourage an attempt to obtain control of the Company by means of a tender
offer, merger, proxy contest or otherwise. Furthermore, this "blank-check"
preferred stock may have other rights, including economic rights, senior to our
common stock, and, therefore, its issuance could have an adverse effect on the
market price of our common stock. We have no current plans to issue shares of
preferred stock. We may in the future adopt other measures that may have the
effect of delaying, deferring or preventing an unsolicited takeover, even if
such a change in control were at a premium price or favored by a majority of
unaffiliated stockholders. Certain of these measures may be adopted without any
further vote or action by the stockholders.
12
<PAGE>
USE OF PROCEEDS
The net proceeds from the sale of the 1,000,000 shares of common stock
offered by us are estimated to be approximately $37 million (approximately
$ million if the underwriters' over-allotment option is exercised in full),
at an assumed offering price of $42 1/8 per share and after deducting the
estimated underwriting discounts and commissions and estimated offering
expenses. We estimate that our expenses in connection with this offering and
certain related matters will total approximately $3 million. We will not
receive any proceeds from the sale of shares of common stock by the selling
stockholders. See "Underwriting."
We intend to use our net proceeds for expansion of existing operations,
including development of new service offerings and possible acquisitions of
related businesses; and general corporate purposes, including working capital.
The amounts actually spent by us may vary significantly and will depend on a
number of factors, including our future revenues and the other factors
described under "Risk Factors." Accordingly, our management has broad
discretion in the allocation of the net proceeds. We continually evaluate
potential acquisition candidates, but we have not reached any agreements,
commitments or understandings for any future acquisitions. Pending such uses,
the net proceeds of this offering will be invested in short-term, interest-
bearing investment grade securities.
13
<PAGE>
PRICE RANGE OF COMMON STOCK AND DIVIDEND POLICY
Our common stock has been traded on the Nasdaq National Market under the
symbol METZ since October 4, 1996. The following table sets forth, for the
periods indicated, the range of high and low bid prices for our common stock as
reported on the Nasdaq National Market.
<TABLE>
<CAPTION>
PRICE RANGE OF
COMMON STOCK
-------------------
HIGH LOW
<S> <C> <C>
Year Ended December 31, 1996:
Fourth Quarter (from October 4, 1996)...................... $22 1/2 $13 21/64
Year Ended December 31, 1997:
First Quarter.............................................. $22 21/64 $14 21/64
Second Quarter............................................. $21 21/64 $13 11/64
Third Quarter.............................................. $26 59/64 $20 43/64
Fourth Quarter............................................. $27 11/64 $23
Year Ended December 31, 1998:
First Quarter.............................................. $33 21/64 $24
Second Quarter............................................. $36 5/8 $26
Third Quarter.............................................. $36 1/2 $28 1/8
Fourth Quarter (through November 2, 1998).................. $42 1/8 $29 1/8
</TABLE>
On November 2, 1998, the last reported closing sale price of the common stock
was $42 1/8 per share.
Since our initial public offering, we have not paid cash dividends on our
common stock. We currently anticipate that all of our earnings will be retained
for development of our business and do not anticipate paying any cash dividends
in the foreseeable future.
14
<PAGE>
SUMMARY CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
The summary consolidated financial data for the three fiscal years ended
December 31, 1997, are derived from the Company's Consolidated Financial
Statements. The financial data as of and for the nine-month periods ended
September 30, 1997 and 1998 are derived from unaudited Consolidated Financial
Statements, and include in the opinion of management, all adjustments
(consisting only of normal recurring adjustments) necessary to present fairly
the data for the periods. The Consolidated Financial Statements give
retroactive effect to the acquisitions of RMI, Reed, LECG and Peterson, each of
which has been accounted for using the pooling of interests method. As a
result, the historical statement of income data and the historical balance
sheet data summarized below are presented as if the combining companies had
been consolidated for all periods presented. These selected consolidated
financial data should be read in conjunction with "Management's Discussion and
Analysis of Financial Condition and Results of Operations" contained elsewhere
herein and the Consolidated Financial Statements and related Notes thereto
filed separately by the Company and incorporated by reference herein.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEARS ENDED DECEMBER 31, SEPTEMBER 30,
----------------------------- -----------------------
1995 1996 1997 1997 1998
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DA-
TA:
Revenues............... $130,909 $151,889 $196,780 $142,096 $193,983
Cost of services....... 79,056 89,410 115,122 83,214 112,358
-------- -------- -------- -------- --------
Gross profit........... 51,853 62,479 81,658 58,882 81,625
General and
administrative
expenses.............. 46,443 47,028 54,151 39,179 46,938
Merger-related costs... -- -- 1,312 1,312 12,778
-------- -------- -------- -------- --------
Operating income....... 5,410 15,451 26,195 18,391 21,909
Other expense
(income).............. 340 285 (1,305) (1,232) (1,878)
-------- -------- -------- -------- --------
Income before provision
for income taxes...... 5,070 15,166 27,500 19,623 23,787
Provision for income
taxes(a).............. 476 9 9,081 4,196 18,444
-------- -------- -------- -------- --------
Net income............. $ 4,594 $ 15,157 $ 18,419 $ 15,427 $ 5,343
======== ======== ======== ======== ========
Pro forma net
income(b)............. $ 2,991 $ 8,952 $ 16,225 $ 11,578 $ 14,810
======== ======== ======== ======== ========
Pro forma net income
per dilutive
share(b).............. $ 0.10 $ 0.29 $ 0.50 $ 0.36 $ 0.41
======== ======== ======== ======== ========
Diluted weighted
average shares
outstanding........... 30,404 31,262 32,288 32,098 36,540
<CAPTION>
AS OF DECEMBER 31, AS OF
------------------------------ SEPTEMBER 30,
1995 1996 1997 1998
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash
equivalents........... $ 1,878 $ 33,699 $ 45,867 $ 70,197
Working capital........ 11,451 45,983 58,269 80,563
Total assets........... 51,514 92,914 124,443 176,056
Long-term debt, less
current portion....... 1,027 1,490 319 --
Total stockholders'
equity................ 12,569 50,386 68,672 97,817
</TABLE>
- --------
(a) During the periods presented, certain of our operating subsidiaries were
entities not subject to federal income taxation. Peterson became taxable as
a C corporation upon our acquisition on August 31, 1998 and the provision
for income taxes for the nine months ended September 30, 1998 reflects the
recording of a deferred tax liability of $7.2 million as a result of the
acquisition.
(b) Pro forma net income and net income per dilutive share: (1) for all periods
presented have been adjusted to reflect a provision for income taxes
assuming a tax rate of 41% that would have been recorded had all
subsidiaries been taxable entities during those periods; and (2) for the
nine months ended September 30, 1998 have been increased by $2.3 million to
reflect the impact of a new executive compensation plan adopted by Peterson
and increased by $7.2 million to reflect the effect of a one time, non-cash
charge to income tax expense as a result of its conversion to a taxable
Corporation as a result of the acquisition. See Note 1 of Notes to
Metzler's Supplemental Consolidated Financial Statements, which are
separately filed and incorporated by reference herein, for a more detailed
discussion of these adjustments.
15
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following section of this prospectus, Management's Discussion and
Analysis of Financial Condition and Results of Operations, contains certain
forward-looking statements that involve substantial risks and uncertainties.
When used in this section, the words "anticipate," "believe," "estimate," and
"expect" and similar expressions as they relate to the Company or its
management are intended to identify such forward-looking statements. The
Company's actual results, performance or achievements could differ materially
from the results expressed in, or implied by, these forward-looking statements.
Factors that could cause or contribute to such differences include those
discussed in "Risk Factors."
As an integral part of our growth strategy, it acquired LECG and Peterson in
1998 (see
"--Acquisitions"). This Management's Discussion and Analysis of Financial
Condition and Results of Operations (this "MD&A") relates to the Consolidated
Financial Statements incorporated by reference in this prospectus, which
restate our financial statements to give effect to the pooling of interests
acquisitions of LECG and Peterson for all periods presented.
OVERVIEW
We are a leading nationwide provider of consulting services to energy based
and other network and regulated industries. We offer a wide range of consulting
services designed to assist our clients as they face changing regulation,
increasing competition and evolving technology. The Company's services include:
(1) management consulting; (2) information technology; and (3) litigation
support.
We derive substantially all of our revenues from fees for professional
services. Over the last three years, the substantial majority of our revenues
have been generated under standard hourly or daily rates billed on a time-and-
expenses basis. Our clients are typically invoiced on a monthly basis with
revenue recognized as the services are provided.
Our most significant expenses are project personnel costs, which consist of
consultant salaries and benefits, and travel-related direct project expenses.
We typically employ our project personnel on a full-time basis, although we
supplement our project personnel through the use of independent contractors. We
retain contractors for specific client engagements on a task-specific, per diem
basis during the period their expertise or skills are required. We believe that
retaining contractors on a per-engagement basis provides us with greater
flexibility in adjusting project personnel levels in response to changes in
demand for our services.
ACQUISITIONS
As part of our growth strategy, we expect to continue to pursue complementary
acquisitions to expand our geographic reach, expand the breadth and depth of
our service offerings and enhance our consultant base. In furtherance of this
growth strategy, we have acquired thirteen consulting firms during 1997 and
1998. All of these transactions were accounted for as pooling of interests.
16
<PAGE>
The following summarizes the significant pooling of interests acquisitions
that we have made since our initial public offering:
Peterson. As of August 31, 1998, we acquired substantially all of the common
stock of Peterson Worldwide, LLC in exchange for 5.6 million shares of our
common stock (valued at approximately $156.7 million) and acquired the
remaining minority interests in exchange for cash. Peterson, based in the
Chicago, Illinois area, is a leading provider of information management
services. Peterson's operations expand our service offerings in the area of
information technology.
LECG. As of August 19, 1998, we acquired substantially all of the common
stock of LECG, Inc. in exchange for 7.3 million shares of our common stock
(valued at approximately $228.7 million) and acquired the remaining minority
interests in exchange for cash. LECG, based in the San Francisco, California
area, is a leading provider of economic consulting and litigation support
services. LECG's operations further increase our economic and regulatory
expertise and expand our presence in the telecommunications industry.
Reed. As of August 15, 1997, we acquired substantially all of the common
stock of Reed Consulting Group, Inc. in exchange for 0.8 million shares of our
common stock (valued at approximately $17.6 million) and acquired the remaining
minority interests in exchange for cash. Reed, based in the Boston,
Massachusetts area, provides strategic planning, operations management and
economic and regulatory services to electric and natural gas utilities. Reed's
operations complement our existing services and client base and expand our
presence in the northeast United States and internationally.
RMI. As of July 31, 1997, we acquired substantially all of the common stock
of Resource Management International, Inc. in exchange for 3.2 million shares
of our common stock (valued at approximately $75.3 million) and acquired the
remaining minority interests in exchange for cash. RMI, based in Sacramento,
California, is a leading provider of consulting services to gas, water and
electric utilities, with operations in the western and eastern United States
and international marketplace. RMI's operations complement our existing
management consulting and information technology services and expand our
service offerings to include a broad range of engineering, technical and
economic regulatory services.
17
<PAGE>
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, selected
statements of operations data as a percentage of revenues:
<TABLE>
<CAPTION>
NINE MONTHS
YEARS ENDED ENDED
DECEMBER 31, SEPTEMBER 30,
------------------- --------------
1995 1996 1997 1997 1998
<S> <C> <C> <C> <C> <C>
Revenues.............................. 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of services...................... 60.4 58.9 58.5 58.6 57.9
----- ----- ----- ------ ------
Gross profit.......................... 39.6 41.1 41.5 41.4 42.1
General and administrative expenses... 35.5 31.0 27.5 27.6 24.2
Merger-related costs.................. 0.0 0.0 0.7 0.9 6.6
----- ----- ----- ------ ------
Operating income...................... 4.1 10.1 13.3 12.9 11.3
Other expense (income)................ 0.2 0.2 (0.7) (0.9) (1.0)
----- ----- ----- ------ ------
Income before provision for income
taxes................................ 3.9 10.0 14.0 13.8 12.3
Provision for income taxes............ 0.4 0.0 4.6 2.9 9.5
----- ----- ----- ------ ------
Net income............................ 3.5% 10.0% 9.4% 10.9% 2.8%
===== ===== ===== ====== ======
</TABLE>
NINE MONTHS ENDED SEPTEMBER 30, 1998 COMPARED TO SEPTEMBER 30, 1997
Revenues. Revenues for the first nine months of 1998 increased 37% to $194.0
million compared to $142.1 million in the corresponding period in 1997. The
growth in revenue was primarily due to the expansion of services provided to
existing clients and engagements with new clients, as a result of continued
strong demand for management consulting services in energy based and other
network and regulated industries, increased selling and business development
efforts and immaterial acquisitions.
Gross Profit. Gross profit consists of revenues less cost of services, which
includes consultant salaries, benefits and travel-related direct project
expenses. For the first nine months of 1998, gross profit increased 39% to
$81.6 million from $58.9 million in the comparable 1997 period. Gross profit as
a percentage of revenues was 42% in the nine month period ended September 30,
1998, compared to 41% for the nine month period ended September 30, 1997. This
increase in 1998 was attributable to higher average utilization rates.
General and Administrative Expenses. General and administrative expenses
include salaries and benefits of management and support personnel, facilities
costs, training, direct selling, outside professional fees and all other
corporate costs. General and administrative expenses for the nine months ended
September 30, 1998 were $46.9 million, or 24% of revenues. In the corresponding
period in 1997, general and administrative expenses were $39.2 million, or 28%
of revenues. The percentage decrease of general and administrative expenses is
principally due to decreases in executive incentive compensation at companies
acquired in 1997. In the current period, the Company also realized some
improvement in general and administrative expenses as a percentage of revenue
attributable to economies of scale, increased efficiency in certain support
functions, reduction of administrative headcount and closing certain facilities
at the beginning of 1998.
18
<PAGE>
Merger-Related Costs. In the third quarter of 1998, the Company incurred
merger-related costs of $12.8 million related to the acquisitions of LECG and
Peterson which were accounted for as pooling of interests. These costs include
legal, accounting and other transaction related fees and expenses, as well as
restructuring accruals to consolidate certain facilities. In the prior year
period, the Company incurred legal, accounting and other transaction related
fees and expenses of $1.3 million related to the acquisitions of RMI and Reed
which were accounted for as pooling of interests.
Other Income, net. Other income, net includes interest expense, interest
income and other non-operating income and expenses. In the nine month period
ended September 30, 1998, other income, net was $1.9 million verses $1.2
million in the corresponding period in 1997. The increase is the result of
higher interest income due to larger average cash balances outstanding during
the period and a reduction in interest expense.
Income Tax Expense. The Company's effective income tax rate was 78% for the
first nine months of 1998. The effective rate for this period would have been
39.5%, excluding the effect of the one-time, non-cash charge to income tax
expense of $7.2 million related to the creation of a deferred income tax
account triggered by the acquisition of Peterson and the effect of certain
merger-related expenses resulting from the acquisitions of LECG and Peterson
that are not tax deductible. The Company's effective income tax rate was 21%
for the first nine months of 1997. The effective rate would have been 39.1%,
including federal and certain state income taxes that would have been required
had LECG and Peterson been taxable entities during this period.
Net Income. Net income for the first nine months of 1998 decreased to $5.3
million from $15.4 million in the year earlier period. After pro forma
adjustments, year to date net income for the current period increased to $14.8
million from $11.6 million in the prior year period.
1997 COMPARED TO 1996
Revenues. Revenues increased by 30% in 1997 to $196.8 million compared to
$151.9 in 1996. The growth in revenue was primarily due to increased selling
and business development efforts to generate new client engagements and
increased demand for management consulting services in the Company's principal
target industry segments.
Gross Profit. Gross profit increased 31% in 1997 to $81.7 million from $62.5
in 1996. Gross profit as a percentage of revenues was 41% in both 1997 and
1996. The gross profit percentage was largely unchanged and average utilization
rates for full time personnel and a similar proportion of subcontracted labor
were consistent in both periods.
General and Administrative Expenses. General and administrative expenses
increased 15% to $54.2 million in 1997 from $47.0 million in 1996. As a
percentage of revenues, general and administrative expenses decreased to 28% in
1997 from 31% in 1996. The decrease is attributable to economies of scale on
certain fixed costs over the higher 1997 revenue base.
Other Income, net. Other income, net for 1997 was $1.3 million, as opposed to
other expense, net of $0.3 million in 1996. The increase is due in large part
to a one-time gain in 1997 of $0.9
19
<PAGE>
million related to the expiration of an option agreement entered into in 1993.
The agreement called for the purchase of all of the assets or outstanding stock
of LECG. The remainder of the increase is the result of higher interest income
due to larger average cash balances during the period and a reduction in
interest expense.
Income Tax Expense. The Company's effective income tax rate was 33% for 1997
and 0.1% for 1996. The pro forma adjustment reflects a 41% effective tax rate
for both periods that would have been applicable had all of the Company's
subsidiaries been taxable entities during these periods.
1996 COMPARED TO 1995
Revenues. Revenues increased by 16% in 1996 to $151.9 million compared to
$130.9 million in 1995. The growth in revenue was primarily attributable to
additional services provided to existing clients and engagements with new
clients. In 1996, the Company expanded the number of billable professionals and
the number of client projects over the prior year.
Gross Profit. Gross profit in 1996 increased 20% to $62.5 million from $51.9
million in 1995. Gross profit as a percentage of revenues was 41% in 1996 and
40% in 1995. The gross profit percentage increased slightly on moderately
higher average utilization rates for full time personnel.
General and Administrative Expenses. General and administrative expenses
increased 1% to $47.0 million in 1996 from $46.4 million in 1995. As a
percentage of revenues, general and administrative expenses decreased to 31% in
1996 from 35% in 1995. The decrease is primarily due to increased leverage on
largely fixed costs over higher revenue volume, partially offset by increased
facilities costs for opening new offices.
Income Tax Expense. The Company's effective income tax rate was 0.1% for 1996
and 9% for 1995. The pro forma adjustment reflects a 41% effective tax rate for
both periods that would have been applicable had all of the Company's
subsidiaries been taxable entities during these periods.
20
<PAGE>
UNAUDITED QUARTERLY RESULTS
The following table sets forth certain unaudited quarterly operating
information for each of the eight quarters ending September 30, 1998. These
data have been prepared on the same basis as the Consolidated Financial
Statements incorporated by reference in this prospectus and include all normal
recurring adjustments necessary for the fair presentation of the information
for the periods presented, when read in conjunction with the Company's
Consolidated Financial Statements and related Notes thereto. Results for any
previous fiscal quarter are not necessarily indicative of results for the full
year or for any future quarter.
<TABLE>
<CAPTION>
QUARTERS ENDED
----------------------------------------------------------------------
DEC 31, MAR 31, JUN 30, SEP 30, DEC 31, MAR 31, JUN 30, SEP 30,
1996 1997 1997 1997 1997 1998 1998 1998
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues................ $40,326 $44,011 $48,121 $49,964 $54,684 $60,809 $64,863 $68,311
Cost of services........ 24,893 26,776 28,293 28,145 31,909 36,023 37,015 39,320
------- ------- ------- ------- ------- ------- ------- -------
Gross profit............ 15,433 17,235 19,828 21,819 22,775 24,786 27,848 28,991
General and
administrative
expenses............... 13,824 12,043 13,145 13,991 14,971 15,887 17,747 13,304
Merger-related costs.... -- -- -- 1,312 -- -- -- 12,778
------- ------- ------- ------- ------- ------- ------- -------
Income from operations.. 1,609 5,192 6,683 6,516 7,804 8,899 10,101 2,909
Other expense (income).. (164) (146) (981) (105) (73) (550) (790) (538)
------- ------- ------- ------- ------- ------- ------- -------
Income before provision
for income taxes....... 1,773 5,338 7,664 6,621 7,877 9,449 10,891 3,447
Provision for income
taxes.................. (59) 1,152 1,552 1,492 4,885 3,791 4,233 10,420
------- ------- ------- ------- ------- ------- ------- -------
Net income.............. $ 1,832 $ 4,186 $ 6,112 $ 5,129 $ 2,992 $ 5,658 $ 6,658 $(6,973)
======= ======= ======= ======= ======= ======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
QUARTERS ENDED
-----------------------------------------------------------------------------------------
MAR 31, JUN 30, SEP 30, DEC 31, MAR 31, JUN 30, SEP 30, DEC 31, MAR 31, JUN 30, SEP 30,
1996 1996 1996 1996 1997 1997 1997 1997 1998 1998 1998
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Total revenues, as
previously reported.... $15,318 $15,654 $16,189 $16,392 $18,084 $20,194 $21,140 $24,243 $25,487 $27,563 $
Adjustments(1).......... 19,778 21,623 23,001 23,934 25,927 27,927 28,824 30,441 35,322 37,300
------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Total revenues.......... $35,096 $37,277 $39,190 $40,326 $44,011 $48,121 $49,964 $54,684 $60,809 $64,863 $
======= ======= ======= ======= ======= ======= ======= ======= ======= ======= =======
Gross profit, as
previously reported.... $ 5,709 $ 5,310 $ 5,365 $ 4,854 $ 6,930 $ 8,246 $ 9,073 $ 9,844 $10,981 $12,240 $
Adjustments(1).......... 9,492 10,565 10,605 10,579 10,305 11,582 12,746 12,931 13,805 15,608
------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Gross profit............ $15,201 $15,875 $15,970 $15,433 $17,235 $19,828 $21,819 $22,775 $24,786 $27,848 $
======= ======= ======= ======= ======= ======= ======= ======= ======= ======= =======
Operating income (loss),
as previously
reported............... $ 2,427 $ 1,825 $ 1,480 $ (104) $ 2,674 $ 3,565 $ 3,465 $ 4,970 $ 5,915 $ 6,990 $
Adjustments(1).......... 2,469 2,999 2,642 1,713 2,518 3,118 3,051 2,834 2,984 3,111
------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Operating income
(loss)................. $ 4,896 $ 4,824 $ 4,122 $ 1,609 $ 5,192 $ 6,683 $ 6,516 $ 7,804 $ 8,899 $10,101 $
======= ======= ======= ======= ======= ======= ======= ======= ======= ======= =======
Net income, as
previously reported.... $ 2,214 $ 1,875 $ 1,424 $ 223 $ 1,806 $ 2,337 $ 2,328 $ 3,216 $ 3,857 $ 4,800 $
Adjustments(1).......... 2,373 2,898 2,541 1,609 2,380 3,775 2,801 (224) 1,801 1,858
------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Net income.............. $ 4,587 $ 4,773 $ 3,965 $ 1,832 $ 4,186 $ 6,112 $ 5,129 $ 2,992 $ 5,658 $ 6,658 $
======= ======= ======= ======= ======= ======= ======= ======= ======= ======= =======
</TABLE>
- -------
(1) Adjustments reflect the effect of acquisitions accounted for as poolings
of interests of the amounts previously reported. See Note of Notes to
Metzler's Consolidated Financial Statements for a more detailed
discussions of these transactions.
Revenues and operating results fluctuate from quarter to quarter as a result
of a number of factors, including the significance of client engagements
commenced and completed during a quarter, the number of business days in a
quarter and employee hiring and utilization rates See "Risk Factors--
Variability of Quarterly Operating Results." The timing of revenues varies
from quarter to quarter due to factors such as the Company's sales cycle, the
ability of clients to terminate engagements without penalty, the size and
scope of assignments and general economic conditions. Because a significant
percentage of the Company's expenses are relatively fixed, a variation in the
number of client assignments or the timing of the initiation or
21
<PAGE>
the completion of client assignments can cause significant variations in
operating results from quarter to quarter. Furthermore, the Company has on
occasion experienced a seasonal pattern in its operating results, with a
smaller proportion of the Company's revenues and lower operating income
occurring in the fourth quarter of the year or a smaller sequential growth rate
than in other quarters.
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operating activities was $16.7 million for the first
nine months of 1998. For the period, the primary sources of cash provided by
operating activities were net income of $5.3 million, non-cash depreciation of
$3.8 million and increases in Accounts Payable and Accrued Liabilities of $8.3
million, Accrued Compensation and Project Costs of $10.9 million, and Other
Current Liabilities of $8.2 million. These increases in liabilities were due to
the higher volume of business in the period and to various merger-related costs
associated with the third quarter transactions which remained unpaid at the end
of the period. Cash flow from operations was also positively affected by a non-
cash, non-recurring deferred tax charge of $7.2 million, which was partially
offset by reductions in income taxes payable due to payment of estimated third
quarter taxes prior to period end. These positive cash flow items were
partially offset by increases of $18.0 million in accounts receivable and $2.7
million in prepaid expenses and other assets.
Year to date investing activities used net cash flows of $10.4 million,
principally to support growth in personnel and services. These investments
included leasehold improvements, furniture and equipment for new leased
facilities, additional computer and related equipment for provision of
information management consulting services by Peterson, and the purchase and
related improvements of the Company's new corporate headquarters in Chicago.
Financing activities provided net cash flows of $18.2 million in the first
nine months of 1998. In March 1998, the Company sold 1.5 million shares of
common stock in a secondary offering, raising approximately $36.0 million
dollars, net of related offering costs. The Company received an additional $6.4
million from transactions related to option exercises, the Employee stock
purchase plan, and notes receivable from stockholders. Cash flows used by
financing activities included $18.9 for the purchase of certain minority
interests of LECG and Peterson. There were also $6.1 million in payments of
pre-acquisition, undistributed income to former shareholders of acquired
companies.
The Company believes that the effect of the millennium on its internal
information systems will have an immaterial impact on the Company.
RECENTLY ISSUED FINANCIAL ACCOUNTING STANDARDS
Statement of Financial Accounting Standards No. 131, "Disclosures about
Segments of an Enterprise and Related Information," was issued in June 1997.
The Company will be required to adopt the new standard for the year ended
December 31, 1998, although early adoption is permitted. This statement
requires use of the "management approach" model for segment reporting. The
management approach model is based on the way the Company's management
organizes segments within the Company for making operating decisions and
assessing performance. Reportable segments are based on products and services,
geography, legal structure, management structure, or any other manner in which
management disaggregates a company. The Company will adopt this statement in
fiscal year 1998.
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BUSINESS
The Metzler Group is a leading nationwide provider of consulting services to
energy based and other network and regulated industries. We offer a wide range
of consulting services designed to assist our clients as they face changing
regulations, increasing competition and evolving technology. Our clients
include the 50 largest investor-owned utilities, the 20 largest gas
distribution companies and the 12 largest local exchange telecommunications
companies in the United States, as well as other Fortune 100 companies.
Our services include: (1) management consulting; (2) information technology;
and (3) litigation support. Since our initial public offering in October 1996,
we have increased the scope and size of our business and expanded our service
offerings through a series of strategic acquisitions and internal growth. We
have also expanded our domestic presence on the east and west coasts, expanded
our base of non-utility energy clients and established a presence in Europe,
Asia and Australia.
We are organized as a holding company that manages independent operating
subsidiaries. We currently have seven principal subsidiaries: Metzler &
Associates, RMI, Bookman-Edmonston, Reed, Sterling, LECG and Peterson. This
organizational structure allows us to rapidly expand our breadth of service
offerings, increase our client base and add highly skilled professionals
through acquisitions, and then integrate these acquisitions to achieve
operational synergies and cost benefits.
We believe that several competitive factors distinguish us from other
participants in the consulting industry, including:
. Established, recognized expertise and academic reputation of our
consultants and affiliated experts;
. Deep-rooted client relationships supporting multiple engagements; and
. A wide range of industry-specific services that enable us to be a single-
source provider of consulting services while maintaining advanced skill
sets in each area.
Our growth strategy is to:
. Continue to build a complementary spectrum of consulting services through
both acquisitions and internal growth;
. Leverage vertical focus to capitalize on current industry dynamics;
. Leverage existing relationships and expand client base in both domestic
and international markets;
. Continue to recruit and retain highly skilled professionals; and
. Continue to acquire other consulting companies that provide complementary
services or geographic presence.
23
<PAGE>
OVERVIEW
Energy based and other network and regulated industries are among the largest
in the United States, with revenues in the energy utility industry alone
exceeding $250 billion. Many of these industries are in various stages of
deregulation and are increasingly relying on consulting services and expert
advice to assist or lead them in the move toward a fully competitive market.
Industry sources estimate that the worldwide consulting industry generated
approximately $58 billion in revenues during 1997, and is expected to grow at a
compound annual rate of approximately 15% through 2001. The market for
consulting services to energy utilities is estimated to be approximately $3.5
billion in 1998 and is estimated to grow at a rate of 15% per year through
2003.
The demand for consulting services among regulated industries is driven in
significant part by the revolutionary change that these industries have
undergone or are just beginning to undergo as they convert from a monopoly
structure to a competitive environment. Deregulation requires these companies
to, among other things, review their management structure, business models and
competitive position, undertake sophisticated financial, pricing and other
economic valuations and analyses, and comply with changing regulation and
policies. Meanwhile, continuing regulation and the increasingly competitive
environment requires these companies to develop customer awareness and loyalty
programs and better collect, analyze and manage information.
Deregulation is a long and complicated process and, in industries that have
already undergone initial deregulation, is usually followed by consolidation
and continued competitive pressures. For example, the telecommunications
industry, in which initial deregulation was accomplished in a relatively short
time period, is currently undergoing consolidation and continues to face
regulatory issues as local phone companies and long-distance phone companies
attempt to penetrate each others' markets. In the electric and gas utility
industries, deregulation has been more difficult due to the complex and
overlapping regulatory web imposed by over 200 federal and state bodies and the
presence of a large number of separate, regulated companies. Accordingly,
implementation of any regulatory change will likely proceed on a state-by-state
basis over the next decade and may well face challenges from utilities and
state and local governments.
Companies operating in a regulated and deregulating environment engage
consultants because: (1) the pace of change far exceeds the companies' internal
resources; (2) many companies lack the experience necessary to identify issues,
evaluate possible solutions and implement the desired actions; (3) experienced
consultants often develop better solutions in shorter periods of time; (4)
purchasing consulting expertise converts fixed labor costs to variable costs
and can be more cost-effective; and (5) consultants can often provide more
objective advice, free of internal cultural or political forces.
OUR STRENGTHS AND DIFFERENTIATION
We believe that several factors distinguish us from our competitors,
including the following:
Established Expertise. For over fifteen years, we have focused primarily on
providing consulting services to energy utilities and other network and
regulated industries. We believe that our vertical focus on regulated
industries and broad service offerings differentiate us from both general
consulting firms that serve multiple industries and "niche" firms that focus on
individual aspects of
24
<PAGE>
a single industry. Our consultants have significant industry and consulting
experience across critical business disciplines, including strategic planning,
systems planning, accounting, finance, economics, organizational design,
engineering, marketing, sales, customer service, systems analysis, resource
acquisition and asset management.
Deep-Rooted Client Relationships. We believe our wide exposure across a broad
client base provides opportunities for deepening existing client relationships.
We have developed numerous contacts at various levels within our clients'
organizations, ranging from chief executive officers and other senior
management to functional managers. Our relationships can span multiple
functional areas, which often lead to follow-on engagements. Many of our
relationships have moved beyond a relatively small initial project to span
multiple engagements over extended periods of time.
Wide Range of Industry-Specific Services. Many engagements require the vendor
to provide a broad array of service offerings, something many "niche" players
cannot provide. Engagements often require creative solutions that must be drawn
from diverse areas of expertise. Our expertise in a wide range of services
enables us to better pursue such opportunities and to be a leading single-
source provider of services.
OUR GROWTH STRATEGY
Our goal is to become the preeminent provider of a full range of consulting
services to energy based and other network and regulated industries. To achieve
this goal, we intend to:
Continue To Build a Complementary Spectrum of Consulting Services. We intend
to continue to broaden our range of service offerings. Through both
acquisitions and internal growth, we have added significant depth and scope to
our consulting services, including: (1) economic, regulatory, engineering and
technical services; (2) expert testimony services; and (3) information
management services. This broad range of consulting services helps us to cross-
sell our expertise and to provide follow-on engagements for many of our
clients.
Leverage Vertical Focus to Capitalize on Current Industry Dynamics. We
believe that our vertical focus in energy based and other network and regulated
industries allows us to continue to develop our in-depth knowledge of the
dynamics facing companies in these industries, which in turn allows us to
enhance our position as a leading world-wide provider of consulting services.
Leverage Existing Relationships and Expand Client Base. Although we provide
consulting services to many of the largest energy utilities in the United
States, some of these clients engage us to provide only limited types of
services or to provide services to a single division or business unit. We
believe that providing additional services to our existing clients represents a
significant growth opportunity. We intend to pursue this opportunity by adding
consultants and further developing our internal resources. The access, contact
and goodwill provided by existing relationships gives us significant advantages
in marketing additional services to other divisions of a client. We also intend
to continue to obtain new clients by increasing our domestic and international
presence and by hiring consultants with established client relationships in
energy based and other network and regulated industries.
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<PAGE>
Continue to Recruit and Retain Highly Skilled Professionals. To continue to
grow, we must continually hire highly-skilled professionals. We seek to hire
senior professionals with skills and experience that enhance or complement our
existing services, as well as professionals with their own established client
relationships. To help recruit and retain consultants, we offer packages of
base salaries, bonuses and benefits that are significantly more attractive than
those offered by the consulting industry in general. We also believe that our
status as a public company aids in recruiting, retaining and incentivizing
current and future employees.
Continue to Acquire Complementary Consulting Companies. Our growth is largely
attributable to our success in making complementary acquisitions. The
consulting industry is highly fragmented and we believe numerous additional
acquisition opportunities exist. Acquisitions provide us with a fast, cost-
effective method to increase our number of consultants, broaden our client
base, expand our geographic presence and enhance and broaden our service
offerings. In addition, we intend to acquire or develop relationships with
firms whose services complement our current offerings, allowing us to cross-
sell and cross-market services to our existing clients and those of the
acquired firms. We believe our public company status makes us an attractive
consolidation partner and provides us with an acquisition currency and the
financial flexibility to effectively pursue this element of our growth
strategy.
SERVICES
We offer our services in three principal areas, including: (1) management
consulting; (2) information technology; and (3) litigation support. The table
below provides examples of our service offerings in each of these areas:
SERVICE CATEGORIES EXAMPLES OF SERVICES
- --------------------------------------------------------------------------------
MANAGEMENT . Develop business plans and objectives for
CONSULTING unregulated markets, including investment and
--Strategic spending objectives.
planning . Examine domestic and international energy market
--Marketing sectors and identify opportunities for competitive
analysis/ leverage.
economic . Quantify and prioritize operational and business
services strategies.
--Financial . Identify and evaluate candidates for acquisition
services or joint ventures and provide sophisticated
--Regulatory economic analysis and valuation.
policy . Redesign and implement marketing and customer
service functions.
. Develop electric transmission and distribution
strategy.
. Provide project and construction management.
. Provide owner and lender engineering services.
. Provide infrastructure and facility environmental
compliance.
. Develop power market modeling and pricing.
. Develop transmission pricing.
. Evaluate and develop alternative regulatory and
legislative positions.
. Advise clients on anti-trust issues.
- --------------------------------------------------------------------------------
INFORMATION . Develop strategic information systems plans.
TECHNOLOGY . Perform total life cycle analysis and implement
--Information activity-based management systems, including
management process evaluation, activity definition, chart of
solutions accounts and system design, construction and
--Emerging implementation.
technologies . Develop information requirements and package
--Industry evaluations for executive information systems,
forecasting materials management systems and work management
systems.
. Develop telecommunications systems, including
integrated communications planning, communications
market analysis, network traffic evaluation and
customer operations process design.
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<PAGE>
SERVICE CATEGORIES EXAMPLES OF SERVICES
- --------------------------------------------------------------------------------
LITIGATION . Administer and process claims and regulatory
SUPPORT compliance.
--Litigation . Serve as expert witnesses.
support systems . Develop regulatory strategy and provide support.
--Document . Provide economic analysis for equitable allocation
management of clean-up costs.
--Expert
testimony
--Dispute
analysis and
resolution
CLIENTS AND REPRESENTATIVE SERVICES
Our clients include the 50 largest investor-owned utilities, the 20 largest
gas distribution companies and the 12 largest local exchange telecommunications
companies in the United States, as well as other Fortune 100 companies. We also
serve independent power producers, co-generators and power marketers, suppliers
to the utility industry and oil and gas exploration and production companies,
insurance and other financial services companies and healthcare and
pharmaceutical companies. We market our services through our subsidiaries
primarily to senior executives, as well in certain circumstances to law firms
or other third party organizations responsible for selecting and engaging
consultants and expert support. We use a variety of business development and
marketing techniques to communicate directly to our current and prospective
clients, including giving on-site presentations to senior executives,
sponsoring industry seminars featuring presentations by our personnel and
writing articles regarding the industry and our methodologies. Many of our
consultants hold highly regarded academic positions and lecture and publish
frequently.
A significant portion of new business arises from prior client engagements.
In addition, we expect to leverage the client relationships of the companies we
acquire by mutually cross-selling and cross marketing our services. Clients
frequently expand the scope of engagements during delivery to include
complementary services. Also, our on-site presence lets us become aware of, and
help define, additional project opportunities for clients. In addition, senior
management teams actively meet with prospective clients and newly appointed
senior managers at existing clients to make them aware of our capabilities.
HUMAN RESOURCES
As of October 1, 1998, we employed approximately 1,500 people and had
approximately 120 additional experts affiliated with our LECG subsidiary. Our
success depends in large part on attracting and retaining talented, creative
and experienced professionals at all levels. To hire consultants, we use
internal recruiters, retain executive search firms and rely on personal and
business contacts. We provide our consultants with professional development
opportunities including formal training programs and case studies from prior
engagements. We promote loyalty and continuity of our consultants by offering
packages of base and incentive compensation and benefits that we believe are
significantly more attractive than those offered by the consulting industry in
general.
We supplement our consultants on certain engagements with independent
contractors, many of whom are former employees. We believe that this practice
of retaining independent contractors on a per-engagement basis provides us with
greater flexibility in adjusting professional personnel levels in response to
changes in demand for our services.
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<PAGE>
COMPETITION
The market for our consulting services is intensely competitive, highly
fragmented and subject to rapid change. The market includes a large number of
participants from a variety of market segments, including general management or
marketing consulting firms, the consulting practices of national accounting
firms, and local or regional firms. Many information technology consulting
firms also maintain significant practice groups devoted to the utilities
industry. Many of our competitors are national and international companies that
have greater personnel, financial, technical and marketing resources than we
do. However, we believe that our experience, reputation, industry focus and
broad range of services enable us to compete effectively in the marketplace.
PROPERTIES
Our headquarters are currently located in a 15,000 square foot building in
Chicago, Illinois which we own. In addition to our headquarters, we lease
office space in over 42 cities. Additional space may be required as our
business expands geographically, but we believe we will be able to obtain
suitable space as needed.
We have principal offices in the following locations:
UNITED STATES INTERNATIONAL
Albany, NY Oakbrook, IL Brussels, Belgium
Atlanta, GA Orem, UT Buenos Aires, Argentina
Austin, TX Orlando, FL Copenhagen, Denmark
Boston, MA Philadelphia, PA London, England
Cambridge, MA Phoenix, AZ Manila, Philippines
Chicago, IL Pittsburgh, PA Melbourne, Australia
Clearwater, FL Portland, OR Sydney, Australia
Colorado Princeton, NJ Toronto, Canada
Springs, CO Richardson, TX Toulouse, France
College Sacramento, CA Wellington, New Zealand
Station, TX Salt Lake City, UT
Dallas, TX San Francisco, CA
Emeryville, CA Springfield, IL
Evanston, IL Tampa, FL
Fairfield, CT Washington, DC
Houston, TX Westbury, NY
Los Angeles, CA
New York City, NY
LEGAL PROCEEDINGS
Peterson Consulting, one of the companies we recently acquired, is a
defendant in a lawsuit filed by NCCI against Peterson Consulting, its former
subsidiary Insurance Data Resources, Inc. ("IDR") and certain of their officers
and former directors. The lawsuit alleges, among other things, that IDR
violated certain copyrights and other intellectual property of NCCI and seeks
to hold Peterson Consulting liable as IDR's sole shareholder. We no longer own
IDR, but continue to have certain rights of indemnification against the former
members of Peterson and the purchaser of IDR. The parties to the lawsuit have
entered into settlement discussions and discovery has been stayed pending such
discussions. Although no assurances can be given, we do not believe this
lawsuit will have a material adverse affect on our business. One of our
directors, Governor James R. Thompson, is also a member of the Board of
Directors of NCCI.
In addition, from time to time, we are party to various lawsuits. We do not
believe that any of our current lawsuits are material.
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<PAGE>
MANAGEMENT
The following is a brief description of our executive officers, directors and
certain key employees:
Robert P. Maher, 48, has served as a director of the Company since April
1991. He has served as Chief Executive Officer and President since January 1996
and as Chairman of the Board since June 1996. From August 1990 to December
1995, Mr. Maher held various positions with the Company, most recently as a
Senior Vice President of Metzler & Associates working primarily in the
information technology area. From 1988 to August 1990, he was a principal with
the consulting practice of Ernst & Young LLP where he organized and directed
information technology engagements for the regulated segment of the
communications industry practice.
Barry S. Cain, 56, has served as the Company's Vice President--Chief
Administrative Officer since September 1997 and as a director since May 1998.
Mr. Cain joined the Company from his position as a member of the law firm of
Sachnoff & Weaver, Ltd., where he was co-chairman of the firm's Business Group
and a member of its board of directors. Prior to joining the Company, Mr. Cain
served as the Company's outside general counsel since its inception.
James T. Ruprecht, 39, has served as a director of the Company since December
1994, as a Senior Vice President of the Company from January 1994 to July 1997,
and as President of Metzler & Associates since July 1997. From April 1987 to
January 1994, Mr. Ruprecht held various management positions with the Company,
working primarily in the areas of business process re-engineering, customer
operations and supply chain management.
James F. Hillman, 41, joined the Company in April 1996 and has served as the
Chief Financial Officer and Treasurer since June 1996. From July 1988 to March
1996, he was employed by Ameritech Corporation, most recently as the Chief
Financial Officer of Ameritech Monitoring Services, Inc.
Stephen J. Denari, 45, has served as the Company's Vice President--Corporate
Development since July 1997. Prior to joining the Company, Mr. Denari served as
a turn-around specialist for a variety of companies, including Harley Davidson,
DMBS, Inc., American Capital Enterprises, and First National Entertainment. Mr.
Denari has also assisted the Company since 1990 in various specialized projects
for the Company's clients.
Charles A. Demirjian, 33, has served as the Company's General Counsel, Vice
President and Secretary since September 1997. Mr. Demirjian joined the Company
from his position as a member of the law firm of Sachnoff & Weaver, Ltd. Prior
to joining Sachnoff & Weaver in March 1996, Mr. Demirjian was an associate with
the law firm of Neal Gerber & Eisenberg.
Peter B. Pond, 54, has served as a director of the Company since November
1996. Mr. Pond has served as the Midwest Head of Investment Banking for
Donaldson, Lufkin & Jenrette since June 1991.
Mitchell H. Saranow, 53, has served as a director of the Company since
November 1996. Mr. Saranow has served as Chairman of The Saranow Group L.L.C.,
and its affiliated companies, since
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<PAGE>
October 1984. He founded Fluid Management, L.P., in April 1987 and served as
Chairman until January 1997. He presently serves as Chairman of Elf Machinery,
L.L.C., a company acquired by an affiliate of the Saranow Group in 1998.
Governor James R. Thompson, 62, has served as a director of the Company since
August 1998. Governor Thompson is the Chairman of the law firm of Winston &
Strawn and has been a partner with the firm since 1991. Prior to joining
Winston & Strawn, he served as the Governor of Illinois from 1977 to 1991.
Governor Thompson serves on the board of directors of FMC Corporation, the
Chicago Board of Trade, International Advisory Council of the Bank of Montreal,
Pechiney International, Prime Retail, Inc., Prime Group Realty Trust, Union
Pacific Resources Company, Hollinger International, Inc. and American National
Can Co.
30
<PAGE>
SELLING STOCKHOLDERS
The following table sets forth, as of November 2, 1998, certain information
regarding the beneficial ownership of outstanding common stock by each selling
stockholder, both before this offering and as adjusted to reflect the sale of
the shares of common stock in this offering. Except where otherwise noted, each
person named in the following table has, to the knowledge of the Company, sole
voting and investment power with respect to the shares beneficially owned. None
of our executive officers or directors are selling shares of common stock in
this offering. All of the individual selling stockholders are employees of the
Company.
<TABLE>
<CAPTION>
SHARES OWNED
SHARES OWNED AFTER THIS
PRIOR TO THIS OFFERING (1) OFFERING (1)
----------------------------- SHARES -----------------
SELLING STOCKHOLDERS: NUMBER PERCENT OFFERED NUMBER PERCENT
<S> <C> <C> <C> <C> <C>
PCI 1,900,995 5.2% 1,001,918 899,077 2.41%
David J. Teece 793,773 2.8% 225,000 568,773 1.52%
Robert G. Harris 556,089 1.5% 275,000 281,089 *
Willian N. Hinman 494,227 1.4% 101,057 393,170 1.05%
Thomas M. Jorde 461,988 1.3% 230,998 230,990 *
Richard J. Gilbert 388,699 1.1% 288,698 100,001 *
Deborah T. Kearns 243,675 * 70,000 203,063 *
Kristine Bean 175,778 * 58,007 117,771 *
Edward Muhl 170,510 * 50,345 120,165 *
David Tortorello(2) 149,228 * 31,456 117,772 *
Gerald R. Benson 127,228 * 31,807 95,421 *
Samuel L. Xanders 127,228 * 13,200 114,028 *
Dennis Staats 117,185 * 37,082 80,103 *
Matthew Kinsinger 117,185 * 33,124 84,061 *
Richard Fultineer 117,185 * 38,671 78,514 *
Timothy Kingsbury 117,185 * 37,082 80,103 *
DRT Holdings, Inc.(2) 63,909 * 31,456 32,453 *
Other selling
stockholders(3) 5,683,151 19.3% 695,099 4,935,031 15.7%
</TABLE>
- --------
*Less than one percent.
(1) Applicable percentage of ownership as of November 2, 1998 is based upon
36,397,781 shares of common stock outstanding. Applicable percentage
ownership after this offering is based upon 37,397,781 shares of common
stock outstanding. Beneficial ownership is determined in accordance with
the rules of the Commission, and includes voting and investment power with
respect to the shares shown as beneficially owned. Assumes no exercise of
the underwriters' over-allotment option to purchase up to an aggregate of
637,500 shares of common stock from the Company and certain selling
stockholders.
(2) Mr. Tortorello is the sole shareholder and director of DRT Holdings, Inc.
(3) Each of these selling stockholders owned less than 0.5% of the outstanding
shares of our common stock before this offering and is selling less than
30,000 shares of our common stock in this offering.
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<PAGE>
UNDERWRITING
Subject to the terms and conditions contained in an underwriting agreement,
dated , 1998, the underwriters named below, who are represented by
Donaldson, Lufkin & Jenrette Securities Corporation, BancBoston Robertson
Stephens Inc., Lehman Brothers Inc. and Merrill Lynch, Pierce, Fenner & Smith
Incorporated, have severally agreed to purchase from the Company and the
selling stockholders the number of shares set forth opposite their names below.
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITERS: SHARES
<S> <C>
Donaldson, Lufkin & Jenrette Securities Corporation.................
BancBoston Robertson Stephens Inc...................................
Lehman Brothers Inc.................................................
Merrill Lynch, Pierce, Fenner & Smith
Incorporated...............................................
---------
Total............................................................... 4,250,000
=========
</TABLE>
The underwriting agreement provides that the obligations of the several
underwriters to purchase and accept delivery of the shares included in this
offering are subject to approval of certain legal matters by their counsel and
to certain other conditions. The underwriters are obligated to purchase and
accept delivery of all the shares (other than those covered by the over-
allotment option described below) if they purchase any of the shares.
The underwriters propose to initially offer some of the shares directly to
the public at the public offering price set forth on the cover page of this
prospectus and some of the shares to certain dealers at the public offering
price less a concession not in excess of $ per share. The underwriters may
allow, and such dealers may re-allow, a concession not in excess of $ per
share on sales to certain other dealers. After the initial offering of the
shares to the public, the representatives may change the public offering price
and such concessions.
The following table shows the underwriting fees to be paid to the
underwriters by the Company in connection with this offering. These amounts are
shown assuming both no exercise and full exercise of the underwriters' option
to purchase additional shares of common stock.
<TABLE>
<CAPTION>
NO EXERCISE FULL EXERCISE
----------- -------------
<S> <C> <C>
Per share....................................... $ $
Total........................................... $ $
</TABLE>
The Company and certain selling stockholders have granted to the underwriters
an option, exercisable for 30 days from the date of the underwriting agreement,
to purchase up to 637,500 additional shares at the public offering price less
the underwriting fees. The underwriters may exercise such option solely to
cover over-allotments, if any, made in connection with this offering. To the
extent that the underwriters exercise such option, each underwriter will become
obligated, subject to certain conditions, to purchase a number of additional
shares approximately proportionate to such underwriter's initial purchase
commitment.
The Company and the selling stockholders have agreed to indemnify the
underwriters against certain civil liabilities, including liabilities under the
Securities Act of 1933, or to contribute to payments that the underwriters may
be required to make in respect of any of those liabilities.
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<PAGE>
The Company, each of the selling stockholders and the executive officers and
directors of the Company have agreed that, for a period of 90 days from the
date of this prospectus, they will not, without the prior written consent of
Donaldson, Lufkin & Jenrette, (i) offer, pledge, sell, contract to sell, sell
any option or contract to purchase, purchase any option or contract to sell,
grant any option, right or warrant to purchase or otherwise transfer or dispose
of, directly or indirectly, any shares of common stock or any securities
convertible into or exercisable or exchangeable for common stock, or (ii) enter
into any swap or other arrangement that transfers all or a portion of the
economic consequences associated with the ownership of any common stock
(regardless of whether any of the transactions described in clause (i) or (ii)
is to be settled by the delivery of common stock, or such other securities, in
cash or otherwise). In addition, during such period, the Company has agreed not
to file any registration statement with respect to, and each of its executive
officers, directors and certain stockholders of the Company (including the
selling stockholders) has agreed not to make any demand for, or exercise any
right with respect to, the registration of any shares of common stock or any
securities convertible into or exercisable or exchangeable for common stock
without the prior written consent of Donaldson, Lufkin & Jenrette.
Other than in the United States, no action has been taken by the Company, the
selling stockholders or the underwriters that would permit a public offering of
the shares of common stock included in this offering in any jurisdiction where
action for that purpose is required. The shares included in this offering may
not be offered or sold, directly or indirectly, nor may this prospectus or any
other offering material or advertisement in connection with the offer and sale
of any such shares be distributed or published in any jurisdiction, except
under circumstances that will result in compliance with the applicable rules
and regulations of such jurisdiction. Persons who receive this prospectus are
advised to inform themselves about and to observe any restrictions relating to
the offering of the common stock and the distribution of this prospectus. This
prospectus is not an offer to sell or a solicitation of an offer to buy any
shares of common stock included in this offering in any jurisdiction where that
would not be permitted or legal.
In the event the common stock does not constitute an excepted security under
the provisions of Regulation M promulgated by the Commission, the underwriters
and dealers may engage in passive market making transactions in accordance with
Rule 103. In general, a passive market maker may not bid for or purchase shares
of common stock at a price that exceeds the highest independent bid. In
addition, the net daily purchases made by any passive market maker generally
may not exceed 30% of its average daily trading volume in the common stock
during a specified two-month prior period, or 200 shares, whichever is greater.
A passive market maker must identify passive market making bids as such on the
Nasdaq electronic inter-dealer reporting system. Passive market making may
stabilize or maintain the market price of the common stock above independent
market levels. Underwriters and dealers are not required to engage in passive
market making and may end passive market making activities at any time.
In connection with this offering, certain underwriters may engage in
transactions that stabilize, maintain or otherwise affect the price of the
common stock. Specifically, the underwriters may overallot this offering,
creating a syndicate short position. In addition, the underwriters may bid for
and purchase shares of common stock in the open market to cover syndicate short
positions or to
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<PAGE>
stabilize the price of the common stock. These activities may stabilize or
maintain the market price of the common stock above independent market levels.
The underwriters are not required to engage in these activities and may end any
of these activities at any time.
Peter B. Pond, a director of the Company, is a principal of Donaldson, Lufkin
& Jenrette. Donaldson, Lufkin & Jenrette from time to time provides, and in the
past has provided, investment banking services to the Company and is serving as
the lead manager in this offering. The Company granted Mr. Pond options to
acquire 4,500 shares on the date of his initial appointment to the board of
directors in November 1996, and 13,500 shares upon his re-election at the
Company's annual stockholders' meeting in May 1997. These options were granted
under the outside directors' formula plan under the Company's Long-Term
Incentive Plan and become exercisable over a three-year period at a per share
exercise price equal to the fair market value of the common stock on the grant
dates. In May 1997, the Company granted Mr. Pond options to acquire an
additional 22,500 shares of common stock in connection with Mr. Pond's services
and duties as a director. This later option has an exercise price equal to the
fair market value of the common stock on the date of grant. Fifty percent of
this later option becomes exercisable on the second anniversary of the date of
grant and twenty-five percent on each of the third and fourth anniversaries of
the date of grant.
Since our initial public offering, Donaldson, Lufkin & Jenrette has been
acting as a financial adviser to the Company, including reviewing and
evaluating capitalization strategies, performing structural and financial
analysis of this offering and evaluating liquidity events for the Company and
its employee-stockholders. As compensation for these services, we have agreed
to pay Donaldson, Lufkin & Jenrette a structuring fee of $2.5 million payable
upon completion of certain events, including this offering.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents have been filed by the Company with the Commission
under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and
are incorporated herein by reference:
1. The Company's Annual Report on Form 10-K, for the fiscal year ended
December 31, 1997;
2. The Company's Quarterly Report on Form 10-Q for the quarters ended
March 31, 1998 and June 30, 1998;
3. The Company's Current Reports on Form 8-K filed September 3, 1998; and
4. The description of the common stock, contained in the Company's
Registration Statement on Form 8-A filed pursuant to Section 12 of the
Exchange Act and all amendments thereto and reports filed for the purpose
of updating such description.
All documents filed by us pursuant to Section 13(a), 13 (c), 14 or 15(d) of
the Exchange Act (1) subsequent to the initial filing of this prospectus and
prior to the date it is declared effective and (2) subsequent to the date of
this prospectus and prior to the termination of this offering are incorporated
by reference and become a part of this prospectus and to be a part hereof from
their date of filing.
34
<PAGE>
Any statement contained in this prospectus or in a document incorporated by
reference are modified or superseded for purposes of this prospectus to the
extent that a statement contained in any such document modifies or supersedes
such statement. Any such statement so modified or superseded shall not be
deemed, except as so modified or superseded, to constitute a part of this
prospectus.
On request, we will provide anyone who receives a copy of this prospectus
with a copy of any or all of the documents incorporated in this Prospectus by
reference. Written or telephone requests for such copies should be directed to
our principal office: The Metzler Group, Inc., 615 North Wabash Avenue,
Chicago, Illinois 60611, Attn: Investor Relations, Telephone: (312) 573-5600.
AVAILABLE INFORMATION
We file reports, proxy statements and other information with the Commission.
Those reports, proxy statements and other information may be obtained:
. At the Public Reference Room of the Commission, Room 1024--Judiciary
Plaza, 450 Fifth Street, N.W., Washington, DC 20549;
. At the public reference facilities at the Commission's regional offices
located at Seven World Trade Center, 13th Floor, New York, New York 10048
or Northwestern Atrium Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661;
. By writing to the Commission, Public Reference Section, Judiciary Plaza,
450 Fifth Street, N.W., Washington, DC 20549;
. At the offices of the National Association of Securities Dealers, Inc.,
Reports Section, 1735 K Street, N.W., Washington, DC 20006; or
. From the Internet site maintained by the Commission at
http://www.sec.gov. which contains reports, proxy and information
statements and other information regarding issuers that file
electronically with the Commission.
Some locations may charge prescribed or modest fees for copies.
The Company has filed with the Commission a Registration Statement on Form S-
3 (together with any amendments or supplements thereto, the "Registration
Statement") under the Securities Act covering the shares of common stock
offered hereby. As permitted by the Commission, this prospectus, which
constitutes a part of the Registration Statement, does not contain all the
information included in the Registration Statement. Such additional information
may be obtained from the locations described above. Statements contained in
this prospectus as to the contents of any contract or other document are not
necessarily complete. You should refer to the contract or other document for
all the details.
LEGAL MATTERS
The validity of the shares of common stock offered hereby will be passed upon
for the Company by Sachnoff & Weaver, Ltd., Chicago, Illinois. In connection
with this offering, Winston & Strawn will pass upon certain legal matters for
the underwriters. Governor James R. Thompson, the
35
<PAGE>
Chairman of Winston & Strawn, became a director of the Company in August 1998.
Winston & Strawn represented the underwriters in the Company's prior two stock
offerings before Governor Thompson became a director. Winston & Strawn has not
represented the Company but may do so in the future. The Company granted
Governor Thompson options to acquire 4,500 shares of common stock on the date
of his initial appointment to the board of directors in August 1998.
EXPERTS
The historical consolidated financial statements of The Metzler Group, Inc.
as of December 31, 1996 and 1997, and for each of the years in the three-year
period ended December 31, 1997, incorporated by reference herein and elsewhere
in the Registration Statement from the 1997 Form 10-K, have been audited by
KPMG Peat Marwick LLP, independent certified public accountants, as set forth
in their report thereon included therein and incorporated herein by reference,
and which is based in portion on the report of other auditors. Such
consolidated financial statements are incorporated herein by reference in
reliance upon such report given upon the authority of said firm as experts in
accounting and auditing. To the extent that KPMG Peat Marwick LLP audits and
reports on consolidated financial statements of The Metzler Group, Inc. issued
at future dates, and consents to the use of their report thereon, such
consolidated financial statements also will be incorporated by reference in the
Registration Statement in reliance upon their report and said authority.
The consolidated balance sheets of LECG, Inc. as of December 31, 1997 and
1996, and the related consolidated statements of operations, stockholders'
equity, and cash flows for each of the years in the three-year period ended
December 31, 1997, incorporated by reference herein and elsewhere in the
Registration Statement from the Company's report on Form 8-K filed on September
3, 1998, have been audited by Arthur Andersen LLP, independent public
accountants, as indicated in their reports with respect thereto, and are
included herein in reliance upon the authority of said firm as experts in
accounting and auditing, in giving said reports.
36
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
, 1998
[METZLER GROUP LOGO]
4,250,000 SHARES OF COMMON STOCK
-------------------
PROSPECTUS
-------------------
DONALDSON, LUFKIN & JENRETTE
BANCBOSTON ROBERTSON STEPHENS
LEHMAN BROTHERS
MERRILL LYNCH & CO.
- --------------------------------------------------------------------------------
We have not authorized any dealer, salesperson or other person to give you
written information other than this prospectus or to make representations as to
matters not stated in this prospectus. You must not rely on unauthorized
information. This prospectus is not an offer to sell these securities or our
solicitation of your offer to buy the securities in any jurisdiction where that
would not be permitted or legal. Neither the delivery of this prospectus nor
any sales made hereunder after the date of this prospectus shall create an
implication that the information contained herein or the affairs of the Company
have not changed since the date hereof.
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following are the estimated expenses in connection with the distribution
of the securities being registered:
<TABLE>
<S> <C>
Securities and Exchange Commission registration fee............. $ 54,859
National Association of Securities Dealers, Inc. filing fee..... 20,234
Nasdaq National Market additional listing fee................... 17,500
Printing and related expenses................................... 125,000
Blue sky fees and expenses...................................... 5,000
Legal fees and expenses......................................... 85,000
Accounting fees and expenses.................................... 100,000
Miscellaneous................................................... 92,407
--------
Total....................................................... $500,000
========
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Article XIII of the Registrant's Amended and Restated Certificate of
Incorporation ("Article XIII") is consistent with Section 102(b)(7) of the
Delaware General Corporation Law, which generally permits a company to include
a provision limiting the personal liability of a director in the company's
certificate of incorporation. With limitations, Article XIII eliminates the
personal liability of the Registrant's directors to the Registrant or its
stockholders for monetary damages for breach of fiduciary duty as a director.
However, Article XIII does not eliminate director liability: (1) for breaches
of the duty of loyalty to the Registrant and its stockholders; (2) for acts or
omissions not in good faith or which involve intentional misconduct or a
knowing violation of law; (3) for transactions from which a director derives
improper personal benefit; or (4) under Section 174 of the Delaware General
Corporation Law ("Section 174"). Section 174 makes directors personally liable
for unlawful dividends and stock repurchases or redemptions and expressly sets
forth a negligence standard with respect to such liability. While Article XIII
protects the directors from awards for monetary damages for breaches of their
duty of care, it does not eliminate their duty of care. The limitations in
Article XIII have no effect on claims arising under the federal securities
laws.
Under Section 145 of the Delaware General Corporation Law, directors and
officers, as well as other employees and individuals, may be indemnified
against expenses (including attorneys' fees), judgments, fines, amounts paid in
settlement in connection with specified actions, suits or proceedings, whether
civil, criminal, administrative or investigative (other than an action by or in
the right of the corporation, a "derivative action") if they acted in good
faith and in a manner they reasonably believed to be in, or not opposed to, the
best interests of the corporation, and, with respect to criminal actions or
proceedings, had no reasonable cause to believe their conduct was unlawful. A
similar standard of care is applicable in the case of derivative actions,
except that indemnification only extends to expenses (including attorneys'
fees) incurred in connection with the defense or settlement of such an action,
and the Delaware General Corporation Law requires court approval before there
can be any indemnification where the person seeking indemnification has been
found liable to the corporation.
II-1
<PAGE>
The directors and officers of the Company are covered by directors' and
officers' insurance in an aggregate maximum of approximately $10 million
indemnifying them against certain liabilities that they might incur in such
capacities, including certain liabilities arising under the Securities Act. The
premium for this insurance is paid by the Company.
The Underwriting Agreement (Exhibit 1.1 hereto) provides for indemnification
by the underwriters of the Company, its directors, its officers who have signed
the Registration Statement, each person, if any, who controls the Company, each
selling stockholder and each person, if any, who controls such selling
stockholder for certain liabilities, including liabilities arising under the
Securities Act, resulting from information relating to the underwriters
furnished in writing to the Registrant by the underwriters for use in the
Registration Statement, the prospectus or any preliminary prospectus.
ITEM 16. EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
<S> <C>
1.1 Form of Underwriting Agreement
5.1 Opinion of Sachnoff & Weaver, Ltd.
23.1 Consent of KPMG Peat Marwick LLP
23.2 Consent of Arthur Andersen LLP
23.3 Consent of Sachnoff & Weaver, Ltd. (included in Exhibit 5.1)
24.1 Powers of Attorney (included on signature page)
</TABLE>
ITEM 17. UNDERTAKINGS
(a) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933 (the "Securities
Act"), each filing of the registrant's annual report pursuant to Section
13(a) or 15(d) of the Securities Exchange Act of 1934 (and, where
applicable, each filing of an employee benefit plan's annual report
pursuant to Section 15(d) of the Securities Exchange Act of 1934) that is
incorporated by reference in the registration statement shall be deemed to
be a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(b) Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Commission such
indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered,
II-2
<PAGE>
the Registrant will, unless in the opinion of its counsel the matter has
been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against
public policy as expressed in the Securities Act and will be governed by
the final adjudication of such issue.
(c) The undersigned registrant hereby undertakes that:
1. For purposes of determining any liability under the Securities Act, the
information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of
this registration statement as of the time it was declared effective.
2. For the purpose of determining any liability under the Securities Act,
each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall
be deemed to be the initial bona fide offering thereof.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant certifies
that it has reasonable grounds to believe that it meets all of the requirements
for filing on Form S-3 and has duly caused this Registration Statement to be
signed on its behalf by the undersigned, thereunto duly authorized, in the City
of Chicago, State of Illinois on the 3rd day of November, 1998.
The Metzler Group, Inc.
/s/ Robert P. Maher
By: _________________________________
Robert P. Maher
President and Chief Executive
Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, THAT EACH PERSON WHOSE SIGNATURE APPEARS
BELOW CONSTITUTES AND APPOINTS JAMES F. HILLMAN AND CHARLES A. DEMIRJIAN, HIS
TRUE AND LAWFUL ATTORNEY-IN-FACT AND AGENT, WITH FULL POWER OF SUBSTITUTION AND
RESUBSTITUTION, FOR HIM AND IN HIS NAME, PLACE AND STEAD, IN ANY AND ALL
CAPACITIES (INCLUDING HIS OR HER CAPACITY AS A DIRECTOR OR OFFICER OF THE
METZLER GROUP, INC.) TO SIGN ANY AND ALL AMENDMENTS AND POST-EFFECTIVE
AMENDMENTS TO THIS REGISTRATION STATEMENT (INCLUDING REGISTRATION STATEMENTS
FILED PURSUANT TO RULE 462(B) UNDER THE SECURITIES ACT OF 1933 AND ALL
AMENDMENTS THERETO) AND TO FILE THE SAME, WITH ALL EXHIBITS HERETO, AND OTHER
DOCUMENTS IN CONNECTION THEREWITH, WITH THE SECURITIES AND EXCHANGE COMMISSION,
GRANTING UNTO SAID ATTORNEY-IN-FACT AND AGENT, FULL POWER AND AUTHORITY TO DO
AND PERFORM EACH AND EVERY ACT AND THING REQUISITE AND NECESSARY TO BE DONE IN
AND ABOUT THE PREMISES, AS FULLY TO ALL INTENTS AND PURPOSES AS HE MIGHT OR
COULD DO IN PERSON, HEREBY RATIFYING AND CONFIRMING ALL THAT SAID ATTORNEY-IN-
FACT AND AGENT OR HIS SUBSTITUTE OR SUBSTITUTES, MAY LAWFULLY DO OR CAUSE TO BE
DONE BY VIRTUE THEREOF.
Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed by the following persons in the capacities and on the
dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Robert P. Maher Chairman of the Board, November 3, 1998
____________________________________ President, Chief Executive
Robert P. Maher Officer and Director
(Principal Executive
Officer)
/s/ James F. Hillman Chief Financial Officer November 3, 1998
____________________________________ (Principal Financial
James F. Hillman Officer)
/s/ Barry S. Cain Director November 3, 1998
____________________________________
Barry S. Cain
/s/ James T. Ruprecht Director November 3, 1998
____________________________________
James T. Ruprecht
/s/ Peter B. Pond Director November 3, 1998
____________________________________
Peter B. Pond
/s/ Mitchell H. Saranow Director November 3, 1998
____________________________________
Mitchell H. Saranow
/s/ James R. Thompson Director November 3, 1998
____________________________________
James R. Thompson
</TABLE>
II-4
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT SEQUENTIAL PAGE
NUMBER DESCRIPTION OF EXHIBIT NUMBER
<C> <S> <C>
1.1 Form of Underwriting Agreement
5.1 Opinion of Sachnoff & Weaver, Ltd.
23.1 Consent of KPMG Peat Marwick LLP
23.2 Consent of Arthur Andersen LLP
Consent of Sachnoff & Weaver, Ltd. (included in
23.3 Exhibit 5.1)
24.1 Powers of Attorney (included on signature page)
</TABLE>
<PAGE>
EXHIBIT 1.1
Shares
THE METZLER GROUP, INC.
Common Stock
FORM OF UNDERWRITING AGREEMENT
------------------------------
, 1998
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
BANCBOSTON ROBERTSON STEPHENS
LEHMAN BROTHERS INC.
MERRILL LYNCH & CO.
As representatives of the several Underwriters
named in Schedule I hereto
c/o Donaldson, Lufkin & Jenrette Securities Corporation
277 Park Avenue
New York, New York 10172
Dear Sirs and Mesdames:
The Metzler Group, Inc., a Delaware corporation (the "Company"), proposes
to issue and sell to the several underwriters named in Schedule I hereto (the
"Underwriters"), and certain stockholders of the Company named in Schedule II
hereto (the "Selling Stockholders"), severally and not jointly, propose to sell
to the several Underwriters, an aggregate of shares of the common
stock, $.001 par value of the Company (the "Firm Shares"), of which
shares are to be issued and sold by the Company and shares are to be
sold by the Selling Stockholders, each Selling Stockholder selling the amount
set forth opposite such Selling Stockholder's name in the middle column of
Schedule II hereto. Certain of the Selling Stockholders also propose to sell to
the several Underwriters not more than an additional shares of common
stock, $.001 par value of the Company (the "Additional Shares"), if requested by
the Underwriters as provided in Section 2 hereof. The Firm Shares and the
Additional Shares are hereinafter referred to collectively as the "Shares." The
shares of common stock of the Company to be outstanding after giving effect to
the sales contemplated hereby are hereinafter referred to as the "Common Stock."
The Company and the Selling Stockholders are hereinafter sometimes referred to
collectively as the "Sellers."
SECTION 1. Registration Statement and Prospectus. The Company has
prepared and filed with the Securities and Exchange Commission (the
"Commission") in accordance with the provisions of the Securities Act of 1933,
as amended, and the rules and regulations of the Commission thereunder
(collectively, the "Act"), a registration statement on Form S-3 (File No. 333-
), including a prospectus, relating to the Shares. The registration
statement, as
<PAGE>
amended at the time it became effective, including the information (if any)
deemed to be part of the registration statement at the time of effectiveness
pursuant to Rule 430A under the Act, is hereinafter referred to as the
"Registration Statement"; and the prospectus in the form first used to confirm
sales of Shares is hereinafter referred to as the "Prospectus." If the Company
has filed or is required pursuant to the terms hereof to file a registration
statement pursuant to Rule 462(b) under the Act registering additional shares of
Common Stock (a "Rule 462(b) Registration Statement"), then, unless otherwise
specified, any reference herein to the term "Registration Statement" shall be
deemed to include such Rule 462(b) Registration Statement.
SECTION 2. Agreements to Sell and Purchase and Lock-Up Agreements. On
the basis of the representations and warranties contained in this Agreement, and
subject to its terms and conditions, (i) the Company agrees to issue and sell
Firm Shares, (ii) each Selling Stockholder agrees, severally and not
jointly, to sell the number of Firm Shares set forth opposite such Selling
Stockholder's name in Schedule II hereto and (iii) each Underwriter agrees,
severally and not jointly, to purchase from each Seller at a price per Share of
$ (the "Purchase Price") the number of Firm Shares (subject to such
adjustments to eliminate fractional shares as you may determine) that bears the
same proportion to the total number of Firm Shares to be sold by such Seller as
the number of Firm Shares set forth opposite the name of such Underwriter in
Schedule I hereto bears to the total number of Firm Shares.
On the basis of the representations and warranties contained in this
Agreement, and subject to its terms and conditions, (i) certain of the Selling
Stockholders agree, severally and not jointly, to sell up to the number of
Additional Shares set forth opposite such Selling Stockholder's name in Schedule
II hereto and (ii) the Underwriters shall have the right to purchase, severally
and not jointly, up to Additional Shares from those Selling Stockholders
who have agreed to sell Additional Shares at the Purchase Price. Additional
Shares may be purchased solely for the purpose of covering over-allotments made
in connection with the offering of the Firm Shares. The Underwriters may
exercise their right to purchase Additional Shares in whole or in part on not
more than two occasions by giving written notice thereof to the Company in each
case within 30 days after the date of this Agreement. You shall give any such
notice on behalf of the Underwriters and such notice shall specify the aggregate
number of Additional Shares to be purchased pursuant to such exercise and the
date for payment and delivery thereof, which date shall be a business day (i) no
earlier than two business days after such notice has been given (and, in any
event, no earlier than the Closing Date (as hereinafter defined)) and (ii) no
later than ten business days after such notice has been given. The maximum
number of Additional Shares to be purchased from each such Selling Stockholder
is set forth in the right most column of Schedule II hereto. If less than the
maximum number of Additional Shares are to be purchased hereunder, each of such
Selling Stockholders, severally and not jointly, agrees to sell to the
Underwriters the number of Additional Shares (subject to such adjustments to
eliminate fractional shares as you may determine) which bears the same
proportion to the total number of Additional Shares to be purchased by the
Underwriters as the maximum number of Additional Shares to be sold by each of
such Selling Stockholders bears to the total number of Additional Shares. If
any Additional Shares are to be purchased, each Underwriter, severally and not
jointly, agrees to purchase from such Selling Stockholders the number of
Additional Shares (subject to such adjustments to eliminate fractional shares as
you
2
<PAGE>
may determine) which bears the same proportion to the total number of Additional
Shares to be purchased from such Selling Stockholders as the number of Firm
Shares set forth opposite the name of such Underwriter in Schedule I bears to
the total number of Firm Shares.
Each Seller hereby agrees not to (i) offer, pledge, sell, contract to sell,
sell any option or contract to purchase, purchase any option or contract to
sell, grant any option, right or warrant to purchase, or otherwise transfer or
dispose of, directly or indirectly, any shares of Common Stock or any securities
convertible into or exercisable or exchangeable for Common Stock or (ii) enter
into any swap or other arrangement that transfers all or a portion of the
economic consequences associated with the ownership of any Common Stock
(regardless of whether any of the transactions described in clause (i) or (ii)
is to be settled by the delivery of Common Stock, or such other securities, in
cash or otherwise), except to the Underwriters pursuant to this Agreement, for a
period of 90 days after the date of the Prospectus without the prior written
consent of both Donaldson, Lufkin & Jenrette Securities Corporation and the
Company. Notwithstanding the foregoing, during such period: (i) the Company may
grant stock options pursuant to the Company's existing stock option plan; (ii)
the Company may issue shares of Common Stock upon the exercise of an option or
warrant or the conversion of a security outstanding on the date hereof; (iii)
the Company may issue shares of Common Stock upon the exercise of options
granted pursuant to the immediately preceding clause (i) in an aggregate amount
not to exceed 25,000 shares; (iv) any person signing an agreement pursuant to
this Section shall be permitted to make gifts and other private transfers
related to estate planning purposes, provided that the transferee agrees to be
bound by the provisions of the agreement for the remainder of its term; and (v)
the Company may issue shares of its Common Stock or securities convertible into
or exercisable or exchangeable for its common stock, or issue other equity
securities of the Company or enter into agreements with respect to any of the
foregoing, in connection with any acquisition by the Company or any of its
subsidiaries or any merger involving the Company or any of its subsidiaries. The
Company also agrees not to file any registration statement with respect to any
shares of Common Stock or any securities convertible into or exercisable or
exchangeable for Common Stock for a period of 90 days after the date of the
Prospectus without the prior written consent of Donaldson, Lufkin & Jenrette
Securities Corporation. In addition, each Selling Stockholder agrees that, for a
period of 90 days after the date of the Prospectus without the prior written
consent of Donaldson, Lufkin & Jenrette Securities Corporation, it will not make
any demand for, or exercise any right with respect to, the registration of any
shares of Common Stock or any securities convertible into or exercisable or
exchangeable for Common Stock. The Company shall, prior to or concurrently with
the execution of this Agreement, deliver an agreement executed by each of the
directors and executive officers of the Company who is not a Selling Stockholder
to the effect that such person will not, during the period ending 90 days after
the date of the Prospectus, without the prior written consent of Donaldson,
Lufkin & Jenrette Securities Corporation, (A) engage in any of the transactions
described in the first sentence of this paragraph or (B) make any demand for, or
exercise any right with respect to, the registration of any shares of Common
Stock or any securities convertible into or exercisable or exchangeable for
Common Stock.
SECTION 3. Terms of Public Offering. The Sellers are advised by you that
the Underwriters propose (i) to make a public offering of their respective
portions of the Shares as
3
<PAGE>
soon after the execution and delivery of this Agreement as in your judgment is
advisable and (ii) initially to offer the Shares upon the terms set forth in the
Prospectus.
SECTION 4. Delivery and Payment. Delivery to the Underwriters of and
payment for the Firm Shares shall be made at or about 10:00 A.M., New York City
time, on the third or fourth business day following the date of the initial
public offering, unless otherwise permitted by the Commission pursuant to Rule
15c6-1 of the Securities Exchange Act of 1934, as amended (the "Exchange
Act")(the "Closing Date") at such place outside the State of New York as you
shall designate.
Delivery to the Underwriters of and payment for any Additional Shares to be
purchased by the Underwriters shall be made at such place as you shall designate
at or about 10:00 A.M., New York City time, on the date specified in the
applicable exercise notice given by you pursuant to Section 2 (an "Option
Closing Date"). Any such Option Closing Date and the location of delivery of and
payment for such Additional Shares may be varied by agreement between you and
the Company.
Certificates for the Shares shall be registered in such names and issued in
such denominations as you shall request in writing not later than two full
business days prior to the Closing Date or an Option Closing Date, as the case
may be. Such certificates shall be made available to you for inspection not
later than 9:30 A.M., New York City time, on the business day prior to the
Closing Date or the applicable Option Closing Date, as the case may be.
Certificates in definitive form evidencing the Shares shall be delivered to you
on the Closing Date or the applicable Option Closing Date, as the case may be,
with any transfer taxes thereon duly paid by the respective Sellers, for the
respective accounts of the several Underwriters, against payment to the Sellers
of the Purchase Price therefor by wire transfer of Federal or other funds
immediately available in New York City.
SECTION 5. Agreements of the Company. The Company agrees with you:
(a) To advise you promptly and, if requested by you, to confirm such
advice in writing, (i) of any request by the Commission for amendments to the
Registration Statement or amendments or supplements to the Prospectus or for
additional information, (ii) of the issuance by the Commission of any stop order
suspending the effectiveness of the Registration Statement or of the suspension
of qualification of the Shares for offering or sale in any jurisdiction, or the
initiation of any proceeding for such purposes, (iii) when any amendment to the
Registration Statement becomes effective, (iv) if the Company is required to
file a Rule 462(b) Registration Statement after the effectiveness of this
Agreement, when the Rule 462(b) Registration Statement has become effective and
(v) of the happening of any event during the period referred to in Section 5(d)
below which makes any statement of a material fact made in the Registration
Statement or the Prospectus untrue or which requires any additions to or changes
in the Registration Statement or the Prospectus in order to make the statements
therein not misleading. If at any time the Commission shall issue any stop order
suspending the effectiveness of the Registration Statement, the Company will use
its best efforts to obtain the withdrawal or lifting of such order at the
earliest possible time and you agree to use your best efforts to assist the
Company, as requested by the Company, in obtaining such withdrawal.
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(b) To furnish to you five signed copies of the Registration Statement as
first filed with the Commission and of each amendment to it, including all
exhibits, together with five copies of all documents incorporated by reference
therein, and to furnish to you and each Underwriter designated by you such
number of conformed copies of the Registration Statement as so filed and of each
amendment to it, without exhibits, as you may reasonably request.
(c) To prepare the Prospectus, the form and substance of which shall be
satisfactory to you, and to file the Prospectus in such form with the Commission
within the applicable period specified in Rule 424(b) under the Act; during the
period specified in Section 5(d) below, not to file any further amendment to the
Registration Statement and not to make any amendment or supplement to the
Prospectus of which you shall not previously have been advised or to which you
shall reasonably object after being so advised; and, during such period, to
prepare and file with the Commission, promptly upon your reasonable request, any
amendment to the Registration Statement or amendment or supplement to the
Prospectus which may be necessary or advisable in connection with the
distribution of the Shares by you, and to use its best efforts to cause any such
amendment to the Registration Statement to become promptly effective.
(d) Prior to 10:00 A.M., New York City time, on the first business day
after the date of this Agreement and from time to time thereafter for such
period as in the opinion of counsel for the Underwriters a prospectus is
required by law to be delivered in connection with sales by an Underwriter or a
dealer, to furnish in New York City to each Underwriter and any dealer as many
copies of the Prospectus (and of any amendment or supplement to the Prospectus)
as such Underwriter or dealer may reasonably request; provided, however, that
delivery of copies of the Prospectus (as amended or supplemented and including
any incorporated documents) more than six months after the date of this
Agreement shall be at the expense of the Underwriter requesting such delivery.
(e) If during the period specified in Section 5(d), any event shall occur
or condition shall exist as a result of which, in the opinion of counsel for the
Underwriters, it becomes necessary to amend or supplement the Prospectus in
order to make the statements therein, in the light of the circumstances when the
Prospectus is delivered to a purchaser, not misleading, or if, in the opinion of
counsel for the Underwriters, it is necessary to amend or supplement the
Prospectus to comply with applicable law, forthwith to prepare and file with the
Commission an appropriate amendment or supplement to the Prospectus so that the
statements in the Prospectus, as so amended or supplemented, will not in the
light of the circumstances when it is so delivered, be misleading, or so that
the Prospectus will comply with applicable law, and to furnish to each
Underwriter and to any dealer as many copies thereof as such Underwriter or
dealer may reasonably request.
(f) Prior to any public offering of the Shares, to cooperate with you and
counsel for the Underwriters in connection with the registration or
qualification of the Shares for offer and sale by the several Underwriters and
by dealers under the state securities or Blue Sky laws of such jurisdictions as
you may request, to continue such registration or qualification in effect so
long as required for distribution of the Shares and to file such consents to
service of process or other documents as may be necessary in order to effect
such registration or qualification; provided, however, that the Company shall
not be required in connection therewith to qualify as
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a foreign corporation in any jurisdiction in which it is not now so qualified or
to take any action that would subject it to general consent to service of
process or taxation other than as to matters and transactions relating to the
Prospectus, the Registration Statement, any preliminary prospectus or the
offering or sale of the Shares, in any jurisdiction in which it is not now so
subject.
(g) To mail and make generally available to its stockholders as soon as
practicable an earnings statement covering the twelve-month period ending
December 31, 1999 that shall satisfy the provisions of Section 11(a) of the Act,
and to advise you in writing when such statement has been so made available.
(h) During the period of three years after the date of this Agreement, to
furnish to you as soon as available, copies of all reports or other
communications furnished to the record holders of Common Stock or furnished to
or filed with the Commission or any national securities exchange on which any
class of securities of the Company is listed and such other publicly available
information concerning the Company and its subsidiaries as you may reasonably
request.
(i) Whether or not the transactions contemplated in this Agreement are
consummated or this Agreement is terminated, to pay or cause to be paid all
expenses incident to the performance of the Sellers' obligations under this
Agreement, including: (i) the fees, disbursements and expenses of the Company's
counsel, the Company's accountants and any Selling Stockholder's counsel (in
addition to the Company's counsel) in connection with the registration and
delivery of the Shares under the Act and all other fees and expenses in
connection with the preparation, printing, filing and distribution of the
Registration Statement (including financial statements and exhibits), any
preliminary prospectus, the Prospectus and all amendments and supplements to any
of the foregoing, including the mailing and delivering of copies thereof to the
Underwriters and dealers in the quantities specified herein, (ii) all costs and
expenses related to the transfer and delivery of the Shares to the Underwriters,
including any transfer or other taxes payable thereon, (iii) all costs of
printing or producing this Agreement and any other agreements or documents in
connection with the offering, purchase, sale or delivery of the Shares, (iv) all
expenses in connection with the registration or qualification of the Shares for
offer and sale under the securities or Blue Sky laws of the several states and
all costs of printing or producing any Preliminary and Supplemental Blue Sky
Memoranda in connection therewith (including the filing fees and fees and
reasonable disbursements of counsel for the Underwriters in connection with such
registration or qualification and memoranda relating thereto), (v) the filing
fees and disbursements of counsel for the Underwriters in connection with the
review and clearance of the offering of the Shares by the National Association
of Securities Dealers, Inc. (the "NASD"), (vi) all costs and expenses incident
to the additional listing of the Shares on the Nasdaq National Market, (vii) the
cost of printing certificates representing the Shares, (viii) the costs and
charges of any transfer agent, registrar and/or depositary, and (ix) all other
costs and expenses incident to the performance of the obligations of the Company
and the Selling Stockholders hereunder for which provision is not otherwise made
in this Section. The provisions of this Section shall not supersede or otherwise
affect any agreement that the Company and the Selling Stockholders may otherwise
have for allocation of such expenses among themselves.
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(j) To use its best efforts to maintain the inclusion of the Common Stock
on the Nasdaq National Market (or on a national securities exchange) for a
period of three years after the date of this Agreement.
(k) To use its best efforts to do and perform all things required or
necessary to be done and performed under this Agreement by the Company prior to
the Closing Date or either Option Closing Date, as the case may be, and to
satisfy all conditions precedent to the delivery of the Shares.
(l) If the Registration Statement at the time of the effectiveness of this
Agreement does not cover all of the Shares, to file a Rule 462(b) Registration
Statement with the Commission registering the Shares not so covered in
compliance with Rule 462(b) by 10:00 P.M., New York City time, on the date of
this Agreement and to pay to the Commission the filing fee for such Rule 462(b)
Registration Statement at the time of the filing thereof or to give irrevocable
instructions for the payment of such fee pursuant to Rule 111(b) under the Act.
SECTION 6. Representations and Warranties of the Company. The Company
represents and warrants to each Underwriter that:
(a) The Registration Statement has become effective (other than any Rule
462(b) Registration Statement to be filed by the Company after the effectiveness
of this Agreement); the Company will use its best efforts to cause any Rule
462(b) Registration Statement filed after the effectiveness of this Agreement to
become effective no later than 10:00 P.M., New York City time, on the date of
this Agreement, and in any event, no later than 9:00 A.M., New York City time on
the date following the date of this Agreement; and no stop order suspending the
effectiveness of the Registration Statement is in effect, and no proceedings for
such purpose are pending before or to the Company's knowledge threatened by the
Commission.
(b)(i) The Registration Statement (other than any Rule 462(b) Registration
Statement to be filed by the Company after the effectiveness of this Agreement),
when it became effective, did not contain and, as amended, if applicable, will
not contain any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading, (ii) the Registration Statement (other than any Rule 462(b)
Registration Statement to be filed by the Company after the effectiveness of
this Agreement) and the Prospectus comply and, as amended or supplemented, if
applicable, will comply in all material respects with the Act, (iii) if the
Company is required to file a Rule 462(b) Registration Statement after the
effectiveness of this Agreement, such Rule 462(b) Registration Statement and any
amendments thereto, when they become effective (A) will not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein not misleading and
(B) will comply in all material respects with the Act and (iv) the Prospectus
does not contain and, as amended or supplemented, if applicable, will not
contain any untrue statement of a material fact or omit to state a material fact
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading, except that the representations and
warranties set forth in this paragraph do not apply to statements or omissions
in the Registration Statement or the Prospectus based upon
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information relating to any Underwriter furnished to the Company in writing by
such Underwriter through you expressly for use therein.
(c) Each preliminary prospectus filed as part of the registration
statement as originally filed or as part of any amendment thereto, or filed
pursuant to Rule 424 under the Act, complied when so filed in all material
respects with the Act, and did not contain an untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
to make the statements therein, in the light of the circumstances under which
they were made, not misleading, except that the representations and warranties
set forth in this paragraph do not apply to statements or omissions in any
preliminary prospectus based upon information relating to any Underwriter
furnished to the Company in writing by such Underwriter through you expressly
for use therein. Any reference herein to any preliminary prospectus or the
Prospectus shall be deemed to refer to and include the documents incorporated by
reference therein pursuant to Form S-3 under the Act ("Incorporated Documents"),
as of the date of such preliminary prospectus or Prospectus, as the case may be.
Any document filed by the Company under the Exchange Act after the effective
date of the Registration Statement or the date of the Prospectus and
incorporated by reference in the Prospectus shall be deemed to be included in
that Registration Statement and the Prospectus as of the date of such filing.
The Incorporated Documents, when filed with the Commission, conformed or will
conform in all material respects to the requirements for the Exchange Act and
none of such documents, as of the date of such Incorporated Document, contained
or will contain an untrue statement of a material fact or omitted or will omit
to state a material fact required to be stated therein or necessary to make the
statements therein not misleading.
(d) Each of the Company and its subsidiaries has been duly incorporated,
is validly existing as a corporation in good standing under the laws of its
jurisdiction of incorporation and has the corporate power and authority to carry
on its business as it is currently being conducted as described in the
Prospectus and to own, lease and operate its properties, and each is duly
qualified and is in good standing as a foreign corporation authorized to do
business in each jurisdiction in which the nature of its business or its
ownership or leasing of property requires such qualification, except where the
failure to be so qualified would not have a material adverse effect on the
Company and its subsidiaries, taken as a whole.
(e) There are no outstanding subscriptions, rights, warrants, options,
calls, convertible securities, commitments of sale or liens granted or issued by
the Company or any of its subsidiaries relating to or entitling any person to
purchase or otherwise to acquire any shares of the capital stock of the Company
or any of its subsidiaries, except as otherwise disclosed in the Registration
Statement.
(f) All of the currently outstanding shares of capital stock of the
Company (including the Shares to be sold by the Selling Stockholders) have been
duly authorized and validly issued and are fully paid, non-assessable and not
subject to any preemptive or similar rights; and the Shares to be issued and
sold by the Company hereunder have been duly authorized and, when issued and
delivered to the Underwriters against payment therefor as provided by this
Agreement, will be validly issued, fully paid and non-assessable, and the
issuance of such Shares will not be subject to any preemptive or similar rights.
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(g) All of the currently outstanding shares of capital stock of each of
the Company's subsidiaries have been duly authorized and validly issued and are
fully paid and non-assessable, and are owned by the Company, directly or
indirectly through one or more subsidiaries, free and clear of any security
interest, claim, lien, encumbrance or adverse interest of any nature.
(h) The authorized capital stock of the Company, including the Common
Stock, conforms as to legal matters to the description thereof contained or
incorporated by reference in the Prospectus.
(i) Neither the Company nor any of its subsidiaries is in violation of its
respective charter or by-laws or in default in the performance of any
obligation, agreement, covenant or condition contained in any indenture, loan
agreement, mortgage, lease or other agreement or instrument that is material to
the Company and its subsidiaries, taken as a whole, to which the Company or any
of its subsidiaries is a party or by which the Company or any of its
subsidiaries or their respective property is bound, except any defaults which do
not, individually or in the aggregate, have a material adverse effect on the
Company and its subsidiaries, taken as a whole.
(j) The execution, delivery and performance of this Agreement by the
Company, the compliance by the Company with all the provisions hereof and the
consummation of the transactions contemplated hereby will not (i) require any
consent, approval, authorization or other order of, or qualification with, any
court or governmental body or agency (except such as may be required under the
securities or Blue Sky laws of the various states), (ii) conflict with or
constitute a breach of any of the terms or provisions of, or a default under,
the charter or by-laws of the Company or any of its subsidiaries or any
indenture, loan agreement, mortgage, lease or other agreement or instrument that
is material to the Company and its subsidiaries, taken as a whole, to which the
Company or any of its subsidiaries is a party or by which the Company or any of
its subsidiaries or their respective property is bound, (iii) violate or
conflict with any applicable law or any rule, regulation, judgment, order or
decree of any court or any governmental body or agency having jurisdiction over
the Company, any of its subsidiaries or their respective property, except any
conflicts, breaches, defaults or violations which do not, individually or in the
aggregate, have a material adverse effect on the Company and its subsidiaries,
taken as a whole or (iv) result in the suspension, termination or revocation of
any Authorization (as defined below) of the Company or any of its subsidiaries
or any other impairment of the rights of the holder of any such Authorization,
except where the failure to have such Authorization would not, individually or
in the aggregate, have a material adverse effect on the Company and its
subsidiaries, taken as a whole.
(k) Except as otherwise set forth in the Prospectus, there are no legal or
governmental proceedings pending or to the Company's knowledge threatened to
which the Company or any of its subsidiaries is a party or to which any of their
respective property is subject that are required to be described in the
Registration Statement or the Prospectus and are not so described; nor are there
any contracts or other documents that are required to be described in the
Registration Statement or the Prospectus or to be filed as exhibits to the
Registration Statement that are not so described or filed as required.
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(l) Neither the Company nor any of its subsidiaries has violated any
foreign, federal, state or local law or regulation relating to the protection of
human health and safety, the environment or hazardous or toxic substances or
wastes, pollutants or contaminants ("Environmental Laws"), nor to the Company's
knowledge, any provisions of the Employee Retirement Income Security Act of
1974, as amended, or the rules and regulations promulgated thereunder, except
for such violations which, singly or in the aggregate, would not have a material
adverse effect on the business, prospects, financial condition or results of
operations of the Company and its subsidiaries, taken as a whole.
(m) Each of the Company and its subsidiaries has such permits, licenses,
consents, exemptions, franchises, authorizations and other approvals (each, an
"Authorization") of, and has made all filings with and notices to, all
governmental or regulatory authorities and self-regulatory organizations and all
courts and other tribunals, including, without limitation, under any applicable
Environmental Laws, as are necessary to own, lease, license and operate its
respective properties and to conduct its business, except where the failure to
have any such Authorization or to make any such filing or notice would not
reasonably be expected to, singly or in the aggregate, have a material adverse
effect on the financial condition or results of operations of the Company and
its subsidiaries, taken as a whole. Each such Authorization is valid and in full
force and effect and each of the Company and its subsidiaries is in compliance
with all the terms and conditions thereof and with the rules and regulations of
the authorities and governing bodies having jurisdiction with respect thereto;
and no event has occurred (including, without limitation, the receipt of any
notice from any authority or governing body) which allows or, after notice or
lapse of time or both, would allow, revocation, suspension or termination of any
such Authorization or results or, after notice or lapse of time or both, would
result in any other material impairment of the rights of the holder of any such
Authorization; and such Authorizations contain no restrictions that are
materially burdensome to the Company or any of its subsidiaries; except where
such failure to be valid and in full force and effect or to be in compliance,
the occurrence of any such event or the presence of any such restriction would
not, singly or in the aggregate, have a material adverse effect on the financial
condition or results of operations of the Company and its subsidiaries, taken as
a whole.
(n) There are no costs or liabilities associated with Environmental Laws
(including, without limitation, any capital or operating expenditures required
for clean-up, closure of properties or compliance with Environmental Laws or any
Authorization, any related constraints on operating activities and any potential
liabilities to third parties) which would, singly or in the aggregate, have a
material adverse effect on the business, financial condition or results of
operations of the Company and its subsidiaries, taken as a whole.
(o) Except as otherwise set forth in the Prospectus or such as are not
material to the business, prospects, financial condition or results of
operations of the Company and its subsidiaries, taken as a whole, each of the
Company and its subsidiaries has good and marketable title, free and clear of
all liens, claims, encumbrances and restrictions except liens for taxes not yet
due and payable, to all property and assets described in the Registration
Statement as being owned by it. All leases to which the Company or its
subsidiaries is a party are valid and binding upon the Company or its
subsidiaries, as the case may be, and, to the Company's knowledge, upon the
respective lessors thereunder and no default has occurred or is continuing
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thereunder on the part of the Company and its subsidiaries and, to the Company's
knowledge, on the part of the respective lessors, which might result in any
material adverse change in the business, prospects, financial condition or
results of operation of the Company and its subsidiaries, taken as a whole, and
the Company and its subsidiaries enjoy peaceful and undisturbed possession under
all such leases to which any of them is a party as lessee with such exceptions
as do not materially interfere with the use made by the Company or its
subsidiaries.
(p) The Company and its subsidiaries, taken as a whole, maintain
reasonably adequate insurance.
(q) Each of the Company and its subsidiaries owns or possesses adequate
rights with respect to the use of all trade secrets, know-how, propriety
techniques, including processes and substances, trademarks, service marks, trade
names and copyrights (collectively, "Intellectual Property") described, referred
to or incorporated by reference in the Prospectus as owned or used by it, or
which are necessary for the conduct of its business as described in the
Prospectus, other than Intellectual Property the lack of which would not
reasonably be expected to result in any material adverse change in the business,
prospects, financial condition or results of operations of the Company and its
subsidiaries, taken as a whole and no such rights as are material to the
business and prospects of the Company and its subsidiaries expire or are subject
to termination at the election of another party without cause or the Company's
or its subsidiaries' consent at a time or under circumstances which would result
in any material adverse change in the business, prospects, financial condition
or results of operation of the Company and its subsidiaries, taken as a whole.
Neither the Company, or its subsidiaries has received any notice of infringement
of or conflict with asserted rights of others with respect to any patents,
patent rights, inventions, trade secrets, know-how, proprietary techniques,
including processes and substances, trademarks, service marks, trade names or
copyrights which would result in any material adverse change in the business,
prospects, financial condition or results of operations of the Company and its
subsidiaries, taken as a whole.
(r) Neither the Company nor its subsidiaries is involved in any labor
dispute which, either individually or in the aggregate, would reasonably be
expected to result in any material adverse change in the business, prospects,
financial condition or results of operations of the Company and its
subsidiaries, taken as a whole, nor, to the knowledge of the Company, is any
such dispute threatened.
(s) This Agreement has been duly authorized, executed and delivered by the
Company.
(t) KPMG Peat Marwick LLP are independent public accountants with respect
to the Company and its subsidiaries as required by the Act.
(u) The consolidated financial statements included or incorporated by
reference in the Registration Statement and the Prospectus (and any amendment or
supplement thereto), together with related schedules and notes, present fairly
the consolidated financial position, results of operations and changes in
financial position of the Company and its subsidiaries on the basis stated
therein at the respective dates or for the respective periods to which they
apply; such
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statements and related schedules and notes have been prepared in accordance with
generally accepted accounting principles consistently applied throughout the
periods involved, except as disclosed therein; the supporting schedules, if any,
included or incorporated by reference in the Registration Statement present
fairly in accordance with generally accepted accounting principles the
information required to be stated therein; and the other financial and
statistical information and data set forth in or incorporated by reference in
the Registration Statement and the Prospectus (and any amendment or supplement
thereto) are, in all material respects, accurately presented and prepared on a
basis consistent with such financial statements and the books and records of the
Company. The pro forma financial statements and data set forth in or
incorporated by reference in the Prospectus present fairly in all material
respects the information shown therein, have been prepared in accordance with
the Commission's rules and guidelines with respect to pro forma information,
have been properly compiled on the pro forma basis described therein, and, in
the opinion of the Company, the assumptions used in the preparation thereof are
reasonable and the adjustments used therein are appropriate under the
circumstances.
(v) The Company is not and, after giving effect to the offering and sale
of the Shares and the application of the proceeds thereof as described in the
Prospectus, will not be, an "investment company" as such term is defined in the
Investment Company Act of 1940, as amended.
(w) Each of the Company and its subsidiaries maintains a system of
internal accounting controls sufficient to provide reasonable assurance that (i)
transactions are executed in accordance with management's general or specific
authorizations; (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with generally accepted
accounting principles and to maintain asset accountability; (iii) access to
assets is permitted only in accordance with management's general or specific
authorization; and (iv) the recorded accountability for assets is compared with
the existing assets at reasonable intervals and appropriate action is taken with
respect to any differences.
(x) All material tax returns required to be filed by each of the Company
and its subsidiaries in any jurisdiction have been filed, other than those
filings being contested in good faith, and all material taxes, including
withholding taxes, penalties and interest, assessments, fees and other charges
due pursuant to such returns or pursuant to any assessment received by the
Company or its subsidiaries have been paid, other than those being contested in
good faith and for which adequate reserves have been provided.
(y) The Company has not taken and will not take, directly or indirectly,
any action designed to or which has constituted or which might reasonably be
expected to cause or result, under the Exchange Act or otherwise, in
stabilization or manipulation of the price of any security of the Company to
facilitate the sale or resale of the Shares.
SECTION 7. Representations and Warranties of the Selling Stockholders.
Each Selling Stockholder represents and warrants and, with respect to paragraph
7(k) below, covenants and agrees, in each case solely with respect to himself
and his shares to each Underwriter that:
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(a) Such Selling Stockholder is the lawful owner of the Shares to be sold
by such Selling Stockholder pursuant to this Agreement and has, and on the
Closing Date will have, good and clear title to such Shares, free of all
restrictions on transfer, liens, encumbrances, security interests, equities and
claims whatsoever.
(b) Such Selling Stockholder has, and on the Closing Date will have, full
legal right, power and authority, and all authorization and approval required by
law, to enter into this Agreement, the Custody Agreement signed by such Selling
Stockholder and Harris Trust & Savings Bank, as Custodian, relating to the
deposit of the Shares to be sold by such Selling Stockholder (the "Custody
Agreement") and the Power of Attorney of such Selling Stockholder appointing
certain individuals as such Selling Stockholder's attorneys-in-fact (the
"Attorneys") to the extent set forth therein, relating to the transactions
contemplated hereby and by the Registration Statement and the Custody Agreement
(the "Power of Attorney") and to sell, assign, transfer and deliver the Shares
to be sold by such Selling Stockholder in the manner provided herein and
therein.
(c) This Agreement has been duly executed and delivered by or on behalf of
such Selling Stockholder.
(d) The Custody Agreement of such Selling Stockholder has been duly
authorized, executed and delivered by such Selling Stockholder and is a valid
and binding agreement of such Selling Stockholder, enforceable in accordance
with its terms, except (A) as rights to indemnity and contribution hereunder may
be limited by applicable law and considerations of public policy, (B) as may be
limited by the effects of applicable bankruptcy, insolvency, reorganization,
receivership, moratorium and other similar laws affecting rights and remedies of
creditors generally, and (C) as maybe limited by the effects of general
principles of equity (including, without limitation, concepts of materiality,
reasonableness, good faith and fair dealing) whether applied by a court of law
or equity.
(e) The Power of Attorney of such Selling Stockholder has been duly
authorized, executed and delivered by such Selling Stockholder and is a valid
and binding instrument of such Selling Stockholder, enforceable in accordance
with its terms, except (A) as rights to indemnity and contribution hereunder may
be limited by applicable law and considerations of public policy, (B) as may be
limited by the effects of applicable bankruptcy, insolvency, reorganization,
receivership, moratorium and other similar laws affecting rights and remedies of
creditors generally, and (C) as maybe limited by the effects of general
principles of equity (including, without limitation, concepts of materiality,
reasonableness, good faith and fair dealing) whether applied by a court of law
or equity, and, pursuant to such Power of Attorney, such Selling Stockholder
has, among other things, authorized the Attorneys, or any one of them, to
execute and deliver on such Selling Stockholder's behalf this Agreement and any
other document that they, or any one of them, may deem necessary or desirable in
connection with the transactions contemplated hereby and thereby and to deliver
the Shares to be sold by such Selling Stockholder pursuant to this Agreement.
(f) Upon delivery of and payment for the Shares to be sold by such Selling
Stockholder pursuant to this Agreement, good and clear title to such Shares will
pass to the
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Underwriters, free of all restrictions on transfer, liens, encumbrances,
security interests, equities and claims whatsoever.
(g) The execution, delivery and performance of this Agreement and the
Custody Agreement and Power of Attorney of such Selling Stockholder by or on
behalf of such Selling Stockholder, the compliance by such Selling Stockholder
with all the provisions hereof and thereof and the consummation of the
transactions contemplated hereby and thereby will not (i) require any consent,
approval, authorization or other order of, or qualification with, any court or
governmental body or agency (except such as may be required under the Act, the
securities or Blue Sky laws of the various states or NASD regulations), (ii)
conflict with or constitute a breach of any of the terms or provisions of, or a
default under, the organizational documents of such Selling Stockholder, if such
Selling Stockholder is not an individual, or any indenture, loan agreement,
mortgage, lease or other agreement or instrument to which such Selling
Stockholder is a party or by which such Selling Stockholder or any property of
such Selling Stockholder is bound or (iii) violate or conflict with any
applicable law or any rule, regulation, judgment, order or decree of any court
or any governmental body or agency having jurisdiction over such Selling
Stockholder or any property of such Selling Stockholder, except for conflicts,
breaches, defaults or violations which do not, individually or in the aggregate,
have a material adverse effect on the Company and its subsidiaries, taken as a
whole.
(h) Such Selling Stockholder has not taken, and will not take, directly or
indirectly, any action designed to, or which might reasonably be expected to,
cause or result in stabilization or manipulation of the price of any security of
the Company to facilitate the sale or resale of the Shares pursuant to the
distribution contemplated by this Agreement, and other than as permitted by the
Act, the Selling Stockholder has not distributed and will not distribute any
prospectus or other offering material in connection with the offering and sale
of the Shares.
(i) To the knowledge of such Selling Stockholder, (i) each of the
Registration Statement and Prospectus does not contain an untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading and the preliminary
prospectus does not include an untrue statement of a material fact or omit to
state a material fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading and (ii)
such information in the Registration Statement under the caption "Selling
Stockholders" that specifically relates to such Selling Stockholder does not
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 circumstances under which they were made, not misleading.
(j) At any time during the period described in Section 5(d), if there is
any change in the information referred to in Section 7(j) with respect to such
Selling Stockholder, such Selling Stockholder will immediately notify you of
such change.
SECTION 8. Indemnification. (a) The Sellers, jointly and severally, agree
to indemnify and hold harmless each Underwriter, its directors, its officers and
each person, if any, who controls any Underwriter within the meaning of Section
15 of the Act or Section 20 of the Exchange Act, from and against any and all
losses, claims, damages, liabilities and judgments
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(including, without limitation, any reasonable legal or other expenses incurred
in connection with investigating or defending any matter, including any action,
that could give rise to any such losses, claims, damages, liabilities or
judgments) caused by any untrue statement or alleged untrue statement of a
material fact contained in or incorporated by reference in the Registration
Statement (or any amendment thereto), the Prospectus (or any amendment or
supplement thereto) or any preliminary prospectus, or caused by any omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading; provided, however,
that: (1) the indemnity agreements of the Sellers contained in this Section 8(a)
shall not apply with respect to any statement or omission if such statement or
omission was made in reliance upon and in conformity with information relating
to any Underwriter furnished in writing to the Company by or on behalf of any
Underwriter for use expressly in any preliminary prospectus or the Registration
Statement or the Prospectus or any such amendment thereof or supplement thereto;
(2) the indemnity agreements of the Sellers contained in the Section 8(a) and
the contribution provided in Section 8(d), with respect to any preliminary
prospectus, shall not inure to the benefit of any Underwriter or controlling
person of such Underwriter from whom the person asserting any losses, claims,
damages, liabilities or judgments purchased the Shares which are the subject
thereof, if at or prior to the written confirmation of the sale of such Shares a
copy of the most recent Prospectus (or the Prospectus as most recently amended
or supplemented) was not sent or delivered to such person by or on behalf of
such Underwriter, if required by law so to have been delivered, and if the most
recent Prospectus (or the Prospectus as most recently amended or supplemented)
would have cured the defect giving rise to such loss, claim, damage, liability
or judgment; and (3) the aggregate liability of any Selling Stockholder pursuant
to this Section 8(a) shall be limited to an amount equal to the aggregate
purchase price received by such Selling Stockholder from the Underwriters for
the sale of the Shares sold by such Selling Stockholder hereunder.
(b) Each Underwriter agrees, severally and not jointly, to indemnify and
hold harmless the Company, its directors, its officers who sign the Registration
Statement, each person, if any, who controls the Company within the meaning of
Section 15 of the Act or Section 20 of the Exchange Act, each Selling
Stockholder and each person, if any, who controls such Selling Stockholder
within the meaning of Section 15 of the Act or Section 20 of the Exchange Act to
the same extent as the foregoing indemnity from the Sellers to such Underwriter
but only with reference to information relating to such Underwriter furnished in
writing to the Company by such Underwriter through you expressly for use in the
Registration Statement (or any amendment thereto), the Prospectus (or any
amendment or supplement thereto) or any preliminary prospectus.
(c) In case any action shall be commenced involving any person in respect
of which indemnity may be sought pursuant to Section 8(a) or 8(b) (the
"indemnified party"), the indemnified party shall promptly notify the person
against whom such indemnity may be sought (the "indemnifying party") in writing
and the indemnifying party shall assume the defense of such action, including
the employment of counsel reasonably satisfactory to the indemnified party and
the payment of all reasonable fees and expenses of such counsel, as incurred
(except that in the case of any action in respect of which indemnity may be
sought pursuant to both Sections 8(a) and 8(b), the Underwriter shall not be
required to assume the defense of such action pursuant to this Section 8(c), but
may employ separate counsel and participate in the
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defense thereof, but the fees and expenses of such counsel, except as provided
below, shall be at the expense of such Underwriter). Any indemnified party shall
have the right to employ separate counsel in any such action and participate in
the defense thereof, but the fees and expenses of such counsel shall be at the
expense of the indemnified party unless (i) the employment of such counsel shall
have been specifically authorized in writing by the indemnifying party, (ii) the
indemnifying party shall have failed to assume the defense of such action or
employ counsel reasonably satisfactory to the indemnified party or (iii) the
named parties to any such action (including any impleaded parties) include both
the indemnified party and the indemnifying party, and the indemnified party
shall have been advised by such counsel that there may be one or more legal
defenses available to it which are different from or additional to those
available to the indemnifying party (in which case the indemnifying party shall
not have the right to assume the defense of such action on behalf of the
indemnified party). In any such case, the indemnifying party shall not, in
connection with any one action or separate but substantially similar or related
actions in the same jurisdiction arising out of the same general allegations or
circumstances, be liable for (i) the fees and expenses of more than one separate
firm of attorneys (in addition to any local counsel) for all Underwriters, their
officers and directors and all persons, if any, who control any Underwriter
within the meaning of either Section 15 of the Act or Section 20 of the Exchange
Act, (ii) the fees and expenses of more than one separate firm of attorneys (in
addition to any local counsel) for the Company, its directors, its officers who
sign the Registration Statement and all persons, if any, who control the Company
within the meaning of either such Section and (iii) the fees and expenses of
more than one separate firm of attorneys (in addition to any local counsel) for
all Selling Stockholders and all persons, if any, who control any Selling
Stockholder within the meaning of either such Section, and all such fees and
expenses shall be reimbursed as they are incurred. In the case of any such
separate firm for the Underwriters, their officers and directors and such
control persons of any Underwriters, such firm shall be designated in writing by
Donaldson, Lufkin & Jenrette Securities Corporation. In the case of any such
separate firm for the Company and such directors, officers and control persons
of the Company, such firm shall be designated in writing by the Company. In the
case of any such separate firm for the Selling Stockholders and such control
persons of any Selling Stockholders, such firm shall be designated in writing by
the Attorneys. The indemnifying party shall indemnify and hold harmless the
indemnified party from and against any and all losses, claims, damages,
liabilities and judgments by reason of any settlement of any action (i) effected
with its written consent or (ii) effected without its written consent if the
settlement is entered into more than twenty business days after the indemnifying
party shall have received a request from the indemnified party for reimbursement
for the reasonable fees and expenses of counsel (in any case where such fees and
expenses are at the expense of the indemnifying party) and, prior to the date of
such settlement, the indemnifying party shall have failed to comply with such
reimbursement request. No indemnifying party shall, without the prior written
consent of the indemnified party, effect any settlement or compromise of, or
consent to the entry of judgment with respect to, any pending or threatened
action in respect of which the indemnified party is or could have been a party
and indemnity or contribution may be or could have been sought hereunder by the
indemnified party, unless such settlement, compromise or judgment (i) includes
an unconditional release of the indemnified party from all liability on claims
that are or could have been the subject matter of such action and (ii) does not
include a statement as to or an admission of fault, culpability or a failure to
act, by or on behalf of the indemnified party.
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(d) To the extent the indemnification provided for in this Section 8 is
unavailable to an indemnified party or insufficient in respect of any losses,
claims, damages, liabilities or judgments referred to therein, then each
indemnifying party, in lieu of indemnifying such indemnified party, shall
contribute to the amount paid or payable by such indemnified party as a result
of such losses, claims, damages, liabilities and judgments (i) in such
proportion as is appropriate to reflect the relative benefits received by the
Sellers on the one hand and the Underwriters on the other hand from the offering
of the Shares or (ii) if the allocation provided by clause 8(d)(i) above is not
permitted by applicable law, in such proportion as is appropriate to reflect not
only the relative benefits referred to in clause 8(d)(i) above but also the
relative fault of the Sellers on the one hand and the Underwriters on the other
hand in connection with the statements or omissions which resulted in such
losses, claims, damages, liabilities or judgments, as well as any other relevant
equitable considerations. The relative benefits received by the Sellers on the
one hand and the Underwriters on the other hand shall be deemed to be in the
same proportion as the total net proceeds from the offering (before deducting
expenses) received by the Sellers, and the total underwriting discounts and
commissions received by the Underwriters, bear to the total price to the public
of the Shares, in each case as set forth in the table on the cover page of the
Prospectus. The relative fault of the Sellers on the one hand and the
Underwriters on the other hand shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by the Company or the Selling Stockholders on the one hand or the
Underwriters on the other hand and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such statement or
omission.
The Sellers and the Underwriters agree that it would not be just and
equitable if contribution pursuant to this Section 8(d) were determined by pro
rata allocation (even if the Underwriters were treated as one entity for such
purpose) or by any other method of allocation which does not take account of the
equitable considerations referred to in the immediately preceding paragraph.
The amount paid or payable by an indemnified party as a result of the losses,
claims, damages, liabilities or judgments referred to in the immediately
preceding paragraph shall be deemed to include, subject to the limitations set
forth above, any legal or other expenses reasonably incurred by such
indemnified party in connection with investigating or defending any matter,
including any action, that could have given rise to such losses, claims,
damages, liabilities or judgments. Notwithstanding the provisions of this
Section 8, no Underwriter shall be required to contribute any amount in excess
of the amount by which the total price at which the Shares underwritten by it
and distributed to the public were offered to the public exceeds the amount of
any damages which such Underwriter has otherwise been required to pay by reason
of such untrue or alleged untrue statement or omission or alleged omission. No
person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. The Underwriters' obligations to
contribute pursuant to this Section 8(d) are several in proportion to the
respective number of Shares purchased by each of the Underwriters hereunder and
not joint.
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(e) The remedies provided for in this Section 8 are not exclusive and shall
not limit any rights or remedies which may otherwise be available to any
indemnified party at law or in equity.
(f) Each Selling Stockholder hereby designates The Metzler Group, Inc., 615
North Wabash Avenue, Chicago, Illinois 60611, as its authorized agent, upon
which process may be served in any action which may be instituted in any state
or federal court in the State of New York by any Underwriter, any director or
officer of any Underwriter or any person controlling any Underwriter asserting a
claim for indemnification or contribution under or pursuant to this Section 8,
and each Selling Stockholder will accept the jurisdiction of such court in such
action, and waives, to the fullest extent permitted by applicable law, any
defense based upon lack of personal jurisdiction or venue. A copy of any such
process shall be sent or given to such Selling Stockholder, at the address for
notices specified in Section 12 hereof.
SECTION 9. Conditions of Underwriters' Obligations. The several
obligations of the Underwriters to purchase the Firm Shares under this Agreement
are subject to the satisfaction of each of the following conditions:
(a) All the representations and warranties of the Company contained in this
Agreement shall be true and correct on the Closing Date with the same force and
effect as if made on and as of the Closing Date.
(b) If the Company is required to file a Rule 462(b) Registration Statement
after the effectiveness of this Agreement, such Rule 462(b) Registration
Statement shall have become effective by 9:00 A.M., New York City time, on the
date following the date of this Agreement; and no stop order suspending the
effectiveness of the Registration Statement shall have been issued and no
proceedings for that purpose shall have been commenced or shall be pending
before or contemplated by the Commission.
(c) You shall have received on the Closing Date a certificate dated the
Closing Date, signed by Robert P. Maher and James F. Hillman, in their
capacities as the President and Chief Executive Officer and Chief Financial
Officer of the Company, confirming the matters set forth in Sections 9(a), 9(b)
and 9(d) and that the Company has complied with all of the agreements and
satisfied all of the conditions herein contained and required to be complied
with or satisfied by the Company on or prior to the Closing Date.
(d) Since the respective dates as of which information is given in the
Prospectus other than as set forth in the Prospectus (exclusive of any
amendments or supplements thereto subsequent to the date of this Agreement), (i)
there shall not have occurred any material adverse change or any development
involving a prospective material adverse change in the condition, financial or
otherwise, or the earnings, business, management or operations of the Company
and its subsidiaries, taken as a whole, (ii) there shall not have been any
material adverse change or any development involving a prospective material
adverse change in the capital stock or in the long-term debt of the Company or
any of its subsidiaries and (iii) neither the Company nor any of its
subsidiaries shall have incurred any liability or obligation, direct or
contingent, the effect of which is material to the Company and its subsidiaries
taken as a whole, other than those
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reflected in the Registration Statement and the Prospectus (exclusive of any
amendments or supplements thereto subsequent to the date of this Agreement).
(e) All the representations and warranties of each Selling Stockholder
contained in this Agreement shall be true and correct on the Closing Date with
the same force and effect as if made on and as of the Closing Date and you shall
have received on the Closing Date a certificate dated the Closing Date executed
by or on behalf of each Selling Stockholder to such effect and to the effect
that such Selling Stockholder has complied with all of the agreements and
satisfied all of the conditions herein contained and required to be complied
with or satisfied by such Selling Stockholder on or prior to the Closing Date.
(f) You shall have received on the Closing Date an opinion (reasonably
satisfactory to you and counsel for the Underwriters), dated the Closing Date,
of Sachnoff & Weaver, Ltd. counsel for the Company and the Selling Stockholders,
to the effect that:
(i) each of the Company and its subsidiaries has been duly
incorporated, is validly existing as a corporation in good standing under
the laws of its jurisdiction of incorporation and has the corporate power
and authority required to carry on its business as it is currently being
conducted and to own, lease and operate its properties;
(ii) all the outstanding shares of capital stock of the Company
(including the Shares to be sold by the Selling Stockholders) have been
duly authorized and validly issued, and assuming receipt of the
consideration contemplated by the resolutions authorizing such issuance,
are fully paid, non-assessable and not subject to any preemptive or similar
rights;
(iii) the Shares to be issued and sold by the Company hereunder have
been duly authorized and, when issued and delivered to the Underwriters
against payment therefor as provided by this Agreement, will be validly
issued, fully paid and non-assessable, and the issuance of such Shares will
not be subject to any preemptive or similar rights;
(iv) this Agreement has been duly authorized, executed and delivered
by the Company and by or on behalf of each Selling Stockholder;
(v) the authorized capital stock of the Company conforms as to legal
matters to the description thereof contained or incorporated by reference
in the Prospectus;
(vi) the Registration Statement has become effective under the Act, no
stop order suspending its effectiveness has been issued and no proceedings
for that purpose are, to the best of such counsel's knowledge after due
inquiry, pending before or contemplated by the Commission;
(vii) the statements under the captions "Risk Factors-Shares Eligible
for Future Sale," "Risk Factors-Impact of Anti-Takeover Provisions on Our
Stock Price" and "Underwriting" in the Prospectus and Item 15 of Part II of
the Registration Statement, insofar as such
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statements constitute a summary of the legal matters, documents or
proceedings referred to therein, fairly present the information called for
with respect to such legal matters, documents and proceedings;
(viii) To the best of such counsel's knowledge, neither the Company
nor any of its subsidiaries is in violation of their respective charters or
by-laws and, to the best of such counsel's knowledge after due inquiry,
neither the Company nor any of its subsidiaries is in default in the
performance of any obligation, agreement, covenant or condition contained
in any indenture, loan agreement, mortgage, lease or other agreement or
instrument filed as an exhibit to the Registration Statement;
(ix) the execution, delivery and performance of this Agreement by the
Company, the compliance by the Company with all the provisions hereof and
the consummation of the transactions contemplated hereby will not (A)
require any consent, approval, authorization or other order of, or
qualification with, any court or governmental body or agency (except such
as may be required under the Act or the securities or Blue Sky laws of the
various states or NASD regulations), (B) conflict with or constitute a
breach of any of the terms or provisions of, or a default under, the
charter or by-laws of the Company or any of its subsidiaries or any
indenture, loan agreement, mortgage, lease or other agreement or instrument
that is material to the Company and its subsidiaries, taken as a whole, to
which the Company or any of its subsidiaries is a party or by which the
Company or any of its subsidiaries or their respective property is bound,
(C) violate or conflict with any applicable law or any rule, regulation,
judgment, order or decree of any court or any governmental body or agency
having jurisdiction over the Company, any of its subsidiaries or their
respective property;
(x) such counsel does not know of any legal or governmental
proceedings pending or threatened to which the Company or any of its
subsidiaries is or could be a party or to which any of their respective
property is or could be subject that is required to be described in the
Registration Statement or the Prospectus and are not so described, nor to
such counsel's knowledge is there any contract or other document that is
required to be described in the Registration Statement or the Prospectus or
to be filed as exhibits to the Registration Statement that are not so
described or filed as required;
(xi) to such counsel's knowledge, neither the Company nor any of its
subsidiaries has violated any Environmental Law or any provisions of the
Employee Retirement Income Security Act of 1974, as amended, or the rules
and regulations promulgated thereunder, except for such violations which,
singly or in the aggregate, would not have a material adverse effect on the
business, prospects, financial condition or results of operation of the
Company and its subsidiaries, taken as a whole;
(xii) the Company is not and, after giving effect to the offering and
sale of the Shares and the application of the proceeds thereof as described
in the Prospectus, will not be, an "investment company" as such term is
defined in the Investment Company Act of 1940, as amended;
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(xiii) (A) the Registration Statement and the Prospectus and any
supplement or amendment thereto (except for the financial statements and
other financial data included therein as to which no opinion need be
expressed) comply as to form with the Act, (B) such counsel has no reason
to believe that at the time the Registration Statement became effective or
on the date of this Agreement, the Registration Statement and the
prospectus included therein (except for the financial statements and other
financial data as to which such counsel need not express any belief)
contained any untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading and (C) such counsel has no reason to
believe that the Prospectus, as amended or supplemented, if applicable
(except for the financial statements and other financial data, as
aforesaid) contains any untrue statement of a material fact or omits to
state a material fact necessary in order to make the statements therein, in
the light of the circumstances under which they were made, not misleading;
(xiv) such counsel has no reason to believe that any of the documents
incorporated by reference in the Prospectus, when they were so filed,
contained an untrue statement of a material fact or omitted to state a
material fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made when such documents
were so filed, not misleading; such counsel need express no opinion as to
the financial statements or other financial or statistical data contained
in any such document;
(xv) each Selling Stockholder has full legal right, power and
authority, and all approvals required by law, to enter into this Agreement
and the Custody Agreement and the Power of Attorney of such Selling
Stockholder and to sell, assign, transfer and deliver the Shares to be sold
by such Selling Stockholder in the manner provided herein and therein;
(xvi) the Custody Agreement of each Selling Stockholder has been duly
executed and delivered by such Selling Stockholder and is a valid and
binding agreement of such Selling Stockholder, enforceable in accordance
with its terms, except (A) as rights to indemnity and contribution
hereunder may be limited by applicable law and considerations of public
policy, (B) as may be limited by the effects of applicable bankruptcy,
insolvency, reorganization, receivership, moratorium and other similar laws
affecting rights and remedies of creditors generally, and (C) as maybe
limited by the effects of general principles of equity (including, without
limitation, concepts of materiality, reasonableness, good faith and fair
dealing) whether applied by a court of law or equity;
(xvii) the Power of Attorney of each Selling Stockholder has been duly
authorized, executed and delivered by such Selling Stockholder and is a
valid and binding instrument of such Selling Stockholder, enforceable in
accordance with its terms, except (A) as rights to indemnity and
contribution hereunder may be limited by applicable law and considerations
of public policy, (B) as may be limited by the effects of applicable
bankruptcy, insolvency, reorganization, receivership, moratorium and other
similar laws affecting rights and remedies of creditors generally, and (C)
as maybe
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limited by the effects of general principles of equity (including, without
limitation, concepts of materiality, reasonableness, good faith and fair
dealing) whether applied by a court of law or equity, and, pursuant to such
Power of Attorney, such Selling Stockholder has, among other things,
authorized the Attorneys, or any one of them, to execute and deliver on
such Selling Stockholder's behalf this Agreement and any other document
they, or any one of them, may deem necessary or desirable in connection
with the transactions contemplated hereby and thereby and to deliver the
Shares to be sold by such Selling Stockholder pursuant to this Agreement;
(xviii) upon delivery of and payment for the Shares to be sold by each
Selling Stockholder pursuant to this Agreement, good and clear title to
such Shares will pass to the Underwriters, severally, free of all
restrictions on transfer, liens, encumbrances, security interests, equities
and claims whatsoever, assuming that each Underwriter purchases the Shares
in good faith without notice of any adverse claim; and
The opinion of Sachnoff & Weaver described in Section 9(f) above shall be
rendered to you at the request of the Company and the Selling Stockholders and
shall so state therein.
(g) You shall have received on the Closing Date an opinion, dated the
Closing Date, of Winston & Strawn, counsel for the Underwriters, as to the
matters referred to in Sections 9(f)(iii), 9(f)(iv) (but only with respect to
the Company), 9(f)(vii) (but only with respect to the statements under the
caption "Underwriting") and 9(f)(xiii).
In giving such opinions with respect to the matters covered by Sections
9(f)(xiii) and (xiv), counsel for the Company and the Selling Stockholders and
counsel for the Underwriters may state that their opinion and belief are based
upon their participation in the preparation of the Registration Statement and
Prospectus and any amendments or supplements thereto and review and discussion
of the contents thereof, but are without independent check or verification
except as specified.
(h) You shall have received, on each of the date hereof and the Closing
Date, a letter dated the date hereof or the Closing Date, as the case may be, in
form and substance satisfactory to you, from KPMG Peat Marwick LLP, independent
public accountants, containing the information and statements of the type
ordinarily included in accountants' "comfort letters" to Underwriters with
respect to the financial statements and certain financial information contained
in the Registration Statement and the Prospectus.
(i) The Company shall have delivered to you the agreements specified in
Section 2 hereof which agreements shall be in full force and effect on the
Closing Date.
(j) The Shares shall have been duly listed on the Nasdaq National Market.
(k) The Company and the Selling Stockholders shall not have failed on or
prior to the Closing Date to perform or comply with any of the agreements herein
contained and required to be performed or complied with by the Company or the
Selling Stockholders, as the case may be, on or prior to the Closing Date.
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(l) You shall have received on the Closing Date, a certificate of each
Selling Stockholder who is not a U.S. Person (as defined under applicable U.S.
federal tax legislation) to the effect that such Selling Stockholder is not a
U.S. Person, which certificate may be in the form of a properly completed and
executed United States Treasury Department Form W-9 (or other applicable form or
statement specified by Treasury Department regulations in lieu thereof).
The several obligations of the Underwriters to purchase any Additional
Shares hereunder are subject to the delivery to you on the applicable Option
Closing Date of such documents as you may reasonably request with respect to the
good standing of the Company, the due authorization and issuance of such
Additional Shares as you shall reasonably request and such other normal and
customary matters related to the issuance of such Additional Shares.
SECTION 10. Effectiveness of Agreement and Termination. This Agreement
shall become effective upon the execution and delivery of this Agreement by the
parties hereto.
This Agreement may be terminated at any time on or prior to the Closing
Date by you by written notice to the Sellers if any of the following has
occurred: (i) any outbreak or escalation of hostilities or other national or
international calamity or crisis or change in economic conditions or in the
financial markets of the United States or elsewhere that, in your reasonable
judgment, is material and adverse and, in your reasonable judgment, makes it
impracticable to market the Shares on the terms and in the manner contemplated
in the Prospectus, (ii) the suspension or material limitation of trading in
securities generally or other instruments on the New York Stock Exchange, the
American Stock Exchange, the Chicago Board of Options Exchange, the Chicago
Mercantile Exchange, the Chicago Board of Trade or the Nasdaq National Market or
limitation on prices for securities or other instruments on any such exchange or
the Nasdaq National Market, (iii) the suspension of trading of any securities of
the Company on any exchange or in the over-the-counter market, (iv) the
enactment, publication, decree or other promulgation of any federal or state
statute, regulation, rule or order of any court or other governmental authority
which in your opinion materially and adversely affects, or will materially and
adversely affect, the business, prospects, financial condition or results of
operations of the Company and its subsidiaries, taken as a whole, (v) the
declaration of a banking moratorium by either federal or New York State
authorities or (vi) the taking of any official action by any federal, state or
local government or agency in respect of its monetary or fiscal affairs which in
your opinion has a material adverse effect on the securities markets in the
United States.
If on the Closing Date or on an Option Closing Date, as the case may be,
any one or more of the Underwriters shall fail or refuse to purchase the Firm
Shares or Additional Shares, as the case may be, which it has or they have
agreed to purchase hereunder on such date and the aggregate number of Firm
Shares or Additional Shares, as the case may be, which such defaulting
Underwriter or Underwriters agreed but failed or refused to purchase is not more
than one-tenth of the total number of Firm Shares or Additional Shares, as the
case may be, to be purchased on such date by all Underwriters, each non-
defaulting Underwriter shall be obligated severally, in the proportion which the
number of Firm Shares set forth opposite its name in Schedule I bears to the
total number of Firm Shares which all the non-defaulting Underwriters have
agreed to purchase, or in such other proportion as you may specify, to purchase
the Firm Shares or Additional Shares, as the case may be, which such defaulting
Underwriter or
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Underwriters agreed but failed or refused to purchase on such date; provided
that in no event shall the number of Firm Shares or Additional Shares, as the
case may be, which any Underwriter has agreed to purchase pursuant to Section 2
hereof be increased pursuant to this Section 10 by an amount in excess of one-
ninth of such number of Firm Shares or Additional Shares, as the case may be,
without the written consent of such Underwriter. If on the Closing Date any
Underwriter or Underwriters shall fail or refuse to purchase Firm Shares and the
aggregate number of Firm Shares with respect to which such default occurs is
more than one-tenth of the aggregate number of Firm Shares to be purchased by
all Underwriters and arrangements satisfactory to you, the Company and the
Selling Stockholders for purchase of such Firm Shares are not made within 48
hours after such default, this Agreement will terminate without liability on the
part of any non-defaulting Underwriter, the Company or the Selling Stockholders.
In any such case which does not result in termination of this Agreement, either
you or the Sellers shall have the right to postpone the Closing Date, but in no
event for longer than seven days, in order that the required changes, if any, in
the Registration Statement and the Prospectus or any other documents or
arrangements may be effected. If, on an Option Closing Date, any Underwriter or
Underwriters shall fail or refuse to purchase Additional Shares and the
aggregate number of Additional Shares with respect to which such default occurs
is more than one-tenth of the aggregate number of Additional Shares to be
purchased on such date, the non-defaulting Underwriters shall have the option to
(i) terminate their obligation hereunder to purchase such Additional Shares or
(ii) purchase not less than the number of Additional Shares that such non-
defaulting Underwriters would have been obligated to purchase on such date in
the absence of such default. Any action taken under this paragraph shall not
relieve any defaulting Underwriter from liability in respect of any default of
any such Underwriter under this Agreement.
SECTION 11. Agreements of the Selling Stockholders. Each Selling
Stockholder agrees with you and the Company:
(a) To pay or to cause to be paid all transfer taxes, if any, payable in
connection with the transfer of the Shares to be sold by such Selling
Stockholder to the Underwriters.
(b) To do and perform all things to be done and performed by such Selling
Stockholder under this Agreement prior to the Closing Date and to satisfy all
conditions precedent to the delivery of the Shares to be sold by such Selling
Stockholder pursuant to this Agreement.
SECTION 12. Miscellaneous. Notices given pursuant to any provision of
this Agreement shall be addressed as follows: (i) if to the Company, to Robert
P. Maher, The Metzler Group, Inc., 615 North Wabash Avenue, Chicago, Illinois
60611, with a copy to Douglas R. Newkirk, Sachnoff & Weaver, 30 S. Wacker Drive,
Chicago, Illinois 60606, (ii) if to the Selling Stockholders, to Robert P. Maher
and/or Charles A. Demirjian c/o The Metzler Group, Inc., 615 North Wabash
Avenue, Chicago, Illinois 60611 and (iii) if to any Underwriter or to you, to
you c/o Donaldson, Lufkin & Jenrette Securities Corporation, 277 Park Avenue,
New York, New York 10172, Attention: Syndicate Department, or in any case to
such other address as the person to be notified may have requested in writing.
24
<PAGE>
The respective indemnities, contribution agreements, representations,
warranties, covenants and other statements of the Company, the Selling
Stockholders and the several Underwriters set forth in or made pursuant to this
Agreement shall remain operative and in full force and effect, and will survive
delivery of and payment for the Shares, regardless of (i) any investigation, or
statement as to the results thereof, made by or on behalf of any Underwriter,
the officers or directors of any Underwriter, any person controlling any
Underwriter, the Company, the officers or directors of the Company, any person
controlling the Company, any Selling Stockholder or any person controlling such
Selling Stockholder, (ii) acceptance of the Shares and payment for them
hereunder and (iii) termination of this Agreement.
If for any reason the Shares are not delivered by or on behalf of any
Seller as provided herein (other than as a result of any termination of this
Agreement pursuant to Section 10), the Sellers agree, jointly and severally, to
reimburse the several Underwriters for all out-of-pocket expenses (including the
fees and disbursements of counsel) incurred by them. Notwithstanding any
termination of this Agreement, the Company shall be liable for all expenses
which it has agreed to pay pursuant to Section 5(i) hereof. The Sellers also
agree, jointly and severally, to reimburse the several Underwriters, their
directors and officers and any persons controlling any of the Underwriters for
any and all fees and expenses (including, without limitation, the fees
disbursements of counsel) incurred by them in connection with enforcing their
rights hereunder (including, without limitation, pursuant to Section 8 hereof).
Except as otherwise expressly provided herein, this Agreement has been and
is made solely for the benefit of and shall be binding upon the Company, the
Selling Stockholders, the Underwriters, the Underwriters' directors and
officers, any controlling persons referred to herein, the Company's directors
and the Company's officers who sign the Registration Statement and their
respective successors and assigns, all as and to the extent provided in this
Agreement, and no other person shall acquire or have any right under or by
virtue of this Agreement. The term "successors and assigns" shall not include a
purchaser of any of the Shares from any of the several Underwriters merely
because of such purchase.
This Agreement shall be governed and construed in accordance with the laws
of the State of New York.
This Agreement may be signed in various counterparts which together shall
constitute one and the same instrument.
25
<PAGE>
Please confirm that the foregoing correctly sets forth the agreement among
the Company, the Selling Stockholders and the several Underwriters.
Very truly yours,
THE METZLER GROUP, INC.
By: ______________________________________________
Title: President and Chief Executive Officer
THE SELLING STOCKHOLDERS
NAMED IN SCHEDULE II
HERETO, ACTING
SEVERALLY
By: ______________________________________________
Attorney-in-fact
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
BANCBOSTON ROBERTSON STEPHENS
LEHMAN BROTHERS INC.
MERRILL LYNCH & CO.
Acting severally on behalf of
themselves and the several
Underwriters named in
Schedule I hereto
By: DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
By:______________________________
Title: Managing Director
26
<PAGE>
SCHEDULE I
----------
Underwriters Number of Firm Shares
- ------------ to be Purchased
---------------------
Donaldson, Lufkin & Jenrette Securities Corporation
BancBoston Robertson Stephens
Lehman Brothers Inc.
Merrill Lynch, Pierce, Fenner & Smith Incorporated
________
Total
<PAGE>
SCHEDULE II
-----------
Selling Stockholders
--------------------
Maximum Number of
Number of Firm Additional Shares
Name Shares Being Sold Subject to Sale
- ---- ----------------- -----------------
_________ _______
Total
<PAGE>
Exhibit 5.1
SACHNOFF & WEAVER, LTD.
30 South Wacker Drive, 29th Floor
Chicago, Illinois 60606
November 3, 1998
The Metzler Group, Inc.
615 N. Wabash Avenue
Chicago, Illinois 60611
Ladies and Gentlemen:
We have acted as counsel to The Metzler Group, Inc., a Delaware corporation
(the "Company"), in connection with the Registration Statement on Form S-3 (the
"Registration Statement"), filed by the Company under the Securities Act of
1933, as amended (the "Securities Act"), with the Securities and Exchange
Commission (the "Commission"), relating to the sale of up to 4,887,500 shares
(the "Shares") of the Company's Common Stock, par value $.001 per share.
Approximately 1 million of the Shares will be issued and sold by the Company and
the remainder will be sold by existing stockholders of the Company. We have
examined the Registration Statement and the form of the Underwriting Agreement
filed with the Commission as an exhibit to the Registration Statement (the
"Underwriting Agreement"). In addition, we have reviewed such other documents
and have made such further investigations as we have deemed necessary to enable
us to express the opinion hereinafter set forth.
We hereby advise you that in our opinion, the Shares have been duly
authorized by the Company and, upon payment and delivery in accordance with the
Underwriting Agreement, will be validly issued, fully paid and nonassessable.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to us under the caption "Legal
Matters" in the Registration Statement. In giving this consent, we do not hereby
admit that we are in the category of persons whose consent is required under
Section 7 of the Securities Act of 1933 or the rules and regulations of the
Commission.
Very truly yours
/s/ Sachnoff & Weaver, Ltd.
SACHNOFF & WEAVER, LTD.
<PAGE>
EXHIBIT 23.1
Independent Auditors' Consent
The Board of Directors
The Metzler Group, Inc.:
We consent to the incorporation by reference in the registration statement on
Form S-3 of The Metzler Group, Inc. of our report dated February 11, 1998,
except for Note 14, as to which the date was March 5, 1998, relating to the
consolidated balance sheets of The Metzler Group, Inc. and subsidiaries as of
December 31, 1997 and 1996, and the related consolidated statements of
operations, stockholders' equity, and cash flows for each of the years in the
three-year period ended December 31, 1997, which report appears in the December
31, 1997 annual report on Form 10-K of The Metzler Group, Inc. The report of
KPMG Peat Marwick LLP is based partially upon the reports of other auditors.
/s/ KPMG Peat Marwick
Chicago, Illinois
November 3, 1998
<PAGE>
EXHIBIT 23.2
ARTHUR ANDERSEN LLP
CONSENT OF INDEPENDENT ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our reports
(and to all references to our Firm) included in or made a part of this
registration statement.
San Francisco, California
November 3, 1998
