LECG INC, S-1/A, 1997-11-26

LECG INC
S-1/A, 1997-11-26
MANAGEMENT CONSULTING SERVICES

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<PAGE>

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 26, 1997

REGISTRATION NO. 333-37989
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- -------------------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

----------------

AMENDMENT NO. 1

TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933

----------------

LECG, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
CALIFORNIA 8742 94-3063119
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
</TABLE>

------------

2000 POWELL STREET
EMERYVILLE, CALIFORNIA 94608
(510) 653-9800
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)

------------

THOMAS M. JORDE
PRESIDENT
LECG, INC.
2000 POWELL STREET
EMERYVILLE, CALIFORNIA 94608
(510) 653-9800
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)

----------------

COPIES TO:

MICHAEL J. DANAHER HERBERT S. WANDER
SELIM DAY KATTEN MUCHIN & ZAVIS
WILSON SONSINI GOODRICH & ROSATI, 525 WEST MONROE STREET, SUITE 1600
PROFESSIONAL CORPORATION CHICAGO, ILLINOIS 60661
650 PAGE MILL ROAD (312) 902-5200
PALO ALTO, CALIFORNIA 94304-1050
(650) 493-9300

----------------

Approximate date of commencement of proposed sale to the public: As soon as
practicable after this Registration Statement becomes effective.

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, 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 STATEMENT 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. [_]

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 COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(a), MAY DETERMINE.

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- -------------------------------------------------------------------------------
<PAGE>

++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO THE REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS +
+OF ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++

SUBJECT TO COMPLETION, DATED NOVEMBER 26, 1997

PROSPECTUS
, 1997

5,000,000 SHARES

[LOGO OF LECG, INC.]

COMMON STOCK

Of the 5,000,000 Shares of Common Stock offered hereby, 3,400,000 shares are
being sold by LECG, Inc. ("LECG" or the "Company") and 1,600,000 shares are
being sold by the Selling Shareholders. See "Principal and Selling
Shareholders." The Company will not receive any part of the proceeds from the
sale of shares by the Selling Shareholders.

Prior to this offering, there has been no public market for the Common Stock
of the Company. It is currently estimated that the initial public offering
price will be between $11.00 and $13.00 per share. See "Underwriting" for
information relating to the factors to be considered in determining the initial
public offering price.

Application has been made to have the Common Stock approved for listing on
the New York Stock Exchange under the symbol " ," subject to official notice
of issuance.

SEE "RISK FACTORS" BEGINNING ON PAGE 6 FOR INFORMATION THAT SHOULD BE
CONSIDERED BY PROSPECTIVE INVESTORS.

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.

<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
PRICE UNDERWRITING PROCEEDS PROCEEDS TO
TO THE DISCOUNTS AND TO THE THE SELLING
PUBLIC COMMISSIONS(1) COMPANY(2) SHAREHOLDERS
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<S> <C> <C> <C> <C>
Per Share......................... $ $ $ $
Total(3).......................... $ $ $ $
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</TABLE>

(1) See "Underwriting" for indemnification agreements with the Underwriters.

(2) Before deducting expenses estimated at $800,000, which will be paid by the
Company.

(3) Certain Selling Shareholders have granted to the Underwriters a 30-day
option to purchase up to 750,000 additional shares of Common Stock at the
Price to the Public, less Underwriting Discounts and Commissions, solely to
cover over-allotments, if any. If such option is exercised in full, the
total Price to the Public, Underwriting Discounts and Commissions and
Proceeds to Selling Shareholders will be $ , $ and $ , respectively.
The Company will not receive any of the proceeds of the sale of shares by
the Selling Shareholders pursuant to the Underwriters' over-allotment
option, if exercised. See "Principal and Selling Shareholders" and
"Underwriting."

The shares of Common Stock are being offered by the several Underwriters
when, as and if delivered to and accepted by the Underwriters and subject to
various prior conditions, including their right to reject orders in whole or in
part. It is expected that delivery of share certificates will be made in New
York, New York on or about December , 1997.

DONALDSON, LUFKIN & JENRETTE LEGG MASON WOOD WALKER
SECURITIES CORPORATION INCORPORATED
<PAGE>

[GRAPHIC]

------------

This Prospectus contains forward-looking statements that involve substantial
risks and uncertainties. When used in this Prospectus, the words "anticipate,"
"believe," "estimate," "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."

------------

IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK
OF THE COMPANY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NEW YORK STOCK EXCHANGE, IN
THE OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY
BE DISCONTINUED AT ANY TIME. SEE "UNDERWRITING."

2
<PAGE>

PROSPECTUS SUMMARY

The following summary is qualified in its entirety by the more detailed
information and the Financial Statements and Notes thereto appearing elsewhere
in this Prospectus. Unless otherwise indicated, the information in this
Prospectus assumes no exercise of the Underwriters' over-allotment option. The
shares of Common Stock offered hereby include a high degree of risk.
Prospective investors should carefully consider the information set forth under
the heading "Risk Factors."

THE COMPANY

LECG, Inc. ("LECG" or the "Company") is an economic consulting services firm
that provides sophisticated economic and financial analysis, expert testimony,
litigation support and strategic management consulting to a broad range of
public and private enterprises. The Company's areas of expertise include
antitrust, industry deregulation, damages analyses, economic and financial
modeling, intellectual property valuation, environmental economics and public
policy. Services are provided by renowned academics, recognized industry
leaders and former high-level government officials ("Experts") who are
supported by a highly educated professional staff, most of whom have Ph.D.s or
advanced degrees in economics, finance or related disciplines ("Professional
Staff"). The Experts include those who provide services to the Company on an
exclusive basis ("Principals") and on a non-exclusive basis ("Affiliates"). The
role of the Professional Staff is critical as it enables the Experts to
leverage their expertise allowing the Company to deliver high quality work
product to its clients. The Company believes that its structure enables its
Experts to provide sophisticated economic consulting services efficiently and
effectively to clients throughout the world. In 1996 alone, the Company
performed over 500 assignments for more than 300 clients in eight countries.

The Company provides its clients with insightful and original studies that
are authored, articulated and ultimately defended by independent, leading
Experts, and which are capable of commanding the attention of regulators,
legislators, judges and juries. The studies and related testimony incorporate
in-depth economic analysis on complex issues, such as the competitive effects
of mergers and acquisitions, restructuring of regulated industries, auction
design and implementation, the efficiency properties of complex contracts, the
impact of regulatory structures on technological innovation, the causes of
financial misfortunes and the cost of environmental damages.

The Company is retained by public and private companies, government agencies,
national and state governments and by major law firms on behalf of their
clients. The Company has provided consulting services to a diverse client base
including (i) leading corporations, such as Abbott Laboratories, Chevron Corp.,
Dow Chemical Co., Intel Corporation, Southern Pacific and Time Warner, Inc.,
(ii) large telecommunication and utility companies, such as Ameritech, Bell
Atlantic Corp., New England Power Co., Northern States Power Co., Pacific Gas
and Electric Co. and Potomac Electric Power Co., (iii) leading financial
services firms such as Bankers Trust New York Corp., Kemper Financial Services,
Inc. and Transamerica Life Insurance and Annuity Co., (iv) United States
government and regulatory agencies, such as the Department of Justice, the
Department of Labor, the Federal Communications Commission, the Federal Deposit
Insurance Corporation, the Federal Trade Commission and the Resolution Trust
Corporation and (v) national governments and government agencies, such as the
governments of Argentina, Colombia, El Salvador, Guatemala, Japan, New Zealand
and South Korea.

The Company's Principals include faculty and former faculty from leading
universities including Brigham Young University, Cambridge University, Harvard
University, the London Business School, New York University, Northwestern
University, Princeton University, Stanford University, Tel Aviv University,
Texas A&M University, the University of California at Berkeley, the University
of California at Davis, the University of California at Los Angeles, the
University of Chicago, the University of Illinois, the University of Maryland,
the University of Pennsylvania, the University of Southern California, the
University of Toronto, the University of Virginia, Vanderbilt University and
Yale University. The Experts' relationships with credentialed, internationally
renowned scholars enables the Company to serve as a "switchboard" to access
talent in the world's great universities.

3
<PAGE>

The Company believes that the business environment is favorable to the
continued application of economic analysis to complex business and policy
problems. The Company believes that there are additional growth opportunities
through (i) increasing engagements performed by the Company's current Experts,
(ii) attracting additional Experts, (iii) expanding geographically in the
United States and abroad and (iv) acquiring economic consulting organizations
on a selective basis.

Since its inception in 1988, the Company has expanded its operations from one
office in Berkeley/Emeryville, California to an aggregate of eleven offices in
Washington, D.C.; New York, New York; Evanston, Illinois; Salt Lake City, Utah;
College Station, Texas; Sacramento, California; Toronto, Canada; Wellington,
New Zealand; London, England; and Brussels, Belgium.

Prior to this offering, the Company was known as The Law and Economics
Consulting Group, Inc. The Company changed its name in October of 1997. The
Company's executive offices are located at 2000 Powell Street, Emeryville,
California 94608 and its telephone number is (510) 653-9800.

THE OFFERING

<TABLE>
<C> <S>
Common Stock offered by the Company................ 3,400,000 shares
Common Stock offered by the Selling Shareholders... 1,600,000 shares
Common Stock to be outstanding after the offering.. 13,400,000 shares
Use of proceeds.................................... For general corporate
purposes, including
working capital and
capital expenditures, and
for payment of
undistributed S
Corporation earnings. See
"Use of Proceeds."
Proposed New York Stock Exchange Symbol............ " "
</TABLE>

4
<PAGE>

SUMMARY FINANCIAL DATA

<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
-------------------------------------------------- --------------------
1992 1993 1994 1995 1996 1996 1997
(UNAUDITED) (UNAUDITED) (UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENTS
OF INCOME DATA:
Revenues............... $14,858 $ 20,317 $ 24,548 $ 24,835 $ 31,392 $ 22,731 $ 31,994
Cost of services....... 10,281 13,614 16,772 16,465 20,881 15,262 20,352
------- -------- -------- -------- -------- -------- --------
Gross profit........... 4,577 6,703 7,776 8,370 10,511 7,469 11,642
General and administra-
tive.................. 2,138 3,537 3,639 4,048 5,258 3,554 5,834
------- -------- -------- -------- -------- -------- --------
Income before income
taxes and extraordi-
nary gain............. 2,439 3,166 4,137 4,322 5,253 3,915 5,808
Income taxes........... 113 183 90 83 189 139 237
------- -------- -------- -------- -------- -------- --------
Income before extraor-
dinary gain........... 2,326 2,983 4,047 4,239 5,064 3,776 5,571
Extraordinary gain..... 0 0 0 0 0 0 818
------- -------- -------- -------- -------- -------- --------
Net income(1).......... $ 2,326 $ 2,983 $ 4,047 $ 4,239 $ 5,064 $ 3,776 $ 6,389
======= ======== ======== ======== ======== ======== ========
Pro forma net in-
come(2)............... $ 3,099 $ 3,427
Pro forma net income
per share(2).......... $ 0.31 $ 0.34
Weighted average shares
outstanding(3)........ 10,049 10,189
</TABLE>

<TABLE>
<CAPTION>
AS OF SEPTEMBER 30, 1997
------------------------------------
ACTUAL PRO FORMA(4) PRO FORMA
(UNAUDITED) AS ADJUSTED (5)
(IN THOUSANDS)
<S> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash............................. $ 1,299 $ 1,299 $38,443
Working capital.................. 5,468 732 37,876
Total assets..................... 20,478 20,478 57,622
Total liabilities................ 11,882 16,618 16,618
Total shareholders' equity....... 8,596 3,860 41,004
</TABLE>
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(1) The Company is currently taxed under subchapter S of the Internal Revenue
Code. As an S Corporation, the Company is not subject to federal and some
state income taxes.

(2) The pro forma consolidated statement of income data for the year ended
December 31, 1996 has been computed by adjusting the Company's net income,
as reported, to record income tax expense assuming an effective tax rate of
41% that would have been recorded had the Company been a C Corporation. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and Notes 2 and 10 of Notes to Consolidated Financial
Statements. Included in net income for the nine months ended September 30,
1997 is an extraordinary gain of $817,778 net of income taxes of $34,084
relating to the expiration of an option to purchase the assets of the
Company by an unrelated third party. The pro forma consolidated statement
of income data for the nine months ended September 30, 1997 has been
computed by (i) adjusting the Company's effective tax rate to 41% and (ii)
eliminating the extraordinary gain resulting from the purchase option. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and Notes 2, 10, and 11 of Notes to Consolidated Financial
Statements.
(3) See Note 10 of Notes to Consolidated Financial Statements for a description
of the computation of the number of shares used in per share calculations
and net income per share.

(4) Pro forma balance sheet data has been adjusted to reflect (i) an estimated
deferred tax liability of $2,554,000 as of September 30, 1997 which would
exist if the Company were treated as a C Corporation and (ii) an estimated
distribution payable of approximately $3,512,000, of which $1,330,000 will
be used to reduce notes receivable from shareholders based upon actual cash
basis earnings through September 30, 1997 which the Company intends to
distribute. The estimated deferred tax liability will change and may
increase based upon changes between cash and accrual basis income. The
estimated distribution payable will change and will significantly increase
based upon actual cash basis earnings between September 30, 1997 and the
date of this Prospectus. See "Use of Proceeds," "S Corporation Termination"
and Notes 2 and 10 of Notes to Consolidated Financial Statements.
(5) Adjusted to reflect (i) the sale of 3,400,000 shares of Common Stock
offered by the Company hereby (at an assumed initial public offering price
of $12 per share and after deducting the underwriting discount and
estimated offering expenses payable by the Company) and the application of
the estimated net proceeds therefrom and (ii) the pro forma balance sheet
adjustments discussed in (4) above. See "Use of Proceeds" and
"Capitalization."

5
<PAGE>

RISK FACTORS

This Prospectus contains forward-looking statements that involve risks and
uncertainties. The Company's actual results may differ materially from those
discussed herein. Factors that could cause or contribute to such differences
include, but are not limited to, those discussed in the following risk factors
as well as those discussed elsewhere in this Prospectus.

Dependence on Certain Principals. The success of the Company is highly
dependent upon the business generation capabilities of certain of the
Principals who are also directors or officers of the Company. In particular,
Messrs. Gilbert, Harris, Jorde, Rausser and Teece have had general oversight
and responsibility for over 67% of the Professional Staff's billings during
1996. There can be no assurance that these individuals will perform at previous
levels, or that they will remain with the Company. The engagement agreements
between the Company and Principals are terminable at will and, upon
termination, do not restrict the Principals from competing with the Company. In
the event that these individuals do not perform at previous levels or do not
remain with the Company, the Company's business, operating results and
financial condition would be materially and adversely affected. These
Principals who are shareholders of the Company are party to a Shareholders'
Agreement which provides, in part, that the Company has the right to purchase a
Shareholder's shares of Common Stock at one-half the market price of such
shares if such shareholder ceases to provide services to the Company on a
regular basis. These limits on transfer lapse ratably over a period of five
years starting on the date of the offering. See "Certain Transactions--
Shareholders' Agreement."

Dependence on Experts. Although the Company does not derive a significant
portion of its net income from Expert billings, the Company's ability to retain
current business and to attract new business is highly dependent on the
academic and consulting reputation of its Experts and on the quality of their
work performed for the Company. In the event the Company's reputation for
academic excellence is tarnished or the quality of its work product is
diminished, the Company's business, operating results and financial condition
could be materially adversely affected. The ability of the Experts to perform
economic consulting services also is often limited by the policies of
universities with which they are affiliated. Any change in the policies of
these universities, or loss of the services of any of these Experts for any
reason could have a material adverse effect upon the Company's business,
operating results and financial condition, including its ability to secure and
complete engagements. See "Business-Human Resources."

Dependence on Professional Staff. The Company derives its net income almost
exclusively from consulting services performed by its Professional Staff. As of
December 31, 1996 and September 30, 1997, the Company employed 104 and 133
Professional Staff, respectively. The portion of the Company's revenues for the
year ended December 31, 1996 and the nine months ended September 30, 1997
attributable to Professional Staff billings was approximately 66% and 70% of
total revenues, respectively. If existing or new Professional Staff are unable
to achieve anticipated billing rates, engagement quality, utilization levels or
other performance measures, the Company's net income could be materially
adversely affected and to the extent that the fixed costs associated with
Professional Staff (including costs associated with salaries and benefits)
exceeds the Professional Staff's billing rates, the Company's business,
operating results and financial condition could be materially and adversely
affected. See "Business-Human Resources."

Attraction, Retention and Management of Professional Staff and Administrative
Staff. The Company's business involves the delivery of professional services
and is labor-intensive. The Company's future performance depends in large part
upon its ability to attract, develop, motivate and retain highly-skilled
experts, staff economists, associates and administrative staff, particularly
senior academics with superior professional reputations. Qualified
professionals are in great demand and there is significant competition for
staff economists from other consulting and investment banking firms, research
firms, governments and government agencies and other related enterprises. There
can be no assurance that the Company will be able to attract and retain
sufficient numbers of highly skilled economists in the future. The loss of the
services of, or the failure to recruit a significant number of Experts, staff
economists, associates or administrative personnel could have a material
adverse effect on the Company's business, operating results and financial
condition, including its ability to secure and complete engagements.

6
<PAGE>

Management of Growth. The Company is currently experiencing significant
operational and geographic growth that could strain the Company's managerial
and other resources. The Company's ability to manage the growth of its
operations will require it to continue to improve its operational, financial
and other internal systems and to attract, develop, motivate and retain its
Experts and Professional Staff. There can be no assurance that the Company's
business model can be successfully scaled up in existing markets or replicated
in new geographic areas. The Company's success will depend in large part on
its ability to maintain high levels of consultant utilization, maintain
billing rates, maintain quality and accurately set and meet schedules. If the
Company's management is unable to manage growth or new employees are unable to
achieve anticipated performance or utilization levels, the Company's business,
operating results and financial condition could be materially and adversely
affected. See "Business-Growth Strategy."

Dependence on Major Practice Areas. Of the several major practice areas,
antitrust (including mergers and acquisitions review) and
regulation/deregulation, each accounted for approximately one-fourth of the
Company's revenue for the year ended December 31, 1996. Changes in the
politics, economics and guiding philosophy with respect to these areas, or any
area in which the Company conducts business, could significantly reduce the
need for economic consulting services in these areas, which would have a
material adverse effect on the Company's business, financial condition and
results of operations.

Project Risks. Many of the Company's engagements involve projects that could
have a significant financial impact on its clients' businesses. The Company's
failure or inability to meet a client's expectations in the performance of its
services could have a material adverse effect on the Company's reputation,
thereby adversely affecting its business, operating results and financial
condition. Some of the projects for which the Company's services have been
retained may be terminated prior to completion because clients are under no
contractual obligation to continue to use the Company's consulting services.
Other projects could terminate because of the settlement of litigation or the
abandonment of a merger. The premature termination of existing or future
engagements by the Company's clients could have a material adverse effect on
its business, operating results and financial condition. Even when a project
is successfully completed, the Company could incur redeployment expenses in
locating a new project for its Professional Staff. In addition, the Company
could incur substantial costs and expend significant resources correcting
errors if any were found in the Company's work, and could possibly become
liable for damage caused by such errors.

Professional and Other Liability. The Company's services involve risks of
professional and other liability. If the Company were found to have been
negligent or to have breached its obligations to its clients, the Company
could be exposed to significant liabilities and its reputation could be
adversely affected. In connection with most of its assignments, the Company
engages experts who are independent contractors. Negligent acts by these
independent contractors could adversely affect the Company. The Company
maintains professional liability insurance in an aggregate amount of
$10 million.

Competition. The market for economic 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 economic consulting firms, general management consulting firms, the
consulting practices of the "Big Six" accounting firms, technical and economic
advisory firms, regional and specialty consulting firms, small "niche"
consulting companies and individual academics. Many of these companies are
national and international in scope and have significantly greater personnel,
financial, technical and marketing resources than the Company, generate
greater revenues and have greater name recognition than the Company. There are
relatively low barriers to entry into the Company's markets and the Company
has faced and expects to continue to face additional competition from new
entrants into the economic consulting industry. There can be no assurance that
the Company will compete successfully with its existing competitors or with
any new competitors. See "Business--Competition."

Control of Principal Shareholders. After completion of this offering, the
Company's executive officers and certain directors will beneficially own
approximately 51.9% of the Company's outstanding shares of Common Stock.
Messrs. Teece, Jorde, Rausser, Gilbert and Harris will own approximately
17.6%, 9.4%, 9.4%, 7.4% and 7.4% of the Company's stock, respectively. As a
result, these officers and directors will be able to

7
<PAGE>

influence the outcome of matters requiring a shareholder vote, including the
election of the members of the Board of Directors, thereby controlling the
affairs and management of the Company. This control could adversely affect the
market price of the Common Stock or delay or prevent a change in control of
the Company. See "Principal and Selling Shareholders."

Significant Unallocated Net Proceeds. A substantial majority of the
anticipated net proceeds of this offering has not been designated for specific
uses. Therefore, the Board of Directors of the Company will have broad
discretion with respect to the use of the net proceeds of this offering. See
"Use of Proceeds."

Absence of Prior Public Market and Possible Volatility of Stock Price. Prior
to this offering, there has been no public market for the Common Stock and
there can be no assurance that an active trading market will develop or be
sustained. The initial public offering price for Common Stock to be sold by
the Company and the Selling Shareholders will be determined by negotiations
among the Company, the Selling Shareholders and the Underwriters and may bear
no relationship to the price at which the Common Stock will trade after
completion of this offering. See "Underwriting" for factors considered in
determining such offering price. The market price of the Common Stock could be
subject to significant fluctuations in response to quarter to quarter
variations in the Company's anticipated or actual operating results, changes
in estimates of the Company's performance or recommendations by securities
analysts, performance of consulting service firms and other events or factors.
These fluctuations, as well as general economic and market conditions, may
adversely affect the market price of the Common Stock. There can be no
assurance that an active trading market for the Common Stock of the Company
will develop or be sustained after this offering.

Shares Eligible for Future Sale. Sales of a substantial number of shares of
Common Stock in the public market following this offering could adversely
affect the market price for the Common Stock. These sales could also make it
more difficult for the Company to sell its equity or equity-related securities
in the future at a time and price that the Company deems appropriate. Upon
completion of this offering, the Company will have approximately 13,400,000
shares of Common Stock outstanding. The 5,000,000 shares offered hereby will
be immediately tradeable without restriction. As a result of lock-up
agreements between certain shareholders and the Underwriters, shares
will not become available for sale in the public market until 180 days after
the effectiveness of this offering, subject in some cases to the volume and
other restrictions of Rule 144 and Rule 701 under the Securities Act of 1933,
as amended (the "Securities Act"). However, the Underwriters may, in their
sole discretion and at any time without notice, release all or any portion of
the securities subject to lock-up agreements. Shares eligible to be sold by
affiliates pursuant to Rule 144 are subject to volume and other restrictions.
Subsequent to the closing of this offering, the Company intends to register
2,000,000 shares of Common Stock reserved for issuance under the Company's
stock plans. See "Shares Eligible for Future Sale."

Potential Issuance of Undesignated Preferred Stock; Anti-Takeover
Effects. The Company's Board of Directors can, without obtaining shareholder
approval, issue shares of Preferred Stock having rights, preferences,
privileges and restrictions, including voting rights, that could adversely
affect the voting power and other rights of holders of the Common Stock. The
issuance of the Preferred Stock could have the effect of making it more
difficult for a person to acquire a majority of the outstanding voting stock
of the Company, thereby delaying, deferring or preventing a change in control
of the Company. Furthermore, such Preferred Stock may have other rights,
including economic rights, senior to the Common Stock, and, as a result, the
issuance of such stock could have a material adverse effect on the market
value of the Common Stock. The Company has no current plans to issue shares of
Preferred Stock. The Company may in the future adopt other measures that may
have the effect of delaying, deferring or preventing a change in control of
the Company, even though at a premium price or favored by a majority of
unaffiliated shareholders. Certain of such measures may be adopted without any
further vote or action by the shareholders. The Company has no current plans
to adopt any such measures. See "Description of Capital Stock."

Dilution. Purchasers of the Common Stock in this offering will suffer
immediate and substantial dilution of $8.98 per share in the net tangible book
value of the Common Stock from the initial public offering price.

8
<PAGE>

USE OF PROCEEDS

The net proceeds to the Company from the sale of 3,400,000 shares of Common
Stock being offered hereby (after deducting underwriting discounts and
commissions and estimated offering expenses) are estimated to be approximately
$37,144,000 at an estimated initial public offering price of $12 per share.
The principal purposes of this offering are to obtain additional capital,
create a public market for the Common Stock, facilitate future access by the
Company to public equity markets and enhance the Company's ability to use its
equity securities as a means of attracting, retaining and providing incentives
to employees. The Company expects to use the net proceeds from this offering
for general corporate purposes, including working capital, capital
expenditures and payment of cash basis undistributed S Corporation earnings
(estimated to be $6.8 million as of the date of this offering). Pending use of
the net proceeds for the above purposes, the Company intends to invest such
funds in short-term, interest-bearing, investment grade obligations. The
Company will not receive any proceeds from the sale of Common Stock by the
Selling Shareholders. See "Risk Factors--Significant Unallocated Net Proceeds"
and "S Corporation Termination."

S CORPORATION TERMINATION

Since its founding in 1988, the Company has been treated as a subchapter S
Corporation ("S Corporation") for federal income tax purposes under subchapter
S of the Internal Revenue Code of 1986, as amended (the "Code"), and for
certain state income tax purposes. As a result, substantially all of the
income of the Company has been taxed directly to its shareholders rather than
to the Company. Following the completion of this offering, the Company will be
subject to corporate income taxation as a subchapter C corporation ("C
Corporation") under the Code.

In connection with the termination of the Company's S Corporation status,
the Company has deferred income taxes of approximately $2.6 million as of
September 30, 1997 in accordance with Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes." This amount is expected to
increase significantly as of the date of this Prospectus. This income tax
expense will be in addition to income tax expense otherwise incurred in such
quarter and will be incurred upon termination of the Company's S Corporation
status, estimated to occur in December 1997. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and Note 2 to Notes
to Consolidated Financial Statements.

DIVIDEND POLICY

The Company currently anticipates that it will retain all of its future
earnings for use in the expansion and operation of its business and does not
anticipate paying any cash dividends in the foreseeable future. Future cash
dividends, if any, will be at the discretion of the Company's Board of
Directors and will depend upon, among other things, the Company's future
operations and earnings, capital requirements and surplus, general financial
condition, contractual restrictions and such other factors as the Board of
Directors may deem relevant.

9
<PAGE>

CAPITALIZATION

The following table sets forth the borrowings and capitalization of the
Company as of September 30, 1997; (i) on an actual basis, (ii) on a Pro forma
basis terminating the Company's S Corporation status and (iii) on an as
adjusted basis giving effect to the sale and issuance of Common Stock offered
hereby. See "S Corporation Termination", Note 10 to Notes to Consolidated
Financial Statements and "Use of Proceeds." This table should be reviewed in
conjunction with the Consolidated Financial Statements and Notes thereto and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" appearing elsewhere in this Prospectus.

<TABLE>
<CAPTION>
SEPTEMBER 30, 1997
-------------------------------------
PRO FORMA
ACTUAL PRO FORMA (2) AS ADJUSTED(3)
(IN THOUSANDS)
<S> <C> <C> <C>
Borrowings under line of credit.......... $ 1,227 $ 1,227 $ 1,227
------- ------- -------
Shareholders' equity:
Common Stock, $.001 par value,
40,000,000 shares authorized,
10,186,375 shares issued and
outstanding, actual and Pro forma ;
13,400,000 shares issued and
outstanding, as adjusted(1)........... 10 10 13
Additional paid-in capital............. 5,620 5,187 42,328
Notes receivable from shareholders..... (2,734) (1,404) (1,404)
Retained earnings...................... 5,700 67 67
------- ------- -------
Total shareholders' equity........... 8,596 3,860 41,004
------- ------- -------
Total capitalization................. $ 9,823 $ 5,087 $42,231
======= ======= =======
</TABLE>
- ---------------------
(1) Excludes 2,000,000 shares of Common Stock reserved for future grant under
the Company's stock option plans. See "Management--Employee Benefit Plans"
and Note 12 of Notes to Consolidated Financial Statements.

(2) Pro forma to reflect the declaration of the S Corporation distribution
(which is estimated to be approximately $3,512,000 as of September 30,
1997 of which $1,330,000 will be used to reduce notes receivable from
shareholders) and the establishment of a deferred tax liability of
$2,554,000 upon termination of the Company's S Corporation status. See
"S Corporation Termination."

(3) Pro forma as adjusted to reflect the sale of 3,400,000 shares of Common
Stock offered by the Company hereby (at an assumed initial public offering
price of $12 per share and after deducting estimated underwriting
discounts and commissions and estimated offering expenses payable by the
Company) and the application of the estimated net proceeds therefrom.

10
<PAGE>

DILUTION

The net tangible book value of the Company as of September 30, 1997 was
approximately $8.6 million or approximately $0.84 per share of Common Stock.
Net tangible book value per share represents the Company's total tangible
assets less the Company's total liabilities, divided by the aggregate number of
shares of Common Stock outstanding. After giving effect to (i) the sale by the
Company of the 3,400,000 shares of Common Stock offered hereby (based upon an
assumed initial public offering price of $12 per share and after deducting
estimated underwriting discounts and commissions and estimated offering
expenses payable by the Company) and the application of the estimated net
proceeds therefrom, (ii) the S Corporation distribution, and (iii) the
recording of deferred income taxes upon termination of the Company's S
Corporation status, the pro forma net tangible book value of the Company at
September 30, 1997 would have been $41.0 million or $3.02 per share. This
amount represents an immediate increase in net tangible book value of $2.18 per
share to existing shareholders and an immediate dilution of $8.98 per share to
purchasers of Common Stock in this offering. The following table illustrates
this per share dilution:

<TABLE>
<S> <C> <C>
Assumed initial public offering price per share................... $12.00
Net tangible book value per share as of September 30, 1997...... $0.84
Increase in net tangible book value per share attributable to
new investors.................................................. 2.18
-----
Net tangible book value per share after this offering............. 3.02
------
Dilution per share to new public investors........................ $ 8.98
======
</TABLE>

The following table summarizes, on a pro forma basis as of September 30,
1997, the number of shares of Common Stock purchased from the Company, the
total consideration paid to the Company and the average price per share paid by
the existing shareholders and by the new investors purchasing shares of Common
Stock in this offering based upon an assumed initial public offering price of
$12 per share (before the deduction of the estimated underwriting discounts and
commissions and estimated offering expenses payable by the Company):

<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION AVERAGE
---------------------- ---------------------- PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
(IN THOUSANDS) (IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Existing sharehold-
ers(1)................. 10,186 75.0% $ 5,197 11.3% $ 0.51
New investors(1)........ 3,400 25.0 40,800 88.7 $12.00
------ ----- ------- -----
Total................. 13,586 100.0% $45,997 100.0%
====== ===== ======= =====
</TABLE>
- ---------------------

(1) Sales by the Selling Shareholders in this offering will reduce the number
of shares held by existing shareholders of the Company to 8,586,000 shares
or 63.2% of the total number of shares outstanding after this offering
(7,836,000 shares or 57.7% if the Underwriters' over-allotment option is
exercised in full) and will increase the number of shares held by new
investors to 5,000,000 shares or 36.8% of the total number of shares of
Common Stock outstanding after this offering (5,750,000 shares or 42.3% if
the Underwriters' over-allotment option is exercised in full). See
"Principal and Selling Shareholders."

11
<PAGE>

SELECTED FINANCIAL DATA

The following selected financial data should be read in conjunction with the
Company's consolidated financial statements and related notes thereto and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" included elsewhere in this Prospectus. The consolidated statements
of income data set forth below with respect to the fiscal years ended December
31, 1994, 1995 and 1996 and the nine months ended September 30, 1997 and the
consolidated balance sheet data as of December 31, 1995 and 1996 and September
30, 1997 are derived from, and are qualified by reference to, the consolidated
financial statements of the Company included elsewhere in this Prospectus. The
Consolidated Statements of Income data with respect to the fiscal years ended
December 31, 1992 and 1993 and the nine months ended September 30, 1996 and
the consolidated balance sheet data as of December 31, 1992, 1993 and 1994 are
derived from the unaudited financial statements not included herein.

<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
--------------------------------------------------- -----------------------
1992 1993 1994 1995 1996 1996 1997
(UNAUDITED) (UNAUDITED) (UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENTS
OF INCOME DATA:
Revenues................ $14,858 $20,317 $ 24,548 $24,835 $31,392 $22,731 $31,994
Costs of services....... 10,281 13,614 16,772 16,465 20,881 15,262 20,352
------- ------- -------- ------- ------- ------- -------
Gross profit........... 4,577 6,703 7,776 8,370 10,511 7,469 11,642
General and
administrative......... 2,138 3,537 3,639 4,048 5,258 3,554 5,834
------- ------- -------- ------- ------- ------- -------
Income before income
taxes and
extraordinary gain.... 2,439 3,166 4,137 4,322 5,253 3,915 5,808
Income taxes............ 113 183 90 83 189 139 237
------- ------- -------- ------- ------- ------- -------
Income before
extraordinary gain.... 2,326 2,983 4,047 4,239 5,064 3,776 5,571
Extraordinary gain:..... 0 0 0 0 0 0 818
------- ------- -------- ------- ------- ------- -------
Net income(1).......... $ 2,326 $ 2,983 $ 4,047 $ 4,239 $ 5,064 $ 3,776 $ 6,389
======= ======= ======== ======= ======= ======= =======
Proforma net income(2).. $ 3,099 $ 3,427
Proforma net income per
share(2)............... $ 0.31 $ 0.34
Weighted average shares
outstanding(3)......... 10,049 10,189
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
--------------------------------------------------- -----------------------
PRO FORMA
1992 1993 1994 1995 1996 1997 1997(4)
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED BALANCE
SHEET DATA:
Cash................... $ 428 $ 721 $ 407 $ 598 $ 3 $ 1,299 $ 1,299
Working capital........ 2,434 3,611 5,319 5,934 4,342 5,468 732
Total assets........... 6,095 8,469 11,348 11,566 13,198 20,478 20,478
Total liabilities...... 3,013 4,599 5,808 5,218 6,934 11,882 16,618
Total shareholders'
equity................ 3,082 3,869 5,539 6,348 6,264 8,596 3,860
</TABLE>
- -------------------

(1) The Company is currently taxed under subchapter S of the Internal Revenue
Code. As an S Corporation, the Company is not subject to federal and some
state income taxes.

(2) The pro forma consolidated statement of income data for the year ended
December 31, 1996 has been computed by adjusting net income, as reported,
to record income tax expense assuming an effective tax rate of 41% that
would have been recorded had the Company been a C Corporation. See
"Management's Discussion and Analysis of Financial Condition and Results
of Operations" and Notes 2 and 10 of Notes to Consolidated Financial
Statements. Included in net income for the nine months ended September 30,
1997 is an extraordinary gain of $817,778 net of income taxes of $34,084,
relating to the expiration of an option to purchase the assets of the
Company by an unrelated third party. The pro forma consolidated statement
of income data for the nine months ended September 30, 1997 has been
computed by (i) adjusting the Company's effective tax rate to 41% and (ii)
eliminating the extraordinary gain resulting from the purchase option. See
"Management's Discussion and Analysis of Financial Condition and Results
of Operations" and Notes 2, 10 and 11 of Notes to Consolidated Financial
Statements.
(3) See Note 10 of Notes to Consolidated Financial Statements for a
description of the computation of the number of shares used in per share
calculations and net income per share.

12
<PAGE>

MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This Management's Discussion and Analysis of Financial Condition and Results
of Operations and other parts of this Prospectus contain forward-looking
statements that involve risks and uncertainties. The Company's actual results
may differ materially from those discussed herein. Factors that could cause or
contribute to such differences include, but are not limited to, those
discussed in "Risk Factors" and "Business," as well as those discussed
elsewhere in this Prospectus.

OVERVIEW

The Company is an economic consulting services firm that provides
sophisticated economic and financial analysis, expert testimony, litigation
support and strategic management consulting to a broad range of public and
private enterprises. The Company's areas of expertise include antitrust,
industry deregulation, damages analyses, economic and financial modeling,
intellectual property valuation, environmental economics and public policy.
Services are provided by Experts who are supported by Professional Staff. The
Experts include Principals and Affiliates. The role of the Professional Staff
is critical as it enables the Experts to leverage their expertise allowing the
Company to deliver high quality work product to its clients. The Company
believes that its structure enables its Experts to provide sophisticated
economic consulting services efficiently and effectively to clients throughout
the world. In 1996 alone, the Company performed over 500 assignments for more
than 300 clients in eight countries.

The Company derives revenues almost exclusively from professional service
fees which are billed at standard hourly rates. Projects are generally billed
monthly on a time and expense basis. Professional Staff compensation ranges
from about 70% of billing rates for senior Professional Staff to about 25% for
junior Professional Staff. Professional Staff are compensated on a salary plus
bonus basis or based on an hourly rate plus overtime. Experts are generally
paid 100% of their collected fees and receive project origination fees for
projects they secure or manage. Project origination fees average approximately
15% but can be up to 19.5% of collected revenues on non-Expert professional
fees.

The Company's most significant expense is personnel costs, which consist of
fees paid to Experts and salaries and benefits for Professional Staff and
other employees. The number of professionals assigned to a project will vary
depending on the size and duration of each engagement. Project terminations,
completion and scheduling delays may result in periods where personnel are not
assigned to active projects. The Company manages its personnel costs by
closely monitoring client needs and utilization of the Professional Staff.

Since its organization in 1988, the Company has been treated as an S
Corporation for tax purposes. As an S Corporation, the net income of the
Company is taxable for federal (and some state) income tax purposes directly
to the Company's shareholders. Accordingly, the statements of income presented
do not include a provision for federal or certain state income taxes. All of
the Company's tax basis net income has been (or will be, as described in "S
Corporation Distribution") distributed to its shareholders and included in
their personal taxable income. The Company's S Corporation status will
terminate upon the date of this Prospectus.

During the quarter in which this offering is completed, the Company will
recognize a significant charge against income resulting from the termination
of the Company's S Corporation status. As a result, the Company will record a
one-time charge to operations estimated at $2.6 million based on the deferred
tax liabilities as of September 30, 1997. This amount is expected to increase
between September 30, 1997 and the date of this Prospectus.

13
<PAGE>

RESULTS OF OPERATIONS

The following table sets forth, for the periods indicated, selected
consolidated statements of income data as a percentage of revenues:

<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
------------------------- ------------------
1994 1995 1996 1996 1997
<S> <C> <C> <C> <C> <C>
Revenues....................... 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of services............... 68.3 66.3 66.5 67.1 63.6
------- ------- ------- -------- --------
Gross profit................... 31.7 33.7 33.5 32.9 36.4
General and administrative .... 14.8 16.3 16.8 15.7 18.2
------- ------- ------- -------- --------
Income before income taxes and
extraordinary gain............ 16.9 17.4 16.7 17.2 18.2
Income taxes................... 0.4 0.3 0.6 0.6 0.8
------- ------- ------- -------- --------
Income before extraordinary
gain.......................... 16.5 17.1 16.1 16.6 17.4
Extraordinary gain............. -- -- -- -- 2.6
------- ------- ------- -------- --------
Net income .................... 16.5% 17.1% 16.1% 16.6% 20.0%
======= ======= ======= ======== ========
</TABLE>

NINE MONTHS ENDED SEPTEMBER 30, 1997 COMPARED TO NINE MONTHS ENDED SEPTEMBER
30, 1996

Revenues. Revenues increased 40.7% to $32.0 million in the nine months ended
September 30, 1997, from $22.7 million in the nine months ended September 30,
1996. This growth in revenues was primarily attributable to additional
services provided to existing clients and engagements with new clients. The
Company expanded the number of projects billed from 423 through the first nine
months of 1996 to 470 through the same period in 1997. Additionally, revenues
increased due to an increased number of senior Professional Staff relative to
junior Professional Staff.

Gross Profit. Gross profit consists of revenues less cost of services, which
includes Expert fees, Professional Staff salaries and benefits, project
origination fees and other direct project expenses. Gross profit increased
55.9% to $11.6 million in the first nine months of 1997 from $7.5 million in
the comparable period of 1996. Gross profit as a percentage of revenues was
36.4% in the first nine months of 1997 compared to 32.9% in 1996. To service
additional client projects, the Company increased the number of Principals and
employees, including Professional Staff, to 218 at September 30, 1997 from 168
at September 30, 1996. Increases in utilization rates resulted in a 8.5%
increase in average billings per Professional Staff member in the 1997 period.
LECG's Experts leveraged Professional Staff resources more effectively which
resulted in a higher contribution to Company margins.

General and Administrative. General and administrative includes salaries and
benefits of management and the administrative staff, facilities costs,
supplies, outside professional fees not billed to clients and all other
corporate costs. General and administrative increased 64.1% to $5.8 million in
the nine month period ended September 30, 1997 from $3.6 million in the prior
year period. As a percentage of revenues, general and administrative increased
to 18.2% in the first nine months of 1997 from 15.7% in the first nine months
of 1996. This expense is due to additional facilities charges for moving an
existing office, expanding three existing offices and opening three new
offices to accommodate planned growth.

Income before Income Taxes and Extraordinary Gain. Income before income
taxes and extraordinary gain for the nine months ended September 30, 1997 was
$5.8 million, compared with $3.9 million for the nine months ended September
30, 1996. The improvement is attributable to increased revenues while
maintaining profit margins.

Extraordinary Gain. The Company recognized an extraordinary gain of $851,862
less taxes of $34,084 in the first nine months of 1997 related to the
expiration of an option agreement entered into in 1993. The agreement called
for the purchase of all the Company's assets or outstanding Common Stock. The
income recognized represents a $1,000,000 payment for the asset option net of
applicable taxes and expenses to arrange the transaction.

14
<PAGE>

Pro Forma Results. The pro forma presentation in Selected Consolidated
Financial Data for the nine months ended September 30, 1997 reflects the
elimination of the extraordinary income of $817,778 that was recorded in the
period. The pro forma tax provision provided assumes the Company had been
operating as a C Corporation and reflects an effective tax rate of 41.0%.

1996 COMPARED TO 1995

Revenues. Revenues increased 26.4% to $31.4 million in 1996 from $24.8
million in 1995. The increase in revenues was attributable to increasing the
number of projects billed by 8.6% while increasing the average billings per
project by 16.3%. The Company worked on several large projects for existing
clients.

Gross Profit. Gross profit increased 25.6% to $10.5 million in 1996 from $8.4
million in 1995. Gross profit as a percentage of revenues decreased slightly to
33.5% in 1996 from 33.7% in 1995. This decrease is attributable to increased
expenses for project origination fees earned by certain Experts eligible for a
higher percent of such fees. This is offset by an increase in staff utilization
rates of 7% over the prior year.

General and Administrative. General and administrative increased 29.9% to
$5.3 million in 1996 from $4.0 million in 1995. This is attributable to
expenses proportionately increasing in relation to revenues as well as
increased recruiting and business development costs associated with expanding
the Company. General and administrative, as a percentage of revenues, increased
to 16.8% in 1996 from 16.3% in 1995.

1995 COMPARED TO 1994

Revenues. Revenues for 1995 were $24.8 million compared to 1994 revenues of
$24.5 million in 1994. Revenues increased by 1.2%, as the Company's management
focused on establishing a plan for future growth which included hiring a Chief
Operating Officer and increasing recruiting efforts for Experts and
Professional Staff.

Gross Profit. Gross profit increased 7.6% to $8.4 million in 1995 from $7.8
million in 1994. Gross profit as a percentage of revenues increased to 33.7% in
1995 from 31.7% in 1994. This increase was a result of the Company's reducing
expenses by reducing the percentage paid, on an ongoing basis, for project
origination fees. Experts and Professional Staff increased to 136 at the end of
1995 from 111 at the end of 1994.

General and Administrative. General and administrative increased 11.2% to
$4.0 million in 1995 from $3.6 million in 1994. As a percentage of revenues,
general and administrative increased to 16.3% in 1995 from 14.8% in 1994. The
increase is attributable to additional facilities charges for opening one new
office and the expansion of two existing offices to accommodate planned growth.

15
<PAGE>

UNAUDITED QUARTERLY RESULTS AND SEASONALITY

The following table sets forth certain unaudited quarterly operating
information for each of the seven quarters ended September 30, 1997. This
information has been prepared on the same basis as the audited financial
statements contained elsewhere 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>
QUARTER ENDED (IN THOUSANDS)
--------------------------------------------------------------
MAR. 31, JUNE 30, SEP. 30, DEC. 31, MAR. 31, JUNE 30, SEP. 30,
1996 1996 1996 1996 1997 1997 1997
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues................ $6,617 $7,781 $8,332 $8,662 $9,901 $10,885 $11,208
Cost of services........ 4,397 5,208 5,656 5,620 6,646 7,094 6,612
------ ------ ------ ------ ------ ------- -------
Gross profit............ 2,220 2,573 2,676 3,042 3,255 3,791 4,596
General and
administrative......... 1,013 1,228 1,313 1,704 1,415 1,887 2,532
------ ------ ------ ------ ------ ------- -------
Income before income
taxes and extraordinary
gain................... 1,207 1,345 1,363 1,338 1,840 1,904 2,064
Income taxes............ 43 48 48 50 64 81 92
------ ------ ------ ------ ------ ------- -------
Income before
extraordinary gain..... 1,164 1,297 1,315 1,288 1,776 1,823 1,972
Extraordinary gain...... -- -- -- -- -- 818 0
------ ------ ------ ------ ------ ------- -------
Net income.............. $1,164 $1,297 $1,315 $1,288 $1,776 $ 2,641 $ 1,972
</TABLE>

Revenues and operating results fluctuate from quarter to quarter as a result
of a number of factors, such as 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. The timing of revenues
varies from quarter to quarter because of the Company's revenue 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 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 third quarter
of the year or a smaller sequential growth rate than in other quarters.

LIQUIDITY AND CAPITAL RESOURCES

The Company's primary source of liquidity has been cash flow from
operations, periodically supplemented by borrowings under a bank line of
credit and by loans from shareholders. Operations provided funds of
$5.8 million for the nine months ended September 30, 1997 as compared to $5.2
million in the nine months ended September 30, 1996. Cash flow from operations
amounted to $2.3 million, $4.2 million and $5.6 million for 1994, 1995 and
1996, respectively. Net income before taxes and net income increased each year
during this three year period.

Investing activities historically have not required significant cash flows.

Cash flow used in financing activities was $2.8 million for the nine months
ended September 30, 1997. During this period, the Company paid $4.1 million in
S Corporation Distributions which was partially funded by the Company's line
of credit. The line expires on May 31, 2000 and provides for maximum
borrowings of $3.0 million. The Company is currently negotiating to increase
the line to $10.0 million. Borrowings are limited to working capital
requirements and bear interest at the bank's prime rate (8.5% at September 30,
1997). There was $1.2 million outstanding borrowings under the line of credit
as of June 30, 1997. Borrowings are secured by accounts receivable and fixed
assets.

Cash flow used in financing activities amounted to $2.4 million, $3.4
million and $5.1 million for 1994, 1995 and 1996, respectively.

16
<PAGE>

The Company believes the net proceeds from the sale of Common Stock offered
hereby, together with funds generated by operations, will provide adequate
cash to fund its anticipated cash needs, at least through the next twelve
months. Thereafter, the Company anticipates that its cash requirements related
to future operations will be funded with cash generated from operations and
short-term borrowings. Pending such uses, the net proceeds will be invested in
short-term, interest-bearing investment grade securities. The Company
currently anticipates that it will retain all of its earnings for development
of the Company's business and does not anticipate paying any cash dividends in
the foreseeable future.

RECENTLY ISSUED FINANCIAL ACCOUNTING STANDARDS

Statement of Financial Accounting Standards No. 128 ("Statement 128"),
issued in February 1997, simplifies the standards for computing and presenting
earnings per share ("EPS"). It replaces the presentation of primary EPS with
basic EPS and requires a reconciliation of the basic EPS computation to the
diluted EPS computation. Basic EPS excludes dilution and is computed by
dividing income available to common shareholders by the weighted-average
number of common shares outstanding for the period. Diluted EPS reflects the
potential dilution that would occur if securities or other contracts to issue
common stock were exercised or converted into common stock or resulted in the
issuance of common stock that then shared in the earnings of the entity.
Adoption of this statement is effective for financial statements issued for
periods ending after December 15, 1997, and earlier application is not
permitted. The Company does not expect the effects of Statement 128 to be
material.

17
<PAGE>

BUSINESS

The Company is retained by public and private companies, government
agencies, national and state governments and by major law firms on behalf of
their clients. The Company has provided consulting services to a diverse
client base including (i) leading corporations, such as Abbott Laboratories,
Chevron Corp., Dow Chemical Co., Intel Corporation, Southern Pacific and Time
Warner, Inc., (ii) large telecommunication and utility companies, such as
Ameritech, Bell Atlantic Corp., New England Power Co., Northern States Power
Co., Pacific Gas and Electric and Potomac Electric Power Co., (iii) leading
financial services firms such as Bankers Trust New York Corp., Kemper
Financial Services, Inc. and Transamerica Life Insurance and Annuity Co., (iv)
United States government and regulatory agencies, such as the Department of
Justice, the Department of Labor, the Federal Communications Commission, the
Federal Deposit Insurance Corporation, the Federal Trade Commission and the
Resolution Trust Corporation and (v) national governments and government
agencies, including the governments of Argentina, Colombia, El Salvador,
Guatemala, Japan, New Zealand and South Korea.

Since its inception in 1988, the Company has expanded its operations from
one office in Berkeley/Emeryville, California to a current aggregate of eleven
offices in Washington, D.C.; New York, New York; Evanston, Illinois; Salt Lake
City, Utah; College Station, Texas; Sacramento, California; Toronto, Canada;
Wellington, New Zealand; London, England; and Brussels, Belgium.

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BUSINESS ENVIRONMENT FOR COMPLEX ECONOMIC ANALYSIS

Micro-economic thinking and modeling have gained wide acceptance. The
application of advanced micro-economic analysis to complex decision-making has
been made increasingly possible by the development of economic models and
model estimation techniques, the advent of low cost computing capacity and the
development of large public and private databases, which enable statistical
relationships to be explored and modeled. The increased use of economic
analysis is reflected in the frequency with which government agencies in the
United States and abroad are engaging economists to assist in evaluating
mergers and acquisitions, establishing deregulatory principles, designing
complex auctions and implementing transfer pricing rules. In turn, affected
private sector parties are compelled to commission similar economic studies to
represent their interests in the shaping of regulatory and deregulatory
processes, privatization outcomes and legislative changes. In addition,
economic analysis is increasingly used to help determine liability and damages
in private litigation or alternative dispute resolution forums.

The Company believes that micro-economic analysis directed by leading
experts is especially useful where there is considerable complexity or
contention as a result of profound change due to technological innovation or
major legal or policy shifts. This complexity and contention have affected
organizations (i) in those industries undergoing fundamental transition, (ii)
directly affected by competition policy and antitrust laws, (iii) confronted
with complex valuation problems, (iv) requiring damage analysis and (v)
formulating corporate strategy.

Industries in Fundamental Transition. Regulatory initiatives typically lead
governments and affected parties to engage consultants to perform economic
analyses. Cost benefit, comparative cost, cost allocation and price impact
studies are frequently commissioned and can yield important findings which can
shape policy. Economic analysis is especially important where governments or
regulators are endeavoring to deregulate industries. Deregulation begets
further regulations as governments increasingly rely on competition policy
rather than price, entry and rates of return regulation.

Recent deregulation in the telecommunications, electric and gas utility and
agribusiness industries as well as the legislative and market turmoil
affecting the United States healthcare system have led to greater use and
application of economic analyses in those industries.

. Telecommunications. The telecommunications industries are undergoing
fundamental restructuring as they move from public control to more
market based methods of governance or control. These developments are
already substantially accomplished in New Zealand and Chile, in progress
in the United States, the United Kingdom and Australia and being
initiated or contemplated in many other countries including continental
European countries. Greater reliance on competition rather than
regulation requires detailed market, cost and financial analyses by the
major industry participants as well as by potential new entrants.

. Electric and Gas Utilities. Deregulation and industry consolidation
often requires sophisticated economic analysis. Where vertical
divestiture has occurred, pricing issues are especially important with
respect to intermediate "products" including wholesale electricity and
transmission/pipeline services, particularly if control of the basic
infrastructure (e.g., transmission/pipelines) remains concentrated.
Also, when integrated providers compete with new entrants that are not
integrated, complex competition policy issues arise with respect to the
terms and conditions under which the integrated provider can self
supply. Organizational design and access issues frequently need to be
analyzed from an economic perspective.

. Agribusiness. With deregulation and the phased reduction of government
subsidies occurring in industrialized countries as a result of the GATT
Uruguay round, and the forthcoming negotiation rounds under the auspices
of the World Trade Organization, greater flexibility and market
sensitivity are being introduced to the agricultural sectors of many
countries. Moreover, environmental issues, water rights and
technological innovation in agricultural machinery, hybrid seeds,
engineered plants and species raise important policy issues requiring
economic analyses.

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. Healthcare. Policy issues arise in many contexts, including hospital
mergers, physician/hospital relations and pharmaceutical pricing.
Because the sale of pharmaceutical products and medical devices are
often heavily regulated, and involve significant levels of intellectual
property, they too involve complex issues which frequently require
economic analysis. Furthermore, pharmaceutical and medical products are
frequently supplied on a global basis, raising important intercountry
pricing issues.

Competition Policy and Antitrust Analysis. Competition policy issues
frequently involve detailed analysis of markets, market entry conditions and
the market positions of incumbents. Such analyses are required not only in
mature markets, but also in the new high technology sectors where the role of
innovation, network externalities, installed base effects and standards are of
great importance. The role of pricing policies and licensing strategies must
frequently be assessed. Antitrust analysis is frequently required before
merging firms can achieve clearance from antitrust and other regulatory bodies
in the United States, Europe and elsewhere. In addition, private antitrust
litigation frequently requires analysis of markets, firm behavior and damages.

Complex Valuation Problems. The growth and expansion of markets has led to
increases in the variety of assets which are traded and the frequency with
which restructuring occurs. In many cases, there may not be organized markets
where the prices of certain assets are readily ascertained. Yet there is often
a need for value to be determined or for asset sales to be organized. Economic
analysis and advanced statistics and econometrics can assist in valuation,
including:

. Financial Securities. Valuation engines and sophisticated mathematical
modeling are frequently needed to value complex derivatives and exotic
securities. These advanced techniques are employed in litigation, as
well as by companies assessing their exposure to risk and seeking to
value their portfolios.

. Intellectual Property and Intangible Assets. Many firms recognize the
need to build and protect brand equity, intangible assets and
intellectual property. Patents, trade secrets, copyrights and trademarks
frequently need to be valued for managerial, licensing, transfer pricing
and litigation purposes. Economic and market analysis is frequently
fundamental to such valuations.
. Auction of Public Assets and Stranded Assets. Governments have recently
auctioned assets in the electromagnetic spectrum, railroad, oil and gas,
forestry and mineral industries. Private parties wishing to sell large
fixed investments have likewise been attracted to the notion of
designing complex auctions. The architecture of market design principles
depends heavily on modern game theory, which is an important analytical
tool in modern micro-economic analysis.

. Contract Rights. Complex contract rights are often analyzed and valued
in the context of litigation, insurance coverage, mergers and
acquisitions and joint ventures.

Damages Analysis. Damages analysis often requires, or benefits from, the
analysis of large data sets and the construction of economic models. Damages
analysis frequently forms the foundation for understandable expert testimony
for litigation and alternative dispute resolution.

. Environmental Damages. Sophisticated economic analysis is frequently
required to quantify damages from hazardous waste contamination,
including estimation of loss of prospective economic gain, diminution in
property value and residual price risk attached to remediated
properties. Economics also is used to analyze hedonic and economic
damages resulting from loss of life.

. Intellectual Property Damages. Intellectual property is increasing in
value, in part because of the new patent regime caused by the
centralization of the Court of Appeals in Washington, D.C. Accordingly,
the stakes involved in patent disputes have also increased. Infringement
damages frequently require the exploration of the cost of non-infringing
alternatives or "invent around" opportunities as well as future market
and alternative technologies calculations.

. Mass Torts. The United States has witnessed a growing number of class
action product liability cases, including cases involving silicone
breast implants, cigarettes, dangerous chemicals and pharmaceuticals
producing unintended side effects. Both plaintiffs and defendants
increasingly rely on sophisticated economic analysis to quantify
exposure, adverse health effects and damages and to allocate damages
among defendants.

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<PAGE>

. Securities Fraud. Securities products have become increasingly complex
with the growth of sophisticated derivative products. As securities
products have become more complex, the calculation of damages in
securities fraud cases has also become more complex, often requiring
sophisticated computer modeling and analysis of extensive data sets.

Corporate Strategy. Economic analytic techniques are also used to examine
the interplay between asset structure, organizational structure and processes
and competitive advantage. Areas where economic analysis is useful include the
analysis of difficult to replicate intangible assets used in supporting
competitive advantage, the choice of organizational structure, decisions
regarding outsourcing, transfer pricing and technology acquisitions.

THE LECG BUSINESS MODEL

The Company's business model attracts and motivates renowned experts who
provide high quality economic analyses and testimony on behalf of companies
and government agencies. The Company believes that several factors distinguish
it from other industry participants. These factors include the following:

Renowned Experts. The Company has the ability to access and productively
utilize renowned scholars and experts from government and the private sector
able to conduct, present and defend authoritative studies. The Experts who
perform these services include nationally recognized and highly credentialed
faculty and former faculty from many top universities. Many of these Experts
have valuable hands-on industry experience or experience in working in or with
government agencies such as the Department of Justice, the Federal Trade
Commission and the Federal Communications Commission. The Experts and
Professional Staff are major contributors to the academic and professional
literature in economics and finance, public policy and intellectual capital
management.

Highly Educated Professional Staff. The Company employs a staff of highly
credentialed and experienced economists and other analysts to support the
Experts. Over one-half of the Company's 133 Professional Staff have advanced
degrees in economics, finance or related disciplines. The Company believes
that its highly educated Professional Staff enables the Experts to leverage
their expertise allowing the Company to deliver high quality work product to
its clients. In addition, many of the Professional Staff have become experts
in their own right, testifying, authoring studies and designing sophisticated
models.

Attractive Support Infrastructure. The Company believes that Experts desire
to associate with the Company in part because of its support infrastructure
which (i) relieves the Experts of administrative tasks and enables them to
focus on their analytic work, (ii) allows them to retain their autonomy and
intellectual freedom and (iii) provides a collegial environment that advances
creativity and cooperation. The Company has designed its infrastructure to
maximize Expert efficiency. As part of this strategy, the Company opens
offices in proximity to the universities at which its Experts are faculty in
order to provide convenient support. Marketing, contract negotiation,
accounting, billing and collecting receivables are handled at the Company's
executive offices. This support infrastructure ensures the Expert focuses on
analysis rather than project administration.

Focused Project Management. The Company treats each client engagement as a
separate project, assigning one or more Experts and a Professional Staff team
consisting of one or more senior economists and analysts. Once assembled,
these teams become virtual organizations using inside and outside resources to
achieve performance in exacting time frames. The Company makes extensive use
of advanced computer hardware and software in executing its projects.

Authoritative Studies. The Company is committed to providing the most
sophisticated and authoritative studies and expert testimony based upon
advanced economic and statistical analysis. The Experts' credentials command
the attention of decision makers, thereby enabling analytical and
authoritative approaches to problems to receive proper recognition.

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Investment in Databases, Models and Methodologies. The Company has developed
proprietary data bases consisting of economic data and studies. In addition,
the Company has developed proprietary computer models used in cost modeling,
auctions and the valuation of complex derivatives. The Company's Experts and
Professional Staff are further aided by access to the Company's network of
contacts and affiliations, internal databases and prior non-confidential
studies.

AREAS OF EXPERTISE

The Company offers its clients leading economic expertise in a number of
industries across a variety of service areas including the following:

Agribusiness Electric Utilities

. Merger analysis . Rate design and cost of service
. "Fair" pricing of agricultural . Market-based rates and contracts
products . Promotional practices
. Intellectual property . Transmission rates and access
. Valuation of biotechnology . Performance-based regulation
. Strategy and complementary asset . Retail wheeling/industry
ownership vs. control assessments restructuring
. Market surveys . Competitive strategies/stranded
. Price forecasting investment
. Application of information . Qualified facility
technology bidding/contract renegotiation

Antitrust Financial Industries

. Market definition . Insurance
. Analysis of market power . Banking/savings and loan
. Assessment of business practices . Real estate
. Mergers and acquisitions . Financial networks
. Cooperative activities
Futures Markets
Auctions
. CFTC regulations
. Auction design . Futures contracts and markets
. Auction execution/software . Computerized hedging models
implementation . Decision support systems
. Bidding strategies . Statistical analysis of trading
and investment strategies
Environmental and Natural
Resource Economics Health Care

. CERCLA and state superfund . Antitrust analysis
. Cost allocation modeling and . Cost benefit analysis
dispute resolution . Merger analysis
. Natural resource damages and . Damages analysis
diminution of value . Intellectual property
. Air and water quality . Market surveys
. Toxic substances and pesticides
. Land and water use Intellectual Property
. Forestry, mining and public lands
. Deregulation and water market . Patent and copyright infringement
pricing . Trade secrets and trademarks
. Management of technology
Damages Analysis . Patent misuse
. Licensing
. Compensatory and punitive . Competitive analysis of high
theories technology industry
. Lost profits and unjust
enrichment
. Patent and copyright infringement
. Valuation
. Breach of contract/fiduciary duty
. Product liability
. Business torts

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International Strategy and Policy Railroads

. Negotiations . Merger analysis and competitive
. Country studies conditions
. Industry studies . Maximum rate reasonableness
. European community regulations . Shipper contract negotiations
. Asian market analysis . Train derailments and health risk
. Eastern Europe and NIS market hazards
analysis
. NAFTA and World Trade Risk Management
Organization dispute settlement
panels . Derivatives
. Portfolio valuation
International Trade
Securities Fraud
. International Trade Commission
injury and causation analysis . Class actions
. Commerce Department margins . Limited partnerships
analysis . Valuation
. Trade pricing . Damage estimation
. Trade policy
. Customs valuations Strategic Management
. Export controls
. Environmental regulation trade . Management of technology and
effects intellectual property
. National security issues . Corporate strategy and structure
. Defense reconversion
Legal and Regulatory Infrastructure
Taxation
. Design of property rights
. Judicial reform . International transfer pricing
. Regulatory policies . Advanced pricing agreements
. Anti-monopolization policies . Economics of transaction costs
. Tax, trade and foreign investment . Depreciation policy
policies . Optimal organization of
. Sequencing of reforms multinational enterprises
. Public policy analysis
Natural Gas and Oil
Telecommunications
. Market-based rates
. Bypass issues . Telephone, cellular, CATV, and
. Pipeline expansion pricing broadcast
. Performance-based regulation . State and federal rate design and
. Take or pay contracts price regulation
. Pricing and energy modeling . Interconnection and competition
. Refinery economics policy
. Oil product supply and demand . Pricing of new services
. Mergers and acquisitions . Cost allocation
. International privatization and
Privatization liberalization
. R&D and technology policy and
. Government strategy management
. Benefits/cost analysis
. Deregulation
. Decentralized process design
. Investment feasibility studies

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PRINCIPAL CLIENTS AND REPRESENTATIVE ENGAGEMENTS

Since its inception in 1988, the Company has advised over 900 clients and
conducted more than 1,400 engagements in 13 countries. In 1996, the Company
performed over 500 assignments for more than 300 clients in eight countries.
No single client has represented more than ten percent of the Company's
revenues in any year, and the ten largest clients typically represent
approximately one-third of the Company's revenues in any year. Although in
many cases the Company's work for a client must be kept confidential, set
forth below is a partial list of those clients for whom the Company's
engagement was publicly disclosed:

Agribusiness Pharmaceuticals

. Conagra, Inc. . Abbott Laboratories
. Dow Chemical Co. . Ciba-Geigy Corp.
. E.I. DuPont de Nemours . Glaxo Wellcome P.L.C.
. E&J Gallo Winery, Inc. . Johnson & Johnson
. Georgia-Pacific Corp. . Merck & Co., Inc.
. H. J. Heinz Co. . Pfizer Inc.
. Kraft General Foods, Inc. . Rhone-Poulenc Rorer Inc.
. Monsanto Company . Sandoz Corp.
. Tri-Valley Corp. . SmithKline Beecham Corp.
. Well-Pict. Inc.
Technology
Financial Services and Insurance
. Advanced Fiber Communications
. Bankers Trust New York Corp. . Advanced Micro Devices, Inc.
. Commercial Union Insurance Co. . Analog Devices, Inc.
. Kemper Financial Services, . Apple Computer, Inc.
Inc. . Ascend Communications
. Steinhardt Management Co. . Atari Corp. (acquired by JTS
. Transamerica Life Insurance & Corp.)
Annuity Co. . DSC Communications Corp.
. IBM
Government Related . Intel Corporation
. Northern Telecom Ltd.
. Department of Justice . Novell, Inc.
. Federal Communications . Packard Bell NEC, Inc.
Commission . Texas Instruments, Inc.
. Federal Deposit Insurance . W. L. Gore & Associates, Inc.
Corporation
. Federal Trade Commission Telecommunications
. Resolution Trust Corporation
. Governments of Argentina, . Ameritech Corp.
Colombia, El Salvador, . Bell Atlantic Corp.
Guatemala, Japan, South Korea, . Bellsouth Corp.
New Zealand . Grupo Iusacell, S.A. de C.V.
. Indiana Bell Telephone Co.
Manufacturing . Nevada Bell
. NYNEX Corp.
. Hansen Industries, Ltd. . Pacific Bell
. Siemens Nixdorf Information . Pacific Telesis Group
Systeme AG . SBC Technologies, Inc.
. Ssangyong Cement Industrial . Southern New England Telephone
Co., Ltd. Co.
. Teledyne, Inc. . Stentor Communications
. TCI International, Inc.
Oil and Gas . Time Warner Inc.
. United States Telephone
. Amoco Corporation Association
. Chevron Corp. . U.S. West Communications
. Conoco Inc. Group, Inc.
. Exxon Corp.
. Humboldt Petroleum, Inc.
. Liquid Carbonic
. Mobil Corp.
. Shell Oil Co.
. Texaco Inc.
. Unocal Corp.

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<PAGE>

Transportation

Other

. American Airlines, Inc.
. APL Limited . DHL Corp.
. Continental Airlines, Inc. . Good Guys, Inc.
. Northwest Airlines, Inc. . Hughes Aircraft Company Inc.
. Southern Pacific Rail Corp. . Moviefone, Inc.
. Union Pacific Corp. . Toyota Motor Sales USA, Inc.
. United Parcel Service of America,
Inc.

Utilities

. Edison Electric Institute Inc.
. New England Power Co.
. Niagara Mohawk Power Corp.
. Northern States Power Co.
. Pacific Gas and Electric Co.
. Potomac Electric Power Co.
. Wisconsin Electric Power Co.

<TABLE>
<CAPTION>
Law Firms. In the last three years, the Company has worked with the following
60 of the largest 100 U.S. law firms (ranked by revenue in 1996 by The American
Lawyer):

<S> <C>
. Akin, Gump, Strauss, Hauer & . Kaye, Scholer, Fierman, Hays &
Feld, L.L.P. Handler, LLP

. Alston & Bird LLP . Kelley Drye & Warren LLP

. Arnold & Porter . King & Spalding

. Baker & Hostetler LLP . Kirkland & Ellis

. Baker & McKenzie . Latham & Watkins

. Baker & Botts L.L.P. . Mayer, Brown & Platt

. Brobeck, Phleger & Harrison LLP . McDermott, Will & Emery

. Morgan, Lewis & Bockius LLP

. Cahill Gordon & Reindel . Morrison & Foerster LLP

. Chadbourne & Parke LLP . O'Melveny & Myers LLP

. Cooley Godward LLP . Orrick, Herrington & Sutcliffe
LLP
. Coudert Brothers

. Covington & Burling . Paul, Weiss, Rifkind, Wharton &
Garrison
. Cravath, Swaine & Moore
. Perkins Coie
. Davis Polk & Wardwell
. Pillsbury Madison & Sutro LLP
. Debevoise & Plimpton

. Dechert Price & Rhoads
. Rogers & Wells
. Dewey Ballantine
. Schulte Roth & Zabel LLP
. Dorsey & Whitney LLP
. Shearman & Sterling
. Fried, Frank, Harris, Shriver &
Jacobson . Sheppard, Mullin, Richter &
Hampton LLP
. Fulbright & Jaworski L.L.P.
. Sidley & Austin
. Gibson, Dunn & Crutcher LLP
. Skadden, Arps, Slate, Meagher &
. Graham & James LLP Flom LLP

.Gray Cary Ware & Freidenrich, A
Professional Corporation . Sonnenschein Nath & Rosenthal

. Hale and Dorr LLP
. Steptoe & Johnson LLP
. Heller Ehrman White & McAuliffe
. Stroock & Stroock & Lavan LLP

. Hogan & Hartson L.L.P.
. Vinson & Elkins L.L.P.
. Howrey & Simon
. Wachtell, Lipton, Rosen & Katz
. Hunton & Williams

. Jenner & Block
. Weil, Gotshal & Manges LLP
. Jones, Day, Reavis & Pogue
. White & Case

. Wilmer, Cutler & Pickering

.Wilson Sonsini Goodrich & Rosati,
Professional Corporation

. Winston & Strawn
</TABLE>
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<PAGE>

Representative Engagements. Examples of the Company's engagements, which the
Company believes are representative of the nature of its services, are set
forth below:

. Mergers and Acquisitions. The Company provides sophisticated economic
analysis to support and advise clients who are pursuing major mergers,
acquisitions or joint ventures, which often require approval by
antitrust authorities in the United States and abroad. This analysis
entails detailed evaluations of the competitive conditions in the
markets in which the firms operate, the potential for new entry into
those markets, and the environment for technological change that can
alter the boundaries of competition in those markets. Examples include:

The mergers of SBC Technologies, Inc. and Pacific Telesis Group and
of Bell Atlantic Corp. and NYNEX Corp.: The Company was engaged in
connection with the mergers of these regional bell operating companies.
The Company conducted detailed analyses of the extent of competition in
telecommunications services in each company's home territory, and the
prospects for future competition in local telephone, long distance and
other telecommunications services. The regulatory authorities allowed
both mergers to proceed.

Monsanto's acquisition of Holden, Corp., a manufacturer of germ
plasma: The Company evaluated the extent to which the assets of the two
firms were complementary and promoted the development of innovative
products.

Freightliner's acquisition of Ford's heavy truck division: The
Company's analysis helped the merging partners negotiate a favorable
termination of the Department of Justice's review.

. Complex Antitrust Litigation. The Company has been jointly engaged by
manufacturers of branded pharmaceutical products in connection with
nationwide antitrust litigation challenging industry pricing and
distribution practices. For this project, the Company is analyzing the
state of competition in markets for the manufacture and sale of
pharmaceutical products, including the effects of managed care on the
performance of the health care industry and specifically on the prices
of pharmaceutical products. The analysis is national in scope,
encompassing most of the manufacturers of branded pharmaceutical
products.

. Deregulation and Competition Policy. The largest twelve local United
States exchange telecommunications companies ("LECs") engaged the
Company to analyze the possible financial impacts of policy alternatives
under consideration by the Federal Communications Commission ("FCC").
The Company's financial simulation model enabled these companies to
assess effects of revenues, operating incomes, cash flow and equity
values under current market expectations and alternate scenarios that
depicted possible FCC policy decisions. The Company was also engaged by
one of the largest LECs to build a model to simulate entry by multiple
competitors to assess the financial viability of multiple local exchange
entrants and determine the impact that this might have on local
exchanges service prices.

. Intellectual Property Valuation. In the context of an international tax
case, the Company was asked to evaluate a complex license agreement
between a United States company and its joint venture subsidiary in
Japan. The firm was asked to analyze the nature of the bargaining
environment in which the license agreement was formulated, the nature of
corporate control in Japan and the value of the technology which was
transferred to the United States company under the grant back provision
of the license agreement. The Company's analysis and presentation
enabled the Company's position to prevail on this important tax matter.

. Environmental. The Company has pioneered the use of economic analysis as
the basis for the equitable allocation of clean up costs at multi-party
superfund sites. The traditional approach to cost allocation at these
sites has been based on the volume of waste that each party generated.
However, at many sites there is only one generator of waste and the
responsible parties are defined by their economic or contractual
relationship to one another. For instance, at a single site there may be
an owner

26
<PAGE>

and an operator as well as one or more parties who arranged for the
waste generating activities to be undertaken. All are responsible for
clean up costs under the superfund laws. Recognizing that these
contracts are merely a means for joint risk and reward sharing, the
Company has advocated the allocation of clean up costs among the parties
according to the economic benefits that each party received under the
relevant contracts or economic relationship. This approach fits with
mainstream economic thinking on efficient contract information and
enforcement, as well as commonly accepted notions of fairness. The
Company has been able to apply this benefits-based approach to cost
allocation to several superfund sites.

. Corporate Strategy. The Company was engaged by a major manufacturer of
computer equipment and supplier of software services to explore the
impact of the Internet, and network computing more generally, on
business processes and business organization in the insurance industry
worldwide. The Experts and Professional Staff advised the client over a
four month period. The Company mapped the conceptual issues, sought
relevant data, and conducted interviews of information technology
managers on four continents. The study produced insights into the
business opportunities presented by the Internet, and identified the new
business models which may be possible in the life insurance industry in
the near future.

GROWTH STRATEGY

In addition to growth through additional engagements performed by the
Company's current Experts, the Company believes that there are additional
growth opportunities through (i) attracting additional Experts, (ii) expanding
geographically in the United States and abroad, and (iii) acquiring economic
consulting organizations on a select basis.

Expand Base of Experts. The Company believes that its continued success and
growth will require it to expand its base of Experts. The Company will
continue its efforts to attract renowned academics from universities
throughout the world and from the government agencies and the private sector
and to train and promote its own Professional Staff. The Company offers
Experts the support of the Professional Staff, an intellectual environment,
the opportunity to work with other leading experts and an attractive
compensation structure. The Company also believes that operating as a public
company will aid in recruiting, retaining and incenting current and future
employees.

Geographic Expansion. The Company intends to expand geographically by
establishing offices in proximity to major universities, think tanks,
financial markets and government centers in additional United States locations
and abroad. The Company believes that offices will need to be established in
various continental European countries, Latin America and the Asia Pacific
region. The Company recently opened offices in London, England; Wellington,
New Zealand; and Brussels, Belgium.

Selective Acquisitions. Given the highly fragmented nature of the economic
consulting industry, the Company believes that smaller consulting
organizations are potential acquisition opportunities. The Company expects to
continue to evaluate and meet with potential acquisition candidates that have
the potential to increase capacity or add complementary capabilities. At the
date of this Prospectus, the Company has no specific acquisition plans.

HUMAN RESOURCES

The Company believes that is has developed a unique model for a professional
services firm. The Company believes that the model is capable of attracting
and incenting the best and the brightest thought leaders and experts from
universities, think tanks and corporations. As a firm, the Company offers high
compensation to its Experts, a collegial atmosphere, high autonomy, and
transparency of rewards. High compensation is, however, coupled with high
accountability because the Experts' compensation on each project is linked to
the Company's collections on that project. To its Professional Staff, the
Company offers a learning environment, the opportunity to work with highly
credentialed Experts, competitive compensation and entrepreneurial
opportunities.

27
<PAGE>

The Company has 35 Principals and 98 Affiliates. In most cases, the
Principals and Affiliates execute agreements with the Company. The agreements
with the Principals provide for the Principal to consult exclusively for the
Company in consideration for consulting fees determined by the time billed by
the Principal and actually collected by the Company as well as project
origination fees for work secured or managed by the Principal. The agreements
with the Affiliates are substantially the same as the agreements with the
Principals except they do not include an exclusivity provision and provide
slightly reduced fees to the Affiliates. The agreements with the Principals
are terminable at will and do not restrict competition with the Company
following termination. From time to time, the Company also engages experts not
otherwise associated with the Company to work on a particular matter. As of
September 30, 1997, the Professional Staff consisted of 133 employees of whom
68 held advanced degrees in economics, finance or related disciplines.

The Company has experienced low turnover with respect to its Principals.
Since the Company was founded in 1988, only four Principals have ceased
providing services to the Company.

The ability to draw on relevant expertise either within the Company or
through its connections with leading universities enables the Company to
assign a project to an Expert who is a leader in the particular field and who
does not require additional time to learn the fundamentals of the relevant
area. The Expert can rely on competent Professional Staff to organize and
analyze large quantities of data and institutional details to support its
thorough analysis. The Company believes that clients see value in having
studies performed by independent experts with recognized credentials and
communication capabilities likely to be able to author studies and provide
testimony that informs regulators, legislators, judges and juries.

Experts. The Company endeavors to attract renowned scholars who are faculty
or former faculty members at leading universities as well as experts from the
private sector and former government officials. The Company believes that
these highly credentialed individuals seek work environments different from
traditional corporate environments and which allow them to retain their
autonomy and intellectual freedom. In order to attract such individuals, the
Company has created a business environment characterized by high autonomy
within the corporate structure, high incentive compensation and a superior
support system.

Professional Staff. As of September 30, 1997, the Company's Professional
Staff consisted of 66 senior level staff, 13 associates and 54 research
analysts located in eleven offices. This represents a 29% increase in
Professional Staff from September 30, 1996.

The Company's goal is to provide multiple and diverse career opportunities
that merge the interests, abilities and aspirations of each individual with
the objectives and interests of the Company. The Company's program offers
structure to the career development process including (i) wide flexibility for
professional growth, (ii) defined responsibilities, consistency and
opportunities for advancement, (iii) recognition of individual contributions
to the Company and (iv) participation in national and international projects.

The Company is committed to hiring the necessary senior economists,
associates and research analysts each year to staff the Company's growth. The
Company seeks the brightest graduates from the top national and international
economics programs as well as individuals with substantial experience. Of the
Company's 66 senior level staff, all have advanced degrees or professional
certificates, and the majority have a Ph.D. in either economics or finance. On
average, the Company's new hires have five to six years of relevant
experience. As a group, the Company's senior level Professional Staff average
about ten years of experience.

The Company encourages the professional growth of its staff and has
established a mentor program to facilitate this growth process. The aim of the
mentor program is to ensure excellence and consistency throughout the entire
organization while increasing individual and team productivity and
facilitating professional advancement. The Company conducts training sessions
that emphasize its consulting core values, development of consulting products
and business development techniques.

28
<PAGE>

The Company's Professional Staff play significant roles in client case work.
Their management responsibilities include involvement with clients, Experts,
other staff, budgets and the quality and content of work product. Professional
Staff work closely with the Experts to conceptualize practical approaches to
clients' economic issues, and then direct professional resources to complete
necessary analyses in support of the Experts' report or testimony.

Administrative Staff. The rapid growth of the Company has increased the need
for sound management principles and programs. Recognizing this need, the
Company has strengthened its administrative management team by attracting
experienced personnel in several functional disciplines and encouraging
internal growth in many others. Members of the Company's administrative team
encompass all offices and work very closely with one another. The Company
believes that its management style enables individuals to grow professionally
and offers great autonomy for individuals to focus on the needs of clients.

Compensation. The Company believes that its success depends in large part on
attracting, retaining and motivating talented, creative and experienced
professionals at all levels. The Company attracts and motivates its
professional and administrative staff by a variable compensation system based
on attractive incentives and strong accountability. Experts are paid in
relation to their hours worked and fees collected and also receive additional
compensation based on projects they secure and manage. Although Experts are
well compensated, they do not receive any remuneration until the Company
collects the fees associated with the Expert's work. Professional Staff
receive salaries, options and bonuses commensurate with their performance,
skills and degrees. Bonuses provide a significant portion of the Professional
Staff's compensation and are paid at the end of the year.

MARKETING

The Company markets its services directly through corporate efforts and
through the individual efforts of its Principals. The Company relies heavily
on its externally recognized expertise and credentials and publications by its
Experts and Professional Staff in academic and professional journals and in
the trade and business press.

The reputation for academic and professional excellence and independence of
the Experts are the most important factors in the Company's business
development efforts. The Company maintains and enhances its name and
reputation through speeches, presentations, articles in industry, business,
economic, legal and scientific journals and through other publications by the
Experts. The Company also organizes conferences on current issues in economics
at which the Experts lecture, present studies, lead seminars and meet with
invitees. In the Company's experience, these conferences have been well
attended by decision makers from a wide range of industries who, the Company
believes, are particularly interested in listening to and retaining the
Experts.

The Company also maintains relationships with law firms whose clients need
economic analyses across the broad range of services provided by the Company.
In the last three years, the Company has worked with 60 of the 100 largest
U.S. law firms (ranked by revenue in 1996 by The American Lawyer).

The Company is selective in its client development targets and as to the
engagements it accepts. The pursuit of specific markets, clients and bids on
specific requests for proposals are carefully considered. As part of this
process, a conflict check is performed against an up-to-date internal client
data base and verified by the Company's administrative staff prior to
accepting an engagement in order to avoid a conflict of interest. In addition,
the Company declines projects which conflict with its ethical or professional
standards.

29
<PAGE>

COMPETITION

The market for economic 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 economic consulting
firms, general management consulting firms, the consulting practices of the
"Big Six" accounting firms, technical and economic advisory firms, regional
and specialty consulting firms, small "niche" consulting companies and
individual academics. Many of these companies are national and international
in scope and have significantly greater personnel, financial, technical and
marketing resources than the Company, generate greater revenues and have
greater name recognition than the Company. There are relatively low barriers
to entry into the Company's markets and the Company has faced and expects to
continue to face additional competition from new entrants into the economic
consulting industry.

FACILITIES

The Company's executive offices are located in Emeryville, California where
the Company leases 47,883 square feet of office space. The Company's other
current offices are located in Washington, D.C.; New York, New York; Evanston,
Illinois; College Station, Texas; Sacramento, California; Salt Lake City,
Utah; Toronto, Canada; Wellington, New Zealand; London, England; and Brussels,
Belgium. The Company believes that its facilities are adequate for its current
needs and that additional facilities can be leased to meet future needs.

30
<PAGE>

MANAGEMENT

EXECUTIVE OFFICERS AND DIRECTORS

The following table sets forth certain information with respect to the
executive officers and directors of the Company as of November 15, 1997:

<TABLE>
<CAPTION>
NAME AGE POSITION
<S> <C> <C>
David J. Teece...................................... 49 Chairman of the Board
Thomas M. Jorde..................................... 50 President and Director
Kimberly D. Gilmour................................. 39 Chief Financial Officer
and Secretary
Donald A. Bunch..................................... 52 Chief Operating Officer
Richard J. Gilbert.................................. 52 Director
Robert G. Harris.................................... 54 Director
Gordon C. Rausser................................... 54 Director
Mario M. Rosati(1)(2)............................... 51 Director
William J. Spencer(1)(2)............................ 67 Director
</TABLE>
- ---------------------
(1) Member of the Audit Committee.
(2) Member of the Compensation Committee.

David J. Teece. Dr. Teece has served as Chairman of the Board of Directors
of the Company since the Company was founded in 1988. Since 1982, he has been
a professor of business administration at the University of California at
Berkeley where since 1994, he has directed the Institute of Management,
Innovation and Organization. Dr. Teece has authored numerous publications in
economics, business and technology strategy. He has been an economic and
business consultant for 25 years.

Thomas M. Jorde. Professor Jorde has served as President and on the Board of
Directors of the Company since 1988. Professor Jorde received his B.A. from
Yale University in 1969 and his J.D. from Yale University in 1972 after which
he served as a law clerk to Justice Brennan, United States Supreme Court.
Since 1982, Professor Jorde has been Professor of Law at the University of
California at Berkeley. Professor Jorde is the co-founder of Boalt Hall's
Program in Technology and Law.

Kimberly D. Gilmour. Ms. Gilmour has served as Secretary of the Company
since October of 1997 and as Chief Financial Officer of the Company since
1991. Prior to joining the Company she held various positions at KPMG Peat
Marwick, LLP. She has over 14 years of accounting and operational experience
and is a C.P.A.

Donald A. Bunch. Mr. Bunch has served as Chief Operating Officer of the
Company since 1995. Prior to joining the Company, he was a partner with Arthur
Andersen LLP and later a chief operating officer at the law firm of Finnegan,
Henderson, Farabow, Garrett & Dunner.

Richard J. Gilbert. Dr. Gilbert has served on the Board of Directors of the
Company since 1990. Since 1983, Dr. Gilbert has been professor of Economics
and adjunct professor of business administration at the University of
California at Berkeley. His previous positions include Assistant Attorney
General for Antitrust Economics in the United States Department of Justice and
Director of the University of California Energy Institute. Dr. Gilbert has
been an economic and business consultant for over 20 years.

Robert G. Harris. Dr. Harris has served on the Board of Directors of the
Company since 1994. Since 1996, Dr. Harris has been a Professor Emeritus, and
from 1977 until 1996, Professor at the Haas School of Business at the
University of California at Berkeley. Dr. Harris has also served as Deputy
Director of the Interstate Commerce Commission.

31
<PAGE>

Gordon C. Rausser. Dr. Rausser has served on the Board of Directors of the
Company since 1990. Since 1986, he has been the Robert Gordon Sproul
Distinguished Professor and, since 1994, Dean of the College of Natural
Resources at the University of California at Berkeley. He has served as a
Senior Economist on the Council of Economic Advisors and as a Chief Economist
of the Agency for International Development and is a fellow of the American
Association for the Advancement of Science, the American Statistical
Association and the American Agricultural Economics Association.

Mario M. Rosati. Mr. Rosati has served on the Board of Directors of the
Company since October 1997. He is a member of the law firm of Wilson Sonsini
Goodrich & Rosati, which he joined in 1971. Mr. Rosati is a graduate of Boalt
Hall, University of California at Berkeley. Mr. Rosati is a director of C*ATS
Software Inc., a software development company, Genus, Inc., a semiconductor
company, Meridian Data, Inc., a software development company, Ross Systems, a
client/server application software company, Aehr Test Systems, a semiconductor
testing device company, and Sanmina Corporation, a customized, integrated
electronics manufacturing services company, as well as several private
companies.

William J. Spencer. Dr. Spencer has served on the Board of Directors of the
Company since October 1997. Since 1990, he has been President and Chief
Executive Officer of SEMATECH, a non-profit research and development
consortium of U.S. semiconductor manufacturers. He was appointed Chairman of
the Board of SEMATECH in August 1996. From May 1986 until October 1990, he was
Group Vice President and Senior Technical Officer of Xerox Corporation. Dr.
Spencer is a director of Investment Corporation of America and Adobe Systems,
Inc.

BOARD OF DIRECTORS; COMMITTEES

The Board of Directors presently consists of seven members who hold office
until the annual meeting of shareholders and until a successor is duly elected
and qualified, or until his earlier resignation or removal.

In October 1997, the Board of Directors formed an Audit Committee and a
Compensation Committee. The functions of the Audit Committee will be to
recommend to the Board of Directors independent auditors for the Company and
to analyze the reports and recommendations of such auditors. The Compensation
Committee will review the compensation of the President and employee benefit
and incentive plans and present recommendations thereon to the Board of
Directors, and will also administer the Company's 1997 Stock Option Plan and
1997 Employee Stock Purchase Plan.

DIRECTOR COMPENSATION

Directors receive $1,000 for each meeting of the Board attended and $500 for
each meeting of a Committee attended, plus, in each case, expenses incident to
attendance at such meetings. Messrs. Rosati and Spencer are expected to be
granted options for their service as Directors. Certain directors also act as
Experts for the Company and receive compensation for their work as Experts.
See "Certain Transactions."

32
<PAGE>

EXECUTIVE COMPENSATION

The following table sets forth all compensation received for services
rendered to the Company in all capacities for the fiscal year ended December
31, 1996 by the Company's President (acting in a capacity similar to a chief
executive officer) and the only other executive officer whose total
compensation exceeded $100,000 for the fiscal year ended December 31, 1996
(collectively, the "Named Executive Officers"):

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
NAME AND PRINCIPAL POSITION SALARY BONUS OTHER
<S> <C> <C> <C>
Thomas M. Jorde(1)................................ $100,000 $ 0 $396,796(2)
President
Donald A. Bunch(3)................................ $200,000 $40,000 $ 0
Chief Operating Officer
</TABLE>
- ---------------------

(1) In addition to these amounts, Mr. Jorde received Subchapter S
Distributions as a shareholder of the Company. See "S Corporation
Termination."

(2) Represents amounts paid by the Company in connection with a consulting
agreement. See "Certain Transactions--Principal Agreements."

(3) Bonuses for services rendered are granted at the discretion of the Board
of Directors. Such bonuses are generally determined and paid before the
end of December.

EMPLOYEE BENEFIT PLANS

1997 STOCK OPTION PLAN

The Company's 1997 Stock Option Plan (the "Option Plan") provides for the
granting to employees of incentive stock options within the meaning of Section
422 of the Code of, and for the granting to employees, directors and
consultants of nonstatutory stock options and stock purchase rights ("SPRs").
The Option Plan was approved by the Board of Directors and the shareholders in
October 1997. Unless terminated sooner, the Option Plan will terminate
automatically in 2007. A total of 1,500,000 shares of Common Stock are
currently authorized for issuance pursuant to the Option Plan, of which
1,500,000 are still available for issuance. As of the date of this Prospectus
no shares had been issued upon the exercise of stock options or stock purchase
rights granted under the Option Plan, no shares were subject to outstanding
options and 1,500,000 shares remained available for future grant.

The Option Plan may be administered by the Board of Directors or a committee
of the Board (the "Committee"), which Committee shall, in the case of options
intended to qualify as "performance-based compensation" within the meaning of
Section 162(m) of the Code, consist of two or more "outside directors" within
the meaning of Section 162(m) of the Code. The Committee has the power to
determine the terms of the options or SPRs granted, including the exercise
price, the number of shares subject to each option or SPR, the exercisability
thereof, and the form of consideration payable upon such exercise. In
addition, the Committee has the authority to amend, suspend or terminate the
Option Plan, provided that no such action may affect any share of Common Stock
previously issued and sold or any option previously granted under the Option
Plan.

Options and SPRs granted under the Option Plan are not generally
transferable by the optionee, and each option and SPR is exercisable during
the lifetime of the optionee only by such optionee. Options granted under the
Option Plan must generally be exercised within three months of the end of
optionee's status as an employee or consultant of the Company, or within
twelve months after such optionee's termination by death or disability, but in
no event later than the expiration of the option's ten year term. In the case
of SPRs, unless the Committee determines otherwise, the Restricted Stock
Purchase Agreement (as defined in the Option Plan) shall grant the Company a
repurchase option exercisable upon the voluntary or involuntary termination of
the purchaser's employment with the Company for any reason (including death or
disability). The purchase price for shares of Common Stock repurchased
pursuant to the Restricted Stock Purchase Agreement shall be the original
price paid

33
<PAGE>

by the purchaser and may be paid by cancellation of any indebtedness of the
purchaser to the Company. The repurchase option shall lapse at a rate
determined by the Committee. The exercise price of all incentive Stock options
granted under the Option Plan must be at least equal to the fair market value
of the Common Stock on the date of grant. The exercise price of nonstatutory
stock options and SPRs granted under the Option Plan is determined by the
Committee, but with respect to nonstatutory stock options intended to qualify
as "performance-based compensation" within the meaning of Section 162(m) of
the Code, the exercise price must at least be equal to the fair market value
of the Common Stock on the date of grant. With respect to any participant who
owns stock possessing more than 10% of the voting power of all classes of the
Company's outstanding capital stock, the exercise price of any incentive stock
option granted must equal at least 110% of the fair market value on the grant
date and the term of such incentive stock option must not exceed five years.
The term of all other options granted under the Option Plan may not exceed ten
years.

The Option Plan provides that in the event of a merger of the Company with
or into another corporation, a sale of substantially all of the Company's
assets or a like transaction involving the Company, each option shall be
assumed or an equivalent option substituted by the successor corporation. If
the outstanding options are not assumed or substituted for as described in the
preceding sentence, the Optionee shall fully vest in and have the right to
exercise the option or SPR as to all of the optioned stock, including shares
as to which it would not otherwise have been vested and be exercisable. In the
event that an option or SPR becomes exercisable in full in the event of a
merger or sale of assets, the Administrator (as defined in the Option Plan)
shall notify the optionee that the option or SPR shall be fully vested and
exercisable for a period of fifteen (15) days from the date of such notice,
and the option or SPR will terminate upon the expiration of such period.

1997 EMPLOYEE STOCK PURCHASE PLAN

The Company's 1997 Employee Stock Purchase Plan (the "Stock Purchase Plan")
was adopted by the Board of Directors and the shareholders in October 1997. A
total of 500,000 shares of Common Stock have been reserved for issuance under
the Stock Purchase Plan. The Stock Purchase Plan, which is intended to qualify
under Section 423 of the Code, has consecutive six month offering periods. The
offering periods generally begin on the first trading day on or after May 1
and November 1 each year, except the first such offering period commences on
the first trading day after the effective date of the offering and ends on the
last trading day on or before October 31, 1998. The Stock Purchase Plan is
administered by the Board of Directors or by a committee appointed by the
Board. Employees are eligible to participate if they are customarily employed
by the Company or any participating subsidiary for at least 20 hours per week
and more than five months in any calendar year. The Stock Purchase Plan
permits eligible employees to purchase Common Stock through payroll deductions
of up to 10% of an employee's total compensation, subject to the limitations
of Section 423(b)(8) of the Code. The price of stock purchased under the Stock
Purchase Plan is 85% of the lower of the fair market value of the Common Stock
at the beginning of the offering period or at the end of the relevant purchase
period. Employees may end their participation at any time during an offering
period, and they will be paid their payroll deductions to date. Participation
ends automatically upon termination of employment with the Company.

Rights granted under the Stock Purchase Plan are not transferable by a
participant other than by will, the laws of descent and distribution, or as
otherwise provided under the Stock Purchase Plan. The Stock Purchase Plan
provides that, in the event of a merger of the Company with or into another
corporation or a sale of substantially all of the Company's assets, the Board
of Directors shall shorten the offering period then in progress (so that
employees' rights to purchase stock under the Stock Purchase Plan are
exercised prior to the merger or sale of assets). The Stock Purchase Plan will
terminate in October 2007. The Board of Directors has the authority to amend
or terminate the Stock Purchase Plan, except that no such action may adversely
affect any outstanding rights to purchase Stock under the Stock Purchase Plan.

34
<PAGE>

401(K) PLAN

The Company maintains a 401(k) retirement savings plan (the "401(k) Plan").
Each participant may contribute to the 401(k) Plan, through payroll
deductions, up to a statutorily prescribed annual limit of $9,500 in 1997,
subject to statutory limitations imposed by the Internal Revenue Service. All
amounts contributed by employee participants and earnings on these
contributions are fully vested at all times. Employee participants may elect
to invest their contributions in various established funds.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

The Board of Directors established a Compensation Committee in October 1997.
Prior to that time there was no compensation committee or other committee of
the board of directors of the Company performing similar functions. During the
fiscal year ended December 31, 1996, executive compensation decisions were
made by the entire board of directors of the Company including Messrs. Teece,
Jorde, Gilbert, Harris and Rausser and one additional person no longer a
director of the Company. Mr. Jorde was the President of the Company at such
time. The Company anticipates that executive compensation for future periods
will be determined by the Compensation Committee.

LIMITATION ON LIABILITY AND INDEMNIFICATION MATTERS

The Company's Restated Articles of Incorporation limit the liability of its
directors for monetary damages arising from a breach of their fiduciary duty
as directors, except to the extent otherwise required by the California
Corporations Code. Such limitation of liability does not affect the
availability of equitable remedies such as injunctive relief or rescission.

The Company's Bylaws provide that the Company shall indemnify its directors
and officers to the fullest extent permitted by California law, including
circumstances in which indemnification is otherwise discretionary under
California law. The Company has also entered into indemnification agreements
with its officers and directors containing provisions which are in some
respects broader than the specific indemnification provisions contained in the
California Corporations Code. The indemnification agreements require the
Company, among other things, to indemnify such officers and directors against
certain liabilities that may arise by reason of their status or service as
directors or officers (other than liabilities arising from willful misconduct
of a culpable nature) and to advance their expenses incurred as a result of
any proceeding against them as to which they could be indemnified.

Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers or persons controlling the Company
pursuant to the foregoing provisions, the Company has been informed that in
the opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Securities Act and is therefore
unenforceable.

35
<PAGE>

CERTAIN TRANSACTIONS

GENERAL

In its ordinary course of business, the Company enters into transactions
with certain of its directors and officers. The Company believes that each
such transaction has been on terms no less favorable for the Company than
could have been obtained in a transaction with an independent third party.

PRINCIPAL AGREEMENTS

The Company is party to a principal agreement with each of David J. Teece,
the Chairman of the Board of Directors of the Company, Thomas M. Jorde, a
director and the President of the Company, and Richard Gilbert, Robert Harris
and Gordon Rausser, each a director of the Company. Each of Messrs. Teece,
Jorde, Gilbert, Harris and Rausser have entered into exclusive consulting
agreements with the Company pursuant to which each such person provides
consulting services to the Company in consideration for a cash payment equal
to the sum of the amount of fees collected by the Company for the hours billed
by such person and a percentage (ranging from 14% to 20%) of fees collected by
the Company on projects secured or managed by such person. During fiscal 1996,
the Company paid $595,082, $396,796, $816,191, $1,461,486 and $1,314,235 to
Dr. Teece, Professor Jorde, Dr. Gilbert, Dr. Harris and Dr. Rausser,
respectively, pursuant to these arrangements as payment in full. These
consulting agreements are terminable at will by either the consultant or the
Company and do not contain restrictions on competition after termination.

SHAREHOLDERS' AGREEMENT

The Company and its shareholders (immediately prior to this offering) are
parties to the Amended and Restated Shareholders' Agreement, effective as of
the date of this offering, which provides, in part, (i) that each such
shareholder will not transfer such shareholder's shares of Common Stock to an
unaffiliated third party without the Company's consent and (ii) the Company
has the right to repurchase each such shareholder's shares of Common Stock at
one-half of the then current market price of the shares if such shareholder
(a) ceases to provide services on a regular basis to the Company, (b) breaches
any provision of such shareholder's Principal Agreement with the Company, or
(c) attempts to transfer such shareholder's shares of Common Stock to an
unaffiliated third party without the Company's consent. The Company's
repurchase right lapses ratably (at 20% per year) over a period of five years
starting on the date of the first anniversary of this offering.

INDEBTEDNESS

In connection with the purchase of shares of Common Stock on July 1, 1993,
Kimberly D. Gilmour, the Company's Chief Financial Officer, executed a
$117,702.40 promissory note to the Company with interest at 7% per annum. The
largest principal amount outstanding under such note during 1996 was
$115,922.53. As of November 15, 1997, the outstanding principal amount under
this promissory note was $78,990.51. In connection with the purchase of shares
of Common Stock on January 1, 1997, Donald A. Bunch, the Company's Chief
Operating Officer, executed a $87,013.76 promissory note to the Company with
interest at 7% per annum. As of November 15, 1997, the outstanding principal
amount under this promissory note was $87,013.76. In connection with the
purchase of shares of Common Stock on July 1, 1993, May 1, 1995 and October
16, 1996, Robert G. Harris, a director of the Company, executed three
promissory notes to the Company for $235,404.80, $536,143.68 and $687,427.20,
respectively, totalling $1,458,975.68 with interest at 7% per annum. The
largest aggregate principal amount outstanding under these three notes during
1996 was $ 1,395,695.06. As of November 15, 1997, the outstanding principal
amount on these three promissory notes was $1,168,508.74. Each of the above
notes was amended in October 1997. As amended, each of the above notes matures
on December 31, 2002. The proceeds from the sale of shares of Common Stock
held by any such payee on the date hereof shall be used to pay amounts
outstanding under the notes.

36
<PAGE>

S CORPORATION DISTRIBUTION

The Company has declared an S Corporation distribution to its existing
shareholders in an aggregate amount representing all cash basis undistributed
earnings of the Company taxed or taxable to its shareholders through the date
of this offering which is the date the Company ceases to be an S Corporation.
This amount of the distribution is estimated to be approximately $6.8 million.
This distribution will be paid to those persons or entities who held shares of
common stock of the Company immediately prior to this offering. If the total
distribution is $6.8 million, then, $1,661,000 will be distributed to David J.
Teece (including family trusts); $291,000 will be distributed to Thomas M.
Jorde (including family trusts); $848,000 will be distributed to Gordon C.
Rausser (including family trusts); $1,178,000 will be distributed to Richard
J. Gilbert (including family trusts); $1,120,000 will be distributed to Robert
G. Harris (including family trusts); $70,000 will be distributed to Kimberly
D. Gilmour and $39,000 will be distributed to Donald A. Bunch; provided,
however, that with respect to Mr. Harris, Mr. Bunch and Ms. Gilmour, the
Company will retain all or part of such distribution as discussed below. Of
the $6.8 million dividend, approximately $2.0 million will be retained by the
Company to reduce the principal and interest of the promissory notes
receivable from shareholders, including $1,102,000, $39,000 and $70,000 from
Mr. Harris, Mr. Bunch and Ms. Gilmour, respectively. The remaining amounts
retained are from shareholders who are not officers or directors of the
Company.

STOCK OPTIONS AND REPURCHASES BY THE COMPANY

On April 22, 1997, David J. Teece, the Chairman of the Board, exercised an
option (granted in April 1994) to purchase from the Company 171,379 shares of
Common Stock for $357,782. On October 10, 1997, the Company repurchased 85,690
of these shares from Mr. Teece at his purchase price plus interest.

37
<PAGE>

PRINCIPAL AND SELLING SHAREHOLDERS

The following table sets forth certain information regarding beneficial
ownership of the Company's Common Stock as of November 15, 1997, and as
adjusted to reflect the sale of the shares of Common Stock offered hereby, by
(i) each person known by the Company to own more than 5% of the outstanding
shares of the Common Stock, (ii) each Named Executive Officer, (iii) each of
the Company's directors, (iv) all directors and executive officers as a group
and (v) each Selling Shareholder:

<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP BENEFICIAL OWNERSHIP
PRIOR TO OFFERING(1) AFTER OFFERING(1)(2)
---------------------- NUMBER OF ----------------------
NAME AND ADDRESS OF NUMBER OF SHARES BEING NUMBER OF
BENEFICIAL OWNER SHARES PERCENT OFFERED SHARES PERCENT
- ------------------- ------------ --------- ------------ ------------ ---------
<S> <C> <C> <C> <C> <C>
NAMED EXECUTIVE OFFICERS
AND DIRECTORS:
David J. Teece(3)..... 2,817,052 28.2% 458,657 2,358,395 17.6%
Gordon C. Rausser(4).. 1,499,571 15.0% 244,152 1,255,419 9.4%
Thomas M. Jorde(5).... 1,491,003 14.9% 244,152 1,246,851 9.3%
Robert G. Harris(6)... 1,178,235 11.8% 191,833 986,402 7.4%
Richard J.
Gilbert(7)........... 1,167,525 11.7% 191,833 975,692 7.3%
Kimberly D. Gilmour... 85,690 * 13,952 71,738 *
Donald A. Bunch....... 42,845 * 0 42,845 *
Mario M. Rosati....... 0 -- 0 0 --
William J. Spencer.... 0 -- 0 0 --
All directors and
executive officers as
a group (seven
persons)............. 8,281,921 82.8% 1,344,579 6,937,342 51.8%
OTHER SELLING
SHAREHOLDERS:
Daniel L. Rubinfeld... 499,143 4.9% 81,268 417,875 3.2%
Steven N. Wiggins..... 428,449 4.2% 69,758 358,691 2.7%
Joe D. Pace........... 321,337 3.2% 52,318 269,019 2.0%
Thomas E. Randlett.... 192,802 1.9% 31,391 161,411 1.2%
David F. Babbel....... 85,690 * 13,710 71,980 *
Barry Nalebuff........ 42,845 * 6,976 35,869 *
</TABLE>
- ---------------------
* Represents less than one percent.

(1) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission. Unless otherwise indicated in the
footnotes to this table, the persons and entities named in the table have
represented to the Company that they have sole voting and sole investment
power with respect to all shares beneficially owned, subject to community
property laws where applicable. Unless otherwise indicated, the address of
each of the individuals listed in the table is c/o LECG, Inc. 2000 Powell
Street, Emeryville, California 94608.

(2) This column assumes no exercise of the Underwriters' over-allotment
option. If, however, the Underwriters' over-allotment is exercised in
full, certain shareholders will sell an aggregate of 750,000 shares of
Common Stock. Specifically, in such event, in addition to those share
amounts set forth in the table above (i) Mr. Teece will sell 216,851
shares, (ii) Mr. Rausser will sell 115,435 shares, (iii) Mr. Jorde will
sell 115,435 shares, (iv) Mr. Harris will sell 90,700 shares, (v) Mr.
Gilbert will sell 90,700 shares,(vi) Ms. Gilmour will sell 6,597 shares,
(vii) Mr. Rubinfeld will sell 38,424 shares, (viii) Mr. Wiggins will sell
32,982 shares, (ix) Mr. Pace will sell 24,736 shares, (x) Mr. Randlett
will sell 14,842 shares and (xi) Mr. Nalebuff will sell 3,298 shares.

(3) Includes 1,285,347 shares held by two family trusts of which 226,712
shares will be offered.

(4) Includes 214,225 shares held by one family trust of which 40,692 shares
will be offered.

(5) Includes 501,286 shares held by three family trusts.

(6) Includes 85,690 shares held by two family trusts of which 7,690 shares
will be offered.

(7) Includes 347,044 shares held by three family trusts.

38
<PAGE>

DESCRIPTION OF CAPITAL STOCK

Upon the closing of this offering, the authorized capital stock of the
Company consists of 40,000,000 shares of Common Stock, $0.001 par value per
share, and 5,000,000 shares of Preferred Stock, $0.001 par value per share.

COMMON STOCK

On October 15, 1997, there were 10,000,000 shares of Common Stock
outstanding, held of record by 34 shareholders. The holders of Common Stock
are entitled to one vote for each share held of record on all matters
submitted to a vote of shareholders. Accordingly, holders of a majority of the
shares of Common Stock entitled to vote in any election of directors may elect
all of the directors standing for election. Subject to preferences that may be
applicable to any outstanding Preferred Stock, holders of Common Stock are
entitled to receive ratably such dividends, if any, as may be declared from
time to time by the Board of Directors out of funds legally available
therefor. See "Dividend Policy." In the event of a liquidation, dissolution or
winding up of the Company, holders of Common Stock are entitled to share
ratably in all assets remaining after payment of the Company's liabilities and
the liquidation preference, if any, of any outstanding preferred stock.
Holders of Common Stock have no preemptive rights and no rights to convert
their Common Stock into any other securities, and there are no redemption
provisions with respect to such shares. All of the outstanding shares of
Common Stock are, and the shares to be sold in the offering when issued and
paid for will be, fully paid and non-assessable. The rights, preferences and
privileges of holders of Common Stock are subject to, and may be adversely
affected by, the rights of the holders of shares of any series of preferred
stock which the Company may designate and issue in the future.

PREFERRED STOCK

The Board of Directors is authorized, without any action of the
shareholders, to provide for the issuance of one or more series of Preferred
Stock and to fix the designation, preferences, powers and relative,
participating, optional and other rights, qualifications, limitations and
restrictions thereof including, without limitation, the dividend rate, voting
rights, conversion rights, redemption price and liquidation preference per
series of Preferred Stock. Any series of Preferred Stock so issued may rank
senior to the Common Stock with respect to the payment of dividends or amounts
to be distributed upon liquidation, dissolution or winding up. There are no
agreements or understandings for the issuance of Preferred Stock, and the
Board of Directors has no present intent to issue any Preferred Stock. The
existence of authorized but unissued Preferred Stock may enable the Board of
Directors to render more difficult or to discourage an attempt to obtain
control of the Company by means of a merger, tender offer, proxy contest or
otherwise. For example, if in the due exercise of its fiduciary obligations,
the Board of Directors were to determine that a takeover proposal is not in
the Company's best interests, the Board of Directors could cause shares of
Preferred Stock to be issued without shareholder approval in one or more
private offerings or other transactions that might dilute the voting or other
rights of the proposed acquirer or insurgent shareholder or shareholder group.
The issuance of shares of Preferred Stock pursuant to the Board of Directors'
authority described above could decrease the amount of earnings and assets
available for distribution to holders of Common Stock and adversely affect the
rights and powers, including voting rights, of such holders and may have the
effect of delaying, deferring or preventing a change in control of the
Company.

TRANSFER AGENT AND REGISTRAR

The transfer agent and registrar for the Company's Common Stock is Norwest
Shareowner Services. Its address is 161 North Concord Exchange Street, South
St. Paul, Minnesota 55075.

LISTING

The Company has applied to list its Common Stock on the New York Stock
Exchange (the "NYSE") under the trading symbol " ". The Company has not
applied to list its Common Stock on any other exchange or quotation system.
See "Risk Factors--Absence of Prior Market and Possible Volatility of Stock
Price."

39
<PAGE>

SHARES ELIGIBLE FOR FUTURE SALE

Prior to this offering, there has been no market for the Common Stock of the
Company. Therefore, future sales of substantial amounts of Common Stock in the
public market could adversely affect the prevailing market price from time to
time. Furthermore, because only a limited number of shares will be available
for sale shortly after this offering because of certain contractual and legal
restrictions on resale (as described below), sales of substantial amounts of
Common Stock of the Company in the public market after the restrictions lapse
could adversely affect the prevailing market price and the ability of the
Company to raise equity capital in the future.

Upon completion of this offering, the Company will have outstanding an
aggregate 13,400,000 shares of Common Stock, assuming no exercise of the
Underwriters' over-allotment option. Of these outstanding shares of Common
Stock, the 5,000,000 shares sold in this offering will be freely tradeable
without restriction or further registration under the 1933 Act, unless
purchased by "affiliates" of the Company as that term is defined in Rule 144
under the 1933 Act. As a result of lock-up agreements between certain
shareholders and the Underwriters, shares will not become available for
sale in the public market until 180 days after the effectiveness of this
offering, subject in some cases to the volume and other restrictions of Rule
144 and Rule 701 of the Securities Act. Shares of Common Stock outstanding
upon completion of this offering and held by existing shareholders will be
"restricted securities" as that term is defined in Rule 144 under the
Securities Act ("Restricted Shares"). Restricted Shares may be sold in the
public market only if registered or if they qualify for an exemption from
registration under Rules 144, 144(k) or 701 promulgated under the 1933 Act,
which rules are summarized below. Sales of the Restricted Shares in the public
market, or the availability of such shares for sale, could adversely affect
the market price of the Common Stock.

All shareholders have entered into contractual "lock-up" agreements
providing that they will not offer, sell, contract to sell or grant any option
to purchase or otherwise dispose of the shares of Common Stock owned by them
or that could be purchased by them through the exercise of options to purchase
Common Stock of the Company for a period of 180 days after the date of this
Prospectus without the prior written consent of Donaldson, Lufkin & Jenrette
Securities Corporation, as Representative of the Underwriters.

In general, under Rule 144 as currently in effect, a person (or persons
whose shares are aggregated) who has beneficially owned Restricted Shares for
at least one year, but less than two years, including persons who may be
deemed to be "affiliates" of the Company, would be entitled to sell within any
three-month period a number of shares that does not exceed the greater of: (i)
one percent of the number of shares of Common Stock then outstanding (which
will equal approximately 134,000 shares immediately after this offering); or
(ii) the average weekly trading volume of the Common Stock during the four
calendar weeks preceding the filing of a Form 144 with respect to such sale.
Sales under Rule 144 are also subject to certain manner of sale provisions and
notice requirements and to the availability of current public information
about the Company. Under Rule 144(k), a person (or persons whose shares are
aggregated) who is not deemed to have been an affiliate of the Company at any
time during the 90 days preceding a sale, and who has beneficially owned for
at least two years the Restricted Shares proposed to be sold (including the
holding period of any prior owner except an affiliate), is entitled to sell
such shares without complying with the manner of sale, public information,
volume limitation or notice provisions of Rule 144. In general, under Rule 701
under the Securities Act as currently in effect, any employee, consultant or
advisor of the Company who purchases shares from the Company in connection
with a compensatory stock or option plan or other written agreement related to
compensation is eligible to resell such shares 90 days after the effective
date of the offering in reliance on Rule 144, but without compliance with
certain restrictions contained in Rule 144.

The Company has agreed not to sell or otherwise dispose of any shares of
Common Stock or any securities convertible into or exercisable or exchangeable
for Common Stock, or enter into any swap or similar agreement that transfers,
in whole or in part, the economic risk of ownership of the Common Stock, for a
period of 180 days after the date of this Prospectus, without the prior
written consent of Donaldson, Lufkin & Jenrette Securities Corporation,
subject to certain limited exceptions. See "Risk Factors--Shares Eligible for
Future Sale."

40
<PAGE>

The Company intends to file a registration statement under the Securities Act
covering 2,000,000 shares of Common Stock reserved for issuance under the 1997
Stock Option Plan and the 1997 Employee Stock Purchase Plan. See "Management--
Employee Benefit Plans." Such registration statement is expected to be filed
subsequently to the closing of this offering and will automatically become
effective upon filing. Accordingly, shares registered under such registration
statement will, subject to Rule 144 volume limitations applicable to affiliates
and the lapsing of the Company's repurchase options, be available for sale in
the open market, except to the extent that such shares are subject to vesting
restrictions with the Company or the contractual restrictions described above.

41
<PAGE>

UNDERWRITING

Subject to the terms and conditions of an Underwriting Agreement, dated
, 1997 (the "Underwriting Agreement"), the underwriters named below (the
"Underwriters"), who are represented by Donaldson, Lufkin & Jenrette
Securities Corporation ("DLJ") and Legg Mason Wood Walker, Incorporated
(collectively, the "Representatives"), have severally agreed to purchase from
the Company and the Selling Shareholders the respective number of shares of
Common Stock set forth opposite their names below.

<TABLE>
<CAPTION>
UNDERWRITERS NUMBER OF SHARES
<S> <C>
Donaldson, Lufkin & Jenrette Securities Corporation.........
Legg Mason Wood Walker, Incorporated........................
---------
Total..................................................... 5,000,000
=========
</TABLE>

The Underwriting Agreement provides that the obligations of the several
Underwriters to purchase and accept delivery of the shares of Common Stock
offered hereby are subject to approval by their counsel of certain legal
matters and to certain other conditions. The Underwriters are obligated to
purchase and accept delivery of all the shares of Common Stock offered hereby
(other than those shares covered by the over-allotment option described below)
if any are purchased.

The Underwriters initially propose to offer the shares of Common Stock in
part directly to the public at the initial public offering price set forth on
the cover page of this Prospectus and in part to certain dealers (including
the Underwriters) at such price less a concession not in excess of $ per
share. The Underwriters may allow, and such dealers may re-allow, to certain
other dealers a concession not in excess of $ per share. After the initial
offering of the Common Stock, the public offering price and other selling
terms may be changed by the Representatives at any time without notice. The
Underwriters do not intend to confirm sales to any accounts over which they
exercise discretionary authority.

The Selling Shareholders have granted to the Underwriters an option,
exercisable within 30 days after the date of this Prospectus, to purchase,
from time to time, in whole or in part, up to an aggregate of 750,000
additional Shares of Common Stock at the initial public offering price less
underwriting discounts and commissions. The Underwriters may exercise such
option solely to cover over-allotments, if any, made in connection with the
offering. To the extent that the Underwriters exercise such option, each
Underwriter will become obligated, subject to certain conditions, to purchase
its pro rata portion of such additional shares based on such Underwriter's
percentage underwriting commitment as indicated in the preceding table.

The Company and the Selling Shareholders have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act, or to contribute to payments that the Underwriters may be
required to make in respect thereof.

Each of the Company, its executive officers and directors and certain of the
shareholders of the Company (including the Selling Shareholders) has agreed,
subject to certain exceptions, 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) for a period of 180 days after the date of this Prospectus
without the prior written consent of Donaldson, Lufkin & Jenrette Securities
Corporation. In addition, during such period, the Company has also agreed not
to file any registration statement

42
<PAGE>

with respect to, or exercise any right with to, the registration of any shares
of Common Stock or any securities convertible into or exercisable or
exchangeable for Common Stock without Donaldson, Lufkin & Jenrette Securities
Corporation's prior written consent.

Prior to this offering, there has been no established trading market for the
Common Stock. The initial public offering price for the shares of Common Stock
offered hereby will be determined by negotiation among the Company,
representatives of the Selling Shareholders and the Representatives. The
factors to be considered in determining the initial public offering include
the history of and the prospects for the industry in which the Company
competes, the past and present operations of the Company, the historical
results of operations of the Company, the prospects for future earnings of the
Company, the recent market prices of securities of generally comparable
companies and the general condition of the securities markets at the time of
the offering.

Application will be made to list the Common Stock on the NYSE. In order to
meet the requirements for listing the Common Stock on the NYSE, the
Underwriters have undertaken to sell lots of 100 or more shares to a minimum
of 2,000 beneficial owners.

Other than in the United States, no action has been taken by the Company,
the Selling Shareholders or the Underwriters that would permit a public
offering of the shares of Common Stock offered hereby in any jurisdiction
where action for that purpose is required. The shares of Common Stock offered
hereby 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 of Common Stock 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 into whose possession this Prospectus comes 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 does
not constitute an offer to sell or a solicitation of an offer to buy any
shares of Common Stock offered hereby in any jurisdiction in which such an
offer or a solicitation is unlawful.

In connection with this offering, the Underwriters may engage in
transactions that stabilize, maintain or otherwise affect the price of the
Common Stock. Specifically, the Underwriters may over-allot the offering,
creating a syndicate short position. The Underwriters may bid for and purchase
shares of Common Stock in the open market to cover such syndicate short
position or to stabilize the price of the Common Stock. In addition, the
underwriting syndicate may reclaim selling concessions from syndicate members
and selected dealers if they repurchase previously distributed Common Stock in
syndicate covering transactions, in stabilizing transactions or otherwise.
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.

From time to time, in the ordinary course of business, Legg Mason Wood
Walker, Incorporated has provided and may in the future provide financial
advisory or other services to the Company. To date, Legg Mason Wood Walker,
Incorporated has received a fee of $25,000 from the Company for such services.

LEGAL MATTERS

Certain legal matters with respect to the legality of the issuance of the
shares of Common Stock offered hereby will be passed upon for the Company and
the Selling Shareholders by Wilson Sonsini Goodrich & Rosati, P.C., Palo Alto,
California. A member of the firm, Mario M. Rosati, is a member of the
Company's Board of Directors. Certain legal matters in connection with this
offering will be passed upon for the Underwriters by Katten Muchin & Zavis,
Chicago, Illinois.

43
<PAGE>

EXPERTS

The consolidated balance sheets of the Company and subsidiaries as of
December 31, 1995 and 1996 and September 1997 and the related consolidated
statements of income, shareholders' equity and cash flows for each of the
years in the three-year period ended December 31, 1996 and for the nine month
period ending September 30, 1997 appearing in this Prospectus and elsewhere in
the Registration Statement 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 giving said reports.

ADDITIONAL INFORMATION

The Company has filed with the Securities and Exchange Commission (the
"Commission"), a Registration Statement on Form S-1 under the 1933 Act with
respect to the shares of Common Stock offered hereby. This Prospectus does not
contain all of the information set forth in the Registration Statement and the
exhibits and schedules thereto. Certain items are omitted in accordance with
the rules and regulations of the Commission. For further information with
respect to the Company and the Common Stock offered hereby, reference is made
to the Registration Statement and the exhibits and schedules filed therewith.
Statements contained in this Prospectus as to the contents of any contract,
agreement or any other document are summaries of the material terms of such
contract, agreement or other document. With respect to each such contract,
agreement or other document filed as an exhibit to the Registration Statement,
reference is made to the exhibits for a more complete description of the
matter involved. A copy of the Registration Statement, and the exhibits and
schedules thereto, may be inspected without charge at the public reference
facilities maintained by the Commission in Room 1024, Judiciary Plaza, 450
Fifth Street, N.W., Washington, D.C. 20549, and at the Commission's Regional
Offices at Seven World Trade Center, Suite 1300, New York, New York 10048 and
500 West Madison Street, Chicago, Illinois 60661. Copies of such materials may
be obtained from the Public Reference Section of the Commission at Room 1024,
Judiciary Plaza, 450 Fifth Street N.W., Washington, D.C. 20549, and its
principal reference facilities in New York, New York and Chicago, Illinois, at
a prescribed rate. The Commission maintains a World Wide Web site that
contains reports, proxy and information statements and other information
regarding registrants that file electronically with the Commission. The
address of the site is http://www.sec.gov.

44
<PAGE>

LECG, INC.

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Accountants.......................................... F-2

Consolidated Balance Sheets................................................ F-3

Consolidated Statements of Income.......................................... F-4

Consolidated Statements of Shareholders' Equity............................ F-5

Consolidated Statements of Cash Flows...................................... F-6

Notes to Consolidated Financial Statements................................. F-7
</TABLE>

F-1
<PAGE>

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Shareholders and Board of Directors of LECG, Inc.:

We have audited the accompanying consolidated balance sheets of LECG, Inc.
(a California corporation) and subsidiaries as of December 31, 1995, December
31, 1996, and September 30, 1997, and the related consolidated statements of
income, shareholders' equity and cash flows for each of the years in the
three-year period ended December 31, 1996 and for the nine month period ended
September 30, 1997. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of LECG, Inc. and
subsidiaries as of December 31, 1995, December 31, 1996, and September 30,
1997 and the results of its operations and its cash flows for each of the
years in the three-year period ended December 31, 1996 and for the nine month
period ended September 30, 1997 in conformity with generally accepted
accounting principles.

San Francisco, California /s/ ARTHUR ANDERSEN LLP

October 31, 1997

F-2
<PAGE>

LECG, INC.

CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------
PRO FORMA
SEPTEMBER SEPTEMBER
30, 30,
1995 1996 1997 1997
----------- ----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C>
Assets
Current assets:
Cash..................... $ 597,928 $ 2,889 $ 1,298,565 $ 1,298,565
Accounts receivable,
net..................... 9,604,923 11,128,887 15,886,023 15,886,023
Prepaid expenses......... 96,985 144,714 164,823 164,823
----------- ----------- ----------- -----------
Total current assets... 10,299,836 11,276,490 17,349,411 17,349,411
Security deposits.......... 71,941 114,326 131,127 131,127
Property and equipment,
net....................... 1,194,227 1,806,888 2,996,997 2,996,997
----------- ----------- ----------- -----------
Total assets........... $11,566,004 $13,197,704 $20,477,535 $20,477,535
=========== =========== =========== ===========
Liabilities and Shareholders' Equity
Current liabilities:
Borrowings under line of
credit.................. $ 0 $ 0 $ 1,227,313 $ 1,227,313
Accounts payable and ac-
crued liabilities....... 318,807 630,442 1,865,541 1,865,541
Accrued expert and proj-
ect origination fees:
Related party.......... 2,611,418 2,944,438 4,546,586 4,546,586
Other.................. 935,298 1,732,727 3,031,053 3,031,053
Client retainers......... 359,565 497,876 725,208 725,208
Deferred purchase option
deposit................. 0 851,862 0 0
Deferred tax liability... 0 0 0 2,554,000
Distribution payable..... 0 0 0 2,182,000
Other current liabili-
ties.................... 140,876 276,749 486,013 486,013
----------- ----------- ----------- -----------
Total current liabili-
ties.................. 4,365,964 6,934,094 11,881,714 16,617,714
Deferred purchase option
deposit................... 851,862 0 0 0
----------- ----------- ----------- -----------
Total liabilities........ 5,217,826 6,934,094 11,881,714 16,617,714
----------- ----------- ----------- -----------
Shareholders' equity:
Common shares, $.001 par
value; authorized
40,000,000 shares;
issued and outstanding,
9,918,595, 10,014,996,
and 10,186,375 shares as
of December 31, 1995,
1996 and September 30,
1997, respectively...... 9,918 10,014 10,186 10,186
Additional paid-in
capital................. 2,628,868 5,101,219 5,619,729 5,186,729
Notes receivable from
shareholders............ (1,575,992) (3,045,169) (2,734,455) (1,404,455)
Retained earnings........ 5,285,384 4,197,546 5,700,361 67,361
----------- ----------- ----------- -----------
Total shareholders' eq-
uity.................. 6,348,178 6,263,610 8,595,821 3,859,821
----------- ----------- ----------- -----------
Total liabilities and
shareholders' equity.. $11,566,004 $13,197,704 $20,477,535 $20,477,535
=========== =========== =========== ===========
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements

F-3
<PAGE>

LECG, INC.

CONSOLIDATED STATEMENTS OF INCOME

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, NINE MONTHS ENDED SEPTEMBER 30,
-------------------------------------- -------------------------------
1994 1995 1996 1996 1997
------------ ------------ ------------ -------------------------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenues................ $ 24,548,023 $ 24,835,188 $ 31,391,870 $ 22,730,994 $ 31,993,685
Cost of services
Related party.......... 7,389,395 6,440,823 7,329,346 5,305,854 6,823,199
Other.................. 9,382,933 10,024,540 13,551,511 9,955,671 13,528,445
------------ ------------ ------------ --------------- ---------------
Total cost of servic-
es.................... 16,772,328 16,465,363 20,880,857 15,261,525 20,351,644
------------ ------------ ------------ --------------- ---------------
Gross profit........... 7,775,695 8,369,825 10,511,013 7,469,469 11,642,041
General and administra-
tive................... 3,639,158 4,047,524 5,258,389 3,554,787 5,834,127
------------ ------------ ------------ --------------- ---------------
Income before income
taxes and
extraordinary gain.... 4,136,537 4,322,301 5,252,624 3,914,682 5,807,914
Income taxes............ 89,801 83,005 188,650 139,085 236,771
------------ ------------ ------------ --------------- ---------------
Income before extraor-
dinary gain........... 4,046,736 4,239,296 5,063,974 3,775,597 5,571,143
Extraordinary gain:
Expiration of purchase
option, net of income
taxes of $34,084...... 0 0 0 0 817,778
------------ ------------ ------------ --------------- ---------------
Net income............. $ 4,046,736 $ 4,239,296 $ 5,063,974 $ 3,775,597 $ 6,388,921
============ ============ ============ =============== ===============
Pro forma income data
(unaudited):
Net income as reported............................ $ 5,063,974 $ 6,388,921
Pro forma adjustments............................. (1,964,926) (2,962,252)
------------ ---------------
Pro forma net income.............................. $ 3,099,048 $ 3,426,669
------------ ---------------
Pro forma net income per share.................... $ 0.31 $ 0.34
============ ===============
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements

F-4
<PAGE>

LECG, INC.

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

COMMON STOCK ADDITIONAL NOTES AND INTEREST
------------------- PAID-IN RECEIVABLE FROM RETAINED
SHARES AMOUNT CAPITAL SHAREHOLDERS EARNINGS TOTAL
---------- ------- ---------- ------------------ ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31,
1993................... 8,997,429 $ 8,997 $ 738,514 $ (470,810) $ 3,592,646 $ 3,869,347
Net income............. 4,046,736 4,046,736
Distributions to share-
holders............... (2,448,382) (2,448,382)
Sale of common shares.. 85,690 86 190,370 (152,365) 38,091
Accrued interest on
notes receivable from
shareholders.......... 53,049 (53,049)
Collection of notes re-
ceivable from share-
holders............... 33,557 33,557
---------- ------- ---------- ------------ ----------- -----------
Balance at December 31,
1994................... 9,083,119 9,083 981,933 (642,667) 5,191,000 5,539,349
Net income............. 4,239,296 4,239,296
Distributions to share-
holders............... (3,344,644) (3,344,644)
Sale of common shares.. 1,435,304 1,435 1,572,378 (982,930) 590,883
Repurchase of common
shares................ (599,828) (600) (3,400) (800,268) (804,268)
Accrued interest on
notes receivable from
shareholders.......... 77,957 (77,957)
Collection of notes re-
ceivable from share-
holders............... 127,562 127,562
---------- ------- ---------- ------------ ----------- -----------
Balance at December 31,
1995................... 9,918,595 9,918 2,628,868 (1,575,992) 5,285,384 6,348,178
Net income............. 5,063,974 5,063,974
Distributions to share-
holders............... (4,901,995) (4,901,995)
Sale of common shares.. 985,433 985 2,318,130 (1,619,174) 699,941
Repurchase of common
shares................ (889,032) (889) (519) (1,249,817) (1,251,225)
Accrued interest on
notes receivable from
shareholders.......... 154,740 (154,740)
Collection of notes re-
ceivable from share-
holders............... 466,926 466,926
Shareholder advances... (162,189) (162,189)
---------- ------- ---------- ------------ ----------- -----------
Balance at December 31,
1996................... 10,014,996 10,014 5,101,219 (3,045,169) 4,197,546 6,263,610
Net income............. 6,388,921 6,388,921
Distributions to
shareholders.......... (4,851,343) (4,851,343)
Sale of common shares.. 214,224 214 466,336 (87,014) 379,536
Repurchase of common
shares................ (42,845) (42) (95,187) 43,860 (34,763) (86,132)
Accrued interest on
notes receivable from
shareholders.......... 147,361 (147,361)
Collection of notes re-
ceivable from share-
holders............... 851,952 851,952
Shareholders advances.. (350,723) (350,723)
---------- ------- ---------- ------------ ----------- -----------
Balance at September 30,
1997................... 10,186,375 $10,186 $5,619,729 $ (2,734,455) $ 5,700,361 $ 8,595,821
========== ======= ========== ============ =========== ===========
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements

F-5
<PAGE>

LECG, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DEC 31, SEPTEMBER 30,
------------------------------------- ------------------------
1994 1995 1996 1996 1997
----------- ----------- ----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from operat-
ing activities:
Net income............. $ 4,046,736 $ 4,239,296 $ 5,063,974 $ 3,775,597 $ 6,388,921
Adjustments to recon-
cile net income to net
cash provided by oper-
ating activities:
Depreciation and amor-
tization.............. 272,205 340,245 435,163 315,052 471,725
Bad debt expense....... 329,758 100,584 358,374 95,659 187,720
Expiration of deferred
purchase option....... 0 0 0 0 (851,862)
Loss on disposal of
property and equip-
ment.................. 9,194 15,335 26,186 26,186 0
Decrease (increase) in
accounts receivable... (3,587,543) 61,759 (1,882,338) (1,618,968) (4,944,856)
Decrease (increase) in
prepaid expenses and
security deposits..... 27,640 15,347 (90,114) (74,035) (36,910)
Increase (decrease) in
accounts payable and
accrued liabilities... (337,577) (110,077) 311,635 609,704 1,235,099
Increase (decrease) in
accrued expert and
project origination
fees.................. 1,454,845 (572,888) 1,130,449 1,892,521 2,900,474
Increase in client re-
tainers............... 123,853 73,065 138,311 93,723 227,332
Increase (decrease) in
other liabilities..... (32,108) 19,422 135,873 103,886 209,264
----------- ----------- ----------- ----------- -----------
Net cash provided by
operating activities.. 2,307,003 4,182,088 5,627,513 5,219,325 5,786,907
----------- ----------- ----------- ----------- -----------
Cash flows from invest-
ing activities:
Purchase of property
and equipment......... (321,651) (563,358) (1,080,333) (732,225) (1,661,834)
Proceeds from disposal
of property and equip-
ment.................. 76,960 2,700 6,323 6,323 0
----------- ----------- ----------- ----------- -----------
Net cash used in in-
vesting activities.... (244,691) (560,658) (1,074,010) (725,902) (1,661,834)
----------- ----------- ----------- ----------- -----------
Cash flows from financ-
ing activities:
Borrowings under line
of credit............. 500,000 0 2,206,380 2,206,380 3,504,643
Repayments on line of
credit................ (500,000) 0 (2,206,380) (1,948,820) (2,277,330)
Sale of common stock... 38,091 590,883 699,941 528,084 379,536
Repurchase of common
stock................. 0 (804,268) (1,251,225) (1,251,225) (86,132)
Advances to sharehold-
ers................... 0 0 (162,189) (66,750) (350,723)
Collection of notes re-
ceivable from share-
holders............... 0 0 121,923 382,672 147,821
Distributions to share-
holders............... (2,414,825) (3,217,082) (4,556,992) (4,901,995) (4,147,212)
----------- ----------- ----------- ----------- -----------
Net cash used in fi-
nancing activities.... (2,376,734) (3,430,467) (5,148,542) (5,051,654) (2,829,397)
----------- ----------- ----------- ----------- -----------
Net increase (decrease)
in cash................ (314,422) 190,963 (595,039) (558,231) 1,295,676
Cash at beginning of pe-
riod................... 721,387 406,965 597,928 597,928 2,889
----------- ----------- ----------- ----------- -----------
Cash at end of period... $ 406,965 $ 597,928 $ 2,889 $ 39,697 $ 1,298,565
=========== =========== =========== =========== ===========
Supplemental cash flow
information:
Cash paid for inter-
est................... $ 10,497 $ 2,535 $ 12,008 $ 10,627 $ 11,443
=========== =========== =========== =========== ===========
Cash paid for state in-
come taxes............. $ 132,936 $ 73,652 $ 200,488 $ 164,167 $ 231,847
=========== =========== =========== =========== ===========
Noncash financing activ-
ities:
Sale of common stock
through issuance of
notes.................. $ 152,365 $ 982,930 $ 1,619,174 $ 931,747 $ 87,014
=========== =========== =========== =========== ===========
Collection of notes re-
ceivable through appli-
cation of distribu-
tions.................. $ 33,557 $ 127,562 $ 345,003 $ 345,003 $ 704,131
=========== =========== =========== =========== ===========
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements

F-6
<PAGE>

LECG, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(ALL INFORMATION FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 IS UNAUDITED)

1. DESCRIPTION OF BUSINESS:

The accompanying consolidated financial statements present the consolidated
financial position and results of operations of LECG, Inc. (formerly Law and
Economics Consulting Group, Inc.) a California Corporation formed in March
1988, and its wholly owned subsidiaries: LECG Limited (United Kingdom), and
Law and Economics Consulting Group Limited (New Zealand).

The Company is a provider of economic consulting services in matters related
to complex litigation, regulation, public policy, and strategic management and
derives its revenues almost exclusively therefrom. The Company provides its
economic consulting services to a broad client base, which includes national
governments, regulatory agencies, and development institutes and agencies in
the United States and abroad. Services are provided by academics, industry
leaders and former high-level government officials ("Experts") who are
supported by professional staff. The Company has offices in the United States
in California, Washington D.C., Illinois, New York, Texas, and Utah, as well
as in Ontario, Canada, Wellington, New Zealand, and London, England.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

Interim Consolidated Financial Information

The consolidated financial statements and related notes thereto for the nine
months ended September 30, 1996 are unaudited and have been prepared on the
same basis as the audited consolidated financial statements included herein.
In the opinion of management, such unaudited consolidated financial statements
include all normal recurring adjustments necessary to present fairly the
information set forth herein. Results of operations for the interim periods
are not necessarily indicative of the results of operations for the full year.

Risks and Uncertainties

The preparation of consolidated financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets, liabilities,
revenues and expenses. Actual results could differ from those estimates.

The Company's ability to retain current business and to attract new business
is highly dependent on the business generation capabilities and consulting
reputation of its Experts and professional staff and on the quality of their
work performed for the Company. There is no assurance that these individuals
will perform at previous levels, or that they will remain with the Company. In
the event that these individuals do not perform at previous levels or do not
remain with the Company, the Company's business, operating results and
financial condition could be materially and adversely affected. Additionally,
the Company's future performance depends in large part on its ability to
attract, develop and motivate highly-skilled Experts and professional staff.
The failure to recruit a significant number of Experts or qualified
professional staff could have a material adverse effect on the Company's
business, operating results and financial condition.

The Company's services involve risks of professional and other liability. If
the Company were found to have been negligent or to have breached its
obligations to its clients, the Company could be exposed to significant
liabilities and its reputation could be adversely affected.

Revenue Recognition

Revenue is recognized when services are provided. An allowance is provided
for any amounts considered uncollectable. Amounts collected in advance of
providing services are recorded as client retainers.

F-7
<PAGE>

LECG, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

The Company bills clients for hourly fees as well as reimbursable expenses.
Reimbursable expenses consist of direct out-of-pocket costs, telecommunication
charges and in-house reproduction services. In providing consulting services
to its clients, the Company engages Experts on both an exclusive and non-
exclusive basis. Once billings related to a specific job are collected, these
Experts are generally paid consulting fees in an amount equal to the Experts'
billing rate for time actually billed and collected.

Project origination fees are paid to Experts (some of whom are related
parties) for securing or managing projects. These project origination fees
approximate 15 percent of all collected professional staff fees (other than
Expert fees) and depend on project profitability. These project origination
fees are recorded on an accrual basis, although they are not paid to the
Experts until the project receivables have been collected.

Property and Equipment

Property and equipment are recorded at cost. Depreciation of furniture,
fixtures and equipment is calculated using the straight-line method over the
estimated useful lives of the assets, generally five to seven years. Leasehold
improvements are amortized over the estimated useful lives of the assets or
the lease term, whichever is shorter.

Income Taxes

The Company has elected Subchapter S Corporation status for income tax
purposes. As a result of this election, the income of the Company is reported
on the individual income tax returns of its shareholders, using a cash basis
of accounting. Accordingly, the consolidated statements of income for the
years ended December 31, 1994, 1995, and 1996 and the nine months ended
September 30, 1996 (unaudited) and 1997 do not include a provision for federal
and certain state income taxes. The recorded provision consists of state
income taxes at rates ranging from 1.5 to 10 percent.

The Subchapter S election will be terminated upon the closing of the
proposed initial public offering of common shares. Subsequently, the Company
will file income taxes as a C Corporation using an accrual basis of
accounting. A pro forma provision for income taxes has been presented as if
the Company was taxed as a C Corporation for the year ended December 31, 1996
and the nine months ended September 30, 1997. For those periods, Statement of
Financial Accounting Standards No. 109 (Statement 109), "Accounting for Income
Taxes" was used to calculate pro forma taxes on earnings and the pro forma
impact of deferred income taxes as a result of the conversion to C Corporation
status.

Under the asset and liability method of Statement 109, deferred tax assets
and liabilities are recognized for the future tax consequences attributable to
differences between the consolidated financial statement carrying amounts of
existing assets and liabilities and their respective tax bases. Deferred tax
assets and liabilities are measured using enacted tax rates expected to apply
to taxable income in the years in which those temporary differences are
expected to be recovered or settled. The effect on deferred tax assets and
liabilities of a change in tax rates is recognized in income in the period
that includes the enactment date.

At the time of the Company's Subchapter S Corporation status termination, a
net deferred income tax liability and a one-time additional provision for
income taxes will be recorded. The amount to be recorded will depend upon
differences between the financial reporting and tax bases of the Company's
assets and liabilities at the time. As of September 30, 1997, the pro forma
deferred tax liability is approximately $2,554,000 (see Note 10.)

Fair Value of Financial Instruments

All financial instruments are short term and are carried at amounts
approximating their fair value.

F-8
<PAGE>

LECG, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

New Accounting Pronouncements

Statement of Financial Accounting Standards No. 128 (Statement 128),
"Earnings per Share", issued in February 1997, simplifies the standards for
computing and presenting earnings per share. It replaces the presentation of
primary EPS with basic EPS and requires a reconciliation of the basic EPS
computation to a diluted EPS computation. Basic EPS excludes dilution and is
computed by dividing income available to common shareholders by the weighted-
average number of common shares outstanding for the period. Diluted EPS
reflects the potential dilution that would occur if securities or other
contracts to issue common shares were exercised or converted into common
shares or resulted in the issuance of common shares that then benefited from
the earnings of the entity. Adoption of this statement is effective for
financial statements issued for periods ending after December 15, 1997, and
earlier application is not permitted. Additional disclosure is required by
Statement 128, however; the Company does not expect the effects of Statement
128 to be material.

3. PROPERTY AND EQUIPMENT:

Property and equipment, at cost, are as follows:

<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31, SEPTEMBER 30, ESTIMATED
1995 1996 1997 USEFUL LIVES
------------ ------------ ------------- ------------
(YEARS)
<S> <C> <C> <C> <C>
Furniture and fixtures... $ 389,311 $ 674,396 $1,026,944 7
Equipment................ 1,484,471 1,976,878 2,972,116 5
Leasehold improvements... 245,842 439,007 753,055 5-7
---------- ---------- ----------
2,119,624 3,090,281 4,752,115
---------- ---------- ----------
Less: Accumulated depre-
ciation and amortiza-
tion.................... 925,397 1,283,393 1,755,118
---------- ---------- ----------
$1,194,227 $1,806,888 $2,996,997
========== ========== ==========
</TABLE>

Depreciation and amortization expense was $272,205, $340,245, $435,163,
$315,052, and $471,725 for the years ended December 31, 1994, 1995 and 1996
and the nine months ended September 30, 1996 (unaudited) and 1997,
respectively. Costs of repairs and maintenance of property and equipment are
expensed as incurred.

4. ACCOUNTS RECEIVABLE:

At December 31, 1995 and 1996 and September 30, 1997, the components of
accounts receivable were as follows:

<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31, SEPTEMBER 30,
1995 1996 1997
------------ ------------ -------------
<S> <C> <C> <C>
Billed amounts.......... $7,427,823 $ 8,882,499 $12,477,899
Unbilled amounts........ 2,377,100 2,546,388 3,867,541
Allowance for
uncollectable ac-
counts................. (200,000) (300,000) (459,417)
---------- ----------- -----------
Total................... $9,604,923 $11,128,887 $15,886,023
========== =========== ===========
</TABLE>

Unbilled amounts represent balances accrued by the Company for services that
have been performed but have not been billed to the customer. Billings are
generally done on a monthly basis for the prior month's services.

F-9
<PAGE>

LECG, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

The activity in the allowance for uncollectable accounts for the years ended
December 31, 1994, 1995, and 1996 and the nine months ended September 30, 1996
(unaudited) and 1997 was as follows:

<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
---------------------------- --------------------
1994 1995 1996 1996 1997
-------- -------- -------- ----------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Balance at beginning of
period................... $100,000 $200,000 $200,000 $200,000 $300,000
Provision for losses
expensed................. 329,758 100,584 358,374 95,659 187,720
Charge-offs, net of recov-
eries.................... (229,758) (100,584) (258,374) (95,659) (28,303)
-------- -------- -------- -------- --------
Balance at end of period.. $200,000 $200,000 $300,000 $200,000 $459,417
======== ======== ======== ======== ========
</TABLE>

5. LINE OF CREDIT:

The Company has a commercial line of credit with a bank which allows
borrowings up to $3,000,000. The Company is currently negotiating with the
bank to increase the line to $10,000,000. The Company had $1,772,687 available
under the line of credit at September 30, 1997. The line is secured by
receivables and fixed assets. The line expires May 31, 2000, and bears
interest at the bank's prime rate, which was 8.5 percent at September 30,
1997. The weighted average interest rate of borrowings under the line of
credit for the years ended December 31, 1996 and for the nine months ended
September 30, 1997 was 8.37 percent and 8.48 percent, respectively. During
1995, no amounts were borrowed. The line of credit agreement contains certain
restrictive covenants including maintaining a ratio of liabilities to tangible
net worth (as defined), among other restrictions. The Company is currently in
compliance with all restrictive covenants.

6. RETIREMENT BENEFITS:

The Company has a defined contribution plan under Section 401(k) of the
Internal Revenue Code. All employees with at least 90 days of employment are
eligible to participate. The Company has the option of matching a portion of
employee contributions to the plan on a current or retroactive basis. In 1997,
the Company intends to match 100% of employee contributions for the first
three percent of salary and 50% of employee contributions between three and
five percent of salary. A liability for matching contributions is included in
accounts payable and accrued liabilities at September 30, 1997.

7. SHAREHOLDERS' EQUITY:

Share sales have been executed in accordance with the First Amended
Shareholders' Buy-Sell Agreement (the Buy-Sell Agreement). At the discretion
of the Board of Directors, new shares can also be sold subject to the Policy
for Option Program for High Performing LECG Shareholder Principals (the
Agreement).

Under the terms of the Buy-Sell Agreement, individuals are offered shares by
the Board of Directors at a formula price based on a multiple of earnings plus
equity. The Company finances up to 80% of the purchase price with notes
receivable. The notes are repaid out of subsequent distributions to the
shareholder. The interest rate charged on these notes was seven percent for
all periods. Principal balances due to the Company under these notes were
$1,525,980, $2,866,357 and $2,688,244 at December 31, 1995, and 1996 and
September 30, 1997, respectively. The principal and interest earned on these
notes are offset against shareholders' equity in the consolidated statements
of shareholders' equity.

At the discretion of the Board of Directors and under the terms of the Buy-
Sell Agreement, shareholders may be required to sell shares back to the
Company. The Company has the right of first refusal for any shares offered for
sale by a selling shareholder. Any repurchases are made at a formula price
specified in either the

F-10
<PAGE>

LECG, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

Buy-Sell Agreement or the Agreement. Balances due on notes receivable are
offset against the repurchase proceeds and the remainder is remitted to the
selling shareholder.

These agreements are expected to be terminated prior to the proposed initial
public offering of shares.

In April 1994, the Company granted options to the Chairman of the Board to
purchase up to 342,759 common shares at $2.09 per share, which was estimated
fair value at the time. Of these options, 171,380 were exercisable upon grant,
with the remaining shares exercisable in April 1997. Any unexercised options
would expire at that time. During 1996, 171,379 of these options were
exercised. The remaining options were exercised in April 1997. No other
options were granted, exercised, expired or outstanding during any of the
periods presented.

8. RELATED-PARTY TRANSACTIONS:

Included in shareholders' equity are notes receivable from shareholders
arising from the sale of common shares (see Note 7), as well as other advances
to shareholders. These amounts are unsecured and payable from future
distributions. The notes bear interest at seven percent.

Related party cost of services and accrued Expert and project origination
fees represent Expert fees, project origination fees and other amounts paid or
owed to shareholders. These amounts are paid when the related project
receivables have been collected.

9. COMMITMENTS AND CONTINGENCIES:

The Company leases its office facilities and certain equipment under
operating leases through the year 2007.

Future minimum rental payments under these noncancellable leases with
initial or remaining lease terms in excess of one year are as follows:

<TABLE>
<CAPTION>
YEAR ENDING
SEPTEMBER 30
------------
<S> <C>
1997........................................................ $ 417,287
1998........................................................ 1,931,092
1999........................................................ 1,889,759
2000........................................................ 2,014,285
2001........................................................ 2,088,988
Thereafter.................................................. 4,217,541
-----------
Total minimum lease payments.............................. $12,558,952
===========
</TABLE>

Rent expense was $756,841, $978,113, $1,077,530, $712,902, and $1,329,862
for the years ended December 31, 1994, 1995, 1996 and the nine months ended
September 30, 1996 (unaudited) and 1997, respectively.

10. PRO FORMA FINANCIAL INFORMATION (UNAUDITED):

Pro Forma Adjustments To Consolidated Financial Statements

The following pro forma adjustments have been made to the historical
consolidated balance sheet as of September 30, 1997, and to the consolidated
results of operations for the year ended December 31, 1996 and the nine months
ended September 30, 1997:

a) The termination of the Subchapter S Corporation election will create a
deferred tax liability estimated at $2,554,000 as of September 30, 1997.
This amount has been reflected on the pro forma consolidated balance

F-11
<PAGE>

LECG, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

sheet as of September 30, 1997. This liability results from differing
methods of accounting for financial reporting and tax purposes. The
components of the pro forma deferred tax liability as of September 30, 1997
are as follows:

<TABLE>
<S> <C>
Deferred tax assets:
Accrued Expert and project origination fees.................. $ 3,106,832
Accounts payable............................................. 764,872
Other current liabilities.................................... 296,161
-----------
4,167,865
Deferred tax liabilities:
Accounts receivable, net..................................... (6,513,269)
Property and equipment....................................... (146,053)
Other........................................................ (62,543)
-----------
(6,721,865)
Net deferred tax liability................................. $(2,554,000)
===========
</TABLE>

b) Subsequent to the consummation of its proposed initial public offering, the
Company will declare a Subchapter S Corporation distribution to its
existing shareholders in an amount representing all undistributed cash
earnings through the termination of the Company's Subchapter S Corporation
status. At September 30, 1997, the Subchapter S Corporation distribution is
estimated to be approximately $3,512,000, of which $1,330,000 will be used
to reduce notes receivable from shareholders. This distribution is
reflected as a liability on the September 30, 1997 pro forma consolidated
balance sheet. The amount of this distribution will significantly increase
based upon actual cash basis earnings between September 30, 1997 and the
close of the Company's initial public offering.

c) The extraordinary gain of $817,778 that occurred in 1997 (see Note 11) is
excluded from pro forma consolidated net income for the nine months ended
September 30, 1997.

d) The pro forma consolidated statements of income for the year ended December
31, 1996 and the nine months ended September 30, 1997 have been adjusted to
reflect a provision for income taxes assuming an effective tax rate of 41
percent that would have been recorded had the Company been a C Corporation.

Pro Forma Net Income Per Share

Pro forma net income per share is computed using the weighted average common
shares outstanding at each reporting date. In accordance with Securities and
Exchange Commission requirements, stock issued within a one year period prior
to the initial filing of the registration relating to the IPO has been treated
as outstanding for all reported periods, using the treasury stock method.
Also, common share options issued after the date of the financial statements,
but before the effective date of the Registration Statement were included in
the calculation of weighted average shares for all reporting dates. The
treasury stock method was used to calculate the effect of these options and
the midpoint of the estimated initial public offering price was used as the
market price. No material dilutive effects resulted from common stock
equivalents outstanding prior to October 1997. The weighted average shares
were 10,049,098 and 10,189,284 as of December 31, 1996 and September 30, 1997,
respectively.

11. EXTRAORDINARY ITEM--DEFERRED PURCHASE OPTION DEPOSIT:

In June 1993, another major consulting firm purchased from the Company an
option to buy all of the Company's assets at a formula price, based on a
multiple of earnings and equity. The Company received $1,000,000 for granting
this option, which was deferred in the consolidated balance sheet, net of
applicable expenses. During 1997, the option agreement expired and the Company
recognized the $851,862, less taxes of $34,084, as an extraordinary gain in
1997.

F-12
<PAGE>

LECG, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONCLUDED)

12. SUBSEQUENT EVENTS:

Share Split

During October, 1997, LECG, Inc. amended its articles of incorporation
effecting a 2,142.2451-for-one share split of the Company's Common Shares,
assigning a par value of $.001 per common share, and increasing the number of
authorized common shares to 40,000,000. The Company also authorized 5,000,000
preferred shares. The accompanying financial statements and notes thereto have
been adjusted retroactively to give effect to the aforementioned actions.

1997 Stock Option Plan

In October, 1997, the Board of Directors and shareholders approved the
Company's 1997 Stock Option Plan (the "Option Plan"). The Option Plan provides
for the granting to employees of incentive stock options within the meaning of
Section 422 of the Internal Revenue Code of 1986, as amended (the "Internal
Revenue Code"), and for the granting to employees, directors and consultants
of nonstatutory stock options and stock purchase rights ("SPRs"). Unless
terminated sooner, the Option Plan will terminate automatically in 2007. A
total of 1,500,000 shares of common stock are currently authorized pursuant to
the Option Plan.

During November 1997, 340,000 stock options were granted to employees with
an exercise price of $11. These options have been included in the calculation
of weighted average shares outstanding as described in Note 10.

1997 Employee Stock Purchase Plan

F-13
<PAGE>

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY, ANY OF THE SELLING
SHAREHOLDERS OR ANY OF THE UNDERWRITERS. THIS PROSPECTUS DOES NOT CONSTITUTE AN
OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY THE SHARES BY ANYONE IN ANY
JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED, OR IN WHICH
THE PERSON MAKING THE OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO, OR TO
ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER
THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL CREATE ANY
IMPLICATION THAT INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSE-
QUENT TO ITS DATE.

-----------

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
<S> <C>
Prospectus Summary....................................................... 3
Risk Factors............................................................. 6
Use of Proceeds.......................................................... 9
S Corporation Termination................................................ 9
Dividend Policy.......................................................... 9
Capitalization........................................................... 10
Dilution................................................................. 11
Selected Financial Data.................................................. 12
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 13
Business................................................................. 18
Management............................................................... 31
Certain Transactions..................................................... 36
Principal and Selling Shareholders....................................... 38
Description of Capital Stock............................................. 39
Shares Eligible for Future Sale.......................................... 40
Underwriting............................................................. 42
Legal Matters............................................................ 43
Experts.................................................................. 44
Additional Information................................................... 44
Index to Financial Statements............................................ F-1
</TABLE>

-----------

UNTIL , 1997 (25 DAYS AFTER THE COMMENCEMENT OF THIS OFFERING), ALL
DEALERS EFFECTING TRANSACTIONS IN THE COMMON STOCK, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS IS IN ADDITION TO THE OBLIGATIONS OF DEALERS TO DELIVER A PROSPECTUS WHEN
ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

5,000,000 SHARES

[LOGO OF LECG, INC.]

COMMON STOCK

---------------

PROSPECTUS

---------------

DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION

LEGG MASON WOOD WALKER
INCORPORATED

, 1997

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

The following table sets forth the costs and expenses, other than
underwriting discounts and commissions, payable by the Registrant in
connection with the sale of Common Stock being registered. All amounts are
estimates except the SEC registration fee, the NASD filing fee and the NYSE
listing fee.

<TABLE>
<CAPTION>
AMOUNT TO
BE PAID
---------
<S> <C>
SEC Registration Fee............................................... $ 22,652
NASD Filing Fee.................................................... 7,975
NYSE Listing Fee................................................... 84,600
Legal Fees and Expenses............................................ 325,000
Accounting Fees and Expenses....................................... 150,000
Printing and Engraving Expenses.................................... 70,000
Blue Sky Fees and Expenses......................................... 15,000
Transfer Agent and Registrar Fees.................................. 10,000
Miscellaneous Expenses............................................. 114,773
--------
Total............................................................ $800,000
========
</TABLE>

ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS

Section 317 of the California Corporations Code allows for indemnification
of officers, directors, and other corporate agents in terms sufficiently broad
to indemnify such persons under certain circumstances for liabilities
(including reimbursement for expenses incurred) arising under the Securities
Act of 1933, as amended the "Act"). Article IV of the Registrant's Restated
Articles of Incorporation (Exhibit 3.1 hereto) and Article VI of the
Registrant's Bylaws (Exhibit 3.2 hereto) provide for indemnification of the
Registrant's directors, officers, employees and other agents to the extent and
under the circumstances permitted by the California Corporations Code. The
Registrant has also entered into agreements with its directors and executive
officers that will require the Registrant, among other things, to indemnify
them against certain liabilities that may arise by reason of their status or
service as directors and executive officers to the fullest extent not
prohibited by law.

The Underwriting Agreement (Exhibit 1.1) provides for indemnification by the
Underwriters of the Registrant, its directors and officers, and by the
Registrant of the Underwriters, for certain liabilities, including liabilities
arising under the Act, and affords certain rights of contribution with respect
thereto.

ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES

Since October 14, 1994, the Registrant has sold or issued the following
securities which were not registered under the Act:

(a) The Registrant issued and sold to Robert Harris 257,069 shares of
Common Stock and 449,871 shares of Common Stock on May 1, 1995 and
October 16, 1996, for $670,180 and $859,284 respectively.

(b) The Registrant issued and sold to Richard Gilbert 964,010 shares of
Common Stock on June 1, 1995 for $345,150.

(c) The Registrant issued and sold to Joseph Pace 214,225 shares of Common
Stock and 107,112 shares of Common Stock on July 31, 1995 and June 1,
1996, for $558,483 and $279,242 respectively.

(d) The Registrant issued and sold to Stephen Wiggins 428,449 shares of
Common Stock on April 1, 1996 for $1,180,590.

(e) The Registrant issued and sold to Donald Bunch 42,845 shares of Common
Stock on January 1, 1997 for $108,767.

(f) On April 22, 1997, David Teece exercised an option (granted in April
1994) to purchase from the Company 171,380 shares of Common Stock for
$358,184.

II-1
<PAGE>

In all such transactions which relied upon the exemption set forth in
Section 4(2) of the Act, the recipients of securities represented their
intentions to acquire the securities for investments only and not with a view
to or for sale in connection with any distribution thereof and appropriate
legends were affixed to the securities issued in such transactions.

ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a) Exhibits

<TABLE>
<C> <S>
1.1 Form of Underwriting Agreement.
3.1 Amended and Restated Articles of Incorporation of the Registrant.+
3.2 Amended and Restated Bylaws of the Registrant.+
4.1 Form of the Registrant's Common Stock Certificate.*
5.1 Opinion of Wilson Sonsini Goodrich & Rosati, Professional Corporation.
10.1 Form of Indemnification Agreement entered into by the Registrant with
each of its directors and executive officers.+
10.2 1997 Stock Option Plan.
10.3 1997 Employee Stock Purchase Plan.
10.4 Line of Credit Agreement between the Registrant and Wells Fargo Bank,
N.A dated May 31, 1996, as amended.
10.5 Promissory Note, dated July 1, 1993, between the Registrant and
Kimberly D. Gilmour, as amended.*
10.6 Promissory Note, dated January 1, 1997, between the Registrant and
Donald A. Bunch, as amended.*
10.7 Promissory Note, dated July 1, 1993, between the Registrant and Robert
G. Harris, as amended.*
10.8 Promissory Note, dated May 1, 1995, between the Registrant and Robert
G. Harris, as amended.*
10.9 Promissory Note, dated October 16, 1996, between the Registrant and
Robert G. Harris, as amended.*
10.10 Form of Principal Agreements.
10.11 Amended and Restated Shareholders' Agreement dated November 11, 1997.*
23.1 Consent of Wilson Sonsini Goodrich & Rosati, Professional Corporation
(included in Exhibit 5.1).
23.2 Consent of Arthur Andersen LLP, Independent Accountants (included on
page II-6).
24.1 Power of Attorney.+
27.1 Financial Data Schedule.
</TABLE>
- ---------------------
* To be filed by amendment.

+ Previously filed with the Commission.

(b) Financial Statement Schedules

Schedules not listed above have been omitted because the information
required to be set forth therein is not applicable or is shown in the
financial statements or notes thereto.

ITEM 17. UNDERTAKINGS

The undersigned hereby undertakes to provide to the Underwriters at the
closing specified in the Underwriting Agreement, certificates in such
denominations and registered in such names as required by the Underwriters to
permit prompt delivery to each purchaser.

II-2
<PAGE>

Insofar as indemnification for liabilities arising under the Act may be
permitted to directors, officers and controlling persons of the Registrant
pursuant to the provisions referenced in Item 14 of this Registration
Statement or otherwise, the Registrant has been advised that in the opinion of
the Securities and Exchange Commission such indemnification is against public
policy as expressed in the 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
hereunder, 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 Act and will be governed by the
final adjudication of such issue.

The undersigned Registrant hereby undertakes that:

(1) For purposes of determining any liability under the 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
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 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 OF 1933, THE REGISTRANT
HAS DULY CAUSED THIS AMENDMENT TO REGISTRATION STATEMENT ON FORM S-1 TO BE
SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE
CITY OF EMERYVILLE, STATE OF CALIFORNIA, ON THIS 26TH DAY OF NOVEMBER 1997.

LECG, INC.

/s/Thomas M. Jorde
By: _________________________________
NAME: THOMAS M. JORDE
TITLE: PRESIDENT

PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS AMENDMENT
TO 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>
* Chairman of the
- ----------------------------------- Board of Directors November 26, 1997
DAVID J. TEECE

/s/Thomas M. Jorde President (Principal November 26, 1997
- ----------------------------------- Executive Officer)
THOMAS M. JORDE

/s/Kimberly D. Gilmour Chief Financial November 26, 1997
- ----------------------------------- Officer (Principal
KIMBERLY D. GILMOUR Financial and
Accounting Officer)

</TABLE>

II-4
<PAGE>

SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>

* Director November 26, 1997
- -------------------------------------
RICHARD J. GILBERT

* Director November 26, 1997
- -------------------------------------
ROBERT G. HARRIS

* Director November 26, 1997
- -------------------------------------
GORDON C. RAUSSER

* Director November 26, 1997
- -------------------------------------
MARIO M. ROSATI

- ------------------------------------- Director
WILLIAM J. SPENCER

*By: /s/ Kimberly D. Gilmour
----------------------------------
KIMBERLY D. GILMOUR,
ATTORNEY-IN-FACT
</TABLE>

II-5
<PAGE>

EXHIBIT 23.2

[Letterhead of Arthur Andersen LLP]
CONSENT OF INDEPENDENT ACCOUNTANTS

As independent public accountants, we hereby consent to the use of our
reports (and to the references to our Firm) included in or made a part of this
registration statement.

/s/ Arthur Andersen LLP
ARTHUR ANDERSEN LLP

San Francisco, California

November 24, 1997

II-6
<PAGE>

EXHIBIT INDEX

<TABLE>
<CAPTION>
EXHIBIT SEQUENTIALLY
NUMBER EXHIBIT DESCRIPTION NUMBERED PAGE
------- ------------------- -------------
<C> <S> <C>
1.1 Form of Underwriting Agreement.
3.1 Amended and Restated Articles of Incorporation of the
Registrant.+
3.2 Amended and Restated Bylaws of the Registrant.+
4.1 Form of the Registrant's Common Stock Certificate.*
5.1 Opinion of Wilson Sonsini Goodrich & Rosati,
Professional Corporation.
10.1 Form of Indemnification Agreement entered into by the
Registrant with each of its directors and executive
officers.+
10.2 1997 Stock Option Plan.
10.3 1997 Employee Stock Purchase Plan.
10.4 Line of Credit Agreement between the Registrant and
Wells Fargo Bank, N.A. dated May 31, 1996, as amended.
10.5 Promissory Note, dated July 1, 1993, between the
Registrant and Kimberly D. Gilmour, as amended.*
10.6 Promissory Note, dated January 1, 1997, between the
Registrant and Donald A. Bunch, as amended.*
10.7 Promissory Note, dated July 1, 1993, between the
Registrant and Robert G. Harris, as amended.*
10.8 Promissory Note, dated May 1, 1995, between the
Registrant and Robert G. Harris as amended.*
10.9 Promissory Note, dated October 16, 1996, between the
Registrant and Robert G. Harris, as amended.*
10.10 Form of Principal Agreements.
10.11 Amended and Restated Shareholders' Agreement dated
November 11, 1997.*
23.1 Consent of Wilson Sonsini Goodrich & Rosati,
Professional Corporation (included in Exhibit 5.1).
23.2 Consent of Arthur Andersen LLP, Independent
Accountants (included on page II-6).
24.1 Power of Attorney.+
27.1 Financial Data Schedule.
</TABLE>
- ---------------------
* To be filed by amendment.

+ Previously filed with the Commission.

<PAGE>

EXHIBIT 1.1

5,000,000 Shares

LECG, INC.

Common Stock

UNDERWRITING AGREEMENT
----------------------

December __, 1997

DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
LEGG MASON WOOD WALKER, INCORPORATED
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:

LECG, INC., a California corporation (the "COMPANY"), proposes to issue and
sell to the several underwriters named in Schedule I hereto (the
"UNDERWRITERS"), and certain shareholders of the Company named in Schedule II
hereto (the "SELLING SHAREHOLDERS") severally propose to sell to the several
Underwriters, an aggregate of 5,000,000 shares of the common stock, par value
$.001 per share, of the Company (the "FIRM SHARES"), of which 3,400,000 shares
are to be issued and sold by the Company and 1,600,000 shares are to be sold by
the Selling Shareholders, each Selling Shareholder selling the amount set forth
opposite such Selling Shareholder's name in Schedule II hereto. The Selling
Shareholders also propose to sell to the several Underwriters not more than an
additional 750,000 shares of common stock, par value $.001 per share, 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
Shareholders 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-1 (File
<PAGE>

No. 333-37989), including a prospectus, relating to the Shares, which may be
amended. The registration statement, as 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 included in the Registration Statement, or, if the prospectus included
in the Registration Statement omits information in reliance on Rule 430A under
the Act and such information is included in a prospectus filed with the
Commission pursuant to Rule 424(b) under the Act or as part of a post-effective
amendment to the Registration Statement after the Registration Statement becomes
effective, the prospectus as so filed is 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
3,400,000 Firm Shares, (ii) each Selling Shareholder agrees, severally and not
jointly, to sell the number of Firm Shares set forth opposite such Selling
Shareholder'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, each of the Selling
Shareholders agrees severally and not jointly to sell up to the number of
Additional Shares set forth opposite such Selling Shareholder's name in Schedule
II hereto and the Underwriters shall have the right to purchase, severally and
not jointly, up to an aggregate of 750,000 Additional Shares from the Selling
Shareholders 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 from time to time by giving written notice
thereof to the Selling Shareholders 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 Shareholder is set forth on Schedule II hereto.
If less than the maximum number of Additional Shares are to be purchased
hereunder, such Selling Shareholders, severally and not jointly, agree to sell
to the Underwriters the number of Additional Shares (subject to such

2
<PAGE>

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 Shareholders bears to the total maximum number of Additional
Shares. If any Additional Shares are to be purchased, each Underwriter,
severally and not jointly, agrees to purchase from the Selling Shareholders 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 from such Selling Shareholder 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 180 days after the date of the Prospectus without the prior written
consent of Donaldson, Lufkin & Jenrette Securities Corporation. Notwithstanding
the foregoing, during such period (i) the Company may grant stock options
pursuant to the Company's existing stock option plans and (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. 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 180 days after the date of the Prospectus
without the prior written consent of Donaldson, Lufkin & Jenrette Securities
Corporation other than a registration statement on Form S-8 or any successor
form with respect to 2,000,000 shares of Common Stock reserved for issuance
under the Company's stock plans in effect on the date hereof. The Company
shall, prior to or concurrently with the execution of this Agreement, deliver an
agreement executed by (i) each Selling Shareholder, (ii) each of the directors
and officers of the Company who is not a Selling Shareholder and (iii) each
shareholder listed on Annex I hereto to the effect that such person will not,
during the period commencing on the date such person signs such agreement and
ending 180 days after the date of the Prospectus, without the prior written
consent of Donaldson, Lufkin & Jenrette 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 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 by the Underwriters for the Firm Shares shall be made at 9:00 A.M., New
York City time, on __________, 1997 (the "CLOSING DATE") following the date of
the initial public offering at such place as you shall designate. The Closing
Date and the location of delivery of and payment for the Firm Shares may be
varied by agreement between you and the Company.

Delivery to the Underwriters of and payment by the Underwriters for any
Additional Shares to be purchased by the Underwriters shall be made at such
place as you shall designate at 9:00 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

3
<PAGE>

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.

(b) To furnish to you three signed copies of the Registration Statement as
first filed with the Commission and of each amendment to it, including all
exhibits, 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

4
<PAGE>

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.

(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) 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 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 shareholders as soon as
practicable an earnings statement covering the twelve-month period ending
December 31, 1998 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 for
so long as the Company is subject to the Exchange Act, 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 Shareholder'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

5
<PAGE>

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 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., (vi) all
fees and expenses in connection with the preparation and filing of the
registration statement on Form 8-A relating to the Common Stock and all costs
and expenses incident to the listing of the Shares on the New York Stock
Exchange (the "NYSE"), (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 Shareholders hereunder for which
provision is not otherwise made in this Section.

(j) To use its best efforts to list, subject to notice of issuance, the
Shares on the NYSE and to maintain the listing of the Shares on the NYSE, the
American Stock Exchange or the Nasdaq National Market 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 any 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 11(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); any Rule 462(b) Registration Statement filed after the
effectiveness of this Agreement will become effective no later than 10:00 P.M.,
New York City time, on 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 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

6
<PAGE>

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 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.

(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 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 business, prospects, financial condition or
results of operations of 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 the outstanding shares of capital stock of the Company (including
the Shares to be sold by the Selling Shareholders) 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 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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<PAGE>

(g) All of the 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 conforms as to legal
matters to the description thereof contained 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 in any material
respect 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.

(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
federal or state securities or Blue Sky laws and as may be set forth in the
Registration Statement), (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 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.

(k) There are no legal or governmental proceedings pending or, to the
knowledge of the Company, 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 are required to be described in the Registration
Statement or the Prospectus and are not so described; nor are there any
statutes, regulations, 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.

(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") 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.

(m) Each of the Company and its subsidiaries has such permits, licenses,
consents,

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<PAGE>

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,
singly or in the aggregate, 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. 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 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 business,
prospects, 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, prospects, financial condition or
results of operations of the Company and its subsidiaries, taken as a whole.

(o) This Agreement has been duly authorized, executed and delivered by the
Company.

(p) Arthur Andersen LLP are independent public accountants with respect to
the Company and its subsidiaries as required by the Act.

(q) The consolidated financial statements included 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 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 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 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.

(r) 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,

9
<PAGE>

an "investment company" as such term is defined in the Investment Company Act of
1940, as amended.

(s) There are no contracts, agreements or understandings between the
Company and any person granting such person the right to require the Company to
file a registration statement under the Act with respect to any securities of
the Company or to require the Company to include such securities with the Shares
registered pursuant to the Registration Statement, except as described in the
Prospectus with respect to the Selling Shareholders.

(t) 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 has not occurred any material adverse change involving a 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 has not been any material adverse change involving a 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 has
incurred any material liability or obligation, direct or contingent.

(u) Each certificate signed by any officer of the Company and delivered to
the Underwriters or counsel for the Underwriters shall be deemed to be a
representation and warranty by the Company to the Underwriters as to the matters
covered thereby.

Section 7. Representations and Warranties of the Selling Shareholders.
Each Selling Shareholder represents and warrants to each Underwriter that:

(a) Such Selling Shareholder is the lawful owner of the Shares to be sold
by such Selling Shareholder 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 Shareholder 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 Shareholder and _________________________, as Custodian, relating to the
deposit of the Shares to be sold by such Selling Shareholder (the "CUSTODY
AGREEMENT") and the Power of Attorney of such Selling Shareholder appointing
certain individuals as such Selling Shareholder'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 Shareholder in the manner provided herein and
therein.

(d) The Custody Agreement of such Selling Shareholder has been duly
authorized, executed and delivered by such Selling Shareholder and is a valid
and binding agreement of such Selling Shareholder, enforceable in accordance
with its terms.

(e) The Power of Attorney of such Selling Shareholder has been duly
authorized,

10
<PAGE>

executed and delivered by such Selling Shareholder and is a valid and binding
instrument of such Selling Shareholder, enforceable in accordance with its
terms, and, pursuant to such Power of Attorney, such Selling Shareholder has,
among other things, authorized the Attorneys, or any one of them, to execute and
deliver on such Selling Shareholder'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 Shareholder pursuant to this Agreement.

(f) Upon delivery of and payment for the Shares to be sold by such Selling
Shareholder pursuant to this Agreement, good and clear title to such Shares will
pass to the 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 Shareholder by or on
behalf of such Selling Shareholder, the compliance by such Selling Shareholder
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 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
organizational documents of such Selling Shareholder, if such Selling
Shareholder is not an individual, or any indenture, loan agreement, mortgage,
lease or other agreement or instrument to which such Selling Shareholder is a
party or by which such Selling Shareholder or any property of such Selling
Shareholder 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 Shareholder or any property
of such Selling Shareholder.

(h) The information in the Registration Statement under the caption
"Principal and Selling Shareholders" which specifically relates to such Selling
Shareholder does not, and will not on the Closing Date, 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 the light of the
circumstances under which they were made, not misleading.

(i) At any time during the period described in Section 5(d), if there is
any change in the information referred to in Section 7(i), such Selling
Shareholder will immediately notify you of such change.

(j) Each certificate signed by or on behalf of such Selling Shareholder
and delivered to the Underwriters or counsel for the Underwriters shall be
deemed to be a representation and warranty by such Selling Shareholder to the
Underwriters as to the matters covered thereby.

(k) Each Selling Shareholder has received and reviewed a copy of the
Registration Statement and the Prospectus and each Selling Shareholder has no
reason to believe that (A) at the time the Registration Statement became
effective or on the date of this Agreement that the Registration Statement and
the prospectus included therein 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 (B) each Selling
Shareholder has no reason to believe that the Prospectus, as amended or
supplemented, if applicable, contains any untrue statement of 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.

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<PAGE>

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 Securities Exchange Act of 1934, as amended
(the "EXCHANGE ACT"), from and against any and all losses, claims, damages,
liabilities and judgments (including, without limitation, any 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 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, except insofar as such losses, claims,
damages, liabilities or judgments are caused by any such untrue statement or
omission or alleged untrue statement or omission based upon information relating
to any Underwriter furnished in writing to the Company by such Underwriter
through you expressly for use therein. Notwithstanding the foregoing, the
aggregate liability of any Selling Shareholder pursuant to this Section 8(a)
shall be limited to an amount equal to the total proceeds (before deducting
expenses) received by such Selling Shareholder from the Underwriters for the
sale of the Shares sold by such Selling Shareholder under the Registration
Statement; provided, however, that the foregoing indemnity agreement with
respect to any preliminary prospectus shall not inure to the benefit of any
Underwriter from who the person asserting any such losses, claims, damages and
liabilities and judgements purchased Shares, or any person controlling such
Underwriter, if a copy of the Prospectus (as then amended or supplemented if the
Company shall have furnished any amendments or supplements thereto) was not sent
or given by or on behalf of such Underwriter to such person, if required by law
so to have been delivered, at or prior to the written confirmation of the sale
of the Shares to such person, and if the Prospectus (as so amended or
supplemented) would have cured the defect giving rise to such loss, claim,
damage, liability or judgment.

(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
Shareholder and each person, if any, who controls such Selling Shareholder
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 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

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<PAGE>

the 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 Shareholders and all persons, if
any, who control any Selling Shareholder 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 Shareholders and such control persons of any Selling Shareholders,
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 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.

(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

13
<PAGE>

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 Shareholders 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 incurred by such indemnified party in
connection with investigating or defending any action or claim, 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.
Notwithstanding the foregoing, no Selling Shareholder shall be required to
provide indemnification under this Section 8 with respect to a breach of the
representations and warranties contained in Section 7 hereof, expressly for use
in the Registration Statement, any preliminary prospectus, the Prospectus or any
amendments or supplements thereto having contained an untrue statement or having
failed to state a material fact necessary to make such information not
misleading, unless (i) the Underwriters seeking indemnification shall have first
made a written demand for payment on the Company with respect to any losses,
claims, damages or liabilities arising out of such breach and the Company shall
have failed to make such demanded payment (x) within thirty (30) days after
receipt of a written demand for fees and expenses of counsel and other
litigation costs and (y) within ninety (90) days after receipt of a written
demand for all other losses, claims, damages or liabilities, including, without
limitation, any final settlements or judgments. The Company

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<PAGE>

agrees to indemnify, to the extent permitted by law, each Selling Shareholder
for any and all amounts paid by such Selling Shareholder pursuant to this
Section 8.

(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 Shareholder hereby designates LECG, Inc., 2000 Powell
Street, Suite 600, Emeryville, California 94608 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 Shareholder 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 Shareholder, 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 10:00 P.M., New York City time, on the
date of this Agreement; and, at the Closing Date, 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 Thomas M. Jorde and Kimberly D. Gilmour, in their
capacities as the President and the Chief Financial Officer of the Company,
respectively, confirming the matters set forth in Sections 6(t), 9(a) and 9(b)
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 date of the latest balance sheet included in the Registration
Statement and the Prospectus, (i) there shall not have occurred any change or
any development involving a prospective 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
change or any development involving a prospective 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, in any such
case described in clause 9(d)(i), 9(d)(ii) or 9(d)(iii), is material and adverse
and, in your judgment, makes it impracticable to market the Shares on the terms
and in the manner contemplated in the Prospectus.

(e) All the representations and warranties of each Selling Shareholder
contained in

15
<PAGE>

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 from each Selling
Shareholder to such effect and to the effect that such Selling Shareholder 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
Shareholder on or prior to the Closing Date.

(f) You shall have received on the Closing Date an opinion (satisfactory to
you and counsel for the Underwriters), dated the Closing Date, of Wilson Sonsini
Goodrich & Rosati counsel for the Company and the Selling Shareholders, to the
effect set forth on Exhibit A, hereto.

The opinion of Wilson Sonsini Goodrich & Rosati described on Exhibit A
shall be rendered to you at the request of the Company and the Selling
Shareholders and shall so state therein.

(g) You shall have received on the Closing Date an opinion, dated the
Closing Date, of Katten Muchin & Zavis, counsel for the Underwriters, as to the
matters referred to in Sections 9(f)(iv), 9(f)(vi) (but only with respect to the
Company), 9(f)(ix) (but only with respect to the statements under the caption
"Description of Capital Stock" and "Underwriting") and 9(f)(xvii).

In giving such opinions with respect to the matters covered by Section
9(f)(xvii), Wilson Sonsini Goodrich & Rosati and Katten Muchin & Zavis 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 Arthur Andersen, 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, subject to notice of issuance,
on the NYSE.

(k) The Company and the Selling Shareholders 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 Shareholders, as the case may be, on or prior to the Closing Date.

(l) You shall have received on the Closing Date, a certificate of each
Selling Shareholder who is not a U.S. Person (as defined under applicable U.S.
federal tax legislation) to the effect that such Selling Shareholder 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-8 (or other applicable form or
statement specified by Treasury Department regulations in lieu

16
<PAGE>

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 and other matters related to the issuance of such Additional
Shares.

Section 10. Effectiveness of Agreement and Termination. This Agreement
shall become effective upon the later of (i) the execution and delivery of this
Agreement by the parties hereto and (ii) release of notification of
effectiveness of the Registration Statement by the Commission.

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 judgment, is
material and adverse and, in your 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 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 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
financial 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 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

17
<PAGE>

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 Shareholders 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 Shareholders. 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 Shareholders. Each Selling
Shareholder agrees with you and the Company:

(a) To pay or to cause to be paid all transfer taxes payable in connection
with the transfer of the Shares to be sold by such Selling Shareholder to the
Underwriters.

(b) To do and perform all things to be done and performed by such Selling
Shareholder 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
Shareholder 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 LECG,
Inc., 2000 Powell Street, Suite 600, Emeryville, California 94608, (ii) if to
the Selling Shareholders, to [NAME OF ATTORNEY-IN-FACT] c/o [ADDRESS OF
ATTORNEY-IN-FACT] 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.

The respective indemnities, contribution agreements, representations,
warranties and other statements of the Company, the Selling Shareholders 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 Shareholder or any person controlling such Selling
Shareholder, (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 Company agrees to reimburse the several
Underwriters for all out-of-pocket expenses

18
<PAGE>

(including the fees and disbursements of counsel) reasonably 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
Company also agrees 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 and disbursements of
counsel) incurred by them in connection with enforcing their rights hereunder
(including, without limitation, pursuant to Section 8 hereof).

Except as otherwise provided, this Agreement has been and is made solely
for the benefit of and shall be binding upon the Company, the Selling
Shareholders, 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.

19
<PAGE>

Please confirm that the foregoing correctly sets forth the agreement among
the Company, the Selling Shareholders and the several Underwriters.

Very truly yours,

LECG, INC.

By:
------------------------------
Title:

The Selling Shareholders named in Schedule II
hereto, acting severally

By:
------------------------------
Attorney-in-fact

DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
LEGG MASON WOOD WALKER, INCORPORATED

Acting severally on behalf of
themselves and the several
Underwriters named in
Schedule I hereto

By: DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION

By
-----------------------------

20
<PAGE>

SCHEDULE I
----------

Number of Firm Shares
Underwriters to be Purchased
- ------------ ---------------------

Donaldson, Lufkin & Jenrette Securities
Corporation

Legg Mason Wood Walker, Incorporated

Total
-------------

<PAGE>

SCHEDULE II
-----------

Selling Shareholders
--------------------

<TABLE>
<CAPTION>
Maximum Number of
Number of Firm Additional Shares
Name Shares Being Sold Subject to Sale
- ---- ----------------- -----------------
<S> <C> <C>

Total 1,600,000 750,000
</TABLE>

<PAGE>

Annex I

[ALL SHAREHOLDERS]

<PAGE>

EXHIBIT 5.1

November 26, 1997

LECG, Inc.
2000 Powell Street
Suite 600
Emeryville, CA 94608

Re: Registration Statement on Form S-1
----------------------------------

Ladies and Gentlemen:

We have examined the Registration Statement on Form S-1 filed by you with
the Securities and Exchange Commission (the "Commission") on October 16, 1997
(as such may be further amended or supplemented, the "Registration Statement"),
in connection with the registration under the Securities Act of 1933, as
amended, of 5,750,000 shares of your Common Stock (the "Shares"). The Shares,
which include up to 750,000 shares of Common Stock issuable pursuant to an over-
allotment option granted to the underwriters (the "Underwriters"), are to be
sold to the Underwriters as described in such Registration Statement for sale to
the public. As your counsel in connection with this transaction, we have
examined the proceedings proposed to be taken by you in connection with the
issuance and sale of the Shares.

Based on the foregoing, it is our opinion that, upon approval by the
pricing committee duly authorized by the Company's Board of Directors, the
Shares, when issued and sold in the manner described in the Registration
Statement, will be legally and validly issued, fully paid and nonassessable.

We consent to the use of this opinion as an exhibit to the Registration
Statement, and further consent to the use of our name wherever appearing in the
Registration Statement, including the prospectus constituting a part thereof,
and any amendments thereto, which has been approved by us as such may be further
amended or supplemented, or incorporated by reference in any registration
statement relating to the prospectus filed pursuant to Rule 462(b) of the Act.

Very truly yours,

WILSON SONSINI GOODRICH & ROSATI
Professional Corporation

/s/ WILSON SONSINI GOODRICH & ROSATI
------------------------------------

<PAGE>

EXHIBIT 10.2

LECG, INC.
1997 STOCK PLAN

1. Purposes of the Plan. The purposes of this Stock Plan are:
--------------------

. to attract and retain the best available personnel for positions of
substantial responsibility,

. to provide additional incentive to Employees, Directors and
Consultants, and

. to promote the success of the Company's business.

Options granted under the Plan may be Incentive Stock Options or Nonstatutory
Stock Options, as determined by the Administrator at the time of grant. Stock
Purchase Rights may also be granted under the Plan.

2. Definitions. As used herein, the following definitions shall apply:
-----------

(a) "Administrator" means the Board or any of its Committees as shall be
-------------
administering the Plan, in accordance with Section 4 of the Plan.

(b) "Applicable Laws" means the requirements relating to the
---------------
administration of stock option plans under U. S. state corporate laws, U.S.
federal and state securities laws, the Code, any stock exchange or quotation
system on which the Common Stock is listed or quoted and the applicable laws of
any foreign country or jurisdiction where Options or Stock Purchase Rights are,
or will be, granted under the Plan.

(d) "Code" means the Internal Revenue Code of 1986, as amended.
----

(e) "Committee" means a committee of Directors appointed by the Board in
---------
accordance with Section 4 of the Plan.

(f) "Common Stock" means the common stock of the Company.
------------

(g) "Company" means LECG, Inc., a California corporation.
-------

(h) "Consultant" means any person, including an advisor, engaged by the
----------
Company or a Parent or Subsidiary to render services to such entity.
<PAGE>

(i) "Director" means a member of the Board.
--------

(j) "Disability" means total and permanent disability as defined in
----------
Section 22(e)(3) of the Code.

(k) "Employee" means any person, including Officers and Directors,
--------
employed by the Company or any Parent or Subsidiary of the Company. A Service
Provider shall not cease to be an Employee in the case of (i) any leave of
absence approved by the Company or (ii) transfers between locations of the
Company or between the Company, its Parent, any Subsidiary, or any successor.
For purposes of Incentive Stock Options, no such leave may exceed ninety days,
unless reemployment upon expiration of such leave is guaranteed by statute or
contract. If reemployment upon expiration of a leave of absence approved by the
Company is not so guaranteed, on the 181st day of such leave any Incentive Stock
Option held by the Optionee shall cease to be treated as an Incentive Stock
Option and shall be treated for tax purposes as a Nonstatutory Stock Option.
Neither service as a Director nor payment of a director's fee by the Company
shall be sufficient to constitute "employment" by the Company.

(l) "Exchange Act" means the Securities Exchange Act of 1934, as amended.
------------

(m) "Fair Market Value" means, as of any date, the value of Common Stock
-----------------
determined as follows:

(i) If the Common Stock is listed on any established stock exchange
or a national market system, including without limitation the Nasdaq National
Market or The Nasdaq SmallCap Market of The Nasdaq Stock Market, its Fair Market
Value shall be the closing sales price for such stock (or the closing bid, if no
sales were reported) as quoted on such exchange or system for the last market
trading day prior to the time of determination, as reported in The Wall Street
Journal or such other source as the Administrator deems reliable;

(ii) If the Common Stock is regularly quoted by a recognized
securities dealer but selling prices are not reported, the Fair Market Value of
a Share of Common Stock shall be the mean between the high bid and low asked
prices for the Common Stock on the last market trading day prior to the day of
determination, as reported in The Wall Street Journal or such other source as
the Administrator deems reliable; or

(iii) In the absence of an established market for the Common Stock,
the Fair Market Value shall be determined in good faith by the Administrator.

(n) "Incentive Stock Option" means an Option intended to qualify as an
----------------------
incentive stock option within the meaning of Section 422 of the Code and the
regulations promulgated thereunder.

-2-
<PAGE>

(o) "Nonstatutory Stock Option" means an Option not intended to qualify
-------------------------
as an Incentive Stock Option.

(p) "Notice of Grant" means a written or electronic notice evidencing
---------------
certain terms and conditions of an individual Option or Stock Purchase Right
grant. The Notice of Grant is part of the Option Agreement.

(q) "Officer" means a person who is an officer of the Company within the
-------
meaning of Section 16 of the Exchange Act and the rules and regulations
promulgated thereunder.

(r) "Option" means a stock option granted pursuant to the Plan.
------

(s) "Option Agreement" means an agreement between the Company and an
----------------
Optionee evidencing the terms and conditions of an individual Option grant. The
Option Agreement is subject to the terms and conditions of the Plan.

(t) "Option Exchange Program" means a program whereby outstanding Options
-----------------------
are surrendered in exchange for Options with a lower exercise price.

(u) "Optioned Stock" means the Common Stock subject to an Option or Stock
--------------
Purchase Right.

(v) "Optionee" means the holder of an outstanding Option or Stock
--------
Purchase Right granted under the Plan.

(w) "Parent" means a "parent corporation," whether now or hereafter
------
existing, as defined in Section 424(e) of the Code.

(x) "Plan" means this 1997 Stock Plan.
----

(y) "Restricted Stock" means shares of Common Stock acquired pursuant
----------------
to a grant of Stock Purchase Rights under Section 11 of the Plan.

(z) "Restricted Stock Purchase Agreement" means a written agreement
-----------------------------------
between the Company and the Optionee evidencing the terms and restrictions
applying to stock purchased under a Stock Purchase Right. The Restricted Stock
Purchase Agreement is subject to the terms and conditions of the Plan and the
Notice of Grant.

(aa) "Rule 16b-3" means Rule 16b-3 of the Exchange Act or any successor to
----------
Rule 16b-3, as in effect when discretion is being exercised with respect to the
Plan.

(bb) "Section 16(b)" means Section 16(b) of the Exchange Act.
-------------

-3-
<PAGE>

(cc) "Service Provider" means an Employee, Director or Consultant.
----------------

(dd) "Share" means a share of the Common Stock, as adjusted in accordance
-----
with Section 13 of the Plan.

(ee) "Stock Purchase Right" means the right to purchase Common Stock
--------------------
pursuant to Section 11 of the Plan, as evidenced by a Notice of Grant.

(ff) "Subsidiary" means a "subsidiary corporation", whether now or
----------
hereafter existing, as defined in Section 424(f) of the Code.

3. Stock Subject to the Plan. Subject to the provisions of Section 13 of the
-------------------------
Plan, the maximum aggregate number of Shares which may be optioned and sold
under the Plan is 1,500,000 Shares. The Shares may be authorized, but unissued,
or reacquired Common Stock.

If an Option or Stock Purchase Right expires or becomes unexercisable
without having been exercised in full, or is surrendered pursuant to an Option
Exchange Program, the unpurchased Shares which were subject thereto shall become
available for future grant or sale under the Plan (unless the Plan has
terminated); provided, however, that Shares that have actually been issued under
--------
the Plan, whether upon exercise of an Option or Right, shall not be returned to
the Plan and shall not become available for future distribution under the Plan,
except that if Shares of Restricted Stock are repurchased by the Company at
their original purchase price, such Shares shall become available for future
grant under the Plan.

4. Administration of the Plan.
--------------------------

(a) Procedure.
---------

(i) Multiple Administrative Bodies. The Plan may be administered by
------------------------------
different Committees with respect to different groups of Service Providers.

(ii) Section 162(m). To the extent that the Administrator determines
--------------
it to be desirable to qualify Options granted hereunder as "performance-based
compensation" within the meaning of Section 162(m) of the Code, the Plan shall
be administered by a Committee of two or more "outside directors" within the
meaning of Section 162(m) of the Code.

(iii) Rule 16b-3. To the extent desirable to qualify
----------
transactions hereunder as exempt under Rule 16b-3, the transactions contemplated
hereunder shall be structured to satisfy the requirements for exemption under
Rule 16b-3.

(iv) Other Administration. Other than as provided above, the Plan
--------------------
shall be administered by (A) the Board or (B) a Committee, which committee shall
be constituted to satisfy Applicable Laws.

-4-
<PAGE>

(b) Powers of the Administrator. Subject to the provisions of the Plan,
---------------------------
and in the case of a Committee, subject to the specific duties delegated by the
Board to such Committee, the Administrator shall have the authority, in its
discretion:

(i) to determine the Fair Market Value;

(ii) to select the Service Providers to whom Options and Stock
Purchase Rights may be granted hereunder;

(iii) to determine the number of shares of Common Stock to be covered
by each Option and Stock Purchase Right granted hereunder;

(iv) to approve forms of agreement for use under the Plan;

(v) to determine the terms and conditions, not inconsistent with
the terms of the Plan, of any Option or Stock Purchase Right granted hereunder.
Such terms and conditions include, but are not limited to, the exercise price,
the time or times when Options or Stock Purchase Rights may be exercised (which
may be based on performance criteria), any vesting acceleration or waiver of
forfeiture restrictions, and any restriction or limitation regarding any Option
or Stock Purchase Right or the shares of Common Stock relating thereto, based in
each case on such factors as the Administrator, in its sole discretion, shall
determine;

(vi) to reduce the exercise price of any Option or Stock Purchase
Right to the then current Fair Market Value if the Fair Market Value of the
Common Stock covered by such Option or Stock Purchase Right shall have declined
since the date the Option or Stock Purchase Right was granted;

(vii) to institute an Option Exchange Program;

(viii) to construe and interpret the terms of the Plan and awards
granted pursuant to the Plan;

(ix) to prescribe, amend and rescind rules and regulations relating
to the Plan, including rules and regulations relating to sub-plans established
for the purpose of qualifying for preferred tax treatment under foreign tax
laws;

(x) to modify or amend each Option or Stock Purchase Right (subject
to Section 15(c) of the Plan), including the discretionary authority to extend
the post-termination exercisability period of Options longer than is otherwise
provided for in the Plan;

(xi) to allow Optionees to satisfy withholding tax obligations by
electing to have the Company withhold from the Shares to be issued upon exercise
of an Option or Stock Purchase Right that number of Shares having a Fair Market
Value equal to the amount required to be

-5-
<PAGE>

withheld. The Fair Market Value of the Shares to be withheld shall be determined
on the date that the amount of tax to be withheld is to be determined. All
elections by an Optionee to have Shares withheld for this purpose shall be made
in such form and under such conditions as the Administrator may deem necessary
or advisable;

(xii) to authorize any person to execute on behalf of the Company
any instrument required to effect the grant of an Option or Stock Purchase Right
previously granted by the Administrator;

(xiii) to make all other determinations deemed necessary or advisable
for administering the Plan.

(c) Effect of Administrator's Decision. The Administrator's decisions,
----------------------------------
determinations and interpretations shall be final and binding on all Optionees
and any other holders of Options or Stock Purchase Rights.

5. Eligibility. Nonstatutory Stock Options and Stock Purchase Rights may be
-----------
granted to Service Providers. Incentive Stock Options may be granted only to
Employees.

6. Limitations.
-----------

(a) Each Option shall be designated in the Option Agreement as either an
Incentive Stock Option or a Nonstatutory Stock Option. However, notwithstanding
such designation, to the extent that the aggregate Fair Market Value of the
Shares with respect to which Incentive Stock Options are exercisable for the
first time by the Optionee during any calendar year (under all plans of the
Company and any Parent or Subsidiary) exceeds $100,000, such Options shall be
treated as Nonstatutory Stock Options. For purposes of this Section 6(a),
Incentive Stock Options shall be taken into account in the order in which they
were granted. The Fair Market Value of the Shares shall be determined as of the
time the Option with respect to such Shares is granted.

(b) Neither the Plan nor any Option or Stock Purchase Right shall confer
upon an Optionee any right with respect to continuing the Optionee's
relationship as a Service Provider with the Company, nor shall they interfere in
any way with the Optionee's right or the Company's right to terminate such
relationship at any time, with or without cause.

(i) No Service Provider shall be granted, in any fiscal year of the
Company, Options to purchase more than 500,000 Shares.

(ii) In connection with his or her initial service, a Service Provider
may be granted Options to purchase up to an additional 500,000 Shares which
shall not count against the limit set forth in subsection (i) above.

-6-
<PAGE>

(iii) The foregoing limitations shall be adjusted proportionately in
connection with any change in the Company's capitalization as described in
Section 13.

(iv) If an Option is cancelled in the same fiscal year of the
Company in which it was granted (other than in connection with a transaction
described in Section 13), the cancelled Option will be counted against the
limits set forth in subsections (i) and (ii) above. For this purpose, if the
exercise price of an Option is reduced, the transaction will be treated as a
cancellation of the Option and the grant of a new Option.

7. Term of Plan. Subject to Section 19 of the Plan, the Plan shall become
------------
effective upon its adoption by the Board. It shall continue in effect for a
term of ten (10) years unless terminated earlier under Section 15 of the Plan.

8. Term of Option. The term of each Option shall be stated in the Option
--------------
Agreement. In the case of an Incentive Stock Option, the term shall be ten (10)
years from the date of grant or such shorter term as may be provided in the
Option Agreement. Moreover, in the case of an Incentive Stock Option granted to
an Optionee who, at the time the Incentive Stock Option is granted, owns stock
representing more than ten percent (10%) of the total combined voting power of
all classes of stock of the Company or any Parent or Subsidiary, the term of the
Incentive Stock Option shall be five (5) years from the date of grant or such
shorter term as may be provided in the Option Agreement.

9. Option Exercise Price and Consideration.
---------------------------------------

(a) Exercise Price. The per share exercise price for the Shares to be
--------------
issued pursuant to exercise of an Option shall be determined by the
Administrator, subject to the following:

(i) In the case of an Incentive Stock Option

(A) granted to an Employee who, at the time the Incentive Stock
Option is granted, owns stock representing more than ten percent (10%) of the
voting power of all classes of stock of the Company or any Parent or Subsidiary,
the per Share exercise price shall be no less than 110% of the Fair Market Value
per Share on the date of grant.

(B) granted to any Employee other than an Employee described in
paragraph (A) immediately above, the per Share exercise price shall be no less
than 100% of the Fair Market Value per Share on the date of grant.

(ii) In the case of a Nonstatutory Stock Option, the per Share
exercise price shall be determined by the Administrator. In the case of a
Nonstatutory Stock Option intended to qualify as "performance-based
compensation" within the meaning of Section 162(m) of the Code, the per Share
exercise price shall be no less than 100% of the Fair Market Value per Share on
the date of grant.

-7-
<PAGE>

(iii) Notwithstanding the foregoing, Options may be granted with a
per Share exercise price of less than 100% of the Fair Market Value per Share on
the date of grant pursuant to a merger or other corporate transaction.

(b) Waiting Period and Exercise Dates. At the time an Option is granted,
---------------------------------
the Administrator shall fix the period within which the Option may be exercised
and shall determine any conditions which must be satisfied before the Option may
be exercised.

(c) Form of Consideration. The Administrator shall determine the
---------------------
acceptable form of consideration for exercising an Option, including the method
of payment. In the case of an Incentive Stock Option, the Administrator shall
determine the acceptable form of consideration at the time of grant. Such
consideration may consist entirely of:

(i) cash;

(ii) check;

(iii) promissory note;

(iv) other Shares which (A) in the case of Shares acquired upon
exercise of an option, have been owned by the Optionee for more than six months
on the date of surrender, and (B) have a Fair Market Value on the date of
surrender equal to the aggregate exercise price of the Shares as to which said
Option shall be exercised;

(v) consideration received by the Company under a cashless
exercise program implemented by the Company in connection with the Plan;

(vi) a reduction in the amount of any Company liability to the
Optionee, including any liability attributable to the Optionee's participation
in any Company-sponsored deferred compensation program or arrangement;

(vii) any combination of the foregoing methods of payment; or

(viii) such other consideration and method of payment for the
issuance of Shares to the extent permitted by Applicable Laws.

10. Exercise of Option.
------------------

(a) Procedure for Exercise; Rights as a Shareholder. Any Option granted
-----------------------------------------------
hereunder shall be exercisable according to the terms of the Plan and at such
times and under such conditions as determined by the Administrator and set forth
in the Option Agreement. Unless the Administrator provides otherwise, vesting
of Options granted hereunder shall be tolled during any unpaid leave of absence.
An Option may not be exercised for a fraction of a Share.

-8-
<PAGE>

An Option shall be deemed exercised when the Company receives: (i)
written or electronic notice of exercise (in accordance with the Option
Agreement) from the person entitled to exercise the Option, and (ii) full
payment for the Shares with respect to which the Option is exercised. Full
payment may consist of any consideration and method of payment authorized by the
Administrator and permitted by the Option Agreement and the Plan. Shares issued
upon exercise of an Option shall be issued in the name of the Optionee or, if
requested by the Optionee, in the name of the Optionee and his or her spouse.
Until the Shares are issued (as evidenced by the appropriate entry on the books
of the Company or of a duly authorized transfer agent of the Company), no right
to vote or receive dividends or any other rights as a shareholder shall exist
with respect to the Optioned Stock, notwithstanding the exercise of the Option.
The Company shall issue (or cause to be issued) such Shares promptly after the
Option is exercised. No adjustment will be made for a dividend or other right
for which the record date is prior to the date the Shares are issued, except as
provided in Section 13 of the Plan.

Exercising an Option in any manner shall decrease the number of Shares
thereafter available, both for purposes of the Plan and for sale under the
Option, by the number of Shares as to which the Option is exercised.

(b) Termination of Relationship as a Service Provider. If an Optionee
-------------------------------------------------
ceases to be a Service Provider, other than upon the Optionee's death or
Disability, the Optionee may exercise his or her Option within such period of
time as is specified in the Option Agreement to the extent that the Option is
vested on the date of termination (but in no event later than the expiration of
the term of such Option as set forth in the Option Agreement). In the absence
of a specified time in the Option Agreement, the Option shall remain exercisable
for three (3) months following the Optionee's termination. If, on the date of
termination, the Optionee is not vested as to his or her entire Option, the
Shares covered by the unvested portion of the Option shall revert to the Plan.
If, after termination, the Optionee does not exercise his or her Option within
the time specified by the Administrator, the Option shall terminate, and the
Shares covered by such Option shall revert to the Plan.

(c) Disability of Optionee. If an Optionee ceases to be a Service
----------------------
Provider as a result of the Optionee's Disability, the Optionee may exercise his
or her Option within such period of time as is specified in the Option Agreement
to the extent the Option is vested on the date of termination (but in no event
later than the expiration of the term of such Option as set forth in the Option
Agreement). In the absence of a specified time in the Option Agreement, the
Option shall remain exercisable for twelve (12) months following the Optionee's
termination. If, on the date of termination, the Optionee is not vested as to
his or her entire Option, the Shares covered by the unvested portion of the
Option shall revert to the Plan. If, after termination, the Optionee does not
exercise his or her Option within the time specified herein, the Option shall
terminate, and the Shares covered by such Option shall revert to the Plan.

(d) Death of Optionee. If an Optionee dies while a Service Provider, the
-----------------
Option may be exercised within such period of time as is specified in the Option
Agreement (but in no event later

-9-
<PAGE>

than the expiration of the term of such Option as set forth in the Notice of
Grant), by the Optionee's estate or by a person who acquires the right to
exercise the Option by bequest or inheritance, but only to the extent that the
Option is vested on the date of death. In the absence of a specified time in
the Option Agreement, the Option shall remain exercisable for twelve (12) months
following the Optionee's termination. If, at the time of death, the Optionee is
not vested as to his or her entire Option, the Shares covered by the unvested
portion of the Option shall immediately revert to the Plan. The Option may be
exercised by the executor or administrator of the Optionee's estate or, if none,
by the person(s) entitled to exercise the Option under the Optionee's will or
the laws of descent or distribution. If the Option is not so exercised within
the time specified herein, the Option shall terminate, and the Shares covered by
such Option shall revert to the Plan.

(e) Buyout Provisions. The Administrator may at any time offer to buy out
-----------------
for a payment in cash or Shares an Option previously granted based on such terms
and conditions as the Administrator shall establish and communicate to the
Optionee at the time that such offer is made.

11. Stock Purchase Rights.
---------------------

(a) Rights to Purchase. Stock Purchase Rights may be issued either alone,
------------------
in addition to, or in tandem with other awards granted under the Plan and/or
cash awards made outside of the Plan. After the Administrator determines that
it will offer Stock Purchase Rights under the Plan, it shall advise the offeree
in writing or electronically, by means of a Notice of Grant, of the terms,
conditions and restrictions related to the offer, including the number of Shares
that the offeree shall be entitled to purchase, the price to be paid, and the
time within which the offeree must accept such offer. The offer shall be
accepted by execution of a Restricted Stock Purchase Agreement in the form
determined by the Administrator.

(b) Repurchase Option. Unless the Administrator determines otherwise, the
-----------------
Restricted Stock Purchase Agreement shall grant the Company a repurchase option
exercisable upon the voluntary or involuntary termination of the purchaser's
service with the Company for any reason (including death or Disability). The
purchase price for Shares repurchased pursuant to the Restricted Stock Purchase
Agreement shall be the original price paid by the purchaser and may be paid by
cancellation of any indebtedness of the purchaser to the Company. The
repurchase option shall lapse at a rate determined by the Administrator.

(c) Other Provisions. The Restricted Stock Purchase Agreement shall
----------------
contain such other terms, provisions and conditions not inconsistent with the
Plan as may be determined by the Administrator in its sole discretion.

(d) Rights as a Shareholder. Once the Stock Purchase Right is exercised,
-----------------------
the purchaser shall have the rights equivalent to those of a shareholder, and
shall be a shareholder when his or her purchase is entered upon the records of
the duly authorized transfer agent of the Company. No adjustment will be made
for a dividend or other right for which the record date is prior to the date the
Stock Purchase Right is exercised, except as provided in Section 13 of the Plan.

-10-
<PAGE>

12. Non-Transferability of Options and Stock Purchase Rights. Unless
--------------------------------------------------------
determined otherwise by the Administrator, an Option or Stock Purchase Right may
not be sold, pledged, assigned, hypothecated, transferred, or disposed of in any
manner other than by will or by the laws of descent or distribution and may be
exercised, during the lifetime of the Optionee, only by the Optionee. If the
Administrator makes an Option or Stock Purchase Right transferable, such Option
or Stock Purchase Right shall contain such additional terms and conditions as
the Administrator deems appropriate.

13. Adjustments Upon Changes in Capitalization, Dissolution, Merger or Asset
------------------------------------------------------------------------
Sale.
----

(a) Changes in Capitalization. Subject to any required action by the
-------------------------
shareholders of the Company, the number of shares of Common Stock covered by
each outstanding Option and Stock Purchase Right, and the number of shares of
Common Stock which have been authorized for issuance under the Plan but as to
which no Options or Stock Purchase Rights have yet been granted or which have
been returned to the Plan upon cancellation or expiration of an Option or Stock
Purchase Right, as well as the price per share of Common Stock covered by each
such outstanding Option or Stock Purchase Right, shall be proportionately
adjusted for any increase or decrease in the number of issued shares of Common
Stock resulting from a stock split, reverse stock split, stock dividend,
combination or reclassification of the Common Stock, or any other increase or
decrease in the number of issued shares of Common Stock effected without receipt
of consideration by the Company; provided, however, that conversion of any
convertible securities of the Company shall not be deemed to have been "effected
without receipt of consideration." Such adjustment shall be made by the Board,
whose determination in that respect shall be final, binding and conclusive.
Except as expressly provided herein, no issuance by the Company of shares of
stock of any class, or securities convertible into shares of stock of any class,
shall affect, and no adjustment by reason thereof shall be made with respect to,
the number or price of shares of Common Stock subject to an Option or Stock
Purchase Right.

(b) Dissolution or Liquidation. In the event of the proposed dissolution
--------------------------
or liquidation of the Company, the Administrator shall notify each Optionee as
soon as practicable prior to the effective date of such proposed transaction.
The Administrator in its discretion may provide for an Optionee to have the
right to exercise his or her Option until ten (10) days prior to such
transaction as to all of the Optioned Stock covered thereby, including Shares as
to which the Option would not otherwise be exercisable. In addition, the
Administrator may provide that any Company repurchase option applicable to any
Shares purchased upon exercise of an Option or Stock Purchase Right shall lapse
as to all such Shares, provided the proposed dissolution or liquidation takes
place at the time and in the manner contemplated. To the extent it has not been
previously exercised, an Option or Stock Purchase Right will terminate
immediately prior to the consummation of such proposed action.

(c) Merger or Asset Sale. In the event of a merger of the Company with or
--------------------
into another corporation, or the sale of substantially all of the assets of the
Company, each outstanding Option and Stock Purchase Right shall be assumed or an
equivalent option or right substituted by the

-11-
<PAGE>

successor corporation or a Parent or Subsidiary of the successor corporation.
In the event that the successor corporation refuses to assume or substitute for
the Option or Stock Purchase Right, the Optionee shall fully vest in and have
the right to exercise the Option or Stock Purchase Right as to all of the
Optioned Stock, including Shares as to which it would not otherwise be vested or
exercisable. If an Option or Stock Purchase Right becomes fully vested and
exercisable in lieu of assumption or substitution in the event of a merger or
sale of assets, the Administrator shall notify the Optionee in writing or
electronically that the Option or Stock Purchase Right shall be fully vested and
exercisable for a period of fifteen (15) days from the date of such notice, and
the Option or Stock Purchase Right shall terminate upon the expiration of such
period. For the purposes of this paragraph, the Option or Stock Purchase Right
shall be considered assumed if, following the merger or sale of assets, the
option or right confers the right to purchase or receive, for each Share of
Optioned Stock subject to the Option or Stock Purchase Right immediately prior
to the merger or sale of assets, the consideration (whether stock, cash, or
other securities or property) received in the merger or sale of assets by
holders of Common Stock for each Share held on the effective date of the
transaction (and if holders were offered a choice of consideration, the type of
consideration chosen by the holders of a majority of the outstanding Shares);
provided, however, that if such consideration received in the merger or sale of
assets is not solely common stock of the successor corporation or its Parent,
the Administrator may, with the consent of the successor corporation, provide
for the consideration to be received upon the exercise of the Option or Stock
Purchase Right, for each Share of Optioned Stock subject to the Option or Stock
Purchase Right, to be solely common stock of the successor corporation or its
Parent equal in fair market value to the per share consideration received by
holders of Common Stock in the merger or sale of assets.

14. Date of Grant. The date of grant of an Option or Stock Purchase Right
-------------
shall be, for all purposes, the date on which the Administrator makes the
determination granting such Option or Stock Purchase Right, or such other later
date as is determined by the Administrator. Notice of the determination shall
be provided to each Optionee within a reasonable time after the date of such
grant.

15. Amendment and Termination of the Plan.
-------------------------------------

(a) Amendment and Termination. The Board may at any time amend, alter,
-------------------------
suspend or terminate the Plan.

(b) Shareholder Approval. The Company shall obtain shareholder approval
--------------------
of any Plan amendment to the extent necessary and desirable to comply with
Applicable Laws.

(c) Effect of Amendment or Termination. No amendment, alteration,
----------------------------------
suspension or termination of the Plan shall impair the rights of any Optionee,
unless mutually agreed otherwise between the Optionee and the Administrator,
which agreement must be in writing and signed by the Optionee and the Company.
Termination of the Plan shall not affect the Administrator's ability to exercise
the powers granted to it hereunder with respect to Options granted under the
Plan prior to the date of such termination.

-12-
<PAGE>

16. Conditions Upon Issuance of Shares.
----------------------------------

(a) Legal Compliance. Shares shall not be issued pursuant to the exercise
----------------
of an Option or Stock Purchase Right unless the exercise of such Option or Stock
Purchase Right and the issuance and delivery of such Shares shall comply with
Applicable Laws and shall be further subject to the approval of counsel for the
Company with respect to such compliance.

(b) Investment Representations. As a condition to the exercise of an
--------------------------
Option or Stock Purchase Right, the Company may require the person exercising
such Option or Stock Purchase Right to represent and warrant at the time of any
such exercise that the Shares are being purchased only for investment and
without any present intention to sell or distribute such Shares if, in the
opinion of counsel for the Company, such a representation is required.

17. Inability to Obtain Authority. The inability of the Company to obtain
-----------------------------
authority from any regulatory body having jurisdiction, which authority is
deemed by the Company's counsel to be necessary to the lawful issuance and sale
of any Shares hereunder, shall relieve the Company of any liability in respect
of the failure to issue or sell such Shares as to which such requisite authority
shall not have been obtained.

18. Reservation of Shares. The Company, during the term of this Plan, will at
---------------------
all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.

19. Shareholder Approval. The Plan shall be subject to approval by the
--------------------
shareholders of the Company within twelve (12) months after the date the Plan is
adopted. Such shareholder approval shall be obtained in the manner and to the
degree required under Applicable Laws.

-13-
<PAGE>

1997 STOCK PLAN

STOCK OPTION AGREEMENT

Unless otherwise defined herein, the terms defined in the Plan shall have the
same defined meanings in this Option Agreement.

I. NOTICE OF STOCK OPTION GRANT
----------------------------

[Optionee's Name and Address]

You have been granted an option to purchase Common Stock of the Company,
subject to the terms and conditions of the Plan and this Option Agreement, as
follows:

Grant Number _________________________

Date of Grant _________________________

Vesting Commencement Date _________________________

Exercise Price per Share $________________________

Total Number of Shares Granted _________________________

Total Exercise Price $_________________________

Type of Option: ___ Incentive Stock Option

___ Nonstatutory Stock Option

Term/Expiration Date: _________________________

Vesting Schedule:
- ----------------

This Option may be exercised, in whole or in part, in accordance with the
following schedule:

25% of the Shares subject to the Option shall vest six (6) months after the
Vesting Commencement Date, and 25% of the Shares subject to the Option shall
vest at the end of each twelve-month period thereafter, subject to Optionee's
continuing to be a Service Provider on such dates.

-1-
<PAGE>

Termination Period:
------------------

This Option may be exercised for three months after Optionee ceases to be a
Service Provider. Upon the death or Disability of the Optionee, this Option may
be exercised for one year after Optionee ceases to be a Service Provider. In no
event shall this Option be exercised later than the Term/Expiration Date as
provided above.

II. AGREEMENT
---------

1. Grant of Option. The Plan Administrator of the Company hereby grants to
---------------
the Optionee named in the Notice of Grant attached as Part I of this Agreement
(the "Optionee") an option (the "Option") to purchase the number of Shares, as
set forth in the Notice of Grant, at the exercise price per share set forth in
the Notice of Grant (the "Exercise Price"), subject to the terms and conditions
of the Plan, which is incorporated herein by reference. Subject to Section
15(c) of the Plan, in the event of a conflict between the terms and conditions
of the Plan and the terms and conditions of this Option Agreement, the terms and
conditions of the Plan shall prevail.

If designated in the Notice of Grant as an Incentive Stock Option ("ISO"),
this Option is intended to qualify as an Incentive Stock Option under Section
422 of the Code. However, if this Option is intended to be an Incentive Stock
Option, to the extent that it exceeds the $100,000 rule of Code Section 422(d)
it shall be treated as a Nonstatutory Stock Option ("NSO").

2. Exercise of Option.
------------------

(a) Right to Exercise. This Option is exercisable during its term in
-----------------
accordance with the Vesting Schedule set out in the Notice of Grant and the
applicable provisions of the Plan and this Option Agreement.

(b) Method of Exercise. This Option is exercisable by delivery of an
------------------
exercise notice, in the form attached as Exhibit A (the "Exercise Notice"),
which shall state the election to exercise the Option, the number of Shares in
respect of which the Option is being exercised (the "Exercised Shares"), and
such other representations and agreements as may be required by the Company
pursuant to the provisions of the Plan. The Exercise Notice shall be completed
by the Optionee and delivered to Corporate Secretary of the Company. The
Exercise Notice shall be accompanied by payment of the aggregate Exercise Price
as to all Exercised Shares. This Option shall be deemed to be exercised upon
receipt by the Company of such fully executed Exercise Notice accompanied by
such aggregate Exercise Price.

No Shares shall be issued pursuant to the exercise of this Option unless
such issuance and exercise complies with Applicable Laws. Assuming such
compliance, for income tax purposes the Exercised Shares shall be considered
transferred to the Optionee on the date the Option is exercised with respect to
such Exercised Shares.

-2-
<PAGE>

3. Method of Payment. Payment of the aggregate Exercise Price shall be by
-----------------
any of the following, or a combination thereof, at the election of the Optionee:

(a) cash;

(b) check;

(c) consideration received by the Company under a cashless exercise
program implemented by the Company in connection with the Plan; or

(d) surrender of other Shares which (i) in the case of Shares acquired
upon exercise of an option, have been owned by the Optionee for more than six
(6) months on the date of surrender, AND (ii) have a Fair Market Value on the
date of surrender equal to the aggregate Exercise Price of the Exercised Shares.

4. Non-Transferability of Option. This Option may not be transferred in any
-----------------------------
manner otherwise than by will or by the laws of descent or distribution and may
be exercised during the lifetime of Optionee only by the Optionee. The terms of
the Plan and this Option Agreement shall be binding upon the executors,
administrators, heirs, successors and assigns of the Optionee.

5. Term of Option. This Option may be exercised only within the term set out
--------------
in the Notice of Grant, and may be exercised during such term only in accordance
with the Plan and the terms of this Option Agreement.

6. Restrictions on Exercise. This Option may not be exercised until such
------------------------
time as the Plan has been approved by the shareholders of the Company, or if the
issuance of such Shares upon such exercise or the method of payment of
consideration for such shares would constitute a violation of any Applicable
Law.

7. Tax Consequences. Some of the federal tax consequences relating to this
----------------
Option, as of the date of this Option, are set forth below. THIS SUMMARY IS
NECESSARILY INCOMPLETE, AND THE TAX LAWS AND REGULATIONS ARE SUBJECT TO CHANGE.
THE OPTIONEE SHOULD CONSULT A TAX ADVISER BEFORE EXERCISING THIS OPTION OR
DISPOSING OF THE SHARES.

(a) Exercising the Option.
---------------------

(i) Nonstatutory Stock Option. The Optionee may incur regular federal
-------------------------
income tax liability upon exercise of a NSO. The Optionee will be treated as
having received compensation income (taxable at ordinary income tax rates) equal
to the excess, if any, of the Fair Market Value of the Exercised Shares on the
date of exercise over their aggregate Exercise Price. If the Optionee is an
Employee or a former Employee, the Company will be required to withhold from his
or her compensation or collect from Optionee and pay to the applicable taxing
authorities an

-3-
<PAGE>

amount in cash equal to a percentage of this compensation income at the time of
exercise, and may refuse to honor the exercise and refuse to deliver Shares if
such withholding amounts are not delivered at the time of exercise.

(ii) Incentive Stock Option. If this Option qualifies as an ISO, the
----------------------
Optionee will have no regular federal income tax liability upon its exercise,
although the excess, if any, of the Fair Market Value of the Exercised Shares on
the date of exercise over their aggregate Exercise Price will be treated as an
adjustment to alternative minimum taxable income for federal tax purposes and
may subject the Optionee to alternative minimum tax in the year of exercise. In
the event that the Optionee ceases to be an Employee but remains a Service
Provider, any Incentive Stock Option of the Optionee that remains unexercised
shall cease to qualify as an Incentive Stock Option and will be treated for tax
purposes as a Nonstatutory Stock Option on the date three (3) months and one (1)
day following such change of status.

(b) Disposition of Shares.
---------------------

(i) NSO. If the Optionee holds NSO Shares for at least one year, any
---
gain realized on disposition of the Shares will be treated as long-term capital
gain for federal income tax purposes.

(ii) ISO. If the Optionee holds ISO Shares for at least one year
---
after exercise and two years after the grant date, any gain realized on
disposition of the Shares will be treated as long-term capital gain for federal
income tax purposes. If the Optionee disposes of ISO Shares within one year
after exercise or two years after the grant date, any gain realized on such
disposition will be treated as compensation income (taxable at ordinary income
rates) to the extent of the excess, if any, of the lesser of (A) the difference
between the Fair Market Value of the Shares acquired on the date of exercise and
the aggregate Exercise Price, or (B) the difference between the sale price of
such Shares and the aggregate Exercise Price. Any additional gain will be taxed
as capital gain, short-term or long-term depending on the period that the ISO
Shares were held.

(c) Notice of Disqualifying Disposition of ISO Shares. If the Optionee
-------------------------------------------------
sells or otherwise disposes of any of the Shares acquired pursuant to an ISO on
or before the later of (i) two years after the grant date, or (ii) one year
after the exercise date, the Optionee shall immediately notify the Company in
writing of such disposition. The Optionee agrees that he or she may be subject
to income tax withholding by the Company on the compensation income recognized
from such early disposition of ISO Shares by payment in cash or out of the
current earnings paid to the Optionee.

8. Entire Agreement; Governing Law. The Plan is incorporated herein by
-------------------------------
reference. The Plan and this Option Agreement constitute the entire agreement
of the parties with respect to the subject matter hereof and supersede in their
entirety all prior undertakings and agreements of the Company and Optionee with
respect to the subject matter hereof, and may not be modified adversely

-4-
<PAGE>

to the Optionee's interest except by means of a writing signed by the Company
and Optionee. This agreement is governed by the internal substantive laws, but
not the choice of law rules, of California.

9. NO GUARANTEE OF CONTINUED SERVICE. OPTIONEE ACKNOWLEDGES AND AGREES THAT
---------------------------------
THE VESTING OF SHARES PURSUANT TO THE VESTING SCHEDULE HEREOF IS EARNED ONLY BY
CONTINUING AS A SERVICE PROVIDER AT THE WILL OF THE COMPANY (AND NOT THROUGH THE
ACT OF BEING HIRED, BEING GRANTED AN OPTION OR PURCHASING SHARES HEREUNDER).
OPTIONEE FURTHER ACKNOWLEDGES AND AGREES THAT THIS AGREEMENT, THE TRANSACTIONS
CONTEMPLATED HEREUNDER AND THE VESTING SCHEDULE SET FORTH HEREIN DO NOT
CONSTITUTE AN EXPRESS OR IMPLIED PROMISE OF CONTINUED ENGAGEMENT AS A SERVICE
PROVIDER FOR THE VESTING PERIOD, FOR ANY PERIOD, OR AT ALL, AND SHALL NOT
INTERFERE WITH OPTIONEE'S RIGHT OR THE COMPANY'S RIGHT TO TERMINATE OPTIONEE'S
RELATIONSHIP AS A SERVICE PROVIDER AT ANY TIME, WITH OR WITHOUT CAUSE.

By your signature and the signature of the Company's representative below, you
and the Company agree that this Option is granted under and governed by the
terms and conditions of the Plan and this Option Agreement. Optionee has
reviewed the Plan and this Option Agreement in their entirety, has had an
opportunity to obtain the advice of counsel prior to executing this Option
Agreement and fully understands all provisions of the Plan and Option Agreement.
Optionee hereby agrees to accept as binding, conclusive and final all decisions
or interpretations of the Administrator upon any questions relating to the Plan
and Option Agreement. Optionee further agrees to notify the Company upon any
change in the residence address indicated below.

OPTIONEE: LECG, INC.

________________________________ ___________________________________
Signature By

________________________________ ___________________________________
Print Name Title

________________________________
Residence Address

________________________________

-5-
<PAGE>

EXHIBIT A
---------

1997 STOCK PLAN

EXERCISE NOTICE

LECG, Inc.
2000 Powell Street
Suite 600
Emeryville, CA 94608

Attention: Corporate Secretary

1. Exercise of Option. Effective as of today, ________________, 199__, the
------------------
undersigned ("Purchaser") hereby elects to purchase ______________ shares (the
"Shares") of the Common Stock of LECG, Inc. (the "Company") under and pursuant
to the 1997 Stock Plan (the "Plan") and the Stock Option Agreement dated
_____________, 19___ (the "Option Agreement"). The purchase price for the
Shares shall be $_____________, as required by the Option Agreement.

2. Delivery of Payment. Purchaser herewith delivers to the Company the full
-------------------
purchase price for the Shares.

3. Representations of Purchaser. Purchaser acknowledges that Purchaser has
----------------------------
received, read and understood the Plan and the Option Agreement and agrees to
abide by and be bound by their terms and conditions.

4. Rights as Shareholder. Until the issuance (as evidenced by the
---------------------
appropriate entry on the books of the Company or of a duly authorized transfer
agent of the Company) of the Shares, no right to vote or receive dividends or
any other rights as a shareholder shall exist with respect to the Optioned
Stock, notwithstanding the exercise of the Option. The Shares so acquired shall
be issued to the Optionee as soon as practicable after exercise of the Option.
No adjustment will be made for a dividend or other right for which the record
date is prior to the date of issuance, except as provided in Section 13 of the
Plan.

5. Designated Brokerage Company. Provided that the common stock of the
----------------------------
Company is publicly traded at such time, Optionee agrees that the resale of the
Shares by the Optionee into such public market shall be through a brokerage
company designated by the Company, so long as such brokerage company does not
charge more than the then market rate in commissions upon such resale.

6. Tax Consultation. Purchaser understands that Purchaser may suffer adverse
----------------
tax

-1-
<PAGE>

consequences as a result of Purchaser's purchase or disposition of the Shares.
Purchaser represents that Purchaser has consulted with any tax consultants
Purchaser deems advisable in connection with the purchase or disposition of the
Shares and that Purchaser is not relying on the Company for any tax advice.

7. Successors and Assigns. The Company may assign any of its rights under
----------------------
this Agreement to single or multiple assignees, and this Agreement shall inure
to the benefit of the successors and assigns of the Company. Subject to the
restrictions on transfer herein set forth, this Agreement shall be binding upon
Optionee and his or her heirs, executors, administrators, successors and
assigns.

8. Interpretation. Any dispute regarding the interpretation of this
--------------
Agreement shall be submitted by Optionee or by the Company forthwith to the
Administrator which shall review such dispute at its next regular meeting. The
resolution of such a dispute by the Administrator shall be final and binding on
all parties.

9. Entire Agreement; Governing Law. The Plan and Option Agreement are
-------------------------------
incorporated herein by reference. This Agreement, the Plan and the Option
Agreement constitute the entire agreement of the parties with respect to the
subject matter hereof and supersede in their entirety all prior undertakings and
agreements of the Company and Purchaser with respect to the subject matter
hereof, and may not be modified adversely to the Purchaser's interest except by
means of a writing signed by the Company and Purchaser. This agreement is
governed by the internal substantive laws, but not the choice of law rules, of
California.

Submitted by: Accepted by:

PURCHASER: LECG, INC.

________________________________ ___________________________________
Signature By

________________________________ ___________________________________
Print Name Its

Address:
- -------
_________________________________ ___________________________________
Date Received
_________________________________

-2-

<PAGE>

EXHIBIT 10.3

LECG, INC.

1997 EMPLOYEE STOCK PURCHASE PLAN

The following constitute the provisions of the 1997 Employee Stock Purchase
Plan of LECG, Inc.

1. Purpose. The purpose of the Plan is to provide employees of the
-------
Company and its Designated Subsidiaries with an opportunity to purchase Common
Stock of the Company through accumulated payroll deductions. It is the
intention of the Company to have the Plan qualify as an "Employee Stock Purchase
Plan" under Section 423 of the Internal Revenue Code of 1986, as amended. The
provisions of the Plan, accordingly, shall be construed so as to extend and
limit participation in a manner consistent with the requirements of that section
of the Code.

2. Definitions.
-----------

(a) "Board" shall mean the Board of Directors of the Company.
-----

(b) "Code" shall mean the Internal Revenue Code of 1986, as amended.
----

(d) "Company" shall mean LECG, Inc. and any Designated Subsidiary of
-------
the Company.

(e) "Compensation" shall mean all base straight time gross earnings
------------
and commissions, payments for overtime, shift premium, incentive compensation,
incentive payments, bonuses and other compensation.

(f) "Designated Subsidiary" shall mean any Subsidiary which has been
---------------------
designated by the Board from time to time in its sole discretion as eligible to
participate in the Plan.

(g) "Employee" shall mean any individual who is an Employee of the
--------
Company for tax purposes whose customary employment with the Company is at least
twenty (20) hours per week and more than five (5) months in any calendar year.
For purposes of the Plan, the employment relationship shall be treated as
continuing intact while the individual is on sick leave or other leave of
absence approved by the Company. Where the period of leave exceeds 90 days and
the individual's right to reemployment is not guaranteed either by statute or by
contract, the employment relationship shall be deemed to have terminated on the
91st day of such leave.

(h) "Enrollment Date" shall mean the first day of each Offering
---------------
Period.
<PAGE>

(i) "Exercise Date" shall mean the last day of each Offering Period.
-------------

(j) "Fair Market Value" shall mean, as of any date, the value of
-----------------
Common Stock determined as follows:

(1) If the Common Stock is listed on any established stock
exchange or a national market system, including without limitation the Nasdaq
National Market or The Nasdaq SmallCap Market of The Nasdaq Stock Market, its
Fair Market Value shall be the closing sales price for such stock (or the
closing bid, if no sales were reported) as quoted on such exchange or system for
the last market trading day on the date of such determination, as reported in
The Wall Street Journal or such other source as the Administrator deems
reliable, or;

(2) If the Common Stock is regularly quoted by a recognized
securities dealer but selling prices are not reported, its Fair Market Value
shall be the mean of the closing bid and asked prices for the Common Stock on
the date of such determination, as reported in The Wall Street Journal or such
other source as the Board deems reliable, or;

(3) In the absence of an established market for the Common
Stock, the Fair Market Value thereof shall be determined in good faith by the
Board, or;

(4) For purposes of the Enrollment Date of the first Offering
Period under the Plan, the Fair Market Value shall be the initial price to the
public as set forth in the final prospectus included within the registration
statement in Form S-1 filed with the Securities and Exchange Commission for the
initial public offering of the Company's Common Stock (the "Registration
Statement").

(k) "Offering Period" shall mean the period of approximately six (6)
---------------
months during which an option granted pursuant to the Plan may be exercised,
commencing on the first Trading Day on or after May 1 and November 1 of each
year and terminating on the last Trading Day in the period ending six months
later; provided, however, that the first Offering Period under the Plan shall
commence with the first Trading Day on or after the date on which the Securities
and Exchange Commission declares the Company's Registration Statement effective
and end on the last Trading Day on or before October 31, 1998. The duration and
timing of Offering Periods may be changed pursuant to Section 4 of this Plan.

(l) "Plan" shall mean this Employee Stock Purchase Plan.
----

(m) "Purchase Price" shall mean an amount equal to 85% of the Fair
--------------
Market Value of a share of Common Stock on the Enrollment Date or on the
Exercise Date, whichever is lower.

-2-
<PAGE>

(n) "Reserves" shall mean the number of shares of Common Stock
covered by each option under the Plan which have not yet been exercised and the
number of shares of Common Stock which have been authorized for issuance under
the Plan but not yet placed under option.

(o) "Subsidiary" shall mean a corporation, domestic or foreign, of
----------
which not less than 50% of the voting shares are held by the Company or a
Subsidiary, whether or not such corporation now exists or is hereafter organized
or acquired by the Company or a Subsidiary.

(p) "Trading Day" shall mean a day on which national stock exchanges
-----------
and the Nasdaq System are open for trading.

3. Eligibility.
-----------

(a) Any Employee who shall be employed by the Company on a given
Enrollment Date shall be eligible to participate in the Plan.

(b) Any provisions of the Plan to the contrary notwithstanding, no
Employee shall be granted an option under the Plan (i) to the extent that,
immediately after the grant, such Employee (or any other person whose stock
would be attributed to such Employee pursuant to Section 424(d) of the Code)
would own capital stock of the Company and/or hold outstanding options to
purchase such stock possessing five percent (5%) or more of the total combined
voting power or value of all classes of the capital stock of the Company or of
any Subsidiary, or (ii) to the extent that his or her rights to purchase stock
under all employee stock purchase plans of the Company and its subsidiaries
accrues at a rate which exceeds Twenty-Five Thousand Dollars ($25,000) worth of
stock (determined at the fair market value of the shares at the time such option
is granted) for each calendar year in which such option is outstanding at any
time.

4. Offering Periods. The Plan shall be implemented by consecutive
----------------
Offering Periods with a new Offering Period commencing on the first Trading Day
on or after May 1 and November 1 each year, or on such other date as the Board
shall determine, and continuing thereafter until termi nated in accordance with
Section 20 hereof; provided, however, that the first Offering Period under the
Plan shall commence with the first Trading Day on or after the date on which the
Securities and Exchange Commission declares the Company's Registration Statement
effective and end on the last Trading Day on or before October 31, 1998. The
Board shall have the power to change the duration of Offering Periods (including
the commencement dates thereof) with respect to future offerings without
shareholder approval if such change is announced at least five (5) days prior to
the scheduled beginning of the first Offering Period to be affected thereafter.

-3-
<PAGE>

5. Participation.
-------------

(a) An eligible Employee may become a participant in the Plan by
completing a subscription agreement authorizing payroll deductions in the form
of Exhibit A to this Plan and filing it with the Company's payroll office prior
to the applicable Enrollment Date.

(b) Payroll deductions for a participant shall commence on the first
payroll following the Enrollment Date and shall end on the last payroll in the
Offering Period to which such authorization is applicable, unless sooner
terminated by the participant as provided in Section 10 hereof.

6. Payroll Deductions.
------------------

(a) At the time a participant files his or her subscription
agreement, he or she shall elect to have payroll deductions made on each pay day
during the Offering Period in an amount not exceeding ten (10%) of the
Compensation which he or she receives on each pay day during the Offering
Period.

(b) All payroll deductions made for a participant shall be credited
to his or her account under the Plan and shall be withheld in whole percentages
only. A participant may not make any additional payments into such account.

(c) A participant may discontinue his or her participation in the
Plan as provided in Section 10 hereof, or may increase or decrease the rate of
his or her payroll deductions during the Offering Period by completing or filing
with the Company a new subscription agreement authorizing a change in payroll
deduction rate. The Board may, in its discretion, limit the number of
participation rate changes during any Offering Period. The change in rate shall
be effective with the first full payroll period following five (5) business days
after the Company's receipt of the new subscription agreement unless the Company
elects to process a given change in participation more quickly. A participant's
subscription agreement shall remain in effect for successive Offering Periods
unless terminated as provided in Section 10 hereof.

(d) Notwithstanding the foregoing, to the extent necessary to comply
with Section 423(b)(8) of the Code and Section 3(b) hereof, a participant's
payroll deductions may be decreased to zero percent (0%) at any time during an
Offering Period. Payroll deductions shall recommence at the rate provided in
such participant's subscription agreement at the beginning of the first Offering
Period which is scheduled to end in the following calendar year, unless
terminated by the participant as provided in Section 10 hereof.

(e) At the time the option is exercised, in whole or in part, or at
the time some or all of the Company's Common Stock issued under the Plan is
disposed of, the participant must make adequate provision for the Company's
federal, state, or other tax withholding obligations, if any,

-4-
<PAGE>

which arise upon the exercise of the option or the disposition of the Common
Stock. At any time, the Company may, but shall not be obligated to, withhold
from the participant's compensation the amount necessary for the Company to meet
applicable withholding obligations, including any withholding required to make
available to the Company any tax deductions or benefits attributable to sale or
early disposition of Common Stock by the Employee.

7. Grant of Option. On the Enrollment Date of each Offering Period, each
---------------
eligible Employee participating in such Offering Period shall be granted an
option to purchase on each Exercise Date during such Offering Period (at the
applicable Purchase Price) up to a number of shares of the Company's Common
Stock determined by dividing such Employee's payroll deductions accumulated
prior to such Exercise Date and retained in the Participant's account as of the
Exercise Date by the applicable Purchase Price; provided that in no event shall
an Employee be permitted to purchase during each Offering Period more than 2500
shares of the Company's Common Stock (subject to any adjustment pursuant to
Section 19) on the Enrollment Date, and provided further that such purchase
shall be subject to the limitations set forth in Sections 3(b) and 12 hereof.
Exercise of the option shall occur as provided in Section 8 hereof, unless the
participant has withdrawn pursuant to Section 10 hereof. The option shall expire
on the last day of the Offering Period.

8. Exercise of Option. Unless a participant withdraws from the Plan as
------------------
provided in Section 10 hereof, his or her option for the purchase of shares
shall be exercised automatically on the Exercise Date, and the maximum number of
full shares subject to option shall be purchased for such participant at the
applicable Purchase Price with the accumulated payroll deductions in his or her
account. No fractional shares shall be purchased; any payroll deductions
accumulated in a participant's account which are not sufficient to purchase a
full share shall be retained in the participant's account for the subsequent
Offering Period, subject to earlier withdrawal by the participant as provided in
Section 10 hereof. Any other monies left over in a participant's account after
the Exercise Date shall be returned to the participant. During a participant's
lifetime, a participant's option to purchase shares hereunder is exercisable
only by him or her.

9. Delivery. As promptly as practicable after each Exercise Date on which
--------
a purchase of shares occurs, the Company shall arrange the delivery to each
participant, as appropriate, of a certificate representing the shares purchased
upon exercise of his or her option.

10. Withdrawal.
----------

(a) A participant may withdraw all but not less than all the payroll
deductions credited to his or her account and not yet used to exercise his or
her option under the Plan at any time by giving written notice to the Company in
the form of Exhibit B to this Plan. All of the participant's payroll deductions
credited to his or her account shall be paid to such participant promptly after
receipt of notice of withdrawal and such participant's option for the Offering
Period shall be automatically terminated, and no further payroll deductions for
the purchase of shares shall be made for such Offering Period. If a participant
withdraws from an Offering Period, payroll

-5-
<PAGE>

deductions shall not resume at the beginning of the succeeding Offering Period
unless the participant delivers to the Company a new subscription agreement.

(b) A participant's withdrawal from an Offering Period shall not have
any effect upon his or her eligibility to participate in any similar plan which
may hereafter be adopted by the Company or in succeeding Offering Periods which
commence after the termination of the Offering Period from which the participant
withdraws.

11. Termination of Employment.
-------------------------

Upon a participant's ceasing to be an Employee, for any reason, he or
she shall be deemed to have elected to withdraw from the Plan and the payroll
deductions credited to such participant's account during the Offering Period but
not yet used to exercise the option shall be returned to such participant or, in
the case of his or her death, to the person or persons entitled thereto under
Section 15 hereof, and such participant's option shall be automatically
terminated. The preceding sentence notwithstanding, a participant who receives
payment in lieu of notice of termination of employment shall be treated as
continuing to be an Employee for the participant's customary number of hours per
week of employment during the period in which the participant is subject to such
payment in lieu of notice.

12. Interest. No interest shall accrue on the payroll deductions of a
--------
participant in the Plan.

13. Stock.
-----

(a) Subject to adjustment upon changes in capitalization of the
Company as provided in Section 19 hereof, the maximum number of shares of the
Company's Common Stock which shall be made available for sale under the Plan
shall be five hundred thousand (500,000) shares, plus an annual increase to be
added on each anniversary date of the adoption of the Plan equal to the lesser
of (i) 150,000 Shares, (ii) 1% of the outstanding Shares on such date or (iii) a
lesser amount determined by the Board. If, on a given Exercise Date, the number
of shares with respect to which options are to be exercised exceeds the number
of shares then available under the Plan, the Company shall make a pro rata
allocation of the shares remaining available for purchase in as uniform a manner
as shall be practicable and as it shall determine to be equitable.

(b) The participant shall have no interest or voting right in shares
covered by his option until such option has been exercised.

(c) Shares to be delivered to a participant under the Plan shall be
registered in the name of the participant or in the name of the participant and
his or her spouse.

-6-
<PAGE>

14. Administration. The Plan shall be administered by the Board or a
--------------
committee of members of the Board appointed by the Board. The Board or its
committee shall have full and exclusive discretionary authority to construe,
interpret and apply the terms of the Plan, to determine eligibility and to
adjudicate all disputed claims filed under the Plan. Every finding, decision
and determination made by the Board or its committee shall, to the full extent
permitted by law, be final and binding upon all parties.

15. Designation of Beneficiary.
--------------------------

(a) A participant may file a written designation of a beneficiary who
is to receive any shares and cash, if any, from the participant's account under
the Plan in the event of such partici pant's death subsequent to an Exercise
Date on which the option is exercised but prior to delivery to such participant
of such shares and cash. In addition, a participant may file a written
designation of a beneficiary who is to receive any cash from the participant's
account under the Plan in the event of such participant's death prior to
exercise of the option. If a participant is married and the designated
beneficiary is not the spouse, spousal consent shall be required for such
designation to be effective.

(b) Such designation of beneficiary may be changed by the participant
at any time by written notice. In the event of the death of a participant and in
the absence of a beneficiary validly designated under the Plan who is living at
the time of such participant's death, the Company shall deliver such shares
and/or cash to the executor or administrator of the estate of the participant,
or if no such executor or administrator has been appointed (to the knowledge of
the Company), the Company, in its discretion, may deliver such shares and/or
cash to the spouse or to any one or more dependents or relatives of the
participant, or if no spouse, dependent or relative is known to the Company,
then to such other person as the Company may designate.

16. Transferability. Neither payroll deductions credited to a
---------------
participant's account nor any rights with regard to the exercise of an option or
to receive shares under the Plan may be assigned, transferred, pledged or
otherwise disposed of in any way (other than by will, the laws of descent and
distribution or as provided in Section 15 hereof) by the participant. Any such
attempt at assignment, transfer, pledge or other disposition shall be without
effect, except that the Company may treat such act as an election to withdraw
funds from an Offering Period in accordance with Section 10 hereof.

17. Use of Funds. All payroll deductions received or held by the Company
------------
under the Plan may be used by the Company for any corporate purpose, and the
Company shall not be obligated to segregate such payroll deductions.

18. Reports. Individual accounts shall be maintained for each participant
-------
in the Plan. Statements of account shall be given to participating Employees at
least annually, which statements shall set forth the amounts of payroll
deductions, the Purchase Price, the number of shares purchased and the remaining
cash balance, if any.

-7-
<PAGE>

19. Adjustments Upon Changes in Capitalization, Dissolution, Liquidation,
---------------------------------------------------------------------
Merger or Asset Sale.
--------------------

(a) Changes in Capitalization. Subject to any required action by the
-------------------------
shareholders of the Company, the Reserves, the maximum number of shares each
participant may purchase each Offering Period (pursuant to Section 7), as well
as the price per share and the number of shares of Common Stock covered by each
option under the Plan which has not yet been exercised shall be proportionately
adjusted for any increase or decrease in the number of issued shares of Common
Stock resulting from a stock split, reverse stock split, stock dividend,
combination or reclassification of the Common Stock, or any other increase or
decrease in the number of shares of Common Stock effected without receipt of
consideration by the Company; provided, however, that conversion of any
convertible securities of the Company shall not be deemed to have been "effected
without receipt of consideration". Such adjustment shall be made by the Board,
whose determination in that respect shall be final, binding and conclusive.
Except as expressly provided herein, no issuance by the Company of shares of
stock of any class, or securities convertible into shares of stock of any class,
shall affect, and no adjustment by reason thereof shall be made with respect to,
the number or price of shares of Common Stock subject to an option.

(b) Dissolution or Liquidation. In the event of the proposed
--------------------------
dissolution or liquidation of the Company, the Offering Period then in progress
shall be shortened by setting a new Exercise Date (the "New Exercise Date"), and
shall terminate immediately prior to the consummation of such proposed
dissolution or liquidation, unless provided otherwise by the Board. The New
Exercise Date shall be before the date of the Company's proposed dissolution or
liquidation. The Board shall notify each participant in writing, at least ten
(10) business days prior to the New Exercise Date, that the Exercise Date for
the participant's option has been changed to the New Exercise Date and that the
participant's option shall be exercised automatically on the New Exercise Date,
unless prior to such date the participant has withdrawn from the Offering Period
as provided in Section 10 hereof.

(c) Merger or Asset Sale. In the event of a proposed sale of all or
--------------------
substantially all of the assets of the Company, or the merger of the Company
with or into another corporation, each outstanding option shall be assumed or an
equivalent option substituted by the successor corporation or a Parent or
Subsidiary of the successor corporation. In the event that the successor
corporation refuses to assume or substitute for the option, any Offering Periods
then in progress shall be shortened by setting a new Exercise Date (the "New
Exercise Date") and any Offering Periods then in progress shall end on the New
Exercise Date. The New Exercise Date shall be before the date of the Company's
proposed sale or merger. The Board shall notify each participant in writing, at
least ten (10) business days prior to the New Exercise Date, that the Exercise
Date for the participant's option has been changed to the New Exercise Date and
that the participant's option shall be exercised automatically on the New
Exercise Date, unless prior to such date the participant has withdrawn from the
Offering Period as provided in Section 10 hereof.

-8-
<PAGE>

20. Amendment or Termination.
------------------------

(a) The Board of Directors of the Company may at any time and for any
reason terminate or amend the Plan. Except as provided in Section 19 hereof, no
such termination can affect options previously granted, provided that an
Offering Period may be terminated by the Board of Directors on any Exercise Date
if the Board determines that the termination of the Plan is in the best
interests of the Company and its shareholders. Except as provided in Section 19
hereof, no amendment may make any change in any option theretofore granted which
adversely affects the rights of any participant. To the extent necessary to
comply with Section 423 of the Code (or any successor rule or provision or any
other applicable law, regulation or stock exchange rule), the Company shall
obtain shareholder approval in such a manner and to such a degree as required.

(b) Without shareholder consent and without regard to whether any
participant rights may be considered to have been "adversely affected," the
Board (or its committee) shall be entitled to change the Offering Periods, limit
the frequency and/or number of changes in the amount withheld during an Offering
Period, establish the exchange ratio applicable to amounts withheld in a
currency other than U.S. dollars, permit payroll withholding in excess of the
amount designated by a participant in order to adjust for delays or mistakes in
the Company's processing of properly completed withholding elections, establish
reasonable waiting and adjustment periods and/or accounting and crediting
procedures to ensure that amounts applied toward the purchase of Common Stock
for each participant properly correspond with amounts withheld from the
participant's Compensation, and establish such other limitations or procedures
as the Board (or its committee) determines in its sole discretion advisable
which are consistent with the Plan.

21. Notices. All notices or other communications by a participant to the
-------
Company under or in connection with the Plan shall be deemed to have been duly
given when received in the form specified by the Company at the location, or by
the person, designated by the Company for the receipt thereof.

22. Conditions Upon Issuance of Shares. Shares shall not be issued with
----------------------------------
respect to an option unless the exercise of such option and the issuance and
delivery of such shares pursuant thereto shall comply with all applicable
provisions of law, domestic or foreign, including, without limitation, the
Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as
amended, the rules and regulations promulgated thereunder, and the requirements
of any stock exchange upon which the shares may then be listed, and shall be
further subject to the approval of counsel for the Company with respect to such
compliance.

As a condition to the exercise of an option, the Company may require
the person exercising such option to represent and warrant at the time of any
such exercise that the shares are being purchased only for investment and
without any present intention to sell or distribute such shares if, in the
opinion of counsel for the Company, such a representation is required by any of
the aforementioned applicable provisions of law.

-9-
<PAGE>

23. Term of Plan. The Plan shall become effective upon the earlier to
------------
occur of its adoption by the Board of Directors or its approval by the
shareholders of the Company. It shall continue in effect for a term of ten (10)
years unless sooner terminated under Section 20 hereof.

-10-
<PAGE>

EXHIBIT A
---------

LECG, INC.

1997 EMPLOYEE STOCK PURCHASE PLAN

SUBSCRIPTION AGREEMENT

_____ Original Application Enrollment Date: ___________
_____ Change in Payroll Deduction Rate
_____ Change of Beneficiary(ies)

1. _____________________________________________________ hereby elects to
participate in the LECG, Inc. 1997 Employee Stock Purchase Plan (the
"Employee Stock Purchase Plan") and subscribes to pur chase shares of the
Company's Common Stock in accordance with this Subscription Agreement and
the Employee Stock Purchase Plan.

2. I hereby authorize payroll deductions from each paycheck in the amount of
____% of my Compensation on each payday (from 1 to 10%) during the Offering
Period in accordance with the Employee Stock Purchase Plan. (Please note
that no fractional percentages are permitted.)

3. I understand that said payroll deductions shall be accumulated for the
purchase of shares of Common Stock at the applicable Purchase Price
determined in accordance with the Employee Stock Purchase Plan. I
understand that if I do not withdraw from an Offering Period, any
accumulated payroll deductions will be used to automatically exercise my
option.

4. I have received a copy of the complete Employee Stock Purchase Plan. I
understand that my participation in the Employee Stock Purchase Plan is in
all respects subject to the terms of the Plan. I understand that my
ability to exercise the option under this Subscription Agreement is subject
to shareholder approval of the Employee Stock Purchase Plan.

5. Shares purchased for me under the Employee Stock Purchase Plan should be
issued in the name(s) of (Employee or Employee and Spouse only):
________________________________________ ___________.

6. I understand that if I dispose of any shares received by me pursuant to the
Plan within 2 years after the Enrollment Date (the first day of the
Offering Period during which I purchased such shares) or one year after the
Exercise Date, I will be treated for federal income tax purposes as having
received ordinary income at the time of such disposition in an amount equal
to the excess of the fair market value of the shares at the time such
shares were purchased by me

<PAGE>

over the price which I paid for the shares. I hereby agree to notify the
----------------------------
Company in writing within 30 days after the date of any disposition of my
-------------------------------------------------------------------------
shares and I will make adequate provision for Federal, state or other tax
-------------------------------------------------------------------------
withholding obligations, if any, which arise upon the disposition of the
-------------------------------------------------------------------------
Common Stock. The Company may, but will not be obligated to, withhold from
------------
my compensation the amount necessary to meet any applicable withholding
obligation including any withholding necessary to make available to the
Company any tax deductions or benefits attributable to sale or early
disposition of Common Stock by me. If I dispose of such shares at any time
after the expiration of the 2-year and 1-year holding periods, I understand
that I will be treated for federal income tax purposes as having received
income only at the time of such disposition, and that such income will be
taxed as ordinary income only to the extent of an amount equal to the
lesser of (1) the excess of the fair market value of the shares at the time
of such disposition over the purchase price which I paid for the shares, or
(2) 15% of the fair market value of the shares on the first day of the
Offering Period. The remainder of the gain, if any, recognized on such
disposition will be taxed as capital gain.

7. I hereby agree to be bound by the terms of the Employee Stock Purchase
Plan. The effectiveness of this Subscription Agreement is dependent upon
my eligibility to participate in the Employee Stock Purchase Plan.

8. In the event of my death, I hereby designate the following as my
beneficiary(ies) to receive all payments and shares due me under the
Employee Stock Purchase Plan:

NAME: (Please print)______________________________________________
(First) (Middle) (Last)

__________________________ _______________________________
Relationship

______________________________
(Address)

-2-
<PAGE>

Employee's Social
Security Number: _________________________________________

Employee's Address: _________________________________________

_________________________________________

I UNDERSTAND THAT THIS SUBSCRIPTION AGREEMENT SHALL REMAIN IN EFFECT THROUGHOUT
SUCCESSIVE OFFERING PERIODS UNLESS TERMINATED BY ME.

Dated:_________________ _____________________________________________
Signature of Employee

____________________________________________
Spouse's Signature (If beneficiary other than
spouse)

-3-
<PAGE>

EXHIBIT B
---------

LECG, INC.

1997 EMPLOYEE STOCK PURCHASE PLAN

NOTICE OF WITHDRAWAL

The undersigned participant in the Offering Period of the LECG, Inc. 1997
Employee Stock Purchase Plan which began on ____________, 19____ (the
"Enrollment Date") hereby notifies the Company that he or she hereby withdraws
from the Offering Period. He or she hereby directs the Company to pay to the
undersigned as promptly as practicable all the payroll deductions credited to
his or her account with respect to such Offering Period. The undersigned
understands and agrees that his or her option for such Offering Period will be
automatically terminated. The undersigned under stands further that no further
payroll deductions will be made for the purchase of shares in the current
Offering Period and the undersigned shall be eligible to participate in
succeeding Offering Periods only by delivering to the Company a new Subscription
Agreement.

Name and Address of Participant:

________________________________
________________________________
________________________________

Signature:

________________________________

Date:__________________________

<PAGE>

EXHIBIT 10.4

FIRST AMENDMENT TO CREDIT AGREEMENT

THIS FIRST AMENDMENT TO CREDIT AGREEMENT (this "Amendment") is entered
into as of July 17, 1997, by and between THE LAW AND ECONOMICS CONSULTING
GROUP, INC., a California corporation ("Borrower"), and WELLS FARGO BANK,
NATIONAL ASSOCIATION ("Bank").

RECITALS
--------

WHEREAS, Borrower is currently indebted to Bank pursuant to the terms
and conditions of that certain Credit Agreement between Borrower and Bank
dated as of May 31, 1996, as amended from time to time ("Credit Agreement").

WHEREAS, Bank and Borrower have agreed to certain changes in the terms
and conditions set forth in the Credit Agreement and have agreed to amend the
Credit Agreement to reflect said changes.

NOW, THEREFORE, for valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree that
the Credit Agreement shall be amended as follows:

1. The first sentence of Section 1.1(c) is hereby deleted in its
entirety, and the following substituted therefor:

"SECTION 1.1(c). Letter of Credit Subfeature. As a subfeature
---------------------------
under the Line of Credit, Bank agrees from time to time during the
term thereof to issue standby letters of credit for purposes deemed
acceptable by Bank (each, a "Letter of Credit" and collectively,
"Letters of Credit"); provided however, that the form and substance
of each Letter of Credit shall be subject to approval by Bank, in
its sole discretion; and provided further, that the aggregate
undrawn amount of all outstanding Letters of Credit shall not at
any time exceed Five Hundred Thousand Dollars ($500,000.00)."

2. Except as specifically provided herein, all terms and conditions of
the Credit Agreement remain in full force and effect, without waiver or
modification. All terms defined in the Credit Agreement shall have the same
meaning when used in this Amendment. This Amendment and the Credit Agreement
shall be read together, as one document.

<PAGE>

3. Borrower hereby remakes all representations and warranties
contained in the Credit Agreement and reaffirms all covenants set forth
therein. Borrower further certifies that as of the date of this Amendment
there exists no Event of Default as defined in the Credit Agreement, nor any
condition, act or event which with the giving of notice or the passage of time
or both would constitute any such Event of Default.

IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be executed as of the day and year first written above.

THE LAW AND ECONOMICS WELLS FARGO BANK,
CONSULTING GROUP, INC. NATIONAL ASSOCIATION

By: /s/ [Signature] By: /s/ Patricia L. Dorsey
----------------------------- ---------------------------
Patricia L. Dorsey
Vice President

Title: President
--------------------------

By: /s/ Kimberly Gilmour
-----------------------------

Title: Chief Financial Officer
-------------------------
<PAGE>

CREDIT AGREEMENT

THIS AGREEMENT is entered into as of May 31, 1996, by and between THE LAW
AND ECONOMICS CONSULTING GROUP, INC., a California corporation ("Borrower"), and
WELLS FARGO BANK, NATIONAL ASSOCIATION ("Bank").

RECITAL
-------

Borrower has requested from Bank the credit accommodations described below
(each, a "Credit" and collectively, the "Credits"), and Bank has agreed to
provide the Credits to Borrower on the terms and conditions contained herein.

NOW, THEREFORE, for valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, Bank and Borrower hereby agree as follows:

ARTICLE I
---------
THE CREDITS
-----------

SECTION 1.1. LINE OF CREDIT.

(a) Line of Credit. Subject to the term and conditions of this Agreement,
--------------
Bank hereby agrees to make advances to Borrower from time to time up to and
including May 31, 2000, not to exceed .at any time the aggregate principal
amount of Three Million Dollars ($3,000,000.00) ("Line of Credit"), the proceeds
of which shall be used solely to finance Borrower's working capital
requirements. Borrower's obligation to repay advances under the Line of Credit
shall be evidenced by a promissory note substantially in the form of Exhibit A
attached hereto ("Line of Credit Note"), all terms of which are incorporated
herein by this reference.
<PAGE>

(b) Optional Commitment Increase. Once during the term of the Line of
----------------------------
Credit, upon Bank's receipt of Borrower's written request for an increase in the
maximum principal amount then available thereunder, Bank agrees to review said
request and, so long as all of the conditions set forth herein are met to Bank's
satisfaction, to provide an increase in said maximum principal amount to an
amount which Bank deems acceptable, in its discretion:

(i) Bank shall have obtained such audits and appraisals of all
collateral for the Line of Credit as Bank deems necessary, all in
form, substance and performed by auditors and appraisers
satisfactory to Bank, and assuring that Bank's security interests in
and liens on, said collateral shall remain of first priority
following any such increase, if granted, with all costs and expenses
of such audits and appraisals to be paid by Borrower;

(ii) Bank shall have determined that there is sufficient collateral value
to support a Line of Credit increase, based upon Bank's then current
loan-to-value ratios and other policies and procedures in effect at
the time such increase is requested for each type of collateral
which secures the Line of Credit;

(iii) Borrower shall have paid to Bank a non-refundable commitment fee for
such increase equal to one-quarter percent (1/4%) of the new maximum
principal amount available under the Line of Credit;

(iv) Borrower shall have executed, or caused to be executed, and
delivered to Bank any and all documents required by Bank to evidence
such increase and Bank's continued security interests in and liens
on all collateral for the Line of Credit, including without
limitation, a Modification to the Line of Credit Note, all of which
shall be in form and substance satisfactory to Bank; and

(v) at the time an increase is requested and the time, if any, any such
increase is granted, there exists no Event of Default hereunder, nor
any condition, act or event which with the giving of notice or the
passage of time, or both, would constitute any such Event of
Default.

(c) Letter of Credit Subfeature. As a subfeature under the Line of
---------------------------
Credit, Bank agrees from time to time up to and including May 31, 1997, to issue
standby letters of credit for the account of Borrower and for purposes deemed
acceptable by Bank (each, a "Letter of Credit" and collectively, "Letters of
Credit"); provided however, that the form and substance of each Letter of

-2-
<PAGE>

Credit shall be subject to approval by Bank, in its sole discretion; and
provided further, that the aggregate undrawn amount of all outstanding Letters
of Credit shall not at any time exceed Two Hundred Fifty Thousand Dollars
($250,000.00). Each Letter of Credit shall be issued for a term not to exceed
three hundred sixty (360) days, as designated by Borrower; provided however,
that no Letter of Credit shall have an expiration date subsequent to the
maturity date of the Line of Credit. The undrawn amount of all Letters of Credit
shall be reserved under the Line of Credit and shall not be available for
borrowings thereunder. Each Letter of Credit shall be subject to the additional
terms and conditions of the Continuing Standby Letter of Credit Agreement and
related documents, if any, required by Bank in connection with the issuance
thereof (each, a "Letter of Credit Agreement" and collectively, "Letter of
Credit Agreements"). Each draft paid by Bank under a Letter of Credit shall be
deemed an advance under the Line of Credit and shall be repaid by Borrower in
accordance with the terms and conditions of this Agreement applicable to such
advances; provided however, that if advances under the Line of Credit are not
available, for any reason, at the time any draft is paid by Bank, then Borrower
shall immediately pay to Bank the full amount of such draft, together with
interest thereon from the date such amount is paid by Bank to the date such
amount is fully repaid by Borrower, at the rate of interest applicable to
advances under the Line of Credit. In such event Borrower agrees that Bank, in
its sole discretion, may debit any demand deposit account maintained by Borrower
with Bank for the amount of any such draft.

(d) Borrowing and Repayment. Borrower may from time to time during the
-----------------------
term of the Line of Credit borrow, partially or wholly repay its outstanding
borrowings, and reborrow, subject to all of the limitations, terms and
conditions contained herein or in the Line of Credit Note; provided however,
that the total outstanding borrowings under the Line of Credit shall not at any
time exceed

-3-
<PAGE>

the maximum principal amount available thereunder, as set forth above or such
other amount as shall then be available thereunder pursuant to the terms hereof.

SECTION 1.2. BMSC LETTER OF CREDIT.

(a) BMSC Letter of Credit. In addition to and separate from the Line of
---------------------
Credit subfeature for Letters of Credit, Bank has issued a standby letter of
credit for the account of Borrower and for the benefit of Bristol-Myers Squibb
Company in support of Borrower's long term lease obligations (the "BMSC Letter
of Credit") in the amount of Sixty-Nine Thousand Dollars ($69,000.00). Subject
to the terms and conditions of this Agreement, Bank hereby confirms that the
BMSC Letter of Credit remains in full force and effect. The BMSC Letter of
Credit has an expiration date of April 30, 1997, and shall be automatically
extended pursuant to its terms, without written amendment, to April 30 of each
succeeding calendar year up to April 30, 2002, and then up to but not beyond
December 29, 2002, and is subject to the additional terms of the Application and
Agreement for Standby Letter of Credit attached hereto as Exhibit B (the "BMSC
Letter of Credit Agreement"), all terms of which are incorporated herein by this
reference.

(b) Repayment of Drafts. Each draft paid by Bank under the BMSC Letter
-------------------
of Credit shall be repaid by Borrower in accordance with the provisions of the
BMSC Letter of Credit Agreement.

SECTION 1.3. INTEREST/FEES.

(a) Interest. The outstanding principal balance of the Line of Credit
--------
shall bear interest at the rate of interest set forth in the Line of Credit
Note. The amount of each draft paid by Bank under the BMSC Letter of Credit
shall bear interest from the date such draft is paid by Bank to the date such
amount is fully repaid by Borrower at the rate of interest set forth in the BMSC
Letter of Credit Agreement.

-4-
<PAGE>

(b) Computation and Payment. Interest shall be computed on the basis of
-----------------------
a 360-day year, actual days elapsed. Interest shall be payable at the times and
place set forth in the Line of Credit Note and the BMSC Letter of Credit
Agreement.

(c) Unused Commitment Fee. Borrower shall pay to Bank a fee equal to
---------------------
one-eighth percent (1/8%) per annum (computed on the basis of a 360-day year,
actual days elapsed) on the average daily unused amount of the Line of Credit,
which fee shall be calculated on a quarterly basis by Bank and shall be due and
payable by Borrower in arrears on each February 28, May 31, August 31, and
November 30.

(d) BMSC Letter of Credit Fees. Borrower shall pay to Bank a fee upon
--------------------------
each annual anniversary date of the BMSC Letter of Credit, commencing as of
April 30, 1997, equal to two percent (2%) per annum (computed on the basis of a
360-day year, actual days elapsed) of the face amount thereof, and fees upon the
payment or negotiation of each draft under the BMSC Letter of Credit and upon
the occurrence of any other activity with respect to the BMSC Letter of Credit
(including without limitation, the transfer, amendment or cancellation thereof)
determined in accordance with Bank's standard fees and charges then in effect
for such activity.

(e) Letter of Credit Fees. Borrower shall pay to Bank fees upon the
---------------------
issuance of each Letter of Credit, upon the payment or negotiation by Bank of
each draft under any Letter of Credit and upon the occurrence of any other
activity with respect to any Letter of Credit (including without limitation, the
transfer, amendment or cancellation of any Letter of Credit) determined in
accordance with Bank's standard fees and charges then in effect for such
activity.

SECTION 1.4. COLLECTION OF PAYMENTS. Borrower authorizes Bank to collect
all interest and fees due under each Credit by charging Borrower's demand
deposit account number

-5-
<PAGE>

4125-108456 with Bank, or any other demand deposit account maintained by
Borrower with Bank, for the full amount thereof. Should there be insufficient
funds in any such demand deposit account to pay all such sums when due, the full
amount of such deficiency shall be immediately due and payable by Borrower.

SECTION 1.5. COLLATERAL. As security for all indebtedness of Borrower to
Bank, Borrower hereby grants to Bank security interests of first priority in all
Borrower's accounts receivable and other rights to payment, general intangibles,
inventory and equipment. All of the foregoing shall be evidenced by and subject
to the terms of such security agreements, financing statements, deeds of trust
and other documents as Bank shall reasonably require, all in form and substance
satisfactory to Bank. Borrower shall reimburse Bank immediately upon demand for
all costs and expenses incurred by Bank in connection with any of the foregoing
security, including without limitation, filing fees and costs of appraisals and
audits.

ARTICLE II
----------
REPRESENTATIONS AND WARRANTIES
------------------------------

Borrower makes the following representations and warranties to Bank, which
representations and warranties shall survive the execution of this Agreement and
shall continue in full force and effect until the full and final payment, and
satisfaction and discharge, of all obligations of Borrower to Bank subject to
this Agreement.

SECTION 2.1. LEGAL STATUS. Borrower is a corporation, duly organized and
existing and in good standing under the laws of the State of California, and is
qualified or licensed to do business (and is in good standing as a foreign
corporation, if applicable) in all jurisdictions in which

-6-
<PAGE>

such qualification or licensing is required or in which the failure to so
qualify or to be so licensed could have a material adverse effect on Borrower.

SECTION 2.2. AUTHORIZATION AND VALIDITY. This Agreement, the Line of
Credit Note, the BMSC Letter of Credit Agreement, and each other document,
contract and instrument required hereby or at any time hereafter delivered to
Bank in connection herewith (collectively, the "Loan Documents") have been duly
authorized, and upon their execution and delivery in accordance with the
provisions hereof will constitute legal, valid and binding agreements and
obligations of Borrower or the party which executes the same, enforceable in
accordance with their respective terms.

SECTION 2.3. NO VIOLATION. The execution, delivery and performance by
Borrower of each of the Loan Documents do not violate any provision of any law
or regulation, or contravene any provision of the Articles of Incorporation or
By-Laws of Borrower, or result in any breach of or default under any contract,
obligation, indenture or other instrument to which Borrower is a party or by
which Borrower may be bound.

SECTION 2.4. LITIGATION. There are no pending, or to the best of
Borrower's knowledge threatened, actions, claims, investigations, suits or
proceedings by or before any governmental authority, arbitrator, court or
administrative agency which could have a material adverse effect on the
financial condition or operation of Borrower other than those disclosed by
Borrower to Bank in writing prior to the date hereof.

SECTION 2.5. CORRECTNESS OF FINANCIAL STATEMENT. The financial statement
of Borrower dated December 31, 1995, a true copy of which has been delivered by
Borrower to Bank prior to the date hereof, (a) is complete and correct and
presents fairly the

-7-
<PAGE>

financial condition of Borrower, (b) discloses all liabilities of Borrower that
are required to be reflected or reserved against under generally accepted
accounting principles, whether liquidated or unliquidated, fixed or contingent,
and (c) has been prepared in accordance with generally accepted accounting
principles consistently applied. Since the date of such financial statement
there has been no material adverse change in the financial condition of
Borrower, nor has Borrower mortgaged, pledged, granted a security interest in or
otherwise encumbered any of its assets or properties except in favor of Bank or
as otherwise permitted by Bank in writing.

SECTION 2.6. INCOME TAX RETURNS. Borrower has no knowledge of any pending
assessments or adjustments of its income tax payable with respect to any year.

SECTION 2.7. NO SUBORDINATION. There is no agreement, indenture, contract
or instrument to which Borrower is a party or by which Borrower may be bound
that requires the subordination in right of payment of any of Borrower's
obligations subject to this Agreement to any other obligation of Borrower.

SECTION 2.8. PERMITS, FRANCHISES. Borrower possesses, and will hereafter
possess, all permits, franchises and licenses required and rights to all
trademarks, trade names, patents, and fictitious names, if any, necessary to
enable it to conduct the business in which it is now engaged in compliance with
applicable law.

SECTION 2.9. ERISA. Borrower is in compliance in all material respects
with all applicable provisions of the Employee Retirement Income Security Act of
1974, as amended or recodified from time to time ("ERISA"); Borrower has not
violated any provision of any defined employee pension benefit plan (as defined
in ERISA) maintained or contributed to by Borrower (each, a "Plan"); no
Reportable Event as defined in ERISA has occurred and is continuing with

-8-
<PAGE>

respect to any Plan initiated by Borrower; Borrower has met its minimum funding
requirements under ERISA with respect to each Plan; and each Plan will be able
to fulfill its benefit obligations as they come due in accordance with the Plan
documents and under generally accepted accounting principles.

SECTION 2.10. OTHER OBLIGATIONS. Borrower is not in default on any
obligation for borrowed money, any purchase money obligation or any other
material lease, commitment, contract, instrument or obligation.

SECTION 2.11. ENVIRONMENTAL MATTERS. Except as disclosed by Borrower to
Bank in writing prior to the date hereof, Borrower is in compliance in all
material respects with all applicable Federal or state environmental, hazardous
waste, health and safety statutes, and any rules or regulations adopted pursuant
thereto, which govern or affect any of Borrower's operations and/or properties,
including without limitation, the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, the Superfund Amendments and
Reauthorization Act of 1986, the Federal Resource Conservation and Recovery Act
of 1976, the Federal Toxic Substances Control Act and the California Health and
Safety Code, as any of the same may be amended, modified or supplemented from
time to time. None of the operations of Borrower is the subject of any Federal
or state investigation evaluating whether any remedial action involving a
material expenditure is needed to respond to a release of any toxic or hazardous
waste or substance into the environment. Borrower has no material contingent
liability in connection with any release of any toxic or hazardous waste or
substance into the environment.

-9-
<PAGE>

ARTICLE III
-----------
CONDITIONS
----------

SECTION 3.1. CONDITIONS OF INITIAL EXTENSION OF CREDIT. The obligation of
Bank to grant any of the Credits is subject to the fulfillment to Bank's
satisfaction of all of the following conditions :

(a) Approval of Bank Counsel. All legal matters incidental to the
------------------------
granting of each of the Credits shall be satisfactory to Bank's counsel.

(b) Documentation. Bank shall have received, in form and substance
-------------
satisfactory to Bank, each of the following, duly executed:

(i) This Agreement and the Line of Credit Note.
(ii) Continuing Standby Letter of Credit Agreement.
(iii) BMSC Letter of Credit Agreement
(iv) Corporate Borrowing Resolution.
(v) Certificate of Incumbency.
(vi) Security Agreement Covering Equipment.
(vii) Continuing Security Agreement Covering Rights to Payment and
Inventory.
(viii) UCC-1 Financing Statements covering accounts receivable,
general intangibles, inventory and equipment.
(ix) Such other documents as Bank may require under any other
Section of this Agreement.

(c) Financial Condition. There shall have been no material adverse change,
-------------------
as determined by Bank, in the financial condition or business of Borrower, nor
any material decline, as determined by Bank, in the market value of any
collateral required hereunder or a substantial or material portion of the assets
of Borrower.

(d) Insurance. Borrower shall have delivered to Bank evidence of insurance
---------
coverage on all Borrower's property, in form, substance, amounts, covering risks
and issued by companies satisfactory to Bank, and where required by Bank, with
loss payable endorsements in favor of Bank.

-10-
<PAGE>

SECTION 3.2. CONDITIONS OF EACH EXTENSION OF CREDIT. The obligation of
Bank to make each extension of credit requested by Borrower hereunder shall be
subject to the fulfillment to Bank's satisfaction of each of the following
conditions:

(a) Compliance. The representations and warranties contained herein and in
----------
each of the other Loan Documents shall be true on and as of the date of the
signing of this Agreement and on the date of each extension of credit by Bank
pursuant hereto, with the same effect as though such representations and
warranties had been made on and as of each such date, and on each such date, no
Event of Default as defined herein, and no condition, event or act which with
the giving of notice or the passage of time or both would constitute such an
Event of Default, shall have occurred and be continuing or shall exist.

(b) Documentation. Bank shall have received all additional documents which
-------------
may be required in connection with such extension of credit, including without
limitation, prior to the issuance of each Letter of Credit, a properly completed
and duly executed Letter of Credit Agreement or application therefor.

ARTICLE IV
----------
AFFIRMATIVE COVENANTS
---------------------

Borrower covenants that so long as Bank remains committed to extend credit
to Borrower pursuant hereto, or any liabilities (whether direct or contingent,
liquidated or unliquidated) of Borrower to Bank under any of the Loan Documents
remain outstanding,.and until payment in full of all obligations of Borrower
subject hereto, Borrower shall, unless Bank otherwise consents in writing:

-11-
<PAGE>

SECTION 4.1. PUNCTUAL PAYMENTS. Punctually pay all principal, interest,
fees or other liabilities due under any of the Loan Documents at the times and
place and in the manner specified therein.

SECTION 4.2. ACCOUNTING RECORDS. Maintain adequate books and records in
accordance with generally accepted accounting principles consistently applied,
and permit any representative of Bank, at any reasonable time, to inspect, audit
and examine such books and records, to make copies of the same, and to inspect
the properties of Borrower.

SECTION 4.3. FINANCIAL STATEMENTS. Provide to Bank all of the following,
in form and detail satisfactory to Bank:

(a) not later than 120 days after and as of the end of each fiscal year, a
reviewed financial statement of Borrower, prepared by a certified public
accountant acceptable to Bank, to include a balance sheet, income statement,
statement of cash flows and accompanying notes and schedules;

(b) not later than 60 days after and as of the end of each fiscal quarter,
a financial statement of Borrower, prepared by Borrower, to include a balance
sheet, income statement, and an aged listing of accounts receivable and accounts
payable;

SECTION 4.4. COMPLIANCE. Preserve and maintain all licenses, permits,
governmental approvals, rights, privileges and franchises necessary for the
conduct of its business; and comply with the provisions of all documents
pursuant to which Borrower is organized and/or which govern Borrower's continued
existence and with the requirements of all laws, rules, regulations and orders
of any governmental authority applicable to Borrower and/or its business.

-12-
<PAGE>

SECTION 4.5. INSURANCE. Maintain and keep in force insurance of the types
and in amounts customarily carried in lines of business similar to that of
Borrower, including but not limited to fire, extended coverage, public
liability, flood, property damage and workers' compensation, with all such
insurance carried with companies and in amounts satisfactory to Bank, and
deliver to Bank from time to time at Bank's request schedules setting forth all
insurance then in effect.

SECTION 4.6. FACILITIES. Keep all properties useful or necessary to
Borrower's business in good repair and condition, and from time to time make
necessary repairs, renewals and replacements thereto so that such properties
shall be fully and efficiently preserved and maintained.

SECTION 4.7. TAXES AND OTHER LIABILITIES. Pay and discharge when due any
and all indebtedness, obligations, assessments and taxes, both real or personal,
including without limitation Federal and state income taxes and state and local
property taxes and assessments, except such (a) as Borrower may in good faith
contest or as to which a bona fide dispute may arise, and (b) for which Borrower
has made provision, to Bank's satisfaction, for eventual payment thereof in the
event Borrower is obligated to make such payment.

SECTION 4.8. LITIGATION. Promptly give notice in writing to Bank of any
litigation pending or threatened against Borrower in excess of an aggregate of
$100,000.00.

SECTION 4.9. FINANCIAL CONDITION. Maintain Borrower's financial condition
as follows using generally accepted accounting principles consistently applied
and used consistently with prior practices (except to the extent modified by the
definitions herein):

-13-
<PAGE>

(a) Tangible Net Worth not at any time less than $5,000,000.00, with
"Tangible Net Worth" defined as the aggregate of total stockholders' equity plus
subordinated debt less any intangible assets.

(b) Total Liabilities divided by Tangible Net Worth not at any time
greater than 1.75 to 1.0, with "Total Liabilities" defined as the aggregate of
current liabilities and non-current liabilities less subordinated debt, and with
"Tangible Net Worth" as defined above.

(d) EBITDA Coverage Ratio not less than 3.0 to 1.0 as of each fiscal year
end, with "EBITDA" defined as net profit before tax plus interest expense (net
of capitalized interest expense), depreciation expense and amortization expense,
and with "EBITDA Coverage Ratio" defined as EBITDA divided by the aggregate of
total interest expense plus the prior period current maturity of long-term debt
and the prior period current maturity of subordinated debt.

SECTION 4.10. NOTICE TO BANK. Promptly (but in no event more than five
(5) days after the occurrence of each such event or matter) give written notice
to Bank in reasonable detail of: (a) the occurrence of any Event of Default, or
any condition, event or act which with the giving of notice or the passage of
time or both would constitute an Event of Default; (b) any change in the name or
the organizational structure of Borrower; (c) the occurrence and nature of any
Reportable Event or Prohibited Transaction, each as defined in ERISA, or any
funding deficiency with respect to any Plan; or (d) any termination or
cancellation of any insurance policy which Borrower is required to maintain, or
any uninsured or partially uninsured loss through liability or property damage,
or

-14-
<PAGE>

through fire, theft or any other cause affecting Borrower's property in excess
of an aggregate of $100,000.00.

ARTICLE V
---------
NEGATIVE COVENANTS
------------------

Borrower further covenants that so long as Bank remains committed to extend
credit to Borrower pursuant hereto, or any liabilities (whether direct or
contingent, liquidated or unliquidated) of Borrower to Bank under any of the
Loan Documents remain outstanding, and until payment in full of all obligations
of Borrower subject hereto, Borrower will not without Bank's prior written
consent:

SECTION 5.1. USE OF FUNDS. Use any of the proceeds of any credit extended
hereunder except for the purposes stated in Article I hereof.

SECTION 5.2. OTHER INDEBTEDNESS. Create, incur, assume or permit to exist
any indebtedness or liabilities resulting from borrowings, loans or advances,
whether secured or unsecured, matured or unmatured, liquidated or unliquidated,
joint gr several, except (a) the liabilities of Borrower to Bank, and (b) any
other liabilities of Borrower existing as of, and disclosed to Bank prior to,
the date hereof.

SECTION 5.3. MERGER, CONSOLIDATION, TRANSFER OF ASSETS. Except as
provided in this Section 5.3, merge into or consolidate with any other entity;
make any substantial change in the nature of Borrower's business as conducted as
of the date hereof; acquire all or substantially all of the assets of any other
entity; nor sell, lease, transfer or otherwise dispose of all or a substantial
or material portion of Borrower's assets except in the ordinary course of its
business. Notwithstanding the foregoing, so long as there exists no Event of
Default under this Agreement or any other of the Loan Documents, (a) Bank hereby
consents to the consolidation of Borrower with,

-15-
<PAGE>

or merger of Borrower into, Coopers & Lybrand, a New York general partnership,
pursuant to the term of that certain Stock or Asset Purchase Option Agreement
dated as of June 18, 1993 (the "Purchase Option Agreement"), and (b) Bank
further agrees that, following such consolidation or merger, Bank shall permit
Coopers & Lybrand to assume Borrower's obligations hereunder with aggregate
future liabilities in excess of $100,000.00 and which are not terminable by
Borrower for a cost of less than $100,000.00, upon similar terms and conditions
as those set forth herein and subject to Bank's prior receipt of notification
from Coopers & Lybrand of its intention to assume said obligations as required
by the Purchase Option Agreement.

SECTION 5.4. GUARANTIES. Guarantee or become liable in any way as surety,
endorser (other than as endorser of negotiable instruments for deposit or
collection in the ordinary course of business), accommodation endorser or
otherwise for, nor pledge or hypothecate any assets of Borrower as security for,
any liabilities or obligations of any other person or entity.

SECTION 5.5. LOANS, ADVANCES, INVESTMENTS. Make any loans or advances to
or investments in any person or entity in amounts in excess of an aggregate of
$150,000.00 outstanding at any one time, except loans or advances to any
existing or new shareholder made in connection with such shareholder's purchase
of shares of stock in Borrower.

SECTION 5.6. PLEDGE OF ASSETS. Mortgage, pledge, grant or permit to exist
a security interest in, or lien upon, all or any portion of Borrower's assets
now owned or hereafter acquired, except any of the foregoing in favor of Bank.

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<PAGE>

ARTICLE VI
----------
EVENTS OF DEFAULT
-----------------

SECTION 6.1. The occurrence of any of the following shall constitute an
"Event of Default" under this Agreement:

(a) Borrower shall fail to pay when due any principal, interest, fees or
other amounts payable under any of the Loan Documents.

(b) Any financial statement or certificate furnished to Bank in connection
with, or any representation or warranty made by Borrower or any other party
under this Agreement or any other Loan Document shall prove to be incorrect,
false or misleading in any material respect when furnished or made.

(c) Any default in the performance of or compliance with any obligation,
agreement or other provision contained herein or in any other Loan Document
(other than those referred to in subsections (a) and (b) above), and with
respect to any such default which by its nature can be cured, such default shall
continue for a period of twenty (20) days from its occurrence.

(d) Any default in the payment or performance of any obligation, or any
defined event of default, under the terms of any contract or instrument (other
than any of the Loan Documents) pursuant to which Borrower has incurred any debt
or other liability to any person or entity, including Bank.

(e) The filing of a notice of judgment lien against Borrower; or the
recording of any abstract of judgment against Borrower in any county in which
Borrower has an interest in real property; or the service of a notice of levy
and/or of a writ of attachment or execution, or other like process,.against the
assets of Borrower; or the entry of a judgment against Borrower.

-17-
<PAGE>

(f) Borrower shall become insolvent, or shall suffer or consent to or
apply for the appointment of a receiver, trustee, custodian or liquidator of
itself or any of its property, or shall generally fail to pay its debts as they
become due, or shall make a general assignment for the benefit of creditors;
Borrower shall file a voluntary petition in bankruptcy, or seeking
reorganization, in order to effect a plan or other arrangement with creditors or
any other relief under the Bankruptcy Reform Act, Title 11 of the United States
Code, as amended or recodified from time to time ("Bankruptcy Code"), or under
any state or Federal law granting relief to debtors, whether now or hereafter in
effect; or any involuntary petition or proceeding pursuant to the Bankruptcy
Code or any other applicable state or Federal law relating to bankruptcy,
reorganization or other relief for debtors is filed or commenced against
Borrower, or Borrower shall file an answer admitting the jurisdiction of the
court and the material allegations of any involuntary petition; or Borrower
shall be adjudicated a bankrupt, or an order for relief shall be entered against
Borrower by any court of competent jurisdiction under the Bankruptcy Code or any
other applicable state or Federal law relating to bankruptcy, reorganization or
other relief for debtors.

(g) There shall exist or occur any event or condition which Bank in good
faith believes impairs, or is substantially likely to impair, the prospect of
payment or performance by Borrower of its obligations under any of the Loan
Documents.

(h) The dissolution or liquidation of Borrower; or Borrower, or any of its
directors, stockholders or members, shall take action seeking to effect the
dissolution or liquidation of Borrower.

-18-
<PAGE>

(i) Any change in ownership during the term of this Agreement of an
aggregate of twenty-five percent (25%) or more of the common stock of Borrower,
except pursuant to the Purchase Option Agreement.

ARTICLE VII
-----------
MISCELLANEOUS
-------------

SECTION 7.1. NO WAIVER. No delay, failure or discontinuance of Bank in
exercising any right, power or remedy under any of the Loan Documents shall
affect or operate as a waiver of such right, power or remedy; nor shall any
single or partial exercise of any such right, power or remedy preclude, waive or
otherwise affect any other or further exercise thereof or the exercise of any
other right, power or remedy. Any waiver, permit, consent or approval of any
kind by Bank of any breach of or default under any of the Loan Documents must be
in writing and shall be effective only to the extent set forth in such writing.

SECTION 7.2. NOTICES. All notices, requests and demands which any party is
required or may desire to give to any other party under any provision of this
Agreement must be in writing delivered to each party at the following address:

BORROWER: THE LAW AND ECONOMICS CONSULTING GROUP, INC.
2000 Powell Street, Suite 600
Emeryville, California 94608

BANK: WELLS FARGO BANK, NATIONAL ASSOCIATION
East Bay Regional Commercial Banking Office
One Kaiser Plaza, Suite 850
Oakland, California 94612
Attention: Darrell Rodriguez

or to such other address as any party may designate by written notice to all
other parties. Each such notice, request and demand shall be deemed given or
made as follows: (a) if sent by hand delivery,

-19-
<PAGE>

upon delivery; (b) if sent by mail, upon the earlier of the date of receipt or
three (3) days after deposit in the U.S. mail, first class and postage prepaid;
and (c) if sent by telecopy, upon receipt.

SECTION 7.3. COSTS, EXPENSES AND ATTORNEYS' FEES. Borrower shall pay to
Bank immediately upon demand the full amount of all payments, advances, charges,
costs and expenses, including reasonable attorneys' fees (to include outside
counsel fees and all allocated costs of Bank's in-house counsel), incurred by
Bank in connection with (a) the negotiation and preparation of this Agreement
and the other Loan Documents, Bank's continued administration hereof and
thereof, and the preparation of any amendments and waivers hereto and thereto,
(b) the enforcement of Bank's rights and/or the collection of any amounts which
become due to Bank under any of the Loan Documents, and (c) the prosecution or
defense of any action in any way related to any of the Loan Documents, including
without limitation, any action for declaratory relief, and including any of the
foregoing incurred in connection with any bankruptcy proceeding relating to
Borrower.

SECTION 7.4. SUCCESSORS, ASSIGNMENT. This Agreement shall be binding upon
and inure to the benefit of the heirs, executors, administrators, legal
representatives, successors and assigns of the parties; provided however, that
Borrower may not assign or transfer its interest hereunder without Bank's prior
written consent. Bank reserves the right to sell, assign, transfer, negotiate or
grant participations in all or any part of, or any interest in, Bank's rights
and benefits under each of the Loan Documents. In connection therewith, Bank may
disclose all documents and information which Bank now has or may hereafter
acquire relating to any of the Credits, Borrower or its business, or any
collateral required hereunder.

SECTION 7.5. ENTIRE AGREEMENT; AMENDMENT. This Agreement and the other
Loan Documents constitute the entire agreement between Borrower and Bank with
respect to the

-20-
<PAGE>

Credits and supersede all prior negotiations, communications, discussions and
correspondence concerning the subject matter hereof. This Agreement may be
amended or modified only by a written instrument executed by each party hereto.

SECTION 7.6. NO THIRD PARTY BENEFICIARIES. This Agreement is made and
entered into for the sole protection and benefit of the parties hereto and their
respective permitted successors and assigns, and no other person or entity shall
be a third party beneficiary of, or have any direct or indirect cause of action
or claim in connection with, this Agreement or any other of the Loan Documents
to which it is not a party.

SECTION 7.7. TIME. Time is of the essence of each and every provision of
this Agreement and each other of the Loan Documents.

SECTION 7.8. SEVERABILITY OF PROVISIONS. If any provision of this
Agreement shall be prohibited by or invalid under applicable law, such provision
shall be ineffective only to the extent of such prohibition or invalidity
without invalidating the remainder of such provision or any remaining provisions
of this Agreement.

SECTION 7.9. GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of California, except to the
extent Bank has greater rights or remedies under Federal law, whether as a
national bank or otherwise, in which case such choice of California law shall
not be deemed to deprive Bank of any such rights and remedies as may be
available under Federal law.

SECTION 7.10. COUNTERPARTS. This Agreement may be executed in any number
of counterparts, each of which when executed and delivered shall be deemed to be
an original, and all of which when taken together shall constitute one and the
same Agreement.

-21-
<PAGE>

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the day and year first written above.

THE LAW AND ECONOMICS WELLS FARGO BANK,
CONSULTING GROUP, INC. NATIONAL ASSOCIATION

By: /s/ Thomas M. Jorde By: /s/ Darrell Rodriguez
--------------------- -----------------------
Darrell Rodriguez
Title: President Assistant Vice President

By: /s/ David J. Teece
--------------------

Title: Chairman of the Board

-22-
<PAGE>

EXHIBIT A

WELLS LINE OF CREDIT
6/1/96 RENEWAL

WELLS FARGO BANK REVOLVING LINE OF CREDIT NOTE
- --------------------------------------------------------------------------------

$3,000,000.00 OAKLAND, CALIFORNIA
MAY 31, 1996

FOR VALUE RECEIVED, the undersigned THE LAW AND ECONOMICS CONSULTING
GROUP, INC. ("Borrower") promises to pay to the order of WELLS FARGO BANK,
NATIONAL ASSOCIATION ("Bank") at its office at EAST BAY RCBO, ONE KAISER PLAZA
SUITE 850, OAKLAND, CA 94612, or at such other place as the holder hereof may
designate, in lawful money of the United States of America and in immediately
available funds, the principal sum of $3,000,000.00, or so much thereof as may
be advanced and be outstanding, with interest thereon, to be computed on each
advance from the date of its disbursement as set forth herein.

INTEREST:

(a) Interest. The outstanding principal balance of this Note shall
--------
bear interest at a rate per annum (computed on the basis of a 360-day year,
actual days elapsed) EQUAL TO the Prime Rate in effect from time to time. The
"Prime Rate" is a base rate that Bank from time to time establishes and which
serves as the basis upon which effective rates of interest are calculated for
those loans making reference thereto. Each change in the rate of interest
hereunder shall become effective on the date each Prime Rate change is
announced within Bank.

(b) Payment of Interest. Interest accrued on this Note shall be
-------------------
payable on the LAST day of each MONTH, commencing JUNE 30, 1996.

(c) Default Interest. From and after the maturity date of this Note,
----------------
or such earlier date as all principal owing hereunder becomes due and payable
by acceleration or otherwise, the outstanding principal balance of this Note
shall bear interest until paid in full at an increased rate per annum
(computed on the basis of a 360-day year, actual days elapsed) equal to 4%
above the rate of interest from time to time applicable to this Note.

BORROWING AND REPAYMENT:

(a) Borrowing and Repayment. Borrower may from time to time during the
-----------------------
term of this Note borrow, partially or wholly repay its outstanding
borrowings, and reborrow, subject to all of the limitations, terms and
conditions of this Note and of the Credit Agreement between Borrower and Bank
defined below; provided however, that the total outstanding borrowings under
this Note shall not at any time exceed the principal amount stated above. The
unpaid principal balance of this obligation at any time shall be the total
amounts advanced hereunder by the holder hereof less the amount of principal
payments made hereon by or for any Borrower, which balance may be endorsed
hereon from time to time by the holder. The outstanding principal balance of
this Note shall be due and payable in full on MAY 31, 2000.

(b) Advances. Advances hereunder, to the total amount of principal sum
--------
available hereunder, may be made by the holder at the oral or written request
of (i) DAVID TEECE OR GORDON RAUSSER OR RICHARD GILBERT OR THOMAS JORDE OR
KIMBERLY GILMOUR, any one acting alone, who are authorized to request advances
and direct the disposition of any advances until written notice of the
revocation of such authority is received by the holder at the office
designated above, or (ii) any person, with respect to advances deposited to
the credit of any account of any Borrower with the holder, which advances,
when so deposited, shall be conclusively presumed to have been made to or for
the benefit of each Borrower regardless of the fact that persons other than
those authorized to request advances may have authority to draw against such
account. The holder shall have no obligation to determine whether any person
requesting an advance is or has been authorized by any Borrower.

(c) Application of Payments. Each payment made on this Note shall be
-----------------------
credited first, to any interest then due and second, to the outstanding
principal balance hereof.

EVENTS OF DEFAULT:

This Note is made pursuant to and is subject to the terms and
conditions of that certain Credit Agreement between Borrower and Bank dated as
of MAY 31, 1996, as amended from time to time (the "Credit Agreement"). Any
default in the payment or performance of any obligation under this Note, or
any defined event of default under the Credit Agreement, shall constitute an
"Event of Default" under this Note.

MISCELLANEOUS:

(a) REMEDIES. Upon the occurrence of any Event of Default as defined
in the Credit Agreement, the holder of this Note, at the holder's option, may
declare all sums of principal and interest outstanding hereunder to be
immediately due and payable without presentment, demand, protest or notice of
dishonor, all of which are expressly waived by each Borrower, and the
obligation, if any, of the holder to extend any further credit hereunder shall
immediately cease and terminate. Each Borrower shall pay to the holder
immediately upon demand the full amount of all payments, advances, charges,
costs and expenses, including reasonable attorneys' fees (to include outside
counsel fees and all allocated costs of the holders' in-house counsel),
incurred by the holder in connection with the enforcement of holder's rights
and/or the collection of any amounts which become due to the holder under this
Note, and the prosecution or defense of any action in any way related to this
Note, including without limitation, any action for declaratory relief, and
including any of the foregoing incurred in connection with any bankruptcy

REVOLVING LINE OF CREDIT NOTE, PAGE 1
<PAGE>

proceeding relating to any Borrower.

(b) Obligations Joint and Several. Should more than one person or
-----------------------------
entity sign this Note as a Borrower, the obligations of each such Borrower
shall be joint and several.

(c) Governing Law. This Note shall be governed by and construed in
-------------
accordance with the laws of the State of California, except to the extent Bank
has greater rights or remedies under Federal law, whether as a national bank
or otherwise, in which case such choice of California law shall not be deemed
to deprive Bank of any such rights and remedies as may be available under
Federal law.

IN WITNESS WHEREOF, the undersigned has executed this Note as of the
date first written above.

THE LAW AND ECONOMICS CONSULTING GROUP, INC.

By: /s/ Thomas M. Jorde
----------------------------------------

Title: President
------------------------------------

By: David J. Teece
----------------------------------------

Title: Chairman of the Board
-------------------------------------

REVOLVING LINE OF CREDIT NOTE, PAGE 2
<PAGE>

EXHIBIT B

WELLS FARGO BANK
APPLICATION AND AGREEMENT
FOR STANDBY LETTER OF CREDIT

This document is a one page application and agreement form which
consists of the following items: applicant's name and address, the amount for
the letter of credit, terms of drawings, terms of transferability, special
instructions, terms of transferability, applicant's signature block and the
bank's signature block.

<PAGE>

EXHIBIT 10.10

FORM OF STANDARD NON-EQUITY PRINCIPAL LETTER

PERSONAL & CONFIDENTIAL
- -----------------------

Dear ____________:

We are delighted with the prospect of having you become a Principal at LECG,
effective _____________. This letter outlines LECG's terms and conditions for
Principals.

Exclusivity
- -----------

As a Principal in LECG, you agree to be exclusive to the firm and bill through
LECG all of your professional consulting activities./1/ You will be an
independent contractor, but LECG will invoice on your behalf, and we will
distribute cash to you promptly once it is received. We expect you to abide by
all LECG policies and procedures as determined from time to time by the Board of
Directors.

As an independent contractor, you are not directed in any way by the firm; nor
can you commit the firm without first getting the approval of an officer of the
Company. When you need staff support, you should contact the coordinators for
the respective practice areas, the Director of the office or me. In addition,
you cannot instruct staff to perform business development work for you without
first receiving my approval.

Fee pass-through
- ----------------

Our current policy is that Principals receive 100% of their collected
professional billings, except when the firm or another Principal brings business
to them. Under this policy, when the firm is the finder, 85% of their collected
billings are passed through. When another Principal is the finder and you are
the expert on the case, 90% is passed through. On the other hand, you will
receive 60% of your collected billings on cases where another Principal or the
firm is the finder and you are not the expert. Needless to say, Principals do
not need to accept offers of work provided by the firm or by other Principals.
The firm reserves the fight to modify these policies as circumstances warrant in
the future.

- ---------------------
/1/ Under special circumstances, it may be desirable for the expert's
fees to be billed separately. Such exceptions shall be approved by the President
of LECG.
<PAGE>

LECG will bill your time at the hourly rate you establish. We understand that
this rate may change on a case-by-case basis, and may be different in different
geographic markets. You agree to discuss your rate with Tom Jorde and to advise
him of any changes in rate that you may contemplate making. We try to keep our
rates a little below market.

Finders' (referral) fees
- ------------------------

As a Principal of LECG you will receive 14.5% of the total collected billings on
all projects that you source, net of all expenses and your own fees, in
accordance with LECG policy. Thus on a $500,000 project in which there was
$100,000 in travel, telephone, copying and other expenses including your expert
fees, you would receive a $58,000 ($400,000 x .145) finders' fee after payment
had been received from the client. In circumstances where you are the finder
and someone else is the expert and a 10% surcharge is assessed on the expert,
your finders' fee will be grossed up by the fees collected from other experts.

Such monies will generally be distributed within 90 days of receipt. I should
point out that finders who are not Principals receive only a 10% finders' fee
and Tom Jorde receives a 19.5% finders' fee to compensate for his corporate
marketing efforts.

When other Principals assist you in securing a project, the finders' fees will
be split according to each Principal's contribution to securing the project.
Normally the Principals involved can work this out amicably. Any dispute is
resolved by the Board of Directors.

Write-downs and bad debt
- ------------------------

LECG has adopted a policy regarding the write down of invoices which gives
guidance as to how these will be handled. A copy of this policy is attached for
your review.

Equity Prospects
- ----------------

At the end of each calendar year, the Board of Directors may decide to offer
options to certain high performing Principals. (The Board can also require
Shareholders to sell shares back to the Company if they are responsible for less
than twice the business their equity share would suggest). LECG's Policy for
Option Program for High Performing LECG Shareholder Principals is attached as
background. Please contact Kim Gilmour if you have any questions.

As a Principal of LECG, the Board of Directors expects you to be responsible for
a significant level of professional (back office) staff receipts. The Board
also expects you to help develop the firm and its employees, to cooperate with
Principals in securing new business, and to abide by the procedures and
standards which LECG is developing to perpetuate its existence as a premier
international consulting firm.

-2-
<PAGE>

Administrative Support
- ----------------------

Our standard arrangement is for Principals to provide their own administrative
support. If you wish, LECG will hire an executive assistant for you at an
agreed upon salary. As such, you would be responsible for all cash costs
associated with such employment in excess of amounts billed and collected on
cases in which the assistant might work. Such amounts, if any, shall be
calculated at the end of the year. You can discuss this with David Teece or me.

Final Agreement
- ---------------

This agreement is final and supersedes any prior understandings you may believe
existed. The Board reserves the right to change any of its policies from time
to time, including policies discussed in this agreement, as business conditions
warrant. Any such changes will be communicated to the Principals upon their
adoption.

All of us at LECG very much look forward to having you as a Principal on our
team. Please sign below to indicate your acceptance of these terms.

Sincerely,

Donald A. Bunch
Chief Operating Officer

Enclosures

cc: LECG Board

Agreed to and Accepted:

- ------------------------------- --------------------------------
Name Date

-3-
<PAGE>

FORM OF STANDARD EQUITY PRINCIPAL LETTER

Confidential
- ------------

Dear ________________:

We are delighted with the prospect of having you become a Principal at LECG,
effective This letter outlines the terms and conditions for Principals.

Exclusivity
- -----------

Fee pass-through
- ----------------

Our current policy is that Principals receive 100% of their collected
professional billings, except when the firm or another Principal brings business
to them. Under this policy, when the firm is the finder, 85% of their collected
billings are passed through. When another Principal is the finder and you are
the expert on the case, 90% is passed through. On the other hand, you will
receive 60% of your collected billings on cases where another Principal or the
firm is the finder and you are not the expert. Needless to say, Principals do
not need to accept offers of work provided by the firm or by other Principals.
The firm reserves the right to modify these policies as circumstances warrant in
the future.

- -----------------------
/1/ Under special circumstances, it may be desirable for the expert's
fees to be billed separately. Such exceptions shall be approved by the President
of LECG.
<PAGE>

Page 2

Finders' (referral) fees
- ------------------------

Write-downs and bad debt
- ------------------------

LECG has adopted a policy regarding the write down of invoices which gives
guidance as to how these will be handled. A copy of this policy is attached for
your review.

Equity
- ------

We will provide you _______ (________) shares in LECG effective date in
---------
accordance with the stock formula price in our Buy-Sell Agreement. The purchase
price is estimated at $_________ per share for a total estimated cost of
$____________. The actual price for date will not be determined until
approximately date . Adjustments may be made at that time. This offer to
----------
provide _______ shares is effective anytime during this calendar year at the
then current formula price.
<PAGE>

Page 3

As we discussed, Company policy requires a minimum of 20% down payment on the
stock with the Company financing at most 80% at its current cost of funds.
Terms of the note to be held by the Company should you wish to take up the
Company's offer of financing are as follows:

A. Principal and interest on the note shall be repaid out of the Law &
Economics Consulting Group, Inc. earnings distributions to you. If
earnings distributions are not sufficient to repay the loan in full as of
date , all outstanding principal and interest shall be due and payable on
-------
that date. All payments shall be applied first to accrued and unpaid
interest and then to principal. If the loan is not repaid as of date ,
--------
the Company will be entitled to acquire shares which remain as collateral
under this agreement. The number of shares which the Company will be
entitled to acquire shall be determined by dividing the outstanding
principal and accrued interest remaining on the note by the then current
market price per share as computed in accordance with the then current
Shareholders' Buy-Sell Agreement. Needless to say, the note can be prepaid
at any time without penalty.

B. The __________ shares purchased will act as collateral on the outstanding
balance and will be released by the Company based on your pay down of the
principal amount of the loan. For example, assume that a loan of $75,000
is collateralized by 20 shares ($3,750 per share). Interest of $5,000 has
accrued after one year. At that time, a repayment of $25,000 is made based
on the repayment described above. The loan balance is now $55,000 with a
total pay down in principal of $20,000 ($25,000 - $5,000). 15 shares will
remain as collateral ($55,000 / $3,750) and 5 shares will be released
($20,000 / $3,750). At such time as loan is paid in full, all shares will
be released.

As an equity owner of LECG, the Board of Directors expects you to be responsible
for a significant level of professional (back office) staff receipts. If at the
end of a calendar year, you are responsible for more than twice the business
your equity share would suggest, the Board of Directors may decide to offer you
the right to buy additional shares. The Board may also require you to sell
shares back to the Company if you are responsible for less than twice the
business your equity share would suggest. LECG's Policy for Option Program for
High Performing LECG Shareholder Principals is attached for your review.

The Board also expects you to help develop the firm and its employees, to
cooperate with Principals in securing new business, and to abide by the
procedures and standards which LECG is developing to perpetuate its existence as
a premier international consulting firm.
<PAGE>

Page 4

Shareholders' Agreement and Coopers Agreement
- ---------------------------------------------

Attached is a packet which contains LECG's Shareholders' Buy-Sell Agreement, the
Coopers & Lybrand Agreement, and other related materials. You must agree to and
sign these documents before we can sell you any shares. Please contact me with
any questions you may have.

Administrative Support
- ----------------------

Final Agreement
- ---------------

Please review the attached documents and contact our Chief Financial Officer,
Kim Gilmour, to execute these documents. Kim can also discuss with you any
questions you may have regarding the firm's financial status. You may view any
of the firm's financial data you believe is pertinent before you purchase the
shares, should you decide to do so.
<PAGE>

Page 5

All of us at LECG very much look forward to having you as a Principal on our
team. Please sign below to indicate your acceptance of these terms and the
terms contained in the attached documents.

Sincerely,

Donald A. Bunch
Chief Operating Officer

Enclosures

cc: LECG Board

Agreed to and Accepted:

- ------------------------------- ---------------------------------
Name Date

<PAGE>

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