SC13D Kaplan 12-12-2003

0001015402-03-005030.txt : 20031222 0001015402-03-005030.hdr.sgml : 20031222 20031222172902 ACCESSION NUMBER: 0001015402-03-005030 CONFORMED SUBMISSION TYPE: SC 13D PUBLIC DOCUMENT COUNT: 5 FILED AS OF DATE: 20031222 SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: LECG CORP CENTRAL INDEX KEY: 0001192305 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-MANAGEMENT CONSULTING SERVICES [8742] IRS NUMBER: 810569994 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D SEC ACT: 1934 Act SEC FILE NUMBER: 005-79357 FILM NUMBER: 031068487 BUSINESS ADDRESS: STREET 1: 2000 POWELL ST STREET 2: STE 600 CITY: EMERYVILLE STATE: CA ZIP: 94608 BUSINESS PHONE: 5106539800 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: KAPLAN DAVID P CENTRAL INDEX KEY: 0001268631 FILING VALUES: FORM TYPE: SC 13D BUSINESS ADDRESS: STREET 1: C/O LECG STREET 2: 2000 POWELL ST SUITE CITY: EMERYVILLE STATE: CA ZIP: 94608 BUSINESS PHONE: 5109856891 SC 13D 1 kaplan.htm SC13D KAPLAN 12-12-2003 SC13D Kaplan 12-12-2003

UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
SCHEDULE 13D 

Under the Securities Exchange Act of 1934 (Amendment No.  )* 

(Name of Issuer):
LECG Corporation

(Title of Class of Securities):
Common Stock, par value $0.001 

(CUSIP Number):
523234 10 2 

(Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications): 

Marvin A. Tenenbaum 

General Counsel & Secretary 

LECG, LLC 

33 West Monroe Street, Suite 1850 

Chicago, IL 60603 

and

Carol Kerr 

Folger, Levin & Kahn LLP 

1900 Avenue of the Stars, Suite 2800 

Los Angeles, CA 90067 

(Date of Event which Requires Filing of this Statement): 
December 12, 2003. 

1.       Names of Reporting Persons. I.R.S. Identification Nos. of above persons (entities only):       David P. Kaplan 

2.       Check the Appropriate Box if a Member of a Group (See Instructions) 

(a) n/a

(b) n/a

3.       SEC Use Only 

4.       Source of Funds (See Instructions):       OO 

5.       Check if Disclosure of Legal Proceedings is Required Pursuant to Items 2(d) or 2 (e) 

6.       Citizenship or Place of Organization:       United States 

7.       Sole Voting Power :       1,380,075 

8.       Shared Voting Power:       0 

9.       Sole Dispositive Power:       1,380,075 

10.     Shared Dispositive Power       0 

11.     Aggregate Amount Beneficially Owned by Each Reporting Person:       1,380,075 

12.     Check if the Aggregate Amount in Row (11) Excludes Certain Shares (See Instructions) 

13.     Percent of Class Represented by Amount in Row (11):       6.36% 

14.     Type of Reporting Person (See Instructions):       IN 

**************************************** 

Item 1: Security and Issuer 

This Schedule 13D relates to shares of Common Stock, par value $0.001 per share (the "Shares"), of LECG Corporation, a Delaware corporation (the "Issuer"). The principal executive office and mailing address of the Issuer is: 2000 Powell Street, Emeryville, California 94608. 

Item 2: Identity and Background 

(a)       This Schedule 13D is being filed on behalf of David P. Kaplan, a natural person. 

(b)       Mr. Kaplan’s principal business address is 1725 Eye Street, NW, Suite 800, Washington, DC 20006. 

(c)       The present principal occupation of Mr. Kaplan is that of President of the Issuer. Mr. Kaplan is also employed by LECG, LLC, a subsidiary of the Issuer, to provide expert consulting services to clients of LECG, LLC. The Issuer’s principal business address is listed in Item 1 above. 

(d)       During the last five (5) years, Mr. Kaplan has not been convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors). 

(e)       During the last five (5) years, Mr. Kaplan has not been a party to a civil proceeding or a judicial or administrative body of competent jurisdiction which resulted in any judgment, decree or final order to which Mr. Kaplan is subject enjoining future violations of, or prohibiting or mandating activities subject to, federal or state securities laws or finding any violation with respect to such laws. 

(f)       Mr. Kaplan is a United States citizen. 

Item 3: Source and Amount of Funds or Other Consideration 

The 1,380,075 Common Shares beneficially owned by Mr. Kaplan include: 

801,950 outstanding Shares owned directly by Mr. Kaplan; and 

578,125 Shares which Mr. Kaplan has a right to acquire pursuant to options granted to Mr. Kaplan under the Issuer’s 2000 Incentive Plan which are either now presently vested and exercisable, or will be fully vested and exercisable within sixty (60) days of the date hereof. 

799,050 of the outstanding Shares owned directly by Mr. Kaplan were received in exchange for 1,278,480 of the common units of LECG Holding Company, LLC held by Mr. Kaplan (the "Exchange"). The Exchange became effective after the effectiveness of the registration statement relating to the Issuer’s initial public offering. The Exchange was part of a larger reorganization (the "Reorganization") undertaken in connection with the Issuer’s initial public offering pursuant to which holders of common units of LECG Holding Company, LLC other than TCEP/LECG Funding Corporation, including Mr. Kaplan, each received one Share for every 1.6 common units of LECG Holding Company, LLC. As part of the Reorganization, certain holders of common units other than TCEP/LECG Funding Corporation, including M
r. Kaplan, also received the right to certain cash payments, including in redemption for preferred units of LECG Holding Company, LLC. 

The remaining 2,900 outstanding Shares owned directly by Mr. Kaplan were acquired by Mr. Kaplan in the Issuer’s initial public offering. 

The options entitling Mr. Kaplan to acquire 578,125 Shares were granted to Mr. Kaplan pursuant to the Issuer’s 2000 Incentive Stock Plan, as amended (the "Plan") and various option grants issued thereunder.1 Of that total, those options entitling Mr. Kaplan to purchase 109,375 Shares have vested and are presently exercisable, or will vest and become exercisable within the next sixty (60) days, according to the time vesting schedule set forth in applicable option grants issued to Mr. Kaplan. The options entitling Mr. Kaplan to purchase 468,750 Shares (the "Performance Options") were scheduled to vest in their entirety on October 30, 2008, but were subject to full acceleration prior to that date if, after the completion of the Issuer’s initial public offering, the average closi
ng market price of its common stock over a 20-day period following the offer equaled or exceeded an amount specified in the option grant (the "Performance Criteria"). The Performance Criteria were satisfied on December 12, 2003, thereby causing the full acceleration and vesting of all of the Performance Options. 

Item 4: Purpose of Transaction 

As described above in Item 3, the Shares beneficially owned by Mr. Kaplan were either acquired pursuant to a combination of the Exchange and the Issuer’s initial public offering, or are subject to presently vested and exercisable options under the Plan, or options under the Plan which will be fully vested and exercisable within 60 days of the date hereof. The Shares owned by Mr. Kaplan are owned for investment purposes. Mr. Kaplan may, from time to time, depending upon market conditions and other factors deemed relevant by Mr. Kaplan , acquire additional Shares. Mr. Kaplan reserves the right to, and may in the future choose to, change his purpose with respect to the investment and, subject to the Lock-up Letter Agreement described in Item 6 herein, take such actions as he may deem appropriate in light of t
he circumstances including, without limitation, to dispose of, in the open market, in a private transaction, by distribution or by gift, all or a portion of the Shares which Mr. Kaplan now owns or may hereafter acquire. 

1     In connection with the Reorganization, the Issuer assumed all obligations of LECG Holding Company, LLC pursuant to the Plan and option grants issued thereunder.

Mr. Kaplan does not have any plans or proposals which relate to or result in: 

(a)       the acquisition by any person of additional securities of the Issuer, or the disposition of securities of the Issuer; 

(b)       an extraordinary transaction, such as a merger, reorganization or liquidation, involving the Issuer or any of its subsidiaries; 

(c)       a sale or transfer of a material amount of assets of the Issuer or any of its subsidiaries; 

(d)       any change in the present board of directors or management of the Issuer, including any plans or proposals to change the number or term of directors or to fill any existing vacancies on the board; 

(e)       any material change in the present capitalization or dividend policy of the Issuer; 

(f)       any other material changes in the Issuer's business or corporate structure; 

(g)       changes in the Issuer's charter, bylaws or instruments corresponding thereto or other actions which may impede the acquisition of control of the Issuer by any person; 

(h)       causing a class of securities of the Issuer to be delisted from a national securities exchange or cease to be authorized to be quoted in an inter-dealer quotation system of a registered national securities association; 

(i)       a class of equity securities of the Issuer becoming eligible for termination of registration pursuant to Section 12(g)(4) of the Securities Exchange Act of 1934; or 

(j)       any action similar to any of those enumerated above. 

Item 5: Interest in Securities of the Issuer 

(a)       As of the date of this report, Mr. Kaplan beneficially owns an aggregate of 1,380,075 Shares, which represent 6.36% of the Issuer’s 21,693,156 outstanding Shares. Of the 1,380,075 Shares which Mr. Kaplan beneficially owns, 578,125 Shares represent Shares which Mr. Kaplan does not currently own, but which Mr. Kaplan has a right to acquire pursuant to presently vested and exercisable options, or will have a right to acquire pursuant to options which will vest and become exercisable within 60 days of the date hereof. 

(b)       Mr. Kaplan has the sole power to vote, direct the vote, dispose, and direct the disposition of all 1,380,075 of the Shares of which Mr. Kaplan is the beneficial owner. Mr. Kaplan does not share the power to vote, direct the vote, dispose, or direct the disposition of a
ny of the 1,380,075 Shares of which Mr. Kaplan is the beneficial owner. 

(c)       Mr. Kaplan has not effected any transactions, other than those described herein, in the class of securities described herein during the past sixty (60) days. 

(d)       No other person is known by Mr. Kaplan to have the right to receive or the power to direct the receipt of dividends from, or the proceeds from the sale of, any Shares beneficially owned by Mr. Kaplan . 

(e)       Not applicable. As of the date of this Schedule 13D, Mr. Kaplan is the beneficial owner of more than 5% of the class of securities described herein. 

Item 6: Contracts, Arrangements, Understandings or Relationships with Respect to Securities of the Issuer 

The Issuer and certain of its stockholders, including Mr. Kaplan , are parties to a Buy-Sell Agreement, effective as of September 29, 2000, which provides, in part, that the Issuer as well as certain stockholders, including Mr. Kaplan , have the right to repurchase unvested Shares issued in exchange for the unvested Shares of restricted common stock issued under the Buy-Sell Agreement 
at original cost if a stockholder: (a) ceases to provide services on a regular basis to the Issuer, (b) makes an assignment for the benefit of creditors, (c) files a petition in any bankruptcy or insolvency proceeding (or a petition is filed against this stockholder) or (d) attempts to transfer shares of restricted common stock in violation of a Securityholders’ Agreement among the Issuer and certain of its stockholders. (The Securityholders’ Agreement was terminated upon the closing of the Issuer’s initial public offering.) The repurchase right generally lapses over a minimum of 4 years and a maximum of 4 1/2 years. This description of the Buy-Sell Agreement is qualified in its entirety by reference to the Buy-Sell Agreement, a copy of which has been incorporated herein by reference as Exhibit 1. 

Substantially all of the Shares issued prior to the Issuer’s initial public offering are held by stockholders, including Mr. Kaplan , who signed Lock-up Letter Agreements under which they agreed not to offer, sell, contract to sell, hedge or otherwise dispose of, directly or indirectly, any Shares or securities convertible into or exercisable or exchangeable for Shares, for a period of 180 days after November 13, 2003. UBS Securities LLC, in its sole discretion, may release some or all of these Shares before the 180-day lock-up period ends. This description of the Lock-
up Letter Agreement is qualified in its entirety by reference to the Lock-up Letter Agreement entered into between Mr. Kaplan and the Issuer, a copy of which is filed herewith as Exhibit 2. 

Certain of the Issuer’s stockholders, including Mr. Kaplan , hold rights to cause the Issuer to register the sale of their currently unregistered Shares under the Securities Act of 1933, as amended (the "Securities Act"). These Shares are referred to as registrable securities. Specifically, commencing 180 days after November 13, 2003, a holder or holders of at least a majority of the registrable securities may require the Issuer to prepare and file a registration statement under the Securities Act at the Issuer’s expense covering all or a portion of the registrable
 securities if the Shares to be included in that registration will generate anticipated aggregate net proceeds of at least $5.0 million. Registration rights terminate no later than 5 years after the Issuer’s initial public offering. Registration of these Shares under the Securities Act would result in these Shares becoming freely tradable without restriction under the Securities Act. This description of the Registration Rights Agreement is qualified in its entirety by reference to the Registration Rights Agreement entered into between LECG Holding Company, LLC, TCEP/LECG Funding Corporation, David J. Teece, Mr. Kaplan , Frog & Peach Investors, LLC and other persons, a copy of which has been incorporated herein by reference to Exhibit 3. 

The response to Item 3 is incorporated herein by reference. The Reorganization and the Exchange were made pursuant to an Omnibus Plan of Reorganization between LECG Holding Company, LLC, TCEP/LECG Funding Corporation, Thoma Cressey Fund VII ("Fund VII"), L.P., Thoma Cressey Friends Fund VII, L.P. ("Friends Fund"), the Issuer, David J. Teece and Mr. Kaplan , dated November 7, 2003 (the "Plan of Reorganization"), a copy of which has been incorporated herein by reference to Exhibit 4. 

The presently vested and exercisable options entitling Mr. Kaplan to acquire 578,125 Shares were granted to Mr. Kaplan pursuant to the Plan and the various option grants issued thereunder. A copy of the Plan is incorporated herein by reference to Exhibit 5 , and a copy of each applicable option grant issued to Mr. Kaplan thereunder are incorporated herein by reference to Exhibit 6 ,
 Exhibit 7 and Exhibit 8 , respectively. 

Item 7. Materials to be Filed as Exhibits 

The Exhibit Index filed herewith is incorporated herein by this reference. 

Signatures 

After reasonable inquiry and to the best of my knowledge and belief, I certify that the information set forth in this Schedule 13D is true, complete and correct. 

Dated: December 22, 2003 

/s/ David P. Kaplan__________________ 

David P. Kaplan 

Exhibit Index 

Exhibit 1. Buy Sell Agreement between LECG Holding Company, LLC, TCEP/LECG Funding Corporation, David J. Teece, David Kaplan, Frog & Peach Investors, LLC and other persons dated September 29, 2000, incorporated by reference to Exhibit 10.19 to the Issuer’s Registration Statement on Form S-1, filed with the SEC on August 25, 2003 (Commission File Number 333-108189). 

Exhibit 2. Lock-up Letter Agreement from David Kaplan to the representatives of the several underwriters of the Issuer’s Initial Public Offering, dated August 8, 2003 (filed herewith). 

Exhibit 3. Registration Rights Agreement between LECG Holding Company, LLC, TCEP/LECG Funding Corporation, David J. Teece, David Kaplan, Frog & Peach Investors, LLC and other persons dated September 29, 2000, incorporated by reference to Exhibit 10.18 to the Issuer’s Registration Statement on Form S-1, filed with the SEC on August 25, 2003 (Commission File Number 333-108189). 

Exhibit 4. Form of Plan of Reorganization, incorporated by reference to Exhibit 10.46 to the Issuer’s Registration Statement on Form S-1, filed with the SEC on November 7, 2003 (Commission File Number 333-108189). 

Exhibit 5. 2000 Incentive Plan, incorporated by reference to Exhibit 10.2 to the Issuer’s Registration Statement on Form S-1, filed with the SEC on November 7, 2003 (Commission File Number 333-108189). 

Exhibit 6. Option Grant to David Kaplan issued pursuant to that certain 2000 Incentive Plan, dated September 29, 2000 (filed herewith). 

Exhibit 7. Option Grant to David Kaplan issued pursuant to that certain 2000 Incentive Plan, dated September 29, 2001 (filed herewith). 

Exhibit 8. Option Grant to David Kaplan issued pursuant to that certain 2000 Incentive Plan, dated October 30, 2001 (filed herewith). 

EX-2 3 ex-2.htm EXHIBIT 2 LOCK UP LETTER AGREEMENT Exhibit 2 Lock up Letter Agreement

Lock-up Letter Agreement 

Common Stock 

($0.001 par value) 

August 8, 2003 

UBS Securities LLC 

Lehman Brothers Inc. 

Adams, Harkness & Hill, Inc. 

Legg Mason Wood Walker, Incorporated 

As Representatives of the several Underwriters 

c/o  UBS Securities LLC 

299 Park Avenue 

New York, New York 10171 

Ladies and Gentlemen: 

This Lock-Up Letter Agreement is being delivered in connection with the proposed Underwriting Agreement (the "Underwriting Agreement") to be entered into by LECG Corporation (the "Company") and UBS Securities LLC ("UBS"), as Representatives of the several Underwriters named therein, with respect to the public offering (the "Offering") of Common Stock, par value $0.001 per share, of the Company (the "Common Stock"). 

In order to induce you to enter into the Underwriting Agreement, the undersigned agrees that for a period of 180 days after the date of the final prospectus relating to the Offering the undersigned will not, without the prior written consent of UBS on behalf of the several Underwriters, (i) sell, offer to sell, contract or agree to sell, hypothecate, pledge, grant any option to purchase or otherwise dispose of or agree to dispose of, directly or indirectly, or file (or participate in the filing of) a registration statement with the Securities and Exchange Commission (the "Commission") in respect of, or establish or increase a put equivalent position or liquidate or decrease a call equivalent position within the meaning of Section 16 of the Securities Exchange Act of 1934, as amended, and the r
ules and regulations of the Commission promulgated thereunder with respect to, any Common Stock of the Company or any securities convertible into or exercisable or exchangeable for Common Stock, or warrants or other rights to purchase Common Stock, (ii) enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of Common Stock or any securities convertible into or exercisable or exchangeable for Common Stock, or warrants or other rights to purchase Common Stock, whether any such transaction is to be settled by delivery of Common Stock or such other securities, in cash or otherwise, or (iii) publicly announce an intention to effect any transaction specified in clause (i) or (ii). The foregoing sentence shall not apply to (a) the registration of or sale to the Underwriters of any Common Stock pursuant to the Offering and the Underwriting Agreement, (b) transactions relating to shares of Common Stock or other securities acquired in open
 market transactions after the consummation of the Offering, (c) transactions relating to shares of Common Stock or other securities acquired as part of a directed share program, provided that the undersigned is not an officer, director or affiliate of the Company, (d) distributions of shares of Common Stock or any security convertible into Common Stock to limited partners or stockholders of the undersigned, (e) transfers of shares of Common Stock or any security convertible into Common Stock by will or intestate succession to the undersigned’s immediate family or to a trust, the beneficiaries of which are exclusively the undersigned or members of the undersigned’s immediate family, (f) transfers of shares of Common Stock or any security convertible into Common Stock as a bona fide gift or gifts, provided that in the case of any transfer or distribution pursuant to clause (d), (e) or (f), (i) each donee, transferee, trustee or distributee shall execute and deliver to UBS a duplicate form of this Lo
ck-up Letter Agreement and (ii) no filing by any party (donor, donee, transferor or transferee) under Section 16(a) of the Securities Exchange Act of 1934, as amended, shall be required or shall be made voluntarily in connection with such transfer or distribution (other than a filing on a Form 5 made after the expiration of the 180-day period referred to above). 

In the event that UBS, on behalf of the several Underwriters, consents to the release of the restrictions set forth in the preceding paragraph with respect to shares of Common Stock held by one or more stockholders of the Company, then such release shall apply to all stockholders who are subject to such restrictions by Lock-Up Letter Agreements executed in connection with the Offering by the same proportionate percentage of the shares of Common Stock being released. 

In addition, the undersigned hereby waives any rights the undersigned may have to require registration of Common Stock in connection with the filing of a registration statement relating to the Offering. The undersigned further agrees that, for a period of 180 days after the date of the final prospectus relating to the Offering, the undersigned will not, without the prior written consent of UBS, make any demand for, or exercise any right with respect to, the registration of Common Stock of the Company or any securities convertible into or exercisable or exchangeable for Common Stock, or warrants or other rights to purchase Common Stock. 

If upon the earliest to occur of (i) the Company notifies you in writing that it does not intend to proceed with the Offering, (ii) the registration statement filed with the Securities and Exchange Commission with respect to the Offering is withdrawn, (iii) for any reason the Underwriting Agreement shall be terminated prior to the time of purchase (as defined in the Underwriting Agreement) or (iv) if the Offering is not consummated prior to March 31, 2004, this Lock-Up Letter Agreement shall be terminated and the undersigned shall be released from its obligations hereunder. 

 
Yours very truly, 

David P. Kaplan________________ 

(Print Name) 

/s/ David P. Kaplan______________ 

(Signature) 

President______________________ 

(Title, if applicable) 

9100 Burning Tree Road 

Bethesda, MD 20817____________ 

(Address)

EX-6 4 ex-6.htm EXHIBIT 6 Exhibit 6

Option No.: 24_________ 

LECG HOLDING COMPANY, LLC 

2000 INCENTIVE PLAN 

NONQUALIFIED OPTION AGREEMENT 

LECG Holding Company, LLC, a California limited liability company (the "Company") hereby grants an option to purchase Common Units (the "Units") as those Units are described in the Limited Liability Company Agreement of LECG Holding Company, LLC (the "LLC Agreement") to the optionee named below. The terms and conditions of the option are set forth in this cover sheet, in the attached Agreement and in the Company’s 2000 Incentive Plan (the "Plan"). 

Grant Date:      September 29, 2000 

Name of Optionee: David Kaplan 

Optionee’s Social Security Number: ###-##-#### 

Number of Units Covered by Option:      50,000 

Option Price Per Unit:      $2.88 

Vesting Start Date:      September 29, 2000 

By signing this cover sheet, you agree to all of the terms and conditions described in the attached Agreement and the Plan, a copy of which is also attached. You acknowledge that you have carefully reviewed the Plan, and agree that the Plan will control in the event any provision of this Agreement should appear to be inconsistent. 

Optionee: /s/ David Kaplan 

(Signature)

Company: /s/ J. Geoffrey Colton 

(Signature)

Title: Chief Financial Officer

Attachment 

This is not a certificate or a negotiable instrument. 

LECG HOLDING COMPANY, LLC 

2000 INCENTIVE PLAN 

NONQUALIFIED OPTION AGREEMENT 

Nonqualified Option	This option is not intended to be an incentive stock option under Section 422 of the Internal Revenue Code and will be interpreted accordingly.

Vesting	This option is only exercisable before it expires and then only with respect to the vested portion of the option. Subject to the preceding sentence, you may exercise this option, in whole or in part, to purchase a whole number of vested Units not less than 100 Units, unless the number of Units purchased is the total number available for purchase under the option, by following the procedures set forth in the plan and below in this Agreement. Your right to purchase Units under this option vests as to one fourth (1/4) of the total number of Units covered by this option, as shown on the cover sheet, on the one-year anniversary of the Vesting Start Date ("Anniversary Date"), provided you then continue in Service. Thereafter, for each such vesting date that you remain in Service, the number of Units which you may purchase under this option shall vest at the rate of one-forty eighth (1/48) per month (i.e., 1/48 of the total number of Units covered by this option) as of the first day of each month following the month of the Anniversary Date. The resulting aggregate number of vested Units will be rounded to the nearest whole number, and you cannot vest in more than the number of Units covered by this option. No additional Units will vest after your Service has terminated for any reason.

Term	Your option will expire in any event at the close of business at Company headquarters on the day before the 10th anniversary of the grant Date, as shown on the cover sheet. Your option will expire earlier if your Service terminates, as described below.

Regular Termination	If your Service terminates for any reason, other than death, Disability or Cause, then your option will expire at the close of business at Company headquarters on the 90th day after your termination date.

Termination for Cause	If your Service is terminated for Cause, then you shall immediately forfeit all rights to your option and the option shall immediately expire.


		2

Death	If your Service terminates because of your death, then your 2 option will expire at the close of business at Company headquarters on the date twelve (12) months after the date of death. During that twelve-month period, your estate or heirs may exercise the vested portion of your option. In addition, if you die during the 90-day period described in connection with a regular termination (i.e., a termination of your Service not on account of your death, Disability or Cause), and a vested portion of your option has not yet been exercised, then your option will instead expire on the date twelve (12) months after your termination date. In such a case, during the period following your death up to the date twelve (12) months after your termination date, your estate or heirs may exercise the vested portion of your option.

Disability	If your Service terminates because of your Disability, then your option will expire at the close of business at Company headquarters on the date twelve (12) months after your termination date.

Leaves of Absence	For purposes of this option, your Service does not terminate when you go on a bona fide employee leave of absence that was approved by the Company in writing, if the terms of the leave provide for continued Service crediting, or when continued Service crediting is required by applicable law. However, your Service will be treated as terminating 90 days after you went on employee leave, unless your right to return to active work is guaranteed by law or by a contract. Your Service terminates in any event when the approved leave ends unless you immediately return to active employee work. The Company determines, in its sole discretion, which leaves count for this purpose, and when your Service terminates for all purpose under the Plan.

Notice of Exercise	When you wish to exercise this option, you must notify the Company by filing the proper "Notice of Exercise" form at the address given on the form. Your notice must specify how many Units you wish to purchase (in a parcel of at least 100 Units generally). Your notice must also specify how your Units should be registered (in your name only or in your and your spouse’s names as joint tenants with right of survivorship). The notice will be effective when it is received by the Company. If someone else wants to exercise this option after your death, that person must prove to the Company’s satisfaction that he or she is entitled to do so.


		3

Form of Payment	When you submit your notice of exercise, you must include payment of the option price for the Units you are purchasing. Payment may be made in one (or a combination) of the following forms: Cash, your personal check, a cashier’s check, a money order or another cash equivalent acceptable to the Company. After a Triggering Event (as defined in the Plan), by Units which have already been owned by you for more than six months and which are surrendered to the Company. The value of the Units, determined as of the effective date of the option exercise, will be applied to the option price. After a Triggering Event (as defined in the Plan) and to the extent a public market for the Units exists as determined by the Company, by delivery (on a form prescribed by the Company) of an irrevocable direction to a licensed securities broker acceptable to the Company to sell Units and to deliver all or part of the sale proceeds to the Company in payment of the aggregate option price and any withholding taxes.
Withholding Taxes	You will not be allowed to exercise this option unless you make acceptable arrangements to pay any withholding or other taxes that may be due as a result of the option exercise or sale of Units acquired under this option. In the event that the Company determines that any federal, state, local or foreign tax or withholding payment is required relating to the exercise or sale of Units arising from this grant, the Company shall have the right to require such payments from you, or withhold such amounts from other payments due to you from the Company or any Affiliate.

Transfer of Option	During your lifetime, only you (or, in the event of your legal incapacity or incompetency, your guardian or legal representative) may exercise the option. You cannot transfer or assign this option. For instance, you may not sell this option or use it as security for a loan. If you attempt to do any of these things, this option will immediately become invalid. You may, however, dispose of this option in your will, by instrument to an intervivos or testamentary trust in which Options are to be passed to the beneficiaries on the death of the trustor (settler) (provided that such a disposition is in compliance with Section 8.2 of the Plan), or it may be transferred upon your death by the laws of descent and distribution. Regardless of any marital property settlement agreement, the Company is not obligated to honor a notice of exercise from your spouse, nor is the Comp any obligated to recognize your spouse’s interest in your option in any other way.


		4

Market Stand-off Agreement	In connection with any underwritten public offering by the Agreement Company of its equity securities pursuant to an effective registration statement filed under the Securities Act, including the Company’s initial public offering, you agree not to sell, make any short sale of, loan, hypothecate, pledge, grant any option for the purchase of, or otherwise dispose or transfer for value or agree to engage in any of the foregoing transactions with respect to any Units without the prior written consent of the Company or its underwriters, for such period of time after the effective date of such registration statement as may be requested by the Company or the underwriters (not to exceed 180 days in length).

Investment Representation	If the sale of Units under the Plan is not registered under the Securities Act, but an exemption is available which requires an investment or other representation, you shall represent and agree at the time of exercise that the Units being acquired upon exercise of this option is being acquired for investment, and not with a view to the sale or distribution thereof, and shall make such other representations as are deemed necessary or appropriate by the Company and its counsel.

Transfer Restrictions	Any Units acquired under this Agreement, or any interest in such Units, are subject to a right of first refusal under that certain Securityholders’ Agreement dated as of September [29], 2000 by and among the Company’s unitholders and are also subject to restrictions on transfer under the LLC Agreement. The transfer restrictions shall terminate in the event that the Units are listed on an established national or regional stock exchange, are admitted for quotation on The Nasdaq Stock Market, or are publicly traded in an established securities market.

Right to Repurchase	Following termination of your Service for any reason, the Company shall have the right to purchase all of those Units you have or will acquire under this option. If the Company exercises its right to purchase the Units, the Company will notify you of its intention to purchase such Units, and will consummate the purchase within 90 days of your termination of Service or, in the case of Units acquired after your termination of Service, within 90 days of the date of exercise.

	The purchase price shall be the Fair Market Value of the Units on the date of your termination of Service if the Company exercises its right to purchase such Units within 90 days of your termination of Service or exercises its right within 90 days of the date of your exercise of the option following termination of Service.


		5

	The Company’s rights of repurchase shall terminate in the event that the Units are listed on an established national or regional stock exchange, are admitted for quotation on The Nasdaq Stock Market, or are publicly traded in an established securities market.

Retention Rights	Neither your option nor this Agreement give you the right to be retained by the Company (or any Parent, Subsidiaries or Affiliates) in any capacity. The Company (and any Parent, Subsidiaries or Affiliates) reserve the right to terminate your Service at any time and for any reason.

Unitholder Rights	You, or your estate or heirs, have no rights as a unitholder of the Company under the LLC Agreement until (I) a certificate for your option’s Units has been issued, and (ii) you have executed the LLC Agreement and the Securityholders’ Agreement. No adjustments are made for distributions or other rights if the applicable record date occurs before your Unit certificate is issued, except as described in the Plan.

Forfeiture of Rights	If you should take actions in competition with the Company, the Company shall have the right to cause a forfeiture of your rights, including, but not limited to, the right to cause: (I) a forfeiture of any outstanding option, and (ii) with respect to the period commencing twelve (12) months prior to your termination of Service with the Company and ending twelve (12) months following such termination of Service (A) a forfeiture of any gain recognized by you upon the exercise of an option or (B) a forfeiture of any Units acquired by you upon the exercise of an option (but the Company will pay you the option price without interest). Unless otherwise specified in an employment or other agreement between the Company and you, you take actions in competition with the Company if you directly or indirec tly, own, manage, operate, join or control, or participate in the ownership, management, operation or control of, or are a proprietor, director, officer, stockholder, member, partner or an employee or agent of, or a consultant to any business, firm, corporation, partnership or other entity which competes with any business in which the Company or any of its Affiliates is engaged during your employment or other relationship with the Company or its Affiliates or at the time of your termination of Service.


		6

Adjustments	In the event of a unit split, a unit dividend or a similar change in the Units, the number of Units covered by this option and the option price per may be adjusted (and rounded down to the nearest whole number) pursuant to the Plan. Your option shall be subject to the terms of the agreement of merger, liquidation or reorganization in the event the Company is subject to such organizational activity.

Legends	All certificates representing the Units issued upon exercise of this option shall, where applicable, have endorsed thereon the legends required by the Securityholders’ Agreement.

Applicable Law	This Agreement will be interpreted and enforced under the laws of the State of California, other than any conflicts or choice of law rule or principle that might otherwise refer construction or interpretation of this Agreement to the substantive law of another jurisdiction.

The Plan	The text of the Plan is incorporated in this Agreement by reference. Certain capitalized terms used in this Agreement are defined in the Plan, and have the meaning set forth in the Plan. This Agreement and the Plan constitute the entire understanding between you and the Company regarding this option. Any prior agreements, commitments or negotiations concerning this option are superseded.

Other Agreements	You agree, as a condition of the grant of this option, that in connection with the exercise of the option, you will execute such documents(s) as necessary to become a party to the LLC Agreement and the Securityholders’ Agreement, or such other similar agreements as the Company may require.

By signing the cover sheet of this Agreement, you agree to all of the terms and conditions described above and in the Plan. 


		7

EX-7 5 ex-7.htm EXHIBIT 7 Exhibit 7

Option No.: 264_________ 

LECG HOLDING COMPANY, LLC 

2000 INCENTIVE PLAN

NONQUALIFIED OPTION AGREEMENT 

LECG Holding Company, LLC, a California limited liability company (the "Company") hereby grants an option to purchase Common Units (the "Units") as those Units are described in the Limited Liability Company Agreement of LECG Holding Company, LLC (the "LLC Agreement") to the optionee named below. The terms and conditions of the option are set forth in this cover sheet, in the attached Agreement and in the Company’s 2000 Incentive Plan (the "Plan"). 

Grant Date: September 29, 2001 

Name of Optionee: David Kaplan 

Optionee’s Social Security Number: ###-##-#### 

Number of Units Covered by Option: 75,000 

Option Price Per Unit: $2.88 

Vesting Start Date: September 29, 2001 

By signing this cover sheet, you agree to all of the terms and conditions described in the attached Agreement and the Plan, a copy of which is also attached. You acknowledge that you have carefully reviewed the Plan, and agree that the Plan will control in the event any provision of this Agreement should appear to be inconsistent. 

Optionee: /s/ David Kaplan 

(Signature)

Company: /s/ J. Geoffrey Colton 

(Signature)

Title: Chief Financial Officer

Attachment 

This is not a certificate or a negotiable instrument. 

LECG HOLDING COMPANY, LLC 

2000 INCENTIVE PLAN 

NONQUALIFIED OPTION AGREEMENT 

Nonqualified Option	This option is not intended to be an incentive stock option under Section 422 of the Internal Revenue Code and will be interpreted accordingly.

Vesting	This option is only exercisable before it expires and then only with respect to the vested portion of the option. Subject to the preceding sentence, you may exercise this option, in whole or in part, to purchase a whole number of vested Units not less than 100 Units, unless the number of Units purchased is the total number available for purchase under the option, by following the procedures set forth in the plan and below in this Agreement. Your right to purchase Units under this option vests as to one fourth (1/4) of the total number of Units covered by this option, as shown on the cover sheet, on the one-year anniversary of the Vesting Start Date ("Anniversary Date"), provided you then continue in Service. Thereafter, for each such vesting date that you remain in Service, the number of Units which you may purchase under this option shall vest at the rate of one-forty eighth (1/48) per month (i.e., 1/48 of the total number of Units covered by this option) as of the first day of each month following the month of the Anniversary Date. The resulting aggregate number of vested Units will be rounded to the nearest whole number, and you cannot vest in more than the number of Units covered by this option. No additional Units will vest after your Service has terminated for any reason.

Term	Your option will expire in any event at the close of business at Company headquarters on the day before the 10th anniversary of the grant Date, as shown on the cover sheet. Your option will expire earlier if your Service terminates, as described below.

Regular Termination	If your Service terminates for any reason, other than death, Disability or Cause, then your option will expire at the close of business at Company headquarters on the 90th day after your termination date.

Termination for Cause	If your Service is terminated for Cause, then you shall immediately forfeit all rights to your option and the option shall immediately expire.

Death	If your Service terminates because of your death, then your 2 option will expire at the close of business at Company headquarters on the date twelve (12) months after the date of death. During that twelve-month period, your estate or heirs may exercise the vested portion of your option. In addition, if you die during the 90-day period described in connection with a regular termination (i.e., a termination of your Service not on account of your death, Disability or Cause), and a vested portion of your option has not yet been exercised, then your option will instead expire on the date twelve (12) months after your termination date. In such a case, during the period following your death up to the date twelve (12) months after your termination date, your estate or heirs may exercise the vested portion of your option.

Disability	If your Service terminates because of your Disability, then your option will expire at the close of business at Company headquarters on the date twelve (12) months after your termination date.

Leaves of Absence	For purposes of this option, your Service does not terminate when you go on a bona fide employee leave of absence that was approved by the Company in writing, if the terms of the leave provide for continued Service crediting, or when continued Service crediting is required by applicable law. However, your Service will be treated as terminating 90 days after you went on employee leave, unless your right to return to active work is guaranteed by law or by a contract. Your Service terminates in any event when the approved leave ends unless you immediately return to active employee work. The Company determines, in its sole discretion, which leaves count for this purpose, and when your Service terminates for all purpose under the Plan.

Notice of Exercise	When you wish to exercise this option, you must notify the Company by filing the proper "Notice of Exercise" form at the address given on the form. Your notice must specify how many Units you wish to purchase (in a parcel of at least 100 Units generally). Your notice must also specify how your Units should be registered (in your name only or in your and your spouse’s names as joint tenants with right of survivorship). The notice will be effective when it is received by the Company. If someone else wants to exercise this option after your death, that person must prove to the Company’s satisfaction that he or she is entitled to do so.

Form of Payment	When you submit your notice of exercise, you must include payment of the option price for the Units you are purchasing. Payment may be made in one (or a combination) of the following forms: Cash, your personal check, a cashier’s check, a money order or another cash equivalent acceptable to the Company. After a Triggering Event (as defined in the Plan), by Units which have already been owned by you for more than six months and which are surrendered to the Company. The value of the Units, determined as of the effective date of the option exercise, will be applied to the option price. After a Triggering Event (as defined in the Plan) and to the extent a public market for the Units exists as determined by the Company, by delivery (on a form prescribed by the Company) of an irrevocable direction to a licensed securities broker acceptable to the Company to sell Units and to deliver all or part of the sale proceeds to the Company in payment of the aggregate option price and any withholding taxes.
Withholding Taxes	You will not be allowed to exercise this option unless you make acceptable arrangements to pay any withholding or other taxes that may be due as a result of the option exercise or sale of Units acquired under this option. In the event that the Company determines that any federal, state, local or foreign tax or withholding payment is required relating to the exercise or sale of Units arising from this grant, the Company shall have the right to require such payments from you, or withhold such amounts from other payments due to you from the Company or any Affiliate.

Transfer of Option	During your lifetime, only you (or, in the event of your legal incapacity or incompetency, your guardian or legal representative) may exercise the option. You cannot transfer or assign this option. For instance, you may not sell this option or use it as security for a loan. If you attempt to do any of these things, this option will immediately become invalid. You may, however, dispose of this option in your will, by instrument to an intervivos or testamentary trust in which Options are to be passed to the beneficiaries on the death of the trustor (settlor) (provided that such a disposition is in compliance with Section 8.2 of the Plan), or it may be transferred upon your death by the laws of descent and distribution. Regardless of any marital property settlement agreement, the Company is not ob ligated to honor a notice of exercise from your spouse, nor is the Company obligated to recognize your spouse’s interest in your option in any other way.

Market Stand-off Agreement	In connection with any underwritten public offering by the Agreement Company of its equity securities pursuant to an effective registration statement filed under the Securities Act, including the Company’s initial public offering, you agree not to sell, make any short sale of, loan, hypothecate, pledge, grant any option for the purchase of, or otherwise dispose or transfer for value or agree to engage in any of the foregoing transactions with respect to any Units without the prior written consent of the Company or its underwriters, for such period of time after the effective date of such registration statement as may be requested by the Company or the underwriters (not to exceed 180 days in length).

Investment Representation	If the sale of Units under the Plan is not registered under the Securities Act, but an exemption is available which requires an investment or other representation, you shall represent and agree at the time of exercise that the Units being acquired upon exercise of this option is being acquired for investment, and not with a view to the sale or distribution thereof, and shall make such other representations as are deemed necessary or appropriate by the Company and its counsel.

Transfer Restrictions	Any Units acquired under this Agreement, or any interest in such Units, are subject to a right of first refusal under that certain Securityholders’ Agreement dated as of September [29], 2000 by and among the Company’s unitholders and are also subject to restrictions on transfer under the LLC Agreement. The transfer restrictions shall terminate in the event that the Units are listed on an established national or regional stock exchange, are admitted for quotation on The Nasdaq Stock Market, or are publicly traded in an established securities market.

Right to Repurchase	Following termination of your Service for any reason, the Company shall have the right to purchase all of those Units you have or will acquire under this option. If the Company exercises its right to purchase the Units, the Company will notify you of its intention to purchase such Units, and will consummate the purchase within 90 days of your termination of Service or, in the case of Units acquired after your termination of Service, within 90 days of the date of exercise.

	The purchase price shall be the Fair Market Value of the Units on the date of your termination of Service if the Company exercises its right to purchase such Units within 90 days of your termination of Service or exercises its right within 90 days of the date of your exercise of the option following termination of Service.

	The Company’s rights of repurchase shall terminate in the event that the Units are listed on an established national or regional stock exchange, are admitted for quotation on The Nasdaq Stock Market, or are publicly traded in an established securities market.

Retention Rights	Neither your option nor this Agreement give you the right to be retained by the Company (or any Parent, Subsidiaries or Affiliates) in any capacity. The Company (and any Parent, Subsidiaries or Affiliates) reserve the right to terminate your Service at any time and for any reason.

Unitholder Rights	You, or your estate or heirs, have no rights as a unitholder of the Company under the LLC Agreement until (I) a certificate for your option’s Units has been issued, and (ii) you have executed the LLC Agreement and the Securityholders’ Agreement. No adjustments are made for distributions or other rights if the applicable record date occurs before your Unit certificate is issued, except as described in the Plan.

Forfeiture of Rights	If you should take actions in competition with the Company, the Company shall have the right to cause a forfeiture of your rights, including, but not limited to, the right to cause: (I) a forfeiture of any outstanding option, and (ii) with respect to the period commencing twelve (12) months prior to your termination of Service with the Company and ending twelve (12) months following such termination of Service (A) a forfeiture of any gain recognized by you upon the exercise of an option or (B) a forfeiture of any Units acquired by you upon the exercise of an option (but the Company will pay you the option price without interest). Unless otherwise specified in an employment or other agreement between the Company and you, you take actions in competition with the Company if you directly or indirec tly, own, manage, operate, join or control, or participate in the ownership, management, operation or control of, or are a proprietor, director, officer, stockholder, member, partner or an employee or agent of, or a consultant to any business, firm, corporation, partnership or other entity which competes with any business in which the Company or any of its Affiliates is engaged during your employment or other relationship with the Company or its Affiliates or at the time of your termination of Service.

Adjustments	In the event of a unit split, a unit dividend or a similar change in the Units, the number of Units covered by this option and the option price per may be adjusted (and rounded down to the nearest whole number) pursuant to the Plan. Your option shall be subject to the terms of the agreement of merger, liquidation or reorganization in the event the Company is subject to such organizational activity.

Legends	All certificates representing the Units issued upon exercise of this option shall, where applicable, have endorsed thereon the legends required by the Securityholders’ Agreement.

Applicable Law	This Agreement will be interpreted and enforced under the laws of the State of California, other than any conflicts or choice of law rule or principle that might otherwise refer construction or interpretation of this Agreement to the substantive law of another jurisdiction.

The Plan	The text of the Plan is incorporated in this Agreement by reference. Certain capitalized terms used in this Agreement are defined in the Plan, and have the meaning set forth in the Plan. This Agreement and the Plan constitute the entire understanding between you and the Company regarding this option. Any prior agreements, commitments or negotiations concerning this option are superseded.

Other Agreements	You agree, as a condition of the grant of this option, that in connection with the exercise of the option, you will execute such documents(s) as necessary to become a party to the LLC Agreement and the Securityholders’ Agreement, or such other similar agreements as the Company may require.

By signing the cover sheet of this Agreement, you agree to all of the terms and conditions described above and in the Plan 

EX-8 6 ex-8.htm EXHIBIT 8 Exhibit 8

Option No.: 308 

LECG HOLDING COMPANY, LLC 

2000 INCENTIVE PLAN

NONQUALIFIED OPTION AGREEMENT 

LECG Holding Company, LLC, a California limited liability company (the "Company") hereby grants an option to purchase Common Units (the "Units") as those Units are described in the Limited Liability Company Agreement of LECG Holding Company, LLC (the "LLC Agreement") to the optionee named below. The terms and conditions of the option are set forth in this cover sheet, in the attached Agreement and in the Company’s 2000 Incentive Plan (the "Plan"). 

Grant Date: October, 30, 2001 

Name of Optionee: David Kaplan 

Optionee’s Social Security Number: ###-##-#### 

Number of Units Covered by Option: 500,000 

Option Price Per Unit: $5.00 

Vesting Start Date: Seventh anniversary of the Grant Date, subject to performance-based acceleration as set forth in Section 2(b) of the attached Agreement. 

By signing this cover sheet, you agree to all of the terms and conditions described in the attached Agreement and the Plan, a copy of which is also attached. You acknowledge that you have carefully reviewed the Plan, and agree that the Plan will control in the event any provision of this Agreement should appear to be inconsistent. 

Optionee: /s/ David Kaplan 

(Signature)

Company: /s/ J. Geoffrey Colton 

(Signature)

By: J. Geoffrey Colton 

Title: Chief Financial Officer

Attachment 

This is not a certificate or a negotiable instrument. 

LECG HOLDING COMPANY, LLC 

NONQUALIFIED OPTION AGREEMENT 

1.	Nonqualified Option. This option is not intended to be an incentive stock option under Section 422 of the Internal Revenue Code and will be interpreted accordingly.

2.	Vesting.

(a)      Vesting Date. Subject to acceleration as provided in Section 2(b) hereof, and termination as provided in Section 4 hereof, this option shall vest in its entirety on the 7th anniversary of the Grant Date, as set forth on the cover sheet (the "Vesting Date"). 

(b)      Performance-Based Accelerated Vesting. This option shall vest prior to the Vesting Date if and when holders of the Company’s Class A Preferred Units (the "Preferred Unit Investors") achieve a minimum return equal to four (4) times the the aggregate purchase price paid by the Preferred Unit Investors for both their Class A Preferred Units and their Common Units (the "Minimum Return Threshold"). The Class A Preferred Units and the Common Units purchased by the Preferred Unit Investors are referred to herein as the "Investment Units." The Preferred Un
it Investors will have achieved the Minimum Return Threshold if one or all of the following events occurs: 

(1)      The total cumulative value of all distributions to the Preferred Unit Investors on the Investment Units made pursuant to Section 4.1 of the Company’s Limited Liability Company Agreement dated as of September 29, 2000, as amended (the "LLC Agreement"), whether made in cash or in additional units, equals the Minimum Return Threshold; or 

(2)      The total consideration received by the Preferred Unit Investors in a sale or exchange of the Investment Units (including, without limitation, distributions made pursuant to Section 4.1(e) of the LLC Agreement as a result of such sale or exchange) equals the Minimum Return Threshold; or 

(3)      The sum of (A) the aggregate consideration received by the Preferred Units Investors pursuant to a mandatory redemption of the Class A Preferred Units following a Public Offering (as that term is defined in the LLC Agreement) plus (B) the average closing price of the Company’s Common Units (or equivalent thereof) over a period of twenty (20) consecutive trading days following a Public Offering multiplied by the aggregate number of Common Units held by the Preferred Unit Investors, equals the Minimum Return Threshold; or 

(4)      The combined value of the distributions described in item (1) plus the consideration described in item (2) and/or item (3) equals the Minimum Return Threshold. 

3.	Term. This option will expire in any event at the close of business at Company headquarters on the day before the 10 ^th anniversary of the Grant Date, as shown on the cover sheet. This option will expire earlier if your Service terminates, as described below.

4.	Regular Termination. If your Service terminates for any reason, other than death, Disability or Cause, then this option will expire at the close of business at Company headquarters on the 90 ^th day after your termination date.

5.	Termination for Cause. If your Service is terminated for Cause, then you shall immediately forfeit all rights to this option and this option shall immediately expire.

6.	Death. If your Service terminates because of your death, then this option will expire at the close of business at Company headquarters on the date twelve (12) months after the date of death. During that twelve-month period, your estate or heirs may exercise this option if it has vested.

	In addition, if you die during the 90-day period described in connection with a regular termination (i.e., a termination of your Service not on account of your death, Disability or Cause), and this option has vested but has not yet been exercised, then this option will instead expire on the date twelve (12) months after your termination date. In such a case, during the period following your death up to the date twelve (12) months after your termination date, your estate or heirs may exercise the vested option.

7.	Disability. If your Service terminates because of your Disability, then this option will expire at the close of business at Company headquarters on the date twelve (12) months after your termination date.

8.	Leaves of Absence. For purposes of this option, your Service does not terminate when you go on a bona fide employee leave of absence that was approved by the Company in writing, if the terms of the leave provide for continued Service crediting, or when continued Service crediting is required by applicable law. However, your Service will be treated as terminating 90 days after you went on employee leave, unless your right to return to active work is guaranteed by law, by a contract or by agreement of the Company. Your Service terminates in any event when the approved leave ends unless you immediately return to active employee work.

9.	Notice of Exercise. When you wish to exercise this option, you must notify the Company by filing the proper "Notice of Exercise" form at the address given on the form. Your notice must specify how many Units you wish to purchase (in a parcel of at least 100 Units generally). Your notice must also specify how your Units should be registered (in your name only or in your and your spouse’s names as joint tenants with right of survivorship). The notice will be effective when it is received by the Company.

	If someone else wants to exercise this option after your death, that person must prove to the Company’s satisfaction that he or she is entitled to do so.


10.	Form of Payment. When you submit your notice of exercise, you must include payment of the option price for the Units you are purchasing. Payment may be made in one (or a combination) of the following forms:

Cash, your personal check, a cashier’s check, a money order or another cash equivalent acceptable to the Company.

After a Triggering Event (as defined in the Plan), in a cashless exercise utilizing Units which have already been owned by you for more than six months and which are surrendered to the Company. The value of the Units, determined as of the effective date of the option exercise, will be applied to the option price.

After a Triggering Event (as defined in the Plan) and to the extent a public market for the Units exists as determined by the Company, by delivery (on a form prescribed by the Company) of an irrevocable direction to a licensed securities broker acceptable to the Company to sell Units and to deliver all or part of the sale proceeds to the Company in payment of the aggregate option price and any withholding taxes.

11.	Withholding Taxes. You will not be allowed to exercise this option unless you make acceptable arrangements to pay any withholding or other taxes that may be due as a result of the option, exercise, or sale of Units acquired under this option. In the event that the Company determines that any federal, state, local or foreign tax or withholding payment is required relating to the exercise or sale of Units arising from this grant, the Company shall have the right to require such payments from you, or withhold such amounts from other payments due to you from the Company or any Affiliate.

12.	Transfer of Option. During your lifetime, only you (or, in the event of your legal incapacity or incompetency, your guardian or legal representative) may exercise this option. You cannot transfer or assign this option. For instance, you may not sell this option or use it as security for a loan. If you attempt to do any of these things, this option will immediately become invalid. You may, however, dispose of this option in your will, by instrument to an intervivos or testamentary trust in which Options are to be passed to the beneficiaries on the death of the trustor (settlor) (provided that such a disposition is in compliance with Section 8.2 of the Plan), or it may be transferred upon your death by the laws of descent and distribution. Regardless of any marital property settlement agreement, the Company is not obligated to honor a notice of exercise from your spouse, nor is the Company obligated to recognize your spouse’s interest in this option in any other way.


13.	Market Stand-off Agreement. In connection with any underwritten public offering by the Company of its equity securities pursuant to an effective registration statement filed under the Securities Act, including the Company’s initial public offering, you agree not to sell, make any short sale of, loan, hypothecate, pledge, grant any option for the purchase of, or otherwise dispose or transfer for value or agree to engage in any of the foregoing transactions with respect to any Units without the prior written consent of the Company or its underwriters, for such period of time after the effective date of such registration statement as may be requested by the Company or the underwriters (not to exceed 180 days in length).

14.	Investment Representation. If the sale of Units under the Plan is not registered under the Representation Securities Act, but an exemption is available which requires an investment or other representation, you shall represent and agree at the time of exercise that the Units being acquired upon exercise of this option is being acquired for investment, and not with a view to the sale or distribution thereof, and shall make such other representations as are deemed necessary or appropriate by the Company and its counsel.

15.	Transfer Restrictions. Any Units acquired under this Agreement, or any interest in such Units, are subject to a right of first refusal under that certain Securityholders’ Agreement dated as of September 29, 2000, as amended, by and among the Company’s unitholders and are also subject to restrictions on transfer under the LLC Agreement.

	The transfer restrictions and the Company’s right of first refusal shall terminate in the event that the Units are listed on an established national or regional stock exchange, are admitted for quotation on the Nasdaq Stock Market, or are publicly traded in an established securities market.

16.	Right to Repurchase. Following termination of your Service for any reason, the Company shall have the right to purchase all of those Units that you acquire under this option. If the Company exercises its right to purchase the Units, the Company will notify you of its intention to purchase such Units, and will consummate the purchase within 90 days of your termination of Service or, in the case of Units acquired after your termination of Service, within 90 days of the date of exercise.

	The purchase price shall be the Fair Market Value of the Units on the date of your termination of Service if the Company exercises its right to purchase such Units within 90 days of your termination of Service, or exercises its right within 90 days of the date of your exercise of the option following termination of Service.

	The Company’s rights of repurchase shall terminate in the event that the Units are listed on an established national or regional stock exchange, are admitted for quotation on the Nasdaq Stock Market, or are publicly traded in an established securities market.


17.	Retention Rights. Neither this option nor this Agreement gives you the right to be retained by the Company (or any Parent, Subsidiaries or Affiliates) in any capacity. The Company (and any Parent, Subsidiaries or Affiliates) reserves the right to terminate your Service at any time and for any reason.

18.	Unitholder Rights. You, or your estate or heirs, have no rights as a unitholder of the Company under the LLC Agreement until (i) a certificate for your option’s Units has been issued, and (ii) you have executed the LLC Agreement and the Securityholders’ Agreement. No adjustments are made for distributions or other rights if the applicable record date occurs before your Unit certificate is issued, except as described in the Plan.

19.	Forfeiture of Rights. If you should take actions in competition with the Company, the Company shall have the right to cause a forfeiture of your rights, including, but not limited to, the right to cause: (i) a forfeiture of any outstanding option, and (ii) with respect to the period commencing twelve (12) months prior to your termination of Service with the Company and ending twelve (12) months following such termination of Service (A) a forfeiture of any gain recognized by you upon the exercise of an option or (B) a forfeiture of any Units acquired by you upon the exercise of an option (but the Company will pay you the option price without interest). Unless otherwise specified in an employm ent or other agreement between the Company and you, you take actions in competition with the Company if you directly or indirectly, own, manage, operate, join or control, or participate in the ownership, management, operation or control of, or are a proprietor, director, officer, stockholder, member, partner or an employee or agent of, or a consultant to any business, firm, corporation, partnership or other entity which competes with any business in which the Company or any of its Affiliates is engaged during your employment or other relationship with the Company or its Affiliates or at the time of your termination of Service.

20.	Adjustments. In the event of a unit split, a unit dividend or a similar change in the Units, the number of Units covered by this option and the option price per Unit may be adjusted (and rounded down to the nearest whole number) pursuant to the Plan. This option shall be subject to the terms of the agreement of merger, liquidation or reorganization in the event the Company is subject to such organizational activity.

21.	Legends. All certificates representing the Units issued upon exercise of this option shall, where applicable, have endorsed thereon the legends required by the Securityholders’ Agreement.

22.	Applicable Law. This Agreement will be interpreted and enforced under the laws of the State of California, other than any conflicts or choice of law rule or principle that might otherwise refer construction or interpretation of this Agreement to the substantive law of another jurisdiction.


23.	The Plan. The text of the Plan is incorporated in this Agreement by reference. Certain capitalized terms used in this Agreement are defined in the Plan, and have the meaning set forth in the Plan.

	This Agreement and the Plan constitute the entire understanding between you and the Company regarding this option. Any prior agreements, commitments or negotiations concerning this option are superseded.

24.	Other Agreements. You agree, as a condition of the grant of this option, that in connection with the exercise of the option, you will execute such document(s) as necessary to become a party to the LLC Agreement and the Securityholders’ Agreement, or such other similar agreement as the Company may require.

By signing the cover sheet of this Agreement, you agree to all of the terms and conditions described above and in the Plan.


	Yours very truly,

	David P. Kaplan________________
	(Print Name)


	/s/ David P. Kaplan______________
	(Signature)


	President______________________
	(Title, if applicable)


	9100 Burning Tree Road
	Bethesda, MD 20817____________
	(Address)