DEFM14A 1 a2195564zdefm14a.htm DEFM14A

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SMART FINANCIAL STATEMENTS

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

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No.           )

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Filed by a Party other than the Registrant o

 

Check the appropriate box:

 

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Preliminary Proxy Statement

 

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Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))

 

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Definitive Proxy Statement

 

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Definitive Additional Materials

 

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Soliciting Material Pursuant to §240.14a-12

LECG CORPORATION

(Name of Registrant as Specified In Its Charter)

n/a

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
         
Payment of Filing Fee (Check the appropriate box):

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No fee required.

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Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.

 

 

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Title of each class of securities to which transaction applies:
 
    (2)   Aggregate number of securities to which transaction applies:
 
    (3)   Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):
 
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Fee paid previously with preliminary materials.

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Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.

 

 

(1)

 

Amount Previously Paid:
        
 
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    (4)   Date Filed:
        
 

GRAPHIC

November 17, 2009

To our Stockholders:

        You are cordially invited to attend the 2009 Annual Meeting of Stockholders of LECG Corporation ("LECG"). The meeting will be held on December 22, 2009, at 2 p.m. local time at LECG's corporate offices located at 2000 Powell Street, Suite 600, Emeryville, California, 94608. The meeting will commence with a discussion and voting on the matters set forth in the accompanying Notice of Annual Meeting of Stockholders followed by presentations and a report on LECG's 2008 performance.

        As we announced on August 17, 2009, LECG and Smart Business Holdings, Inc. ("Smart") entered into an Agreement and Plan of Merger, dated as of August 17, 2009 (as amended by Amendment No. 1 to Agreement and Plan of Merger dated as of September 25, 2009 and as it may be further amended from time to time, the "Merger Agreement"), which provides for a two-step merger in which Smart will merge with and into a wholly-owned subsidiary of LECG (the "Merger") and LECG will issue 10,927,869 shares of LECG common stock, representing approximately 25% of LECG's voting stock, to the stockholders of Smart. Also on August 17, 2009, LECG entered into a Stock Purchase Agreement (the "Stock Purchase Agreement") with Smart's majority stockholder, Great Hill Equity Partners III, LP, and Great Hill Investors, LLC (together, the "Great Hill Entities"), which provides for the purchase by these two investment funds (the "Investment") of approximately $25,000,000 of newly designated Series A Convertible Redeemable Preferred Stock of LECG (the "Series A Preferred Stock"), representing approximately 15% of LECG's voting stock. In total, the Great Hill Entities would hold Common Stock and Series A Preferred Stock representing approximately 40% of the voting power of LECG stock after the Merger and the Investment. Our stockholders will not receive any consideration in connection with the Merger or the Investment.

        Our board of directors, by a vote of five in favor, one against, and two abstentions, has approved and declared advisable the Merger Agreement and the transactions contemplated by the Merger Agreement and has determined that the Merger Agreement and the transactions contemplated by the Merger Agreement, including the Merger, are fair to, and in the best interests of our company and our stockholders.

        Our board of directors, by a vote of seven in favor and one abstention, has also approved and declared advisable the Stock Purchase Agreement and the transactions contemplated by the Stock Purchase Agreement and has determined that the Stock Purchase Agreement, the transactions contemplated by the Stock Purchase Agreement, including the Investment, and the adoption of the Second Amended and Restated Certificate of Incorporation (the "Amended Charter") are fair to, and in the best interests of our company and our stockholders.

        We are asking you to vote to (i) approve the Merger and the issuance of our common stock pursuant thereto, (ii) approve the Investment and the issuance of the Series A Preferred Stock pursuant thereto, and (iii) approve the Amended Charter at our 2009 Annual Meeting of Stockholders. At this meeting, you also will be asked to vote on the election of our directors and other annual meeting matters.


        Our board of directors, by a majority vote, recommends that our stockholders vote (i) "FOR" the proposal to approve the Merger and the issuance of our common stock pursuant thereto, (ii) "FOR" the proposal to approve the Investment and the issuance of the Series A Preferred Stock pursuant thereto, (iii) "FOR" the proposal to approve the Amended Charter, and (iv) "FOR" each of the other proposals described in the accompanying proxy statement.

        The Notice of Annual Meeting of Stockholders and a proxy statement, which more fully describe the formal business to be conducted at the meeting, follow this letter. Our Annual Report on Form 10-K is also enclosed herewith for your information.

        Your vote is very important.    It is a condition of the Merger that the majority of the votes cast on the proposal to approve the Merger at the annual meeting (provided that the total votes cast on the proposal represents over 50% in interest of all LECG common stock entitled to vote on the proposal at the annual meeting) are in favor of the Merger and the issuance of our common stock in connection therewith. Furthermore, it is a condition of the Investment that the affirmative vote of the holders of a majority of the votes cast at the annual meeting (provided that the total votes cast on the proposal represents over 50% in interest of all LECG common stock entitled to vote on the proposal at the annual meeting) approve the Investment and the issuance of the Series A Preferred Stock pursuant thereto. In addition, the election of the nominees to our board of directors set forth in this proxy statement is a condition to completion of the Merger. Furthermore, the closing of the Merger and the closing of the Investment are each conditioned on the other closing. Therefore, we will be unable to complete the transactions described in this proxy statement unless we receive a successful vote on all matters related to the Merger, the Investment and the election of the nominees recommended by a majority of our board of directors. Approval of the other matters at the annual meeting is not a condition to completion of the Merger or the Investment. Whether or not you expect to attend the meeting in person, your vote is very important and we urge you to submit your proxy as promptly as possible (1) through the internet, (2) by telephone or (3) by marking, signing and dating the enclosed proxy card and returning it in the postage-paid envelope provided. If you have any questions about the Merger, the Investment or any of the other matters described in the accompanying proxy statement or if you need assistance voting your shares, please call Laurel Hill Advisory Group, LLC, which is assisting us with the solicitation of proxies, toll-free at (888) 742-1305.

        The obligations of LECG and Smart to complete the Merger are subject to several conditions as set forth in the Merger Agreement, including that the Merger and the Investment close at substantially the same time, and as are more fully summarized in the accompanying proxy statement. A copy of the Merger Agreement, the Stock Purchase Agreement and the Second Amended and Restated Certificate of Incorporation are attached to the accompanying proxy statement as Annexes A, B and C, respectively. More information about LECG, Smart, the annual meeting, the Merger, the Investment and the other proposals for your consideration at the meeting is contained in the accompanying proxy statement. You are encouraged to read carefully the accompanying proxy statement in its entirety including the section titled "Risk Factors" beginning on page 22 and all of the Annexes to the proxy statement.

        On behalf of our board of directors, thank you for your continued support.

    Sincerely,

 

 

GRAPHIC

 

 

Garrett F. Bouton
Chairman of the Board

        Neither the SEC nor any state securities commission has approved or disapproved of the Merger or the Investment described in the accompanying proxy statement or the securities to be issued pursuant to the Merger and the Investment described in the accompanying proxy statement or determined if the accompanying proxy statement is accurate or adequate. Any representation to the contrary is a criminal offense.

        The accompanying proxy statement is dated November 17, 2009 and is first being mailed to the stockholders of LECG on or about November 18, 2009.



ADDITIONAL INFORMATION

        If you have any questions about the Merger, the Investment, the other meeting matters or the proxy statement, would like additional copies of the proxy statement or the other materials delivered with the proxy statement, need to obtain proxy cards, or other information related to the proxy solicitation, you may contact Laurel Hill Advisory Group, LLC, LECG's proxy solicitor, at the address and telephone number listed below. You will not be charged for any of these documents that you request.

100 Wall Street, 22nd Floor
New York, NY 10005
Toll Free (888) 742-1305

        In order to receive timely delivery of the documents in advance of the annual meeting of stockholders, you must request the information no later than December 12, 2009.

        For more information, see "Where You Can Find Additional Information" on page 183 of the accompanying proxy statement.


GRAPHIC

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held On December 22, 2009

TO OUR STOCKHOLDERS:

        We are pleased to invite you to attend the 2009 Annual Meeting of Stockholders of LECG Corporation ("LECG"), which will be held on December 22, 2009, at 2 p.m. local time, at LECG's corporate offices located at 2000 Powell Street, Suite 600, Emeryville, California, 94608, for the following purposes:

    1.
    To consider and vote on a proposal to approve (i) a two-step merger in which Smart Business Holdings, Inc. ("Smart") will merge with and into a wholly-owned subsidiary of LECG (the "Merger") and (ii) the issuance of LECG common stock pursuant thereto, as provided for in the Agreement and Plan of Merger, dated as of August 17, 2009 (as amended by Amendment No. 1 to Agreement and Plan of Merger dated as of September 25, 2009 and as it may be further amended from time to time, the "Merger Agreement"), a copy of which is attached as Annex A to the proxy statement accompanying this notice, by and among LECG, Smart, Red Sox Acquisition Corporation, a wholly-owned subsidiary of LECG, and Red Sox Acquisition LLC, a wholly-owned subsidiary of LECG;

    2.
    To consider and vote on a proposal to approve the issuance to and purchase by (the "Investment") Great Hill Equity Partners III, LP, a Delaware limited partnership ("Great Hill III"), and Great Hill Investors, LLC, a Massachusetts limited liability company ("Great Hill Investors" and together with Great Hill III, the "Great Hill Entities"), of shares of LECG Series A Convertible Redeemable Preferred Stock (the "Series A Preferred Stock") pursuant to the Stock Purchase Agreement, dated as of August 17, 2009 (the "Stock Purchase Agreement"), by and among LECG and the Great Hill Entities, a copy of which is attached as Annex B to the proxy statement accompanying this notice;

    3.
    To consider and vote on a proposal to approve the Second Amended and Restated Certificate of Incorporation of LECG, a copy of which is attached as Annex C to the proxy statement accompanying this notice (the "Amended Charter");

    4.
    To elect seven nominees to the LECG board of directors, each to hold office until the earliest of LECG's 2010 annual meeting of stockholders, his or her removal, or his or her resignation;

    5.
    To ratify the appointment of Deloitte & Touche LLP as LECG's independent registered public accounting firm for 2009;

    6.
    To approve the adjournment of the annual meeting, if necessary, to solicit additional proxies if there are not sufficient votes to (i) approve the Merger and the issuance of LECG common stock pursuant thereto, (ii) approve the Investment and the issuance of the Series A Preferred Stock pursuant thereto, and (iii) approve the Amended Charter, at the time of the annual meeting; and

    7.
    To transact such other business as may properly come before the annual meeting.

        Please refer to the accompanying proxy statement with respect to the business to be transacted at the meeting. Our board of directors, by a majority vote, has determined that the Merger Agreement and the transactions contemplated by the Merger Agreement, including the Merger and the issuance of our common stock in connection therewith, are advisable and are fair to, and in the best interests of LECG and its stockholders, and recommends that LECG stockholders vote "FOR" the proposal to approve the Merger and the issuance of LECG common stock pursuant thereto. Our board of directors, by a majority vote, has determined that the Stock Purchase Agreement and the transactions contemplated by the Stock Purchase Agreement, including the Amended Charter and the Investment, are advisable and are fair to, and in the best interests of, LECG and its stockholders, and recommends that LECG's stockholders vote "FOR" the proposal to approve the Investment and the issuance of the Series A Preferred Stock pursuant thereto and "FOR" the proposal to approve the Amended Charter. In addition, our board of directors recommends that you vote (i) "FOR" the proposal to adjourn the meeting, if necessary, to permit further solicitation of proxies for the approval of the Merger and the issuance of LECG common stock pursuant thereto, or approval of the Investment and the issuance of Series A Preferred Stock pursuant thereto, or approval of the Amended Charter, (ii) "FOR" the election of each of our nominees for director as proposed herein, and (iii) "FOR" the ratification of the selection by our audit committee of Deloitte & Touche LLP as our independent registered public accounting firm for 2009.

        Our board of directors has fixed the close of business on November 9, 2009 as the record date for the determination of the stockholders who are entitled to receive notice of, and to vote at, the meeting or at any adjournment or postponement of the annual meeting. A complete list of the names of LECG's stockholders of record will be available at the annual meeting and for 10 days prior to the annual meeting for any purpose germane to the annual meeting during regular business hours at 2000 Powell Street, Suite 600, Emeryville, California, 94608.

        Only holders of record of LECG common stock at the close of business on the record date are entitled to vote at the annual meeting.

    By order of the board of directors,

 

 

GRAPHIC

 

 

Deanne M. Tully
General Counsel and Secretary

Emeryville, California
November 17, 2009



YOUR VOTE IS IMPORTANT!

        WHETHER OR NOT YOU EXPECT TO ATTEND THE ANNUAL MEETING IN PERSON, WE URGE YOU TO SUBMIT YOUR PROXY AS PROMPTLY AS POSSIBLE (1) THROUGH THE INTERNET, (2) BY TELEPHONE OR (3) BY MARKING, SIGNING AND DATING THE ENCLOSED PROXY CARD AND RETURNING IT IN THE POSTAGE-PAID ENVELOPE PROVIDED. You may revoke your proxy at any time before the annual meeting. If your shares are held in the name of a bank, broker or other nominee, please follow the instructions on the voting instruction card furnished to you by such record holder.

        The accompanying proxy statement provides a detailed description of the Merger, the Merger Agreement, the Investment, the Stock Purchase Agreement, the Amended Charter and the other matters to be considered at the annual meeting. We urge you to read the accompanying proxy statement, including the documents delivered along with the proxy statement, and its annexes carefully and in their entirety. In particular the Merger Agreement and the Stock Purchase Agreement attached as annexes to the proxy statement are the legally binding documents governing the terms of the Merger and the Investment and they supersede any contrary information which may be set forth in the descriptions thereof in the proxy statement. If you have any questions concerning the Merger, the Investment, the other meeting matters or the accompanying proxy statement, would like additional copies of the accompanying proxy statement or need help voting your shares, please contact LECG's proxy solicitor:

Laurel Hill Advisory Group, LLC
100 Wall Street, 22nd Floor
New York, NY 10005
Toll Free: (888) 742-1305

IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE MEETING OF STOCKHOLDERS TO BE HELD ON DECEMBER 22, 2009: A complete set of proxy materials relating to our annual meeting is available on the internet. These materials, consisting of the Notice of Annual Meeting, Proxy Statement, Proxy Card and Annual Report, may be viewed at www.lecg.com/2009proxymaterials/.


Table of Contents


TABLE OF CONTENTS

QUESTIONS AND ANSWERS ABOUT THE MERGER, THE INVESTMENT, THE AMENDED CHARTER AND THE ANNUAL MEETING

  1

SUMMARY

  10

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

  20

RISK FACTORS

  22

SELECTED HISTORICAL AND UNAUDITED PRO FORMA CONDENSED FINANCIAL DATA

  36
 

SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA OF LECG

  36
 

SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA OF SMART

  37
 

SELECTED UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL DATA OF LECG AND SMART

  38
 

COMPARATIVE HISTORICAL AND UNAUDITED PRO FORMA PER SHARE. 

  39
 

MARKET PRICE AND DIVIDEND INFORMATION

  40

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS

  42

THE LECG ANNUAL MEETING

  50

PROPOSAL 1: THE MERGER

  55
 

BACKGROUND OF THE MERGER AND THE INVESTMENT

  55
 

LECG'S REASONS FOR THE MERGER

  62
 

NASDAQ SHAREHOLDER APPROVAL REQUIREMENTS

  65
 

NO DISSENTERS' RIGHTS

  66
 

IMPACT OF THE MERGER AND THE INVESTMENT ON EXISTING LECG STOCKHOLDERS

  66
 

OPINION OF LECG'S FINANCIAL ADVISOR

  66
 

LISTING ON THE NASDAQ GLOBAL SELECT MARKET OF LECG SHARES ISSUED PURSUANT TO THE MERGER

  74
 

THE MERGER AGREEMENT

  75
   

STRUCTURE OF THE MERGER

  75
   

COMPLETION OF THE MERGER

  75
   

CONSIDERATION IN THE MERGER

  76
   

TREATMENT OF SMART STOCK OPTIONS; NEW LECG STOCK OPTIONS

  76
   

FRACTIONAL SHARES

  77
   

EXCHANGE OF SMART STOCK CERTIFICATES FOR LECG STOCK CERTIFICATES

  77
   

LOST, STOLEN OR DESTROYED STOCK CERTIFICATES

  77
   

REPRESENTATIONS AND WARRANTIES

  77
   

COVENANTS OF SMART

  79
   

COVENANTS OF LECG

  82
   

MUTUAL COVENANTS

  85
   

INDEMNIFICATION

  85
   

SMART'S OFFICERS AND DIRECTORS

  85
   

REGULATORY APPROVALS

  86
   

MATERIAL ADVERSE EFFECT

  87
   

CONDITIONS TO COMPLETION OF THE MERGER

  88
   

LIMITATIONS ON SOLICITATION, NEGOTIATION AND DISCUSSION BY SMART AND LECG OF ALTERNATIVE ACQUISITION PROPOSALS

  89
   

TERMINATION OF THE MERGER AGREEMENT

  92
   

TERMINATION FEES AND EXPENSES

  93
   

AMENDMENT AND WAIVER

  94
   

AMENDMENT NO. 1 TO MERGER AGREEMENT

  94

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INTERESTS OF EXECUTIVE OFFICERS, DIRECTORS AND DIRECTOR NOMINEES IN THE MERGER

  94
 

MATERIAL UNITED STATES FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER TO EXISTING LECG STOCKHOLDERS

  95
 

REQUIRED VOTE AND BOARD RECOMMENDATION

  96

PROPOSAL 2: THE INVESTMENT

  97
 

BACKGROUND OF THE INVESTMENT

  97
 

LECG'S REASONS FOR THE INVESTMENT

  97
 

SUMMARY OF BYLAW AMENDMENT

  98
 

SUMMARY OF STOCK PURCHASE AGREEMENT

  98
   

GENERAL

  98
   

CLOSING

  99
   

REPRESENTATIONS AND WARRANTIES

  99
   

COVENANTS AND AGREEMENTS

  100
   

CONDITIONS TO COMPLETION OF THE INVESTMENT

  100
   

TERMINATION

  101
 

SUMMARY OF CERTIFICATE OF DESIGNATIONS

  101
   

AUTHORIZED SHARES

  101
   

RANK

  101
   

DIVIDENDS

  101
   

LIQUIDATION PREFERENCE

  102
   

DEEMED LIQUIDATIONS

  102
   

CONVERSION

  103
   

VOTING

  103
   

PROTECTIVE PROVISIONS

  103
   

REDEMPTION

  103
 

INTEREST OF EXECUTIVE OFFICERS, DIRECTORS AND DIRECTOR NOMINEES IN THE INVESTMENT

  104
 

USE OF PROCEEDS

  104
 

REQUIRED VOTE AND BOARD RECOMMENDATION

  104

PROPOSAL 3: THE AMENDED CHARTER

  105
 

SUMMARY OF AMENDED CHARTER

  105
 

REQUIRED VOTE AND BOARD RECOMMENDATION

  105

SUMMARY OF ADDITIONAL AGREEMENTS

  106
 

GOVERNANCE AGREEMENT

  106
 

STOCKHOLDERS AGREEMENT

  106
 

VOTING AGREEMENTS

  107

INFORMATION ABOUT LECG

  108
 

LECG BUSINESS

  108
 

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

  108

INFORMATION ABOUT SMART

  129
 

INTRODUCTION & COMPANY OVERVIEW

  129
 

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

  134

PROPOSAL 4: ELECTION OF DIRECTORS

  146
 

INFORMATION ABOUT THE DIRECTORS AND NOMINEES

  147
 

CORPORATE GOVERNANCE

  149
 

BOARD OF DIRECTOR MEETINGS AND COMMITTEE MEETINGS

  149
 

BOARD INDEPENDENCE

  149
 

COMMITTEES OF THE BOARD OF DIRECTORS

  149

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AUDIT COMMITTEE

  149
 

COMMITTEE OF INDEPENDENT DIRECTORS

  150
 

CORPORATE GOVERNANCE COMMITTEE

  151
 

STOCKHOLDER RECOMMENDATIONS AND NOMINATIONS OF DIRECTOR CANDIDATES

  151
 

DIRECTOR QUALIFICATIONS

  152
 

IDENTIFICATION AND EVALUATION OF NOMINEES FOR DIRECTORS

  152
 

COMPENSATION COMMITTEE

  153
 

COMPENSATION COMMITTEE SCOPE OF RESPONSIBILITY

  154
 

COMPENSATION COMMITTEE PROCESS

  155
 

COMPENSATION COMMITTEE MEETINGS

  156
 

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

  156
 

ANNUAL MEETING ATTENDANCE

  156
 

COMMUNICATING WITH THE BOARD OF DIRECTORS

  157
 

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

  157
 

APPROVAL OF RELATED PARTY TRANSACTIONS

  157
 

DIRECTOR COMPENSATION

  158
   

SUMMARY COMPENSATION TABLE

  158
   

EQUITY AWARDS HELD BY NON-EXECUTIVE DIRECTORS

  159
   

NARRATIVE DISCUSSION OF DIRECTOR SUMMARY COMPENSATION TABLE

  159
 

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

  161
 

CERTAIN RELATIONSHIP AND RELATED TRANSACTIONS

  164
 

COMPENSATION DISCUSSION AND ANALYSIS

  164
 

COMPENSATION COMMITTEE REPORT

  169
 

EXECUTIVE OFFICERS

  170
 

EXECUTIVE COMPENSATION

  172
   

SUMMARY COMPENSATION TABLE

  172
   

GRANT OF PLAN-BASED AWARDS

  173
   

OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END 2008

  174
   

OPTION EXERCISES AND STOCK VESTED IN FISCAL YEAR 2008

  175
   

NON-QUALIFIED DEFERRED COMPENSATION FOR FISCAL YEAR 2008

  175
   

EMPLOYMENT CONTRACTS AND CHANGE IN CONTROL ARRANGEMENTS

  176
 

AUDIT COMMITTEE REPORT

  179

PROPOSAL 5: RATIFICATION OF THE APPOINTMENT OF DELOITTE & TOUCHE LLP

  180
 

FEES BILLED BY DELOITTE & TOUCHE LLP DURING FISCAL YEARS 2008 AND 2007

  180
 

AUDIT COMMITTEE PRE-APPROVAL POLICY

  181

PROPOSAL 6: ADJOURNMENT OF THE MEETING

  182
 

ADJOURNMENT OF THE MEETING

  182
 

VOTE REQUIRED AND BOARD RECOMMENDATION

  182

DEADLINE FOR RECEIPT OF STOCKHOLDER PROPOSALS FOR 2010 ANNUAL MEETING

  183

WHERE YOU CAN FIND ADDITIONAL INFORMATION

  183

INCORPORATION BY REFERENCE

  184

ANNUAL REPORT

  184

DELIVERY OF DOCUMENTS TO STOCKHOLDERS SHARING AN ADDRESS

  184

OTHER MATTERS

  184

LECG FINANCIAL STATEMENTS

  FP-1

SMART FINANCIAL STATEMENTS

  FP-17

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QUESTIONS AND ANSWERS ABOUT THE MERGER, THE INVESTMENT, THE AMENDED CHARTER AND THE ANNUAL MEETING

        The following are some questions that you, as a stockholder of LECG, may have regarding the Merger, the Investment and the other matters being considered at LECG's 2009 Annual Meeting of Stockholders, which is referred to herein as "the meeting," and the answers to those questions. You are urged to carefully read this proxy statement (including the annexes hereto) and the other documents referred to in this proxy statement in their entirety because the information in this section does not provide all of the information that might be important to you with respect to the Merger, the Investment, the Charter Amendment and the other matters being considered at the meeting. In particular the Merger Agreement and the Stock Purchase Agreement attached as annexes to the proxy statement are the legally binding documents governing the terms of the Merger and the Investment and they supersede any contrary information which may be set forth in the descriptions thereof set forth below. Additional important information is contained in the annexes to, and the documents delivered along with this proxy statement. In this proxy statement, unless stated to the contrary, the terms "the company," "LECG," "we," "our," "ours," and "us," and any deviation thereof, refer to LECG Corporation and its subsidiaries.


The Merger and the Investment

Q:    What are the proposed transactions?

A:    We are proposing to acquire Smart pursuant to a two-step merger. Upon completion of the Merger, Smart would be merged with and into a wholly-owned subsidiary of LECG. In conjunction with the acquisition of Smart, we are proposing to issue and sell newly designated Series A Preferred Stock to the Great Hill Entities in exchange for approximately $25 million in cash. In order to effect the Investment as currently contemplated by the Stock Purchase Agreement, we will need our stockholders to adopt the Amended Charter; however, it is possible for us to effect the Investment on substantially the same terms without stockholder approval of the Amended Charter. For example, we could agree to an amendment to the Stock Purchase Agreement with the Great Hill Entities which would reduce the number of shares of Series A Preferred Stock being issued, increase the price per share, and make conforming changes to the ratio at which the Series A Preferred Stock converts into common stock. Assuming our stockholders adopt the Amended Charter, upon completion of the Investment, the Great Hill Entities will collectively own all 6,313,131 shares of our outstanding Series A Preferred Stock, and such shares will initially be convertible on a one-for-one basis for our common stock. The Merger and the Investment are expected to close at substantially the same time and, upon completion of both the Merger and the Investment, the Great Hill Entities will collectively own approximately 40% of our voting stock.


Q:    Why are you asking for LECG stockholders to approve the Merger and the issuance of LECG common stock pursuant thereto and the Investment and the issuance of Series A Preferred Stock pursuant thereto?

A:    Pursuant to the Merger Agreement, 10,927,869 shares of our common stock, representing approximately 25% of our outstanding common stock after giving effect to both the Merger and the Investment, will be issued to the Great Hill Entities. After giving effect to the shares of Series A Preferred Stock that the Great Hill Entities will acquire pursuant to the Investment, the Great Hill Entities will collectively hold approximately 40% of LECG's voting stock as of the closing of the Merger and Investment. The Merger and the Investment are significant transactions for LECG and our existing stockholders will experience significant dilution as a result of these transactions. Furthermore, NASDAQ Rule 5635 requires stockholder approval for the issuance of more than 20% of a company's outstanding common stock in connection with the acquisition of stock or assets of another company. For all of these reasons, we are asking you to (i) approve the Merger and the issuance of our common stock pursuant thereto, (ii) approve the Investment and the issuance of the Series A Preferred Stock pursuant thereto, and (iii) approve the Amended Charter.

1


Table of Contents


Q:    What is the purpose of the proposed Merger?

A:    After evaluating a number of strategic alternatives, our board of directors determined that acquiring Smart creates a unique and important opportunity to expand the combined company's client base, to realize economies of scale and efficiencies in providing services to the combined company's clients and provides a platform from which a number of growth opportunities into related markets and industries may be possible.

Please see "LECG's Reasons for the Merger" beginning on page 62 and "LECG's Reasons for the Investment" beginning on page 97 for a discussion of some of the reasons and the expected benefits of the Merger and the Investment.


Q:    What will it cost LECG to acquire Smart?

A:    Pursuant to the Merger Agreement, we have agreed to issue 10,927,869 shares of our common stock as the entire consideration for the Merger. No cash is being paid as consideration for the Merger.


Q:    Who will receive the LECG shares issuable pursuant to the Merger Agreement?

A:    Pursuant to the Merger Agreement and Smart's certificate of incorporation, the Great Hill Entities will receive all of the shares of common stock issuable by LECG pursuant to the Merger Agreement. We have also committed, pursuant to the Merger Agreement, to grant options to purchase up to 500,000 shares of our common stock to certain employees of Smart that remain employed by us or one of our affiliated entities following the Merger.


Q:    Is there a break-up fee under the Merger Agreement?

A:    Yes, under certain circumstances, we may be required to pay Smart a break-up fee of $2.9 million. In addition, under certain circumstances we may have to reimburse Smart for up to $800,000 of its expenses incurred in connection with the proposed Merger, though any such amounts will reduce any break-up fee we may be required to pay. Furthermore, we will pay the legal and accounting fees and expenses of Great Hill III in the event the Merger closes.


Q:    Will LECG stockholders receive anything in connection with the Merger or the Investment?

A:    No, our stockholders will not receive any of the proceeds in connection with the Merger or the Investment. Following the closing of the Merger, our stockholders will continue to hold the shares they held immediately prior to the Merger, although our existing stockholders will experience dilution as a result of the issuance of 10,927,869 new shares of our common stock pursuant to the Merger and the issuance of 6,313,131 shares of our Series A Preferred Stock pursuant to the Investment. Furthermore, we have no current intention of paying a cash dividend or other distribution to our stockholders.


Q:    Why should I vote in favor of the Merger and the Investment?

A:    Our board of directors believes that the Merger is in the best interests of our company and our stockholders. We believe that the acquisition of Smart will form a platform from which the combined company's business may grow. In addition, the Merger will occur concurrently with an investment of approximately $25 million from the Great Hill Entities into LECG as described elsewhere in this proxy statement. If the Merger does not occur, the Great Hill Entities will not provide us with this equity investment, which will provide much needed working capital for the company to execute on its business plan.

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Q:    When will the Merger and the Investment close?

A:    Assuming that (i) a sufficient number of our stockholders approve the Merger and the issuance of our common stock pursuant thereto, (ii) a sufficient number of our stockholders approve the Investment and the issuance of our Series A Preferred Stock pursuant thereto, (iii) a sufficient number of our stockholders approve the Amended Charter, (iv) any applicable antitrust waiting periods expire or are terminated and (v) the other closing conditions described in the Merger Agreement and the Stock Purchase Agreement occur as currently expected by LECG's management, we believe that the closing of the Merger and the Investment will occur in the fourth calendar quarter of 2009 or the first calendar quarter of 2010.


Q:    What will happen if the Merger and the Investment are not approved?

A:    If our stockholders do not approve the Merger and the issuance of our common stock pursuant thereto and the Investment and the issuance of our Series A Preferred Stock pursuant thereto, we will not be able to acquire Smart. In addition, we will be required to reimburse Smart for its transaction expenses, up to $800,000 (and in some situations we may have to pay a $2.9 million break-up fee to Smart) pursuant to the terms of the Merger Agreement. Finally, the Great Hill Entities will not be obligated to provide us with the $25 million preferred stock investment, because one of the closing conditions for the Investment is the successful closing of the Merger. We believe, based upon a review of recently completed private investments in public equity (PIPE) transactions, that alternative sources of equity financing that we might seek would either not be available or would be available on less favorable terms than the Investment.


The Charter Amendment

Q:    What is the Charter Amendment?

A:    We are amending our Certificate of Incorporation to increase the number of shares of preferred stock that we are authorized to issue so that we will have a sufficient number of authorized but unissued shares of our preferred stock to complete the Investment. However, if the Amended Charter is not approved by our stockholders, we may be able to enter into an amendment to the Stock Purchase Agreement which might reduce the number of shares of Series A Preferred Stock being issued to the Great Hill Entities to a number of shares that is less than the current 5 million shares of preferred stock we are authorized to issue under our current Certificate of Incorporation. For example, we may provide that the smaller number of shares of Series A Preferred Stock to be issued to the Great Hill Entities be priced at a higher price than the current $3.96 per share, with a commensurate adjustment to the ratio at which the Series A Preferred Stock converts into our common stock. Any such amendment to the Stock Purchase Agreement would be more costly to LECG and would result in more of a diversion from our management's attention, as compared to proceeding as planned with the Amended Charter. Therefore, our board of directors, by a majority vote, has recommended that our stockholders approve the Amended Charter.


Q:    Why are you asking for LECG stockholders to approve the Amended Charter?

A:    Delaware law requires that we obtain approval from our stockholders in order to amend our Certificate of Incorporation.


Q:    What will happen if the Amended Charter is not approved?

A:    If the Amended Charter is not approved and we do not file the Amended Charter with the Secretary of State of the State of Delaware, we will have an insufficient number of authorized but unissued shares of our preferred stock to complete the Investment on the terms contemplated by the Stock Purchase Agreement. We could, however, enter into an amendment to the Stock Purchase

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Agreement and complete the Investment on revised, but economically equivalent terms, as discussed above.


The Annual Meeting

Q:    Why am I receiving this proxy statement?

A:    We are soliciting proxies for our 2009 Annual Meeting of Stockholders. You are receiving a proxy statement because you owned shares of LECG common stock on November 9, 2009, the "record date," and that entitles you to vote at the meeting. Our board of directors is soliciting proxies to vote on (i) the approval of the Merger and the issuance of our common stock pursuant thereto, (ii) the approval of the Investment and the issuance of our Series A Preferred Stock pursuant thereto, and (iii) the approval of the Amended Charter, at our 2009 Annual Meeting of Stockholders, as well as the other matters set forth in the notice of the meeting and described elsewhere in this proxy statement, and your proxy will be used at the meeting or at any adjournment or postponement of the meeting.


Q:    How does this annual meeting differ from LECG's typical annual meeting?

A:    In addition to the annual opportunity to vote on the election of directors and the ratification of the appointment of our independent registered public accounting firm, this year our stockholders will also be asked to vote on (i) the approval of the Merger and the issuance of our common stock pursuant thereto, (ii) the approval of the Investment and the issuance of our Series A Preferred Stock pursuant thereto, and (iii) the approval of the Amended Charter.


Q:    What am I being asked to vote on?

A:    Our stockholders are being asked to vote on the following proposals:

        Proposal 1:    Approval of the Merger and the issuance of our common stock pursuant thereto;

        Proposal 2:    Approval of the Investment and the issuance of our Series A Preferred Stock pursuant thereto;

        Proposal 3:    Approval of the Amended Charter;

        Proposal 4:    Election of seven nominees to the LECG board of directors, each to hold office until the earliest to occur of our 2010 annual meeting of stockholders, his or her removal, or his or her resignation;

        Proposal 5:    Ratification of the appointment of Deloitte & Touche LLP as LECG's independent registered public accounting firm for 2009; and

        Proposal 6:    Approval of the adjournment of the meeting, if necessary, to solicit additional proxies if there are not sufficient votes to (i) approve the Merger and the issuance of our common stock pursuant thereto, (ii) approve the Investment and the issuance of our Series A Preferred Stock pursuant thereto, and (iii) approve the Amended Charter, at the time of the meeting.

The consummation of the actions contemplated by Proposals 1 and 2, even if approved by our stockholders, will not occur unless the other closing conditions set forth in the Merger Agreement and the Stock Purchase Agreement are satisfied.


Q:    Are there any other matters to be addressed at the meeting?

A:    We know of no other matters to be brought before the meeting, but if other matters are brought before the meeting or at any adjournment or postponement of the meeting, the officers named in your

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proxy intend to take such action as in their judgment is in the best interest of our company and our stockholders.


Q:    What is a proxy and how do I vote?

A:    A proxy is a legal designation of another person to vote your shares on your behalf. If a broker, bank or other nominee is the holder of record of shares that you beneficially own, you will receive instructions from them that you must follow in order to have your shares voted. If a bank, broker or other nominee holds your shares and you wish to attend the meeting and vote in person, you must obtain a "legal proxy" from the record holder of the shares giving you the right to vote the shares.

If you hold your shares in your own name as a holder of record, you may instruct the proxy holders how to vote your common stock by completing and executing a proxy by means of any of the three voting methods described in these proxy materials (by telephone, over the internet, or by signing, dating and mailing a proxy card). Of course, you may also choose to attend the meeting and vote your shares in person.

The proxy holders will vote your shares in accordance with your instructions on your completed proxy as submitted. If you complete and deliver a proxy without giving specific voting instructions, your shares will be voted (i) "FOR" the approval of the Merger and the issuance of our common stock pursuant thereto, (ii) "FOR" the approval of the Investment and the issuance of our Series A Preferred Stock pursuant thereto, (iii) "FOR" the approval of the Amended Charter, (iv) "FOR" each of the nominees for director, (v) "FOR" each of the other proposals set forth herein, as recommended by a majority vote of our board of directors and (vi) as the proxy holders may determine in their discretion with respect to any other matters that properly come before the annual meeting.


Q:    How do I vote via the internet or by telephone?

A:    Stockholders whose shares are registered in the name of a bank or brokerage firm may be eligible to vote electronically through the internet or by telephone. Many banks and brokerage firms participate in the Broadridge Financial Solutions, Inc. ("Broadridge") online and telephone program. This program provides eligible stockholders the opportunity to vote via the internet or by telephone. Voting forms provided by your broker will provide instructions for stockholders whose banks or brokerage firms participate in Broadridge's online and telephone proxy voting program.

Registered stockholders may vote electronically through the internet or by telephone by following the instructions included with their notice of internet availability or their proxy card. A stockholder not wishing to vote electronically through the internet or by telephone or whose form does not reference internet or telephone voting information should complete and return the enclosed paper proxy card if you are a registered stockholder or the paper proxy card provided by your broker if your shares are held in "street name". Signing and returning the proxy card or submitting the proxy via the internet or by telephone does not affect the right to vote in person at the annual meeting.


Q:    When is this proxy statement being mailed?

A:    This proxy statement and the proxy card are first being sent to our stockholders on or about November 18, 2009.


Q:    When and where will the meeting be held?

A:    The meeting will be held at our corporate offices located at 2000 Powell Street, Suite 600, Emeryville, California, 94608, on December 22, 2009, at 2 p.m., local time.

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Q:    Who is entitled to vote at the meeting and how many shares may be voted at the meeting?

A:    All holders of our common stock who held shares at the close of business on the "record date" (November 9, 2009) are entitled to receive notice of and to vote at the meeting provided that such shares remain outstanding on the date of the meeting. As of the close of business on the record date, there were 25,867,515 shares of LECG common stock outstanding and entitled to vote at the meeting, and such shares were held by approximately 87 holders of record. Each share of common stock is entitled to one vote.


Q:    As a LECG stockholder, why am I electing LECG directors and ratifying the appointment of an independent registered public accounting firm for LECG when I am being asked to approve the Merger and the issuance of LECG common stock pursuant thereto, approve the Investment and the issuance of LECG preferred stock pursuant thereto and approve the Amended Charter?

A:    We have determined to observe the requirement to hold the meeting to elect the members of our board of directors and ratify the appointment of Deloitte & Touche LLP as our independent registered public accounting firm for 2009 in connection with the other required votes related to the Merger and the Investment. The Merger and the Investment are important corporate events and we are considering these proposals together with the regular annual meeting proposals in part to avoid the expense and diversion of management's attention that would be required if we held two separate stockholder meetings in 2009 to address the regular annual meeting proposals separately from the significant corporate transaction proposals. The LECG directors elected at the meeting will serve as directors of LECG following the meeting through the earliest of our 2010 annual meeting of stockholders, his or her removal or his or her resignation. The election of all seven nominees for director is also a condition to completion of the Merger. The ratification of the selection of Deloitte & Touche LLP as our independent registered public accounting firm is not a condition to completion of the Merger or the Investment.


Q:    Why is my vote important?

A:    If you do not submit a proxy or vote in person at the meeting, it will be more difficult for us to obtain the necessary quorum to hold the meeting. In addition, your failure to submit a proxy or to vote in person will have the same effect as a vote against the approval of the Amended Charter. If you hold your shares through a broker, your broker will not be able to cast a vote on the approval of the Merger and the issuance of our common stock pursuant thereto, approval of the Investment and the issuance of the Series A Preferred Stock pursuant thereto, or approval of the Amended Charter without instructions from you. Our board of directors, by a majority vote, recommends that you vote (i) "FOR" the approval of the Merger and the issuance of our common stock pursuant thereto, (ii) "FOR" the approval of the Investment and the issuance of the Series A Preferred Stock pursuant thereto, (iii) "FOR" the approval of the Amended Charter and (iv) "FOR" the nominees for director.


Q:    What constitutes a quorum for the annual meeting?

A:    The annual meeting will be held if a majority of the outstanding common stock entitled to vote is present or represented at the meeting. If you have returned valid proxy instructions or attend the meeting in person, your common stock will be counted for the purpose of determining whether there is a quorum, even if you wish to abstain from voting on some or all matters at the meeting.


Q:    How many votes are required for the approval of each item?

A:    The following are the vote requirements for the various proposals:

        Proposals 1 and 2:    Approval of the Merger and the issuance of LECG common stock pursuant thereto and Approval of the Investment and the issuance of the Series A Preferred Stock pursuant

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thereto.    The approval of the Merger and the issuance of LECG common stock pursuant thereto and approval of the Investment and the issuance of LECG Series A Preferred Stock pursuant thereto requires the affirmative vote of the holders of a majority of the votes cast at the annual meeting (provided that quorum is present at the meeting) on each of those proposals.

        Proposal 3:    Approval of the Amended Charter.    The approval of the Amended Charter requires the affirmative vote of the holders of a majority of our shares outstanding as of the record date.

        All Other Matters:    All other matters on the agenda will be decided by the affirmative vote of the holders of a majority of the shares present in person or represented by proxy at the meeting (provided that quorum is present at the meeting).


Q:    How will abstentions be counted?

A:    Shares that are voted "WITHHELD" or "ABSTAIN" are treated as being present for purposes of determining the presence of a quorum and as entitled to vote on a particular proposal at the annual meeting. If you hold your common stock through a bank, broker or other nominee, the broker may be prevented from voting shares held in your account on some proposals (a "broker non-vote") unless you have given voting instructions to the bank, broker or nominee. Shares that are subject to a broker non-vote are counted for purposes of determining whether a quorum exists but not for purposes of determining whether a proposal has passed. If you abstain from voting on any proposal other than to approve the Amended Charter, ratify the selection of our independent registered accounting firm, or to adjourn the meeting to solicit additional proxies, you will effectively not vote on that matter at the meeting. Abstentions are not considered to be votes cast under our bylaws or under the laws of Delaware (our state of incorporation) and will have no effect on the outcome of the vote for the proposals other than the approval of the Amended Charter, the ratification of the selection of our independent registered accounting firm or the adjournment of the meeting to solicit additional proxies. For the proposal to approve the Merger and the issuance of our common stock pursuant thereto, abstentions have no effect on the outcome of the proposal. For the proposal to approve the Investment and the issuance of the Series A Preferred Stock pursuant thereto, abstentions have no effect on the outcome of the proposal. For the proposal to approve the Amended Charter, abstentions have the same effect as a vote against the approval of the Amended Charter. For the proposal to elect the nominees to our board of directors named in this proxy statement, abstentions have no effect on the outcome of the proposal. For the proposal to ratify the selection of our independent registered public accounting firm and the proposal to adjourn the meeting to solicit additional proxies, abstentions are treated as present and entitled to vote at the meeting and therefore have the same effect as a vote against the matter.


Q:    How will my shares be represented at the meeting?

A:    At the meeting, the individuals named in your proxy card will vote your shares in the manner you requested if you correctly submitted your proxy. If you sign your proxy card and return it without indicating how you would like to vote your shares, your proxy will be voted as our board of directors, by a majority vote, recommends, which is:

    FOR the approval of the Merger and the issuance of our common stock pursuant thereto;

    FOR the approval of the Investment and the issuance the Series A Preferred Stock pursuant thereto;

    FOR the approval of the Amended Charter;

    FOR the election to our board of directors of each of the nominees for director named in this proxy statement;

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    FOR the ratification of the appointment of Deloitte & Touche LLP as our independent registered public accounting firm for 2009; and

    FOR the approval of the adjournment of the meeting, if necessary to solicit additional proxies if there are not sufficient votes to adopt the forgoing proposals at the time of the meeting.


Q:    What are the material United States federal income tax consequences of the Merger to existing LECG stockholders?

A:    Existing LECG stockholders will not recognize any gain or loss for United State federal income tax purposes as a result of the Merger.


Q:    What happens if I sell my shares after the record date but before the meeting?

A:    The record date of the meeting is earlier than the date of the meeting and the date that the Merger and the Investment are expected to be completed. If you transfer your LECG shares after the record date but before the date of the meeting, you will retain your right to vote at the meeting (provided that such shares remain outstanding on the date of the meeting).


Q:    What do I do if I receive more than one proxy statement or set of voting instructions?

A:    If you hold shares directly as a record holder and also in "street name," or otherwise through a nominee, you may receive more than one proxy statement and/or set of voting instructions relating to the meeting. These should each be voted and/or returned separately in order to ensure that all of your shares are voted at the meeting.


Q:    If my LECG shares are held in street name by my broker, will my broker automatically vote my shares for me?

A:    No.    If your shares are held in an account at a broker, you must instruct the broker on how to vote your shares. If you do not provide voting instructions to your broker, your shares will not be voted on any proposal on which your broker does not have discretionary authority to vote. This is called a "broker non-vote." In these cases, the broker can register your shares as being present at the meeting for purposes of determining the presence of a quorum but will not be able to vote on those matters for which specific authorization is required.


Q:    Can I revoke my proxy?

A:    Yes.    You may revoke your proxy at any time before the meeting. Simply attending the meeting will not revoke your proxy. To revoke your proxy instructions if you are a holder of record, you must either (i) advise our Corporate Secretary in writing before the proxy holders vote your shares, (ii) deliver proxy instructions bearing a later date, or (iii) attend the meeting, affirmatively revoke your proxy and vote your shares in person. If your shares are held by a bank, broker or other nominee and you wish to revoke or change your vote, you must follow the instructions provided by the bank, broker or nominee.


Q:    Do I have dissenters' or appraisal rights in connection with any of the proposals described in this proxy statement?

A:    No.    LECG stockholders are not entitled to dissenters' or appraisal rights with respect to the approval of the Merger, the Investment, the Amended Charter or the other proposals described in this proxy statement.

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Q:    Who may attend the annual meeting?

A:    Our stockholders (or their authorized representatives) and our invited guests may attend the meeting. Verification of stock ownership will be required at the meeting. If you own your shares in your own name or hold them through a broker (and can provide documentation showing ownership such as a letter from your broker or a recent account statement) at the close of business on the record date (November 9, 2009), you will be permitted to attend the meeting. Stockholders may call the LECG Office of the Corporate Secretary at (510) 985-6700 to obtain directions to LECG's corporate offices located at 2000 Powell Street, Suite 600, Emeryville, California, 94608.


Q:    Will cameras and recording devices be permitted at the meeting?

A:    No.    Stockholders are not permitted to bring cameras or recording equipment into the meeting room.


Q:    Will a proxy solicitor be used?

A:    Yes.    We have hired Laurel Hill Advisory Group, LLC to assist in the solicitation of proxies for the meeting and we estimate we will pay them a fee of approximately $7,000 for their services in connection therewith. We have also agreed to reimburse Laurel Hill Advisory Group, LLC, for reasonable out-of-pocket expenses and disbursements incurred in connection with the proxy solicitation and to indemnify them against certain losses, costs and expenses. In addition, our officers and employees may solicit proxies by telephone or in person, but no additional compensation will be paid to them.


Q:    Who should I call with questions?

A:    Our stockholders should call Laurel Hill Advisory Group, LLC, our proxy solicitor, toll-free at 1-888-742-1305, and banks and brokers may call collect at 1-917-338-3181 with any questions about the Merger, the Investment and the other matters to be voted on at the meeting, or to obtain additional copies of this proxy statement, the materials delivered with this proxy statement or additional proxy cards.

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SUMMARY

        This summary highlights selected information from this proxy statement. It does not contain all of the information that may be important to you. We encourage you to read this proxy statement carefully and in its entirety, including all of the annexes and the other documents delivered with this proxy statement, to fully understand the proposals. See "Where You Can Find Additional Information" on page 183.

The Companies

    LECG Corporation (see page 108)
    2000 Powell Street, Suite 600
    Emeryville, CA 94608
    (510) 985-6700

        LECG provides expert services through its highly credentialed experts and professional staff whose skills and qualifications provide LECG the opportunity to address complex, unstructured business and public policy problems. LECG delivers independent expert testimony and original authoritative studies in both adversarial and non-adversarial environments. It conducts economic, financial, accounting and statistical analyses to provide objective opinions and strategic advice to legislative, judicial, regulatory and business decision makers. Its skills include electronic discovery, forensic accounting, data collection, econometric modeling and other types of statistical analyses, report preparation and oral presentation at depositions. LECG experts are renowned academics, former senior government officials, experienced industry leaders, technical analysts and seasoned consultants. Its clients include Fortune Global 500 corporations, major law firms and local, state and federal governments and agencies in the United States and other countries throughout the world.

    Smart Business Holdings, Inc. (see page 129)
    80 Lancaster Avenue
    Devon, PA 19333
    (610) 254-0700

        Smart is privately held. Founded in 1988, it provides business advisory, consulting, accounting, compensation and benefits, tax, and transaction advisory services. Smart's principal stockholder is Great Hill III. Smart will be the surviving corporation in the first step of the Merger but will merge with and into Red Sox Acquisition LLC in the second step of the Merger, with Red Sox Acquisition being the surviving company.

    Great Hill Partners, LLC
    1 Liberty Square
    Boston, MA 02109
    (617) 790-9400

        Great Hill Partners, LLC is a private equity firm with $2.7 billion in capital under management and focuses on investing in growth companies operating in the business and consumer services, media, transaction processing and software industries. Great Hill Partners and its affiliates, including the Great Hill Entities, target equity investments of $50 million to $150 million.

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    Great Hill Equity Partners III, LP
    1 Liberty Square
    Boston, MA 02109
    (617) 790-9400

        Great Hill III is an affiliated fund of Great Hill Partners, LLC and the principal stockholder of Smart.

    Great Hill Investors, LLC
    1 Liberty Square
    Boston, MA 02109
    (617) 790-9400

        Great Hill Investors is an affiliated fund of Great Hill Partners, LLC and a minority stockholder of Smart.

    Red Sox Acquisition LLC
    c/o LECG Corporation
    2000 Powell Street, Suite 600
    Emeryville, CA 94608
    (510) 985-6700

        Red Sox Acquisition LLC is a newly formed Delaware limited liability company and wholly-owned subsidiary of LECG organized for the sole purpose of completing the Merger. It has engaged in no business activities, and it has no assets or liabilities of any kind, other than those incidental to its formation and those incurred in connection with entering into the Merger Agreement. Red Sox Acquisition LLC will be the surviving corporation of the second step of the Merger and will remain a wholly-owned subsidiary of LECG following the Merger. LECG expects to change Red Sox Acquisition LLC's name to "Smart Business Holdings, LLC" in connection with the closing of the Merger.

    Red Sox Acquisition Corporation
    c/o LECG Corporation
    2000 Powell Street, Suite 600
    Emeryville, CA 94608
    (510) 985-6700

        Red Sox Acquisition Corporation is a newly formed Delaware corporation and wholly-owned subsidiary of LECG organized for the sole purpose of completing the Merger. It has engaged in no business activities, and it has no assets or liabilities of any kind, other than those incidental to its formation and those incurred in connection with entering into the Merger Agreement. Red Sox Acquisition Corporation will merge with and into Smart and will not survive the first step of the Merger.

Summary of the Merger (see page 55)

        The Merger will be accomplished in two steps: first, Red Sox Acquisition Corporation will merge with and into Smart with Smart continuing as the surviving company. Immediately after the completion of this first step of the Merger, Smart will merge with and into Red Sox Acquisition LLC, with Red Sox Acquisition LLC continuing as the surviving company. We expect that promptly following the second step, Red Sox Acquisition LLC will change its name to "Smart Business Holdings, LLC". As consideration for the Merger, LECG will issue a total of 10,927,869 shares of LECG common stock to the Great Hill Entities, which own an aggregate of 82% of the common stock and all of the preferred

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stock of Smart. The remaining 18% of the common stock of Smart is held by current and former employees of Smart. In accordance with Smart's certificate of incorporation and the Merger Agreement, all of the merger consideration will be allocated to the Great Hill Entities in exchange for shares of redeemable preferred stock of Smart held by them. In connection with the Merger, each outstanding share of Smart's redeemable preferred stock will be exchanged for 176.57 shares of LECG's common stock. Smart's certificate of incorporation provides for a liquidation preference in favor of the preferred stock of Smart, pursuant to which the holders of preferred stock of Smart are entitled to receive approximately $64.7 million in cash or assets upon the occurrence of a change in control, which would include the Merger, before any proceeds are distributed to the holders of common stock of Smart. For purposes of allocating the value to be received by Smart stockholders in the Merger, the determination was made at the time the holders of Smart's preferred stock and common stock voted to approve the Merger and the preferred stockholders waived their right to receive their full liquidation preference in cash. At that time, the aggregate value of the shares of LECG common stock to be issued in the Merger was less than $40 million, based on the closing trading price per share of LECG common stock of $3.65 as of August 14, 2009, which was significantly less than the preferred stock liquidation preference. As a result, pursuant to Smart's certificate of incorporation and the Merger Agreement, no merger consideration will be payable by LECG to the holders of Smart's common stock or holders of options, warrants or other rights to purchase Smart's common stock.

        We have attached the Merger Agreement to this proxy statement as Annex A. The Merger Agreement describes the terms of the Merger. We encourage you to read the Merger Agreement, because it is the legal document that governs the Merger and its exact language prevails over the more general, abbreviated descriptions in this proxy statement.

        LECG stockholders are not third party beneficiaries under the Merger Agreement or any agreements entered into in connection with Merger and for this and other reasons discussed elsewhere in this proxy statement, including in the more detailed summary of the Merger Agreement beginning on page 75, you should not rely on specific representations, warranties and covenants or any descriptions thereof as characterizations of the actual state of facts or condition of LECG, Smart, the Great Hill Entities or any of their respective affiliates. LECG is not currently aware of specific material facts that contradict such representations or warranties that have not otherwise been disclosed in this proxy statement or in LECG's other reports filed with the SEC, and LECG will file corrective disclosures with the SEC if it becomes aware of any such specific material facts.

        Our board of directors, by a vote of five in favor, one against, and two abstentions, has determined that the Merger Agreement and the transactions contemplated by the Merger Agreement, including the Merger and the issuance of our common stock in connection therewith, are advisable and are fair to, and in the best interests of LECG and its stockholders and recommends that LECG stockholders vote "FOR" the proposal to approve the Merger and the issuance of LECG common stock pursuant thereto.

Summary of the Investment (see page 97)

        In connection with the Merger and pursuant to the Stock Purchase Agreement, the Great Hill Entities will purchase 6,313,131 shares of Series A Preferred Stock at a price of $3.96 per share, for an aggregate purchase price of approximately $25 million. Following the closing of the Merger and the Investment, the Great Hill Entities will together hold shares of LECG common stock and Series A Preferred Stock representing approximately 40% of the outstanding voting power of LECG. In addition, as of the closing of the Merger and the Investment, the Great Hill Entities will have two designees to the LECG board of directors, and Mr. Steve Samek, the current Chief Executive Officer of Smart who had been appointed by the Smart board of directors with the support of the Great Hill Entities, will become the Chief Executive Officer of LECG and will become a member of our board of

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directors. Therefore, the Great Hill Entities will have the power to influence LECG business strategy following the closing of the Merger and the Investment.

        We have attached the Stock Purchase Agreement to this proxy statement as Annex B. The Stock Purchase Agreement describes the terms of the Investment. We encourage you to read the Stock Purchase Agreement because it is the legal document that governs the Investment and its exact language prevails over the more general, abbreviated descriptions in this proxy statement.

        LECG stockholders are not third party beneficiaries under the Stock Purchase Agreement or any agreements entered into in connection with the Investment.

        Our board of directors, by a vote of seven in favor and one abstention, has determined that the Stock Purchase Agreement and the transactions contemplated by the Stock Purchase Agreement, including the Amended Charter and the Investment, are advisable and are fair to, and in the best interests of, LECG and its stockholders and recommends that LECG stockholders vote "FOR" the proposal to approve the Investment and the issuance of the Series A Preferred Stock pursuant thereto and "FOR" the proposal to approve the Amended Charter.

Option Grants to Smart Employees (see page 76)

        Pursuant to the Merger Agreement, LECG has committed to grant options to purchase up to 500,000 shares of LECG common stock to certain employees of Smart that remain employed by LECG affiliated entities following the closing of the Merger. The options will be granted under LECG's stock option plan effective upon the closing of the Merger and the Investment. LECG expects that the exercise price for these stock options will be the fair market value of LECG's common stock on the date such options are granted following the closing date.

Opinion of LECG's Financial Advisor (see page 66)

        In connection with the Merger, LECG's board of directors received an oral opinion, which was confirmed by a written opinion, dated August 17, 2009, of LECG's financial advisor, William Blair & Company ("William Blair"), as to the fairness, from a financial point of view and as of the date of the opinion, to LECG of the merger consideration to be paid by LECG to Smart's stockholders in the Merger. The full text of William Blair's written opinion, dated August 17, 2009, which describes the assumptions made, procedures followed, matters considered and limitations on the review undertaken, is attached to this proxy statement as Annex D. William Blair's opinion was provided to LECG's board of directors in connection with its evaluation of the merger consideration to be paid by LECG from a financial point of view and does not address any other aspect of the Merger or any related transaction, including the Investment. William Blair's opinion does not address the underlying business decision of LECG to effect the Merger or any related transaction, including the Investment, the relative merits of the Merger or any related transaction as compared to any alternative business strategies that might exist for LECG or the effect of any other transaction in which LECG might engage and does not constitute a recommendation to any stockholder as to how such stockholder should vote or act with respect to any matters relating to the Merger.

LECG's Reasons for the Merger (see page 62) and LECG's Reasons for the Investment (see page 97)

        In reaching its decision to approve the Merger and the issuance of LECG common stock pursuant thereto, the Merger Agreement, the Amended Charter, and the Investment and the issuance of the Series A Preferred Stock pursuant thereto, the LECG board of directors consulted with LECG's senior management team, as well as LECG's outside advisors, and considered a number of factors, including

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the following material factors which a majority of the LECG board of directors viewed as supporting its decision:

    the acquisition of Smart may provide LECG with (a) an increase in revenues and profits, (b) cost saving synergies, (c) a cash investment from a new investment partner that will have representation on the board of directors, and (d) new seasoned executive leadership to join the existing management team;

    the acquisition of Smart may enhance the LECG operating platform, providing an opportunity for LECG to better grow and compete from a position of strength;

    the creation of larger sales and services organizations, greater marketing resources and financial strength may present improved opportunities for marketing the products and services of the combined company;

    the experience, financial resources, size and breadth of product and service offerings of the combined company may allow the combined company to respond more quickly and effectively to client needs, technological change, increased competition and shifting market demand; and

    LECG's belief that the Investment is the least expensive way of raising capital given the current economic climate.

        In view of the wide variety of factors considered by the LECG board of directors in connection with its evaluation of the Merger and the Investment and the complexity of these matters, the LECG board of directors did not consider it practical, and did not attempt, to quantify, rank or otherwise assign relative weights to the specific factors it considered in reaching its decision. Rather, the LECG board of directors made its recommendation based on the totality of information presented to, and the investigation conducted by, it. In considering the factors discussed above, individual directors may have given different weights to different factors. As a result of the foregoing analysis, a majority of the members of LECG's board of directors believes that the Merger and the Investment are fair to, and in the best interests of LECG and its stockholders.

Overview of the Merger Agreement

    Merger Consideration (see page 76)

        In consideration of the Merger, LECG will issue a total of 10,927,869 new shares of LECG common stock to Smart stockholders, all of which will be issued to the Great Hill Entities.

    Conditions to Completion of the Merger (see page 88)

        Consummation of the Merger is subject to a number of conditions, including among others, the following:

    LECG's stockholders shall have approved the Merger, as well as the Amended Charter;

    Smart's stockholders shall have approved the Merger, which they have already done;

    there shall not have been any "material adverse effect", as defined in the Merger Agreement, on LECG or Smart;

    all of the representations and warranties made by the parties to the Merger Agreement and related transaction documents shall remain true and correct, except where the failure of such representations and warranties to be true and correct, individually or in the aggregate, would not reasonably be expected to have a "material adverse effect" on LECG or Smart, as the case may be;

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    each of LECG and Smart shall have complied with all pre-closing covenants in all material respects;

    the Investment shall have closed prior to or concurrently with the closing of the Merger;

    the parties shall have received all regulatory approvals, including antitrust approvals in connection with the Merger and related transactions;

    the aggregate amount of "net indebtedness" of LECG shall not exceed $28,000,000;

    the aggregate amount of "net indebtedness" of Smart shall not exceed $42,000,000;

    the size of LECG's board of directors shall be set at seven, and the seven directors nominated in this proxy statement shall have been elected at the meeting;

    the Chief Executive Officer of LECG shall be Steve Samek;

    the Committee of the Independent Directors of LECG and Smart shall have received tax opinions from their respective legal counsel;

    LECG and Smart shall have received the required consents from their respective lenders or, alternatively, arrangements mutually acceptable to LECG and Smart shall have been made to repay the indebtedness under such credit facilities concurrently with closing of the Merger;

    the LECG shares of common stock to be issued to the Great Hill Entities, as Smart's preferred stockholders, in connection with the Merger shall be exempt from the registration requirements under the Securities Act of 1933, as amended (the "Securities Act"), pursuant to Regulation D promulgated under the Securities Act ("Regulation D"); and

    no temporary restraining order, preliminary or permanent injunction or other order shall have been issued by any governmental authority or other legal or regulatory restraint or prohibition preventing the consummation of the Merger and the other transactions contemplated by the Merger Agreement.

    Indemnification (see page 85)

        After the closing of the Merger, Great Hill III shall indemnify LECG for losses as a result of a breach of the representations by Smart relating to Smart's financial statements and LECG shall indemnify Great Hill III for losses as a result of a breach of the representations by LECG relating to the shares to be issued in the Merger and its financial statements. Indemnification claims are to be paid and resolved only through the surrender by Great Hill III or the issuance by LECG, as the case may be, of shares of LECG common stock, subject to a deductible of 303,030 shares of LECG common stock (which is equal to $1,000,000 based on the deemed value of $3.30 per share as set forth in the Merger Agreement and which the indemnified party may only recover amounts in excess of) and an aggregate maximum indemnification liability of 1,092,787 shares of LECG common stock (or $3,606,197 based on the deemed value of $3.30 per share value as set forth in the Merger Agreement). The representations that are subject to indemnification survive for 12 months after the closing of the Merger. If indemnification claims are made against LECG following the closing of the Merger, LECG could be required to issue up to a maximum of 1,092,787 additional shares of its common stock to Great Hill III in satisfaction of those claims.

    No Solicitation (see page 89)

        Each of Smart and LECG agreed that, subject to specified exceptions, Smart and LECG shall not, nor shall either of them authorize or permit any of their respective subsidiaries or any of their or their

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subsidiaries' respective officers, directors, employees, financial advisors, representatives, agents, or affiliates to, directly or indirectly:

    solicit, initiate, facilitate or knowingly encourage any inquiry, proposal or offer from any third party in respect of, or that reasonably may be expected to lead to, a "company alternative transaction proposal" or "parent alternative transaction proposal", as the case may be, each as defined in the Merger Agreement and generally meaning a transaction with a third party that is competitive to the pending Merger;

    participate in any discussions or negotiations or enter into any agreement with, or provide any non-public information to, or otherwise cooperate with, any third party in respect of, or that reasonably may be expected to lead to, a company alternative transaction proposal or parent alternative transaction proposal, as the case may be; or

    accept any company alternative transaction proposal or parent alternative transaction proposal, as the case may be.

    Termination of the Merger Agreement (see page 92)

        Before the Merger is completed, and whether or not the Merger Agreement has been approved by the LECG or Smart stockholders, LECG and Smart can mutually agree to terminate the Merger Agreement.

        Also, either party can terminate the Merger Agreement if:

    the closing of the Merger shall not have occurred by February 10, 2010, provided that this right to terminate the Merger Agreement shall not be available to any party whose breach of the Merger Agreement has been the principal reason resulting in the failure of the closing of the Merger to occur on or before February 10, 2010;

    there is a final, non-appealable order in effect preventing the closing of the Merger or the other transactions contemplated by the Merger Agreement;

    there is any law or order that would make the closing of the Merger or any of the other transactions contemplated by the Merger Agreement illegal;

    the LECG stockholders do not approve the transactions contemplated by the Merger Agreement at the LECG stockholder meeting; or

    the other party has breached any of its representations, warranties or covenants such that the closing conditions could not be satisfied by the breaching party and such breach is not cured within 30 days after being notified of such breach.

        In addition, Smart can terminate the Merger Agreement if any of the following events occur: (i) LECG's board of directors changes its recommendation with respect to the Merger for any reason; (ii) LECG shall have entered into any agreement (other than a confidentiality agreement) relating to a "parent alternative transaction" (as defined in the Merger Agreement); (iii) LECG fails to include the recommendation of its board of directors with respect to the Merger in this proxy statement; (iv) a third party tender offer is launched for LECG prior to LECG's stockholder approval of the Merger and the issuance of LECG common stock pursuant thereto and the LECG board of directors does not recommend that its stockholders reject such third party tender offer within 10 business days following the launching of such third party tender offer; (v) LECG fails to publicly reaffirm the LECG board of directors recommendation of the Merger within 10 days of Smart's request to do so following a Parent Alternative Transaction Proposal; or (vi) LECG publicly announces its intention to do any of the foregoing.

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        LECG may also terminate the Merger Agreement (a) if any of the triggering events listed in the previous paragraph occurs or (b) at any time prior to obtaining its stockholders' approval of the Merger and the issuance of LECG common stock pursuant thereto if the LECG board of directors has approved in good faith a "parent alternative transaction proposal" (as defined in the Merger Agreement) that the LECG board of directors believes is in the best interest of LECG and its stockholders after reflecting the consequences of terminating the Merger Agreement, including the payment of the termination fee described below.

    Termination Fees and Expenses (see page 93)

        LECG is required to pay Smart a $2.9 million termination fee if (a) one of the triggering events described above occurs and the Merger Agreement is terminated by either Smart or LECG, (b) LECG terminates the Merger Agreement after its board of directors determines that it is in the best interests of LECG and its stockholders for LECG to accept a parent alternative transaction proposal, (c) (i) a parent alternative transaction proposal has been made to LECG, (ii) the LECG stockholders fail to approve the Merger and the issuance of LECG common stock pursuant thereto and proposals related to the Merger described in this proxy statement, (iii) the Merger Agreement is terminated by either Smart or LECG due to the failure of the LECG stockholder vote, and (iv) LECG enters into a definitive agreement to effectuate any parent alternative transaction proposal within 12 months of the termination of the Merger Agreement.

        LECG and Smart will each pay their own expenses incurred in connection with the Merger Agreement and the transactions contemplated thereby; however, LECG and Smart will share equally the fees and expenses (other than attorneys' and accountants' fees) incurred in connection with the printing and filing of this proxy statement (or any amendments or supplements hereto) and the Hart-Scott-Rodino Antitrust Improvements Act of 1976 ("HSR Act") filing fee. If the Merger is consummated, LECG will pay the legal and accounting fees and expenses of the Great Hill Entities in connection with the Merger and the other transactions contemplated by the Merger Agreement. In addition to the above, if the LECG stockholders fail to approve the Merger and the issuance of LECG common stock pursuant thereto and the other transactions contemplated by the Merger Agreement at the LECG stockholder meeting, LECG will reimburse Smart's transaction expenses up to $800,000.

Overview of the Stock Purchase Agreement

    Stock Purchase Agreement with certain Smart Stockholders (see page 98)

        Concurrently with the execution of the Merger Agreement, LECG and the Great Hill Entities entered into a Stock Purchase Agreement, pursuant to which LECG will issue 6,313,131 shares of Series A Preferred Stock to the Great Hill Entities at a price of $3.96 per share for an aggregate purchase price of approximately $25 million. Upon the closing of the Merger and the Investment, the Great Hill Entities will together hold LECG common stock and Series A Preferred Stock representing approximately 40% of the outstanding voting power of LECG.

        Upon consummation of the Merger and the Investment, it is currently expected that Great Hill III and Great Hill Investor will each beneficially own more than 5% of the outstanding shares of LECG common stock upon consummation of the Merger and the Investment. The Investment is subject to certain conditions, including the substantially concurrent closing of the Merger.

Overview of other Related Agreements

    Voting Agreements (see page 107)

        Concurrently with the execution of the Merger Agreement, Smart entered into voting agreements (collectively, the "Voting Agreements") with certain directors and executive officers of LECG, pursuant

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to which such signatories have agreed to vote in favor of the Merger and related matters when presented for approval by the LECG stockholders. The Voting Agreements apply to all shares of LECG common stock held by the signatories, which in the aggregate represents less than 2% of the outstanding shares. The Voting Agreements also restrict transfers of shares by the signatories.

    Governance Agreement (see page 106)

        It is a condition to the closing of the Merger that LECG and the Great Hill Entities enter into a governance agreement (the "Governance Agreement") as of the closing date of the Merger Agreement. The Governance Agreement provides for the designation of nominees to LECG's board of directors and restricts the Great Hill Entities' voting related to the same. Pursuant to the Governance Agreement, the Great Hill Entities may designate two nominees to LECG's board of directors. In addition, pursuant to the Governance Agreement, the Great Hill Entities have agreed to certain standstill restrictions with respect to future acquisitions of LECG common stock and have been granted preemptive rights with respect to future issuances of LECG common stock.

    Stockholders Agreement (see page 106)

        It is a condition to the closing of the Merger that LECG and the Great Hill Entities enter into a stockholders agreement (the "Stockholders Agreement") as of the closing date of the Merger Agreement. The Stockholders Agreement provides the Great Hill Entities with certain demand and piggy-back registration rights related to the shares of LECG common stock they will receive in connection with the Merger and upon conversion of the shares of the Series A Preferred Stock they will receive in connection with the Investment.

Risk Factors (see page 22)

        The Merger and the Investment, including the possibility that the Merger and the Investment may not be consummated, pose a number of risks to LECG and its stockholders (including, if the Merger is completed, the Great Hill Entities receiving LECG common stock). In addition, both LECG and Smart are subject to various risks associated with their businesses and their industries. The combined business will also be subject to these and other risks. We encourage you to read carefully the section of this proxy statement entitled "Risk Factors".

The LECG Board of Directors After the Merger (see page 88)

        It is a condition to the closing of the Merger that the nominees to the LECG board of directors set forth herein make up LECG's board of directors at the time of the closing of the Merger.

LECG Management After the Merger (see page 88)

        Steve Samek, the current Chief Executive Officer of Smart, has been designated to become the Chief Executive Officer of LECG after the Merger, and it is expected that Steven Fife will continue as the Chief Financial Officer of LECG.

LECG Per Share Market Price Information (see page 40)

        The stock of LECG is listed on the NASDAQ Global Select Market. On August 14, 2009, the last trading day before Smart and LECG announced the execution of the Merger Agreement, the closing price of LECG's common stock was $3.65 per share. On November 9, 2009, the latest practicable date before the date of this proxy statement, the closing price of LECG's common stock was $3.50 per share.

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Voting by LECG Directors and Executive Officers (see page 107)

        On November 9, 2009, the record date set by the LECG board of directors for the annual meeting, the directors and executive officers of LECG and their affiliates owned and were entitled to vote 944,818 shares of LECG common stock, or approximately 3.7% of the shares of LECG common stock outstanding on that date. Directors holding 127,583 shares of LECG common stock signed Voting Agreements in connection with the Merger and Investment.

Government and Regulatory Matters (see page 86)

        LECG and Smart are required to obtain approvals and clearances from antitrust regulatory authorities in the United States to consummate the Merger. LECG and Smart filed notification and report forms under the HSR Act with regulatory authorities in the United States and received early termination of the waiting period under the HSR Act from the FTC on October 19, 2009.

LECG will List Shares of LECG Common Stock Issued to Smart Stockholders on the NASDAQ Global Select Market (see page 74)

        LECG has agreed to use its reasonable best efforts to cause the shares of LECG common stock to be issued to the Great Hill Entities pursuant to the Merger Agreement to be authorized for listing on the NASDAQ Global Select Market, subject to notice of issuance. The listing of the shares on the NASDAQ Global Select Market (subject to notice of issuance) is a condition to each company's obligation to complete the Merger.

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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

        This proxy statement (including information included in the documents accompanying this proxy statement) includes "forward-looking statements" (as that term is defined under Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and/or the United States Private Securities Litigation Reform Act of 1995). There are forward-looking statements throughout this proxy statement, including, without limitation, under the headings "Questions and Answers about the Annual Meeting" and "Risk Factors" and in statements containing words such as "expect," "estimate," "project," "budget," "forecast," "anticipate," "contemplate," "intend," "plan," "may," "will," "could," "should," "would," "believes," "predicts," "potential," "continue," and similar expressions which are intended to identify such forward-looking statements. These forward-looking statements include, without limitation, Smart's and LECG's expectations with respect to the synergies, costs and charges, capitalization and anticipated financial impacts of the Merger and the Investment and related transactions.

        These forward-looking statements involve significant risks and uncertainties that could cause the actual results to differ materially from the expected results. Most of these factors are outside Smart's and LECG's control and difficult to predict. Factors that may cause such differences include, but are not limited to:

    the ability of LECG and Smart to satisfy all conditions precedent to the completion of the Merger and Investment;

    the ability of LECG and Smart to integrate their operations successfully;

    the timing of the integration of LECG and Smart necessary to achieve enhanced earnings or realize cost savings;

    the retention of existing, and continued attraction of additional clients;

    the retention and continued attraction of key employees of LECG and Smart, particularly LECG senior professionals known as "experts";

    any unsolicited offer by another company to acquire the assets or capital stock of LECG or Smart;

    unexpected costs or unexpected liabilities related to the Merger, or the effects of purchase accounting that may different from our current expectations;

    unexpected costs or unexpected liabilities related to the Investment;

    the effects of uncertainty surrounding the Merger and Investment that may cause the business of LECG to suffer;

    other economic, business and competitive factors;

    the costs and other effects of legal proceedings;

    the impact on the trading price of LECG common stock caused by the resales in the public market of shares of LECG common stock received by the Great Hill Entities in the Merger;

    the impact of the trading price of LECG common stock caused by the issuance of the Series A Preferred Stock in accordance with the Stock Purchase Agreement;

    the ability of the Great Hill Entities and their affiliates to exert significant influence over corporate decisions as a result of its ownership of LECG common stock following the Merger and Investment and their rights to designate two nominees for election as directors in the combined entity;

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    changes in accounting policies, practices or their interpretation;

    the ability of LECG and Smart to obtain from LECG's and Smart's bank creditors consent to the Merger and the Investment; and

    the factors described in LECG's reports filed with the SEC.

        LECG cautions that the foregoing list of factors is not exclusive. Additional information concerning these and other risk factors is discussed under the heading "Risk Factors" and elsewhere in this proxy statement and in documents accompanying this proxy statement, including, LECG's Annual Report on Form 10-K for the fiscal year ended December 31, 2008 which was filed with the SEC on March 31, 2009, as amended by Amendment No. 1 as filed with the SEC on April 29, 2009, including under Part I, Item IA in LECG's Annual Report on Form 10-K for the year ended December 31, 2008. All subsequent written and oral forward-looking statements concerning Smart, LECG, the meeting, the Merger, the Investment the related transactions or other matters attributable to Smart or LECG or any person acting on their behalf are expressly qualified in their entirety by the cautionary statements above. These forward-looking statements speak only as of the date on which the statements were made and Smart and LECG expressly disclaim any obligation to release publicly any updates or revisions to any forward-looking statement included in this proxy statement or elsewhere, whether written or oral, relating to the matters discussed in this proxy statement.

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RISK FACTORS

        In addition to the other information included in documents delivered with this proxy statement, you should carefully consider the risk factors described below in evaluating whether to approve the Merger and the issuance of LECG common stock pursuant thereto, approve the Investment and the issuance of Series A Preferred Stock pursuant thereto, and approve the Amended Charter.

LECG may fail to realize some or all of the anticipated benefits of the Merger, which may adversely affect the value of LECG's common stock.

        The success of the Merger will depend, in part, on LECG's ability to realize the anticipated benefits and cost savings from combining the businesses of Smart and LECG. However, to realize these anticipated benefits and cost savings, LECG must successfully combine the businesses of Smart and LECG. If LECG is not able to achieve these objectives within the anticipated time frame, or at all, the anticipated benefits and cost savings of the Merger may not be realized fully or at all or may take longer to realize than expected and the value of LECG's common stock may be adversely affected.

        Smart and LECG have operated and, until the completion of the Merger, will continue to operate, independently. It is possible that the integration process could result in the loss of key employees, including experts, consultants, other professionals and other senior management, result in the disruption of each company's ongoing businesses or identify inconsistencies in standards, controls, procedures and policies that adversely affect LECG's ability to maintain relationships with clients, experts, contractors, creditors, lessors, landlords, or to otherwise achieve the anticipated benefits of the Merger.

        Specifically, risks in integrating the operations of Smart into LECG's operations in order to realize the anticipated benefits of the Merger include, among other things:

    failure of clients to accept new products or services or to continue as clients of the combined company;

    failure to successfully manage relationships with expert witnesses, consultants and other professionals, which could result in the loss of key revenue generating experts;

    the loss of other key employees;

    failure to effectively coordinate sales and marketing efforts to communicate the capabilities of the combined company;

    failure to combine product and service offerings quickly and effectively;

    failure to successfully develop new products and services on a timely basis that address the market opportunities of the combined company;

    failure to compete effectively against companies already serving the broader market opportunities expected to be available to the combined company;

    unexpected revenue attrition; and

    failure to successfully integrate and harmonize financial reporting and information technology systems of LECG and Smart.

        Integration efforts between the two companies will also divert management attention and resources. An inability to realize the full extent of, or any of, the anticipated benefits of the Merger, as well as any delays encountered in the integration process, could have an adverse effect on LECG's business and results of operations, which may affect the value of the shares of LECG's common stock after the completion of the Merger.

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        In addition, the actual integration may result in additional and unforeseen expenses, and the anticipated benefits of the integration plan may not be realized. Actual cost synergies, if achieved at all, may be lower than LECG expects and may take longer to achieve than anticipated. If LECG is not able to adequately address these challenges, LECG may be unable to successfully integrate Smart's operations into its own, or to realize the anticipated benefits of the integration of the two companies.

The market price of LECG common stock after the Merger may be affected by factors different from those affecting the shares of LECG currently.

        The businesses of Smart differ from those of LECG in important respects and, accordingly, the results of operations of the combined company and the market price of LECG's common stock following the Merger may be affected by factors different from those currently affecting the independent results of operations of Smart and LECG. For a discussion of LECG's businesses and of certain factors to consider in connection with those businesses, see the documents accompanying this proxy statement, including LECG's Annual Report on Form 10-K.

Failure to complete the Merger could negatively impact the stock price and the future business and financial results of LECG.

        If the Merger is not completed, the ongoing businesses of Smart and LECG may be adversely affected and, without realizing any of the benefits of having completed the Merger, Smart and LECG will be subject to a number of risks, including the following:

    LECG may be required to pay Smart a termination fee of up to $2,900,000 if the Merger is terminated under certain circumstances (plus, in certain circumstances relating to a change in recommendation by the LECG board of directors, LECG also would be obligated to reimburse Smart for up to $800,000 of Smart's actual expenses incurred in connection with the Merger), all as described in the Merger Agreement and summarized in this proxy statement;

    Smart and LECG will be required to pay certain costs relating to the Merger, whether or not the Merger is completed;

    under the Merger Agreement, LECG is subject to certain restrictions on the conduct of its business prior to completing the Merger which may affect its ability to execute certain of its business strategies;

    matters relating to the Merger (including integration planning) may require substantial commitments of time and resources by Smart and LECG management, which could otherwise have been devoted to other opportunities that may have been beneficial to Smart and LECG as independent companies, as the case may be; and

    if the Merger does not occur, the Great Hill Entities will not provide the Investment and LECG would likely need to raise additional capital at less favorable terms.

        Smart and LECG also could be subject to litigation related to any failure to complete the Merger or related to any enforcement proceeding commenced against Smart or LECG to perform their respective obligations under the Merger Agreement. If the Merger is not completed, these risks may materialize and may adversely affect LECG's business, financial results and stock price.

As of September 30, 2009, Smart and LECG together have a combined amount of approximately $57 million in outstanding obligations under their respective credit agreements, which will become due and payable in full if they fail to obtain the consent of their lenders to the Merger and the Investment.

        Pursuant to LECG's credit agreement by and among LECG, Bank of America NA and certain other parties, the lenders may call all amounts outstanding thereunder due in the event any party

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acquires more than 30% of the outstanding voting stock of LECG. Because, in connection with the Merger and the Investment, the Great Hill Entities will acquire approximately 40% of the outstanding voting stock of LECG, LECG must obtain the consent of its lender to the Merger and the Investment in order to avoid the approximately $16 million in obligations outstanding, as of September 30, 2009, under its credit agreement coming immediately due and payable in full as of the closing of the Merger.

        Pursuant to Smart's credit agreement by and among Smart, Bank of Montreal and certain other parties, the lenders may call all amounts outstanding thereunder due in the event of a merger of Smart. Because LECG is acquiring all of the outstanding voting stock of Smart in connection with the Merger, Smart must obtain the consent of its lender to the Merger in order to avoid the approximately $41 million in obligations outstanding, as of September 30, 2009, under the Smart credit agreement coming immediately due and payable in full as of the closing of the Merger.

        As of the date of this proxy statement, neither lender consent referred to above has been obtained. If either LECG or Smart fail to obtain their respective lenders' consent referred to above, the combined company would be substantially impaired by the need to repay all outstanding amounts under either or both of the credit agreements. Given the current economic climate and in particular the limited availability of credit, in the event either or both of the lender consents referred to above are not obtained, LECG may not be able to refinance this outstanding indebtedness or otherwise obtain alternative financing to repay the amounts that will have accelerated as of the closing of the Merger under the LECG and Smart credit agreements on favorable terms or at all.

LECG will incur significant transaction and Merger-related costs in connection with the Merger and the Investment.

        LECG expects to incur a number of non-recurring costs associated with combining the operations of the two companies. The substantial majority of non-recurring expenses resulting from the Merger and the Investment will be comprised of transaction costs related to the Merger and the Investment, facilities and systems consolidation costs and employment-related costs, including severance and other employee separation costs. LECG will also incur transaction fees and costs related to formulating integration plans. Transaction costs incurred by LECG through September 30, 2009 totaled approximately $1.0 million and an additional $2.0 million is expected to be incurred to consummate the Merger and the Investment. LECG is still in the process of quantifying systems integration and exit activity related costs, but this amount could ultimately total several million dollars. Additional unanticipated costs may be incurred in the integration of the two companies' businesses. Although LECG expects that the elimination of duplicative costs, as well as the realization of other efficiencies related to the integration of the businesses, should allow LECG to offset incremental transaction and Merger-related costs over time, this net benefit may not be achieved in the near term, or at all.

The Merger may not be accretive and may cause dilution to LECG's earnings per share, which may negatively affect the market price of LECG's common stock.

        LECG currently anticipates that the Merger will be accretive to earnings per share during the first full calendar year after the Merger. This expectation is based on preliminary estimates which may materially change. LECG could also encounter additional transaction and integration-related costs or other factors such as the failure to realize all of the benefits anticipated in the Merger. All of these factors could cause dilution to LECG's earnings per share or decrease or delay the expected accretive effect of the Merger and cause a decrease in the price of LECG's common stock.

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Smart, LECG and, subsequently, the combined company must continue to retain, motivate and recruit executives, experts and other key employees, which may be difficult in light of uncertainty regarding the Merger, and failure to do so could negatively affect the combined company.

        For the Merger to be successful, during the period before the Merger is completed, both Smart and LECG must continue to retain, motivate and recruit executives, experts and other key employees. The combined company also must be successful at retaining key employees following the completion of the Merger. Experienced experts and executives are in high demand and competition for their talents can be intense. Employees of both Smart and LECG may experience uncertainty about their future role with the combined company until, or even after, strategies with regard to the combined company are announced or executed. These potential distractions of the Merger may adversely affect the ability of Smart, LECG or the combined company to attract, motivate and retain executives, experts and other key employees and keep them focused on applicable strategies and goals. A failure by Smart, LECG or the combined company to retain and motivate executives, experts and other key employees during the period prior to or after the completion of the Merger could have a material and adverse impact on the business of Smart, LECG or the combined company.

The Merger and the Investment will be dilutive to LECG's existing stockholders.

        Pursuant to the Merger Agreement and the Stock Purchase Agreement, LECG will be issuing approximately 17.2 million new shares of capital stock to the Great Hill Entities, which will represent approximately 40% of the total outstanding voting power of all LECG stockholders following the closing of the Merger and the Investment. The issuance of these shares will cause immediate and significant dilution to existing LECG stockholders. An additional approximately 1.1 million new shares of LECG common stock may also be issued to Great Hill III to satisfy certain indemnification obligations described in the Merger Agreement and LECG has agreed to grant the Great Hill Entities pre-emptive rights for certain future new issuances of its capital stock. Further, the holders of the Series A Preferred Stock to be issued pursuant to the Investment are entitled to receive cumulative dividends at a rate of 7.5% per share per annum (subject to potential increase as described in the section titled "Summary of Certificate of Designations" in this proxy statement), which may be paid in additional shares of LECG capital stock, which will further dilute LECG's current stockholders.

LECG's existing stockholders will not receive any of the proceeds from the Investment.

        The net proceeds from the sale of the Series A Preferred Stock being issued in the Investment will be paid directly to LECG. LECG currently anticipates that it will retain $21 million of the net cash proceeds for working capital and general corporate purposes, and will use $4 million for the payment of transaction fees and expenses incurred in connection with the Merger and the Investment. LECG's management could spend or invest the net proceeds from the sale of the Series A Preferred Stock in ways with which LECG stockholders may not agree. The Investment and use of the proceeds from the Investment may not yield a favorable return to LECG.

LECG's obligation to pay a termination fee under certain circumstances and the restrictions on its ability to solicit or engage in negotiations with respect to other acquisition proposals may discourage other transactions which may be favorable to LECG stockholders.

        Until the Merger is completed or the Merger Agreement is terminated, with limited exceptions, the Merger Agreement prohibits LECG from entering into, soliciting or engaging in negotiations with respect to acquisition proposals or other business combinations with a party other than Smart. LECG has agreed to pay Smart a termination fee of $2.9 million under specified circumstances. These provisions could discourage other companies from proposing alternative transactions which may be more favorable to LECG stockholders than the Merger and the Investment.

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Because following the closing of the Merger and the Investment, the Great Hill Entities will hold a significant interest in LECG voting stock, the influence of LECG's other public stockholders over the election of directors and significant corporate actions may be more limited than it would be if there were no stockholder owning such a significant percentage of LECG's outstanding voting stock.

        As of the closing of the Merger and the Investment, the Great Hill Entities will own approximately 40% of LECG's outstanding voting stock and will have designated two of the members of the LECG board of directors. Although the Governance Agreement imposes limits on the Great Hill Entities regarding taking specified actions related to the acquisition of additional shares of LECG capital stock and the removal of directors (all as described in the section titled "Governance Agreement" beginning on page 106), the Great Hill Entities will nonetheless still be able to exert significant influence over the outcome of a range of corporate matters, including significant corporate transactions requiring a stockholder vote, such as a merger or a sale of the combined company or its assets. This concentration of ownership and influence in management and board decision-making could also harm the price of LECG common stock following completion of the Merger by, among other things, discouraging a potential acquirer from seeking to acquire shares of LECG common stock (whether by making a tender offer or otherwise) or otherwise attempting to obtain control of the combined company.

Sales of LECG common stock by the Great Hill Entities or issuances of shares of common stock by LECG in connection with future acquisitions or otherwise could cause the price of LECG's common stock to decline.

        If the Great Hill Entities sell a substantial number of their shares of LECG common stock in the future, the market price of LECG's common stock could decline. The perception among investors that these sales may occur could produce the same effect. The Great Hill Entities have rights, subject to specified conditions, to require LECG to file registration statements covering shares of common stock held by them or to include shares of common stock held by them in registration statements that LECG may file. By exercising their registration rights and selling a large number of shares of LECG common stock, the Great Hill Entities could cause the price of LECG common stock to decline. Furthermore, if LECG were to include common stock held by the Great Hill Entities in a registration statement initiated by LECG, those additional shares could impair our ability to raise needed capital by depressing the price at which LECG could sell its common stock.

        One component of LECG's business strategy is to make acquisitions. In the event of any future acquisitions, LECG could issue additional shares of common stock, which would have the effect of diluting existing LECG stockholders' percentage ownership of LECG common stock and could cause the price of LECG common stock to decline.

Smart's Sarbanes-Oxley Compliance Business May Decline.

        The demand for Smart's services related to Sarbanes-Oxley or other regulatory compliance may decline. A key component of Smart's business includes services related to Sarbanes-Oxley and other regulatory compliance. There can be no assurance that there will be ongoing demand for these services.

A reversal of or decline in the current trend of businesses utilizing third-party service providers may have a material adverse effect on Smart's business, financial condition and results of operations.

        Smart's business and growth depend in part on the trend toward businesses utilizing third-party service providers. We can give you no assurance that this trend will continue. Current and potential customers of Smart may elect to perform such services with their own employees. A significant reversal of, or a decline in, this trend would have a material adverse effect on Smart's business, financial condition and results of operations.

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Restrictions imposed by state accountancy authority conflict of interest rules may limit Smart's ability to provide services to Smart and Associates, LLP.

        Restrictions imposed by state accountancy laws and regulations preclude Smart from rendering audit and attest services (other than internal audit services). As such, Smart and Smart and Associates, LLP, an affiliate of Smart ("Smart LLP"), have entered into an agreement under which audit and attest services may be provided to Smart's clients by Smart LLP. Under this agreement, Smart pays for all the direct and indirect overhead costs of Smart LLP and in exchange Smart LLP pays Smart a management fee.

        While currently state accountancy conflict rules generally only apply to public companies, which Smart LLP does not provide audit or attest services for, there can be no assurance that state accountancy authorities will not extend current restrictions on the profession to include private companies. To the extent that Smart LLP is affected by any such change in state conflict of interest rules, Smart may experience a decline in fee revenue from the management fee which Smart LLP currently pays to Smart.


Risks Relating to LECG

We are dependent on retaining our experts to keep our existing clients and ongoing and future projects, and our financial results and growth prospects could suffer if we are unable to successfully attract and retain our experts and professional staff.

        Many of our clients are attracted to us by their desire to engage individual experts, and the ongoing relationship with our clients is often managed primarily by our individual experts. If an expert terminates his or her relationship with us, it is probable that most of the clients and projects for which that expert is responsible will continue with the expert, and the clients will terminate or significantly reduce their relationship with us. We generally do not have non-competition agreements with any of our experts, unless the expert came to us through an acquisition of a business. Consequently, experts can generally terminate their relationship with us at any time and immediately begin to compete against us. Our top five experts accounted for 11% and 13% of our revenues for the nine months ended September 30, 2009 and 2008, respectively. If any of these individuals or our other experts terminate their relationship with us or compete against us, it could materially harm our business and financial results. Dr. Teece was one of LECG's top five experts in the first nine months of 2009, in 2008 and in previous years; his employment as an expert terminated on August 12, 2009. The terms of Dr. Teece's termination and his future relationship, if any, with LECG are being negotiated.

        In addition, if we are unable to attract, develop, and retain highly qualified experts, professional staff and administrative personnel, our ability to adequately manage and staff our existing projects and obtain new projects could be impaired, which would adversely affect our business, our financial results and our prospects for growth. Qualified professionals are in great demand, and we face significant competition for both experts and professional staff with the requisite credentials and experience. Our competition comes from other consulting firms, research firms, governments, universities and other similar enterprises. Many of these competitors may be able to offer greater compensation and benefits or more attractive lifestyle choices, career paths or geographic locations than we do. Increasing competition for these professionals may also significantly increase our labor costs, which could negatively affect our margins and results of operations. The loss of services from, or the failure to recruit, a significant number of experts, professional staff or administrative personnel could harm our business, including our ability to secure and complete new projects.

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Our financial results could suffer if we are unable to achieve or maintain high utilization and billing rates for our professional staff.

        Our profitability depends to a large extent on the utilization of our professional staff and the billing rates we are able to charge for their services. Utilization of our professional staff is affected by a number of factors, including:

    the number and size of client engagements;

    our experts' use of professional staff to perform the projects they obtain from clients and the nature of specific client engagements, some of which require greater professional staff involvement than others;

    the timing of the commencement, completion and termination of projects, which in many cases is unpredictable;

    our ability to transition our professional staff efficiently from completed projects to new engagements;

    our ability to forecast demand for our services and thereby maintain an appropriate level of professional staff; and

    conditions affecting the industries in which we practice as well as general economic conditions.

        The billing rates of our professional staff that we are able to charge are also affected by a number of additional factors, including:

    the quality of our expert services;

    the market demand for the expert services we provide;

    our competition and the pricing policies of our competitors; and

    general economic conditions.

        Forecasting demand for our services and managing staffing levels and transitions in the face of the uncertainties in engagement demand is quite difficult, especially during the current U.S. and European economic slow-down. If we are unable to achieve and maintain high utilization as well as maintain or increase the billing rates for our billable professional staff, our financial results could suffer materially.

We rely on our credit facility to provide us with sufficient working capital to operate our business.

        Historically, we have relied upon our revolving credit facility to provide us with adequate working capital to operate our business. The current economic downturn adds uncertainty to our revenue levels and cash flow from operations, which may increase our dependence on our revolving credit facility, but also increases the likelihood we may fall out of compliance with our debt covenants. Non-compliance with those covenants could result in our lenders restricting or terminating our borrowing ability, accelerating the time for repayment of outstanding borrowings, or increasing the cost of borrowing under the revolving credit facility. If our lenders reduce or terminate our access to amounts under our revolving credit facility, we may not have sufficient capital to fund our operating needs and/or we may need to secure additional financing to fund our working capital requirements or to repay outstanding debt under our revolving credit facility. Lenders may be less flexible and willing to provide waivers or to extend credit in the current economic downturn than they have been historically. We cannot be certain that we will be successful in complying with our covenants or maintaining the availability to us of amounts under our revolving credit facility or, if necessary, that we will be able to raise additional capital, or that any amount, if raised, will be sufficient to meet our cash requirements. Also, if we are not able to maintain our borrowing availability under our revolving credit facility and/or raise additional capital when needed, we may be forced to curtail our operations.

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        See "Risk Factors—As of September 30, 2009, Smart and LECG together have a combined amount of approximately $57 million in outstanding obligations under their respective credit agreements, which will become due if they fail to obtain the consent of their lenders to the Merger and the Investment" above.

Recent turmoil in the credit markets and in the financial services industry may impact our ability to collect receivables on a timely basis and may negatively impact our cash flow.

        Recently, the credit markets and the financial services industry have been experiencing a period of unprecedented turmoil and upheaval. While the ultimate outcome of these events cannot be predicted, they could adversely impact the availability of financing and working capital to our clients and therefore adversely impact our ability to collect amounts due from such clients or cause them to terminate their contracts with us completely.

Our client projects may be terminated or initiated suddenly, which may negatively impact our financial results.

        Our projects generally center on decisions, disputes, proceedings or transactions in which clients are seeking expert advice and opinions. Our projects can terminate suddenly and without advance notice to us. Our clients may decide at any time to settle their disputes or proceedings, to abandon or defer their transactions or to take other actions that result in the early termination of a project. Our clients are ordinarily under no contractual obligation to continue using our services. If an engagement is terminated unexpectedly, or even upon the planned completion of a project, our professionals working on that engagement may be underutilized until we assign and transition them to other projects. The termination, deferral or significant reduction in the scope of a single large engagement could negatively impact our results of operations in a given reporting period.

        Conversely, projects may be initiated or expanded suddenly, and we may not be able to adequately manage the demands placed upon our experts and staff when that occurs. This could result in inefficiencies and additional time spent on engagements by our experts and staff that we may not be able to bill and collect. For example, in 2006 and 2007 we experienced a significant increase in work performed that we considered uncollectible, a part of which was the result of our failure to successfully manage certain engagements. If we are unable to successfully manage the requirements and time spent by experts and staff on engagements, our financial results may be adversely impacted.

Our ability to maintain and attract new business depends upon our reputation, the professional reputation of our experts and the quality of our services on client projects.

        Our ability to secure new projects depends heavily upon our reputation and the individual reputations of our experts. Any factor that diminishes our reputation or that of our experts could make it substantially more difficult for us to attract new projects and clients. Similarly, because we obtain many of our new projects from clients that we have worked with in the past or from referrals by those clients, any client that is dissatisfied with the quality of our work or that of our experts could seriously impair our ability to secure additional new projects and clients.

        In litigation, we believe that there has been an increase in the frequency of challenges made by opposing parties to the qualifications of experts. In the event a court or other decision-maker determines that an expert is not qualified to serve as an expert witness in a particular matter, then this determination could harm the expert's reputation and ability to act as an expert in other engagements which could in turn harm our business reputation and our ability to obtain new engagements.

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The implementation of our 2009, 2008 and 2007 restructuring activities, which involved workforce reductions and office closures, may not successfully achieve improved long-term operating results.

        In the second and third quarters of 2009, the fourth quarter of 2008, and in 2007 we implemented a number of restructuring actions intended to better align our cost structure with current business levels and market conditions. In connection with the restructuring actions, we incurred charges totaling $5.5 million during the second and third quarters of 2009, $6.4 million during the fourth quarter of 2008 and $10.7 million during 2007, respectively. These charges included one-time termination benefits, write-offs of unearned signing bonuses, lease termination costs and other costs. As a result of these restructuring actions, our fee-generating head count was reduced, and the employment of some experts and professional staff with unique skills was terminated. In the future, other experts and employees may leave our company voluntarily due to the uncertainties associated with our business environment and their job security, and we have experienced and may continue to experience morale issues. In addition, we may lose revenue and miss opportunities to generate revenue and we may not achieve the improved longer-term operating results that we anticipated. Any of these consequences may harm our business and our future results of operations.

Our estimated restructuring accruals may not be adequate.

        While our management uses all available information to estimate restructuring charges, particularly facilities costs, our estimated accruals for restructuring related to our 2009 and 2008 activities and the 2007 value recovery plan may prove to be inadequate. If our actual sublease revenues or the results of our exiting negotiations differ from our assumptions, we may have to record additional charges, which could materially affect our results of operations, financial position and cash flow.

Impairment charges could reduce our results of operations.

        In accordance with the provisions of Financial Accounting Standards Board Accounting Standard Codification 350, Intangible—Goodwill and Other, we test goodwill and other intangible assets with indefinite useful lives for impairment on an annual basis or on an interim basis if an event occurs that might reduce the fair value of the reporting unit below its carrying value. We conduct testing for impairment during the fourth quarter of each year using an October 1st measurement date. Various uncertainties, including changes in business trends, deterioration in the political environment, continued adverse conditions in the capital markets or changes in general economic conditions, could impact the expected cash flows to be generated by an intangible asset or group of intangible assets, and may result in an impairment of those assets. For example, we recorded a goodwill impairment charge of $118.8 million and other impairment charges of $5.4 million for the year ended December 31, 2008. Although any such impairment charge would be a non-cash expense, further impairment of our intangible assets could materially increase our expenses and reduce our results of operations.

Changes in our effective tax rate may harm our results of operations.

        A number of factors may cause our future effective tax rates to be volatile and unpredictable, including:

    the jurisdictions in which profits are determined to be earned and taxed;

    the resolution of issues arising from tax audits with various tax authorities;

    changes in the valuation of our deferred tax assets and liabilities;

    adjustments to estimated taxes upon finalization of various tax returns;

    increases in expenses not deductible for tax purposes, including impairments of goodwill;

    changes in available tax credits or limitations on our ability to utilize foreign tax credits;

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    changes in share-based compensation;

    changes in tax laws or the interpretation of such tax laws, and changes in generally accepted accounting principles; and

    the repatriation of non-U.S. earnings for which we have not previously provided for U.S. taxes.

        Any significant change in our future effective tax rates could reduce net income or negatively impact earnings for future periods.

If we are unable to manage the growth of our business successfully, our financial results and business prospects could suffer.

        Over the past several years we experienced significant growth in the number of our experts and professional staff. We also expanded our practice areas and opened offices in new locations. We may not be able to successfully manage a significantly larger and more geographically diverse workforce as we increase the number of our experts and professional staff and expand our practice areas. In 2009, 2008 and 2007, we recognized restructuring charges of $5.5 million, $6.4 million and $10.7 million, respectively, primarily related to the termination of experts and professional staff who were generally direct hires in new practice areas during the past three years. We also closed 11 facilities from 2007 to 2009. From 2006 to 2008, we experienced increased and sometimes unplanned selling, general and administrative costs.

        In addition, growth increases the demands on our management, our internal systems, procedures and controls. To successfully manage growth and maintain our capability of complying with existing and new regulatory requirements, we must add administrative staff and periodically update and strengthen our operating, financial and other systems, procedures and controls, which will increase our costs and may reduce our profitability. There are certain key personnel that have developed over time a deep institutional knowledge of, and have helped shape and implement our expert compensation models, including developing the financial and operational support systems and contractual agreements necessary to administer their complexities. This institutional knowledge has been an essential element in our ability to respond to the demands imposed by our growth.

        In 2006, we reported a material weakness in connection with the calculation of certain complex, non-standard compensation arrangements and business acquisition performance-based agreements. At December 31, 2007, we had remediated that material weakness. However, as we acquire new businesses in the future we will need to properly and timely manage the accounting for the acquisition and compensation arrangements, and integrate their financial reporting systems into ours, including our disclosure controls and procedures. We may be unable to successfully implement changes and make improvements to our information and control systems in an efficient or timely manner and we may discover additional deficiencies in our existing systems and controls. Any failure to successfully manage growth, retain key administrative personnel, and maintain adequate internal disclosure controls and procedures or controls over financial reporting, could result in the identification of additional material weaknesses in our controls which could harm our financial results and business prospects.

Additional hiring and acquisitions could disrupt our operations, increase our costs or otherwise harm our business.

        A portion of our business strategy is dependent in part upon our ability to grow by hiring individuals or groups of experts and by acquiring other expert services firms. However, we may be unable to identify, hire, acquire or successfully integrate new experts and consulting practices without substantial expense, delay or other operational or financial problems. And, we may be unable to achieve the financial, operational and other benefits we anticipate from any hiring or acquisition.

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Hiring additional experts or acquiring other expert services firms could also involve a number of additional risks, including:

    the diversion of management's and key senior experts' time, attention and resources, especially since key senior experts involved in the recruiting and acquisition process also provide consulting services that account for a significant amount of our revenues;

    loss of key acquisition related personnel;

    the incurrence of significant signing and performance bonuses, which could adversely impact our profitability and cash flow, or result in the later write-off of unearned portions of such bonus, which could adversely impact our profitability;

    additional expenses associated with the amortization, impairment or write-off of acquired intangible assets, which could adversely impact our profitability;

    potential assumption of debt to acquire businesses;

    potential impairment of existing relationships with our experts, professionals and clients;

    the creation of conflicts of interest that require us to decline engagements that we otherwise could have accepted;

    increased costs to improve, coordinate or integrate managerial, operational, financial and administrative systems;

    increased costs associated with the opening and build-out of new offices, redundant offices in the same city where consolidation is not immediately possible or office closures where consolidation is possible, which would result in the immediate recognition of expense associated with the abandoned lease;

    dilution to our stockholders as a result of issuing equity securities in connection with hiring new experts or acquiring other expert services firms; and

    difficulties in integrating diverse corporate cultures.

We depend on complex damages and competition policy/antitrust practices, which could be adversely affected by changes in the legal, regulatory and economic environment.

        Our business is heavily concentrated in the practice areas of complex damages and competition policy/antitrust, including mergers and acquisitions. Projects in our complex damages practice area account for 27% and 23% of our billings in the nine months ended September 30, 2009 and 2008, respectively. Projects in our competition policy/antitrust practice area, including mergers and acquisitions, accounted for 16% and 19% of our billings in the nine months ended September 30, 2009 and 2008, respectively. Changes in the federal antitrust laws or the federal regulatory environment, or changes in judicial interpretations of these laws could substantially reduce the need for expert consulting services in these areas. This would reduce our revenues and the number of future projects in these practice areas. In addition, adverse changes in general economic conditions, particularly conditions influencing the merger and acquisition activity of larger companies, could also negatively impact the number and scope of our projects in proceedings before the Department of Justice and the Federal Trade Commission.

Intense competition from economic, business and financial consulting firms could hurt our business.

        The market for expert consulting services is intensely competitive, highly fragmented and subject to rapid change. Many of our competitors are national and international in scope and have significantly greater personnel, financial, technical and marketing resources. We may be unable to compete

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successfully with our existing competitors or with any new competitors. There are relatively low barriers to entry, and we have faced and expect to continue to face additional competition from new entrants into the economic, business and financial consulting industries. In the litigation and regulatory expert services markets, we compete primarily with economic, business and financial consulting firms and individual academics. Expert services are also available from a variety of participants in the business consulting market, including general management consulting firms, the consulting practices of major accounting firms, technical and economic advisory firms, regional and specialty consulting firms, small consulting companies and the internal professional resources of companies.

Conflicts of interest could preclude us from accepting projects.

        We provide our services primarily in connection with significant or complex decisions, disputes and regulatory proceedings that are often adversarial or involve sensitive client information. Our engagement by a given client may preclude us from accepting projects with that client's competitors or adversaries because of conflicts of interest or other business reasons. As we increase the size of our operations, the number of conflict situations can be expected to increase. Moreover, in many industries in which we provide services, for example the petroleum and telecommunications industries, there has been a continuing trend toward business consolidations and strategic alliances, the impact of which is to reduce the number of companies that may seek our services and to increase the chances that we will be unable to accept new projects as a result of conflicts of interest. If we are unable to accept new assignments for any reason, our business may not grow and our professional staff may become underutilized, which would adversely affect our revenues and results of operations in future periods.

Our engagements could result in professional liability, which could be very costly and hurt our reputation.

        Our projects typically involve complex analysis and the exercise of professional judgment. As a result, we are subject to the risk of professional liability. Many of our projects involve matters that could have a severe impact on a client's business, cause a client to gain or lose significant amounts of money or assist or prevent a client from pursuing desirable business opportunities. If a client questions the quality of our work, the client could threaten or bring a lawsuit to recover damages or contest its obligation to pay our fees. Litigation alleging that we performed negligently or breached any other obligations to a client could expose us to significant liabilities and damage our reputation. We carry professional liability insurance intended to cover many of these types of claims, but the policy limits and the breadth of coverage may be inadequate to cover any particular claim or all claims plus the cost of legal defense. For example, we provide services on engagements in which the amounts in controversy or the impact on a client may substantially exceed the limits of our errors and omissions insurance coverage. If we are found to have professional liability with respect to work performed on such an engagement, we may not have sufficient insurance to cover the entire liability. Defending ourselves in any litigation, regardless of the outcome, is often very costly, could result in distractions to our management and experts and could harm our business and our reputation.

We are subject to additional risks associated with international operations.

        We currently have operations in Argentina, Australia, Belgium, France, Hong Kong, Italy, Mexico, New Zealand, Spain and the United Kingdom. Revenues attributable to activities outside of the United States were 18% and 23% in the nine months ended September 30, 2009 and 2008, respectively. Foreign tax laws can be complex and disputes with foreign tax authority can be lengthy and span multiple years. We have been involved in a tax dispute with the Argentine tax authority since 2007 regarding a potential income tax deficiency related to our 2003 and 2004 tax returns and a withholding tax deficiency in connection with our 2005 withholding tax return totaling approximately $3.3 million, which includes potential interest if our position is not ultimately sustained. We paid this amount and filed an appeal with the tax authorities, objecting to their position and requesting a refund. On April 8,

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2009, we were notified that the AFIP had terminated the penalty procedures relating to amounts previously paid for the 2003 and 2004 income tax and 2005 withholding tax deficiencies due to the passage of Argentine National Law No. 26.476 (Tax Moratorium). However, we may still be subject to penalties and interest on a potential underpayment of taxes related to the 2005 withholding tax return. Also, based on the results of the completed audit discussed above, we may receive additional notices for assessments of additional income taxes, penalties, and interest related to our 2005 and 2006 income tax returns and withholding taxes, penalties, and interest payments made to the U.S. parent company to settle intercompany balances from June 2005 to December 2007.

        We may continue to expand internationally and our international revenues may account for an increasing portion of our revenues in the future. In addition to the tax dispute noted above, our international operations carry special financial and business risks, including:

    greater difficulties in managing and staffing foreign operations;

    less stable political and economic environments;

    cultural differences that adversely affect utilization;

    currency fluctuations that adversely affect our financial position and operating results;

    unexpected changes in regulatory requirements, tariffs and other barriers;

    civil disturbances or other catastrophic events that reduce business activity; and

    greater difficulties in collecting accounts receivable.

The occurrence of any one of these factors could have an adverse effect on our operating results.

Our stock price has been and may continue to be volatile.

        The price of our common stock has fluctuated widely and may continue to do so, depending upon many factors, including but not limited to the risk factors listed above and the following:

    the limited trading volume of our common stock on the NASDAQ Global Select Market;

    variations in our quarterly results of operations;

    the hiring or departure of key personnel, including experts;

    our ability to maintain high utilization of our professional staff;

    announcements by us or our competitors;

    the loss of significant clients;

    changes in our reputation or the reputations of our experts;

    acquisitions or strategic alliances involving us or our competitors;

    changes in the legal and regulatory environment affecting businesses to which we provide services;

    changes in estimates of our performance or recommendations by securities analysts;

    inability to meet quarterly or yearly estimates or targets of our performance; and

    market conditions in the industry and the economy as a whole.

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The issuance of preferred stock could discourage or prevent an acquisition of our company, even if the acquisition would be beneficial to our stockholders.

        Our board of directors has the authority to issue preferred stock and to determine the preferences, limitations and relative rights of shares of preferred stock and to fix the number of shares constituting any series and the designation of such series, without any further vote or action by our stockholders. The preferred stock could be issued with voting, liquidation, dividend and other rights superior to the rights of our common stock. The potential issuance of preferred stock may make it more difficult for a person to acquire a majority of our outstanding voting stock, and thereby delay or prevent a change in control of us, discourage bids for our common stock over the market price and adversely affect the market price and the relative voting and other rights of the holders of our common stock.

Our charter documents and Delaware law could prevent a takeover that stockholders consider favorable and could also reduce the market price of our stock.

        Our amended and restated certificate of incorporation and our bylaws contain provisions that could delay or prevent a change in control of our company. For example, our charter documents prohibit stockholder actions by written consent.

        In addition, the provisions of Section 203 of Delaware General Corporate Law govern us. These provisions may prohibit large stockholders, in particular those owning 15% or more of our outstanding voting stock, from merging or combining with us. These and other provisions in our amended and restated certificate of incorporation, our bylaws and under Delaware law could reduce the price that investors might be willing to pay for shares of our common stock in the future and result in the market price being lower than it would be without these provisions.

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SELECTED HISTORICAL AND UNAUDITED PRO FORMA
CONDENSED COMBINED FINANCIAL DATA

        The following tables present summary historical financial data for LECG and Smart, summary unaudited pro forma condensed combined financial data for LECG and Smart and comparative historical and unaudited pro forma per share data for LECG and Smart.


Selected Historical Consolidated Financial Data of LECG

        The following selected financial data for the five years ended December 31, 2008 are derived from LECG's audited consolidated financial statements. The financial data for the nine month periods ended September 30, 2009 and 2008 are derived from LECG's unaudited condensed consolidated financial statements. The unaudited condensed consolidated financial statements include all adjustments, consisting of normal recurring accruals, which LECG considers necessary for a fair presentation of the financial position and the results of operations for these periods. Operating results for the nine months ended September 30, 2009 are not necessarily indicative of the results that may be expected for the entire fiscal year ending December 31, 2009.

        The information in this table is based on, and should be read together with, the historical financial information that LECG has presented in its filings with the SEC. See "Where You Can Find Additional Information" on page 183.

 
  Nine months ended
September 30,
(unaudited)
  Years ended December 31,  
 
  2009   2008   2008   2007   2006   2005   2004  
 
  (in thousands, except per share data)
 

Statement of operations data:

                                           

Revenues

  $ 196,897   $ 265,751   $ 335,679   $ 370,429   $ 345,285   $ 278,073   $ 213,318  

Gross profit

    46,350     85,633     100,864     123,803     115,402     95,763     71,899  

Operating (loss) income

    (29,905 )   15,877     (126,327 )   21,929     35,444     36,577     28,528  

(Loss) income from continuing operations before income taxes

    (31,981 )   14,461     (128,367 )   21,554     35,233     37,030     28,654  

(Loss) income from continuing operations after income taxes

  $ (74,929 ) $ 8,591   $ (86,687 ) $ 12,801   $ 20,893   $ 21,845   $ 16,912  

Discontinued operations:

                                           
 

Income from operations of discontinued subsidiary, net of income taxes

                778     574     531     192  
 

Loss on disposal of subsidiary

                (2,219 )            

Net (loss) income

  $ (74,929 ) $ 8,591   $ (86,687 )   11,360     21,467     22,376     17,104  
                               

Basic earnings per share:

                                           
 

(Loss) income from continuing operations

  $ (2.94 ) $ 0.34   $ (3.42 ) $ 0.51   $ 0.86   $ 0.94   $ 0.77  
 

(Loss) income from discontinued operations

                (0.06 )   0.02     0.02     0.01  
                               
   

Basic earnings per share

  $ (2.94 ) $ 0.34   $ (3.42 ) $ 0.45   $ 0.88   $ 0.96   $ 0.78  
                               

Diluted earnings per share:

                                           
 

(Loss) income from continuing operations

  $ (2.94 ) $ 0.34   $ (3.42 ) $ 0.51   $ 0.83   $ 0.89   $ 0.72  
 

(Loss) income from discontinued operations

                (0.06 )   0.02     0.02     0.01  
                               
   

Diluted earnings per share

  $ (2.94 ) $ 0.34   $ (3.42 ) $ 0.45   $ 0.85   $ 0.91   $ 0.73  
                               

Shares used in calculating earnings per share

                                           
 

Basic

    25,515     25,316     25,330     25,117     24,345     23,409     21,905  
 

Diluted

    25,515     25,528     25,330     25,499     25,250     24,557     23,429  

 

 
   
  As of December 31,  
 
  As of
September 30, 2009
(unaudited)
 
 
  2008   2007   2006   2005   2004  
 
  (in thousands)
 

Selected balance sheet data:

                                     

Cash and cash equivalents

  $ 7,246   $ 19,510   $ 21,602   $ 26,489   $ 35,722   $ 42,082  

Total assets

    131,412     256,207     359,319     327,153     272,885     214,711  

Debt

    16,000                      

Total stockholders' equity

    96,204     168,606     253,490     231,114     195,066     154,387  

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Selected Historical Consolidated Financial Data of Smart

        The following selected financial data for the three years ended December 31, 2008 are derived from the audited consolidated financial statements of Smart and its predecessor entity. The financial data as of September 30, 2009 and for the nine month periods ended September 30, 2009 and 2008 and the years ended December 31, 2005 and 2004 are derived from Smart's unaudited consolidated financial statements. The unaudited consolidated financial statements include all adjustments, consisting of normal recurring adjustments, which Smart considers necessary for a fair presentation of the financial position and the results of operations for these periods. Operating results for the nine months ended September 30, 2009 are not necessarily indicative of the results that may be expected for the entire year ending December 31, 2009.

        You should read the following financial information together with the information under the sections titled, "Smart's financial statements" and the related notes to these financial statements, "Smart's Business" and "Smart's Management's Discussion and Analysis of Financial Condition and Results of Operations" appearing elsewhere in this proxy statement. Certain reclassifications have been made to the Smart financials to conform to the LECG presentation.

 
   
   
   
   
  Predecessor entity  
 
  Nine months ended
September 30,
(unaudited)
   
  Period from
May 15,
2007 to
December 31,
2007
  Period from
January 1,
2007 to
May 14,
2007
   
  Year ended
December 31,
(unaudited)
 
 
  Year ended
December 31,
2008
  Year ended
December 31, 2006
 
 
  2009   2008   2005   2004  
 
  (in thousands, except per share data)
 

Statement of operations data:

                                                 

Revenues

  $ 78,262   $ 79,484   $ 103,790   $ 70,335   $ 45,300   $ 106,350   $ 78,415   $ 61,396  

Gross profit

    22,971     24,795     31,228     23,942     18,292     43,395     39,369     27,444  

Operating (loss) income

    (917 )   (30,875 )   (43,676 )   331     (712 )   12,937     5,232     4,384  

(Loss) income from continuing operations before income taxes

    (3,706 )   (34,667 )   (49,570 )   (2,838 )   (1,721 )   10,204     4,938     4,396  

(Loss) income from continuing operations after income taxes

    (3,728 )   (36,648 )   (50,185 )   (3,076 )   (1,721 )   10,204     4,938     4,396  

Discontinued operations:

                                                 
 

(Loss) income from operations of discontinued subsidiary, net of income taxes

                    14     (477 )   (144 )   (125 )
                                   

Net (loss) income

  $ (3,728 ) $ (36,648 ) $ (50,185 ) $ (3,076 ) $ (1,707 ) $ 9,727   $ 4,794   $ 4,271  
                                   

 

 
   
   
   
  Predecessor entity  
 
   
   
   
  As of December 31,  
 
   
  As of December 31,  
 
  As of
September 30, 2009
(unaudited)
   
  2005
(unaudited)
  2004
(unaudited)
 
 
  2008   2007   2006  
 
  (in thousands)
 

Selected balance sheet data:

                                     

Cash and cash equivalents

  $ 5,713   $ 9,026   $ 8,055   $ 3,493   $ 3,015   $ 2,937  

Total assets

    82,126     85,484     128,350     38,636     27,536     19,925  

Debt

    42,806     43,473     47,233     7,897     6,476     5,880  

Total (deficit) equity

    (38,062 )   (32,161 )   70,205     20,710     13,385     7,963  

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Selected Unaudited Pro Forma Condensed Combined Financial Data of LECG and Smart

        The following selected unaudited pro forma condensed combined financial information was prepared using the acquisition method of accounting. For accounting purposes, LECG is considered to be acquiring Smart in the Merger. LECG's and Smart's unaudited pro forma condensed combined balance sheet data assumes that the Merger took place on September 30, 2009 and combines LECG's and Smart's historical balance sheets at September 30, 2009. LECG's and Smart's unaudited pro forma condensed combined statement of operations data assumes that the Merger took place as of the beginning of the periods presented. The unaudited pro forma condensed combined statement of operations data for the year ended December 31, 2008 combines LECG's and Smart's historical statements of operations for the year ended December 31, 2008. The unaudited pro forma condensed combined statement of operations data for the nine months ended September 30, 2009 combines LECG's and Smart's historical statements of operations for the nine months ended September 30, 2009.

        The selected unaudited pro forma condensed combined financial data is presented for illustrative purposes only and is not necessarily indicative of the combined financial position or results of operations of future periods or the results that actually would have been realized had the entities been a single entity during these periods. The selected unaudited pro forma condensed combined financial data as of and for the nine months ended September 30, 2009 and for the year ended December 31, 2008 is derived from the unaudited pro forma condensed combined financial information and should be read in conjunction with that information. Please see the section titled, "Unaudited Pro Forma Condensed Combined Financial Statements" in this proxy statement for more information.

 
  Nine months ended
September 30, 2009
  Year ended
December 31, 2008
 
 
  (in thousands)
 

Pro forma condensed combined statement of operations data (unaudited):

             

Revenues

  $ 275,159   $ 439,469  

Gross profit

    69,321     132,092  

Operating loss

    (28,785 )   (167,202 )

Loss before income taxes

    (33,767 )   (175,281 )

Net loss

    (76,737 )   (135,276 )

 

 
  As of
September 30, 2009
 
 
  (in thousands)
 

Pro forma condensed combined balance sheet data (unaudited):

       

Cash and cash equivalents

  $ 35,938  

Total assets

    299,869  

Debt

    57,243  

Total stockholders' equity

    131,452  

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Comparative Historical and Unaudited Pro Forma Per Share

        The information below reflects the historical net loss and book value per share of LECG and Smart common stock in comparison with the unaudited pro forma net loss and book value per share after giving effect to the proposed Merger on a purchase basis.

        You should read the tables below in conjunction with the audited and unaudited financial statements of LECG included in its filings with the SEC, the audited and unaudited financial statements of Smart included in this proxy statement and the related notes, and the unaudited pro forma condensed financial information and notes related to such financial statements included elsewhere in this proxy statement. See "Where You Can Find Additional Information" on page 183 and "Unaudited Pro Forma Condensed Combined Financial Statements" beginning on page 42.

        The combined pro forma common share data is presented for illustrative purposes only and is not necessarily indicative of actual or future financial position or results of operations that would have been realized if the proposed Merger had been completed as of the date indicated or will be realized upon completion of the proposed Merger.


LECG

 
  Nine months ended
September 30, 2009
  Year ended
December 31, 2008
 

Historical per common share data (unaudited):

             

Net loss per common share—basic and diluted

  $ (2.94 ) $ (3.42 )

Book value per share(1)

  $ 3.74   $ 6.60  


SMART

 
  Nine months ended
September 30, 2009
  Year ended
December 31, 2008
 

Historical per common share data (unaudited):

             

Net loss per common share—basic and diluted

  $ (6.33 ) $ (53.43 )

Book value per share(1)

  $ (37.03 ) $ (31.22 )

Equivalent pro forma per common share data (unaudited)(2):

             

Net loss per common share—basic and diluted

  $ (22.75 ) $ (40.10 )

Book value per share(1)

  $ 38.06   $ 59.73  


LECG and Smart Combined

 
  Nine months ended
September 30, 2009
  Year ended
December 31, 2008
 

Combined pro forma per common share data (unaudited):

             

Net loss per common share—basic and diluted

  $ (2.14 ) $ (3.78 )

Book value per share(1)

  $ 3.58   $ 5.63  

      (1)
      The book value per share is computed by dividing stockholders' equity (deficit) at the end of the period by the basic number of shares outstanding at the end of the period.

      (2)
      The Smart equivalent pro forma share amounts are calculated by multiplying the LECG and Smart combined pro forma per common share amounts by the exchange ratio in the transactions of 10.63 and 10.61, at September 30, 2009 and December 31, 2008, respectively, of LECG common shares for each Smart common share.

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MARKET PRICE AND DIVIDEND INFORMATION

        LECG's common stock currently trades on the NASDAQ Global Select Market under the symbol "XPRT." The following table sets forth the range of high and low daily closing prices of LECG's common stock for the quarterly periods indicated, as reported by NASDAQ. Such quotations represent inter-dealer prices without retail mark up, mark down or commission and may not necessarily represent actual transactions. Smart is not a public company and its common stock is privately held, and is therefore not presented as a comparison to LECG's common stock price.

 
  Low   High  

For the year ended December 31, 2009

             

First quarter

  $ 1.61   $ 7.00  

Second quarter

  $ 2.39   $ 4.15  

Third quarter

  $ 3.00   $ 4.22  

Fourth quarter (through November 9, 2009)

  $ 3.31   $ 3.66  

For the year ended December 31, 2008

             

First quarter

  $ 8.13   $ 14.62  

Second quarter

  $ 8.43   $ 10.71  

Third quarter

  $ 7.40   $ 10.59  

Fourth quarter

  $ 4.00   $ 7.90  

For the year ended December 31, 2007

             

First quarter

  $ 12.90   $ 18.55  

Second quarter

  $ 14.35   $ 15.48  

Third quarter

  $ 13.34   $ 16.44  

Fourth quarter

  $ 14.38   $ 17.87  

For the year ended December 31, 2006

             

First quarter

  $ 15.98   $ 19.27  

Second quarter

  $ 16.98   $ 19.34  

Third quarter

  $ 16.00   $ 19.00  

Fourth quarter

  $ 18.15   $ 19.71  

        On August 14, 2009, the last trading day prior to announcement of the Merger, the closing price of LECG common stock was $3.65, for an aggregate implied equity value of LECG of approximately $92.9 million. Accordingly, if the Merger had been consummated on that day, the value attributable to the Smart capital stock would have equaled $39.9 million.

        The following table presents trading information for LECG's common stock for August 14, 2009 and November 9, 2009. November 9, 2009 was the last practicable trading day for which information was available prior to the date of the first mailing of this proxy statement.

 
  LECG
Common
Stock Close
 

August 14, 2009

  $ 3.65  

November 9, 2009

  $ 3.50  

        Because the market price of LECG common stock is subject to fluctuation and the number of shares to effect the transaction is fixed, the market value of the shares of LECG common stock that Smart stockholders will be entitled to receive in the Merger may increase or decrease.

        As of November 9, 2009, there were 87 holders of record of LECG's common stock and there were 30 holders of Smart's common stock.

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Dividends

        LECG has never declared or paid any cash dividends on its common stock and the combined company does not intend to do so in the foreseeable future. Any future determination to pay cash dividends will be at the discretion of LECG's board of directors and will depend upon its financial condition, operating results, capital requirements, any applicable contractual restrictions and such other factors as LECG's board of directors deems relevant.

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UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS

        The unaudited pro forma condensed combined balance sheet as of September 30, 2009 set forth below gives effect to the proposed (i) two-step merger in which Smart will merge with and into a wholly-owned subsidiary of LECG and become a wholly-owned subsidiary of LECG (the "Merger") pursuant to the terms of the Agreement and Plan of Merger, dated as of August 17, 2009 and as amended on September 25, 2009, by and among LECG, Smart, Red Sox Acquisition Corporation, a wholly-owned subsidiary of LECG, and Red Sox Acquisition LLC, a wholly-owned subsidiary of LECG, and (ii) sale of LECG's Series A convertible redeemable preferred stock to Great Hill III and Great Hill Investors for approximately $25.0 million in cash pursuant to the terms of the Stock Purchase Agreement, dated as of August 17, 2009, by and among LECG, on one hand, and Great Hill III and Great Hill Investors, on the other hand (the "Investment"), as if these transactions had occurred on September 30, 2009, and combines the historical unaudited consolidated balance sheets of LECG and Smart as of September 30, 2009. The unaudited pro forma condensed combined statements of operations of LECG and Smart set forth below are presented as if the proposed Merger had occurred on January 1st of each period presented, and combine the historical results of LECG and Smart for the nine month period ended September 30, 2009 and for the fiscal year ended December 31, 2008. The historical condensed combined financial statement information has been adjusted to give pro forma effect to events that are (i) directly attributable to the Merger and the Investment, (ii) factually supportable and (iii) with respect to the statements of operations, expected to have a continuing impact on the combined results. The pro forma adjustments include, among other things, adjustments to reflect the issuance of LECG common to effect the Merger, the sale of Series A Preferred Stock for $25.0 million in cash and the amortization of other identified intangible assets.

        The Merger will be accounted for as a business combination under the acquisition method of accounting and LECG is the deemed acquirer and Smart is the deemed acquiree for accounting purposes. The unaudited pro forma condensed combined financial statements were prepared in accordance with the regulations of the SEC. The pro forma adjustments reflecting the completion of the Merger are based upon the acquisition method of accounting in accordance with SFAS 141(R), Business Combinations, and upon the assumptions set forth in the notes to the unaudited pro forma condensed combined financial statements. The unaudited pro forma condensed combined balance sheet has been adjusted to reflect the preliminary allocation of the estimated purchase price to identifiable net assets acquired including an amount for goodwill representing the difference between the purchase price and the estimated fair value of the identifiable net assets. The estimated purchase price was calculated based upon the closing price for LECG common stock of $3.50 on November 9, 2009, which is the last practicable trading day for which information was available prior to the date of the first mailing of this proxy statement. The allocation of the purchase price is dependent upon certain valuation and other studies that are not yet final. The final allocation will be determined after the Merger is completed subject to further adjustments as additional information becomes available and as additional analyses are performed. Accordingly, the pro forma purchase price adjustments shown herein are preliminary. There can be no assurances that the final valuations will not result in material changes to these purchase price allocations. In addition, the estimated purchase price itself is preliminary and will be adjusted based upon the price per share of LECG common stock on the date the Merger is completed. If the closing price of LECG's common stock on the day the Merger closes were to increase or decrease by 10%, 20% and 30% from the November 9, 2009 closing price, the $38.2 million purchase price would increase or decrease by $3.8 million, $7.6 million and $11.5 million, respectively. Accordingly, the final acquisition accounting adjustments and the income from operations may be materially different from the unaudited pro forma adjustments and unaudited condensed combined balance sheet and statements of operations.

        The unaudited pro forma condensed combined financial statements are presented for illustrative purposes only and are not necessarily indicative of the financial condition or results of operations of

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future periods or the financial condition or results of operations that actually would have been realized had the entities been a single company during the periods presented or the results that the combined company will experience after the merger is completed. The unaudited pro forma condensed combined financial statements do not give effect to the potential impact of current financial conditions, regulatory matters or any anticipated synergies, operating efficiencies or cost savings that may be associated with the Merger. These unaudited pro forma condensed combined financial statements also do not include any integration costs, potential incremental costs related to operating a larger entity or estimated future transaction costs. In addition, these unaudited pro forma consolidated financial statements include no assumptions regarding the use of proceeds from the Investment (other than to pay transaction related expenses), which are presented as additional cash on the unaudited pro forma condensed balance sheets. Accordingly, the actual effect of the Merger and Investment, due to this and other factors, could differ from the pro forma adjustments presented herein.

        The unaudited pro forma condensed combined financial information presented below is based on, and should be read together with, the historical financial information that LECG has presented its filings with the SEC (see "Where You Can Find Additional Information" on page 183) and Smart's financial statements beginning on page FP-17.

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LECG CORPORATION AND SUBSIDIARIES
PRO FORMA CONDENSED COMBINED BALANCE SHEETS
SEPTEMBER 30, 2009
(in thousands)
(unaudited)

 
  LECG   SMART(11)   Pro Forma
Adjustments
  Pro Forma
Combined
 

Assets

                         

Current assets:

                         
 

Cash and cash equivalents

  $ 7,246   $ 5,713   $ 25,000 (2) $ 35,938  

                (2,021 )(9)      
 

Restricted cash

        571         571  
 

Accounts receivable, net

    86,791     25,181         111,972  
 

Prepaid expenses

    5,494     1,816         7,310  
 

Signing, retention and performance bonuses—

    14,499             14,499  
 

Income taxes receivable

    12,450             12,450  
 

Other current assets

    4,392             4,392  
 

Note receivable—current portion

    540     27         567  
                   
   

Total current assets

    131,412     33,308     22,979     187,699  

Property and equipment, net

    8,456     5,002         13,458  

Goodwill

    1,800     15,420     (15,420 )(3)   30,450  

                28,650 (3)      

Other intangible assets, net

    3,256     26,693     (26,693 )(3)   28,392  

                25,136 (3)      

Signing, retention and performance bonuses

    21,633             21,633  

Deferred compensation plan assets

    9,711             9,711  

Note receivable

    1,503             1,503  

Other long-term assets

    5,320     1,703         7,023  
                   

Total assets

  $ 183,091   $ 82,126   $ 34,652   $ 299,869  
                   

Liabilities and stockholders' equity

                         

Current liabilities:

                         
 

Accrued compensation

  $ 36,740   $ 6,468   $   $ 43,208  
 

Accounts payable and other accrued liabilities

    10,865     2,699     3,000 (10)   16,564  
 

Payable for business acquisitions—current portion

    2,755             2,755  
 

Debt—current portion

    16,000     507         16,507  
 

Deferred revenue

    2,741     464         3,205  
                   
   

Total current liabilities

    69,101     10,138     3,000     82,239  

Payable for business acquisitions

    100             100  

Debt

        42,299     (1,563 )(9)   40,736  

Deferred compensation plan obligations

    9,900     351         10,251  

Deferred rent

    6,412     2,282         8,694  

Other long-term liabilities

    1,374     23         1,397  
                   
   

Total liabilities

    86,887     55,093     1,437     143,417  
                   

Commitments and contingencies

                 

Redeemable preferred stock

        65,095     (65,095 )(4)   25,000  

                25,000 (2)      

Stockholders' equity (deficit)

                         

Common stock

    26     1     (1) (4)   37  

                11 (1)      

Additional paid-in capital

    173,679     27,392     (27,392) (4)   211,916  

                38,237 (1)      

Treasury stock

        (660 )   660 (4)    

Accumulated other comprehensive loss

    (554 )   (406 )   406 (4)   (554 )

Accumulated deficit

    (76,947 )   (64,389 )   64,389 (4)   (79,947 )

                (3,000) (10)      
                   
 

Total stockholders' equity (deficit)

    96,204     (38,062 )   73,310     131,452  
                   

Total liabilities and stockholders' equity

  $ 183,091   $ 82,126   $ 34,652   $ 299,869  
                   

See notes to unaudited pro forma condensed combined financial statements

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LECG CORPORATION AND SUBSIDIARIES

PRO FORMA CONDENSED COMBINED STATEMENTS OF OPERATIONS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2009

(in thousands, except per share data)

(unaudited)

 
  LECG   SMART(11)   Pro Forma
Adjustments
  Pro Forma
Combined
 

Fee-based revenues, net

  $ 189,578   $ 74,191   $   $ 263,769  

Reimbursable revenues

    7,319     4,071         11,390  
                   
   

Revenues

    196,897     78,262         275,159  

Direct costs

    142,844     50,889         193,733  

Reimbursable costs

    7,703     4,402         12,105  
                   
   

Cost of services

    150,547     55,291         205,838  

Gross profit

    46,350     22,971         69,321  

Operating expenses:

                         
 

General and administrative expenses

    55,125     18,820         73,945  
 

Depreciation and amortization

    3,849     5,068     (3,766 )(7)   6,880  

                1,729 (5)      
 

Other impairments

    9,939             9,939  
 

Restructuring charges

    5,479             5,479  
 

Divestiture charges

    1,863             1,863  
                   

Operating loss

    (29,905 )   (917 )   2,037     (28,785 )

Interest income

    122             122  

Interest expense

    (1,617 )   (2,918 )   (117 )(9)   (4,652 )

Other expense, net

    (581 )   129         (452 )
                   

(Loss) income before income taxes

    (31,981 )   (3,706 )   1,920     (33,767 )

Income tax (benefit) expense

    42,948     22     (8)   42,970  
                   

Net (loss) income

    (74,929 )   (3,728 )   1,920     (76,737 )
                   

Preferred dividends

            1,406 (6)   1,406  
                   

Net (loss) income available to common shares

  $ (74,929 ) $ (3,728 ) $ 514   $ (78,143 )
                   

Earnings per share:

                         
   

Basic

  $ (2.94 )         $ (2.14 )
   

Diluted

  $ (2.94 )         $ (2.14 )

Shares used in calculating earnings per share

                         
 

Basic

    25,515         10,928 (6)   36,443  
 

Diluted

    25,515         10,928 (6)   36,443  

See notes to unaudited pro forma condensed combined financial statements

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LECG CORPORATION AND SUBSIDIARIES

PRO FORMA CONDENSED COMBINED STATEMENTS OF OPERATIONS

FOR THE YEAR ENDED DECEMBER 31, 2008

(in thousands, except per share data)

(unaudited)

 
  LECG   SMART(11)   Pro Forma
Adjustments
  Pro Forma
Combined
 

Fee-based revenues, net

  $ 322,714   $ 98,889   $   $ 421,603  

Reimbursable revenues

    12,965     4,901         17,866  
                   
   

Revenues

    335,679     103,790         439,469  

Direct costs

    221,476     68,269         289,745  

Reimbursable costs

    13,339     4,293         17,632  
                   
   

Cost of services

    234,815     72,562         307,377  

Gross profit

    100,864     31,228         132,092  

Operating expenses:

                         
 

General and administrative expenses

    88,021     35,666         123,687  
 

Depreciation and amortization

    5,939     6,946     (5,176 )(7)   10,014  

                2,305 (5)      
 

Goodwill impairment

    118,800     26,292         145,092  
 

Other impairments

    5,358     6,000         11,358  
 

Restructuring charges

    5,937             5,937  
 

Divestiture charges

    3,136             3,136  
                   

Operating loss

    (126,327 )   (43,676 )   2,871     (167,132 )

Interest income

    445             445  

Interest expense

    (636 )   (5,336 )   (145 )(9)   (6,117 )

Other expense, net

    (1,849 )   (558 )       (2,407 )
                   

(Loss) income before income taxes

    (128,367 )   (49,570 )   2,726     (175,211 )

Income tax (benefit) expense

    (41,680 )   615     1,088 (8)   (39,977 )
                   

Net (loss) income

  $ (86,687 ) $ (50,185 ) $ 1,638   $ (135,234 )
                   

Preferred dividends

            1,875 (6)   1,875  
                   

Net (loss) income available to common shares

  $ (86,687 ) $ (50,185 ) $ (237 ) $ (137,109 )
                   

Earnings per share:

                         
   

Basic

  $ (3.42 )             $ (3.78 )
   

Diluted

  $ (3.42 )             $ (3.78 )

Shares used in calculating earnings per share

                         
 

Basic

    25,330           10,928 (6)   36,258  
 

Diluted

    25,330           10,928 (6)   36,258  

See notes to unaudited pro forma condensed combined financial statements

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LECG CORPORATION AND SUBSIDIARIES

NOTES TO PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS (UNAUDITED)

Note 1: Preliminary Allocation of Purchase Price to Net Assets Acquired (in thousands)

        The estimated purchase price has been allocated to Smart's acquired tangible and identified intangible assets and liabilities assumed based on their estimated fair values as of September 30, 2009:

Cash, cash equivalents and restricted cash

  $ 4,263  

Accounts receivable, net

   
25,181
 

Prepaid expenses and other current assets

   
1,843
 

Property and equipment, net

   
5,002
 

Other identified intangible assets, net (finite-lived)

   
16,136
 

Other identified intangible assets (indefinite-lived)

   
9,000
 

Goodwill

   
28,650
 

Other assets

   
1,703
 

Accrued compensation

   
(6,468

)

Accounts payable and other accrued liabilities

   
(2,699

)

Debt—current and long-term portion

   
(41,243

)

Deferred compensation plan obligations

   
(351

)

Deferred rent

   
(2,282

)

Other liabilities

   
(487

)
       

Estimated purchase price to be allocated

 
$

38,248
 
       

        The allocation of purchase price set forth above is preliminary and the final determination will be based on (i) the fair values of assets acquired and other identifiable intangibles, (ii) the fair values of liabilities assumed, and (iii) the fair value of the common stock issued to the Great Hill Entities as of the date that the Merger is consummated. The excess purchase price over the fair value of tangible and identified intangible assets acquired and liabilities assumed is allocated to goodwill. At the time of the 2007 recapitalization of Smart by Great Hill Partners, an allocation of the fair value of the company to the tangible assets, other identifiable intangible assets and goodwill was performed in accordance with the requirements of the Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") 805-Business Combinations. Subsequently, Smart performed an impairment test for its goodwill and other identified intangible assets and recorded an impairment charge related to these assets at December 31, 2008 in accordance with the requirements of FASB ASC 350-Intangibles-Goodwill and Other and FASB ASC 360-Property, Plant and Equipment, which resulted in the assets being carried at the lower of their net book value or fair value. In lieu of performing a detailed valuation of the other identifiable intangible assets and goodwill, we have provided a preliminary allocation of the fair value of Smart to the underlying assets which is consistent with this recent valuation work performed by Smart. The allocation of purchase price will remain preliminary until LECG completes a final valuation of significant identified intangible assets acquired and determines the fair values of other assets acquired and liabilities assumed. The final determination of the allocation of the purchase price is expected to be completed as soon as practicable after consummation of the

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LECG CORPORATION AND SUBSIDIARIES

NOTES TO PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

Note 1: Preliminary Allocation of Purchase Price to Net Assets Acquired (in thousands) (Continued)


Merger. The final amounts allocated to the assets acquired and liabilities assumed could be materially different from the amounts presented in the unaudited pro forma condensed combined financial statements.

        We estimate that transaction costs for the Merger and the Investment will be approximately $3.0 million, which will be reflected as an expense in the period the expense is incurred. The transaction costs include fees for legal, financial advisory, accounting, due diligence, tax, valuation, printing and other various services in connection with the transaction.

        For pro forma purposes, the estimated fair value of the other identified intangible assets, which is anticipated to include customer relationships, trade name and covenants not to compete, with a finite life are assumed to be amortized on a straight-line basis over an average seven year estimated life. The acquired indefinite lived assets are not amortized, but are subject to at least annual impairment evaluation.

Note 2: Unaudited Pro Forma Adjustments

        The adjustments to the unaudited pro forma condensed combined balance sheet as of September 30, 2009 and the unaudited pro forma condensed combined statements of operations for the nine months ended September 30, 2009 and for the year ended December 31, 2008 are as follows:

    (1)
    To reflect the acquisition of all of the outstanding capital stock of Smart for a total estimated purchase price of approximately $38.2 million. The purchase consideration consists of the issuance of 10,927,869 shares of LECG common stock with a fair value of approximately $38.2 million. The preliminary estimated fair value per share of common stock issued is based on the $3.50 closing price on November 9, 2009, which is the last practicable trading day for which information is available prior to the date of the first mailing of this proxy statement.

    (2)
    To reflect the sale and issuance of 6,313,131 shares of the Series A Preferred Stock to the Great Hill Entities for approximately $25.0 million in cash. This transaction is contingent upon the consummation of the Merger.

    (3)
    Eliminate Smart's historical goodwill and other identified intangible assets, net. Recognition of the excess purchase price over the fair value of net tangible assets acquired has been recorded as goodwill and other identified intangible assets, which is anticipated to include customer relationships, trade name (indefinite-lived) and covenants not to compete, as follows (in thousands):

Other identified intangible assets (finite-lived)

  $ 16,136  

Other identified intangible assets (indefinite-lived)

    9,000  
       
 

Total other identified intangible assets

    25,136  

Goodwill

    28,650  
       

Total intangible assets

  $ 53,786  
       
    (4)
    To reflect the elimination of the historical equity (deficit) accounts of Smart.

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LECG CORPORATION AND SUBSIDIARIES

NOTES TO PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS (UNAUDITED) (Continued)

Note 2: Unaudited Pro Forma Adjustments (Continued)

    (5)
    To reflect the amortization of other identified intangible assets acquired by LECG in connection with the Merger over a seven year average estimated life.

    (6)
    Basic and diluted pro forma net loss per share has been adjusted to reflect the issuance of 10,927,869 shares of LECG common stock as if the shares had been outstanding for the entire period presented. The effect of the Series A Preferred Stock issued to the Great Hill Entities as potentially dilutive common shares has not been included in the weighted average shares as the effect on earnings per share would be anti-dilutive. Also, net loss available to common shares has been adjusted to reflect a 7.5% annual dividend rate on the Series A Preferred Stock.

    (7)
    Reverse Smart's amortization of other identified intangible assets.

    (8)
    Due to a full valuation allowance recorded against our deferred tax assets in the third quarter of 2009, we have assumed no tax benefit for the September 30, 2009 pro forma adjustments. However, income taxes on the December 31, 2008 pro forma adjustments are provided using LECG's statutory tax rate of 39.9%.

    (9)
    To reflect the settlement of Smart's subordinated promissory note as contractually required upon the consummation of a merger transaction, and to eliminate interest expense related to the subordinated promissory note for the periods presented.

    (10)
    To reflect transaction costs incurred to consummate the Merger and Investment.

    (11)
    Pro forma reclassifications have been made to conform the Smart financial statement line item presentation to the LECG financial statement line item presentation.

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THE LECG ANNUAL MEETING

Date, Time and Place

        The annual meeting of stockholders will be held on December 22, 2009, at 2 p.m. local time, at LECG's corporate offices located at 2000 Powell Street, Suite 600, Emeryville, California, 94608. The approximate date on which this proxy statement and the enclosed proxy card will first be sent to our stockholders is November 18, 2009.


Purpose of the Annual Meeting

        At the annual meeting, we will ask our stockholders to consider and vote upon the following proposals: (i) to approve the Merger and the issuance of our common stock pursuant thereto; (ii) to approve the Investment and the issuance of the Series A Preferred Stock pursuant thereto; (iii) to approve the Amended Charter; (iv) to elect to the LECG board of directors each of the nominees for director named in this proxy statement; (v) to ratify of the appointment of Deloitte & Touche LLP as our independent registered public accounting firm for 2009; and (vi) to approve of the adjournment of the meeting, if necessary to solicit additional proxies if there are not sufficient votes to adopt the forgoing at the time of the meeting.

        After careful consideration, a majority of the members of our board of directors has (i) approved and declared advisable the Merger Agreement and the transactions contemplated by the Merger Agreement and determined that the Merger Agreement and the transactions contemplated by the Merger Agreement, including the Merger, are fair to, and in the best interests of, LECG and its stockholders, and (ii) approved and declared advisable the Stock Purchase Agreement and the transactions contemplated by the Stock Purchase Agreement and determined that the Stock Purchase Agreement, the transactions contemplated by the Stock Purchase Agreement, including the Investment, and the approval of the Amended Charter are fair to, and in the best interests of, LECG and its stockholders. Therefore, our board of directors, by a majority vote, recommends that you vote (i) "FOR" the approval of the Merger and the issuance of LECG common stock pursuant thereto, (ii) "FOR" the approval of the Investment and the issuance of the Series A Preferred Stock pursuant thereto, and (iii) "FOR" the approval of the Amended Charter. LECG's board of directors, by a majority vote, further recommends that you vote (i) "FOR" the election of the seven directors identified herein, (ii) "FOR" the ratification of the appointment of Deloitte & Touche LLP as the company's independent registered public accounting firm for the 2009 fiscal year and (iii) "FOR" the adjournment of the annual meeting, if necessary, to facilitate the adoption and approval of the forgoing.

        You are urged to review carefully the information contained in the enclosed proxy statement prior to deciding how to vote your shares at the annual meeting.


Record Date, Voting and Quorum

        Our board of directors fixed the close of business on November 9, 2009 as the record date for the determination of holders of outstanding shares entitled to notice of, and to vote on all matters presented at, the annual meeting. Such stockholders will be entitled to one vote for each share held on each matter submitted to a vote at the annual meeting. As of the record date, there were approximately 25,867,515 shares of our common stock issued and outstanding, and such shares were held by approximately 87 holders of record.

        The required quorum for the transaction of business at the annual meeting is a majority of the votes eligible to be cast by holders of shares of our common stock issued and outstanding on the record date. Shares that are voted "FOR," or "AGAINST" a proposal or marked "ABSTAIN" are treated as being present at the annual meeting for purposes of establishing a quorum and are also

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treated as shares entitled to vote at the annual meeting with respect to such proposal. "Broker non-votes" are also included for purposes of determining whether a quorum of shares of common stock is present at a meeting. A "broker non-vote" occurs when a nominee holding shares of common stock for the beneficial owner does not vote on a particular proposal because the nominee does not have discretionary voting power with respect to that item and has not received instructions from the beneficial owner.


Required Vote

        On all matters, each share has one vote. The proposal to approve the Merger and the issuance of our common stock pursuant thereto requires the affirmative vote of the holders of a majority of the votes cast on the proposal. With respect to the proposal to approve the Merger and the issuance of our common stock pursuant thereto, neither "broker non-votes" nor abstentions are included in the tabulation of the voting results and, therefore, they do not have the effect of votes "AGAINST" such proposal. The proposal to approve the Investment and the issuance of the Series A Preferred Stock pursuant thereto requires the affirmative vote of the holders of a majority of the votes cast on the proposal. With respect to the proposal to approve the Investment and the issuance of the Series A Preferred Stock pursuant thereto, neither "broker non-votes" nor abstentions are included in the tabulation of the voting results and, therefore, they do not have the effect of votes "AGAINST" such proposal. The proposal to approve the Amended Charter requires the affirmative vote of the holders of a majority of the shares outstanding as of the record date. With respect to the proposal to approve of the Amended Charter, both "broker non-votes" and abstentions would have the same effect as votes "AGAINST" such proposal. With respect to the proposal regarding the election of our directors, neither "broker non-votes" nor abstentions are included in the tabulation of the voting results and, therefore, they do not have the effect of votes "AGAINST" such proposal. The proposal to ratify the appointment of Deloitte & Touche LLP as our independent registered public accounting firm for fiscal year 2009 requires the affirmative vote of the holders of a majority of the outstanding shares as of the record date that are present in person or represented by proxy at the annual meeting. With respect to the proposal ratify the appointment of Deloitte & Touche LLP as our independent registered public accounting firm for fiscal year 2009, and the proposal to adjourn the annual meeting, if necessary, abstentions will have the effect of a vote "AGAINST" those proposals and "broker non-votes" will have no effect on the outcome of the vote.


Voting

        Stockholders may vote their shares:

    by attending the annual meeting and voting their shares of LECG common stock in person;

    by completing the enclosed proxy card, signing and dating it and mailing it in the enclosed post-prepaid envelope;

    by following the instructions for internet voting printed on your proxy card; or

    by using the telephone number printed on your proxy card.

        Our board of directors is asking you to give your proxy to Steven R. Fife and Deanne M. Tully. Giving your proxy to Steven R. Fife and Deanne M. Tully means that you authorize Steven R. Fife and Deanne M. Tully or either of them to vote your shares at the annual meeting in the manner you direct. You may vote "FOR" or "AGAINST" the proposals or abstain from voting. All valid proxies received prior to the annual meeting will be voted at the annual meeting. All shares represented by a proxy will be voted, and where a stockholder specifies by means of the proxy a choice with respect to any matter to be acted upon, the shares will be voted in accordance with the specification so made.

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        If no choice is indicated on the proxy, the shares will be voted (i) "FOR" the proposal to approve the Merger and the issuance of LECG common stock pursuant thereto, (ii) "FOR" the proposal to approval of the Investment and the issuance of the Series A Preferred Stock pursuant thereto, (iii) "FOR" the proposal to approve the Amended Charter, (iv) "FOR" the proposal to elect Garrett F. Bouton, Alison Davis, Ruth M. Richardson, Michael E. Dunn, Christopher S. Gaffney, John G. Hayes and Steve Samek to the board of directors until our 2010 annual meeting of stockholders and thereafter until their successors are elected and qualified, (v) "FOR" the proposal to ratify the appointment of Deloitte & Touche LLP as our independent registered public accounting firm for fiscal year 2009, and (vi) "FOR" the adjournment of the annual meeting, if necessary, to facilitate the adoption and approval of the preceding proposals.

        Stockholders who hold their shares in "street name," meaning the name of a broker or other nominee who is the record holder, must either direct broker or other record holder of their shares to vote their shares or obtain a proxy from the record holder to vote their shares at the annual meeting. Such stockholder will receive instructions from such stockholder's broker or other nominee who is the record holder that the stockholder must follow in order to have such stockholder's shares voted. If a bank, broker or other nominee holds the stockholder's shares and the stockholder wishes to attend the meeting and vote in person, then the stockholder must obtain a "legal proxy" from the broker or other record holder of the shares giving such stockholder the right to vote the shares.

        Stockholders who hold their shares in their own name as a holder of record may instruct the proxy holders how to vote their common stock by completing and executing a proxy by means of any of the three voting methods described in these proxy materials (by telephone, over the internet, or by signing, dating and mailing a proxy card). Of course, such stockholder may also choose to attend the meeting and vote such stockholder's shares in person. The proxy holders will vote such stockholder's shares in accordance with such stockholder's instructions on the completed proxy as submitted.

        Stockholders who have questions or requests for assistance in completing or submitting proxy cards should contact LECG's proxy solicitor, Laurel Hill Advisory Group, LLC, at 1-888-742-1305.


Voting via the Internet or by Telephone

        Stockholders whose shares are registered in the name of a bank or brokerage firm may be eligible to vote electronically through the internet or by telephone. Many banks and brokerage firms participate in the Broadridge online and telephone program. This program provides eligible stockholders the opportunity to vote via the internet or by telephone. Voting forms will provide instructions for stockholders whose banks or brokerage firms participate in Broadridge's online and telephone proxy voting program.

        Registered stockholders may vote electronically through the internet or by telephone by following the instructions included on their proxy card. A stockholder not wishing to vote electronically through the internet or by telephone or whose form does not reference internet or telephone voting information should complete and return the enclosed paper proxy card. Signing and returning the proxy card or submitting the proxy via the internet or by telephone does not affect the right to vote in person at the annual meeting.


Revocability of Proxies

        A stockholder giving a proxy has the power to revoke his or her proxy, at any time prior to the time it is voted, by:

    delivering to our principal offices (Attention: Corporate Secretary) a written instrument that revokes the proxy;

    submitting another properly completed proxy with a later date; or

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    attending the annual meeting, affirmatively revoking the proxy and voting in person.

        Simply attending the annual meeting will not constitute revocation of your proxy. If your shares are held in the name of a broker or other nominee who is the record holder, you must follow the instructions of your broker or other nominee to revoke a previously given proxy.

        The form of proxy accompanying this proxy statement confers discretionary authority upon the named proxy holders with respect to amendments or variations to the matters identified in the accompanying Notice of Annual Meeting and with respect to any other matters which may properly come before the annual meeting. As of the date of this proxy statement, management knows of no such amendment or variation or of any matters expected to come before the annual meeting which are not referred to in the accompanying Notice of Annual Meeting.


Attendance at the Annual Meeting

        Only holders of the shares of LECG outstanding common stock, their proxy holders and guests we may invite may attend the annual meeting. If you wish to attend the annual meeting in person but you hold your shares through someone else, such as a broker, you must bring proof of your ownership and photo identification to the annual meeting. For example, you could bring an account statement showing that you beneficially owned shares of LECG common stock as of the record date as acceptable proof of ownership.


Solicitation of Proxies

        In addition to solicitation by mail, our directors, officers and employees may solicit proxies by telephone, other electronic means or in person. These people will not receive compensation for their services, but we will reimburse them for their out-of-pocket expenses. We will bear the cost of printing and mailing proxy materials, including the reasonable expenses of brokerage firms and others for forwarding the proxy materials to beneficial owners of our common stock. We have also retained Laurel Hill Advisory Group, LLC, a proxy solicitation firm, to assist in the solicitation of proxies for a fee of approximately $7,000, plus out-of-pocket expenses.


Proposal to Approve Adjournment of the Annual Meeting

        We are submitting a proposal for consideration at the annual meeting to authorize the named proxies to approve one or more adjournments of the annual meeting if there are not sufficient votes to approve the Merger and the issuance of our common stock pursuant thereto, approve the Investment and the issuance of our Series A Preferred Stock pursuant thereto, or approve the Amended Charter at the time of the annual meeting. Even though a quorum may be present at the annual meeting, it is possible that we may not have received sufficient votes to approve the Merger and the issuance of our common stock pursuant thereto, approve the Investment and the issuance of our Series A Preferred Stock pursuant thereto, or approve the Amended Charter by the time of the annual meeting. In that event, we will determine to adjourn the annual meeting in order to solicit additional proxies. The adjournment proposal relates only to an adjournment of the annual meeting for purposes of soliciting additional proxies to obtain the requisite stockholder approval to approve the Merger and the issuance of our common stock pursuant thereto, approve the Investment and the issuance of our Series A Preferred Stock pursuant thereto, and approve the Amended Charter. Any other adjournment of the annual meeting (e.g., an adjournment required because of the absence of a quorum) would be voted upon pursuant to the discretionary authority granted by the proxy.

        The approval of a proposal to adjourn the annual meeting would require the affirmative vote of the holders of a majority of the shares of our outstanding common stock present in person or by proxy and entitled to vote at the annual meeting. The failure to vote shares of common stock would have no effect on the approval of the adjournment proposal.

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        Our board of directors recommends that you vote "FOR" the adjournment proposal so that proxies may be used for that purpose, should it become necessary. Properly executed proxies will be voted "FOR" the adjournment proposal, unless otherwise noted on the proxies. If the annual meeting is adjourned, we are not required to give notice of the time and place of the adjourned meeting unless our board of directors fixes a new record date for the annual meeting.


Other Business

        We are not currently aware of any business to be acted upon at the annual meeting other than the matters discussed in this proxy statement. Under our bylaws, business transacted at the annual meeting is limited to matters relating to the purposes stated in the Notice of Annual Meeting, which is provided at the beginning of this proxy statement. If other matters do properly come before the annual meeting, or at any adjournment of the annual meeting, we intend that shares of our outstanding common stock represented by properly submitted proxies will be voted by and at the discretion of the persons named as proxies on the proxy card. In addition, the grant of a proxy will confer discretionary authority on the persons named as proxies on the proxy card to vote in accordance with their best judgment on procedural matters incident to the conduct of the annual meeting.

WHETHER OR NOT YOU EXPECT TO ATTEND THE ANNUAL MEETING IN PERSON, YOU ARE REQUESTED TO COMPLETE, DATE, AND SIGN THE PROXY CARD AND RETURN IT PROMPTLY, OR VOTE BY TELEPHONE OR VIA THE INTERNET BY FOLLOWING THE DIRECTIONS ON THE PROXY CARD. BY RETURNING YOUR PROXY CARD OR VOTING BY PHONE OR THE INTERNET PROMPTLY, YOU CAN HELP US AVOID THE EXPENSE OF FOLLOW-UP MAILINGS TO ENSURE A QUORUM IS PRESENT AT THE ANNUAL MEETING. STOCKHOLDERS WHO ATTEND THE ANNUAL MEETING MAY REVOKE A PRIOR PROXY VOTE AND VOTE THEIR SHARES IN PERSON AS SET FORTH IN THIS PROXY STATEMENT.

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PROPOSAL 1: THE MERGER

        The following is a discussion of the Merger and the Merger Agreement, including the background information thereto. This is a summary only and may not contain all of the information that is important to you. A copy of the Merger Agreement is attached to this proxy statement as Annex A. LECG stockholders are urged to read this entire proxy statement, including the Merger Agreement, for a more complete understanding of the Merger.


Background of the Merger and the Investment

        On February 19, 2007, the board of directors of LECG appointed Michael Jeffery as Chief Executive Officer of LECG, replacing David Teece. Dr. Teece remained employed as an academic Director (LECG's term for its experts) providing professional consulting services and served as Chairman of the board of directors until July 2007, and thereafter continued to be employed by LECG as a Director providing professional consulting services and served as Vice Chairman of the board of directors until August 12, 2009. In May 2007, the board of directors of LECG formed an Independent Directors' Committee (the "Committee") to engage an investment banking firm (the "First Financial Advisor") to advise it with respect to strategic alternatives available to LECG, including the possibility of a business combination with another professional services company and/or the possibility of engaging a private equity firm to take LECG private. The board took this step in part at the suggestion of Dr. Teece that this could be an opportunity to maximize value to the LECG stockholders, and in part to gain a better understanding of what alternatives to remaining an independent, publicly held company might be available. The First Financial Advisor contacted 8 potential strategic buyers and 15 financial sponsors for indications of interest in potentially acquiring LECG. None of the potential strategic buyers submitted indications of interest. Six of the potential financial sponsors submitted indications of interest in acquiring LECG for cash, at prices that ranged from $17.50 to $21.00 per share. All six indications of interest stated that they were not binding offers. Four of those six submissions indicated that they would expect to finance any acquisition with a combination of equity and third-party debt. The remaining two did not specify the source of funds for a potential acquisition. The First Financial Advisor advised the Committee and the board of directors that there had been a "severe correction" in the debt markets and that the supply of transactions seeking debt financing was significantly greater than the demand for such transactions, due to the subprime mortgage crisis. The First Financial Advisor stated that numerous transactions were being restructured, postponed or pulled from the market, and that they expected continued volatility in the debt markets. The board of directors then decided, by a 4-3 vote, that based upon the information and analysis from the First Financial Advisor and the board of directors' review of available strategic alternatives, it was not in the best interests of LECG and its stockholders to pursue a sale of LECG at that time. The majority of the board of directors concluded that the "severe correction" in the debt markets posed a significant risk that, even if a transaction could be negotiated at an acceptable price with any of the financial sponsors that had expressed interest, the completion of such a transaction would be dependent on the sponsor obtaining debt financing in a difficult and highly volatile debt market. The majority of the board of directors concluded that the likelihood of completing such a transaction within the indicated ranges was low, and further concluded that the process of negotiating a transaction that failed to close would itself damage employee morale, make retention of experts and other key employees more difficult and cause disruption to LECG's business. LECG then instructed the First Financial Advisor not to pursue any of the indications of interest.

        In July 2007, the board of directors of LECG appointed Garrett Bouton as Chairman of the board of directors and appointed Dr. Teece as the non-executive Vice Chairman of the board of directors. On November 27, 2007, LECG and Dr. Teece entered into a new employment agreement governing the terms of his employment by LECG. Among other things, this new agreement included a "standstill" provision under which Dr. Teece agreed that he would not, prior to August 1, 2008, (i) directly or indirectly seek or propose to acquire any assets, business or voting securities of LECG if as a result of

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such acquisition he would be the beneficial owner of more than 20% of LECG's voting securities, (ii) seek or propose a merger, consolidation or recapitalization of LECG, or (iii) solicit proxies with respect to any election of LECG directors or any other matter.

        On August 22, 2008, a private equity firm, (the "First Private Equity Firm") sent the board of directors of LECG a non-binding letter in which the First Private Equity Firm, in partnership with Dr. Teece, proposed to take LECG private through a cash merger of LECG with a new company to be formed by the First Private Equity Firm. We refer to this proposal as the "First Teece Proposal." The First Teece Proposal contemplated an offer price of $10.50 per share of LECG, subject to due diligence and other contingencies.

        During the remainder of August and September 2008, the independent members of the board of directors of LECG considered the First Teece Proposal. In September 2008, the board of directors of LECG formally reconstituted the Committee with authority to (i) take any and all actions that the Committee deemed necessary, advisable or appropriate in connection with a potential transaction, including, without limitation, the consideration and evaluation of a potential transaction with the First Private Equity Firm; (ii) make an initial determination as to whether the First Private Equity Firm's expression of interest should be pursued or rejected; (iii) have any discussions and negotiations with the First Private Equity Firm regarding a potential transaction; (iv) consider, explore, discuss and negotiate any potential transactions with parties other than the First Private Equity Firm; and (v) consider, explore, discuss and negotiate any alternatives to a potential transaction. After the Committee was reconstituted, the Committee engaged a second financial advisor (the "Second Financial Advisor") to advise it with respect to the First Teece Proposal. In meetings of the Committee held on August 31, September 18, October 1 and October 16, 2008, the Committee considered the First Teece Proposal and reviewed other alternatives that might be available to LECG, including the possible combination of LECG with another professional services company, the possibility of a "going private" transaction with a private equity firm other than the First Private Equity Firm, and continuing as a stand-alone company. The Committee decided to pursue discussions with Dr. Teece and the First Private Equity Firm regarding the First Teece Proposal.

        By letter dated October 29, 2008, the First Private Equity Firm withdrew the First Teece Proposal, stating that market conditions, LECG's third quarter results announced on October 27, 2008 and LECG's announcement that it would cease providing guidance for future quarters had made it impossible for the First Private Equity Firm to commit to the price in the First Teece Proposal. The First Private Equity Firm requested that LECG sign a confidentiality agreement and give the First Private Equity Firm access to confidential information to enable it to formulate a revised proposal. In light of the economic and market conditions at that time, the Committee did not authorize LECG to enter into such an agreement.

        On December 8, 2008, the board of directors of LECG received a letter from Dr. Teece describing a proposal by the First Private Equity Firm, in partnership with Dr. Teece, to take LECG private in a cash merger similar in structure to the First Teece Proposal, subject to completion of due diligence and other contingencies. We refer to this proposal as the "Second Teece Proposal." The proposed purchase price of LECG's common stock in the Second Teece Proposal was $7.75 in cash per share (assuming approximately 25.5 million fully-diluted shares were outstanding), financed through up to $50 million in equity to be provided from the First Private Equity Firm, $85 million of senior debt from lenders unaffiliated with the First Private Equity Firm, and the remainder from various co-investors.

        At meetings held on December 11 and 12, 2008, the Committee authorized Mr. Bouton and the management of LECG to enter into negotiations with Dr. Teece and the First Private Equity Firm regarding the Second Teece Proposal. At the same meeting, the Committee also authorized and directed the Second Financial Advisor to contact other possibly interested parties to explore their interest in a potential transaction with LECG. The Committee conditioned its willingness to enter into negotiations with Dr. Teece and the First Private Equity Firm on the execution by Dr. Teece and the

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First Private Equity Firm of confidentiality agreements with standstill provisions satisfactory to the Committee, in which Dr. Teece and the First Private Equity Firm would each agree, subject to limited exceptions, not to directly or indirectly acquire voting securities of LECG, make proposals to acquire control of LECG or otherwise seek to control management or the board of directors of LECG (other than in connection with the Second Teece Proposal).

        From December 15, 2009 until February 9, 2009, the Committee, Dr. Teece and the First Private Equity Firm negotiated the terms of confidentiality and standstill agreements.

        On January 30, 2009, the First Private Equity Firm, on behalf of itself and Dr. Teece, submitted a revised proposal to Mr. Bouton, reducing the proposed purchase price to $6.00 in cash per share, which we refer to as the "Third Teece Proposal". The First Private Equity Firm indicated that the revised proposal was based on the review of LECG's disclosures pertaining to its results during the fourth quarter of 2008. On February 9, 2009, the First Private Equity Firm and Dr. Teece each executed confidentiality agreements with LECG that contained standstill provisions prohibiting the First Private Equity Firm and Dr. Teece from taking the types of actions referred to above until the earlier of December 31, 2009 (or August 9, 2009 in the case of private proposals made directly to LECG) or the public announcement of a competing acquisition transaction involving LECG. On March 10, 2009, the First Private Equity Firm sent a letter to Mr. Bouton stating that it was further reducing the proposed purchase price to $3.50 in cash per share (the "Fourth Teece Proposal") and stating that this was due to LECG's worsened financial condition and cash flow profile, key expert departures and the worsening macroeconomic environment.

        During the period from January 2009 to March 2009, representatives of the First Private Equity Firm met with officers of LECG and several of LECG's experts as part of that firm's due diligence investigation of LECG while the Second Teece Proposal, the Third Teece Proposal and the Fourth Teece Proposal were pending. Counsel for the First Private Equity Firm drafted and sent a draft merger agreement to the Second Financial Advisor and Jones Day, counsel for the Committee. Jones Day reviewed the draft merger agreement and prepared a list of important issues raised by the draft merger agreement. The Second Financial Advisor presented this list of issues to the First Private Equity Firm on March 26, 2009. On or about March 30, 2009, the First Private Equity Firm informed the Second Financial Advisor that it was not interested in pursuing the Fourth Teece Proposal any further, at which point negotiations between the Committee and the First Private Equity Firm on the draft merger agreement ceased.

        During the period from February to April 2009, the Second Financial Advisor, on behalf of the Committee, contacted nine professional services companies regarding potential transactions with LECG. Smart was not among the companies contacted. Of those nine companies, three either expressed no interest or did not respond to the inquiry from the Second Financial Advisor. Six of the nine companies expressed some interest in conducting limited due diligence to help them determine whether they would have an interest in further exploring a potential transaction with LECG. Representatives of the Second Financial Advisor and LECG met once each with representatives of six different companies, all of which took place following the execution of confidentiality agreements that LECG had signed with those companies. None of these six companies expressed interest in doing further due diligence or having additional meetings following the initial meetings.

        By letter dated April 3, 2009, Dr. Teece informed Mr. Bouton that Dr. Teece had had discussions with a different private equity firm (the "Second Private Equity Firm") regarding the possibility of working with Dr. Teece to acquire LECG in a going-private transaction. We refer to this proposed transaction as the "Fifth Teece Proposal." Dr. Teece requested the Committee's consent to him exploring the Fifth Teece Proposal, and the Committee gave its consent. From that date until May 21, 2009, representatives of the Second Financial Advisor and LECG met with representatives of the Second Private Equity Firm and Dr. Teece to explore the possibility of such a transaction and to allow the Second Private Equity Firm to pursue its due diligence investigation of LECG and its operations.

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On April 6, 2009, the Second Private Equity Firm wrote to Mr. Bouton expressing its strong interest in pursuing an acquisition of LECG, with a potential valuation of $3.50 per share based solely on publicly available information. On April 20, 2009, the Second Private Equity Firm wrote to Mr. Bouton, increasing the potential valuation for a possible transaction to $4.50 per share (the "Sixth Teece Proposal"), based upon non-public information and operating metrics relating to LECG's performance in the first quarter of 2009, which Dr. Teece had shared with the Second Private Equity Firm under a confidentiality agreement between Dr. Teece and that firm.

        The Committee then directed Jones Day to prepare a draft merger agreement for the Sixth Teece Proposal. In connection with the Sixth Teece Proposal, the Second Private Equity Firm entered into a confidentiality agreement with LECG on April 27, 2009, which contained standstill provisions lasting until the earlier of April 30, 2010 (or October 31, 2009 in the case of private proposals made directly to LECG) or the public announcement of a competing acquisition transaction involving LECG. Dr. Teece entered into an amended and restated confidentiality agreement, extending his standstill provisions until the earlier of March 15, 2010 (or August 31, 2009 in the case of private proposals made directly to LECG) or the public announcement of a competing acquisition transaction involving LECG. On April 30, 2009, LECG entered into an exclusivity agreement with the Second Private Equity Firm, agreeing not to solicit any competing acquisition proposals until May 29, 2009. On May 22, 2009, however, representatives of the Second Private Equity Firm informed the Second Financial Advisor that it was no longer interested in pursuing the Sixth Teece Proposal.

        The board and the Committee did not solicit any proposals from Dr. Teece or any of the private equity firms, and Dr. Teece was not acting at the request or on behalf of the Company, the board of directors or the Committee in pursuing the proposals he presented to the board.

        On or about June 1, 2009, Steve Samek, the Chief Executive Officer of Smart contacted Michael Jeffery, the Chief Executive Officer of LECG on an unsolicited basis to express interest in a potential business combination transaction between Smart and LECG, together with a cash investment by the Great Hill Entities. Smart had independently been assessing different strategic options, had identified LECG, and decided that it wanted to explore the potential benefits of a combination with LECG. On June 10, 2009, Mr. Jeffrey and Steven Fife, the Chief Financial Officer of LECG, met with Mr. Samek and Christopher S. Gaffney, a Managing Director of Great Hill Partners, LLC, in New York. On June 16 and 17, 2009, Mr. Samek and Mr. Gaffney met with Mr. Bouton in Aspen, Colorado, to present to Mr. Bouton their vision for a potential business combination of LECG and Smart. On June 19, 2009, Mr. Bouton contacted a representative of William Blair in regard to potentially engaging William Blair as financial advisor to the Committee. On July 6, 2009, the Committee met telephonically, and representatives of William Blair joined the meeting. The Committee reviewed an initial financial presentation relating to a potential business combination with Smart that had been prepared by William Blair. The Committee agreed that it should explore the possibility of such a combination, together with an investment in the combined company by the Great Hill Entities. The Committee also authorized Mr. Bouton to retain William Blair as the Committee's financial advisor for any proposed transaction with Smart and the Great Hill Entities.

        On June 19, 2009, Smart sent LECG and counsel for the Committee a summary of the principal terms of a merger of LECG and Smart and an investment in the combined company by the Great Hill Entities. In meetings and phone calls held between June 19, 2009 and July 29, 2009, Mr. Bouton, and representatives of William Blair and Jones Day negotiated with Smart, the Great Hill Entities and their counsel the principal terms of the Merger and the Investment.

        On July 8, 2009, Jones Day began the legal due diligence review of Smart, and Deloitte & Touche LLP began the accounting due diligence review of Smart on behalf of the Committee.

        On July 13, 2009, the Committee entered into a formal engagement letter with William Blair to advise it on the proposed transaction between Smart and LECG.

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        The Committee met on July 22, 2009 in advance of the normally scheduled meetings of the LECG board of directors and other committees on July 23, 2009. Representatives of William Blair and Jones Day attended the meeting, as well as Michael Jeffery and Steven Fife, LECG's Chief Executive Officer and Chief Financial Officer, respectively. Prior to the meeting, a summary of the proposed terms of the transaction had been circulated to the Committee members. At the meeting, Mr. Bouton reviewed with the Committee the history of the Committee's actions since the receipt of the First Teece Proposal to consider different strategic alternatives available to LECG, none of which had come to fruition. The William Blair representatives reviewed the proposed terms of the Merger from a financial point of view, reviewed a presentation that had been distributed to the Committee members of William Blair's financial analysis to date of the proposed transaction, and also discussed with the Committee the proposed terms of the Investment. The Jones Day representatives reviewed with the Committee the proposed terms of both the Merger and the Investment from a legal point of view.

        After the Committee had discussed the proposed transactions, Mr. Samek, as Chief Executive Officer of Smart, and Mr. Gaffney, as representative of the Great Hill Entities, joined the meeting. Mr. Samek described his background and Smart's business. Mr. Gaffney described Great Hill Partners, LLC, its experience investing in professional services organizations and the history of Great Hill Partners, LLC's investment in Smart. The members of the Committee, and Messrs. Samek and Gaffney discussed the potential advantages and possible disadvantages of a combination of Smart with LECG. The Committee unanimously authorized Mr. Bouton to continue negotiations with Smart and the Great Hill Entities, and further authorized Mr. Bouton and management to execute an exclusivity agreement with Smart. The Committee reconvened on July 23, 2009 after the meeting of the full LECG board of directors, and further discussed the potential advantages and disadvantages of the proposed transactions in light of presentations that had been made to the full board of directors at the meeting earlier that day.

        On July 24, 2009, LECG, Smart and Great Hill III entered into an Exclusivity Agreement, which, among other things, prohibited any of the parties from soliciting competing transactions until August 15, 2009.

        Between July 29, 2009 and August 4, 2009, Jones Day and Goodwin Procter LLP, counsel to Smart and the Great Hill Entities, prepared and sent to each other initial drafts of the Merger Agreement, the Governance Agreement, the Stock Purchase Agreement and other related documents.

        On August 5 and 7, 2009, Mr. Bouton, as chairman of LECG's board of directors and chairman of the Committee, met with Dr. Teece and Richard Boulton, respectively, to inform them of the Committee's negotiations with Smart and the Great Hill Entities regarding the transactions.

        Between August 4, 2009 and August 17, 2009, representatives of the Committee, representatives of Smart and the Great Hill Entities and representatives of Jones Day and Goodwin Procter continued negotiating various terms and conditions of the Merger Agreement, Stock Purchase Agreement and related documents, and circulated revised drafts of such documents. Also during this period, representatives of LECG continued their due diligence review of Smart, and members of LECG and Smart management met, with representatives of William Blair attending a portion of the meetings, to discuss integration and communication matters relating to the proposed transactions, and to review a presentation prepared by William Blair regarding the financial profile of the combined entity. Additionally, Mr. Bouton met with certain key experts within LECG to hear their views on the strategic direction of LECG and to discuss the general outline of the proposed transactions while maintaining the confidentiality of the parties involved.

        On August 12, 2009, LECG terminated Dr. Teece's employment, though he remained a member of LECG's board of directors and the Vice Chairman of the board of directors. The terms of Dr. Teece's termination and his future relationship, if any, with LECG are being negotiated.

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        On August 14, 2009, the Committee met to consider whether to recommend to the board of directors of LECG that the board of directors approve the proposed Merger Agreement, Stock Purchase Agreement and related documents, and the Merger, the Investment and other transactions contemplated by those agreements and documents. Representatives of Jones Day and William Blair attended these meetings. At the Committee meeting, the representatives of William Blair reviewed with the Committee the proposed terms of the Merger for LECG from a financial point of view. The William Blair representatives also reviewed the proposed terms of the Investment. Following the presentation by William Blair, the representatives of Jones Day reviewed the terms of the Merger Agreement, the Stock Purchase Agreement and the related agreements with the Committee, noting that certain terms of the various agreements were still under negotiation.

        After the presentations from William Blair and Jones Day, the Committee approved a recommendation to the board of directors that the board of directors approve the proposed transactions. Ms. Richardson, Ms. Davis and Messrs. Bouton and Spencer voted in favor of the resolution. Mr. Liebeck abstained from the vote.

        Later that day, following the meeting of the Committee, the Committee presented its recommendation at a meeting of the full board of directors. The William Blair representatives reviewed the proposed terms of the Merger from a financial point of view for LECG. They orally indicated that, subject to subsequent changes in the market price of LECG's common stock, they expected that William Blair would be prepared to give its opinion that the consideration to be paid in the Merger was fair to LECG from a financial point of view. The Jones Day representatives reviewed the proposed terms of the Merger Agreement, the Stock Purchase Agreement and the other transaction documents. The LECG board of directors discussed the proposed transactions and asked the William Blair representatives for some additional information. The board of directors also abolished the position of Vice Chairman of the board of directors at this meeting.

        On August 17, 2009, LECG's board of directors convened a teleconference meeting to further consider and vote upon the Merger, the Investment and the related documents and transactions. Representatives of Jones Day and William Blair also participated in this meeting. The representatives of William Blair presented an analysis of the Merger from a financial point of view based on the closing trading price of LECG's common stock as of August 14, 2009 and rendered William Blair's oral opinion, which was subsequently confirmed in writing, that, based upon and subject to the assumptions and limitations set forth in the written opinion, the aggregate consideration to be paid by LECG in connection with the Merger was fair, from a financial point of view and as of the date of the opinion, to LECG. William Blair was not asked to, and did not, render any opinion with respect to the fairness of consideration paid or received by LECG in connection with the Investment.

        Jones Day then reviewed with the LECG board of directors the outcome of those remaining issues that had been unresolved as of the meeting of the board of directors on August 14, 2009. Following discussion, LECG's board of directors (i) by a vote of five in favor (Ms. Richardson, Ms. Davis and Messrs. Bouton, Spencer and Jeffery), one opposed (Dr. Teece) and two abstentions (Messrs. Liebeck and Boulton), approved and declared advisable the Merger Agreement and the transactions contemplated by the Merger Agreement and determined that the Merger Agreement and the transactions contemplated by the Merger Agreement, including the Merger, are fair to, and in the best interests of, LECG and its stockholders, and (ii) by a vote of seven in favor and one abstention (Dr. Teece), approved and declared advisable the Stock Purchase Agreement and the transactions contemplated by the Stock Purchase Agreement and determined that the Stock Purchase Agreement, the transactions contemplated by the Stock Purchase Agreement, including the Investment, and the adoption of the Amended Charter are fair to, and in the best interests of, LECG and its stockholders.

        During the meetings of the full board of directors of LECG on August 14 and August 17, 2009, Dr. Teece expressed his opposition to the Merger. He abstained from the vote on the Investment.

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Dr. Teece stated that he opposed the Merger for the following reasons: (i) his belief that the board of directors had not adequately considered the strategic fit between LECG (which he characterized as a high end expert consulting business) and Smart (which he characterized as a commodity services business), (ii) his belief that the board of directors had not adequately evaluated whether LECG would be able to retain key LECG experts after the announcement of the Merger, (iii) his belief that other capital raising transactions were available to LECG, (iv) his belief that the Committee had not involved enough LECG experts in the analysis of the Smart business and the prospects for the combined company after the Merger and (v) his belief that the Committee should have informed him about the proposed transaction earlier than it did, which would have allowed him additional time to evaluate the Merger.

        Mr. Liebeck abstained from the Committee vote to recommend approval of the Merger and the Investment to the full board of directors. Mr. Liebeck and Mr. Boulton abstained from the board vote approving the Merger; they both voted in favor of the Investment and related resolutions. Mr. Liebeck stated that his abstention was based on his belief that, prior to a vote on the Merger, LECG should undertake additional investigation of the risks and benefits of the Merger. He recommended that the Committee and the board of directors inform LECG's leading experts of the Merger and obtain their support for the Merger, thereby enabling the Committee and the board of directors to better assess the risk that the Merger would have a negative impact on key revenue-generating experts within LECG, which he believed would enable him to make a more informed decision. Mr. Boulton stated that his abstention was based upon his belief that the Committee had not involved enough LECG experts in the analysis of the Smart business and the prospects for the combined company after the Merger and that, consequently, he believed he did not have sufficient information to assess the risks to LECG of experts leaving LECG as a result of the Merger, the potential for conflicts between the LECG client base and the Smart client base and the strategic fit between LECG and Smart. Those directors who voted in favor of the Merger articulated their belief that the risks identified by Messrs. Liebeck and Boulton had been adequately addressed during the process of due diligence and negotiation of the Merger and the Investment.

        Those directors who voted in favor of the Merger also responded to Dr. Teece's reasons for his opposition to the Merger. They stated that (i) they had considered the strategic fit between LECG and Smart, in particular the benefits that Smart's recurring client engagements would provide, (ii) the Committee had explored multiple strategic alternatives in the prior 12 months, including six proposals from Dr. Teece and exploratory meetings with six other potential strategic partners, all in accordance with the authority delegated to the Committee by the board of directors, none of which came to fruition, (iii) the Committee had thoroughly considered both the risk that some experts might leave LECG as a result of the Merger and the prospect that experts who might otherwise leave LECG would be more inclined to remain with LECG as a result of the combined effect of the Merger and the Investment, and believed that the positive impact of the Merger and the Investment on LECG's ability to recruit and retain experts would outweigh the impact of potential departures by some experts, and (iv) Dr. Teece had for at least a year repeatedly expressed his desire to acquire LECG in conjunction with a private equity firm in a "going private" transaction and that, for this reason, the board of directors had delegated to the Committee the principal responsibility for evaluating and recommending to the board of directors various potential transactions, whether led by Dr. Teece or otherwise.

        The Merger Agreement and the Stock Purchase Agreement were executed by LECG, Smart and the Great Hill Entities, as applicable, on August 17, 2009.

        On August 18, 2009, prior to commencement of trading on NASDAQ, LECG issued a press release announcing the execution of the Merger Agreement and the Stock Purchase Agreement.

        Since the announcement of the Merger and the Investment on August 18, 2009 through November 17, 2009, none of LECG's top 50 experts (determined based on revenues originated by such

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individuals from January 1, 2009 through August 31, 2009) have voluntarily left LECG, nor have any of them informed LECG's management of an intention to do so; however, no assurances can be given that these experts will not in the future choose to leave LECG voluntarily.


LECG's Reasons for the Merger

        LECG's board of directors, by a majority vote, recommends that the LECG stockholder approve the Merger and the issuance of common stock pursuant thereto because the majority of the members of the board believe that the Merger will (i) provide LECG with (a) a substantial increase in revenues and profits that would substantially offset any short-term increase in net losses realized by the combined entity, (b) cost saving synergies, (c) a cash investment from a new investment partner that will have representation on the board of directors, and (d) new seasoned executive leadership; (ii) significantly enhance the LECG operating platform, allowing LECG to better grow and compete from a position of strength; and (iii) create a comprehensive client services platform to help clients of the combined company navigate and succeed in a rapidly changing world. Although the board of directors assessed the benefits and risks of each of the Merger and the Investment, both separately and in conjunction with the other, in an effort to be thorough in its decision-making process, the board of directors recognized and understood that Smart and the Great Hill Entities were only willing to engage in the transactions with LECG if the Merger and the Investment were consummated simultaneously. The board of directors agreed that the simultaneous closing of the Investment and the Merger was integral to the success of the Merger, as the Investment would add a substantial cash infusion at a valuation the board of directors did not believe was otherwise available.

        LECG provides expert services through highly credentialed experts and professional staff whose skills and qualifications provide LECG the opportunity to address complex, unstructured business and public policy problems. LECG delivers independent expert testimony and original authoritative studies in both adversarial and non-adversarial environments. LECG conducts economic, financial, accounting and statistical analyses to provide objective opinions and strategic advice to legislative, judicial, regulatory and business decision makers. LECG skills include electronic discovery, forensic accounting, data collection, econometric modeling and other types of statistical analyses, report preparation and oral presentation at depositions. LECG experts are renowned academics, former senior government officials, experienced industry leaders, technical analysts and seasoned consultants. LECG clients include Fortune Global 500 corporations, major law firms and local, state and federal governments and agencies in the United States and other countries throughout the world. Because LECG is a premium service provider, it does not offer a full array of services to a broad spectrum of clients. With the acquisition of Smart, the majority of the board of directors believes that the combined company will be better able to offer a comprehensive client services platform offering micro and macro services and answers to more client demands from a broader array of clients.

        LECG's projects historically have centered on decisions, disputes, proceedings or transactions in which clients are seeking expert advice and opinions. LECG's projects can terminate suddenly and without advance notice. LECG's clients may decide at any time to settle their disputes or proceedings, to abandon or defer their transactions or to take other actions that result in the early termination of a project. LECG's clients are ordinarily under no contractual obligation to continue using LECG's services. If an engagement is terminated unexpectedly, or even upon the planned completion of a project, LECG's professionals working on that engagement may be underutilized until assigned and transitioned to other projects. The termination, deferral or significant reduction in the scope of a single large engagement could negatively impact results of operations in a given reporting period. A majority of LECG's board of directors believes that Smart's business model, while yielding lower margins than LECG's, is subject to substantially less volatility and will provide the combined company with a more uniform and predictable revenue stream to offset LECG's current cyclical volatility.

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        In evaluating the Merger Agreement and the other transactions contemplated thereby, including the Merger, and recommending that LECG's stockholders approve the Merger Agreement, the Merger and the issuance of common stock pursuant thereto, LECG's board of directors consulted with outside legal counsel and financial advisors. LECG's board of directors also consulted with outside legal counsel regarding its fiduciary duties, legal due diligence matters, and the terms of the Merger Agreement and related agreements. Based on these consultations, the factors discussed above and the opinion of William Blair & Company (attached as Annex D), LECG's board of directors by a majority vote concluded that the Merger Agreement and transactions contemplated by the Merger Agreement, including the Merger, were and are fair to and in the best interests of LECG's stockholders and recommended that LECG stockholders approve the Merger and the issuance of common stock pursuant thereto.

        The factors that LECG's board of directors considered in reaching its determination included, but were not limited to, the following:

    Smart's experienced management team;

    the Investment and the mutual conditioning of the Investment and the Merger upon each other;

    the broadened service offerings the combined company will have to offer its clients;

    opportunities for cross-selling as a result of an expanded platform and increased breadth of service offerings to clients, including opportunities for the business process, regulatory compliance, risk management, information technology and infrastructure, tax, and other advisory services professionals from Smart to learn of client needs for expert services and to make client referrals to LECG experts, and vice versa;

    cost saving synergies related to reductions in occupancy, personnel and other general and administrative costs, estimated to be $6.0 million, but discounted to $4.0 million for purposes of analysis;

    historical and current information concerning Smart's and LECG's respective businesses, including trends in financial performance, financial condition, operations and competitive position;

    current financial market conditions, and historical market prices, volatility and trading information with respect to LECG's common stock;

    results of LECG's due diligence investigation of Smart;

    the opportunity for LECG's stockholders to participate in the potential future value of the combined company;

    the belief, after considering numerous potential strategic alternatives over two years, that the Merger and the Investment are more favorable to LECG's stockholders than other alternatives reasonably available to LECG and its stockholders;

    William Blair & Company's opinion, dated August 17, 2009, to LECG's board of directors that, as of that date and based upon and subject to the assumptions and qualifications stated in its opinion, the consideration to be paid by LECG to holders of Smart capital stock pursuant to the Merger Agreement was fair, from a financial point of view, to LECG, as more fully described below under the caption "Opinion of LECG's Financial Advisor"; and

    the terms and conditions of the Merger Agreement, including: (a) the determination that the relative percentage ownership of the combined company by LECG's stockholders and Smart's stockholders is consistent with LECG's perceived valuations of each company at the time LECG's board of directors approved the Merger Agreement; (b) the conditions to the closing of

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      the Merger, including the receipt of stockholder approval, the expiration of the HSR Act waiting period, and the simultaneous closing of the Investment, and the likelihood of those conditions being satisfied; (c) the absence of any terms providing for an adjustment to the number of shares to be issued in connection with the Merger; (d) the fact that the Merger involves no cash merger consideration, even with respect to potential indemnification claims (which would be satisfied in shares of our common stock); and (e) the belief of a majority of LECG's board of directors that the termination fees payable in the circumstances set forth in the Merger Agreement, were reasonable in the context of termination fees that were payable in other comparable transactions and would not be likely to preclude another party from making a superior proposal for LECG.

        In the course of its deliberations, LECG's board of directors also considered a variety of risks and other countervailing factors related to entering into the Merger Agreement, including the following:

    the risk that the Merger might not be completed in a timely manner or at all due to failure to satisfy the closing conditions, a number of which are outside of LECG's control;

    if the Merger is not completed, the potential adverse effect of the public announcement of the Merger on LECG's business, including its key business relationships, LECG's ability to attract and retain executive management, experts and other key employees and LECG's overall competitive position;

    the immediate and substantial dilution of the equity interests and voting power of LECG's existing stockholders upon completion of the Merger and the Investment;

    the ability of the Great Hill Entities to significantly influence the combined company's business strategy after the completion of the Merger and the Investment;

    the risk that the combined company may need additional financing, and be unable to raise such additional capital and that such additional capital, even if available, will be further dilutive to LECG's stockholders and may be at a lower valuation than reflected in the Investment;

    the restrictions that the Merger Agreement imposes on soliciting competing acquisition proposals;

    the fact that LECG would be obligated to pay significant termination fees under certain specified circumstances;

    the restrictions on the conduct of LECG's business prior to the completion of the Merger, which require LECG to carry on its business in the usual, regular and ordinary course in substantially the same manner as previously conducted, subject to specific additional restrictions;

    the challenges and costs of integrating the administrative and other operations of the two companies, including operations outside of the United States, and the substantial expenses to be incurred in connection with the Merger, including the risks that delays or difficulties in completing the administrative integration, and such other expenses, could adversely affect the combined company's operating results and preclude the achievement of some benefits anticipated from the Merger;

    the possible volatility, at least in the short term, of the trading price of LECG's common stock resulting from the announcement and pendency of the Merger;

    the consents required under both the LECG and Smart credit facilities and the fact that if either or both consents are not obtained from the respective lenders prior to the closing of the Merger, a material amount of indebtedness of the combined company may become immediately due and payable in full;

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    the possible loss of key management, important expert witnesses or key professionals or other personnel of LECG; and

    the risk of diverting management's attention from day-to-day operations to implement the Merger and the subsequent integration of the two companies.

        The foregoing information and factors considered by LECG's board of directors are not intended to be exhaustive but are believed to include all of the material factors considered by LECG's board of directors. In view of the variety of factors and the amount of information considered, LECG's board of directors did not find it practicable to, and did not, quantify, rank or otherwise assign relative weights to the specific factors it considered in approving the Merger and Merger Agreement. Although the board of directors was mindful that the Company would incur integration costs as a result of the Merger, it did not quantify those costs because the information required to do so was not available, and such costs were considered to be typical business combination expenses and unlikely to be large or unusual in view of the overall transaction and the expected synergies. The board did not quantify the amount of additional financing that might be needed by the combined company because the need for any additional financing is not yet apparent or likely, and the amount, if any, of additional financing is dependent on information that the Company will not have until after the closings of the Merger and the Investment. In addition, individual members of LECG's board of directors may have given different weights to different factors. LECG's board of directors considered all of these factors as a whole, and overall considered them to be favorable to and to support its determination.


NASDAQ Shareholder Approval Requirements

        LECG is submitting the proposal to approve the Merger, and the issuance of its common stock pursuant thereto, and the Investment, and the issuance of the Series A Preferred Stock pursuant thereto, for shareholder approval pursuant to Rule 5635 of the NASDAQ Marketplace Rules ("NASDAQ Rule 5365"), which contains the qualitative listing requirements applicable to NASDAQ listed companies, such as LECG. Among other items, NASDAQ Rule 5365 requires shareholder approval prior to the issuance of securities in the following circumstances:

    in connection the acquisition of the stock or assets of another company if 20% of more of the common stock of the issuer outstanding before such issuance would be issued in connection with such acquisition transaction; and

    in connection with a transaction other than a public offering involving the sale or issuance by the issuer of common stock (or securities convertible into or exercisable for common stock) equal to 20% or more of the common stock or 20% or more of the voting power outstanding before the issuance for less than the greater of book or market value of the stock.

        Applying these requirements to the Merger and the Investment, LECG is seeking shareholder approval of the following issuances and related transactions in connection with the Merger and the Investment:

    the issuance of 10,927,869 shares of LECG common stock to the Great Hill Entities pursuant to the Merger Agreement plus any additional number of shares of LECG common stock which may be issuable to the Great Hill Entities in the future to satisfy our indemnification obligations set forth in the Merger Agreement; and

    the issuance, at a purchase price that may be less than book or market value, to the Great Hill Entities of 6,313,131 shares of the Series A Preferred Stock plus the shares of LECG common stock which may be issuable upon conversion thereof and any additional shares of capital stock that LECG may issue to the Great Hill Entities from time to time in compliance with the preemptive rights set forth in the Governance Agreement entered into in connection with the Investment.

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No Dissenters' Rights

        Under applicable Delaware law, LECG stockholders are not entitled to dissenters' or appraisal rights with respect to the approval of the Merger, the Investment, the Amended Charter or the other proposals described in this proxy statement.


Impact of the Merger and the Investment on Existing LECG Stockholders

        Before voting, each LECG stockholder should consider the fact that the Investment will provide substantial capital that will be critically important to the survival and growth of LECG and that the Merger will result in LECG's acquisition of Smart and the expansion of its business. If the Merger, the Investment and the Amended Charter are approved by LECG stockholders, LECG will at the closing of the transactions issue an aggregate of 10,927,829 shares of LECG common stock and 6,313,131 shares of Series A Preferred Stock, which are initially convertible into LECG common stock on a one-for-one basis. As a result, the Merger and the Investment will have a dilutive effect on current LECG stockholders whose aggregate percentage ownership in LECG will decline significantly as a result of the Merger and the Investment. The number of shares issued pursuant to the Merger and the Investment will increase substantially the number of outstanding shares of LECG voting stock. This means that LECG current stockholders will own a much smaller interest in LECG as a result of the Merger and the Investment. For purposes of example only, a hypothetical LECG stockholder who owned approximately 1.0% of our voting stock outstanding as of August 14, 2009, would own approximately 0.6% of our voting stock outstanding immediately after the closing of the Merger and the Investment. As described more fully elsewhere in this proxy statement, upon the closing of the Merger and the Investment, the Great Hill Entities will own approximately 40% of LECG's outstanding voting stock.

        All shares of common stock issued in connection with the Merger and the common stock issuable upon conversion of the Series A Preferred Stock issued in connection with the Investment will be entitled to registration rights as described elsewhere in this proxy statement. These shares will be available for immediate resale pursuant to any registration statement we are obligated to file with the SEC or in connection with an exemption from registration under Rule 144 of the Securities Act. The market price of LECG's common stock could fall as a result of such resales due to the increased number of shares of common stock available for sale in the public market.


Opinion of LECG's Financial Advisor

        William Blair was retained to act as financial advisor to LECG in connection with the Merger. As part of its engagement, LECG requested that William Blair render a fairness opinion relating to the Merger. On August 17, 2009, William Blair delivered its oral opinion to the board of directors of LECG and subsequently confirmed in writing, that, as of that date and based upon and subject to the assumptions and qualifications stated in its opinion, the consideration to be paid by LECG to holders of Smart capital stock pursuant to the Merger Agreement was fair, from a financial point of view, to LECG.

        William Blair provided the opinion described above for the information and assistance of LECG's board of directors in connection with its consideration of the Merger. William Blair's opinion to LECG's board of directors was one of many factors taken into consideration by LECG's board of directors in making its determination to approve the Merger Agreement. The terms of the Merger Agreement and the merger consideration, however, were determined through negotiations between LECG and Smart and were approved by LECG's board of directors. William Blair provided financial advice to LECG during these negotiations. However, William Blair did not recommend to LECG any specific amount of merger consideration or other form of consideration or that any specific amount of merger consideration or other form of consideration constituted the only appropriate consideration for

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the proposed merger. William Blair's opinion was reviewed and approved by William Blair's fairness opinion committee. William Blair has consented to the inclusion in this proxy statement of its opinion and the description of its opinion appearing under this subheading "Opinion of LECG's Financial Advisor."

        The full text of William Blair's written opinion, dated August 17, 2009, is attached as Annex D to this document and incorporated into this document by reference. You are urged to read the entire opinion carefully to learn about the assumptions made, general procedures followed, matters considered and limits on the scope of the review undertaken by William Blair in rendering its opinion. William Blair's opinion relates only to the fairness, as of the date of the opinion and from a financial point of view to LECG, of the merger consideration to be paid by LECG in connection with the Merger pursuant to the Merger Agreement, does not address any other aspect of the proposed merger or any related transaction, and does not constitute a recommendation to any stockholder as to how that stockholder should vote at any special meetings. William Blair did not address the merits of the underlying decision by LECG to engage in the Merger and did not express any opinion as to the fairness of any consideration received or amount paid by LECG in connection with the Investment. The following summary of William Blair's opinion is qualified in its entirety by reference to the full text of the opinion. William Blair's opinion was directed to LECG's board of directors for its benefit and use in evaluating the fairness of the merger consideration.

        In connection with its opinion, William Blair examined:

    the terms and conditions set forth in a draft of the Merger Agreement, dated August 17, 2009, and the most recent drafts of any ancillary agreements as of that date, based on the assumption that the Merger would be consummated on the terms described therein, without any waiver or amendment of any material terms or conditions by LECG;

    the audited historical financial statements of LECG for the four years ended December 31, 2008 and of Smart for the three years ended December 31, 2008;

    the unaudited interim financial statements of LECG and Smart, respectively, for the six months ended June 30, 2009 and the six months ended June 30, 2008;

    certain (i) internal business, operating and financial information and forecasts of LECG and Smart prepared by senior management of LECG and Smart, respectively, which are referred to as the "forecasts" throughout this description of William Blair's opinion; (ii) information regarding the strategic, financial and operational benefits anticipated from the Merger and the prospects of LECG (with and without the Merger) prepared by senior management of LECG, which are referred to as the "expected benefits" throughout this description of William Blair's opinion; and (iii) the pro forma impact of the Merger and the Investment on the earnings per share of LECG based on certain pro forma financial information prepared by the senior management of LECG;

    information provided by senior management of LECG regarding the amount and timing of cost savings and related expenses and synergies which senior management of LECG expects will result from the Merger, which are referred to as the "expected synergies" throughout this description of William Blair's opinion;

    information regarding publicly available financial terms of certain other business combinations William Blair deemed relevant;

    the financial position and operating results of Smart compared with those of certain publicly traded companies William Blair deemed relevant;

    current and historical market prices and trading volumes of the common stock of LECG; and

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    certain other publicly available information regarding LECG and Smart, respectively.

        William Blair also held discussions with members of the senior management of LECG and Smart to discuss the foregoing, the past and current business operations, and the financial condition and future prospects, of LECG and Smart. William Blair also held discussions with LECG's board of directors, including the committee of independent directors, and legal counsel for LECG's special committee to discuss Smart, the Merger and the results of its analysis and examination, and considered such other matters that it deemed relevant to its inquiry and took into account such accepted financial and investment banking procedures and considerations that it deemed relevant or appropriate.

        In conducting its review and analysis and rendering its opinion, William Blair assumed and relied, without any independent verification, upon the accuracy and completeness of all the information examined by or otherwise reviewed or discussed with William Blair for purposes of its opinion, including, without limitation, the forecasts, the expected benefits and the expected synergies, each as provided by senior management of LECG and Smart, as applicable. William Blair did not make or obtain an independent valuation or appraisal of the assets, liabilities or solvency of LECG or Smart, nor was William Blair furnished with any such valuation or appraisal. William Blair was advised by the senior management of LECG and Smart that the forecasts, the expected benefits and the expected synergies examined by William Blair were reasonably prepared on bases reflecting the best currently available estimates and judgments of the senior management of LECG and Smart, as the case may be. In that regard, William Blair assumed, with the consent of LECG's board of directors, that (1) the forecasts would be achieved and the expected benefits and expected synergies would be realized in the amounts and at the times contemplated thereby, (2) all material assets and liabilities (contingent or otherwise) of LECG and Smart were as set forth in the financial statements or other information made available to William Blair of LECG and Smart, respectively, and (3) the financing arrangement for the continuing entity would not be materially different from the arrangements in effect for LECG and Smart as of the date of the opinion letter. William Blair expressed no opinion with respect to the forecasts, the expected benefits or the expected synergies or the estimates and judgments on which they were based. In rendering its opinion, William Blair assumed that the Merger would be consummated on the terms and conditions set forth in the draft of the Merger Agreement dated August 17, 2009 and the most recent drafts of any ancillary agreements as of that date, without any waiver or amendment of any material terms or conditions by LECG. William Blair relied as to all legal, tax and accounting matters on advice of LECG's management and LECG's third-party legal counsel and tax and accounting advisors.

        William Blair did not express any opinion as to the price at which shares of LECG common stock will trade at any future time or as to the effect of the Merger on the trading price of LECG common stock. The trading price of LECG common stock may be affected by a number of factors, including, but not limited to:

    dispositions of LECG common stock by stockholders within a short period of time after the announcement or effectiveness of the Merger;

    changes in the prevailing interest rates and other factors which generally influence the price of securities;

    adverse changes in the current capital markets;

    the occurrence of adverse changes in the financial condition, business, assets, results of operations or prospects of LECG or of Smart or in the specialty consulting market;

    any necessary actions by or restrictions of federal, state or other governmental agencies or regulatory authorities; and

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    timely completion of the Merger on terms and conditions that are acceptable to all parties at interest.

        William Blair's opinion did not address the merits of the underlying decision by LECG to engage in the Merger, the relative merits of the Merger as compared to any alternative business strategies that might exist for LECG or the effect of any other transaction in which LECG might engage. In particular, William Blair was not requested to examine, and accordingly did not express any opinion as to, the fairness of any consideration received or amount paid by LECG in connection with the Investment. William Blair did not consider and expressed no opinion as to the amount or nature of the compensation paid to any of LECG's or Smart's officers, directors or employees (or any class of such persons), whether such payments are made to persons holding such positions before or after the Merger, relative to the compensation to other stockholders. William Blair's opinion was based upon economic, market, financial and other conditions existing on and as could be evaluated as of, and other information disclosed to William Blair as of, the date of such opinion. The opinion noted that subsequent developments might affect its opinion and that William Blair disclaimed any obligation to update, revise or reaffirm its opinion. William Blair's opinion does not constitute a recommendation to any stockholder as to how that stockholder should vote at any special meetings.

        William Blair evaluated LECG's historical and future business prospects and considered the following factors, which were communicated to William Blair by senior management of LECG and which William Blair assumed to be true without further investigation: (1) LECG has amended its current credit agreement multiple times and may face covenant and liquidity issues in the future and if the transactions contemplated hereby are not consummated, LECG will likely need to pursue a private investment in public equity (PIPE) transaction, (2) LECG has announced its current chief executive officer is retiring and LECG is actively looking for a new chief executive officer, (3) the employment of David Teece, co-founder of LECG, ex-officio member of LECG's executive management team, and professional consultant to LECG, was terminated on August 12, 2009, (4) LECG has limited backlog and revenue visibility and (5) LECG has had conversations with several potential buyers about a sale of the company over the last twelve months, none of which have led to a transaction.

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        The following is a summary of the material financial analyses performed and material factors considered by William Blair in arriving at its opinion. William Blair performed certain procedures, including each of the financial analyses described below, and reviewed with LECG's board of directors, including the special committee of independent directors and the senior management of LECG the assumptions upon which such analyses were based, as well as other factors. Although the summary does not purport to describe all of the analyses performed or factors considered by William Blair in this regard, it does describe the principal elements of analyses performed by William Blair in arriving at its opinion.


Selected Public Company Analysis

        William Blair reviewed and compared certain financial information relating to Smart to corresponding financial information, ratios and public market multiples for certain publicly traded companies with operations in the specialty consulting and professional services industries that William Blair deemed relevant. The companies selected by William Blair were:

    CBIZ, Inc.

    CRA International, Inc.

    Duff & Phelps Corporation

    Exponent, Inc.

    FTI Consulting, Inc.

    Navigant Consulting, Inc.

    LECG Corporation

    Resources Connection, Inc.

    Robert Half International Inc.

        William Blair selected these companies because they are the publicly traded companies that engage in businesses reasonably comparable to those of Smart. None of the selected companies is identical to Smart. Accordingly, any analysis of the selected publicly traded companies necessarily involved complex considerations and judgments concerning the differences in financial and operating characteristics and other factors that would necessarily affect the analysis of trading multiples of the selected publicly traded companies.

        Among the information William Blair considered was revenue and earnings before interest, taxes, depreciation and amortization (commonly referred to as "EBITDA"). William Blair analyzed the selected companies in terms of the equity market value plus book value of debt, less cash and cash equivalents ("enterprise value") as a multiple of revenue for the latest twelve months of publicly available information, EBITDA for the latest twelve months of publicly available information adjusted to add back certain unusual or non-recurring expenses, 2009 forecast EBITDA adjusted to add back certain unusual or non-recurring expenses and 2010 forecast EBITDA. The operating results and the corresponding derived multiples for Smart and each of the selected companies were based on each company's most recent available publicly disclosed financial information for the last 12 months ("LTM"), 2009 and 2010 forecasts and closing share prices as of August 14, 2009. The enterprise value of the transaction is based on the equity value implied by the merger consideration of 10,927,869 shares of LECG common stock, plus the book value of total debt, less cash and cash equivalents ("net debt" of $32.4 million as of June 30, 2009) assumed to be included in the Merger.

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        William Blair then compared the implied transaction multiples for the Merger to the range of trading multiples for the selected companies. Information regarding the multiples from William Blair's analysis of selected publicly traded companies is set forth in the following table.

 
  Implied
Transaction
Multiples
Based on
8/14/09
Closing
Stock Price
  Implied
Transaction
Multiples
Based on
20-Day Average
as of 8/14/09
   
   
   
   
 
 
  Selected Public Company
Valuation Multiples
 
Multiple
  Minimum   Median   Mean   Maximum  

Enterprise Value/LTM Net Fee Revenue

    0.75x     0.74x     0.38x     0.98x     1.21x     2.12x  

Enterprise Value/LTM Adjusted EBITDA

   
12.9x
   
12.8x
   
7.0x
   
9.1x
   
9.2x
   
13.0x
 

Enterprise Value/Adjusted 2009 Estimated EBITDA

   
6.9x
   
6.8x
   
6.8x
   
8.6x
   
9.1x
   
13.3x
 

Enterprise Value/2010 Estimated EBITDA

   
6.2x
   
6.2x
   
5.6x
   
7.4x
   
8.1x
   
14.5x
 


Selected M&A Transactions Analysis

        William Blair performed an analysis based on publicly-available information of selected recent business combinations in the specialty consulting and professional services industries consisting of transactions announced and closed since 2003 where financial information was publicly disclosed. In total, William Blair examined 14 transactions with publicly disclosed valuations that were chosen based on William Blair's judgment that they were generally similar, in whole or in part, to the Merger. The selected transactions were not intended to be representative of the entire range of possible transactions in the industry. The 14 transactions examined were (target/acquirer (date announced)):

    Stockamp & Associates, Inc. / Huron Consulting Group Inc. (July 2008)

    Attenex Corporation / FTI Consulting, Inc. (June 2008)

    Chicago Partners, LLC / Navigant Consulting, Inc. (April 2008)

    First Consulting Group, Inc. / Computer Sciences Corporation (October 2007)

    Infocrossing, Inc. / Wipro Technologies Ltd. (August 2007)

    Callaway Partners, LLC / Huron Consulting Group Inc. (July 2007)

    Constella Group, LLC / SRA International Inc. (June 2007)

    Dr. Heissmann GmbH / Watson Wyatt Worldwide, Inc. (May 2007)

    Covansys Corporation / Computer Sciences Corporation (April 2007)

    Keane, Inc. / Caritor, Inc. (February 2007)

    Hp3, Inc. / Navigant Consulting, Inc. (November 2006)

    Competition Policy Associates, Inc. / FTI Consulting, Inc. (November 2005)

    Superior Consultant Holdings Corporation / Affiliated Computer Services, Inc. (December 2004)

    Lexecon / FTI Consulting, Inc. (September 2003)

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        Although William Blair analyzed the multiples implied by the selected transactions and compared them to the implied transaction multiples of the Merger, none of these transactions or associated target companies is identical to the Merger or Smart. Accordingly, any analysis of the selected transactions necessarily involved complex considerations and judgments concerning the differences in financial and operating characteristics, parties involved and terms of their transactions and other factors that would necessarily affect the implied value of Smart versus the values of the companies in the selected transactions. In addition, William Blair noted that on average the S&P 500 index had declined by approximately 26% since each of the selected transactions were announced.

        William Blair reviewed the consideration paid in the selected transactions in terms of the enterprise value of such transactions as a multiple of LTM revenue and LTM EBITDA. William Blair compared the resulting range of transaction multiples of sales and EBITDA for the selected transactions to the implied transaction multiples for the merger. Information regarding the multiples from William Blair's analysis of selected transactions is set forth in the following table:

 
   
  Implied
Transaction
Multiples
Based on
20-Day Average
as of 8/14/09
   
   
   
   
 
 
   
  Selected Transaction
Valuation Multiples
 
 
  Implied
Transaction
Multiples as
of 8/14/09
 
Multiple
  Minimum   Median   Mean   Maximum  

Enterprise Value/LTM Revenue

    0.70x     0.69x     0.89x     1.69x     1.82x     3.52x  

Enterprise Value/LTM EBITDA

   
12.9x
   
12.8x
   
6.3x
   
10.4x
   
10.5x
   
19.0x
 

Enterprise Value/Adjusted 2009 Estimated EBITDA

   
6.9x
   
6.8x
   
NA
   
NA
   
NA
   
NA
 


Discounted Cash Flow Analysis

        William Blair utilized the forecasts provided by the management of Smart to perform a discounted cash flow analysis of Smart's projected future cash flows for the period commencing January 1, 2010 and ending December 31, 2014. Using discounted cash flow methodology, William Blair calculated the present values of the projected free cash flows for Smart (excluding expected synergies). William Blair used terminal value multiples and perpetual growth rates to calculate terminal values. In the terminal value multiple analysis, William Blair assumed terminal value multiples ranging from 7.0x to 9.0x and discount rates ranging from 10% to 14%. William Blair selected the EBITDA terminal value range based on William Blair's review of, among other matters, the current and historical trading multiples of the companies identified above under the subheading "—Selected Public Companies Analysis." In the perpetual growth rate analysis, William Blair assumed perpetual growth rates ranging from 3.5% to 5.5% and discount rates ranging from 10% to 14%. William Blair selected the perpetual growth rate range based on William Blair's review of, among other matters, estimated inflation rates and long-term industry growth rates. William Blair determined the appropriate discount rate range based upon an analysis of the weighted average cost of capital of Smart and other comparable companies that William Blair deemed relevant in its expertise and judgment. William Blair aggregated (1) the present value of the free cash flows over the applicable forecast period with (2) the present value of the range of terminal values. The aggregate present value of these items represented the enterprise value range. An equity value was determined by subtracting the net debt assumed to be included in the transaction from the enterprise value. The range of equity values for Smart (excluding the expected synergies) implied by the discounted cash flow analysis ranged from approximately $83 million to $130 million and $67 million to $191 million using the terminal value multiple and perpetual growth rate methodologies, respectively; as compared to the implied transaction equity value of the Merger of approximately $39.9 million based on the August 14, 2009 closing price of LECG's common stock and $39.1 million based on the 20-day average price as of August 14, 2009.

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Leveraged Acquisition Analysis

        William Blair utilized information included in the forecasts provided by Smart's management to perform an analysis as to the price that could be paid by an acquirer in a leveraged acquisition of Smart. In this analysis, William Blair assumed a capital structure and interest rate representative of the prevailing market for leveraged acquisitions for companies similar to Smart. This analysis assumed (i) a five year holding period commencing January 1, 2010 and ending December 31, 2014; (ii) a targeted internal rate of return to equity investors of approximately 25% to 30%; and (iii) a range of exit multiples of projected 2014 EBITDA of 7.0x to 9.0x. William Blair noted that the assumed EBITDA exit multiple range was based on the range of multiples from the selected public company trading analysis and selected transaction analysis shown above. This analysis indicated that the enterprise value that an acquirer in a leveraged buyout might be willing to pay for Smart ranged from $70.0 to $95.0 million, as compared to the merger consideration of $72.3 million based on the August 14, 2009 closing price of LECG's common stock and $71.5 million based on the 20-day average price of LECG's common stock as of August 14, 2009.


Earnings Accretion/Dilution Analysis

        William Blair analyzed the pro forma impact of the Merger on projected fiscal year 2010 earnings per share of LECG following the Merger, assuming the Merger closes prior to December 31, 2009. William Blair utilized Smart's and LECG's projected earnings for 2010 as set forth in the forecasts provided by the management of Smart and LECG. William Blair's analysis included assumptions regarding, among other matters, various structural considerations, the estimated allocation of purchase price to amortizable intangible assets, the period over which such intangibles would be amortized, and the partial synergies expected to be achieved in 2010 as provided by the management of LECG. William Blair compared the earnings per share of LECG common stock, on a stand-alone basis, to the earnings per share of the common stock of the combined company on a pro forma basis for 2010. The results of the pro forma merger analysis suggested that the transaction would be accretive to LECG on an earnings per share basis in fiscal 2010 assuming achievement of the expected synergies anticipated by LECG management to result from the Merger and excluding one-time costs associated with the Merger. The results of William Blair's analysis are not necessarily indicative of future operating results or financial position. The actual results achieved by LECG may vary from projected results, and the variations may be material.

        In conducting its analysis, William Blair also evaluated a number of other transaction considerations. First, the Merger is facilitating the Investment. Second, Smart has certain attractive tax characteristics that may result in incremental cash tax deductions. Finally, the combined company may be able to create a material amount of synergies.


General

        The preparation of an opinion regarding fairness is a complex analytic process involving various determinations as to the most appropriate and relevant methods of financial analysis and the application of those methods to the particular circumstances, and, therefore, such an opinion is not readily susceptible to partial analysis or summary description. The preparation of an opinion regarding fairness does not involve a mathematical evaluation or weighing of the results of the individual analyses performed, but requires William Blair to exercise its professional judgment, based on its experience and expertise, in considering a wide variety of analyses taken as a whole. Each of the analyses conducted by William Blair was carried out in order to provide a different perspective on the financial terms of the Merger and add to the total mix of information available. William Blair did not form a conclusion as to whether any individual analysis, considered in isolation, supported or failed to support an opinion about the fairness of the consideration to be paid by LECG. Rather, in reaching its conclusion, William Blair considered the results of the analyses in light of each other and ultimately reached its opinion based on

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the results of all analyses taken as a whole. William Blair did not place particular reliance or weight on any particular analysis, but instead concluded that its analyses, taken as a whole, supported its determination. Accordingly, notwithstanding the separate factors summarized above, William Blair believes that its analyses must be considered as a whole and that selecting portions of its analyses and the factors considered by it, without considering all analyses and factors, may create an incomplete view of the evaluation process underlying its opinion. No company or transaction used in the above analyses as a comparison is directly comparable to LECG, Smart or the Merger. In performing its analyses, William Blair made numerous assumptions with respect to industry performance, business and economic conditions and other matters. The analyses performed by William Blair are not necessarily indicative of future actual values or results, which may be significantly more or less favorable than suggested by such analyses.


Engagement of William Blair

        William Blair is a nationally recognized firm and, as part of its investment banking activities, is regularly engaged in the valuation of businesses and their securities in connection with merger transactions and other types of strategic combinations and acquisitions. William Blair is familiar with LECG, having acted as a financial advisor to LECG in connection with, and having participated in, certain of the negotiations leading to, the Merger Agreement. William Blair has also provided certain investment banking services to Great Hill Partners, LLC or its portfolio companies from time to time, but it is not currently providing any investment banking or other services to Great Hill Partners, LLC, Smart or any other portfolio companies of Great Hill Partners, LLC. In addition, in the ordinary course of its business, William Blair and its affiliates may beneficially own or actively trade shares of common stock and other securities of LECG for its own account and for the accounts of customers, and, accordingly, may at any time hold a long or short position in these securities.

        LECG hired William Blair based on its qualifications and expertise in providing financial advice to companies in general and professional services firms in particular, and on its reputation as a nationally recognized investment banking firm. Pursuant to a letter agreement, dated July 13, 2009, William Blair was paid a retainer fee of $75,000 for its role as financial advisor and an additional $400,000 upon the execution of the Merger Agreement on August 17, 2009. In addition, under the terms of the July 13, 2009 letter agreement, William Blair will receive an additional fee of $525,000 contingent upon consummation of the Merger. LECG has also agreed to reimburse William Blair for all of its out-of-pocket expenses (including fees and expenses of its counsel) reasonably incurred by it in connection with its services and will indemnify William Blair against certain liabilities that may arise out of its engagement, including certain liabilities under the federal securities laws.


Listing on the NASDAQ Global Select Market of LECG Shares Issued Pursuant to the Merger

        LECG has agreed to use its reasonable best efforts to cause the shares of LECG common stock to be issued pursuant to the Merger to be approved for listing on the NASDAQ Global Select Market before the completion of the Merger, subject to notice of issuance.

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THE MERGER AGREEMENT

        The following summary describes material provisions of the Merger Agreement. This summary does not purport to be complete and may not contain all of the information about the Merger Agreement that is important to you. This summary is subject to, and qualified in its entirety by reference to, the Merger Agreement, which is attached to this proxy statement as Annex A. You are urged to read the Merger Agreement carefully and in its entirety, as it is the legal document governing the Merger. In the event of any discrepancy between the summary below and the terms of the Merger Agreement, the terms of the Merger Agreement shall control.

        The Merger Agreement summary below is included in this proxy statement only to provide you with information regarding the terms and conditions of the Merger Agreement, and not to provide any other factual information regarding LECG, Smart or their respective businesses. Accordingly, the representations and warranties and other provisions of the Merger Agreement should not be read alone, but instead should be read only in conjunction with the information provided elsewhere in this proxy statement and in the documents delivered along with this proxy statement. See "Where You Can Find Additional Information" on page 183.

        The representations, warranties and covenants contained in the Merger Agreement and described in this proxy statement were made only for purposes of the Merger Agreement and as of specific dates and may be subject to more recent developments, were made solely for the benefit of the parties to the Merger Agreement and may be subject to limitations agreed upon by the contracting parties, including being qualified by reference to confidential disclosures, for the purposes of allocating risk between parties to the Merger Agreement instead of establishing these matters as facts, and may apply standards of materiality in a way that is different from what may be viewed as material by you or by other investors. Accordingly, these representations and warranties alone may not describe the actual state of affairs as of the date they were made or at any other time. The representations and warranties contained in the Merger Agreement do not survive the effective time of the Merger, except for certain representations which survive for 12 months following the effective time. Investors should not rely on the representations, warranties and covenants or any description thereof as characterizations of the actual state of facts or condition of LECG, Smart, Red Sox Acquisition Corporation, or Red Sox Acquisition LLC or any of their respective subsidiaries or affiliates. Moreover, information concerning the subject matter of the representations, warranties and covenants may change after the date of the Merger Agreement, which subsequent information may or may not be fully reflected in public disclosures by LECG and Smart. LECG is not currently aware of specific material facts that contradict the representations or warranties in the Merger Agreement that have not otherwise been disclosed in this proxy statement or in LECG's other reports filed with the SEC, and LECG will file corrective disclosures with the SEC if it becomes aware of any such specific material facts.


Structure of the Merger

        The Merger will be accomplished in two steps. The first step of the Merger will involve Red Sox Acquisition Corporation, a newly formed, wholly-owned subsidiary of LECG, merging with and into Smart. Smart will survive the first step of the Merger as a wholly-owned subsidiary of LECG. As soon as practicable following the first step of the Merger described in the preceding sentence, Smart shall merge with and into Red Sox Acquisition LLC, a newly formed, wholly-owned subsidiary of LECG, with Red Sox Acquisition LLC surviving the Merger. LECG expects to change Red Sox Acquisition LLC's name to "Smart Business Holdings, LLC" in connection with the closing of the Merger. The Merger is being accomplished in two steps in order to provide added assurance and protection that it will not result in the recognition of gain or loss to Smart for U.S. federal income tax purposes.


Completion of the Merger

        The Merger will be completed at the time of filing of certificates of merger with the Secretary of State of the State of Delaware or at such later time as may be specified in such certificates of merger

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with the written consent of LECG and Smart. The closing of the Merger will take place on the date that is 3 business days after the satisfaction or waiver of all of the conditions to completion of the Merger set forth in the Merger Agreement (other than certain conditions that by their nature are to be satisfied on the closing date, but subject to the satisfaction or waiver of each of such conditions), or at such other time as LECG and Smart may agree in writing.


Consideration in the Merger

        The Merger Agreement provides that, upon completion of the Merger, each share of Smart redeemable preferred stock will be converted into the right to receive shares of LECG common stock. Excluding potential issuances or forfeiture of shares discussed below under the heading "Indemnification", 10,927,869 shares of LECG common stock are to be issued to the holders of Smart redeemable preferred stock pursuant to the Merger Agreement. In connection with the Merger, each outstanding share of Smart's redeemable preferred stock will be exchanged for 176.57 shares of LECG's common stock. The Great Hill Entities own all of Smart's outstanding redeemable preferred stock and will be entitled to receive all of the merger consideration pursuant to the Merger Agreement and Smart's certificate of incorporation.

        Smart's certificate of incorporation provides for a liquidation preference in favor of the preferred stock of Smart, pursuant to which the holders of preferred stock of Smart are entitled to receive approximately $64.7 million in cash or assets upon the occurrence of a change in control, which would include the Merger, before any proceeds are distributed to the holders of common stock of Smart. For purposes of allocating the value to be received by Smart stockholders in the Merger, the determination was made at the time the holders of Smart's preferred stock and common stock voted to approve the Merger and the preferred stockholders waived their right to receive their full liquidation preference in cash. At that time, the aggregate value of the shares of LECG common stock to be issued in the Merger was less than $40 million, based on the closing trading price per share of LECG common stock of $3.65 as of August 14, 2009, which was significantly less than the preferred stock liquidation preference. As a result, pursuant to Smart's certificate of incorporation and the Merger Agreement, no merger consideration will be payable by LECG to the holders of Smart's common stock or holders of options, warrants or other rights to purchase Smart's common stock.

        Each share of Smart common stock will automatically be cancelled upon the closing of the Merger and no merger consideration will be delivered or deliverable in exchange therefor because the liquidation preference in favor of the redeemable preferred stock of Smart exceeds the value of the LECG common shares to be issued pursuant to the Merger. Smart's common stockholders are entitled to appraisal rights in connection with the Merger. If any Smart common stockholder validly exercises its appraisal rights, LECG will be obligated to make any payments resulting from the determination by Delaware Court of Chancery of the fair value of the Smart common shares.

        The merger consideration will be adjusted to reflect the effect of any stock split or other like change with respect to Smart capital stock or LECG common stock occurring (or having a record date) after the date of the Merger Agreement and prior to the effective time of the Merger.


Treatment of Smart Stock Options; New LECG Stock Options

        The Merger Agreement provides that Smart shall take all necessary actions to accelerate in full the vesting of all outstanding Smart stock options and then effect the cancellation of all such options, with such cancellation to be effective immediately prior to the effective time of the Merger. No merger consideration shall be issuable to holders of Smart stock options. Under the Merger Agreement, Smart is required to take all actions necessary to terminate the Smart stock option plan and cancel all outstanding options as of immediately prior to the effective time of the Merger.

        Pursuant to the Merger Agreement, LECG has committed to grant options to purchase up to 500,000 shares of LECG common stock to employees of Smart that Smart and LECG have mutually

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agreed will receive options from LECG and that remain employed by LECG affiliated entities following the Merger. The options will be granted under LECG's stock option plan effective upon the closing of the Merger and the Investment. LECG expects that the exercise price for these stock options will be the fair market value of LECG's common stock on the date such options are granted following the closing of the Merger.


Fractional Shares

        LECG will not issue any fractional shares of common stock in connection with the Merger. Instead, the Merger Agreement provides that each holder of Smart redeemable convertible preferred stock who would otherwise be entitled to receive a fraction of a share of LECG common stock (after aggregating all fractional shares of LECG common stock that would otherwise be received by such Smart stockholder) will be entitled to receive cash, without interest, in an amount equal to such fraction multiplied by $3.30.


Exchange of Smart Stock Certificates for LECG Stock Certificates

        The Merger Agreement provides that at or prior to the closing of the Merger, LECG will enter into an agreement with its transfer agent, or another bank or trust company in the United States that may be appointed by LECG to act as the exchange agent for the Merger, and shall deliver to the exchange agent a number of shares of LECG common stock sufficient to satisfy in full the merger consideration. LECG will mail to each record holder of Smart redeemable convertible preferred stock a letter of transmittal and instructions for surrendering the record holder's Smart stock certificates in exchange for the applicable merger consideration. Holders of Smart redeemable convertible preferred stock who properly surrender their Smart stock certificates in accordance with the exchange agent's instructions and execute a counterpart to the Stockholders Agreement described on page 106 will receive:

    a certificate representing the number of whole shares of LECG common stock to which such holder is entitled pursuant to the Merger Agreement; and

    cash in lieu of any fractional share of LECG common stock.

        The Smart stock certificates so surrendered will be canceled. After the effective time of the Merger, outstanding Smart stock certificates representing shares of redeemable convertible preferred stock that have not been surrendered will represent only the right to receive the shares of LECG common stock and cash in lieu of fractional shares enumerated above. Following the completion of the Merger, Smart will not register any transfers of Smart capital stock on its stock transfer books.


Lost, Stolen or Destroyed Stock Certificates

        If any Smart redeemable convertible preferred stock certificate has been lost, stolen or destroyed, LECG may, in its discretion and as a condition precedent to the issuance of any certificate representing LECG common stock in exchange therefor pursuant to the Merger Agreement, require the owner of such certificate to deliver an affidavit claiming that such certificate has been lost, stolen or destroyed and a bond in customary amount as indemnity against any claim that may be made with respect to that certificate against LECG, Smart or the exchange agent.


Representations and Warranties

        The Merger Agreement contains representations and warranties made by LECG, Red Sox Acquisition Corporation, and Red Sox Acquisition LLC and by Smart to, and solely for the benefit of, each other. The assertions embodied in the representations and warranties of Smart contained in the Merger Agreement are qualified by information in a confidential disclosure schedule provided by Smart to LECG in connection with the signing of the Merger Agreement. While LECG and Smart do not believe that this disclosure schedule contains information that the securities laws require the parties to

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publicly disclose other than information that has already been so disclosed, they do contain information that modifies, qualifies and creates exceptions to the representations and warranties of Smart set forth in the Merger Agreement. You should not rely on the representations and warranties in the Merger Agreement as characterizations of the actual state of facts about LECG or Smart, since they were only made as of the date of the Merger Agreement and, with respect to Smart's representations and warranties, are modified in important part by the underlying disclosure schedules. Moreover, certain representations and warranties in the Merger Agreement were used for the purpose of allocating risk between LECG and Smart rather than establishing matters as facts. In addition, information concerning the subject matter of the representations and warranties may have changed since the date of the Merger Agreement, which subsequent information may or may not be fully reflected in the companies' public disclosures; however, LECG will file corrective disclosures with the SEC if it becomes aware of specific material facts that contradict the representations and warranties contained in the Merger Agreement.

        The representations and warranties of Smart in the Merger Agreement relate to the following subject matters:

    corporate organization, qualifications to do business, corporate standing and corporate power;

    capitalization;

    corporate authority and absence of governmental consents, approvals, orders or authorizations;

    financial statements;

    absence of litigation;

    absence of restrictions on business activity;

    intellectual property;

    taxes;

    employee benefit plans and employee matters;

    related party transactions;

    insurance;

    compliance with applicable laws, including the Foreign Corrupt Practices Act;

    indebtedness;

    brokerage, finder's or other finders fees or agents commissions payable by or on behalf of Smart in connection with the Merger;

    clients;

    material contracts;

    real and personal property;

    the information supplied by Smart in this proxy statement and in the information statement to its stockholders;

    stockholder vote needed to approve the transactions contemplated by the Merger Agreement;

    approval by the Smart board of directors; and

    earn out payments.

        In addition, the Merger Agreement contains representations and warranties of Great Hill III, as the principal stockholder of Smart, relating to:

    ownership of Smart capital stock;

    corporate authority and absence of third party consents or approvals;

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    ownership of sufficient shares to provide for the required vote of the holders of Smart capital stock; and

    access to funds to pay for the shares it is acquiring pursuant to the Investment.

        In addition, the Merger Agreement contains representations and warranties of LECG, Red Sox Acquisition Corporation, and Red Sox Acquisition LLC relating to:

    corporate organization, qualifications to do business, corporate standing and corporate power;

    capitalization and the shares to be issued in the Merger;

    corporate authority and absence of governmental consents, approvals, orders or authorizations;

    SEC documents and financial statements;

    absence of litigation;

    absence of restrictions on business activity;

    intellectual property;

    taxes;

    employee benefit plans and employee matters;

    related party transactions;

    insurance;

    compliance with applicable laws, including the Foreign Corrupt Practices Act;

    indebtedness;

    brokerage, other finders' fees or agent commissions payable by or on behalf of LECG in connection with the Merger;

    clients;

    material contracts;

    real and personal property;

    the information supplied by LECG in this proxy statement and in the information statement to Smart's stockholders;

    stockholder vote needed to approve the transactions contemplated by the Merger Agreement;

    approval by the LECG board of directors;

    arrangements with a financial advisor and receipt of a fairness opinion; and

    earn out payments.

        Other than the representations regarding Smart and LECG's respective financial statements (and SEC filings in the case of LECG) and LECG's representation regarding the issuance of shares in compliance with applicable securities laws, which shall each survive for 12 months following the closing of the Merger, the representations and warranties contained in the Merger Agreement will not survive the Merger, but they form the basis of certain conditions to LECG's and Smart's obligations to complete the Merger.


Covenants of Smart

        Except as contemplated by the Merger Agreement, Smart has agreed that, until the closing of the Merger or earlier termination of the Merger Agreement, it will, and in certain cases it will cause its subsidiaries to, take the following actions, among others:

    conduct its business and operations in the ordinary course in substantially the same manner as conducted prior to signing the Merger Agreement, including using commercially reasonable

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      efforts to manage working capital and maintain collections (as a proportion of accounts receivable) and disbursements at historic levels (except to the extent expressly provided otherwise in the Merger Agreement or as consented to in writing by LECG):

    pay all of its debts and material taxes when due, except to the extent such debts or taxes are being contested in good faith by appropriate proceedings and for which adequate reserves according to GAAP have been established;

    pay or perform its other obligations when due;

    use commercially reasonable efforts to (i) preserve intact its present business organizations, (ii) keep available the services of its present officers and key employees, and (iii) preserve its relationships with clients and others having business dealings with it, to the end that its goodwill and ongoing businesses shall be unimpaired at the closing of the Merger;

    promptly notify LECG of any change, occurrence or event which, individually or in the aggregate with any other changes, occurrences and events, would reasonably be expected to have a material adverse effect on Smart or which is reasonably likely to cause the closing conditions not to be satisfied; and

    assure that each of the contracts entered into on or after the date of the Merger Agreement by it shall not require the procurement of any consent, waiver or novation or provide for any material change in the obligations of any party in connection with, or terminate as a result of the consummation of, the transactions contemplated by the Merger Agreement.

        Under the Merger Agreement, Smart has also agreed that, until the closing of the Merger or the earlier termination of the Merger Agreement, except as previously disclosed to LECG pursuant to the Merger Agreement, Smart will not, and will ensure that its subsidiaries do not, take any of the following actions (unless LECG consents in writing or as required by applicable law, in which case Smart shall notify LECG before taking such action):

    cause or permit any amendments to its organizational documents;

    subject to limited exceptions and other than pursuant to the terms of the Smart redeemable convertible preferred stock, declare or pay any dividends on or make any other distributions (whether in cash, stock or property) in respect of any of its issued capital stock, or split, combine or reclassify any of its capital stock or issue or authorize the issuance of any other securities in respect of, in lieu of or in substitution for shares of its capital stock, or repurchase, redeem or otherwise acquire, directly or indirectly, any shares of its capital stock;

    except as expressly contemplated by the Merger Agreement, accelerate, amend or change the period of exercisability or vesting of Smart stock options or rights granted under the Smart stock option plan or the vesting of the securities purchased or purchasable under such options or rights, amend or change any other terms, including the exercise price or base value, of such options or rights or authorize cash payments in exchange for any such options or rights or the securities purchased or purchasable under those options or rights or waive or amend the right of repurchase applicable to any issued shares in the capital of Smart;

    enter into certain contracts, or violate, amend, terminate or otherwise modify or waive any of the terms of any such contracts;

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    terminate any contract with any client, where such termination would reasonably be expected to trigger any payment by Smart to such client pursuant to the express terms of such contract or under applicable law;

    issue or grant any securities or agree to issue or grant any securities (including the issuance or grant of any awards under the Smart stock option plan or any other compensatory grants), in each case other than the issuance of Smart common stock pursuant to the exercise of Smart stock options issued and outstanding as of the date of the Merger Agreement;

    subject to limited exceptions, make any loans or advances to, or any investments in or capital contributions to, any person, or forgive or discharge in whole or in part any outstanding loans or advances;

    other than in the ordinary course of business in connection with the license or sale of any of Smart's products or services to clients, transfer or license to any person any rights to any Smart intellectual property;

    sell, lease, license or otherwise dispose of or create, extend, grant or issue any encumbrance over any of its properties or assets;

    subject to limited exceptions, pay, discharge or satisfy, in an amount in excess of $100,000 in the aggregate, any liability (other than in the ordinary course of business and not in violation of the Merger Agreement);

    other than in the ordinary course of business, make any material capital expenditures or material commitments, material capital additions or material capital improvements or enter into any material capital leases;

    materially reduce the amount of any insurance coverage provided by existing insurance policies;

    terminate or waive any right or claim of substantial value;

    subject to limited exceptions, commence any legal action;

    acquire or agree to acquire any business or any company, partnership, association or other business organization or division thereof, or otherwise acquire or agree to acquire any assets which are material, individually or in the aggregate, to its business;

    adopt or enter into a plan of complete or partial liquidation, dissolution, merger, consolidation, restructuring, recapitalization or other reorganization;

    make any change in accounting or tax principles, practices or policies from those utilized in the preparation of Smart's financial statements;

    other than in the ordinary course of business, make any write-off or write-down of or made any determination to write-off or write-down any of its assets and properties; or make any material change in its general pricing practices or policies or any material change in its credit or allowance practices or policies;

    change any election in respect of taxes, file any amendment to a tax return, enter into any closing agreement in respect of taxes, settle any claim or assessment in respect of taxes, or consent to any extension or waiver of the limitation period applicable to any claim or assessment in respect of taxes;

    subject to limited exceptions, increase the salary, wages or other compensation payable or to become payable to or the fringe benefits of its directors, officers or employees by an amount for any individual in excess of $250,000 individually or $1,000,000 in the aggregate;

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    subject to limited exceptions, enter into or amend any employment, change in control, consulting or severance agreement with, or establish, adopt, enter into or amend any employee benefit plan, incentive plan, bonus, profit sharing, thrift, stock option, restricted stock, pension, retirement, deferred compensation, employment, change in control, termination or severance plan, agreement, policy or arrangement for the benefit of, any director, officer or employee of Smart;

    subject to limited exceptions, pay any discretionary bonuses to its directors, officers or employees in excess of $250,000 individually or $1,000,000 in the aggregate;

    settle or compromise any pending or threatened suit, action or claim arising out of or in connection with any of the transactions contemplated by the Merger Agreement for an amount in excess of $1,000,000;

    terminate or hire any employees, or encourage any such employees to resign from Smart, or promote any such employees or change the employment status or titles of any such employee, other than in the ordinary course of business consistent with past practice, or for new hires with compensation (including any signing bonus) less than $250,000 per annum, provided that Smart will consult with LECG prior to taking any such actions taken in the ordinary course consistent with past practice; or

    take or agree in writing or otherwise to take, any of the foregoing actions.


Covenants of LECG

        Except as contemplated by the Merger Agreement, LECG has agreed that, until the closing of the Merger or the earlier termination of the Merger Agreement, it will take the following actions, among others:

    conduct its business and operations in the ordinary course in substantially the same manner as conducted prior to signing the Merger Agreement, including using commercially reasonable efforts to manage working capital and maintain collections (as a proportion of accounts receivable) and disbursements at historic levels (except to the extent expressly provided otherwise in the Merger Agreement or as consented to in writing by Smart);

    pay all of its debts and material taxes when due, except to the extent such debts or taxes are being contested in good faith by appropriate proceedings and for which adequate reserves according to GAAP have been established;

    pay or perform its other obligations when due;

    use commercially reasonable efforts to (i) preserve intact its present business organizations, (ii) keep available the services of its present officers and key employees, and (iii) preserve its relationships with clients and others having business dealings with it, to the end that its goodwill and ongoing businesses shall be unimpaired at the closing of the Merger;

    promptly notify Smart of any change, occurrence or event which, individually or in the aggregate with any other changes, occurrences and events, would reasonably be expected to have a material adverse effect on Smart or which is reasonably likely to cause the closing conditions not to be satisfied;

    assure that each of the contracts entered into on or after the date of the Merger Agreement by it shall not require the procurement of any consent, waiver or novation or provide for any material change in the obligations of any party in connection with, or terminate as a result of the consummation of, the transactions contemplated by the Merger Agreement; and

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    review each LECG employee benefit plan and the contracts between LECG and any "service provider" (as such term is defined in Section 409A of the Internal Revenue Code, or the "Code") to determine whether such employee benefit plans and contracts are in operational and documentary compliance with Section 409A of the Code, to the extent required by Section 409A of the Code and the regulations and guidance promulgated thereunder; provided that LECG shall consult with Smart about, and keep Smart reasonably apprised of, the status of such review, and will cooperate in good faith with Smart with respect to any efforts that may be necessary to ensure compliance of such employee benefit plans and contracts with Section 409A of the Code.

        Under the Merger Agreement, LECG has also agreed that, until the closing of the Merger or the earlier termination of the Merger Agreement, except as previously disclosed to Smart pursuant to the Merger Agreement, LECG will not, and will ensure that its subsidiaries do not, take any of the following actions (unless Smart consents in writing or as required by applicable law, (in which case LECG shall notify Smart before taking such action):

    except as contemplated by the Merger Agreement, cause or permit any amendments to its organizational documents;

    subject to limited exceptions, declare or pay any dividends on or make any other distributions (whether in cash, stock or property) in respect of any of its issued capital stock, or split, combine or reclassify any of its capital stock or issue or authorize the issuance of any other securities in respect of, in lieu of or in substitution for shares of its capital stock, or repurchase, redeem or otherwise acquire, directly or indirectly, any shares of its capital stock;

    except as expressly contemplated by the Merger Agreement, accelerate, amend or change the period of exercisability or vesting of LECG stock options or rights granted under the LECG stock option plan or the vesting of the securities purchased or purchasable under such options or rights, amend or change any other terms, including the exercise price or base value, of such options or rights or authorize cash payments in exchange for any such options or rights or the securities purchased or purchasable under those options or rights or waive or amend the right of repurchase applicable to any issued shares in the capital of LECG;

    enter into certain contracts, or violate, amend, terminate or otherwise modify or waive any of the terms of any such contracts;

    terminate any contract with any client, where such termination would reasonably be expected to trigger any payment by LECG to such client pursuant to the express terms of such contract or under applicable law;

    issue or grant any securities or agree to issue or grant any securities (including the issuance or grant of any awards under the LECG stock option plan or any other compensatory grants), in each case other than the issuance of LECG common stock pursuant to the exercise of LECG stock options issued and outstanding as of the date of the Merger Agreement;

    subject to limited exceptions, make any loans or advances to, or any investments in or capital contributions to, any person, or forgive or discharge in whole or in part any outstanding loans or advances;

    other than in the ordinary course of business in connection with the license or sale of any of LECG's products or services to clients, transfer or license to any person any rights to any LECG intellectual property;

    sell, lease, license or otherwise dispose of or create, extend, grant or issue any encumbrance over any of its properties or assets;

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    subject to limited exceptions, pay, discharge or satisfy, in an amount in excess of $100,000 in the aggregate, any liability (other than in the ordinary course of business and not in violation of the Merger Agreement);

    other than in the ordinary course of business, make any material capital expenditures or material commitments, material capital additions or material capital improvements or enter into any material capital leases;

    materially reduce the amount of any insurance coverage provided by existing insurance policies;

    terminate or waive any right or claim of substantial value;

    subject to limited exceptions, commence any legal action;

    acquire or agree to acquire any business or any company, partnership, association or other business organization or division thereof, or otherwise acquire or agree to acquire any assets which are material, individually or in the aggregate, to its business;

    adopt or enter into a plan of complete or partial liquidation, dissolution, merger, consolidation, restructuring, recapitalization or other reorganization;

    make any change in accounting or tax principles, practices or policies from those utilized in the preparation of Smart's financial statements;

    other than in the ordinary course of business, make any write-off or write-down of or made any determination to write-off or write-down any of its assets and properties; or make any material change in its general pricing practices or policies or any material change in its credit or allowance practices or policies;

    change any election in respect of taxes, file any amendment to a tax return, enter into any closing agreement in respect of taxes, settle any claim or assessment in respect of taxes, or consent to any extension or waiver of the limitation period applicable to any claim or assessment in respect of taxes;

    subject to limited exceptions, increase the salary, wages or other compensation payable or to become payable to or the fringe benefits of its directors, officers or employees by an amount for any individual in excess of $250,000 individually or $1,000,000 in the aggregate;

    subject to limited exceptions, enter into or amend any employment, change in control, consulting or severance agreement with, or establish, adopt, enter into or amend any employee benefit plan, incentive plan, bonus, profit sharing, thrift, stock option, restricted stock, pension, retirement, deferred compensation, employment, change in control, termination or severance plan, agreement, policy or arrangement for the benefit of, any director, officer or employee of LECG;

    subject to limited exceptions, pay any discretionary bonuses to its directors, officers or employees in excess of $250,000 individually or $1,000,000 in the aggregate;

    settle or compromise any pending or threatened suit, action or claim arising out of or in connection with any of the transactions contemplated by the Merger Agreement for an amount in excess of $1,000,000;

    terminate or hire any employees, or encourage any such employees to resign from LECG, or promote any such employees or change the employment status or titles of any such employee, other than in the ordinary course of business consistent with past practice, or for new hires with compensation (including any signing bonus) less than $250,000 per annum, provided that LECG will consult with Smart prior to taking any such actions taken in the ordinary course consistent with past practice; or

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    take or agree in writing or otherwise to take, any of the foregoing actions.


Mutual Covenants

        The Merger Agreement contains a number of mutual covenants by LECG and Smart, including, among others:

    LECG and Smart agreed to promptly prepare and file this proxy statement. Both parties also agreed to use their reasonable best efforts to respond to SEC comments and have this proxy statement cleared by the SEC as promptly as reasonably practicable, and LECG and Smart agreed to use their reasonable best efforts to obtain all regulatory approvals required by applicable state securities laws in connection with the Merger;

    Smart has agreed to, subject to reasonable opportunity of LECG to review and comment, send an information statement to its stockholders describing the Smart stockholder approval and the dissenters' rights available to minority stockholders;

    Subject to certain exceptions, LECG and Smart have agreed to consult with one another before issuing, and to use their reasonable best efforts to agree upon, any press release or otherwise making any other public statements about the Merger; and

    LECG and Smart have agreed to provide each other with reasonable access to information and to cooperate with each other with respect to any governmental or other required consents.


Indemnification

        After the closing of the Merger, LECG shall indemnify Great Hill III with regard to any breaches of the financial statement representations and warranties and the representations and warranties related to the due authorization and valid issuance of the common stock issued in connection with the Merger made by LECG in the Merger Agreement. Similarly, after the closing of the Merger, Great Hill III shall indemnify LECG with regard to any breaches of the financial statement representations and warranties made by Smart in the Merger Agreement. The period for making such indemnification claims will expire 12 months after the closing of the Merger.

        Before either LECG or the Great Hill III may recover for an indemnification claim relating to breaches of representations and warranties referred to above, it must have incurred more than $1 million of losses as result of such breaches, and then it may only recover for losses in excess of the first $1 million of losses that it has incurred as a result of such breaches.

        All indemnification claims by both LECG and Great Hill III shall be payable only in shares of LECG's common stock valued at $3.30 per share, with LECG issuing additional shares of common stock to Great Hill III or Great Hill III forfeiting shares of common stock received in connection with the Merger. Except with respect to claims for fraud, the aggregate indemnification liability of either party will not exceed an amount equal to 1,092,787 shares of LECG common stock (or $3,606,197 based on a $3.30 per share valuation).


Smart's Officers and Directors

        The Merger Agreement provides that the surviving entity shall fulfill and honor in all respects the obligations of Smart which exist prior to the date of the Merger Agreement to indemnify Smart's present and former directors and officers. The Merger Agreement further provides that for a period of six years from the effective time of the Merger, LECG will cause the surviving corporation in the Merger to maintain in effect the indemnification provisions contained in Smart's charter documents as in effect as of the date of the Merger Agreement, and will not amend, repeal or otherwise modify them

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in any manner that would adversely affect the rights of any such persons thereunder unless such modification is required by law and then only to the minimum extent required by such law.

        The Merger Agreement further provides that after the effective time of the Merger, LECG shall, to the fullest extent permitted under applicable law, indemnify and hold harmless, each present and former director or officer of Smart, in and to the extent of their capacities as such and not as securityholders, against any costs or expenses (including attorneys' fees), judgments, fines, losses, claims, damages, liabilities and amounts paid in settlement in connection with any claim, action, suit, proceeding or investigation, whether civil, criminal, administrative or investigative, arising out of or pertaining to the transactions contemplated by the Merger Agreement or otherwise pertaining to any action or omission in his or her capacity as a director or officer of Smart occurring prior to the effective time of the Merger to the same extent as provided in Smart's charter documents for a period of 6 years after the effective time.

        The Merger Agreement provides that, prior to the effective time of the Merger, Smart will purchase a six-year "tail" policy to extend Smart's existing director and officer insurance in an amount not to exceed 300% of the annual premium paid by Smart in 2008 for such existing director and officer insurance coverage (or, if such "tail" policy is not available for less than such amount, Smart will purchase as much coverage as is available for such amount).


Regulatory Approvals

        Each of LECG, Red Sox Acquisition Corporation, Red Sox Acquisition LLC and Smart has agreed to coordinate and cooperate with each other and to use its commercially reasonable efforts to make all filings and submissions required by any governmental body in connection with the Merger and the other transactions contemplated by the Merger Agreement as soon as practicable after the date of the Merger Agreement, including the following:

    the notification and report forms required under the HSR Act; and

    any filings required under applicable securities laws.

        LECG and Smart also agreed to coordinate regarding the response to inquiries or requests from the Federal Trade Commission ("FTC") or the U.S. Department of Justice ("DOJ") or any state attorney general, foreign antitrust or competition authority or other governmental body in connection with antitrust or competition matters and to be jointly responsible for determining the strategy for dealing with the FTC, the DOJ or other governmental authority with responsibility for reviewing the Merger with respect to antitrust or competition issues. LECG and Smart filed notification and report forms under the HSR Act with the DOJ and the FTC, and the FTC granted early termination of the waiting period under the HSR Act with respect to the Merger on October 19, 2009. The termination of the waiting period means the parties have satisfied the regulatory requirements under the HSR Act.

        In addition, LECG and Smart agreed to provide the other with a copy of each proposed filing with or submissions to any governmental body in connection with the transactions contemplated by the Merger Agreement and provide the other an opportunity to review and comment on such filings or submissions.

        Subject to the provisions of the Merger Agreement and upon the terms set forth in the Merger Agreement, each of LECG and Smart has agreed to use its reasonable best efforts to take, or cause to be taken, all actions necessary to complete the Merger and the other transactions contemplated by the Merger Agreement, including using commercially reasonable efforts to:

    obtain each necessary action or nonactions, waivers, consents, orders, approvals and authorizations from governmental authorities; and

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    defending any suits, claims, actions, investigations or proceedings, whether judicial or administrative, challenging the Merger Agreement or the consummation of the transactions contemplated by the Merger Agreement, including seeking to have any stay or temporary restraining order entered by any court or other governmental authority vacated or reversed.

        However, notwithstanding anything in the Merger Agreement to the contrary, in no event shall LECG be obligated to (i) divest any of its or any of its subsidiaries' businesses, product lines or assets, or to agree to any divestiture of Smart's or any of Smart's subsidiaries' businesses, product lines or assets, or (ii) take or agree to take any other action or agree to any limitation that individually or in the aggregate would reasonably be expected to be material and adverse to LECG, or LECG and Smart collectively, after the effective time of the Merger. In addition, neither Smart nor any of its subsidiaries shall be required to (i) divest any of their respective businesses, product lines or assets, or (ii) take or agree to take any other action or agree to any limitation that individually or in the aggregate would reasonably be expected to be material and adverse to Smart.


Material Adverse Effect

        Several of the representations, warranties, conditions and termination provisions in the Merger Agreement use the phrase "material adverse effect." The Merger Agreement provides that "material adverse effect" means any effect that either alone or in combination with any other effect is materially adverse in relation to the condition (financial or otherwise), properties, assets, liabilities, business, operations or results of operations of such person and its subsidiaries, taken as a whole, or to the ability of such person to perform its obligations under the Merger Agreement or under any of the ancillary agreements entered into in connection with the Merger or to consummate the transactions contemplated by the Merger Agreement; provided, however, that none of the following shall be deemed to constitute, and none of the following shall be taken into account in determining whether there has been, a material adverse effect: any adverse change, event, development, or effect to the extent arising from:

    changes in the industry in which such person and its subsidiaries operate in general and not specifically relating to such person and its subsidiaries;

    general legal, regulatory, political, business, economic, financial or securities market conditions in the United States or elsewhere;

    the announcement or pendency of the Merger Agreement, any agreement entered into in connection with the Merger or the transactions contemplated by the Merger Agreement, the undertaking and performance or observance of the obligations contemplated by the Merger Agreement or any related agreement or necessary to consummate the transactions contemplated by the Merger Agreement or the consummation of any transactions contemplated by the Merger Agreement (including the Merger and the Investment), including any action or inaction by any person or any of its subsidiaries resulting from the announcement or pendency of the Merger Agreement, any related agreement or any of the other transactions contemplated by the Merger Agreement;

    acts of war, insurrection, sabotage or terrorism;

    earthquakes, hurricanes, tsunamis, tornadoes, floods, mudslides, wild fires or other natural disasters, weather conditions and other force majeure events in the United States or elsewhere;

    any actions taken, or failure to take action, in each case to which the other parties hereto have in writing expressly approved, consented to or requested;

    any legal proceedings made or brought by any person (including a derivative action) challenging for any reason, or arising out of, the Merger or the Investment or in connection with any of the transactions contemplated by the Merger Agreement;

    changes in any laws, GAAP or any accounting rules or regulations of the SEC (or changes in the interpretation of any of the foregoing);

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    the failure, in and of itself, by such person to meet any internal or published projections, forecasts or revenue or earnings predictions for any period ending on or after the date of the Merger Agreement); or

    a decline in the market price, or change in trading volume, of any shares of capital stock of such person, if applicable to such person's shares.


Conditions to Completion of the Merger

        The Merger Agreement provides that the obligations of each party to effect the Merger and complete the other transactions contemplated by the Merger Agreement are subject to the satisfaction of each of the following conditions at or prior to the completion of the Merger:

    approval by Smart stockholders, which has already been obtained;

    approval by LECG stockholders;

    no temporary restraining order, preliminary or permanent injunction or other order preventing the completion of the Merger shall have been issued by any governmental authority and no legal requirement shall have been enacted or deemed applicable to the Merger that makes the completion of the Merger illegal;

    all material approvals, waivers and consents have been obtained from all governmental authorities, including the expiration of the waiting period under the HSR Act;

    the Investment shall have closed prior to or concurrently with the closing of the Merger;

    the total number of authorized LECG directors shall be seven, LECG's board of directors shall be comprised of Garrett Bouton, Steve Samek, Christopher S. Gaffney, John G. Hayes and three persons that are designated by LECG's board of directors as "independent directors" under the NASDAQ rules;

    the chief executive officer of LECG shall be Steve Samek;

    the Amended Charter shall have been filed with the Secretary of State of the State of Delaware and become effective; and

    the shares of LECG common stock to be issued in the Merger and to be reserved for issuance upon conversion of any shares of LECG preferred stock to be issued in the Investment shall have been authorized for listing on the NASDAQ Global Market, subject only to official notice of issuance.

        In addition, the Merger Agreement provides that the obligations of Smart to effect the Merger and complete the other transactions contemplated by the Merger Agreement are subject to the satisfaction of each of the following conditions at or prior to the completion of the Merger:

    the representations and warranties of LECG, Red Sox Acquisition Corporation, and Red Sox Acquisition LLC shall be true and correct in all respects (without regard to any qualifications therein as to materiality, or "material adverse effect") both when made and at and as of the closing date of the Merger, as though such representations and warranties were made at and as of the closing date of the Merger, except to the extent that such representations and warranties are made as of a specified date, in which case such representations and warranties shall be true and correct as of the specified date; provided, however, that this condition shall be deemed satisfied unless the failure of any such representations and warranties to be true and correct, individually or in the aggregate, at and as of the dates set forth above, would reasonably be expected to have a material adverse effect on LECG;

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    LECG, Red Sox Acquisition Corporation, and Red Sox Acquisition LLC shall have performed and complied in all material respects with all covenants and obligations required by the Merger Agreement to be performed and complied with at or prior to the closing of the Merger;

    receipt of certain closing certificates and other closing deliveries, including either the required consent from LECG's lender or evidence of an arrangement mutually acceptable to LECG and Smart to repay the indebtedness under LECG's credit facility concurrently with closing of the Merger;

    no "material adverse effect" on LECG since the date of the Merger Agreement;

    net LECG indebtedness shall not exceed $28 million;

    LECG shall have delivered to Great Hill III a venture capital operating company letter; and

    Smart shall have received a tax opinion from its outside legal counsel.

        In addition, the Merger Agreement provides that the obligations of LECG to effect the Merger and complete the other transactions contemplated by the Merger Agreement are subject to the satisfaction of each of the following conditions at or prior to the completion of the Merger:

    the representations and warranties of Smart shall be true and correct in all respects (without regard to any qualifications therein as to materiality, or "material adverse effect") both when made and at and as of the closing date, as though such representations and warranties were made at and as of the closing date, except to the extent that such representations and warranties are made as of a specified date, in which case such representations and warranties shall be true and correct as of the specified date; provided, however, that this condition shall be deemed satisfied unless the failure of any such representations and warranties to be true and correct, individually or in the aggregate, at and as of the dates set forth above, would reasonably be expected to have a material adverse effect on Smart;

    Smart shall have performed and complied in all material respects with all covenants and obligations required by the Merger Agreement to be performed and complied with at or prior to the Closing;

    receipt of certain closing certificates and other closing deliveries, including either the required consent from Smart's lender or evidence of an arrangement mutually acceptable to LECG and Smart to repay the indebtedness under Smart's credit facility concurrently with closing of the Merger;

    no "material adverse effect" on Smart since the date of the Merger Agreement;

    net Smart indebtedness shall not exceed $42 million;

    the LECG common stock issued pursuant to the Merger shall be exempt from registration pursuant to Regulation D;

    no more than 5% of any class of Smart shares shall have exercised their dissenters rights;

    the Smart 401(k) plan shall have been terminated (unless directed otherwise by LECG); and

    the Committee shall have received a tax opinion from its outside legal counsel.


Limitation on the Solicitation, Negotiation and Discussion by Smart and LECG of Alternative Acquisition Proposals

        The Merger Agreement contains provisions prohibiting Smart and LECG from seeking or entering into an alternative transaction to the Merger. Under these provisions, subject to the specific exceptions described below, both Smart and LECG have agreed that, from the date of the Merger Agreement

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until the earlier of the termination of the Merger Agreement or the effective time of the Merger, LECG will not, directly or indirectly (and it will ensure that its subsidiaries do not, directly or indirectly):

    solicit, initiate, facilitate or knowingly encourage any inquiry, proposal or offer from any person (other than LECG or Smart, as the case may be) in respect of, or that reasonably may be expected to lead to, a "company alternative transaction" or a "parent alternative transaction", each as defined in the Merger Agreement;

    participate in any discussions or negotiations or enter into any agreement with, or provide any non-public information to, or otherwise cooperate with, any person (other than LECG or Smart, as the case may be) in respect of, or that reasonably may be expected to lead to, a "company alternative transaction proposal" or a "parent alternative transaction proposal", each as defined in the Merger Agreement; or

    accept any "company alternative transaction proposal" or "parent alternative transaction proposal", as the case may be.

        Under the Merger Agreement, a "company alternative transaction" is any transaction (other than the Merger) involving:

    the sale, license, disposition or acquisition of all or a substantial portion (excluding the provision of services in the ordinary course of business) of the business or assets of Smart or any of its subsidiaries;

    the issuance, disposition or acquisition of (i) any capital stock or other equity security of Smart (other than Smart stock options issued in the ordinary course of business under the Smart stock option plan and any Smart common stock issued upon exercise of Smart stock options), (ii) any option, call, warrant or right (whether or not immediately exercisable) to acquire any capital stock or other equity security of Smart (other than Smart stock options issued in the ordinary course of business under the Smart stock option plan), or (iii) any security, instrument or obligation that is or may become convertible into or exchangeable for any capital stock or other equity security of Smart (other than Smart stock options issued in the ordinary course of business under the Smart stock option plan); in each of clauses (i) through (iii), representing in the aggregate 50% or more of the voting power of Smart; or

    any merger, consolidation, share exchange, business combination, reorganization, recapitalization or similar transaction involving Smart that if consummated would result in any person (other than the Smart stockholders, in substantially similar proportions to immediately prior to such transaction) beneficially owning 50% or more of any class of equity securities of Smart.

        Under the Merger Agreement, a "parent alternative transaction" is any transaction (other than the Merger and the Investment) involving:

    the sale, license, disposition or acquisition of all or a substantial portion (excluding the provision of services in the ordinary course of business) of the business or assets of LECG or any of its subsidiaries;

    the issuance, disposition or acquisition of (i) any capital stock or other equity security of LECG (other than LECG stock options issued in the ordinary course of business under the LECG stock option plan and any LECG common stock issued upon exercise of LECG stock options), (ii) any option, call, warrant or right (whether or not immediately exercisable) to acquire any capital stock or other equity security of LECG (other than LECG stock options issued in the ordinary course of business under the LECG stock option plan), or (iii) any security, instrument or obligation that is or may become convertible into or exchangeable for any capital stock or other equity security of LECG (other than LECG stock options issued in the ordinary course of

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      business under the LECG stock option plan); in each of clauses (i) through (iii), representing in the aggregate 20% or more of the voting power of LECG; or

    any merger, consolidation, share exchange, business combination, reorganization, recapitalization or similar transaction involving LECG that if consummated would result in any person (other than the Smart stockholders, in substantially similar proportions to immediately prior to such transaction) beneficially owning 20% or more of any class of equity securities of LECG.

        Under the Merger Agreement, a "company alternative transaction proposal" or a "parent alternative transaction proposal" means an inquiry, proposal or offer from any person (other than LECG or Smart, as the case may be) that reasonably may be expected to lead to a company alternative transaction or a parent alternative transaction, as the case may be.

        Under the Merger Agreement, both LECG and Smart agreed to immediately cease and cause to be terminated any existing discussions with any third party that relate to any company alternative transaction or parent alternative transaction, as the case may be.

        Under the Merger Agreement, the parties agreed to promptly advise the other, within 24 hours after receipt of any company alternative transaction or parent alternative transaction, as the case may be, including the material terms thereof. Further, the party receiving the alternative transaction proposal must keep the other party fully informed with respect to the status of the proposal and the status and terms of any modifications or proposed modifications thereto. The parties also agreed not to enter into any confidentiality agreement after the date of the Merger Agreement that prohibits the parties from providing this information to the other party.

        Under the Merger Agreement, the parties have agreed to not release or permit the release of any person from, or to waive or permit the waiver of any provision of standstill agreement or similar agreement unless (i) such parties' board of directors determines in good faith, following consultation with its counsel, that failing to take such action would be a breach of the fiduciary duties of the board of directors under applicable law and (ii) prior to taking such action, the party notifies the other party of the intent to do so.

        Furthermore, Smart agreed that its board of directors shall not (x) withdraw or modify, or propose publicly to withdraw or modify, in a manner adverse to LECG, its recommendation in favor of the Merger; (y) approve or recommend, or propose publicly to approve or recommend, any company alternative transaction proposal or (z) enter into any agreement with respect to any company alternative transaction proposal.

        In addition, LECG's board of directors covenanted to not (i) withdraw or modify, or propose publicly to withdraw or modify, in a manner adverse to Smart, the LECG recommendation in favor of the Merger, (ii) approve or recommend, or propose publicly to approve or recommend, any parent alternative transaction proposal, or (iii) enter into any agreement with respect to any parent alternative transaction proposal (other than a confidentiality agreement in compliance with the Merger Agreement). Notwithstanding anything to the contrary contained in the Merger Agreement, at any time after the date of the Merger Agreement and prior to the receipt of the LECG stockholder approval, (x) in response to a bona fide written parent alternative transaction proposal that was not solicited by LECG, LECG's board of directors may cause LECG to enter into an agreement with respect to any "acceptable proposal" (as defined in the Merger Agreement), and (y) LECG's board of directors may withdraw or modify in a manner adverse to Smart the LECG board of director's recommendation in favor of the Merger, but only if and to the extent that, in the case of both clauses (x) and (y), LECG's board of directors has determined in good faith, after consultation with its financial advisors and counsel, that taking any such action would not be a breach of the fiduciary duties of LECG's board of directors under applicable law; provided, however, that, in the case of both clauses (x) and (y), such actions may only be taken at a time that is after (I) the fifth day following Smart's receipt of written

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notice from LECG, that LECG's board of directors is prepared to take such action, and (II) at the end of such period, LECG's board of directors determines in good faith, after taking into account all amendments or revisions committed to by Smart with respect to any counterproposal and after consultation with its independent financial advisors, that taking such action is in the best interests of LECG and the LECG stockholders assuming the Merger Agreement is terminated pursuant to the terms of the Merger Agreement in connection therewith (including the payment of the termination fee described below). Except to the extent LECG is precluded from doing so pursuant to any such written nondisclosure or confidentiality agreement entered into before the date of the Merger Agreement, any such written notice shall specify the material terms and conditions of such parent alternative transaction proposal, and state that LECG's board of directors intends to take such actions described above. During any such five day period, Smart shall be entitled to deliver to LECG a counterproposal to such parent alternative transaction proposal and LECG shall negotiate in good faith with respect to the terms of any such counterproposal.

        Under the Merger Agreement, an "acceptable proposal" means a parent alternative transaction proposal (with 50% substituted for 20% in the definition of parent alternative transaction proposal) that LECG's board of directors determines in good faith, after consultation with its financial advisors and counsel, and taking into account the legal, financial and regulatory and other aspects of the parent alternative proposal, the person making the parent alternative transaction proposal and the relevant material terms of the parent alternative transaction proposal and the Merger Agreement (including any potential consequences under the Merger Agreement for pursuing the parent alternative transaction proposal, including the possibility of having to pay the termination fee described below), is in the best interests of LECG and the LECG stockholders assuming the Merger Agreement is terminated pursuant to the terms of the Merger Agreement as a result of entering into any agreement with respect to such parent alternative transaction proposal.

        LECG and LECG's board of directors shall not be prohibited from taking and disclosing to LECG's stockholders a position contemplated by Rule 14d-9 or Rule 14e-2(a) promulgated under the Exchange Act, from making a "stop, look and listen" communication pursuant to Rule 14d-9(f) promulgated under the Exchange Act or any substantially similar communication, or from making any other disclosure to LECG's stockholders if, in the determination of LECG's board of directors in good faith after consultation with counsel, the failure to so disclose could constitute a violation of applicable law. Any "stop-look-and-listen" communication by LECG or LECG's board of directors to LECG stockholders pursuant to such Rule 14d-9(f) (or any similar communication to its stockholders that does not involve LECG or LECG's board of directors taking a position) shall not be deemed a modification of the LECG board of directors recommendation in favor of the Merger.


Termination of the Merger Agreement

        Before the Merger is completed, and whether or not the Merger Agreement has been adopted and approved by the LECG or Smart stockholders, LECG and Smart can mutually agree to terminate the Merger Agreement.

        Also, either party can terminate the Merger Agreement if:

    the closing of the Merger shall not have occurred by February 10, 2010, provided that this right to terminate the Merger Agreement shall not be available to any party whose breach of the Merger Agreement has been the principal reason resulting in the failure of the closing of the Merger to occur on or before February 10, 2010;

    there is a final, non-appealable order in effect preventing the closing of the Merger or the other transactions contemplated by the Merger Agreement;

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    there is any law or order that would make the closing of the Merger or any of the other transactions contemplated by the Merger Agreement illegal;

    the LECG stockholders do not approve the transactions at the LECG stockholder meeting; or

    the other party has breached any of its representations, warranties or covenants such that the closing conditions could not be satisfied by the breaching party and such breach is not cured within 30 days after being notified of such breach.

        In addition, Smart can terminate the Merger Agreement if any of the following "parent triggering events" (as defined in the Merger Agreement) occur: (i) LECG's board of directors changes its recommendation with respect to the Merger for any reason; (ii) LECG shall have entered into any agreement (other than a confidentiality agreement) relating to a parent alternative transaction; (iii) LECG fails to include the recommendation of its board of directors with respect to the Merger in this proxy statement; (iv) a third party tender offer is launched for LECG prior to LECG's stockholder approval of the Merger and the issuance of LECG common stock pursuant thereto and the LECG board of directors does not recommend that its stockholders reject such third party tender offer within 10 business days following the launching of such third party tender offer; (v) LECG fails to publicly reaffirm the LECG board of directors recommendation of the Merger within 10 days of Smart's request to do so following a parent alternative transaction proposal; or (vi) LECG publicly announces its intention to do any of the foregoing.

        LECG may also terminate the Merger Agreement (a) if a parent triggering event occurs or (b) at any time prior to obtaining its stockholders' approval of the Merger and the issuance of LECG common stock pursuant thereto if the LECG board of directors has approved in good faith a parent alternative transaction proposal that the LECG board of directors believes is in the best interest of LECG and its stockholders after reflecting the consequences of terminating the Merger Agreement, including the payment of the termination fee described below.


Termination Fees and Expenses

        LECG is required to pay Smart a $2.9 million termination fee if (a) a parent triggering event occurs and the Merger Agreement is terminated by either Smart or LECG, (b) LECG terminates the Merger Agreement after its board of directors determines that it is in the best interests of LECG and its stockholders for LECG to accept a parent alternative transaction proposal, or (c) (i) a parent alternative transaction proposal has been made to LECG, (ii) the LECG stockholders fail to approve the Merger and the issuance of LECG common stock pursuant thereto, (iii) the Merger Agreement is terminated by either Smart or LECG due to the failure of the successful LECG stockholder vote, and (iv) LECG enters into a definitive agreement to effectuate any parent alternative transaction proposal within 12 months of the termination of the Merger Agreement.

        LECG and Smart will each pay their own expenses incurred in connection with the Merger Agreement and the transactions contemplated thereby, however, LECG and Smart will share equally the fees and expenses (other than attorneys' and accountants' fees) incurred in connection with the printing and filing of this proxy statement (or any amendments or supplements hereto) and the HSR Act filing fee. If the Merger is consummated, LECG will pay the legal and accounting fees and expenses of Great Hill III in connection with the Merger. In addition to the above, if the LECG stockholders fail to approve the Merger and the issuance of LECG common stock pursuant thereto and the other transactions contemplated by the Merger Agreement at the LECG stockholder meeting, LECG may have to reimburse Smart's transaction expenses up to $800,000.

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Amendment and Waiver

        Subject to the provisions of applicable law, LECG and Smart may amend the Merger Agreement by written agreement at any time prior to the closing of the Merger and LECG and Great Hill III may amend the Merger Agreement by written agreement at any time after the closing of the Merger; provided that in each case, an amendment made after receipt of the LECG and Smart stockholder approvals may not alter or change the Merger consideration being offered to the Great Hill Entities or alter or change any term of the Merger Agreement in a manner that would materially and adversely affect the Smart stockholders.

        To the extent legally allowed, LECG, Smart or Great Hill III (and, following the closing of the Merger Agreement, LECG or Great Hill III) may, by a signed written instrument, extend the time for the performance of any obligation of the other parties under the Merger Agreement, waive any inaccuracies in the representations and warranties made by the other parties in the Merger Agreement or waive compliance with any of the other agreements or conditions of the other parties set forth in the Merger Agreement. No delay in exercising any such right shall constitute a waiver of such right and no waiver of any particular breach or default shall be deemed a waiver of any other breach or default of the same or any other provision of the Merger Agreement.

        If LECG were to consider agreeing to a requested amendment to the Merger Agreement or to a waiver of one or more requirements of Smart under the Merger Agreement, LECG would supplement this proxy statement to disclose the amendment or waiver, unless such amendment or waiver would not be expected to have a material adverse effect on LECG or its stockholders. LECG would provide at least five business days for review of any such supplement prior to the date of the annual meeting, and would indicate that investors are permitted to change their votes at any time until the closing of the polls at the annual meeting. LECG will re-solicit the vote of its stockholders, if appropriate, if LECG decided to waive a material condition or to adopt a material amendment to the Merger Agreement that is material and adverse to the interests of the LECG stockholders.


Amendment No. 1 to Merger Agreement

        On September 25, 2009, the parties to the Merger Agreement entered into Amendment No. 1 to Agreement and Plan of Merger (the "Amendment") for the purpose of substituting John G. Hayes for James P. Dougherty as one of the persons who will be a member of LECG's board of directors in the applicable condition to completion of the Merger. The Amendment also provided for a corresponding change to the Governance Agreement.


Interests of Executive Officers, Directors and Director Nominees in the Merger

        Steve Samek, Christopher S. Gaffney and John G. Hayes are nominees for director of LECG pursuant to the Merger Agreement and the Governance Agreement. These individuals are not currently members of the board of directors of LECG and, accordingly, did not participate in the LECG board of directors' consideration of the Merger and the Investment and the recommendations of the LECG board of directors described elsewhere in this proxy statement.

        If the Merger and the Investment are consummated, Mr. Samek will become Chief Executive Officer of LECG. In addition, LECG will grant Mr. Samek an option to purchase 120,000 shares of LECG common stock as part of the up to 500,000 share option pool for certain Smart employees that remain employed by LECG affiliated entities following the Merger.

        Messrs. Gaffney and Hayes are both Managing Partners of Great Hill Partners, LLC, an affiliate of the Great Hill Entities. As noted elsewhere in this proxy statement, the Great Hill Entities will own approximately 40% of the voting stock of LECG following the closing of the Merger and the Investment.

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Material United States Federal Income Tax Consequences of the Merger to Existing LECG Stockholders

        The following is a summary of the material United States federal income tax consequences of the Merger to existing LECG stockholders, but does not purport to be a complete analysis of all potential tax considerations related to the Merger. This summary is based on the provisions of the Code, Treasury regulations promulgated thereunder, judicial authority, published administrative positions of the United States Internal Revenue Service ("IRS") and other applicable authorities, all as in effect on the date of this document, and all of which are subject to change, possibly on a retroactive basis. We have not sought any ruling from the IRS with respect to the statements made and the conclusions reached in this summary and there can be no assurance that the IRS will agree with such statements and conclusions or that, if challenged by the IRS, any court would agree with such statements and conclusions.

        This summary deals only with beneficial owners of shares of common stock in LECG that hold such shares of stock as "capital assets" within the meaning of section 1221 of the Code (generally, property held for investment). This summary does not purport to deal with all aspects of United States federal income taxation that might be relevant to particular holders in light of their personal investment circumstances or status, nor does it address tax considerations applicable to holders that may be subject to special tax rules, such as certain financial institutions, tax-exempt organizations, subchapter S corporations, partnerships or other pass-through entities for United States federal income tax purposes or investors in such entities, insurance companies, broker-dealers, dealers or traders in securities or currencies, certain former citizens or residents of the United States subject to section 877 of the Code and taxpayers subject to the alternative minimum tax. This summary also does not discuss shares of LECG common stock held as part of a hedge, straddle, synthetic security or conversion transaction, or situations in which the "functional currency" of a holder is not the United States dollar. Moreover, the effect of any applicable federal estate or gift, state, local or non-United States tax laws is not discussed.

        The following discussion is not a substitute for careful tax planning and advice. Each holder of shares of LECG common stock should consult its own tax advisors with respect to the application of the United States federal income tax laws to its particular situation, as well as any tax consequences arising under the federal estate or gift tax laws or the laws of any state, local or non-United States taxing jurisdiction or under any applicable tax treaty.

        At the closing of the Merger, Jones Day, counsel to the Committee, will deliver to the Committee its legal opinion, and Goodwin Procter LLP, counsel to Smart, will deliver to Smart its legal opinion, each to the effect that, on the basis of the facts, representations and assumptions set forth in such opinion and the representations and covenants set forth in certificates obtained from officers of LECG and Smart, the Merger will be treated as a reorganization within the meaning of section 368(a) of the Code and each of LECG and Smart will be treated as a party to the reorganization within the meaning of section 368(b) of the Code. These opinions will be based on the law in effect on the date that these opinions are rendered. Any change in currently applicable law, which may or may not be retroactive, or the failure of any factual representation or assumption to be true, correct and complete in all material respects, could affect the validity of the Jones Day opinion and/or the Goodwin Procter LLP opinion. An opinion of counsel represents counsel's best legal judgment and is not binding on the Internal Revenue Service or on any court.

        It is a condition to the respective obligations of LECG and Smart to consummate the Merger that LECG receive the opinion of Jones Day, and that Smart receive the opinion of Goodwin Procter LLP, both to the effect that the Merger will be treated as a reorganization within the meaning of

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section 368(a) of the Code and each of LECG and Smart will be treated as a party to the reorganization within the meaning of section 368(b) of the Code. In accordance with the tax opinions:

    LECG stockholders will not recognize any gain or loss for U.S. federal income purposes in the Merger; and

    neither LECG nor Smart will recognize any gain or loss for U.S. federal income purposes in the Merger;


Required Vote and Board Recommendation

Vote Required   If a quorum is present, the affirmative vote of the holders of a majority of the votes cast on the proposal will be required to approve the Merger and the issuance of LECG common stock pursuant thereto. Neither "broker non-votes" nor abstentions are included in the tabulation of the voting results and, therefore, they do not have the effect of votes "AGAINST" such proposal. The consummation of the Merger is also conditioned on LECG stockholder approval of the Investment as described in Proposal 2, and the concurrent closing of the Investment.

LECG'S BOARD OF DIRECTORS, BY A MAJORITY VOTE, RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" THE APPROVAL OF THE MERGER AND THE
ISSUANCE OF LECG COMMON STOCK PURSUANT THERETO.

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PROPOSAL 2: THE INVESTMENT

        The following is a discussion of the Investment and the Stock Purchase Agreement, including the background information thereto. This is a summary only and may not contain all of the information that is important to you. A copy of the Stock Purchase Agreement is attached to this proxy statement as Annex B. LECG stockholders are urged to read this entire proxy statement, including the Stock Purchase Agreement, for a more complete understanding of the Investment. In the event of any discrepancy between the summary below and the terms of the Stock Purchase Agreement, the terms of the Stock Purchase Agreement shall control.


Background of the Investment

        Please see the section titled "Background of the Merger and the Investment" in this proxy statement for a discussion of the background of the Investment.


LECG's Reasons for the Investment

        LECG's board of directors, by a majority vote, recommends approving the Investment and the issuance of Series A Preferred Stock pursuant thereto because its directors believe that the Investment will provide necessary capital for maintenance and growth of LECG's business on terms substantially more favorable than those generally available in the current market.

        LECG's total cash and cash equivalents was $7.2 million as of September 30, 2009. Historically, LECG has relied upon its revolving credit facility to provide it with adequate working capital to operate its business. The current economic downturn adds uncertainty to LECG's revenue levels and cash flow from operations, which may increase LECG's dependence on its revolving credit facility, but also increases the likelihood LECG may fall out of compliance with the debt covenants set forth in such credit facility. Non-compliance with those covenants could result in LECG's lenders restricting or terminating LECG's borrowing ability, accelerating the time for repayment of outstanding borrowings, or increasing the cost of borrowing under the revolving credit facility. If LECG's lenders reduce or terminate its access to amounts under the revolving credit facility, LECG may not have sufficient capital to fund its operating needs and/or may need to secure additional financing to fund working capital requirements or to repay outstanding debt under the facility. Lenders may be less flexible and willing to provide waivers or to extend credit in the current economic downturn than they have been historically. LECG cannot be certain that it will be successful in complying with the covenants set forth in the credit facility or maintaining the availability of amounts under the facility or, if necessary, that it will be able to raise additional capital, or that any amount, if raised, will be sufficient to meet its cash requirements or will be on favorable terms. Also, if LECG is not able to maintain its borrowing availability under its revolving credit facility and/or raise additional capital when needed, it may be forced to curtail its operations.

        Many of LECG's clients are attracted to LECG by their desire to engage individual experts, and the ongoing relationship with LECG's clients is often managed primarily by individual experts. If an expert terminates his or her relationship with LECG, it is probable that most of the clients and projects for which that expert is responsible will continue with the expert to another company or firm, and the clients will terminate or significantly reduce their relationship with LECG. LECG's top five experts accounted for 15%, 17% and 17% of revenues in 2008, 2007, and 2006, respectively. If any of these individuals or a group of LECG's other experts terminate their relationship with LECG or compete against LECG, it could materially harm LECG's business and financial results. On August 12, 2009, LECG terminated the employment of Dr. David Teece, whose practice represented approximately 3% of LECG's revenue in 2008. In addition, if LECG is unable to attract, develop, and retain highly qualified experts, professional staff and administrative personnel, its ability to adequately manage and staff existing projects and obtain new projects could be impaired, which would adversely affect its

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business, financial results and prospects for growth. Qualified professionals in our industry are in great demand, and LECG faces significant competition for both experts and professional staff with the requisite credentials and experience. Competition comes from other consulting firms, research firms, governments, universities and other similar enterprises. Many of these competitors may be able to offer greater compensation and benefits or more attractive lifestyle choices, career paths or geographic locations than LECG does. Increasing competition for these professionals may also significantly increase labor costs, which could negatively affect profit margins and results of operations. The loss of services from, or the failure to recruit, a significant number of experts, professional staff or administrative personnel could harm LECG's business, including its ability to secure and complete new projects.

        In light of LECG's uncertain cash flow and the expenses necessary to maintain and grow its expert base, LECG believes that the Investment will provide the capital resources necessary to enhance its ability to recruit and retain high quality experts, professional staff and administrative personnel for current and future growth efforts.

        Great Hill Partners, LLC is a committed and knowledgeable private equity firm with experience in the expert consulting industry. LECG believes that representatives of Great Hill Partners, LLC will add valuable expertise to LECG's board of directors. As noted in the section titled "Background of the Merger and the Investment", LECG, over the past two years, has explored multiple outside funding opportunities, none of which came to fruition. The terms of the Investment, including the price being paid for the Series A Preferred Stock, the number of shares being issued and the lack of any warrants being issued, are substantially more favorable to LECG than LECG believes are otherwise available under current market situations. Based on these factors, LECG's board of directors, by a majority vote, concluded that the Investment was in the best interests of LECG's stockholders and recommended that LECG stockholders approve the Investment and the issuance of the Series A Preferred Stock pursuant thereto.


Summary of Bylaw Amendment

        At the August 17, 2009 LECG board of directors meeting, LECG's board of directors approved, conditioned upon the closing of the Merger and the Investment, an amendment to LECG's bylaws to provide that any LECG stockholder that holds 20% or more of the outstanding voting power of LECG's voting stock may call a special meeting of LECG's stockholders. Pursuant to the Governance Agreement, the Great Hill Entities have agreed not to exercise this right with respect to the election or removal of members of the LECG board of directors prior to the earlier to occur of the first anniversary of the 2010 LECG annual stockholder meeting and June 30, 2011.


Summary of Stock Purchase Agreement

        The following is a summary of the material terms of the Stock Purchase Agreement. This summary does not purport to describe all the terms of the Stock Purchase Agreement and is qualified by reference to the complete Stock Purchase Agreement, which is attached as Annex B to this proxy statement and incorporated herein by reference. We urge you to read the Stock Purchase Agreement carefully and in its entirety because it, and not the summary set forth in this proxy statement, is the legal document that governs the Investment.

        The terms of the Stock Purchase Agreement are intended to govern the contractual rights and relationships, and allocate risks, between the parties in relation to the Investment.


General

        Under the terms of the Stock Purchase Agreement, the Great Hill Entities have agreed to purchase 6,313,131 shares of the Series A Preferred Stock. Pursuant to the terms of the Stock Purchase

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Agreement, immediately prior to or simultaneously with the closing of the Merger, the Great Hill Entities will make a cash payment of approximately $25 million to LECG in exchange for shares of Series A Preferred Stock. All transfer taxes, fees and duties payable under applicable law incurred in connection with the Investment will be borne and paid by LECG. The Series A Preferred Stock will not be publicly traded on an exchange.


Closing

        Closing of the Investment under the Stock Purchase Agreement will occur immediately prior to or simultaneously with the closing of the Merger, and is subject to certain conditions described below.


Representations and Warranties

        The Stock Purchase Agreement contains customary representations and warranties from LECG to the Great Hill Entities, subject in some cases to customary qualifications, relating to, among other things, the following:

    the shares of Series A Preferred Stock to be issued pursuant to the Stock Purchase Agreement when issued, sold and delivered pursuant to the Stock Purchase Agreement will be duly authorized, validly issued, fully paid and non-assessable and will be free of any encumbrances;

    the shares of common stock issuable upon a conversion of the Series A Preferred Stock will be duly and validly reserved for issuance, and when issued in accordance with the terms of the Series A Preferred Stock, will be duly authorized, validly issued, fully paid and non-assessable and will be free of any encumbrances; and

    subject to approval of the Merger and the issuance of LECG common stock pursuant thereto by LECG's stockholders and filing of the certificate of merger with the Secretary of State of the State of Delaware, the actions contemplated by the Stock Purchase Agreement have been duly authorized by all necessary corporate or other action of LECG.

        The Stock Purchase Agreement also contains customary representations and warranties from each Great Hill Entity to LECG, subject in some cases to customary qualifications, relating to, among other things, the following:

    the shares of the Series A Preferred Stock are purchased for such Great Hill Entity's own account;

    such Great Hill Entity has had the opportunity to ask questions of and receive answers from LECG;

    such Great Hill Entity has sufficient investment experience to evaluate its investment;

    such Great Hill Entity is an "accredited investor" within the meaning of Rule 501 of Regulation D;

    such Great Hill Entity understands that the shares of the Series A Preferred Stock that it is acquiring are "restricted securities" within the meaning of the federal securities laws;

    such Great Hill Entity has the requisite power and authority to enter into the Stock Purchase Agreement and the actions contemplated by Stock Purchase Agreement do not conflict with other obligations of such Great Hill Entity; and

    such Great Hill Entity has not and will not incur liability for brokerage or finders' fees or agents' commissions or investment bankers' fees or any similar charges in connection with the Stock Purchase Agreement or the transactions contemplated by the Stock Purchase Agreement.

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Covenants and Agreements

        Under the Stock Purchase Agreement, LECG has agreed to abide by the following covenants:

    from the date of the Stock Purchase Agreement until such time as neither Great Hill Entity nor any of its affiliates owns any shares of Series A Preferred Stock, LECG will not incur or permit any subsidiary to incur any "indebtedness", as that term is defined in the Stock Purchase Agreement, that would result in LECG having indebtedness in excess of the greater of $75,000,000 or the product of 2.5 and LECG's EBITDA for the most recently completed fiscal year; and

    for so long as any affiliate of a Great Hill Entity is a member of LECG's board of directors, to maintain insurance coverage from reputable insurers, under an errors and omissions insurance policy, a director and officer liability insurance policy, an employment practices liability insurance policy and such other insurance coverage in such amounts as is customary for companies similarly situated (as determined in good faith by LECG's board of directors), for the benefit of directors, managers and employees to the extent applicable.


Conditions to Completion of the Investment

        The obligations of LECG and the Great Hill Entities to complete the Investment are subject to the Merger closing prior to or concurrently with the Investment.

        In addition, the obligation of the Great Hill Entities to complete the Investment are subject to the satisfaction by LECG or waiver by the Great Hill Entities of the following conditions:

    the representations and warranties of LECG set forth by LECG in the Stock Purchase Agreement shall be true and correct as of the closing of the Investment;

    LECG shall have performed and complied in all material respects with all covenants and obligations contained in the Stock Purchase Agreement that LECG are required to perform or comply with on or before the closing of the Investment;

    executing and or delivering to the Great Hill Entities stock certificates representing the shares of Series A Preferred Stock being purchased by the Great Hill Entities;

    a certificate of the chief executive officer of LECG certifying that certain of LECG's closing obligations have been fulfilled; and

    the Great Hill Entities shall have received a legal opinion from LECG's legal counsel relating to the Series A Preferred Stock.

        In addition, LECG's obligation to complete the Investment is subject to the satisfaction by each Great Hill Entity or waiver by LECG of the following conditions:

    the representations and warranties of each Great Hill Entity set forth in the Stock Purchase Agreement shall be true and correct as of the closing of the Investment;

    each Great Hill Entity shall have performed and complied in all material respects with all covenants and obligations contained in the Stock Purchase Agreement that they are required to perform or comply with on or before the closing of the Investment;

    each Great Hill Entity shall have delivered the purchase price for the Series A Preferred Stock; and

    a certificate of an authorized signatory of each Great Hill Entity certifying that certain conditions in the Stock Purchase Agreement have been fulfilled.

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Termination

        LECG and the Great Hill Entities may, by mutual written consent, terminate the Stock Purchase Agreement at any time prior to the closing of the Investment.

        In addition, the Stock Purchase Agreement will terminate automatically if the Merger Agreement is terminated for any reason prior to closing of the Merger.


Summary of Certificate of Designations

        Pursuant to the Stock Purchase Agreement and subject to the approval by our stockholders of Proposals 1, 2 and 3 and the filing of the Amended Charter with the Secretary of State of the State of Delaware, LECG's board of directors, pursuant to the authority granted to it in LECG's certificate of incorporation, will create a new series of preferred stock, designated as Series A Preferred Stock, by filing a Certificate of Designations with the Secretary of State of the State of Delaware, to be sold in the Investment. In the event the Amended Charter is not adopted by LECG stockholders but the Merger and the Investment are approved by LECG stockholders and the other relevant closing conditions to the Merger and the Investment are satisfied or waived, LECG may revise the Certificate of Designations in a manner consistent with any amendment to the Stock Purchase Agreement which may be executed to reflect any revised terms of the Investment. For example, the Certificate of Designation may reflect a lower number of authorized shares of Series A Preferred Stock, a corresponding higher liquidation preference and redemption price per share, and a commensurate change in the ratio at which the Series A Preferred Stock is convertible into common stock.

        The preferences, limitations, voting powers and relative rights of the Series A Preferred Stock are contained in the Certificate of Designations, the form of which is attached to this proxy statement as Annex E.

        The following is a summary of the material terms and provisions of the preferences, limitations, voting powers and relative rights of the Series A Preferred Stock as contained in the Certificate of Designations. Stockholders are urged to read the Certificate of Designations in its entirety because that is the legal document which governs the terms of the Series A Preferred Stock. While we believe this summary covers the material terms and provisions of the Series A Preferred Stock and the Certificate of Designations, it may not contain all of the information that is important to you and is qualified in its entirety by reference to Annex E.


Authorized Shares

        The number of authorized shares of the Series A Preferred Stock is initially set at 12,000,000 shares. Shares of the Series A Preferred Stock have a par value of $0.001 per share.


Rank

        The Series A Preferred Stock ranks senior to LECG's common stock with respect to payment of dividends and distribution of assets upon the liquidation, winding-up or dissolution of LECG.


Dividends

        The holders of Series A Preferred Stock are entitled to receive cumulative dividends at a rate of 7.5% per share per annum, subject to increase as described below. These dividends are payable in additional shares of Series A Preferred Stock or, at LECG's option, in cash so long as LECG has sufficient cash to make such distribution without breaching the terms of any contract for borrowed money indebtedness and such cash is legally available therefor. Dividends accrue from the date of issuance of the Series A Preferred Stock and are payable quarterly, in arrears, on the last day of March, June, September and December. Any accrued but unpaid dividends shall compound quarterly.

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        Dividends on the Series A Preferred Stock are payable in preference and priority to any payment of any dividend on the common stock. We may not pay or declare a dividend or any other distribution on the common stock (other than dividends or distributions paid in additional shares of common stock) or, subject to limited exceptions, purchase, redeem or otherwise acquire any of our capital stock, unless and until full dividends on the Series A Preferred Stock have been paid or declared and set apart.

        The dividend rate shall increase from 7.5% per annum to 16% per annum if:

    LECG pays or declares any dividend or any other distribution on the common stock (other than dividends or distributions paid in additional shares of common stock) or, subject to limited exceptions, purchases, redeems or otherwise acquires any of our capital stock, unless and until full dividends on the Series A Preferred Stock have been paid or declared and set apart;

    LECG incurs or permits any subsidiary to incur, directly or indirectly, any indebtedness for borrowed money that would result in LECG having, as of immediately following the incurrence of such indebtedness, indebtedness in excess of the greater of: (A) $75,000,000 or (B) 2.5 times the amount of LECG's EBITDA for the most recently completed fiscal year for which audited financial statements are available; or

    LECG does not make full payment of the redemption price, on any required redemption date, in connection with the election by any holder of shares of Series A Preferred Stock to cause LECG to redeem any shares Series A Preferred Stock as described below.

        The holders of a majority of the then outstanding shares of Series A Preferred Stock may, from time to time, waive the increase in the dividend rate with respect to any event and any such waiver will be binding on all holders of shares of Series A Preferred Stock.


Liquidation Preference

        If LECG was to voluntarily or involuntarily dissolve or liquidate, the holders of its Series A Preferred Stock would be entitled to receive, prior and in preference to any distribution of LECG's assets to the holders of it common stock, an amount per share equal to the greater of:

    $3.96 (as adjusted for any stock splits, stock dividends, combinations, recapitalizations or other similar transactions) plus all accrued and unpaid cumulative dividends on such share; or

    the amount which such holder of the Series A Preferred Stock would have received assuming all shares of Series A Preferred Stock had been converted into common stock at the then applicable conversion price immediately prior to any such dissolution or liquidation.

        If LECG has insufficient funds to distribute to the holders of its Series A Preferred Stock, then all of the funds legally available for distribution by LECG shall be distributed pro rata among the holders of the Series A Preferred Stock in proportion to the preferential amount each such holder is entitled to receive.


Deemed Liquidations

        Certain events will also be treated as a liquidation or dissolution of LECG, entitling the holders of Series A Preferred Stock to receive the liquidation payment described above. These events include: (i) a reorganization, consolidation or merger in which we are not the surviving entity; (ii) any other transaction in which the holders of our outstanding capital stock entitled to vote for the election of members of our board of directors immediately prior to such transaction do not hold a majority of the outstanding capital stock of the surviving or resulting entity entitled to vote for the election of members of the board of directors of the surviving or resulting entity; and (iii) any sale, conveyance or transfer of all or substantially all of our assets or business.

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Conversion

        A holder of Series A Preferred Stock has the option to convert each share of Series A Preferred Stock at any time or times from the date of issuance, into shares of common stock at an initial conversion price of $3.96 per share. The conversion price shall be equitably adjusted in the event our common stock is subdivided, combined or consolidated or in the event our common stock is changed into the same or a different number of shares of any other class or classes of stock or other securities or property.

        LECG may also require the conversion of the Series A Preferred Stock, in whole or in part, by sending written notice to the holders of the Series A Preferred Stock at any time after the second anniversary of the first date of issuance of shares of Series A Preferred Stock, if (i) the trading volume of our common stock averages at least 100,000 shares per trading day over the immediately preceding 30 trading day period (as adjusted for stock dividends, combination or splits with respect to our common stock), and (ii) the daily volume-weighted average price of price per share of our common stock for at least 20 of the 30 trading days preceding the date that we send our notice requesting conversion exceeds two times the then current conversion price of the Series A Preferred Stock.


Voting

        Except as otherwise required by law, the holders of Series A Preferred Stock vote (on an as-if converted to common stock basis) on all matters voted on by the holders of our common stock. In addition, the holders of Series A Preferred Stock vote separately as a class in certain circumstances as set forth in further detail below and in the certificate of designations.


Protective Provisions

        For so long as any shares of Series A Preferred Stock remain outstanding, LECG may not, without first obtaining the affirmative vote or written consent of the holders of a majority of the then outstanding shares of its Series A Preferred Stock:

    alter, amend or repeal any provisions of, or add any provision to the Certificate of Designations, our certificate of incorporation or our bylaws if such action would adversely alter, change or repeal the designations, preferences, rights, privileges or powers of, or the restrictions provided for the benefit of, the Series A Preferred Stock;

    authorize or designate any class or series of capital stock to rank on parity with the Series A Preferred Stock or any class or series of capital stock having rights on liquidation or as to distributions (including dividends) senior to the Series A Preferred Stock; or authorize or issue any other equity security convertible into or exercisable for any equity security, having preference equal to or over, as to distributions or liquidation preference, the Series A Preferred Stock; or

    increase or decrease the total number of authorized or issued shares of Series A Preferred Stock, other than with respect to an increase in authorized shares of Series A Preferred Stock for the purpose of paying dividends on the outstanding shares of Series A Preferred Stock.


Redemption

        At any time after the seventh anniversary of the first date of issuance of shares of Series A Preferred Stock, a holder of the Series A Preferred Stock may elect, by delivering a redemption notice to LECG, to require LECG to redeem, at such holder's option, some or all of its shares of Series A Preferred Stock.

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        The redemption price per share for the Series A Preferred Stock is $3.96 (as adjusted for any stock splits, stock dividends, combinations, recapitalizations or other similar transactions) plus all accrued and unpaid cumulative dividends on such share.

        Unless LECG exercises its partial deferral right described in the following sentence, within 90 days of its receipt of a redemption notice from a holder of Series A Preferred Stock, LECG must redeem all of the shares of Series A Preferred Stock elected to be redeemed by such holder. LECG, however, has the right, at its discretion, to defer for one year from the date of such redemption notice the redemption of 50% of the shares of its Series A Preferred Stock subject to such redemption notice (rounded down to the nearest whole share).

        The holders of a majority of the then outstanding shares of Series A Preferred Stock may, from time to time, waive any aspects of the redemption rights and any such waiver will be binding on all holders of shares of Series A Preferred Stock.


Interests of Executive Officers, Directors and Director Nominees in the Investment

        Steve Samek, Christopher S. Gaffney and John G. Hayes are nominees for director of LECG pursuant to the Merger Agreement and the Governance Agreement. These individuals are not currently members of the board of directors of LECG and, accordingly, did not participate in the LECG board of directors' consideration of the Merger and the Investment and the recommendations of the LECG board of directors described elsewhere in this proxy statement.

        If the Merger and the Investment are consummated, Mr. Samek will become Chief Executive Officer of LECG. In addition, LECG will grant Mr. Samek an option to purchase 120,000 shares of LECG common stock as part of the up to 500,000 share option pool for certain Smart employees that remain employed by LECG affiliated entities following the Merger.

        Messrs. Gaffney and Hayes are both Managing Partners of Great Hill Partners, LLC, an affiliate of the Great Hill Entities. As noted elsewhere in this proxy statement, the Great Hill Entities will own approximately 40% of the voting stock of LECG following the closing of the Merger and the Investment.


Use of Proceeds

        LECG currently anticipates that of the net cash proceeds from the Investment, it will retain $21 million for working capital and general corporate purposes and will use $4 million for the payment of transaction fees and expenses incurred in connection with the Merger and the Investment.


Required Vote and Board Recommendation

Vote Required   If a quorum is present, the affirmative vote of the holders of a majority of the votes cast on the proposal will be required to approve the Investment and the issuance of the Series A Preferred Stock pursuant thereto. Neither "broker non-votes" nor abstentions are included in the tabulation of the voting results and, therefore, they do not have the effect of votes "AGAINST" such proposal.

 

 

The consummation of the Investment is also conditioned on LECG stockholder approval of the Merger as described in Proposal 1, and the concurrent closing of the Merger.

LECG'S BOARD OF DIRECTORS, BY A MAJORITY VOTE, RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" THE APPROVAL OF THE INVESTMENT AND THE ISSUANCE OF THE SERIES A PREFERRED STOCK PURSUANT THERETO.

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PROPOSAL 3: THE AMENDED CHARTER

        The following is a discussion of the Amended Charter. This is a summary only and may not contain all of the information that is important to you. A copy of the Amended Charter is attached to this proxy statement as Annex C. LECG stockholders are urged to read this entire proxy statement, including the Amended Charter, for a more complete understanding of the Amended Charter. In the event of any discrepancy between the summary below and the terms of the Amended Charter, the terms of the Amended Charter shall control.

        It is a condition to the Merger and the Investment that LECG's stockholders approve the Amended Charter to provide for a sufficient number of shares of preferred stock to be issuable in the Investment. The amendment of LECG's Certificate of Incorporation requires stockholder approval under Delaware law and LECG's Certificate of Incorporation. However, if the Amended Charter is not approved by our stockholders, we may be able to enter into an amendment to the Stock Purchase Agreement which might reduce the number of shares of Series A Preferred Stock being issued to the Great Hill Entities to a number of shares that is less than the current 5 million shares of preferred stock we are authorized to issue under our current certificate of incorporation. For example, we may provide that the smaller number of shares of Series A Preferred Stock to be issued to the Great Hill Entities be priced at a higher price than the current $3.96 per share, with a commensurate adjustment to the ratio at which the Series A Preferred Stock converts into our common stock. Any such amendment to the Stock Purchase Agreement would be more costly to LECG and would result in more of a diversion from our management's attention, as compared to proceeding as planned with the Amended Charter. Therefore, our board of directors, by a majority vote, has recommended that our stockholders approve the Amended Charter


Summary of Amended Charter

        The Amended Charter increases the authorized capital stock of LECG from 205 million total shares, of which 200 million shares are common stock and 5 million shares are preferred stock, to 215 million total shares, of which 200 million are common stock and 15 million are preferred stock. The Amended Charter makes no other substantive changes to LECG's current certificate of incorporation.


Required Vote and Board Recommendation

Vote Required   The affirmative vote of the holders of a majority of the shares outstanding as of the record date will be required to approve the Amended Charter. Abstentions and broker non-votes will have the effect of a vote "AGAINST" the approval of the Amended Charter.

LECG'S BOARD OF DIRECTORS, BY A MAJORITY VOTE, RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" THE APPROVAL OF THE AMENDED CHARTER.

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SUMMARY OF ADDITIONAL AGREEMENTS

        It is a condition to the closing of the Merger that LECG and the Great Hill Entities enter into a Governance Agreement and Stockholders Agreements, as described below, as of the closing date.


Governance Agreement

        A form of the Governance Agreement that LECG and the Great Hill Entities propose to enter into on the closing date of the Merger is attached hereto as Annex F and is incorporated herein by reference. Pursuant to the Governance Agreement: (a) LECG will agree to solicit proxies in favor of, and the Great Hill Entities will agree to vote in favor of, a slate of directors of LECG consisting of LECG's Chief Executive Officer, two individuals designated by the Great Hill Entities (who are Christopher S. Gaffney and John G. Hayes) and four individuals designated by LECG's current board of directors (who are Garrett Bouton, Alison Davis, Michael E. Dunn, and Ruth M. Richardson) so long as they stand for reelection (b) the Great Hill Entities will agree not to vote for the removal of such slate of LECG directors for one year following the 2010 annual meeting of stockholders; (c) the Great Hill Entities will agree to vote in favor of no less than two "Management Directors" who shall be employees of LECG and who shall be invited to attend LECG board meetings in a non-voting capacity; (d) subject to limited exceptions, the Great Hill Entities will agree not to acquire additional voting stock of LECG for 2 years following the closing of the Merger; and (e) subject to limited exceptions, LECG will grant the Great Hill Entities pre-emptive rights in connection with future equity issuances by LECG in order to maintain the Great Hill Entities' ownership percentage in LECG (which such pre-emptive rights terminate once the Great Hill Entities no longer holds at least 20% of the shares of LECG stock that it held as of the closing of the Merger and the Investment).


Stockholders Agreement

        A form of the Stockholders Agreement that LECG and the Great Hill Entities propose to enter into on the closing date of the Merger and the Investment is attached hereto as Annex G and is incorporated herein by reference


General

        Under the terms of the Stockholders Agreement, the Great Hill Entities shall have the right to cause LECG to register securities held by the Great Hill Entities under certain circumstances, as described in further detail below.


Registration Rights

        Demand Registration.    If LECG receives a written request for registration from the Great Hill Entities covering registrable securities that would have an anticipated aggregate offering price of greater than $1,000,000, then LECG will file a registration statement under the Securities Act covering all the registrable securities that Great Hill requested be registered in the offering. LECG is only obligated to file two demand registration statements for Great Hill pursuant to the Stockholders Agreement.

        Piggyback Registrations.    Subject to certain limitations, LECG shall notify the Great Hill Entities in writing prior to filing a registration statement for purposes of effecting an offering of shares of LECG common stock and give the Great Hill Entities the opportunity to include its registrable securities in the registration statement. If the registration is pursuant to a firmly underwritten public offering, then the rights of the Great Hill Entities are conditioned upon the Great Hill Entities' participation and the inclusion of their registrable securities in such underwriting. If LECG and the Great Hill Entities propose to distribute such securities through the underwriting they shall enter into an underwriting agreement, and if the managing underwriter(s) determine(s) in good faith that marketing factors

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require a limitation of the number of shares to be underwritten, then the managing underwriter(s) may exclude shares from the registration and the underwriting, with the number of registrable securities, if any, included in the registration and the underwriting being allocated to the Great Hill Entities.

        S-3 Registration.    The Great Hill Entities also have customary S-3 registration rights.


Indemnification

        The Stockholders Agreement provides that LECG will indemnify the Great Hill Entities against claims arising out of or based on any untrue statement of a material fact contained in any registration statement or prospectus or omission of a material fact required to make the registration statement or prospectus not misleading, or any violation by LECG of the Securities Act or any applicable state securities law (other than with respect to information provided by the Great Hill Entities for inclusion in such registration statement).

        The Stockholders Agreement provides that the Great Hill Entities shall indemnify LECG against claims arising out of or based on any untrue statement of a material fact provided by the Great Hill Entities and contained in any registration statement or prospectus or omission of a material fact required to make the registration statement or prospectus not misleading, or any violation by the Great Hill Entities of the Securities Act or any applicable state securities law.


Termination

        The registration rights described above will terminate at such time that in the opinion of LECG's counsel all registrable securities held by the Great Hill Entities may be sold in a three month period without registration pursuant to Rule 144.


Voting Agreements

        Under the terms of the Voting Agreements entered into between Smart and certain executives and directors of LECG, the stockholder that is a party to the agreement agrees to cause the stockholder's shares to be counted as present for purposes of calculating a quorum, to vote their shares in favor of the proposals related to the Merger and the Investment set forth in this proxy statement, to vote their shares against any proposal made in opposition to, or in competition with, the proposals related to the Merger set forth in this proxy statement and to vote against any action or agreement that would result in a breach of any covenant, representation or warranty or other obligation or agreement of LECG contained in the Merger Agreement or of the stockholder contained in the Voting Agreements or that would prevent fulfillment of a condition to LECG and Smart's obligations to consummate the Merger. The Voting Agreements also grant Smart a power of attorney and assign Smart an irrevocable proxy to vote the stockholder's shares with respect to the matters described above. LECG stockholders holding approximately 2% of LECG's outstanding common stock have signed Voting Agreements.

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INFORMATION ABOUT LECG

LECG Business

        We provide expert services through our highly credentialed experts and professional staff, whose skills and qualifications provide us the opportunity to address complex, unstructured business and public policy problems. We deliver independent expert testimony and original authoritative studies in both adversarial and non-adversarial situations. We conduct economic, financial, accounting and statistical analyses to provide objective opinions and strategic advice to legislative, judicial, regulatory and business decision makers. Our skills include electronic discovery, forensic accounting, data collection, econometric modeling and other types of statistical analyses, report preparation and oral presentation at depositions. Our experts are renowned academics, former senior government officials, experienced industry leaders, technical analysts and seasoned consultants. Our clients include Fortune Global 500 corporations, major law firms, and local, state and federal governments and agencies in the United States and other countries throughout the world.

        We currently manage our business in two operating segments: Economics Services and Finance and Accounting Services. See Note 16 of Notes to Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, 2008 accompanying this proxy statement for a description of our two operating segments.


Management's Discussion and Analysis of Financial Condition and Results of Operations

        The following Management's Discussion and Analysis of Financial Condition and Results of Operations section should be read in conjunction with the Management's Discussion and Analysis of Financial Condition and Results of Operations section in our Annual Report on Form 10-K for the year ended December 31, 2008, a copy of which accompanies this proxy statement and which is incorporated herein by reference.


2009 Billable headcount

        The following table summarizes the change in the period-end billable headcount since September 30, 2008 and December 31, 2008.

 
   
   
   
  Change since  
 
   
   
   
  December 31,
2008
  September 30,
2008
 
 
  September 30,
2009
  December 31,
2008
  September 30,
2008
 
 
  Number   %   Number   %  

Economics Services

    239     287     298     (48 )   (17 )%   (59 )   (20 )%

Finance and Accounting Services

    447     496     503     (49 )   (10 )%   (56 )   (11 )%
                               

Consolidated

    686     783     801     (97 )   (12 )%   (115 )   (14 )%
                               

        The decrease in consolidated billable headcount since December 31, 2008 is due to 133 terminations as a result of our second and third quarter 2009 restructuring actions, including 43 involuntary terminations in our Economics segment and 66 involuntary terminations in our Finance and Accounting Services segment, and offset by 36 new hires, net of voluntary attrition.

        The decrease in consolidated billable headcount from September 30, 2008 to September 30, 2009 is primarily due to 168 terminations in connection with our fourth quarter 2008 and our second and third quarter 2009 restructuring activities, including 53 involuntary terminations in our Economics segment and 91 involuntary terminations in our Finance and Accounting Services segment, and offset by 53 new hires, net of voluntary attrition.

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        The retention of key experts and the recruitment and hiring of additional experts and professional staff, both through direct hiring and through acquisitions, contributes to the success of our business. Our retention and hiring strategy is designed to promote our competitive advantage, to deepen our existing service offerings and to enter into new service areas when strategic opportunities arise. In connection with our retention and hiring efforts in the nine months ended September 30, 2009 and 2008, we paid signing, retention and performance bonuses of $9.8 million and $15.0 million, respectively, which will be amortized over periods ranging from one to seven years. Amortization of signing, retention and performance bonuses expense was $13.3 million and $12.4 million in the nine months ended September 30, 2009 and 2008, respectively.


Operations

Revenues

        We derive our revenue primarily from professional service fees that are billed at hourly rates on a time and expense basis. Revenue related to these services is recognized when the earnings process is complete and collection is reasonably assured. Revenues are recognized net of amounts estimated to be unrealizable based on several factors, including the historical percentage of write-offs due to fee adjustments for both unbilled and billed receivables.

        Fee-based revenues, net are comprised of:

    fees for the services of our professional staff and subcontractors;

    fees for the services of our experts and affiliates; and

    realization allowance.

        Reimbursable revenues are comprised of amounts we charge for services provided by others, and costs that are reimbursable by clients, including travel, document reproduction, subscription data services and other costs.

Cost of services

        Direct costs are comprised of:

    salary, bonuses, employer taxes and benefits of all professional staff and salaried experts;

    compensation to experts based on a percentage of their individual professional fees;

    compensation to experts based on specified revenue and gross margin performance targets;

    compensation to subcontractors and affiliates;

    fees earned by experts and other business generators as project origination fees;

    amortization of signing, retention and performance bonuses that are subject to vesting over time; and

    equity-based compensation.

        Reimbursable costs are costs incurred for services provided by others, and costs that are reimbursable by clients, including travel, document reproduction and subscription data services.

        Hourly fees charged by the professional staff that support our experts, rather than the hourly fees charged by our experts, generate a majority of our gross profit. Most of our experts are compensated based on a percentage of their billings from 30% to 100%, and averaging approximately 72% of their individual billings on particular projects in the nine months ended September 30, 2009 and 2008. Such experts are paid when we have received payment from our clients. We refer to these experts as

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"at-risk" experts. Some of our experts are compensated based on a percentage of performance targets such as revenue or gross margin associated with engagements generated by an expert or a group of experts. Experts not on either of these compensation models are compensated under a salary plus performance-based bonus model. We make advance payments, or draws, to many of our non-salaried experts, and any outstanding draws previously paid to experts are deducted from the experts' fee payments. We recognize an estimate of compensation expense for expert advances that we consider may ultimately be unrecoverable. In some cases, we guarantee an expert's draw at the inception of their employment for a period of time, which is typically one year or less. In such cases, if the expert's earnings do not exceed their draws within a reasonable period of time prior to the end of the guarantee period, we recognize an estimate of the compensation expense we will ultimately incur by the end of the guarantee period.

        Because of the manner in which we pay our experts, our gross profit is significantly dependent on the margin on our professional staff services. The number of professional staff and the level of experience of professional staff assigned to a project will vary depending on the size, nature and duration of each engagement. We manage our personnel costs by monitoring engagement requirements and utilization of the professional staff. As an inducement to encourage experts to utilize our professional staff, experts generally receive project origination fees. Such fees are based primarily on a percentage of the collected professional staff fees. Project origination fees can also include a percentage of the collected expert fees for those experts acting in a support role on an engagement. These fees have averaged 10% and 12% of professional staff revenues in the nine months ended September 30, 2009 and 2008, respectively. Experts are generally required to use our professional staff unless the skills required to perform the work are not available through us. In these instances we engage outside individual or firm-based consultants, who are typically compensated on an hourly basis. Both the revenue and the cost resulting from the services provided by these outside consultants are recognized in the period in which the services are performed.

        Hiring and/or retaining experts sometimes involve the payment of upfront cash amounts. In some cases, the payment of a portion of an upfront amount is due at a future date. These types of upfront payments are recognized when the payment is made, the obligation to pay such amount is incurred, or on the execution date of the retention agreement, and are generally amortized over the period for which they are recoverable from the individual expert up to a maximum period of seven years.

        We have also paid or are obligated to pay certain performance bonuses that are subject to recovery of unearned amounts if the expert were to voluntarily leave us, be terminated for cause, or fail to meet certain performance criteria prior to a specified date. Like signing and retention payments, these performance bonuses are amortized over the period for which unearned amounts are recoverable from the individual expert up to a maximum period of seven years, and we recognize such performance bonuses at the time we determine it to be more likely than not that the performance criteria will be met.

        Most of our agreements allow us to recover signing, retention and performance bonuses from the employee if he or she were to voluntarily leave us or be terminated for cause prior to a specified date. However, for the purpose of recognizing expense, we amortize such signing, retention and performance bonuses over the shorter of the contractual recovery period or seven years. If an employee is involuntarily terminated, we generally cannot recover the unearned amount and we write off the unearned amount at the time of termination.


Critical Accounting Policies

Revenue recognition

        Revenue includes all amounts earned that are billed or billable to clients, including reimbursable expenses, and are reduced for amounts related to work performed that are estimated to be

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unrealizable. Expert revenues consist of revenues generated by experts who are our employees as well as revenues generated by experts who are independent contractors. There is no operating, business or other substantive distinction between our employee experts and our exclusive independent contractor experts.

        Revenues primarily arise from time and expense contracts, which are recognized in the period in which the services are performed. We also enter into certain performance-based contracts for which performance fees are dependent upon a successful outcome, as defined by the consulting engagement. Revenues related to performance-based fee contracts are recognized in the period when the earnings process is complete and we have received payment for the services performed under the contract. Revenues are also generated from fixed price contracts, which are recognized as the agreed upon services are performed. Fixed price and performance-based contracts revenues are not a material component of total revenues.

        We recognize revenue net of an estimate for amounts that will not be collected from the client due to fee adjustments. This estimate is based on several factors, including our historical percentage of fee adjustments and review of unbilled and billed receivables. These estimates are reviewed by management on a regular basis.


Equity-based compensation

        Stock-based compensation arrangements covered by FASB ASC 718, Compensation—Stock Compensation ("FASB ASC 718") currently include stock option grants and restricted stock awards under our 2003 Stock Option Plan and purchases of common stock by our employees at a discount to the market price under our Employee Stock Purchase Plan ("ESPP"). Under FASB ASC 718, the value of the portion of the option or award that is ultimately expected to vest is recognized as expense on a straight line basis over the requisite service periods in our Condensed Consolidated Statements of Operations. Stock-based compensation expense for purchases under the ESPP are recognized based on the estimated fair value of the common stock during each offering period and the percentage of the purchase discount.

        We use the Black-Scholes option valuation model adjusted for the estimated historical forfeiture rate for the respective grant to determine the estimated fair value of our stock-based compensation arrangements on the date of grant ("grant date fair value"), and we expense this value ratably over the service period of the option or performance period of the restricted stock award. Expense amounts are allocated among cost of revenue and general and administrative expenses based on the function of the employee receiving the grant. The Black-Scholes option pricing model requires the input of subjective assumptions. Because our employee stock options have characteristics significantly different from those of traded options, and because changes in the subjective input assumptions can materially affect the fair value estimate, in management's opinion, the existing models may not provide a reliable single measure of the fair value of our employee stock options or common stock purchased under the ESPP. In addition, management will continue to assess the assumptions and methodologies used to calculate estimated fair value of our stock-based compensation. Circumstances may change and additional data may become available over time, which could result in changes to these assumptions and methodologies, and which could materially impact our fair value determination.


Income taxes

        We account for income taxes in accordance with FASB ASC 740, Income Taxes ("FASB ASC 740"). The objectives of accounting for income taxes are to recognize the amount of taxes payable or refundable for the current year and deferred tax liabilities and assets for the future tax consequences of events that have been recognized in an entity's consolidated financial statements or tax returns. We must assess the likelihood that we will be able to recover our deferred tax assets. If recovery is not

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likely, we must increase our provision for taxes by recording a valuation allowance against the deferred tax assets that we estimate will not ultimately be recoverable. Judgment is required in assessing the future tax consequences of events that have been recognized in our consolidated financial statements or tax returns. Variations in the actual outcome of these future tax consequences could materially impact our financial position, results of operations or cash flows.

        Effective January 1, 2007, we adopted an accounting principle which addresses the accounting for uncertainty in income taxes recognized in an enterprise's financial statements and requires the use of a two-step approach to recognizing and measuring uncertain tax positions. The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates it is "more likely than not" that the position will be sustained on audit, including resolution of related appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount which is more than 50% likely to be realized upon ultimate settlement.

        Our deferred tax assets are generally projected to reverse over the next one to thirty-three years. The extended reversal period is the result of significant income tax basis in intangibles which were impaired for financial statement purposes during 2008. Tax amortization from these assets, if not offset with current taxable income, would create a net operating loss with a 20-year carryforward period for federal tax purposes. During the third quarter of 2009, we reviewed our deferred tax assets, as well as projected taxable income, for recovery using the "more likely than not" approach by assessing the available evidence surrounding its recoverability. We considered all available evidence, both positive and negative, including forecasts of future taxable income, tax planning strategies and past operating results which includes a net loss for 2008 and a net loss for the nine months ended September 30, 2009. Even though we project income in future years, based upon past losses, the current economic environment, and the difficulty of accurately projecting income, we determined that it was "more likely than not" that our deferred tax assets may not be realized. Consequently, a full valuation allowance of $53.0 million has been recorded at September 30, 2009, against our deferred tax assets. In future years, if we begin to generate taxable income and our management determines that the deferred tax asset is recoverable, the valuation allowance will be reversed. Any such reversal will result in a tax benefit in the period of reversal.


Goodwill and other intangible assets

        Our goodwill asset relates to accounting for the additional purchase price payment for a 2007 acquisition. FASB ASC 350, Intangible—Goodwill and Other ("FASB ASC 350"), requires that goodwill and intangible assets with indefinite lives not be amortized, but rather tested for impairment at least annually, or whenever events or changes in circumstances indicate the carrying amounts of these assets may not be recoverable. Our annual impairment test is performed during the fourth quarter of each year using an October 1st measurement date.

        Factors that we consider important in determining whether to perform an impairment review on a date other than October 1st, include significant underperformance relative to forecasted operating results, significant negative industry or economic trends, and permanent declines in our stock price and related market capitalization. If we determine that the carrying value of goodwill may not be recoverable, we will assess impairment based on a projection of discounted future cash flows for each reporting unit, or some other fair value measurement such as the quoted market price of our stock and the resulting market capitalization, and then measure the amount of impairment, if necessary, based on the difference between the carrying value of our reporting units assigned goodwill and the implied fair value.

        Other intangible assets that are separable from goodwill and have determinable useful lives are valued separately and amortized over their expected useful lives. Other intangible assets consist principally of customer relationships and non-compete agreements and are generally amortized over six

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to nine years. We evaluate the recoverability of its other intangible assets over their remaining useful life when changes in events or circumstances warrant an impairment review. If the carrying value of an intangible asset is determined to be impaired and unrecoverable over its originally estimated useful life, we will record an impairment charge to reduce the asset's carrying value to its fair value and then amortize the remaining value prospectively over the revised remaining useful life. We generally determine the fair value of our intangible asset using a discounted cash flow model as quoted market prices for these types of assets is not readily available.

Recently issued accounting standards

        See "Note 1—Basis of presentation and operations" to the Condensed Consolidated Financial Statements, regarding the impact of certain recent accounting pronouncements on our condensed consolidated financial statements.


Results of Operations

        We manage our business in two operating segments: Economics Services and Finance and Accounting Services. The Chief Operating Decision Maker (our CEO) considers the key profit/loss measurement of the two segments to be gross profit and gross margin. As such, only revenue, costs of services and gross margin are presented and discussed at the segment level.


Three and nine months ended September 30, 2009 and 2008

        The following table sets forth the percentage of revenues represented by certain line items in our statement of operations for the three and nine months ended September 30, 2009 and 2008, respectively.