METZLER GROUP INC, S-1/A, 1996-09-05

METZLER GROUP INC
S-1/A, 1996-09-05
MANAGEMENT SERVICES

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<PAGE>

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 4, 1996

REGISTRATION STATEMENT NO. 333-9019
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- -------------------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

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

AMENDMENT NO. 1

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

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

THE METZLER GROUP, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 36-4094854
(STATE OR OTHER 8742
JURISDICTION (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
OF INCORPORATION OR
ORGANIZATION)

520 LAKE COOK ROAD, SUITE 500, DEERFIELD, ILLINOIS 60015 (847) 945-0001
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
ROBERT P. MAHER
PRESIDENT AND CHIEF EXECUTIVE OFFICER
THE METZLER GROUP, INC.
520 LAKE COOK ROAD, SUITE 500, DEERFIELD, ILLINOIS 60015 (847) 945-0001
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)

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

Copies to:
DOUGLAS R. NEWKIRK ROBERT WALL
SACHNOFF & WEAVER, LTD. WINSTON & STRAWN
30 S. WACKER DRIVE, 29TH FLOOR 35 W. WACKER DRIVE, SUITE 4200
CHICAGO, ILLINOIS 60606-7484 CHICAGO, ILLINOIS 60601
TELEPHONE NO. (312) 207-1000 TELEPHONE NO. (312) 558-5600

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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after the effective date of this Registration
Statement.

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

If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]

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

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THIS
REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION,
ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.

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<PAGE>

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

SUBJECT TO COMPLETION, DATED SEPTEMBER 4, 1996

PROSPECTUS
, 1996

3,200,000 SHARES

LOGO
COMMON STOCK

Of the 3,200,000 shares of Common Stock offered hereby, 2,000,000 shares are
being sold by The Metzler Group, Inc. ("Metzler" or the "Company") and
1,200,000 shares are being sold by the Selling Stockholders. See "Principal and
Selling Stockholders." The Company will not receive any of the proceeds from
the sale of shares by the Selling Stockholders.

Prior to this offering, there has been no public market for the Common Stock
of the Company. It is currently estimated that the initial public offering
price per share will be between $14.00 and $16.00 per share. See "Underwriting"
for information relating to the factors to be considered in determining the
initial public offering price.

The Common Stock has been approved for quotation on the Nasdaq National
Market under the symbol "METZ" subject to notice of issuance.

-----------

SEE "RISK FACTORS" BEGINNING ON PAGE 5 FOR INFORMATION THAT SHOULD BE
CONSIDERED BY PROSPECTIVE INVESTORS.

-----------

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

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<TABLE>
<CAPTION>
PRICE UNDERWRITING PROCEEDS PROCEEDS TO
TO THE DISCOUNTS AND TO THE THE SELLING
PUBLIC COMMISSIONS (1) COMPANY (2) STOCKHOLDERS
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<S> <C> <C> <C> <C>
Per Share.............. $ $ $ $
Total(3)............... $ $ $ $
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</TABLE>
(1) See "Underwriting" for indemnification arrangements with the Underwriters.
(2) Before deducting expenses estimated at $750,000, which will be paid by the
Company.
(3) The Company and certain Selling Stockholders have granted to the
Underwriters a 30-day option to purchase up to an additional 480,000 shares
of Common Stock at the Price to the Public, less Underwriting Discounts and
Commissions, solely to cover over-allotments, if any. If such option is
exercised in full, the total Price to the Public, Underwriting Discounts
and Commissions, Proceeds to the Company and Proceeds to the Selling
Stockholders will be $ , $ , $ and $ , respectively. The Company
will not receive any of the proceeds from the sale of shares of Common
Stock by the Selling Stockholders pursuant to the Underwriters' over-
allotment option, if exercised. See "Underwriting" and "Principal and
Selling Stockholders."

The shares of Common Stock are being offered by the several Underwriters
when, as and if delivered to and accepted by the Underwriters and subject to
various prior conditions, including their right to reject orders in whole or in
part. It is expected that delivery of share certificates will be made in New
York, New York, on or about , 1996.

DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
<PAGE>

This Prospectus contains certain forward-looking statements that involve
substantial risks and uncertainties. When used in this Prospectus, the words
"anticipate," "believe," "estimate," and "expect" and similar expressions as
they relate to the Company or its management are intended to identify such
forward-looking statements. The Company's actual results, performance or
achievements could differ materially from the results expressed in, or implied
by, these forward-looking statements. Factors that could cause or contribute
to such differences include those discussed in "Risk Factors."

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

<PAGE>

PROSPECTUS SUMMARY

The following summary is qualified in its entirety by reference to, and
should be read in conjunction with, the more detailed information and the
Financial Statements and related Notes thereto appearing elsewhere in this
Prospectus. Unless indicated otherwise, the information contained in this
Prospectus: (i) assumes that the Underwriters' over-allotment option is not
exercised; (ii) gives retroactive effect to the Company's reorganization as a
Delaware holding company immediately prior to the consummation of this
offering; and (iii) gives retroactive effect to the 9,714.285 for 1 split of
the shares of common stock, $.001 par value per share (the "Common Stock") in
September 1996. Unless otherwise indicated, all references to "Metzler" or the
"Company" include the Company and its subsidiaries.

THE COMPANY

The Metzler Group, Inc. is a leading nationwide provider of consulting
services to electric utilities and other energy-related businesses. The Company
offers a wide range of consulting services related to information technology,
process/operations management, strategy, and marketing and sales designed to
assist its clients in succeeding in a business environment of changing
regulation, increasing competition and evolving technology. The Company has
competed successfully in this environment, having achieved revenue growth of
29% from 1994 to 1995 and 93% from the six months ended June 30, 1995 to the
corresponding period in 1996.

The changing competitive environment in the electric utility industry has
forced utility companies to confront an evolving range of strategic options and
challenges. In order to deal with these challenges and address these
opportunities, electric utilities are formulating and implementing new
strategies and tactics, including redesigning business processes, re-
engineering work forces, acquiring more effective information technology and
adopting or restructuring customer service and marketing programs. Utilities
are increasingly turning to experienced outside consulting firms to assist in
or lead this process because: (i) the pace of change is eclipsing utilities'
internal resources; (ii) many utilities lack the depth and breadth of
experience to identify, evaluate and implement the full range of possible
options and solutions; (iii) outside specialists often enable electric
utilities to develop better solutions in shorter time frames; (iv) purchasing
consulting expertise converts fixed labor costs to variable costs and can be
more cost-effective; and (v) consultants can often formulate more objective
advice, free of internal cultural or political forces. An industry source
estimates that the market for consulting services to the utility industry was
$1.8 billion in 1995, representing approximately 8% of the total market for
consulting services, and projects a 9% annual growth rate through 2000.

Metzler believes that several competitive factors distinguish it from other
participants in the consulting market including: (i) established electric
utility expertise developed over more than thirteen years of providing
consulting services to the electric utility industry; (ii) deep-rooted client
relationships supporting multiple engagements; (iii) proprietary knowledge base
that the Company has developed internally and continuously refines for
incorporation into analysis for new engagements; (iv) wide range of industry-
specific services that enables the Company to be a single-source provider of
consulting services to utilities while maintaining advanced skill sets in each
area; and (v) strategic planning methodology using a high-level modeling tool
developed by Metzler to support the comprehensive strategic planning process of
utilities.

Metzler's growth strategy includes the following elements: (i) further
penetrating its existing client base; (ii) seeking new clients and expanding
its geographic presence; (iii) continuing to recruit highly skilled
professionals with skill sets and client relationships complementary to the
Company's existing professional base; (iv) pursuing strategic acquisitions that
provide the Company with an expeditious and cost-effective method of increasing
its number of consultants, broadening its client base, expanding its skill sets
or expanding its presence in a geographic region; and (v) expanding its service
offerings to include other service areas that the Company believes will be in
demand as the industry continues its move toward a more competitive
environment.

3
<PAGE>

THE OFFERING

<TABLE>
<S> <C>
Common Stock offered by the Company. 2,000,000 shares
Common Stock offered by the Selling
Stockholders....................... 1,200,000 shares
Common Stock to be outstanding after
the offering....................... 10,000,000 shares(1)
Use of proceeds..................... Repayment of indebtedness to the Company's
founder incurred in connection with a
redemption of Common Stock and general
corporate purposes, including working
capital and possible acquisitions of
related businesses
Proposed Nasdaq National Market
symbol............................. METZ
</TABLE>
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(1) Excludes: (i) options outstanding on the date hereof to purchase 355,666
shares at an exercise price of $12.00; and (ii) 944,334 shares reserved for
issuance upon exercise of options that may be granted in the future under
the Company's Long-Term Incentive Plan. See "Management--Long-Term
Incentive Plan," "Description of Capital Stock" and Note 8 of Notes to
Financial Statements.

SUMMARY FINANCIAL DATA

<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEARS ENDED DECEMBER 31, JUNE 30,
---------------------------------------------------- -------------------------
PRO FORMA PRO FORMA
1991 1992 1993 1994 1995 1995(1) 1995 1996 1996(2)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Revenues............... $12,786 $9,216 $10,380 $10,420 $13,460 $13,460 $5,626 $10,857 $10,857
Cost of services....... 6,615 5,644 5,797 5,263 6,422 6,422 2,841 5,215 5,215
------- ------ ------- ------- ------- ------- ------ ------- -------
Gross profit........... 6,171 3,572 4,583 5,157 7,038 7,038 2,785 5,642 5,642
Selling, general and
administrative
expenses(3)........... 5,387 4,006 4,267 5,327 7,650 4,875 4,023 1,404 2,423
------- ------ ------- ------- ------- ------- ------ ------- -------
Operating income
(loss)................ 784 (434) 316 (170) (612) 2,163 (1,238) 4,238 3,219
Other expense (income),
net................... (69) (24) 15 72 127 127 98 12 12
------- ------ ------- ------- ------- ------- ------ ------- -------
Income (loss) before
income tax expense
(benefit)............. 853 (410) 301 (242) (739) 2,036 (1,336) 4,226 3,207
Income tax expense
(benefit)............. 343 (145) 147 (58) (266) 844 (478) 86 1,283
------- ------ ------- ------- ------- ------- ------ ------- -------
Net income (loss)...... $ 510 $ (265) $ 154 $ (184) $ (473) $ 1,192 $ (858) $ 4,140 $ 1,924
======= ====== ======= ======= ======= ======= ====== ======= =======
Pro forma net income
per share............. $ 0.12 $ 0.20
======= =======
Shares used in
computing pro forma
net income per
share(4).............. 9,763 9,785
</TABLE>

<TABLE>
<CAPTION>
AS OF JUNE 30, 1996
----------------------------------
ACTUAL PRO FORMA(5) AS ADJUSTED(6)
(IN THOUSANDS)
<S> <C> <C> <C>
BALANCE SHEET DATA:
Cash....................................... $ 226 $ 226 $19,401
Working capital (deficit).................. 2,261 (332) 18,843
Total assets............................... 5,653 5,653 24,828
Obligations under capital lease, less
current portion........................... 22 22 22
Total stockholders' equity................. 2,783 143 19,318
</TABLE>
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(1) The pro forma statement of operations data for the year ended December 31,
1995 have been computed by eliminating from selling, general and
administrative expenses that portion of officer compensation that exceeded
the compensation that would have been paid had the compensation plan
adopted on July 1, 1996 been in effect for all of 1995. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
and "Management--Executive Compensation."
(2) Effective January 1, 1996, the Company elected to be treated as an S-
corporation. As an S-corporation, the Company was not subject to federal
(and some state) income taxes. The pro forma statement of operations
information for the six months ended June 30, 1996 has been computed by
adjusting the Company's net income, as reported, to (a) increase selling,
general and administrative expenses to reflect the amount by which the
officer compensation that would have been paid under the compensation plan
adopted July 1, 1996 exceeded officer compensation actually paid during the
six months ended June 30, 1996, and (b) record income tax expense assuming
an effective tax rate of 40% that would have been recorded had the Company
been a C-corporation. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations," "Management--Executive
Compensation" and Note 2 of Notes to Financial Statements.
(3) Selling, general and administrative expenses include salary and bonuses for
the executive officers of the Company. Beginning July 1, 1996, these eight
persons will be compensated pursuant to a compensation plan that provides
for annual base and bonus compensation in the aggregate amount of
$3,193,750, assuming the Company meets the mid-point of the compensation
plan's financial performance criteria. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and
"Management--Executive Compensation."

(4) Pro forma net income per share is based on the weighted average of
9,763,267 shares of common and common stock equivalent shares outstanding
which includes 9,692,134 actual shares outstanding and 71,133 common stock
equivalent shares outstanding during the year ended December 31, 1995. Pro
forma net income per share is based on the weighted average of 9,785,418
shares of common and common stock equivalent shares outstanding which
includes 9,714,285 actual shares outstanding and 71,133 common stock
equivalent shares outstanding during the six months ended June 30, 1996.
See Note 2 of Notes to Financial Statements.

(5) As adjusted to reflect the declaration of the S Corporation Dividend (as
defined in "S Corporation Dividend"), which is estimated to be
approximately $2,540,000 as of June 30, 1996, and a $100,000 charge to
earnings to reinstate deferred income taxes upon termination of the
Company's S-corporation status. See "S Corporation Dividend."

(6) Pro forma data, adjusted to give effect to: (i) the sale of 2,000,000
shares of Common Stock offered by the Company hereby at an assumed initial
public offering price of $15.00 per share and the application of the
estimated net proceeds therefrom; and (ii) the Redemption as described in
"Use of Proceeds." See "Use of Proceeds," "Capitalization" and "Certain
Transactions."

4
<PAGE>

RISK FACTORS

In addition to the other information set forth in this Prospectus, investors
should consider carefully the

following factors in connection with an investment in the shares of Common
Stock offered hereby.

RELIANCE ON KEY EXECUTIVES

The success of the Company is highly dependent upon the efforts, abilities,
business generation capabilities and project execution of certain of its
executive officers and senior managers. The loss of the services of any of
these key executives for any reason could have a material adverse effect upon
the Company's business, operating results and financial condition, including
its ability to secure and complete engagements. The Company maintains key-man
life insurance policies on six of its executive officers in the approximate
amount of $1,500,000 each. See "Management."

ATTRACTION AND RETENTION OF EMPLOYEES

The Company's business involves the delivery of professional services and is
labor-intensive. The Company's success depends in large part upon its ability
to attract, develop, motivate and retain highly skilled consultants and senior
consultants possessing business generation skills. Qualified consultants are
in great demand and are likely to remain a limited resource for the
foreseeable future. There can be no assurance that the Company will be able to
attract and retain sufficient numbers of highly skilled consultants in the
future. The loss of a significant number of consultants could have a material
adverse effect on the Company's business, operating results and financial
condition, including its ability to secure and complete engagements. See
"Business--Human Resources."

CONCENTRATION OF REVENUES IN THE ELECTRIC UTILITY INDUSTRY

The Company currently derives the vast majority of its revenues from
consulting engagements with electric utility companies. Much of the Company's
recent growth has arisen from the business opportunities presented by the
trend to deregulate the electric utility industry and introduce increased
competition. If the current trend towards government deregulation of the
electric utility industry slows or the industry becomes subject to more
government regulation, the demand for consulting work from electric utilities
is likely to decrease. If the United States experiences a shortage of
electricity or a nuclear accident should occur, increased regulation of the
electric utility industry would be likely, and the Company's business,
operating results and financial condition could be materially and adversely
affected. Moreover, as a result of deregulation, the electric utility industry
is in a period of consolidation, which could have the effect of reducing the
number of the Company's current or potential clients or create conflicts of
interest between its clients. To date, the Company has lost one client from a
conflict of interest attributable to this industry consolidation trend.
Although this client loss did not have a material effect on the Company's
business, additional conflicts may develop, preventing the Company from
representing certain clients and potentially causing a material adverse effect
on the Company's business, operating results and financial condition.
Furthermore, the number of potential clients in the electric utility industry
may decrease. Additionally, current and future economic pressures may limit
spending by utilities for the types of services offered by the Company. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."

Because of the nature and scope of many of the Company's projects, the
Company derives a significant portion of its revenues from a relatively
limited number of clients that operate exclusively in the electric utility
industry. For example, during 1995 and the first half of 1996, revenues from
the Company's ten most significant clients accounted for approximately 80.5%
and 76.3% of its revenues, respectively. In 1995, a group of affiliated
clients and the Company's largest single client accounted for approximately
22.6% and 15.5% of the Company's revenues, respectively. There can be no
assurance that these clients will continue to engage the Company for
additional significant projects. Clients engage the Company on an assignment-
by-assignment basis, and a client

5
<PAGE>

can generally terminate an assignment at any time without penalty. The loss of
any significant client could have a material adverse effect on the Company's
business, operating results and financial condition. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
"Business--Clients and Representative Solutions."

MANAGEMENT OF GROWTH

The Company is currently experiencing rapid growth that has strained, and
could continue to strain, the Company's managerial and other resources. The
Company's ability to manage the growth of its operations will require it to
continue to improve its operational, financial and other internal systems and
to attract, develop, motivate and retain its employees. If the Company's
management is unable to manage growth or new employees are unable to achieve
anticipated performance or utilization levels, the Company's business,
operating results and financial condition could be materially and adversely
affected.

PROJECT RISKS

Many of the Company's engagements involve projects that are critical to the
operations of its clients' utilities businesses and provide benefits that may
be difficult to quantify. The Company's failure or inability to meet a client's
expectations in the performance of its services could have a material adverse
effect on the Company's reputation, thereby adversely affecting its business,
operating results and financial condition.

VARIABILITY OF QUARTERLY OPERATING RESULTS; SEASONALITY

Variations in the Company's revenues and operating results occur from quarter
to quarter as a result of a number of factors, such as the significance of
client engagements commenced and completed during a quarter, the number of
business days in a quarter, employee hiring and utilization rates, the length
of the Company's sales cycle, the ability of clients to terminate engagements
without penalty, the size and scope of assignments and general economic
conditions. Because a significant portion of the Company's expenses are
relatively fixed, a variation in the number of client assignments or the timing
of the initiation or the completion of client assignments can cause significant
variations in operating results from quarter to quarter and could result in
losses to the Company. To the extent that increases in the number of
professional personnel are not followed by corresponding increases in revenues,
the Company's operating results could be materially and adversely affected.
Furthermore, the Company has on occasion experienced a seasonal pattern in its
operating results, with a smaller proportion of the Company's revenues and
lower operating income occurring in the fourth quarter of the year or a smaller
sequential growth rate than in other quarters. The Company believes these
results can be attributed to constraints on the annual budgets of electric
utilities, and vacation and holidays taken by both its clients and consultants.
See "Management's Discussion and Analysis of Financial Condition and Results of
Operations--Unaudited Quarterly Results."

INTENSE COMPETITION

The market for consulting services to electric utilities is intensely
competitive, highly fragmented and subject to rapid change. The market includes
a large number of participants from a variety of market segments, including
general management consulting firms, the consulting practices of "Big Six"
accounting firms and local or regional firms specializing in utility services.
Many information technology consulting firms also maintain significant practice
groups devoted to the utility industry. Many of these companies are national
and international in scope and have greater personnel, financial, technical and
marketing resources than the Company. There can be no assurance that the
Company will compete successfully with its existing competitors or with any new
competitors. See "Business--Competition."

6
<PAGE>

RISKS RELATED TO POSSIBLE ACQUISITIONS

The Company may expand its operations through the acquisition of additional
businesses. There can be no assurance that the Company will be able to
identify, acquire or profitably manage additional businesses or successfully
integrate any acquired businesses into the Company without substantial
expenses, delays or other operational or financial problems. Further,
acquisitions may involve a number of special risks, including diversion of
management's attention, failure to retain key acquired personnel,
unanticipated events or circumstances, legal liabilities and amortization of
acquired intangible assets, some or all of which could have a material adverse
effect on the Company's business, operating results and financial condition.
Client satisfaction or performance problems at a single acquired firm could
have a material adverse impact on the reputation of the Company as a whole. In
addition, there can be no assurance that acquired businesses, if any, will
achieve anticipated revenues and earnings. The failure of the Company to
manage its acquisition strategy successfully could have a material adverse
effect on the Company's business, operating results and financial condition.
See "Business--Growth Strategy."

SIGNIFICANT UNALLOCATED NET PROCEEDS

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

BENEFITS OF OFFERING TO SELLING STOCKHOLDERS

The Selling Stockholders will receive substantial proceeds from this
offering and certain other benefits in connection with the offering. The
offering will establish a public market for the Common Stock and provide
significantly increased liquidity to the Selling Stockholders for the shares
of Common Stock they will own after the offering. At an assumed initial public
offering price of $15.00 per share, after deduction of underwriting discounts
and commissions, the aggregate realized gain as a result of the offering by
the Selling Stockholders will be approximately $16.6 million (exclusive of the
S-Corporation Dividend from the Company to the Selling Stockholders). Upon
completion of the offering, the Selling Stockholders will own an aggregate of
approximately 68% of the outstanding Common Stock. At $15.00 per share, the
Selling Stockholders' aggregate unrealized gain (before deduction of estimated
income taxes) would be approximately $98.5 million. See "Use of Proceeds,"
"Dilution," "Principal and Selling Stockholders" and "Certain Transactions."

In addition, Richard J. Metzler, the founder of the Company, was granted a
look-back option to purchase certain shares of Common Stock from the Selling
Stockholders that became exercisable as a result of this offering.
Accordingly, Mr. Metzler exercised his option to purchase 1,457,143 shares
from the remaining Selling Stockholders for total consideration of $1.00. The
Company will use proceeds from this offering in the amount of $7,975,000 to
redeem all of these shares and an additional 257,142 shares of Common Stock
owned by Mr. Metzler (for a price of approximately $4.65 per share).

CONTROL BY PRINCIPAL STOCKHOLDERS

After completion of this offering, the Company's executive officers will
beneficially own approximately 68% of the Company's outstanding shares of
Common Stock. As a result, these officers will continue to be able to control
the outcome of matters requiring a stockholder vote, including the election of
the members of the Board of Directors, thereby controlling the affairs and
management of the Company. Such control could

7
<PAGE>

adversely affect the market price of the Common Stock or delay or prevent a
change in control of the Company. See "Principal and Selling Stockholders."

NO PRIOR PUBLIC MARKET; POSSIBLE VOLATILITY OF STOCK PRICE

Prior to this offering, there has been no public market for the Common
Stock. Consequently, the initial public offering price per share of the Common
Stock will be determined by negotiations among management of the Company and
the representative of the Underwriters (the "Representative"). See
"Underwriting" for factors to be considered in determining the initial public
offering price per share. Although the Common Stock has been approved for
quotation on the Nasdaq National Market, there can be no assurance that an
active trading market will develop or be sustained after this offering. The
market price of the Common Stock may fluctuate substantially due to a variety
of factors, including quarterly fluctuations in results of operations, adverse
circumstances affecting the introduction or market acceptance of new services
offered by the Company, announcements of new services by competitors, changes
in earnings estimates by analysts, changes in accounting principles, sales of
Common Stock by existing holders, loss of key personnel and other factors. In
addition, the stock market is subject to extreme price and volume
fluctuations. This volatility has often had a significant effect on the market
prices of securities issued by many companies for reasons unrelated to the
operating performance of these companies. In the past, following periods of
volatility in the market price of a company's securities, securities class
action litigation has often been instituted against such a company. Any such
litigation instigated against the Company could result in substantial costs
and a diversion of management's attention and resources, which could have a
material adverse effect on the Company's business, operating results and
financial condition.

IMMEDIATE AND SUBSTANTIAL DILUTION

The initial public offering price per share of Common Stock is substantially
higher than the net tangible book value per share of the Common Stock.
Purchasers of shares of Common Stock in this offering will experience
immediate and substantial dilution of $13.07 in the pro forma net tangible
book value per share of Common Stock. To the extent outstanding options to
purchase the Company's Common Stock are exercised, there will be further
dilution. See "Dilution."

DIVIDEND POLICY

Other than the S Corporation Dividend (see "S Corporation Dividend"), the
Company has never paid cash dividends on its capital stock and does not
anticipate paying cash dividends in the foreseeable future. The Company
currently intends to retain all earnings for the development of its business.
See "Dividend Policy."

CERTAIN ANTITAKEOVER EFFECTS

The Company's Certificate of Incorporation and By-Laws and the Delaware
General Corporation Law include provisions that may be deemed to have
antitakeover effects and may delay, defer or prevent a takeover attempt that
stockholders might consider in their best interests. Directors of the Company
are divided into three classes and are elected to serve staggered three-year
terms. The Board of Directors of the Company is authorized to issue up to
3,000,000 shares of preferred stock and to determine the price, rights,
preferences and privileges of such shares, without any further stockholder
action. The existence of this "blank-check" preferred stock could render more
difficult or discourage an attempt to obtain control of the Company by means
of a tender offer, merger, proxy contest or otherwise. In addition, the
existence or issuance of "blank check" preferred stock may have an adverse
effect on the market price of the Company's Common Stock. See "Management--
Executive Officers and Directors" and "Description of Capital Stock--
Antitakeover Effects of Provisions of the Certificate of Incorporation, By-
Laws and Delaware Law."

8
<PAGE>

SHARES ELIGIBLE FOR FUTURE SALE

Immediately after completion of this offering, the Company will have
10,000,000 shares of Common Stock outstanding, of which the 3,200,000 shares
sold pursuant to this offering will be freely tradable without restriction or
further registration under the Securities Act of 1933, as amended (the
"Securities Act"), except those shares acquired by affiliates of the Company.
Holders of the remaining shares will be eligible to sell such shares pursuant
to Rule 144 under the Securities Act ("Rule 144") at prescribed times and
subject to the manner of sale, volume, notice and information restrictions of
Rule 144. In addition, 355,666 shares of Common Stock (none of which are
currently exercisable) are issuable upon the exercise of outstanding stock
options, which shares may be registered by the Company under the Securities
Act and become freely tradable without restriction. The Company, together with
each of its stockholders (holding in the aggregate 6,800,000 shares of Common
Stock upon consummation of this offering), have agreed not to offer, sell,
contract to sell or otherwise dispose of, directly or indirectly, any Common
Stock, or any securities convertible into or exchangeable or exercisable for
Common Stock, until 180 days after the date of this Prospectus, without the
prior consent of Donaldson, Lufkin & Jenrette Securities Corporation. Sales of
substantial amounts of such shares in the public market or the availability of
such shares for future sale could adversely affect the market price of the
shares of Common Stock and the Company's ability to raise additional capital
at a price favorable to the Company. See "Shares Eligible for Future Sale" and
"Underwriting."

9
<PAGE>

THE COMPANY

From its inception in 1983 to immediately prior to the date of this
Prospectus, the Company has operated as an Illinois corporation, most recently
under the name Metzler & Associates, Inc. ("Metzler-Illinois"). In December
1995, Richard J. Metzler, the founder of the Company and the owner of 85% of
its capital stock at that time, sold 60% of the Company's outstanding capital
stock to the other then-existing shareholders. These existing shareholders,
who are also senior officers of the Company, each own between 10% to 15% of
the Company's Common Stock as of the date of this Prospectus. See "Certain
Transactions" and "Principal and Selling Stockholders." Effective as of the
date of this Prospectus, the Company will restructure itself in a merger (the
"Reorganization"), pursuant to which Metzler-Illinois will become a wholly
owned operating subsidiary of the registrant, The Metzler Group, Inc., a newly
formed Delaware corporation, and the current shareholders of Metzler-Illinois
will exchange all of their shares of common stock of Metzler-Illinois for a
like number of shares of Common Stock of The Metzler Group, Inc.

The Company maintains its principal executive offices at 520 Lake Cook Road,
Suite 500, Deerfield, Illinois 60015. The Company's telephone number is (847)
945-0001.

USE OF PROCEEDS

The net proceeds to the Company from the sale of the 2,000,000 shares of
Common Stock offered by the Company hereby, assuming an initial public
offering price of $15.00 per share and after deducting underwriting discounts
and commissions and other offering expenses (estimated to be approximately
$750,000), all of which are payable by the Company, are estimated to be
approximately $27.2 million ($30.5 million if the Underwriters' over-allotment
option is exercised in full). The Company will use a portion of the net
proceeds to repay indebtedness of $7,975,000 (which bears no interest and is
payable within 30 days of the closing of this offering) owed to the Company's
founder, Richard J. Metzler, in connection with a redemption of a portion of
the Company's Common Stock from Mr. Metzler (the "Redemption"). See "Certain
Transactions." The balance of the net proceeds will be used for general
corporate purposes, which may include future acquisitions of complementary
businesses. The Company currently has no agreements, understandings or
commitments regarding any future acquisitions. Pending such uses, the net
proceeds will be invested in short-term, interest-bearing investment grade
securities.

The principal purposes of this offering are to increase the Company's equity
capital and financial flexibility, create a public market for the Common
Stock, facilitate future access by the Company to the public equity markets,
create a currency for potential acquisitions, enhance the Company's ability to
use the Common Stock as a means of attracting, retaining and incentivizing
senior managers and consultants and provide working capital to fund the
Company's growth strategy. See "Business--Growth Strategy."

S CORPORATION DIVIDEND

Commencing on January 1, 1996, the Company elected to be treated as an S-
corporation for federal income tax purposes under Subchapter S of the Internal
Revenue Code of 1986, as amended, and for certain state income tax purposes.
As a result, substantially all of the Company's 1996 income through the date
of this Prospectus will be taxed directly to its stockholders rather than to
the Company. The Company's S-corporation status will terminate in connection
with the offering and the Company will make a final distribution to its
existing stockholders of undistributed S-corporation earnings, as explained
below.

Prior to consummating this offering, the Company will declare an S-
corporation dividend to its existing stockholders in an aggregate amount
representing all undistributed earnings of the Company from January 1, 1996
through the date of this Prospectus (the "S Corporation Dividend"). The S
Corporation Dividend is currently estimated to be approximately $4,000,000,
and 40% of such amount will be paid upon the closing of this offering from the
Company's cash on hand at that time in order to fund the existing
stockholders' estimated tax payments. The remainder of the S Corporation
Dividend will be paid to the existing stockholders on December 15, 1996.
Purchasers of Common Stock in this offering will not receive any portion of
the S Corporation Dividend. Following termination of its S-corporation status
upon the Reorganization, the Company will be subject to corporate income
taxation as a Subchapter C corporation.

10
<PAGE>

DIVIDEND POLICY

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

CAPITALIZATION

The following table sets forth the capitalization of the Company as of June
30, 1996, and as adjusted to reflect: (i) the Redemption; (ii) the declaration
of the S Corporation Dividend (estimated through June 30, 1996); (iii) the
reinstatement of deferred income taxes upon termination of the Company's S-
corporation status; and (iv) the sale of 2,000,000 shares of Common Stock
offered by the Company (at an assumed initial public offering price of $15.00
per share) and the application of the estimated net proceeds therefrom as
described in "Use of Proceeds." The following table should be read in
conjunction with the Financial Statements and related Notes thereto included
elsewhere in this Prospectus.

<TABLE>
<CAPTION>
AS OF JUNE 30,
1996
------------------
PRO FORMA
ACTUAL AS ADJUSTED
(IN THOUSANDS)
<S> <C> <C>
Current portion of obligations under capital lease.......... $ 16 $ 16
====== =======
Obligations under capital lease, less current maturities.... $ 22 $ 22
Stockholders' equity:
Preferred Stock, $.001 par value; 3,000,000 shares
authorized; no shares issued or outstanding.............. -- --
Common Stock, $.001 par value; 15,000,000 shares
authorized; 9,714,285
shares issued and outstanding, 10,000,000 shares issued
and outstanding as adjusted (1).......................... 10 10
Additional paid-in capital (2)............................ 107 19,282
Retained earnings (3)..................................... 2,666 26
------ -------
Total stockholders' equity.............................. 2,783 19,318
------ -------
Total capitalization.................................. $2,805 $19,340
====== =======
</TABLE>
- --------
(1) Excludes 355,666 shares of Common Stock issuable upon the exercise of
stock options outstanding as of June 30, 1996 at an exercise price of
$12.00 per share, and 944,334 shares of Common Stock reserved for grant of
future options or direct issuances under the Company's Long-Term Incentive
Plan. See "Management--Long-Term Incentive Plan."
(2) As adjusted to reflect the sale of 2,000,000 shares of Common Stock
offered by the Company at an assumed initial public offering price of
$15.00, net of estimated underwriting discounts and commissions and
estimated offering expenses, less $7,975,000 paid to the founder of the
Company in connection with the Redemption.

(3) As adjusted to reflect the declaration of the S Corporation Dividend
(which is estimated to be approximately $2,540,000 as of June 30, 1996)
and a $100,000 charge to earnings to reinstate deferred income taxes upon
termination of the Company's S-corporation status. See "S Corporation
Dividend."

11
<PAGE>

DILUTION

As of June 30, 1996, the net tangible book value of the Company was
$2,783,000 or $0.29 per share. Net tangible book value per share represents
the amount of tangible net assets of the Company, less total liabilities,
divided by the number of shares of Common Stock outstanding. After giving
effect to: (i) the Redemption as described in "Use of Proceeds"; (ii) the
declaration of the S Corporation Dividend (estimated through June 30, 1996) as
described in "S Corporation Dividend"; (iii) the reinstatement of deferred
income taxes upon termination of the Company's S-corporation status; and (iv)
the sale by the Company of 2,000,000 shares of Common Stock (at an assumed
initial public offering price of $15.00 per share) and the application of the
net proceeds therefrom, the pro forma net tangible adjusted book value of the
Company at June 30, 1996 would have been $19,318,000 or $1.93 per share. This
amount represents an immediate increase in net tangible book value of $1.64
per share to existing owners of the Company and an immediate dilution in net
tangible book value per share of $13.07 per share to purchasers of Common
Stock in this offering. The following table illustrates this per share
dilution, without giving effect to any exercise of the Underwriters' over-
allotment options:

<TABLE>
<S> <C> <C>
Assumed initial public offering price per share.................. $ 15.00
Net tangible book value per share at June 30, 1996............. $0.29
Increase in net tangible book value per share attributable to
new investors................................................. 1.64
Pro forma net tangible book value per share after this offering.. 1.93
-------
Dilution in net tangible book value per share to new investors... $ 13.07
=======
</TABLE>

As of June 30, 1996, there were options outstanding to purchase a total of
355,666 shares of Common Stock at an exercise price of $12.00 per share. To
the extent outstanding options are exercised, there will be further dilution
to investors.

The following table summarizes, on a pro forma basis as of June 30, 1996,
the differences in the number of shares of capital stock purchased from the
Company, the total consideration paid and the average price paid per share by
existing shareholders and new investors at the assumed initial public offering
price of $15.00 per share:

<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
------------------ ------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
<S> <C> <C> <C> <C> <C>
Existing stockholders(1)... 8,000,000 80.0% $ 117,396 0.4% $ 0.01
New investors(1)........... 2,000,000 20.0 30,000,000 99.6 $15.00
---------- ----- ----------- -----
Total.................... 10,000,000 100.0% $30,117,396 100.0%
========== ===== =========== =====
</TABLE>
- --------
(1) Sales by the Selling Stockholders in this offering will reduce the number
of shares held by existing stockholders of the Company to 6,800,000 or
68.0% of the total number of shares outstanding after this offering
(6,560,000 shares or 64.1% if the Underwriters' over-allotment option is
exercised in full), and will increase the number of shares held by new
investors to 3,200,000 shares or 32.0% of the total number of shares of
Common Stock outstanding after this offering (3,680,000 shares or 35.9% if
the Underwriters' over-allotment option is exercised in full). See
"Principal and Selling Stockholders."

12
<PAGE>

SELECTED FINANCIAL DATA

The following selected financial data for the fiscal years ended 1991
through 1995 are derived from the Company's Financial Statements and related
Notes thereto. The Company's Financial Statements and related Notes thereto as
of December 31, 1994 and 1995 and for the three years ended December 31, 1995
have been audited by KPMG Peat Marwick LLP, independent accountants. The
statements of operations and the balance sheet data as set forth below for the
years ended December 31, 1991 and 1992 and each of the six-month periods ended
June 30, 1995 and 1996 and as of December 31, 1991, 1992 and 1993, and June
30, 1995 and June 30, 1996 and the pro forma statements of operations for the
year ended December 31, 1995 and the six months ended June 30, 1996 have been
derived from the Company's financial statements. In the opinion of management,
the interim period financial statements include all adjustments necessary for
a fair statement of the results for the interim periods, and all such
adjustments are of a normal recurring nature. The selected financial data for
the six months ended June 30, 1996 are not necessarily indicative of the
results to be expected for the full year. The selected financial data set
forth below should be read in conjunction with the Company's Financial
Statements and related Notes thereto and with "Management's Discussion and
Analysis of Financial Condition and Results of Operations."

<TABLE>
<CAPTION>
SIX MONTHS
YEARS ENDED DECEMBER 31, ENDED JUNE 30,
-------------------------------------------------- -----------------------
PRO PRO
FORMA FORMA
1991 1992 1993 1994 1995 1995(1) 1995 1996 1996(2)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Revenues................ $12,786 $9,216 $10,380 $10,420 $13,460 $13,460 $5,626 $10,857 $10,857
Cost of services........ 6,615 5,644 5,797 5,263 6,422 6,422 2,841 5,215 5,215
------- ------ ------- ------- ------- ------- ------ ------- -------
Gross profit............ 6,171 3,572 4,583 5,157 7,038 7,038 2,785 5,642 5,642
Selling, general and
administrative
expenses(3)............ 5,387 4,006 4,267 5,327 7,650 4,875 4,023 1,404 2,423
------- ------ ------- ------- ------- ------- ------ ------- -------
Operating income (loss). 784 (434) 316 (170) (612) 2,163 (1,238) 4,238 3,219
Other expense (income),
net.................... (69) (24) 15 72 127 127 98 12 12
------- ------ ------- ------- ------- ------- ------ ------- -------
Income (loss) before
income tax expense
(benefit).............. 853 (410) 301 (242) (739) 2,036 (1,336) 4,226 3,207
Income tax expense
(benefit).............. 343 (145) 147 (58) (266) 844 (478) 86 1,283
------- ------ ------- ------- ------- ------- ------ ------- -------
Net income (loss)....... $ 510 $ (265) $ 154 $ (184) $ (473) $ 1,192 $ (858) $ 4,140 $ 1,924
======= ====== ======= ======= ======= ======= ====== ======= =======
Pro forma net income
per share(4)........... $ 0.12 $ 0.20
======= =======
</TABLE>

<TABLE>
<CAPTION>
AS OF DECEMBER 31, AS OF JUNE 30,
---------------------------------- ----------------------
PRO
FORMA
1991 1992 1993 1994 1995 1995 1996 1996(5)
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash.................... $ 20 $ 2 $ 3 $ 64 $ 223 $ 573 $ 226 $ 226
Working capital
(deficit).............. 848 85 348 310 49 (392) 2,261 (332)
Total assets............ 1,996 2,697 3,459 2,518 2,780 3,951 5,653 5,653
Obligations under
capital lease, less
current portion........ 17 -- 60 46 30 38 22 22
Total stockholders'
equity (deficit)....... 1,016 752 860 655 243 (141) 2,783 143
</TABLE>
- --------

(1) The pro forma statement of operations data for the year ended December 31,
1995 have been computed by eliminating from selling, general and
administrative expenses that portion of officer compensation that exceeded
the compensation that would have been paid had the compensation plan
adopted on July 1, 1996 been in effect for all of 1995. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
and "Management--Executive Compensation."
(2) Effective January 1, 1996, the Company elected to be treated as an S-
corporation. As an S-corporation, the Company was not subject to federal
(and some state) income taxes. The pro forma statement of operations
information for the six months ended June 30, 1996 has been computed by
adjusting the Company's net income, as reported, to (a) increase selling,
general and administrative expenses to reflect the amount by which the
officer compensation that would have been paid under the compensation plan
adopted July 1, 1996 exceeded officer compensation actually paid during
the six months ended June 30, 1996, and (b) record income tax expense
assuming an effective tax rate of 40% that would have been recorded had
the Company been a C-corporation. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations," "Management--
Executive Compensation" and Note 2 of Notes to Financial Statements.
(3) Selling, general and administrative expenses include salary and bonuses
for the executive officers of the Company. Beginning July 1, 1996, these
eight persons will be compensated pursuant to a compensation plan that
provides for annual base and bonus compensation in the aggregate amount of
$3,193,750, assuming the Company meets the mid-point of the compensation
plan's financial performance criteria. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and
"Management--Executive Compensation."

(5) As adjusted to reflect the declaration of the S Corporation Dividend
(which is estimated to be approximately $2,540,000 as of June 30, 1996)
and a $100,000 charge to earnings to reinstate deferred income taxes upon
termination of the Company's S-corporation status. See "S Corporation
Dividend."

13
<PAGE>

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

The following section of the Prospectus, Management's Discussion and
Analysis of Financial Condition and Results of Operations, contains certain
forward-looking statements that involve substantial risks and uncertainties.
When used in this section, the words "anticipate," "believe," "estimate," and
"expect" and similar expressions as they relate to the Company or its
management are intended to identify such forward-looking statements. The
Company's actual results, performance or achievements could differ materially
from the results expressed in, or implied by, these forward-looking
statements. Factors that could cause or contribute to such differences include
those discussed in "Risk Factors."

OVERVIEW

The Company derives substantially all of its revenues from fees for
professional services, which are billed at standard daily rates or provided on
a fixed-bid basis. Over the last three years, the substantial majority of the
Company's revenues has been generated under standard daily rates billed on a
time and expenses basis. Clients are typically invoiced on a monthly basis
with revenue recognized as the services are provided. Fixed-bid revenue is
recognized by the percentage of completion method based on the ratio of costs
incurred to total estimated project costs. Although fixed-bid projects subject
the Company to the risk of cost overruns, the Company has not incurred a loss
on a fixed-bid contract during the last three years.

The Company's most significant expenses are project personnel costs, which
consist of consultant salaries and benefits, and travel-related direct project
expenses. Project personnel are typically full-time professionals employed by
the Company, although the Company supplements its project professional
personnel through the use of independent contractors. The Company retains
contractors for specific client engagements on a task-specific, per diem basis
during the period their expertise or skills are required. The Company believes
that retaining contractors on a per-engagement basis provides it with greater
flexibility in adjusting professional personnel levels in response to changes
in demand for its services.

Effective January 1, 1996, the Company elected to be taxed as an S-
corporation. As an S-corporation, the net income of the Company from January
1, 1996 is taxable for federal (and some state) income tax purposes directly
to the Company's stockholders. The Company's compensation structure for its
executive officers for the periods presented reflected the Company's then tax
status. For all periods prior to January 1, 1996, when the Company was taxable
as a C-corporation, incentive compensation to the Company's key executives
represented a significant percentage of the Company's revenues. For the period
commencing January 1, 1996, until the termination of the Company's S-
corporation status upon consummation of the Reorganization, the Company's key
executives will not earn any incentive compensation as it is not a component
of the compensation plan in effect at that time. As an S-corporation, all the
Company's net income during the period it is taxable as an S-corporation will
be distributed to its key executives and included in their personal taxable
income. Effective July 1, 1996, in contemplation of the termination of the
Company's S-corporation status and its going public as a result of this
offering, the Company adopted a new executive officer compensation plan that
provides for annual base salaries ranging from $225,000 to $375,000 and bonus
compensation subject to the attainment of certain financial performance
criteria, ranging from 0% to 125% of each executive officer's annual base
salary. See "S Corporation Dividend" and "Management--Executive Compensation."

14
<PAGE>

RESULTS OF OPERATIONS

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

<TABLE>
<CAPTION>
SIX
MONTHS
YEARS ENDED ENDED
DECEMBER 31, JUNE 30,
----------------- -----------
1993 1994 1995 1995 1996
<S> <C> <C> <C> <C> <C>
Revenues........................................... 100% 100% 100% 100% 100%
Cost of services................................... 56 51 48 50 48
--- --- --- --- ---
Gross profit....................................... 44 49 52 50 52
Selling, general and administrative expenses....... 41 51 57 72 13
--- --- --- --- ---
Operating income (loss)............................ 3 (2) (5) (22) 39
Other expense (income), net........................ * 1 1 2 *
--- --- --- --- ---
Income (loss) before income tax expense (benefit).. 3 (3) (6) (24) 39
Income tax expense (benefit)....................... 1 (1) (2) (9) 1
--- --- --- --- ---
Net income (loss).................................. 2% (2)% (4)% (15)% 38%
=== === === === ===
</TABLE>
- --------
*Less than one percent.

SIX MONTHS ENDED JUNE 30, 1996 COMPARED TO SIX MONTHS ENDED JUNE 30, 1995

Revenues. Revenues increased 93% to $10.9 million in the six months ended
June 30, 1996 from $5.6 million in the six months ended June 30, 1995. This
increase was caused by increased demand for management consulting services in
the electric utility industry and a change in the Company's management
compensation structure that places more emphasis on the generation of new
client engagements. These factors generated increases in both the number of
client projects and the average size of client projects.

Gross Profit. Gross profit consists of revenues less cost of services, which
includes consultant salaries, benefits and travel-related direct project
expenses. Gross profit increased 103% to $5.6 million in the first half of 1996
from $2.8 million in the comparable period of 1995. Gross profit as a
percentage of revenues was 52% in 1996 compared to 50% in 1995. To service
additional client project commitments, the Company increased its full-time
equivalent consultants, including independent subcontractors, to 43
professionals in the first six months of 1996 from approximately 30 in the
comparable period in 1995. Increased utilization rates resulted in a 10%
increase in average billings per professional in the 1996 period.

Selling, General and Administrative Expenses. Selling, general and
administrative expenses include salaries and benefits of management and support
personnel, facilities costs, training, direct selling, outside professional
fees and all other corporate costs. Selling, general and administrative
expenses decreased 65% to $1.4 million in the six month period ended June 30,
1996 from $4.0 million in the prior year period. As a percentage of revenues,
selling, general and administrative expenses decreased to 13% in the first six
months of 1996 from 72% in the first six months of 1995. The decrease is
attributable to the change in the taxable status of the Company from a C-
corporation to an S-corporation, with the Company's profits being distributed
to its principal executives commencing January 1, 1996. Pursuant to the
compensation plan in effect, the Company's key executives did not earn any
incentive compensation in the first six months of 1996. Excluding the $3.1
million of incentive compensation recorded with respect to the Company's key
executives in 1995, the remaining selling, general and administrative expenses
were 13% and 16% of revenues in the first six months of 1996 and 1995,
respectively. Effective July 1, 1996, in contemplation of the termination of
the Company's S-corporation status in connection with the closing of this
offering, the Company adopted a new executive compensation plan. See
"Management--Executive Compensation." Although selling, general and
administrative expenses generally

15
<PAGE>

increase as the Company's revenues increase, the Company believes it can
leverage its existing overhead structure to lower selling, general and
administrative expenses as a percentage of revenues in the future.

Operating Income (Loss). Operating income for the six months ended June 30,
1996 was $4.2 million, as opposed to an operating loss for the six months
ended June 30, 1995 of $1.2 million. The improvement is attributable to the
increased revenues and the decrease in selling, general and administrative
expenses resulting from the change in compensation for the Company's key
executives, as described above.

Income Taxes. Effective January 1, 1996, the stockholders of the Company
elected to be taxed under Subchapter S of the Internal Revenue Code. See "S
Corporation Dividend." Federal income taxes are the responsibility of the
Company's stockholders, as are certain state income taxes. Accordingly, the
statement of operations for the six months ended June 30, 1996 does not
include a provision for federal or certain state income taxes. The Company's
S-corporation status will terminate upon the consummation of this offering.

PRO FORMA RESULTS

The pro forma statement of operations data reflect an adjustment to selling,
general and administrative expenses for executive officer compensation for the
year ended December 31, 1995 to eliminate the excess of key executive
compensation paid in 1995 over the compensation estimated that would have been
paid under the newly adopted executive officer compensation plan as if such
plan were in place throughout 1995. The estimated amount payable under the new
plan was calculated by assuming the payment to the executive officers of their
annual base salaries plus a 75% bonus level (payable upon attainment of the
mid-point of the compensation plan's financial performance criteria). The pro
forma adjustment for officer compensation expenses for the six months ended
June 30, 1996 adds back the excess of compensation estimated to be payable
under the newly adopted plan over the limited base salaries actually paid in
1996 in light of the Company's S-corporation tax structure.

The pro forma tax provision provided for the six months ended June 30, 1996
assumes the Company had been operating as a C-corporation during such period
and reflects an effective tax rate of 40% after giving effect to the
aforementioned executive officer compensation expense adjustments.

1995 COMPARED TO 1994

Revenues. Revenues increased 29% to $13.5 million in 1995 from $10.4 million
in 1994. The increase in revenues was attributable to a 10% increase in the
Company's standard daily rates, an increase in the number of client projects
and an increase in the average size of client projects. The rate increase was
applicable to new client engagements that commenced after the third quarter of
1994, but the full effect was not evident until 1995 because of the high level
of work in process for the fourth quarter of 1994.

Gross Profit. Gross profit increased 36% to $7.0 million in 1995 from $5.2
million in 1994. Gross profit as a percentage of revenues increased to 52% in
1995 from 49% in 1994. This increase is attributable to improvements in the
utilization rates for professional personnel and reduced reliance on
independent subcontractors in 1995. Full-time equivalent consultants,
including subcontractors, increased to 35 professionals in 1995 from 31 in
1994, to accommodate the increased number and size of client projects.
Increased utilization, in addition to the impact of the consultant billing
rate increase, improved average billings per professional in 1995 by 14% over
1994's levels.

Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased 44% to $7.7 million in 1995 from $5.3
million in 1994. This increase is attributable to higher 1995 compensation for
the Company's principal executive officers. The Company's 1995 executive
incentive plan provided for compensation payments that were largely
commensurate with increased gross profits generated from incremental revenues.
Selling, general and administrative expenses, as a percentage of revenues,
increased to 57% in 1995 from 51% in 1994. Excluding the incentive
compensation expense for key executives, the remaining selling, general and
administrative expenses were 11% and 13% of revenues in 1995 and 1994,
respectively.

16
<PAGE>

Operating Income (Loss). The operating loss increased to $0.6 million in
1995 from $0.2 million in 1994. The higher operating loss in 1995 was driven
by increased compensation for the Company's principal executive officers,
mitigated to some degree by improved gross margins.

1994 COMPARED TO 1993

Revenues. Revenues for both 1994 and 1993 were approximately $10.4 million.
Revenues increased by less than 1%, as the number of client projects and the
average project size were largely consistent from year to year. The Company
increased its standard daily rates in the third quarter of 1994, but the
increase did not have a material effect on 1994 results because it was
effective only for new client engagements commencing after the effective date.

Gross Profit. Gross profit increased 13% to $5.2 million in 1994 from $4.6
million in 1993. Gross profit as a percentage of revenues increased to 49% in
1994 from 44% in 1993. This increase was a result of higher utilization of
professional personnel. Full-time equivalent consultants, including
subcontractors, decreased to 31 professionals in 1994 from 35 in 1993. The
improved utilization and a modest increase in the average size of client
projects improved average billings per professional for 1994 by 13% over
1993's levels.

Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased 25% to $5.3 million in 1994 from $4.3
million in 1993. The increase is attributable to higher 1994 compensation for
the Company's principal executive officers. The Company's 1994 executive
incentive plan provided for compensation payments that were largely
commensurate with increased gross profits generated from productivity
improvements. As a percentage of revenues, selling, general and administrative
expenses increased to 51% in 1994 from 41% in 1993. Excluding the incentive
compensation expense for key executives, the remaining selling, general and
administrative expenses were 13% and 14% of revenues in 1994 and 1993,
respectively.

Operating Income (Loss). The Company generated an operating loss of $0.2
million in 1994, as compared to operating income of $0.3 million in 1993. This
change was the result of increased compensation for the Company's principal
executive officers, offset to some degree by improvements in gross margins.

UNAUDITED QUARTERLY RESULTS

The following table sets forth certain unaudited quarterly operating
information for each of the eight quarters ending June 30, 1996. These data
have been prepared on the same basis as the audited financial statements
contained elsewhere in this Prospectus and include all normal recurring
adjustments necessary for the fair presentation of the information for the
periods presented, when read in conjunction with the Company's Financial
Statements and related Notes thereto. Results for any previous fiscal quarter
are not necessarily indicative of results for the full year or for any future
quarter.

<TABLE>
<CAPTION>
QUARTERS ENDED
-----------------------------------------------------------------------
SEP. 30, DEC. 31, MAR. 31, JUNE 30, SEP. 30, DEC. 31, MAR. 31, JUNE 30,
1994 1994 1995 1995 1995 1995 1996 1996
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues................ $2,569 $2,191 $2,526 $3,100 $3,692 $4,142 $5,344 $5,513
Cost of services........ 1,185 1,205 1,294 1,547 1,645 1,936 2,546 2,669
------ ------ ------ ------ ------ ------ ------ ------
Gross profit............ 1,384 986 1,232 1,553 2,047 2,206 2,798 2,844
Selling, general and
administrative
expenses............... 1,460 1,063 1,986 2,037 1,942 1,685 709 695
------ ------ ------ ------ ------ ------ ------ ------
Operating income (loss). (76) (77) (754) (484) 105 521 2,089 2,149
Other expense (income),
net.................... 78 (38) 78 20 1 28 13 (1)
------ ------ ------ ------ ------ ------ ------ ------
Income (loss) before
income tax expense
(benefit).............. (154) (39) (832) (504) 104 493 2,076 2,150
Income tax expense
(benefit).............. (37) (10) (298) (180) 37 175 42 44
------ ------ ------ ------ ------ ------ ------ ------
Net income (loss)....... $ (117) $ (29) $ (534) $ (324) $ 67 $ 318 $2,034 $2,106
====== ====== ====== ====== ====== ====== ====== ======
</TABLE>

17
<PAGE>

Revenues and operating results fluctuate from quarter to quarter as a result
of a number of factors, such as the significance of client engagements
commenced and completed during a quarter, the number of business days in a
quarter and employee hiring and utilization rates. The timing of revenues
varies from quarter to quarter because of the Company's sales cycle, the
ability of clients to terminate engagements without penalty, the size and
scope of assignments and general economic conditions. Because a significant
percentage of the Company's expenses are relatively fixed, a variation in the
number of client assignments or the timing of the initiation or the completion
of client assignments can cause significant variations in operating results
from quarter to quarter. Furthermore, the Company has on occasion experienced
a seasonal pattern in its operating results, with a smaller proportion of the
Company's revenues and lower operating income occurring in the fourth quarter
of the year or a smaller sequential growth rate than in other quarters.

LIQUIDITY AND CAPITAL RESOURCES

The Company's primary source of liquidity has been cash flow from
operations, periodically supplemented by borrowings under a bank line of
credit and by loans from stockholders. Operations provided funds of $1.8
million for the six months ended June 30, 1996 as compared to $232,000 in the
six months ended June 30, 1995. Cash flow from operations amounted to
$118,000, $254,000 and $112,000 for 1993, 1994 and 1995, respectively.
Operating income and net income decreased each year during this three year
period, but the effects on cash flow were offset to varying degrees by changes
in working capital. In particular, two elements of working capital, accounts
receivable and accrued compensation and related costs, account for most of the
variability in cash flow from operations. In 1993, accounts receivable
increased as a result of higher revenues and because of an increase in the
days revenue outstanding over the prior year. Accounts receivable decreased in
1994 as improvements in year-end collections reduced the days revenue
outstanding at year end. At year end 1995, accounts receivable increased as a
result of higher revenues and billings, partially offset by improvements in
collections which further reduced the days revenue outstanding. The Company
has a substantial level of accrued compensation at each year end because
salaries are paid monthly, in arrears, and because annual incentives and
bonuses earned and accrued during the calendar year are typically paid in the
first quarter of the subsequent year. Incentives and bonuses are based on
individual as well as overall business performance and represent a significant
proportion of total compensation for both project personnel and executive
management. In 1993, accrued compensation increased commensurately with
revenues and project personnel levels. In 1994, accrued compensation decreased
with the reduction in full time equivalent consultants. Accrued compensation
for 1995 increased in line with the growth in professional personnel and
improved utilization rates.

Investing activities have not required significant cash flows historically.

Cash flow used in financing activities was $1.7 million for the six months
ended June 30, 1996. During this period the Company issued notes payable to
two shareholders in the aggregate amount of $1.0 million. The notes, each with
a principal amount of $0.5 million, bear interest at a rate of 10% and mature
on December 31, 1996. The proceeds from these notes and funds provided by
operations were used to repay $406,000 in debt outstanding under a line of
credit, to pay a $1.6 million S Corporation Dividend, and to make an advance
of $725,000 to an officer. At June 30, 1996, the Company had a line of credit
which expires on December 31, 1996 and provides for maximum borrowings of $1.2
million. Borrowings are limited to 65% of eligible accounts receivable and
bear interest at the bank's prime rate (8.25% at June 30, 1996) plus 0.5%.
There were no outstanding borrowings under the line of credit as of June 30,
1996.

Cash flow (used in) provided by financing activities amounted to ($59,000),
($168,000), and $97,000 for 1993, 1994 and 1995, respectively.

The Company believes the net proceeds from the sale of Common Stock offered
hereby, together with funds generated by operations, will provide adequate
cash to fund its anticipated cash needs, which may include future acquisitions
of complementary businesses, at least through the next eighteen months. The
Company currently has no agreements, understandings or commitments regarding
future acquisitions. Pending such uses, the net proceeds will be invested in
short-term, interest-bearing investment grade securities. The Company
currently anticipates that it will retain all of its earnings for development
of the Company's business and does not anticipate paying any cash dividends in
the foreseeable future.

18
<PAGE>

RECENTLY ISSUED FINANCIAL ACCOUNTING STANDARDS

Statement of Financial Accounting Standards (SFAS) No. 121, "Accounting for
the Impairment of Long-Lived Assets to Be Disposed Of," was issued in 1995.
Implementation of SFAS No. 121 is effective for financial statements for fiscal
years beginning after December 15, 1995. SFAS No. 121 established accounting
standards for the impairment of long-lived assets, certain identifiable
intangibles, and goodwill relating to those assets to be held and used and for
long-lived assets and certain identifiable intangibles to be disposed of. SFAS
No. 121 is not expected to have a significant impact on the Company's financial
statements.

Statement of Financial Accounting Standards No. 123, Accounting for Stock-
Based Compensation, was issued in October 1995. The Company will be required to
adopt the new standard no later than fiscal 1996, although early adoption is
permitted. This standard establishes the fair value based method (the "FAS 123
Method") rather than the intrinsic value based method as the preferred
accounting methodology for stock-based compensation arrangements. Entities are
allowed to: (i) continue to use the intrinsic value based methodology in their
basic financial statements and provide in the footnotes pro forma net income
and earnings per share information as if the FAS 123 Method had been adopted;
or (ii) adopt the FAS 123 Method. Adoption of the FAS 123 Method would result
in higher compensation cost for the Company.

19
<PAGE>

BUSINESS

OVERVIEW

Background. The electric utility industry is one of the largest industries
in the United States. According to the Edison Electric Institute, in 1995 the
total assets of investor-owned utilities (which account for the vast majority
of the industry's generating capacity and revenues) exceeded $575 billion and
electric utility industry revenues from sales to end users totaled
approximately $207 billion.

Like other businesses, electric utilities are increasingly turning to
outside consulting firms to assist in or lead the process by which such
enterprises address fundamental changes. In general, businesses engage
consultants because: (i) the pace of change is eclipsing the companies'
internal resources; (ii) many enterprises lack the depth and breadth of
experience to identify, evaluate and implement the full range of possible
options and solutions; (iii) outside specialists often enable their clients to
develop better solutions in shorter time frames; (iv) purchasing consulting
expertise converts fixed labor costs to variable costs and can be more cost-
effective; and (v) consultants can often formulate more objective advice, free
of internal cultural or political forces.

Utility Consulting Opportunity. The utilities industry represents a
significant market for consulting services. An industry source estimates that
the market for utility consulting in the U.S. was $1.8 billion (or 8% of the
total market for consulting services) in 1995 and that this market will grow
at a 9% compound annual rate through 2000.

The demand for consulting services in the U.S. electric utility industry is
driven in significant part by the revolutionary change facing the industry as
it begins to convert from a regulated monopoly structure to an increasingly
competitive environment. Historically, due to the significant fixed costs
inherent in generating and transmitting electricity, electric utilities were
viewed as natural local monopolies, operating as an integrated entity to
generate, transmit and distribute retail electricity within designated
geographic service areas without competition from other suppliers.

However, as a result of recent market, regulatory and legislative factors,
competition in the electric utility industry is being encouraged at both the
state and federal regulatory levels, but the transformation to a competitive
market for electricity is proceeding unevenly. Although deregulation of the
transportation and telecommunications industries was accomplished relatively
rapidly, deregulation of the electric utility industry has been more difficult
due to the complex and overlapping web of over 200 federal and state
regulatory bodies and the presence of a large number of separate, regulated
companies. Accordingly, implementation will likely unfold on a state-by-state
basis into the next century and may well face challenges from utilities and
state and local governments.

Deregulation and the introduction of competition have created a significant
need for consulting services that provide solutions to the problems facing
electric utilities today. The changing competitive environment has forced the
electric utility industry to confront an evolving range of strategic options
and challenges, most of which are unfamiliar to participants that have
operated under monopolistic assumptions since inception. Emerging strategies
and challenges presently identified include the following:

. Information Technology. In general, the electric utility industry has
been slow to adopt the latest in information technologies. Rapid
technological advances and competitive pressures are forcing utilities to
replace antiquated systems with new technology and to undertake major,
critical systems projects.

20
<PAGE>

. Cost Control. Utilities must reduce their costs in order to improve
margins and to offer more competitive prices. Many utilities are already
engaging in significant restructuring efforts, including process
redesigns, deploying innovative information systems and technologies and
redefining staffing and skill-mix requirements.

. Customer Focus and Innovation. In a fully deregulated electric utility
market, end users will be able to select their electricity provider, much
as they can choose their provider of long-distance and cellular telephone
services today. In response, utilities, which have historically enjoyed a
captive customer base, will need to develop marketing and sales skills to
attract and retain customers, develop customer awareness and loyalty
enhancement programs in order to establish brand identity and provide
innovative services.

. Organization Restructuring. A number of utilities are abandoning their
traditional integrated corporate structure and are organizing into
distinct divisions responsible for power generation, transmission,
distribution, and billing and customer service in an effort to provide
these services more efficiently and effectively. These divisions need to
formulate their own strategies, develop their own administrative
infrastructure and implement their own marketing campaigns.

. Consolidation. More than 31 utilities have either consummated or
announced mergers and other consolidations totaling more than $41 billion
in value since 1990. This trend is expected to continue as utilities seek
to achieve economies of scale, increase geographic coverage, eliminate
redundant infrastructure, increase market leverage, reduce their cost of
capital and expand their customer base. After a combination is
consummated, the new entity often faces the difficult process of
combining separate operations and infrastructure to achieve the desired
efficiencies.

. Global Expansion. To improve investment opportunities and gain knowledge
of deregulation, many utilities have taken advantage of utility
privatization in foreign countries. This strategy has typically taken the
form of either passive investments, alliances with other utilities,
suppliers or financial institutions, or direct ownership and operation.

. Developing New Services. In order to meet the increased expectations of
the competitive marketplace, utilities are evaluating new value-added
services, such as the ability to monitor and control electrical usage
with computerized metering devices. Furthermore, utilities may provide
services to customers that are not directly related to the delivery of
electricity. Like cable and local telephone companies, electric utilities
have access to homes and businesses through their existing hard-wire
connections, and they possess a significant infrastructure of poles and
wires and related property easements. In addition, electric utilities
have long-standing billing relationships with virtually every home and
business in their service area. These factors may permit utilities to
offer their customers a variety of new services--from security services
in the near future, to telecommunications services and direct access
video services in the distant future. In addition, many utilities are
redirecting and redeploying assets through diversification initiatives,
primarily within traditional business sectors such as energy services,
fuel resources and services, and energy project investments.

STRENGTHS AND DIFFERENTIATION

Metzler offers a wide range of consulting services to electric utilities and
other energy-related businesses to assist them in succeeding in a business
environment of changing regulation, increasing competition and evolving
technology. With its 44 full-time consultants devoted predominantly to the
electric utility industry, the Company believes that it is a leading provider
of electric utility consulting services. As a result, the Company believes
that it is well equipped to offer its clients innovative solutions
appropriately tailored to the changing dynamics of the electric utility
industry.

The Company believes that several factors distinguish it from many of the
other participants in the consulting industry. These Company strengths include
the following:

Established Electric Utility Expertise. For over thirteen years, the Company
has focused primarily on providing consulting services to the electric utility
industry. The Company believes that its vertical focus

21
<PAGE>

and broad service offerings differentiate it from both general consulting
firms that serve multiple industries and "niche" firms with limited skill sets
that focus on the electric utility industry. The Company's consultants have
significant prior industry or consulting experience and possess a breadth of
functional knowledge in the critical business disciplines of strategic
planning, information technology, accounting, finance, economics, organization
design, marketing, sales, customer service, systems analysis, resource
acquisition and asset management.

Deep-Rooted Client Relationships. By providing services to 34 of the 50
largest investor-owned electric utilities in the United States, the Company
has developed numerous contacts at various levels within these client
organizations, ranging from chief executive officers and other senior
management to functional managers. Metzler's relationships can span multiple
functional areas, which often leads to follow-on engagements. Many of the
Company's relationships have moved beyond a relatively small initial project
to span multiple engagements over a period of as much as eighteen months.

Proprietary Knowledge Base. Metzler has internally developed and
continuously refines for use by its consultants a proprietary database of
electric utility industry research, benchmarks and practical solutions.
Relevant aspects of this accumulated knowledge are available to be
incorporated quickly into the Company's analysis for new engagements,
resulting in the consistent provision of proven, effective solutions and
tangible benefits to its clients.

Wide Range of Industry-Specific Services. Many electric utility consulting
engagements require the vendor to provide a broad array of service offerings--
something many "niche" players cannot provide. Engagements often require
creative solutions that must be drawn from diverse areas of expertise.
Metzler's expertise in a wide range of services enables the Company to better
pursue such opportunities and to offer itself as a single-source provider of
information technology, process/operations management, strategy, and marketing
and sales consulting services to utilities.

Strategic Planning Methodology. In its engagements, the Company uses
COMPPASS 2000SM, a high-level modeling tool developed by Metzler to evaluate
and explore broad issues in support of a utility's comprehensive strategic
planning process. COMPPASS 2000 integrates available information on system
capabilities (generation, transmission and distribution) and the marketplace
(competitors and customers) to test and evaluate proposed management
strategies against system constraints, market needs, regulatory commitments
and potential competitive responses to maintain a company's competitive
advantage within the evolving electric utility industry.

GROWTH STRATEGY

The Company's goal is to become the preeminent provider of a full range of
consulting services necessary for electric utilities to thrive in a dynamic
environment. Metzler's strategy to achieve this goal includes the following
elements:

Further Penetrate Existing Client Base. Although Metzler has provided
consulting services to many of the largest utilities in the United States,
some of these clients have historically engaged the Company to provide only
limited types of services or to provide services to a single division or
business unit. The Company believes that the provision of additional services
to its existing client base represents a significant growth opportunity and
that the opportunity can be better pursued if the Company adds consultants and
further develops internal resources. The access, contact and goodwill provided
by its existing client relationships afford it significant advantages in
marketing additional services and solutions on an enterprise-wide basis.

Seek New Clients and Expand Geographic Presence. The Company intends to
target new clients by increasing its nationwide presence through the hiring of
consultants with existing client relationships or through acquisitions of
existing consulting firms. The Company will place particular emphasis on
hiring new consultants that will expand the Company's geographic presence.

22
<PAGE>

Continue to Recruit Highly Skilled Professionals. The Company believes that
its continued success and growth require it to expand its base of highly
skilled professionals. In order to compete successfully for new business and
to obtain additional business from existing clients, the Company continually
strives to recruit qualified, experienced personnel possessing the skills
currently demanded by the changing dynamics of the electric utility industry.
The Company particularly targets senior professionals with skills and client
relationships that complement services currently offered by Metzler. The
Company believes it enhances recruitment and retention of consultants by
offering packages of base and incentive compensation and benefits that are
significantly more attractive than those offered by the consulting industry in
general. The Company also believes that operating as a public company will aid
greatly in recruiting, retaining and incentivizing current and future
employees.

Pursue Strategic Acquisitions. Given the highly fragmented nature of the
consulting services marketplace, Metzler believes numerous acquisition
opportunities exist. Acquisitions may provide the Company with a fast, cost-
effective method to increase its number of consultants, broaden its client
base, establish or expand its presence in a geographic region or obtain
additional skill sets. In addition, the Company intends to seek to acquire or
develop relationships with firms serving the utility industry whose services
complement the Company's current offerings, thereby enabling the Company to
market its existing services to the acquired company's client base and to
market the acquired company's services to its own clients. The Company may
also pursue vertical integration by acquiring businesses which it currently
engages on a subcontractor basis to provide specialized technical skills in
certain engagements.

Expand Service Offerings. The Company believes that in a more competitive
marketplace, many electric utilities may seek to concentrate on their core
business and delegate the operation of support functions to outside consulting
firms. The Company is exploring the possibility of providing its electric
utility clients with outsourcing services for certain information technology
tasks and customer support operations.

SERVICES

The Company offers its consulting services in four principal areas:
information technology, process/operations management, strategy, and marketing
and sales. In order to understand the basic characteristics of a client,
organizational unit or project, the Company generally performs more than 75%
of the engagement at the client's site. This on-site presence helps avoid the
development of conclusions drawn from limited exposure to company personnel,
processes and facilities and enables Metzler consultants to be available to
service further or expanded client needs as they may evolve. Although
extensive time is spent on site, all Metzler consultants have portable
computers running common software for word processing and tabular and graphic
presentations, thereby allowing the project team to remain relatively
independent of and non-intrusive into the client's daily business operations.

23
<PAGE>

The table below provides examples of the Company's service offerings in each
of these areas.

<TABLE>
<CAPTION>
CATEGORY
OF SERVICE DESCRIPTION OF PROJECTS
- -------------------------------------------------------------------------------
<C> <S>
INFORMATION . Total life cycle analysis and implementation of
TECHNOLOGY activity-based management systems, including process
evaluation, activity definition, chart of accounts and
system design, construction and implementation
. Development of strategic information systems plans
. Development of information systems such as activity-
based management and marketing information systems
. Development of information requirements and package
evaluations for executive information systems, materials
management systems and work management systems
. Development of telecommunications systems, including in-
tegrated communications planning, communications market
analysis, network traffic evaluation and customer opera-
tions process design
- -------------------------------------------------------------------------------
PROCESS/OPERATIONS . Examination and reorganization of customer operations
MANAGEMENT . Evaluation of distribution operations
. Business process redesign of the material procurement
and contract function
. Consolidation options for transmission, distribution and
customer service operations
. Examination and restructuring of plant operations and
maintenance functions
. Consolidation and integration options for the marketing
and customer services operations
. Development of materials management programs
. Materials management support for outages
. Development of procurement strategies, policies and
procedures
. Examination of contract consolidation
- -------------------------------------------------------------------------------
STRATEGY . Identification and evaluation of candidates for merger,
consolidation or acquisition
. Evaluation of alternative regulatory and legislative
positions
. Identification of how market clearing prices would
respond to various strategic initiatives and activities
within the marketplace
. Development of non-regulated business plans and
objectives, including investment and spending objectives
. Examination of domestic and international energy market
sectors and identification of opportunities for
competitive leverage
. Development of negotiation strategies for the client in
the initiation and renewal of power commitment contracts
. Independent evaluation of the planning process and
products
. Quantification and prioritization of operational and
business strategies
- -------------------------------------------------------------------------------
MARKETING AND . Marketing analysis, market surveys, competitive
SALES assessments and profitability objectives
. Detailed analysis of the marketplace including potential
size and volume growth rates, customer preferences,
competitive strategies and market penetration options
. Market survey of industrial and commercial customers in
response to proposed unbundled energy services
. Development of market strategies and marketing plans
. Restructuring of account management programs
. Restructuring and consolidation of distribution system
networks to optimize service delivery
. Redesign and implementation of marketing and customer
service functions
</TABLE>

24
<PAGE>

MARKETING AND SALES

The Company markets its services directly to senior executives of utilities
from its headquarters near Chicago, Illinois. The Company employs a variety of
business development and marketing techniques to communicate directly with
current and prospective clients, including on-site presentations to senior
utility executives, industry seminars featuring presentations by Metzler
personnel and authoring of articles and other publications regarding the
utility industry and the Company's methodologies.

A significant portion of new business arises from prior client engagements.
Clients frequently expand the scope of engagements during delivery to include
follow-on complementary activities. Also, the Company's on-site presence
affords it the opportunity to become aware of, and to help define, additional
project opportunities as they are identified by the client. The strong client
relationships arising out of many engagements often facilitate the Company's
ability to market additional capabilities to its clients in the future. In
addition, the Metzler senior management team is actively engaged in meeting
with utilities that have not yet engaged the Company and newly appointed
senior managers in utilities where the Company has worked in the past to make
them aware of the Company's capabilities.

CLIENTS AND REPRESENTATIVE SOLUTIONS

The Company has performed consulting assignments for more than 100 utility
industry clients, principally investor-owned electric utilities. The Company's
clients also include gas and water companies and other ownership structures
such as holding companies, electric cooperatives, public power agencies and
state regulatory commissions. The Company also serves independent power
producers, co-generators and power marketers and suppliers to the utility
industry.

Because of the nature and scope of many of the Company's projects, the
Company derives a significant portion of its revenues from a relatively
limited number of clients that operate exclusively in the electric utility
industry. For example, during 1995 and the first half of 1996, revenues from
the Company's ten most significant clients accounted for approximately 80.5%
and 76.3% of its revenues, respectively. In 1995, a group of affiliated
clients and the Company's largest single client accounted for approximately
22.6% and 15.5% of the Company's revenues, respectively. The Company's largest
clients typically engage the Company on consulting projects that span from
twelve to eighteen months and thereafter the Company may not be rehired for a
significant project for varying periods of time. This typical engagement cycle
causes the Company's ten most significant clients, absent project carryovers,
to change from year to year. For these reasons, the Company believes that it
is not materially dependent on any particular client.

A list of representative clients is set forth below:

Allegheny Power System, Inc.Gulf States Utilities Co.Pennsylvania Power &
Baltimore Gas & Electric Co. Light Co.
Houston Industries Incorporated
Carolina Power & Light Co. Illinois Power Co. Philadelphia Electric Co.
Centerior Energy Corp. Long Island Lighting Co. Pinnacle West Capital
Central and South West Corp. Corp.
New England Electric System
Cincinnati Gas & Electric Co. PSI Resources, Inc.
Niagara Mohawk Power Co.
CMS Energy Corp. Northeast Utilities Public Service Enterprise
Commonwealth Edison Co. Northern States Power Co.Group, Inc.
Dominion Resources, Inc. Ohio Edison Co. Public Service of
Entergy Corporation Colorado
Oklahoma Gas & Electric Co.
General Public Utilities Corp. San Diego Gas & Electric
Co.
Pacific Gas & Electric Co.

SCANA Corp.
SCEcorp.
Texas Utilities Company
Wisconsin Energy Corp.

Examples of Metzler's engagements include the following:

Strategic and Operations Planning. A start-up energy services company
engaged Metzler to assist in its strategic and operations planning. The client
was created from an acquisition by an electric utility company as

25
<PAGE>

part of the utility's diversification strategy in preparation for
deregulation. Over the course of a multi-year engagement, the Company
performed regulatory, financial, marketing and product development studies to
help develop and implement the energy service company's business strategy.

Business Strategy Implementation Planning. For a large east coast electric
utility, Metzler jointly worked with a joint client team to complete a
comprehensive analysis of its electric distribution business. This analysis
identified specific strategies for the client to pursue in order to improve
its competitive position. Using this analysis, Metzler led the development of
a new business model for these operations, transitioning to the development of
a separate power distribution entity. The new model focused on maximizing
service levels while improving the cost competitiveness of the distribution
business. The resulting implementation plan specified the procedures for the
client to follow over the next three years in parallel to ongoing changes in
the industry.

Distribution Operations Redesign. Metzler worked with management of a major
southwest electric utility to identify opportunities to redesign the service
delivery network for metropolitan operations serving 1.2 million customers and
involving 1,500 distribution personnel. The analysis involved developing a
comprehensive operations model for the business and evaluating existing
boundaries, facilities, and work practices. The resulting recommendations lead
to the development of implementation teams to move forward in four key areas:
(i) establishing a flexible organization that can respond to customer changes
over time; (ii) implementing job site reporting for company construction
personnel, improving service and reducing costs; (iii) redesigning trouble
response operations to reduce outage times; and (iv) implementing new work day
structures to increase utilization.

HUMAN RESOURCES

As of July 1, 1996, the Company's personnel consisted of 52 employees,
consisting of 44 full-time consultants and eight support personnel. The
Company's success depends in large part on attracting, retaining and
motivating talented, creative and experienced professionals at all levels. See
"Risk Factors--Attraction and Retention of Employees." In connection with its
hiring efforts, the Company employs a full-time human resources coordinator,
retains several executive search firms and relies on personal and business
contacts to recruit professionals with significant utility industry or
consulting experience. The Company's hiring focus is not on finding a large
number of employees, but rather on identifying candidates who are well suited
by background and temperament to serve the Company's utility client base. The
Company's consultants are drawn from utility and related industries such as
engineering, construction and telecommunications, and from accounting and
other consulting organizations. The Company's fifteen senior most managers
each average a total of fifteen years of utility industry and consulting
experience.

The Company has developed mentoring programs to assist in training its
employees, and intends to further enhance its focus on employee training in
the future. The Company also develops its consultants through a training
program, as well as review of precedent from prior Company engagements.

The Company promotes loyalty and continuity of its consultants by offering
packages of base and incentive compensation and benefits that it believes are
significantly more attractive than those offered by the consulting industry in
general. In addition, to attract and retain consultants, the Company has
established several employee benefit plans. See "Management--Long-Term
Incentive Plan."

In addition to the employees discussed above, Metzler supplements its
consultants on certain engagements with independent contractors, many of whom
are former employees of the Company. The Company is responsible for selecting
these individuals and integrating their work product into a total solution for
the Company's utility client. The Company has 37 individuals on its current
list of approved independent contractors, of whom approximately ten to fifteen
are working on engagements with Metzler at any given time. The Company
believes that its practice of retaining independent contractors on a per-
engagement basis provides it with greater flexibility in adjusting
professional personnel levels in response to changes in demand for its
services.

26
<PAGE>

COMPETITION

The market for consulting services to electric utilities is intensely
competitive, highly fragmented and subject to rapid change. The market
includes a large number of participants from a variety of market segments,
including general management consulting firms, the consulting practices of
"Big Six" accounting firms, and local or regional firms specializing in
utility services. Many information technology consulting firms also maintain
significant practice groups devoted to the utility industry. Many of these
companies are national and international in scope and have greater financial,
technical and marketing resources than the Company. The Company believes that
its experience, reputation, industry focus and broad range of services will
enable it to compete effectively in its marketplace. See "Risk Factors--
Competition."

FACILITIES

Metzler currently operates from 10,000 square feet of leased office space
located in Deerfield, Illinois. The Company believes that additional space
will be required as its business expands geographically and that it will be
able to obtain suitable space as needed.

27
<PAGE>

MANAGEMENT

EXECUTIVE OFFICERS AND DIRECTORS

The Company's executive officers and directors and their respective ages and
positions as of August 1, 1996, are as follows:

<TABLE>
<CAPTION>
NAME AGE POSITION
<S> <C> <C>
Robert P. Maher..................... 46 Chairman of the Board, President, Chief
Executive Officer and Director
Gerald R. Lanz...................... 48 Chief Operating Officer and Director
James F. Hillman.................... 39 Chief Financial Officer and Treasurer
James T. Ruprecht................... 37 Senior Vice President and Director
James R. Blomberg................... 36 Senior Vice President
David J. Donovan.................... 46 Senior Vice President
Stephen R. Goldfield................ 32 Senior Vice President
Richard J. Metzler.................. 55 Senior Vice President
</TABLE>

Robert P. Maher has served as a Director of the Company since April 1991. He
has served as Chief Executive Officer and President since January 1996 and as
Chairman of the Board since June 1996. From August 1990 to December 1995, Mr.
Maher held various positions with the Company, most recently as a Senior Vice
President working primarily in the information technology area. From 1988 to
August 1990, he was a principal with the consulting practice of Ernst & Young
LLP where he organized and directed information technology engagements for the
regulated segment of the communications industry practice.

Gerald R. Lanz has served as a Director of the Company since January 1996
and as Chief Operating Officer since June 1996. From December 1994 to June
1996, Mr. Lanz held various management positions with the Company, most
recently as a Senior Vice President working in the area of strategic and
business practices. From July 1989 to June 1994, he was employed by Ameritech
Corporation in a series of management positions, most recently as Vice
President of Marketing and Business Development for its Small Business
Services division.

James F. Hillman has served as the Chief Financial Officer and Treasurer
since June 1996. From April 1996 to June 1996, Mr. Hillman served as a
Principal Associate of the Company. From July 1988 to March 1996, he was
employed by Ameritech Corporation, most recently as the Chief Financial
Officer of Ameritech Monitoring Services, Inc.

James T. Ruprecht has served as a Director of the Company since December
1994 and as a Senior Vice President since January 1994. From April 1987 to
January 1996, Mr. Ruprecht held various management positions with the Company,
working primarily in the areas of business process re-engineering, customer
operations and supply chain management. Prior to his employment at Metzler, he
held various positions with the Northern Illinois Gas Company, most recently
as an Area Manager of Operations.

James R. Blomberg has served as a Senior Vice President since January 1996.
From May 1989 to January 1996, Mr. Blomberg held various management positions
with the Company, working primarily in the areas of business process re-
engineering, customer operations and marketing. He served as a Director of the
Company from June 1995 to June 1996.

David J. Donovan has served as a Senior Vice President since April 1987,
working in the areas of strategic marketing and energy planning. He served as
a Director of the Company from April 1991 to June 1996.

Stephen R. Goldfield has served as a Senior Vice President since January
1996. From July 1990 to January 1996, Mr. Goldfield held various senior
management positions with the Company. He served as Director of the Company
from June 1995 to June 1996. Prior to his employment at the Company, Mr.
Goldfield was employed by the Philadelphia Electric Company.

28
<PAGE>

Richard J. Metzler, the founder of the Company, has served as a Senior Vice
President and Chairman Emeritus since June 1996. From January 1996 to June
1996 he served as Treasurer, and from July 1983 to December 1995 Mr. Metzler
served as the President and Chairman of the Board of the Company. He served as
a Director of the Company from July 1983 to June 1996.

The Company's executive officers are appointed annually by, and serve at the
discretion of, the Board of Directors. Each executive officer is a full-time
employee of the Company. The Board of Directors currently consists of three
members. The Company expects to fill the two current vacancies on the Board
with independent directors following the consummation of the offering. The
Board of Directors is divided into three classes, each of whose members serve
for a staggered three-year term. The Board is comprised of two Class I
Directors (to be appointed within 90 days after the closing of this offering),
two Class II Directors (Messrs. Lanz and Ruprecht) and one Class III Director
(Mr. Maher). At each annual meeting of stockholders the appropriate number of
directors will be elected for a three-year term to succeed the directors of
the same class whose terms are then expiring. The terms of the Class I
Directors, Class II Directors and Class III Directors will expire upon the
election and qualification of successor directors at the annual meetings of
stockholders held in calendar years 1997, 1998 and 1999, respectively. There
are no family relationships between any director or executive officer of the
Company.

BOARD COMMITTEES

The Audit Committee will be responsible for reviewing with management the
financial controls, accounting and audit and reporting activities of the
Company. The Committee will review the qualifications of the Company's
independent auditors, make recommendations to the Board of Directors regarding
the selection of independent auditors, review the scope, fees and results of
any audit and review non-audit services and related fees provided by the
independent auditors. The members of the Audit Committee have not yet been
appointed. The Company intends to appoint the two independent directors to
this committee.

The Compensation Committee will be responsible for the administration of all
salary and incentive compensation plans for the officers and key employees of
the Company, including bonuses. The Committee will also administer the
Company's Long-Term Incentive Plan. The members of the Compensation Committee
have not yet been appointed. The Company intends to appoint the two
independent directors to this committee.

No director has been appointed to the Company's Audit Committee or
Compensation Committee as of the date of this Prospectus. When the two
independent directors are elected after this offering, they will each be
appointed to each committee and will collectively constitute all members of
both committees.

The Board of Directors does not have a nominating committee. The selection
of nominees for the Board of Directors will be made by the entire Board of
Directors.

DIRECTOR COMPENSATION

Directors who are not executive officers of the Company will be paid a fee
of $1,000 for each board meeting attended in person and all directors will be
reimbursed for travel expenses incurred in connection with attending board and
committee meetings. Directors are not entitled to additional fees for serving
on committees of the Board of Directors. Pursuant to the terms of the formula
program of the Company's Long-Term Incentive Plan, each director of the
Company appointed after the completion of this offering who is not otherwise
employed by the Company automatically will be granted an option to purchase
3,000 shares of Common Stock for each year of the term to be served upon his
or her initial election or re-election to the Board of Directors. The options
will have an exercise price equal to the fair market value of the Common Stock
on the date of grant, and will be exercisable in equal annual installments
over the term to be served beginning on the first anniversary of the date of
grant.

29
<PAGE>

EXECUTIVE COMPENSATION

The following table sets forth certain information with respect to the
annual and long-term compensation earned for the fiscal year ended December
31, 1995 for the Company's Chief Executive Officer and the four most highly
compensated executive officers other than the Chief Executive Officer (the
"Named Executive Officers").

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
ANNUAL
COMPENSATION(1)
------------------- ALL OTHER
NAME AND PRINCIPAL POSITION SALARY BONUS COMPENSATION(2)
<S> <C> <C> <C>
Robert P. Maher
President and Chief Executive
Officer............................ $ 182,333 $414,505 $ 9,636
Gerald R. Lanz
Chief Operating Officer............ 175,000 599,230 --
James T. Ruprecht
Senior Vice President.............. 175,000 864,205 11,136
David J. Donovan
Senior Vice President.............. 175,000 678,011 11,136
Richard J. Metzler
Senior Vice President.............. 1,050,776 412,938 11,136
</TABLE>
- --------
(1) The Company did not issue any restricted stock or grant any stock
appreciation rights or make any Long-Term Incentive Plan payouts to any of
the Named Executive Officers in 1995.

(2) Represents matching payments under the Company's 401(k) Plan.

Effective as of the date of this Prospectus, the Board of Directors has
approved a new compensation program for the Named Executive Officers, which
provides for initial annual base salaries ranging from $225,000 to $375,000.
In addition to the base salaries, a bonus structure has been established under
which bonuses ranging from 0% to 125% of the Named Executive Officer's annual
base salary will be awarded based on the attainment of certain financial
performance criteria. Under the compensation program, the Company's other
senior managers will have annual base compensation and bonus arrangements
similar to the Named Executive Officers.

LONG-TERM INCENTIVE PLAN

The Board of Directors has adopted The Metzler Group, Inc. Long-Term
Incentive Plan (the "Long-Term Plan"). The Long-Term Plan is designed to
enhance the long-term profitability and stockholder value of the Company by
offering Common Stock, Common Stock-based, and other performance incentives to
those individuals who are key to the growth and success of the Company, to
attract and retain executives with experience and ability on a basis
competitive with industry practice and to encourage executives to acquire and
maintain stock ownership in the Company.

The Long-Term Plan is administered by the Compensation Committee, which,
except for the formula program (the "Formula Program") noted below for non-
employee directors, has exclusive authority to grant awards under the Long-
Term Plan and to make all interpretations and determinations affecting the
Long-Term Plan. The Compensation Committee has the discretion to determine the
individuals to whom Awards (as defined below) are granted, the amount of such
Award, any applicable vesting schedule and other terms of any Award.

Participation in the Long-Term Plan is limited to employees, consultants,
advisors and independent contractors of the Company and its subsidiaries who
are selected from time to time by the Compensation Committee. In addition,
non-employee directors automatically participate in the Formula Program.
Awards under the Long-Term Plan may be in the form of stock options (including
both incentive stock options that meet the requirements of Section 422 of the
Internal Revenue Code and nonqualified stock options), stock awards,
restricted stock grants, stock appreciation rights ("SARs") and performance
awards (collectively, "Awards"). Any Award issued under the Long-Term Plan
that is forfeited, expired, canceled or terminated prior to vesting or
exercise will again become available for grant under the Long-Term Plan.

30
<PAGE>

The Long-Term Plan also includes the Formula Program. The Formula Program
provides for the automatic grant of options to purchase shares of Common Stock
to non-employee directors of the Company. Pursuant to the terms of the Formula
Program, each director of the Company who is not otherwise employed by the
Company automatically will be granted an option to purchase 3,000 shares of
Common Stock for each year of the term to be served upon his or her initial
election or re-election to the Board of Directors. The options will vest in
equal annual installments over the term to be served beginning on the first
anniversary of the option grant date.

The maximum number of shares of Common Stock that may be issued and sold
under the Long-Term Plan is 1,300,000 shares. In the event of any stock
dividend, stock split, recapitalization, merger, other change in the
capitalization of the Company or similar corporate transaction or event
affecting the Common Stock the Compensation Committee may make appropriate
adjustments to the Awards. Alternatively, the Company may accelerate the
timing of the exercise of any Awards or cancel any Award and provide instead
for the payment to the participant in cash of the economic value of the Award
at the time of cancellation.

On June 30, 1996, the Company granted options under the Long-Term Plan to
all of its employees other than then-existing stockholders to purchase an
aggregate of 355,666 shares at an exercise price of $12 per share, which was
equal to the estimated fair market value of the Common Stock as of that date.
In general, the options are exercisable in four approximately equal annual
installments commencing on July 1, 1998.

CERTAIN TRANSACTIONS

In December 1995, Richard J. Metzler, the Company's founder and owner of 85%
of its capital stock at that time, sold 60% of the Company's outstanding
capital stock for total consideration of $3,231,900 ($0.48 per share) to the
other then-existing shareholders, who are all senior officers of the Company.
Following the completion of this transaction, Messrs. Metzler, Donovan,
Goldfield, Lanz, Maher and Ruprecht each owned 15% of the Company's capital
stock and Mr. Blomberg owned 10% of the Company's capital stock. In connection
with this ownership transition from Mr. Metzler to the existing stockholders,
the Company and each of the Selling Stockholders entered into a shareholders
agreement (the "Shareholders Agreement"), pursuant to which, among other
things: (i) certain actions of the Company required the prior approval by a
specified number of the stockholders; (ii) compensation levels and dividends
were fixed; and (iii) certain restrictions relating to the transfer of the
shares of Common Stock were established. In addition, under the terms of the
Shareholders Agreement, Mr. Metzler was granted a "look-back" option pursuant
to which, under certain circumstances including a public offering of Common
Stock of the Company, Mr. Metzler was granted the right to repurchase from the
existing stockholders certain shares of Common Stock for a total consideration
of $1.00. Immediately prior to this offering, Mr. Metzler exercised his "look-
back" option to purchase from the other shareholders of the Company 257,143
shares from each of Messrs. Donovan, Goldfield, Lanz, Maher and Ruprecht and
171,428 shares from Mr. Blomberg and the Shareholder Agreement was terminated.
Pursuant to a Redemption Agreement between the Company and Mr. Metzler
effective as of the date of this Prospectus, the Company repurchased 1,714,285
shares from Mr. Metzler in exchange for a promissory note in the amount of
$7,975,000. The redemption price was reached through arms-length negotiations
between Mr. Metzler and the Company.

During the years ended December 31, 1993, 1994 and 1995, Richard Metzler,
the founder of the Company and a director at the time, withdrew advances
aggregating $715,000, $457,000 and $289,000, respectively, from the Company
that were later converted to salary expense.

Richard Metzler borrowed $725,000 from the Company, as evidenced by a
promissory note dated May 1, 1996 that bears interest at 6% and was due in
three equal annual installments beginning on December 31, 1996. In September
1996, this note was amended to be immediately due and payable in cash upon the
closing of this offering.

31
<PAGE>

During 1993 and 1994 the Company paid expenses and collected revenues on
behalf of LORE Systems, Inc. ("LORE"), a company owned solely by Mr. Metzler.
LORE was in the business of developing and creating optical image databases
from printed documents and indexing them for storage and rapid retrieval.
Amounts paid by the Company, net of amounts collected, were reimbursed by
LORE. Expenses paid by the Company on behalf of LORE during the years ended
December 31, 1993 and 1994 were $294,194 and $228,275, respectively.

In January 1996, the Company borrowed $500,000 from each of Messrs. Metzler
and Maher for operating capital. The promissory notes bear interest at 10% per
annum and are due on December 31, 1996.

32
<PAGE>

PRINCIPAL AND SELLING STOCKHOLDERS

The following table sets forth certain information regarding the beneficial
ownership of Common Stock immediately prior to the effective date of this
offering, and as adjusted to reflect the sale of the shares offered hereby,
by: (i) each person known by the Company to own beneficially more than five
percent of the outstanding shares of Common Stock; (ii) each of the Company's
directors; (iii) each of the Named Executive Officers; (iv) each Selling
Stockholder; and (v) all directors and executive officers of the Company as a
group. Each person named below has an address in care of the Company's
principal executive offices. The Company believes that each person named below
has sole voting and investment power with respect to all shares of Common
Stock shown as beneficially owned by such holder, subject to community
property laws where applicable.

<TABLE>
<CAPTION>
BENEFICIAL
OWNERSHIP BENEFICIAL
PRIOR TO OWNERSHIP
OFFERING(1) NUMBER AFTER OFFERING(1)
----------------- OF SHARES -----------------
NUMBER OF BEING NUMBER OF
NAME SHARES PERCENT OFFERED SHARES PERCENT
<S> <C> <C> <C> <C> <C>
David J. Donovan................. 1,200,000 15.0% 100,000 1,100,000 11.0%
Stephen R. Goldfield............. 1,200,000 15.0% 100,000 1,100,000 11.0%
Gerald R. Lanz................... 1,200,000 15.0% 100,000 1,100,000 11.0%
Robert P. Maher(2)............... 1,200,000 15.0% 100,000 1,100,000 11.0%
Richard J. Metzler............... 1,200,000 15.0% 600,000 600,000 6.0%
James T. Ruprecht................ 1,200,000 15.0% 100,000 1,100,000 11.0%
James R. Blomberg................ 800,000 10.0% 100,000 700,000 7.0%
All Directors and Executive
Officers as a group
(8 persons)..................... 8,000,000 100.0% 1,200,000 6,800,000 68.0%
</TABLE>
- --------
(1) Applicable percentage of ownership as of July 1, 1996 is based upon
8,000,000 shares of Common Stock outstanding. Applicable percentage
ownership after this offering is based upon 10,000,000 shares of Common
Stock outstanding. Beneficial ownership is determined in accordance with
the rules of the Securities and Exchange Commission, and includes voting
and investment power with respect to the shares shown as beneficially
owned.

(2) Mr. Maher maintains voting control over an aggregate of 77,712 shares held
of record equally by each of his three children, which shares are included
in the shares indicated as beneficially owned by Mr. Maher.

33
<PAGE>

DESCRIPTION OF CAPITAL STOCK

GENERAL

The authorized capital stock of the Company consists of 15,000,000 shares of
Common Stock, par value $.001 per share, and 3,000,000 shares of Preferred
Stock, par value $.001 per share (the "Preferred Stock"). Prior to the
consummation of the offering, the Company will have outstanding 8,000,000
shares of Common Stock and no shares of Preferred Stock. Upon completion of
this offering, the Company will have outstanding 10,000,000 shares of Common
Stock and no shares of Preferred Stock. As of July 1, 1996, there were seven
record holders of Common Stock.

COMMON STOCK

Holders of Common Stock are entitled to one vote per share for the election
of directors and all other matters submitted for stockholder vote, except
matters submitted to the vote of another class or series of shares. Holders of
Common Stock are not entitled to cumulative voting rights. Therefore, the
holders of a majority of the shares voting for the election of directors can
elect all of the directors if they choose to do so. The holders of Common
Stock are entitled to dividends in such amounts and at such times, if any, as
may be declared by the Board of Directors out of funds legally available
therefor. The Company has not paid any dividends, other than dividends paid in
connection with the Company's S-corporation status (see "S Corporation
Dividend"), on its Common Stock and does not anticipate paying any cash
dividends on such stock in the foreseeable future. See "Dividend Policy." Upon
liquidation, dissolution or winding up of the Company, the holders of Common
Stock are entitled to share ratably in all net assets available for
distribution to stockholders after payments to creditors. The Common Stock is
not redeemable and has no preemptive or conversion rights.

The rights of the holders of Common Stock are subject to the rights of the
holders of any Preferred Stock which may, in the future, be issued. All
outstanding shares of Common Stock are, and the shares of Common Stock to be
sold by the Company in this offering when issued will be, duly authorized,
validly issued, fully paid and nonassessable.

PREFERRED STOCK

The Board of Directors has the authority to issue the Preferred Stock in one
or more series and to fix the price, rights, preferences, privileges and
restrictions thereof, including dividend rights, dividend rates, conversion
rights, voting rights, terms of redemption, redemption prices, liquidation
preferences and the number of shares constituting any series or the
designation of such series, without further vote or action by the
stockholders. The issuance of Preferred Stock may have the effect of delaying,
deferring or preventing a change in control of the Company without further
action by the stockholders and may adversely affect the voting and other
rights of the holders of Common Stock. The issuance of Preferred Stock with
voting and conversion rights may adversely affect the voting power of the
holders of Common Stock, including the loss of voting control to others.

ANTITAKEOVER EFFECTS OF PROVISIONS OF THE CERTIFICATE OF INCORPORATION, BY-
LAWS AND DELAWARE LAW

Certificate of Incorporation and By-Laws. The Company's Certificate of
Incorporation provides that the Board of Directors will be divided into three
classes of directors, each class constituting approximately one-third of the
total number of directors and with the classes serving staggered three-year
terms. The By-Laws provide that the Company's stockholders may call a special
meeting of stockholders only upon a request of stockholders owning at least
50% of the Company's capital stock. These provisions of the Certificate of
Incorporation and By-Laws could discourage potential acquisition proposals and
could delay, defer or prevent a change in control of the Company. These
provisions are intended to enhance the likelihood of continuity and stability
in the composition of the Board of Directors and in the policies formulated by
the Board of Directors and to discourage certain types of transactions that
may involve an actual or threatened change of control of the Company. These
provisions are designed to reduce the vulnerability of the Company to an
unsolicited acquisition proposal. The

34
<PAGE>

provisions also are intended to discourage certain tactics that may be used in
proxy fights. However, such provisions could have the effect of discouraging
others from making tender offers for the Company's shares and, as a
consequence, they also may inhibit fluctuations in the market price of the
Company's shares that could result from actual or rumored takeover attempts.
Such provisions also may have the effect of preventing changes in the
management of the Company. See "Risk Factors--Certain Anti-Takeover Effects."

Delaware Takeover Statute. The Company is subject to Section 203 of the
Delaware General Corporation Law ("Section 203"), which, subject to certain
exceptions, prohibits a Delaware corporation from engaging in any business
combination with any interested stockholder for a period of three years
following the date that such stockholder became an interested stockholder,
unless: (i) prior to such date, the board of directors of the corporation
approved either the business combination or the transaction that resulted in
the stockholder becoming an interested stockholder; (ii) upon consummation of
the transaction that resulted in the stockholder becoming an interested
stockholder, the interested stockholder owned at least 85% of the voting stock
of the corporation outstanding at the time the transaction commenced, excluding
for purposes of determining the number of shares outstanding those shares owned
(a) by persons who are directors and also officers and (b) by employee stock
plans in which employee participants do not have the right to determine
confidentially whether shares held subject to such plans will be tendered in a
tender or exchange offer; or (iii) on or subsequent to such date, the business
combination is approved by the board of directors and authorized at an annual
or special meeting of the stockholders, and not by written consent, by the
affirmative vote of at least 66 2/3% of the outstanding voting stock that is
not owned by the interested stockholder.

Section 203 defines business combination to include: (i) any merger or
consolidation involving the corporation and the interested stockholder; (ii)
any sale, transfer, pledge or other disposition of 10% or more of the assets of
the corporation involving the interested stockholder; (iii) subject to certain
exceptions, any transaction that results in the issuance or transfer by the
corporation of any stock of the corporation to the interested stockholder; (iv)
any transaction involving the corporation that has the effect of increasing the
proportionate share of the stock of any class or series of the corporation
beneficially owned by the interested stockholder; or (v) the receipt by the
interested stockholder of the benefit of any loans, advances, guarantees,
pledges or other financial benefits provided by or through the corporation. In
general, Section 203 defines an interested stockholder as any entity or person
beneficially owning 15% or more of the outstanding voting stock of the
corporation and any entity or person affiliated with or controlling or
controlled by such entity or person.

LIMITATION OF LIABILITY AND INDEMNIFICATION

Limitation of Liability. As permitted by the Delaware General Corporation
Law, the Company's Certificate of Incorporation provides that directors of the
Company shall not be personally liable for monetary damages to the Company for
certain breaches of their fiduciary duty as directors, unless they violated
their duty of loyalty to the Company or its stockholders, acted in bad faith,
knowingly or intentionally violated the law, authorized illegal dividends or
redemptions, or derived an improper personal benefit from their action as
directors. This provision would have no effect on the availability of equitable
remedies or nonmonetary relief, such as an injunction or rescission for breach
of the duty of care. In addition, the provision applies only to claims against
a director arising out of his or her role as a director and not in any other
capacity (such as an officer or employee of the Company). Further, liability of
a director for violations of the federal securities laws will not be limited by
this provision. Directors will, however, no longer be liable for monetary
damages arising from decisions involving violations of the duty of care which
could be deemed grossly negligent.

Indemnification. The Certificate of Incorporation provides that directors and
officers of the Company shall be indemnified by the Company to the fullest
extent authorized by Delaware law, as it now exists or may in the future be
amended, against all expenses and liabilities reasonably incurred in connection
with service for or on behalf of the Company. The Certificate of Incorporation
also authorizes the Company to enter into one or more agreements with any
person that provide for indemnification greater or different from that provided
in the Certificate of Incorporation. The Company has entered into
indemnification agreements with all current members

35
<PAGE>

of the Board of Directors and executive officers. The Company believes that
these provisions and agreements are desirable to attract and retain qualified
directors and officers. Insofar as indemnification for liabilities arising
under the Securities Act may be permitted to directors, officers and
controlling persons of the Company pursuant to the foregoing provisions, or
otherwise, the Company has been advised that in the opinion of the Commission
such indemnification is against public policy as expressed in the Securities
Act and is, therefore, unenforceable.

TRANSFER AGENT AND REGISTRAR

The transfer agent and registrar for the Common Stock is Harris Trust and
Savings Bank.

SHARES ELIGIBLE FOR FUTURE SALE

Upon completion of this offering, the Company will have 10,000,000 shares of
Common Stock outstanding. Of these shares, the 3,200,000 shares sold in this
offering will be freely tradable without restriction or further registration
under the Securities Act, except that any shares purchased by "affiliates" of
the Company, as that term is defined under the Securities Act ("Affiliates"),
may generally only be sold in compliance with the limitations of Rule 144
described below.

The remaining 6,800,000 shares of Common Stock are deemed "Restricted
Shares" under Rule 144. The number of shares of Common Stock available for
sale in the public market is limited by restrictions under the Securities Act
and lock-up agreements under which the holders of such shares have agreed not
to sell or otherwise dispose of any of their shares for a period of 180 days
after the effective date of this offering (the "Lock-Up Period") without the
prior written consent of the Representative. Because of these restrictions, on
the date of this Prospectus, no shares other than the 3,200,000 shares offered
hereby will be eligible for sale. Until October 1997, no Restricted Shares may
become available for sale in the public market subject to Rule 144 and Rule
701 of the Securities Act.

In general, under Rule 144 of the Securities Act as currently in effect,
beginning 90 days after this offering, a person (or persons whose shares are
aggregated) who has beneficially owned "restricted" shares for at least two
years, including a person who may be deemed an Affiliate of the Company, is
entitled to sell within any three-month period a number of shares of Common
Stock that does not exceed the greater of 1% of the then-outstanding shares of
Common Stock of the Company (100,000 shares after giving effect to this
offering) or the average weekly trading volume of the Common Stock as reported
through the Nasdaq National Market during the four calendar weeks preceding
such sale. Sales under Rule 144 of the Securities Act are subject to certain
restrictions relating to manner of sale, notice and the availability of
current public information about the Company. In addition, under Rule 144(k)
of the Securities Act, a person who is not an Affiliate of the Company at any
time 90 days preceding a sale, and who has beneficially owned shares for at
least three years, would be entitled to sell such shares immediately following
this offering without regard to the volume limitations, manner of sale
provisions or notice or other requirements of Rule 144 of the Securities Act.

Rule 701 under the Securities Act provides that shares of Common Stock
acquired on the exercise of outstanding options may be resold by persons other
than Affiliates, beginning 90 days after the date of this Prospectus, subject
only to the manner of sale provisions of Rule 144, and by Affiliates,
beginning 90 days after the date of this Prospectus, subject to all provisions
of Rule 144 except its two-year minimum holding period. The Company intends to
register on a registration statement on Form S-8, shortly after the date of
this Prospectus, a total of 1,300,000 shares of Common Stock reserved for
issuance under the Company's Long-Term Incentive Plan.

36
<PAGE>

UNDERWRITING

Subject to certain terms and conditions of the Underwriting Agreement, the
underwriters named below (the "Underwriters"), for whom Donaldson, Lufkin &
Jenrette Securities Corporation is acting as Representative, have severally
agreed to purchase from the Company and the Selling Stockholders, and the
Company and the Selling Stockholders have agreed severally to sell to each of
the Underwriters, the number of shares of Common Stock (the "Shares") set
forth opposite their respective names at the initial public offering price per
share less the underwriting discounts and commissions set forth on the cover
of this Prospectus.

<TABLE>
<CAPTION>
NUMBER
UNDERWRITERS OF SHARES
<S> <C>
Donaldson, Lufkin & Jenrette Securities Corporation.............
---------
Total......................................................... 3,200,000
=========
</TABLE>

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

The Company and the Selling Stockholders have been advised by the
Underwriters that they propose to offer the Shares to the public initially at
the price to the public set forth on the cover page of this Prospectus and to
certain dealers at such price, less a concession not in excess of $ per
Share. The Underwriters may allow, and such dealers may re-allow, a concession
not in excess of $ per Share to certain other dealers. After this
offering, the offering price and other selling terms may be changed by the
Underwriters.

Pursuant to the Underwriting Agreement, the Company and certain Selling
Stockholders have granted to the Underwriters an option, exercisable not later
than 30 calendar days from the date of the Underwriting Agreement, to purchase
up to an aggregate of 480,000 additional Shares at the initial offering price
set forth on the cover page of this Prospectus, less the underwriting
discounts and commissions, solely to cover over-allotments. Up to 240,000 of
the Shares covered by such option will be made available by the Company, and
up to an additional 240,000 Shares in the aggregate will be made available
equally by Messrs. Maher, Lanz, Ruprecht, Blomberg, Donovan and Goldfield.

To the extent that the Underwriters exercise such option, each of the
Underwriters will have a firm commitment to purchase approximately the same
percentage of the option shares as the number of Shares to be purchased by it
shown in the above table bears to the total number of Shares shown in the
above table, and the Selling Stockholders will be obligated, pursuant to the
option, to sell such Shares to the Underwriters. The Underwriters may exercise
such option only to cover over-allotments made in connection with the sale of
the Shares offered hereby. If purchased, the Underwriters will sell such
additional 480,000 Shares on the same terms as those on which the Shares are
being offered.

The Underwriting Agreement contains covenants of indemnity among the
Underwriters, the Company and the Selling Stockholders against certain civil
liabilities, including liabilities under the Securities Act.

37
<PAGE>

The Company, the Selling Stockholders and the executive officers and
directors of the Company have each agreed that during the 180-day period after
the date of this Prospectus they will not, without the prior written consent
of Donaldson, Lufkin & Jenrette Securities Corporation, sell, offer to sell,
contract to sell, grant any option to purchase or otherwise dispose of any
shares of Common Stock or any securities convertible into or exercisable or
exchangeable for Common Stock, other than the Shares, except that the Company
may issue shares upon the exercise of stock options granted prior to the
execution of the Underwriting Agreement, and may grant additional options
under its Long-Term Incentive Plan, provided that, without the prior written
consent of Donaldson, Lufkin & Jenrette Securities Corporation, such options
shall not be exercisable during such period.

The Representative has informed the Company and the Selling Stockholders
that the Underwriters do not intend to confirm sales to any discretionary
accounts without prior specific written approval of the customer.

Prior to this offering, there has been no public market for the shares of
Common Stock. The initial public offering price will be negotiated among the
Company, the Selling Stockholders and the Representative. Among the factors to
be considered in determining the initial public offering price of the Common
Stock, in addition to prevailing market conditions, will be the Company's
historical performance, estimates of the business potential and earnings
prospects of the Company, an assessment of the Company's management and the
consideration of the above factors in relation to market valuation of
companies in related businesses.

LEGAL MATTERS

The validity of the shares of Common Stock offered hereby will be passed
upon for the Company by Sachnoff & Weaver, Ltd., Chicago, Illinois. Certain
legal matters in connection with the offering will be passed upon for the
Underwriters by Winston & Strawn, Chicago, Illinois.

EXPERTS

The Financial Statements of the Company as of December 31, 1994 and 1995,
and for each of the years in the three-year period ended December 31, 1995,
have been included herein in reliance upon the report of KPMG Peat Marwick
LLP, independent certified public accountants, appearing elsewhere herein, and
upon the authority of such firm as experts in accounting and auditing.

ADDITIONAL INFORMATION

The Company has filed with the Commission, Washington, D.C. 20549, a
Registration Statement, of which this Prospectus constitutes a part, on Form
S-1 under the Securities Act with respect to the Common Stock offered hereby.
This Prospectus does not contain all of the information set forth in the
Registration Statement and the exhibits and schedules to the Registration
Statement. For further information with respect to the Company and the Common
Stock offered hereby, reference is made to the Registration Statement and the
exhibits and schedules filed as a part of the Registration Statement.
Statements contained in this Prospectus concerning the contents of any
contract or any other document referred to are not necessarily complete;
reference is made in each instance to the copy of such contract or document
filed as an exhibit to the Registration Statement. Each such statement is
qualified in all respects by such reference to such exhibit. The Registration
Statement, including exhibits and schedules thereto, may be inspected without
charge at the Commission's principal office in Washington, D.C., and copies of
all or any part thereof may be obtained from such office after payment of fees
prescribed by the Commission. The Registration Statement, including the
exhibits and schedules thereto, is also available at the Commission's site on
the World Wide Web at http:/www.sec.gov. Copies of reports, proxy and
information statements and other information regarding the Company are also
available at the Commission's Web site.

38
<PAGE>

THE METZLER GROUP, INC.

INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
<S> <C>
Independent Auditors' Report............................................. F-2
Balance Sheets as of December 31, 1994 and 1995 and June 30, 1996
(unaudited) and Pro Forma as of June 30, 1996 (unaudited)............... F-3
Statements of Operations for the years ended December 31, 1993, 1994 and
1995 and for the six months ended June 30, 1995 and 1996 (unaudited).... F-4
Statements of Stockholders' Equity for the years ended December 31, 1993,
1994 and 1995 and for the six months ended June 30, 1996 (unaudited).... F-5
Statements of Cash Flows for the years ended December 31, 1993, 1994 and
1995 and for the six months ended June 30, 1995 and 1996 (unaudited).... F-6
Notes to Financial Statements............................................ F-7
</TABLE>

F-1
<PAGE>

INDEPENDENT AUDITORS' REPORT

WHEN THE TRANSACTION REFERRED TO IN PARAGRAPH 1 OF NOTE 11 OF THE NOTES TO
FINANCIAL STATEMENTS HAS BEEN CONSUMMATED, WE WILL BE IN A POSITION TO RENDER
THE FOLLOWING REPORT.

KPMG Peat Marwick LLP
The Stockholders and Board of Directors
The Metzler Group, Inc.:

We have audited the accompanying balance sheets of The Metzler Group, Inc.
as of December 31, 1994 and 1995, and the related statements of operations,
stockholders' equity, and cash flows for each of the years in the three-year
period ended December 31, 1995. These financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.

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

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of The Metzler Group, Inc. as
of December 31, 1994 and 1995, and the results of its operations and its cash
flows for each of the years in the three-year period ended December 31, 1995
in conformity with generally accepted accounting principles.

Chicago, Illinois
July 23, 1996

except for paragraph 1 of Note 11,
which is as of , 1996

F-2
<PAGE>

THE METZLER GROUP, INC.

BALANCE SHEETS

ASSETS

<TABLE>
<CAPTION>
PRO FORMA
DECEMBER 31, JUNE 30, 1996
---------------------- JUNE 30, 1996 (NOTE 2)
1994 1995 (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
Current assets:
Cash..................... $ 63,631 $ 223,235 $ 226,200 $ 226,200
Trade accounts
receivable.............. 2,004,241 2,288,878 4,315,355 4,315,355
Current portion of note
receivable from officer. -- -- 241,667 241,667
Prepaid expenses and
other................... 10,616 7,939 144,431 144,431
---------- ---------- ---------- ----------
Total current assets... 2,078,488 2,520,052 4,927,653 4,927,653
---------- ---------- ---------- ----------
Property and equipment, at
cost:
Office furniture and
equipment............... 889,791 599,466 623,953 623,953
Computer software........ 107,044 55,109 58,729 58,729
Automobiles.............. 53,846 64,471 64,471 64,471
---------- ---------- ---------- ----------
1,050,681 719,046 747,153 747,153
Less accumulated
depreciation and
amortization............ (611,380) (459,520) (505,505) (505,505)
---------- ---------- ---------- ----------
Net property and equipment. 439,301 259,526 241,648 241,648
Note receivable from
officer, less current
portion................... -- -- 483,333 483,333
---------- ---------- ---------- ----------
Total assets........... $2,517,789 $2,779,578 $5,652,634 $5,652,634
========== ========== ========== ==========

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Note payable............. $ 355,740 $ 405,740 $ -- $ --
Notes payable to
officers................ -- -- 1,000,000 1,000,000
Current portion of
obligations under
capital lease........... 14,168 15,443 16,123 16,123
Accounts payable......... 44,205 177,576 140,560 140,560
Accrued compensation and
related costs........... 879,889 1,659,290 1,327,528 1,327,528
Income taxes payable..... -- 14,859 27,000 27,000
Deferred income taxes.... 404,000 160,000 25,000 77,900
Distribution payable..... -- -- -- 2,540,069
Other current
liabilities............. 70,154 37,786 130,915 130,915
---------- ---------- ---------- ----------
Total current
liabilities........... 1,768,156 2,470,694 2,667,126 5,260,095
Obligations under capital
lease, less current
maturities................ 45,887 30,443 22,208 22,208
Deferred revenue........... -- 15,348 25,138 25,138
Deferred income taxes...... 49,000 20,000 155,000 202,100
---------- ---------- ---------- ----------
Total liabilities...... 1,863,043 2,536,485 2,869,472 5,509,541
---------- ---------- ---------- ----------
Stockholders' equity:
Preferred stock, $.001
par value; 3,000,000
shares authorized; no
shares issued or
outstanding............. -- -- -- --
Common stock, $.001 par
value, 15,000,000 shares
authorized; 9,519,999,
9,714,285, and 9,714,285
shares issued and
outstanding in 1994,
1995, and June 30, 1996;
respectively............ 9,520 9,714 9,714 9,714
Additional paid-in
capital................. 46,297 107,682 107,682 107,682
Retained earnings........ 598,929 125,697 2,665,766 25,697
---------- ---------- ---------- ----------
Total stockholders'
equity................ 654,746 243,093 2,783,162 143,093
---------- ---------- ---------- ----------
Total liabilities and
stockholders' equity.. $2,517,789 $2,779,578 $5,652,634 $5,652,634
========== ========== ========== ==========
</TABLE>

See accompanying Notes to Financial Statements.

F-3
<PAGE>

THE METZLER GROUP, INC.

STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31, SIX MONTHS ENDED JUNE 30,
------------------------------------- ---------------------------
1993 1994 1995 1995 1996
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenues................ $10,379,915 $10,419,878 $13,459,725 $ 5,625,590 $ 10,856,647
Cost of services........ 5,797,297 5,262,922 6,421,560 2,840,445 5,214,810
----------- ----------- ----------- ------------ -------------
Gross profit............ 4,582,618 5,156,956 7,038,165 2,785,145 5,641,837
----------- ----------- ----------- ------------ -------------
Selling, general and
administrative
expenses............... 4,266,140 5,326,668 7,650,047 4,023,325 1,403,341
----------- ----------- ----------- ------------ -------------
Operating income (loss). 316,478 (169,712) (611,882) (1,238,180) 4,238,496
Other expense (income):
Interest expense...... 33,140 51,111 50,893 26,769 20,394
Interest income....... (11,990) (5,097) (17,469) (2,187) (11,075)
Other, net............ (5,870) 26,048 93,926 73,061 3,108
----------- ----------- ----------- ------------ -------------
Total other expense
(income)............... 15,280 72,062 127,350 97,643 12,427
----------- ----------- ----------- ------------ -------------
Income (loss) before
income tax expense
(benefit).............. 301,198 (241,774) (739,232) (1,335,823) 4,226,069
Income tax expense
(benefit).............. 147,000 (58,000) (266,000) (478,000) 86,000
----------- ----------- ----------- ------------ -------------
Net income (loss)....... $ 154,198 $ (183,774) $ (473,232) $ (857,823) $ 4,140,069
=========== =========== =========== ============ =============
Pro forma income data
(unaudited) (note 2):
Net income (loss) as
reported............. $ (473,232) $ 4,140,069
Pro forma adjustments. 1,665,176 (2,216,104)
----------- -------------
Pro forma net
income............. 1,191,944 1,923,965
=========== =============
Pro forma net income
per share.......... $ 0.12 $ 0.20
=========== =============
</TABLE>

See accompanying Notes to Financial Statements.

F-4
<PAGE>

THE METZLER GROUP, INC.

STATEMENTS OF STOCKHOLDERS' EQUITY

FOR THE YEARS ENDED DECEMBER 31, 1993, 1994, 1995
AND THE SIX MONTHS ENDED JUNE 30, 1996 (UNAUDITED)

<TABLE>
<CAPTION>
PREFERRED STOCK COMMON STOCK ADDITIONAL TOTAL
---------------- ----------------- PAID-IN RETAINED STOCKHOLDERS'
SHARES AMOUNT SHARES AMOUNT CAPITAL EARNINGS EQUITY
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at
December 31, 1992...... -- $ -- 1,010 $1,010 $122,162 $ 628,505 $ 751,677
Retroactive restatement
for a 9,714.285 for 1
stock split in the form
of a common stock
dividend effective
September , 1996..... -- -- 9,810,418 9,810 (9,810) -- --
-------- ------- --------- ------ -------- ---------- ----------
As restated............. -- -- 9,811,428 9,811 113,361 628,505 751,677
Net income.............. -- -- -- -- -- 154,198 154,198
Purchase of common
stock.................. -- -- (194,286) (194) (45,988) -- (46,182)
-------- ------- --------- ------ -------- ---------- ----------
Balance at
December 31, 1993...... -- -- 9,617,142 9,617 67,373 782,703 859,693
Net loss................ -- -- -- -- -- (183,774) (183,774)
Purchase of common
stock.................. -- -- (485,714) (486) (140,662) -- (141,148)
Issuance of common
stock.................. -- -- 388,571 389 119,586 -- 119,975
-------- ------- --------- ------ -------- ---------- ----------
Balance at
December 31, 1994...... -- -- 9,519,999 9,520 46,297 598,929 654,746
Net loss................ -- -- -- -- -- (473,232) (473,232)
Issuance of common
stock.................. -- -- 194,286 194 61,385 -- 61,579
-------- ------- --------- ------ -------- ---------- ----------
Balance at
December 31, 1995...... -- -- 9,714,285 9,714 107,682 125,697 243,093
Net income (unaudited).. -- -- -- -- -- 4,140,069 4,140,069
S-Corporation
distributions
(unaudited)............ -- -- -- -- -- (1,600,000) (1,600,000)
-------- ------- --------- ------ -------- ---------- ----------
Balance at June 30, 1996
(unaudited)............ -- $ -- 9,714,285 $9,714 $107,682 $2,665,766 $2,783,162
======== ======= ========= ====== ======== ========== ==========
</TABLE>

See accompanying Notes to Financial Statements.

F-5
<PAGE>

THE METZLER GROUP, INC.

STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31, SIX MONTHS ENDED JUNE 30,
------------------------------ ---------------------------
1993 1994 1995 1995 1996
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from
operating activities:
Net income (loss)..... $154,198 $(183,774) $(473,232) $ (857,823) $ 4,140,069
Adjustments to
reconcile net income
(loss) to net cash
provided by operating
expenses:
Depreciation and
amortization........ 195,678 186,297 136,024 47,775 49,571
Loss on sale of
property and
equipment........... -- 25,246 93,622 73,411 665
Deferred income
taxes............... 118,000 (80,000) (273,000) (573,000) --
Changes in assets and
liabilities:
Receivables........ (719,972) 695,518 (284,637) (802,623) (2,026,477)
Prepaid expenses... 856 (10,616) 2,677 (215,969) (136,492)
Salary advances to
officer........... (47,502) 57,502 -- -- --
Advances to
affiliate......... (72,842) 72,842 -- -- --
Accounts payable... 26,898 (19,726) 133,371 68,923 (37,016)
Accrued
compensation and
related costs..... 459,558 (474,210) 779,401 2,195,865 (331,762)
Other accrued
liabilities....... 12,569 (15,330) (17,509) 120,435 105,270
Deferred revenues.. (9,299) -- 15,348 1,550 9,790
-------- --------- --------- ------------ -------------
Net cash provided by
operating activities... 118,142 253,749 112,065 232,544 1,773,618
-------- --------- --------- ------------ -------------
Cash flows from
investing activities:
Purchase of property
and equipment........ (58,101) (45,081) (51,329) (27,565) (32,358)
Proceeds from sale of
property and
equipment............ -- 20,500 1,458 1,458 --
-------- --------- --------- ------------ -------------
Net cash used in
investing activities... (58,101) (24,581) (49,871) (26,107) (32,358)
-------- --------- --------- ------------ -------------
Cash flows from
financing activities:
Purchase of common
stock................ (46,182) (141,148) -- -- --
Sale of common stock.. -- 119,975 61,579 61,579 --
Repayment of note
payable.............. (225,000) (506,260) (200,000) -- (405,740)
Issuance of note
payable.............. 215,000 372,000 250,000 248,272 --
Issuance of notes
payable to officers.. -- -- -- -- 1,000,000
Note receivable from
officer.............. -- -- -- -- (725,000)
Distributions to
stockholders......... -- -- -- -- (1,600,000)
Payments for
obligation under
capital lease........ (2,809) (12,999) (14,169) (6,932) (7,555)
-------- --------- --------- ------------ -------------
Net cash provided by
(used in) financing
activities............. (58,991) (168,432) 97,410 302,919 (1,738,295)
-------- --------- --------- ------------ -------------
Net increase in cash.... 1,050 60,736 159,604 509,356 2,965
Cash at beginning of
year................... 1,845 2,895 63,631 63,631 223,235
-------- --------- --------- ------------ -------------
Cash at end of year..... $ 2,895 $ 63,631 $ 223,235 $ 572,987 $ 226,200
======== ========= ========= ============ =============
Noncash investing
activities:
Acquisition of
equipment under
capital lease........ $ 75,863 $ -- $ -- $ -- $ --
Exchange of like-kind
property............. -- -- 28,500 -- --
Noncash financing
activity--issuance of
long-term debt
obligation for
repurchase of common
stock.................. $ 46,182 $ -- $ -- $ -- $ --
======== ========= ========= ============ =============
Supplemental
information:
Interest payments..... $ 33,140 $ 48,435 $ 51,119 $ 28,992 $ 20,621
Income tax payments... $ 11,454 $ 52,226 $ 7,830 $ 10,250 $ 2,400
======== ========= ========= ============ =============
</TABLE>

See accompanying Notes to Financial Statements.

F-6
<PAGE>

THE METZLER GROUP, INC.

NOTES TO FINANCIAL STATEMENTS
(INFORMATION AS OF JUNE 30, 1996 AND FOR THE SIX MONTHS ENDED JUNE 30, 1995
AND 1996 IS UNAUDITED.)

1. DESCRIPTION OF BUSINESS

The Metzler Group, Inc. (the "Company") is a leading nationwide provider of
consulting services to electric utilities and other energy-related businesses.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Revenue Recognition

The Company recognizes revenues as the related services are performed.

Property and Equipment

Property and equipment are recorded at cost. Depreciation and amortization
are computed using the straight-line method based on the estimated useful
lives, ranging from three to seven years, of the various classes of property
and equipment. Depreciation related to capital lease obligations is amortized
over the shorter of their useful lives or the term of the related leases by
use of the straight-line method.

Income Taxes

Income taxes, including pro forma calculations, are accounted for in
accordance with Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes" (Statement 109). Under the asset and liability
method of Statement 109, deferred tax assets and liabilities are recognized
for the future tax consequences attributable to differences between the
financial statement carrying amounts of existing assets and liabilities and
their respective tax bases. Deferred tax assets and liabilities are measured
using enacted tax rates expected to apply to taxable income in the years in
which those temporary differences are expected to be recovered or settled. The
effect on deferred tax assets and liabilities of a change in tax rates is
recognized in income in the period that includes the enactment date.

Prior to January 1, 1996, the Company had operated as a C-corporation.
Effective January 1, 1996, the stockholders of the Company elected to be taxed
under Subchapter S of the Internal Revenue Code. Federal income taxes are the
responsibility of the Company's stockholders as are certain state income
taxes. As of the effective date of the election, the Company is responsible
for Federal built-in-gain taxes to the extent applicable. Accordingly, the
statement of earnings for the six months ended June 30, 1996 provides for such
taxes. The S-corporation election will terminate in connection with the
consummation of the proposed initial public offering of the Company's common
stock.

Prior to the consummation of its proposed initial public offering, the
Company will declare a S-corporation dividend to its existing stockholders in
an amount representing all undistributed earnings of the Company from January
1, 1996 through the termination of the Company's S-corporation status
resulting from the initial public offering. The S-corporation dividend is
estimated to be approximately $2,540,000 as of June 30, 1996.

In addition, at the effective date of termination of the S-corporation
election, deferred income taxes of approximately $100,000 (unaudited) will be
reinstated as a charge to earnings representing the tax effect of cumulative
timing differences, primarily related to accrued compensation and differing
depreciation methodologies at that time.

The pro forma balance sheet as of June 30, 1996 reflects the S-corporation
dividend and the reinstatement of deferred income taxes as discussed in the
previous two paragraphs.

Fair Value of Financial Instruments

The carrying amount of the Company's financial instruments approximates fair
value because of the short maturity of those instruments.

Use of Estimates

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and

F-7
<PAGE>

THE METZLER GROUP. INC.

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.

Interim Financial Information

The financial statements and related notes thereto as of June 30, 1996 and
for the six months ended June 30, 1995 and 1996 are unaudited and have been
prepared on the same basis as the audited financial statements included
herein. In the opinion of management, such unaudited financial statements
include all normal recurring adjustments necessary to present fairly the
information set forth herein.

Pro Forma Net Income Per Share

Pro forma net income per common and common equivalent share is computed
based on the weighted average of 9,763,267 common and common equivalent shares
outstanding during the year ended December 31, 1995 and 9,785,418 common and
common equivalent shares outstanding during the six month period ended June
30, 1996.

Net income (loss) per share is computed using the weighted average number of
shares of common stock and dilutive common equivalent shares resulting from
the grant of 355,666 common stock options on June 30, 1996 (using the treasury
stock method). Pursuant to Securities and Exchange Commission Staff Accounting
Bulletin No. 83, common and common equivalent shares issued by the Company
during the twelve-month period prior to the proposed initial public offering
have been included in the calculation of common and common equivalent shares
using the treasury stock method and the mid-point of the proposed initial
public offering price per share as if they were outstanding for all periods
presented.

The pro forma adjustments during the year ended December 31, 1995 and the
six months ended June 30, 1996 reflect the impact of a compensation plan
effective July 1, 1996. The pro forma adjustments for the year ended December
31, 1995 include a decrease to officer compensation expense of $1,665,176, net
of income tax expense of $1,110,117. The pro forma adjustments for the six
months ended June 30, 1996 include an increase to officer compensation expense
of $611,676, net of income tax benefits of $407,784.

The pro forma adjustments for the six months ended June 30, 1996 include
federal and the additional state income tax expense of $1,196,644 that would
have been required had the Company not made the S-corporation election
effective January 1, 1996.

3. OTHER EXPENSE (INCOME)

Included in other expense (income) in the accompanying statements of
operations are losses on sale of property and equipment of $25,246 and $93,622
during the years ended December 31, 1994 and 1995, respectively.

4. NOTE PAYABLE

The Company has a line of credit with a bank which provides for maximum
borrowings limited to 65% of eligible accounts receivable. At December 31,
1994 and 1995 the line of credit had maximum borrowing of $800,000 and bore
interest at the bank's prime rate (8.5% at December 31, 1994 and 1995) plus
1%. Outstanding borrowings under the line of credit were $355,740 and $405,740
at December 31, 1994 and 1995, respectively.

During 1996, the Company entered into a new line of credit which expires on
December 31, 1996 and provides for maximum borrowings of $1,200,000.
Borrowings are limited to 65% of eligible accounts receivable and bear
interest at the bank's prime rate (8.25% at June 30, 1996) plus 0.5%.

Under its credit agreement, the Company is required to maintain tangible net
worth, debt-to-equity and cash flow ratios. The Company's borrowings are
secured by the Company's accounts receivable and equipment.

F-8
<PAGE>

THE METZLER GROUP, INC.

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

5. LEASE COMMITMENTS

The Company leases its office facilities and certain equipment under
operating and capital lease arrangements which expire at various dates through
January 31, 2002.

Operating Leases

The operating lease of the office facilities includes scheduled base rent
increases over the term of the lease. The total amount of the base rent
payments is being charged to expense on the straight-line method over the term
of the lease. The Company has recorded a deferred credit to reflect the excess
of rent expense over cash payments since the inception of the lease. The lease
provides for monthly payments of real estate taxes, insurance and other
operating expenses applicable to the property. In addition, the Company leases
equipment under a noncancelable operating lease.

Future minimum annual lease payments, for the years subsequent to 1995 and
in the aggregate, are as follows:

<TABLE>
<CAPTION>
YEAR ENDING
DECEMBER 31 AMOUNT
<S> <C>
1996............................................................ $ 188,863
1997............................................................ 194,207
1998............................................................ 199,463
1999............................................................ 205,353
2000............................................................ 208,300
Thereafter...................................................... 232,472
----------
$1,228,658
==========
</TABLE>

Rent expense for operating leases entered into by the Company and charged to
operations amounted to the following:

<TABLE>
<CAPTION>
PERIOD ENDED AMOUNT
<S> <C>
December 31, 1993............................................... $ 155,444
December 31, 1994............................................... 155,542
December 31, 1995............................................... 155,598
June 30, 1995 (unaudited)....................................... 77,800
June 30, 1996 (unaudited)....................................... 90,431
</TABLE>

Capital Lease

The Company leases equipment which is classified within the Company's
financial statements as a capital lease. Included in the property, plant and
equipment in the accompanying balance sheets is the following asset held under
capital lease:

<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
--------------- -----------
1994 1995 1996
(UNAUDITED)
<S> <C> <C> <C>
Property and equipment......................... $75,863 $75,863 $75,863
Less accumulated amortization.................. 22,759 37,932 45,518
------- ------- -------
Asset held under capital lease, net............ $53,104 $37,931 $30,345
======= ======= =======
</TABLE>

F-9
<PAGE>

THE METZLER GROUP, INC.

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

The future minimum annual lease payments under the noncancelable capital
lease are as follows:

<TABLE>
<CAPTION>
YEAR ENDING
DECEMBER 31 AMOUNT
<S> <C>
1996.............................................................. $18,808
1997.............................................................. 18,808
1998.............................................................. 14,105
-------
Net minimum rentals............................................... 51,721
Less interest portion............................................. (5,835)
-------
Present value of net minimum rentals at December 31, 1995......... $45,886
=======
</TABLE>

6. INCOME TAX EXPENSE (BENEFIT)

Income tax expense (benefit) consists of the following:

<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
---------------------------- ------------------
1993 1994 1995 1995 1996
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Federal:
Current..................... $ 25,000 $ 9,000 $ -- $ -- $25,000
Deferred.................... 94,000 (64,000) (218,000) (370,000) --
-------- -------- --------- --------- -------
Total......................... 119,000 (55,000) (218,000) (370,000) 25,000
-------- -------- --------- --------- -------
State:
Current..................... 4,000 13,000 7,000 7,000 61,000
Deferred.................... 24,000 (16,000) (55,000) (115,000) --
-------- -------- --------- --------- -------
Total......................... 28,000 (3,000) (48,000) (108,000) 61,000
-------- -------- --------- --------- -------
Total federal and state income
tax
expense (benefit)............ $147,000 $(58,000) $(266,000) $(478,000) $86,000
======== ======== ========= ========= =======
</TABLE>

Income tax expense (benefit) differs from the amounts estimated by applying
the statutory income tax rates to income (loss) before income tax expense
(benefit) as follows:

<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
---------------------------- ------------------
1993 1994 1995 1995 1996
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Federal tax (benefit) at stat-
utory rate................... $106,000 $(85,000) $(258,000) $(451,000) $ --
State tax (benefit) at statu-
tory rate.................... 18,000 (2,000) (35,000) (75,000) 61,000
Effect of nondeductible ex-
penses....................... 14,000 29,000 27,000 15,000 --
Other......................... 9,000 -- -- 33,000 25,000
-------- -------- --------- --------- -------
$147,000 $(58,000) $(266,000) $(478,000) $86,000
======== ======== ========= ========= =======
</TABLE>

F-10
<PAGE>

THE METZLER GROUP, INC

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

Deferred income taxes result from temporary differences between years in the
recognition of certain expense items for income tax and financial reporting
purposes. The source and income tax effect of these differences are as
follows:

<TABLE>
<CAPTION>
DECEMBER 31,
----------------
1994 1995
<S> <C> <C>
Deferred tax assets:
Items presented on an accrual basis for financial purposes
reported on a cash basis for income tax purposes:
Accounts payable.......................................... $ 18,000 71,000
Accrued expenses.......................................... 352,000 664,000
Deferred revenues......................................... -- 6,000
Accrued rents............................................. 28,000 15,000
-------- -------
Total gross deferred tax assets............................... 398,000 756,000
Less valuation allowance...................................... -- --
-------- -------
Net deferred tax assets....................................... 398,000 756,000
-------- -------
Deferred tax liabilities;
Depreciation--resulting from the difference between using
straight-line and accelerated methods...................... 49,000 20,000
Items presented on an accrual basis for financial purposes
reported on a cash basis for tax purposes:
Accounts receivable and accrued billings.................. 802,000 916,000
-------- -------
Total gross deferred tax liabilities.......................... 851,000 936,000
-------- -------
Net deferred tax liability.................................... $453,000 180,000
-------- -------
</TABLE>

At June 30, 1996, the Company has net deferred tax liabilities of $180,000
(unaudited) related to built-in-gain taxes of the S-corporation.

In assessing the realizability of deferred tax assets, management considers
whether it is more likely than not that some portion or all of the deferred
tax assets will not be realized. Based upon historical results of the
Company's operations, management believes it is more likely than not that the
Company will realize the benefits of the deductible differences.

F-11
<PAGE>

THE METZLER GROUP, INC.

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

7. EMPLOYEE BENEFIT PLANS

The Company has a Profit Sharing and Savings Plan and Trust ("Savings
Plan"). The Savings Plan covers employees after the later of the completion of
one year of service and reaching 21 years of age. Participants may contribute
up to 15% of their eligible compensation. The Company, at its discretion,
matches participant contributions as defined within the Savings Plan. In
addition, the Company, at its discretion, makes profit sharing contributions.
Company contributions to the Savings Plan which were charged to operations
were the following:

<TABLE>
<CAPTION>
PERIOD ENDED TOTAL
<S> <C>
December 31, 1993................................................. $230,092
December 31, 1994................................................. 168,203
December 31, 1995................................................. 231,477
June 30, 1995 (unaudited)......................................... 72,981
June 30, 1996 (unaudited)......................................... 175,600
</TABLE>

8. LONG-TERM INCENTIVE PLAN (UNAUDITED)

On June 30, 1996, the Company adopted a Long-Term Incentive Plan which
provides for common stock, common stock-based, and other performance
incentives to employees, consultants, directors, advisors, and independent
contractors of the Company. The maximum number of shares of common stock which
may be issued and sold under the plan is 1,300,000 shares. On June 30, 1996,
the Company has granted 355,666 options at an exercise price of $12 per share
which was equal to the estimated fair market value of common stock at the date
of grant. As of June 30, 1996 no options were exercisable.

9. RELATED-PARTY TRANSACTIONS

During 1993 and 1994 the Company paid expenses and collected revenues on
behalf of an affiliated company. Amounts paid by the Company, net of amounts
collected, were reimbursed by the affiliate. The affiliate's sole shareholder
was also a shareholder of the Company.

During January 1996, the Company entered into note payable agreements with
two officers. The notes, each with a principal amount of $500,000, bear
interest at a rate of 10% and mature on December 31, 1996.

During May 1996, the Company advanced an officer $725,000 as part of an
employment agreement and entered into a note receivable agreement with the
officer. The note receivable bears interest at a rate of 6% and the terms
require payment in three equal annual installments beginning December 31,
1996. The note may be repaid in the form of services rendered to the Company
by the officer. (See Note 11).

10. REVENUES AND ACCOUNTS RECEIVABLE FROM SIGNIFICANT CUSTOMERS

The Company's customers are located throughout the United States and Canada.
In 1993, 1994, and 1995, and for the six months ended June 30, 1995
(unaudited) and June 30, 1996 (unaudited), the Company's five largest clients
accounted for approximately, 43%, 58%, 55%, 52% and 61% of the Company's total
revenues, respectively. One customer accounted for 26%, 15%, and 29% of the
Company's accounts receivable balance at December 31, 1994, 1995, and June 30,
1996 (unaudited), respectively.

F-12
<PAGE>

THE METZLER GROUP, INC.

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

11. SUBSEQUENT EVENTS

Board of Director Actions

The Board of Directors approved an effective 9,714.285 for 1 stock split of
common stock to be effective not later than the effective date of the offering
contemplated hereby, an increase in the number of authorized shares of the
Company's common stock to 15,000,000 shares and authorized 3,000,000 shares of
preferred stock of the Company. In addition, in conjunction with the initial
public offering of the Company's common stock, the Company's Board of
Directors approved a resolution to merge Metzler & Associates, Inc. with a
newly formed subsidiary of The Metzler Group, Inc. After the effectiveness of
the merger, Metzler & Associates, Inc. will be a wholly-owned subsidiary of
The Metzler Group, Inc. The accompanying financial statements and notes
thereto have been adjusted retroactively to give effect to the aforementioned
actions.

Stock Redemption Agreement (unaudited)

During July 1996, the Company entered into an agreement with its founding
shareholder to redeem 1,714,285 shares of the shareholder's common stock. The
agreement is contingent upon the execution of an underwriting agreement in
connection with the offering contemplated hereby ("Offering"). The agreement
calls for the Company to issue the shareholder a promissory note for
$7,975,000. The promissory note is to be repaid within thirty days after the
effective date of the Offering.

Amendment to Note Receivable From Officer

In September 1996, the note receivable from an officer described in Note 9
was amended. As amended, the note is due and payable immediately following the
closing of the Offering.

F-13
<PAGE>

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

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

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

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
<S> <C>
Prospectus Summary........................................................ 3
Risk Factors.............................................................. 5
The Company............................................................... 10
Use of Proceeds........................................................... 10
S Corporation Dividend.................................................... 10
Dividend Policy........................................................... 11
Capitalization............................................................ 11
Dilution.................................................................. 12
Selected Financial Data................................................... 13
Management's Discussion and Analysis of Financial Condition and Results of
Operations............................................................... 14
Business.................................................................. 20
Management................................................................ 28
Certain Transactions...................................................... 31
Principal and Selling Stockholders........................................ 33
Description of Capital Stock.............................................. 34
Shares Eligible for Future Sale........................................... 36
Underwriting.............................................................. 37
Legal Matters............................................................. 38
Experts................................................................... 38
Additional Information.................................................... 38
Index to Financial Statements............................................. F-1
</TABLE>

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

UNTIL , 1996 (25 DAYS AFTER THE COMMENCEMENT OF THIS OFFER-
ING), ALL DEALERS EFFECTING TRANSACTIONS IN THE COMMON STOCK, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN
ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.

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

3,200,000 SHARES

LOGO

COMMON STOCK

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

PROSPECTUS

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

DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION

, 1996

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

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

The following table sets forth the costs and expenses, other than
underwriting discounts and commissions, payable by the Company in connection
with the sale of the Common Stock being registered hereby. All the amounts
shown are estimated, except the SEC registration fee, the NASD filing fee and
the Nasdaq National Market listing fee.

<TABLE>
<S> <C>
SEC registration fee.............................................. $ 20,303
NASD filing fee................................................... 6,388
Nasdaq National Market listing fee................................ 42,500
Blue Sky filing fees and expenses................................. 10,000
Printing expenses................................................. 120,000
Legal fees and expenses........................................... *
Accounting fees and expenses...................................... *
Transfer Agent and Registrar fees and expenses.................... *
Officers and directors liability insurance premiums............... *
Miscellaneous expenses............................................ *
--------
Total......................................................... $750,000
========
</TABLE>
- --------
* To be supplied by amendment.

ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS

The Company is a Delaware corporation, subject to the applicable
indemnification provisions of the General Corporation Law of the State of
Delaware (the "DGCL"). Section 145 of the DGCL empowers a Delaware corporation
to indemnify, subject to the standards therein prescribed, any person in
connection with any action, suit or proceeding brought or threatened because
such person is or was a director, officer, employee or agent of the
corporation or was serving as such with respect to another corporation or
other entity at the request of such corporation.

In accordance with Section 102(b)(7) of the DGCL, Article XIII of the
Company's Amended and Restated Certificate of Incorporation provides that no
director of the Corporation shall be personally liable to the Corporation or
its stockholders for monetary damages for breach of fiduciary duty as a
director, notwithstanding any provision of law imposing such liability except
for liability: (i) for any breach of the director's duty of loyalty to the
Corporation or its stockholders; (ii) for acts or omissions not in good faith
or which involve intentional misconduct or a knowing violation of law; (iii)
under Section 174 of the DGCL, as the same exists or hereafter may be amended;
or (iv) for any transaction from which the director derived an improper
personal benefit. If the DGCL is amended to authorize the further elimination
or limitation of liability of directors, then the liability of a director of
the Corporation, in addition to the limitation on personal liability provided
herein, shall be limited to the fullest extent permitted by a amended DGCL.
Any repeal or modification of this Article XIII by the stockholders of the
Corporation shall be prospective only, and shall not adversely affect any
limitation on the personal liability of a director of the Corporation existing
at the time of such repeal or modification.

The Company's Certificate of Incorporation contains provisions that require
the Company to indemnify its directors and officers to the fullest extent
permitted by Delaware law.

The Company has entered into indemnification agreements with each of its
executive officers and directors in which the Company agrees to indemnify and
hold harmless the officer or director to the fullest extent permitted by
applicable law against any and all reasonable attorneys' fees and all other
reasonable expense, cost, liability and loss (including a mandatory obligation
by the Company to advance reimbursement of legal fees and

II-1
<PAGE>

expenses) paid or reasonably incurred by such officer or director or on his or
her behalf in connection with any threatened, pending or completed action,
suit or proceeding, or any inquiry or investigation not initiated by the
officer or director that he or she believes in good faith might lead to a
proceeding, inquiry or investigation (a "Proceeding"), relating to the fact
that the officer or director is or was a director, officer, employee or agent
of the Company, or is or was serving at the request of the Company as a
director, officer, employee, trustee, agent or fiduciary of another
corporation, partnership, joint venture, employee benefit plan, trust or other
enterprise, or by reason of any action or inaction by the officer or director
in such capacity. However, the Company's obligation to indemnify the officer
or director is subject to a determination by: (i) the Company's Board of
Directors, by vote of the majority of disinterested directors; (ii) under
certain circumstances, independent legal counsel appointed by the Board of
Directors in a written opinion; (iii) stockholders of the Company; or (iv) a
court of competent jurisdiction in a final, nonappealable adjudication, that
the officer or director acted in good faith and in a manner he or she
reasonably believed to be in or not opposed to the best interests of the
Company and, with respect to any criminal Proceeding, the officer or director
acted in good faith and in a manner he or she reasonably believed to be in or
not opposed to the best interests of the Company, and with respect to any
criminal Proceeding, the officer or director had no reasonable cause to
believe that his or her conduct was unlawful.

The Underwriting Agreement (Exhibit 1.1 hereto) provides for indemnification
by the underwriters of the Company and its directors and executive officers in
the offering of the Common Stock registered hereby, and each person, if any,
who controls the Company, for certain liabilities, including liabilities
arising under the Securities Act.

ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES

The following information relates to securities of the Company issued or
sold since June 30, 1993 which have been adjusted to reflect the Company's
approximate 9,714-for-1 stock split effective June 30, 1996.

Since June 30, 1993, the Company has issued the following securities (as
adjusted for the 9,714-for-1 stock split) that were not registered under the
Securities Act:

On January 1, 1994, James T. Ruprecht purchased 194,280 shares of Common
Stock at $0.28 per share for an aggregate purchase price of $54,899.

On October 1, 1994, Stephen R. Goldfield purchased 97,140 shares of Common
Stock at approximately $0.33 per share for an aggregate purchase price of
$32,538.

On October 1, 1994, James R. Blomberg purchased 97,140 shares of Common
Stock at approximately $0.33 per share for an aggregate purchase price of
$32,538.

On January 26, 1995, James T. Ruprecht purchased 97,140 shares of Common
Stock at approximately $0.33 per share for an aggregate purchase price of
$31,810.

On January 26, 1995, Gerald R. Lanz 97,140 shares of Common Stock at
approximately $0.31 per share for an aggregate purchase price of $29,758.

On June 30, 1996, the Company approved the issuance of options to purchase
355,666 shares of Common Stock at an exercise price of $12.00 per share.

No underwriters were engaged in connection with the foregoing sales of
securities. Such sales were made in reliance upon the exemption from
registration set forth in Section 4(2) of the Securities Act for transactions
not involving a public offering.

II-2
<PAGE>

ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a) Exhibits

<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
<C> <S>
1.1 Form of Underwriting Agreement**
2.1 Form of Merger Agreement Among The Metzler Group, Inc., Metzler
Acquisition, Inc. and Metzler & Associates, Inc.**
2.2 Form of Promissory Note of Metzler-Illinois to Richard J. Metzler
in the amount of $7,975,000**
3.1 Amended and Restated Certificate of Incorporation of the Company
3.2 By-Laws of the Company**
4.1 Specimen Common Stock certificate*
5.1 Opinion of Sachnoff & Weaver, Ltd.*
10.1 Form of Indemnification Agreement between the Company and each of
its directors and officers*
10.2 Long-Term Incentive Plan**
10.3 Form of Stock Redemption Agreement among the Company, Richard J.
Metzler, Robert P. Maher, David J. Donovan, James T. Ruprecht,
James R. Blomberg, Stephen R. Goldfield and Gerald R. Lanz**
10.4 Lease dated October 29, 1991 between Metzler-Illinois and American
National Bank and Trust Company of Chicago, as Land Trustee,
regarding the space at 520 Lake-Cook Road, Deerfield, Illinois
(a/k/a Corporate 500 Centre), and the First Amendment to Lease
dated February 28, 1992, and the Second Amendment to Lease dated
April 17, 1996, and the Third Amendment to Lease dated May,
1996**
10.5 Promissory Note of Metzler-Illinois to Robert P. Maher in the
amount of $500,000 dated January 19, 1996**
10.6 Promissory Note of Metzler-Illinois to Richard J. Metzler in the
amount of $500,000 dated January 19, 1996**
10.7 Promissory Note of Richard J. Metzler to the Company in the amount
of $725,000 dated May 1, 1996**
10.8 Line of Credit Agreement between NBD Bank and Metzler &
Associates, Inc. dated May 31, 1996 for $1,200,000**
10.9 Stock Purchase Agreement among Richard J. Metzler, David J.
Donovan, Robert P. Maher, James T. Ruprecht, James R. Blomberg,
Stephen R. Goldfield and Gerald R. Lanz dated as of December 15,
1995
10.10 Shareholders' Agreement of Metzler & Associates, Inc. among
Richard J. Metzler, David J. Donovan, Robert P. Maher, James T.
Ruprecht, James R. Blomberg, Stephen R. Goldfield, Gerald R. Lanz
and Metlzer & Associates, Inc. dated as of January 1, 1996
10.11 Amendment to Promissory Note of Richard J. Metzler in the amount
of $725,000 dated September 3, 1996
21.1 Subsidiaries of The Metzler Group, Inc.
23.1 Consent of KPMG Peat Marwick LLP
23.2 Consent of Sachnoff & Weaver, Ltd. (to be included in Exhibit 5.1)
24.1 Power of Attorney**
27.1 Financial Data Schedule
</TABLE>
- --------
* To be supplied by amendment.

**Previously filed.

(b) Financial Statement Schedule(s).

None

II-3
<PAGE>

ITEM 17. UNDERTAKINGS

Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the Company
pursuant to the foregoing provisions or otherwise, the Company has been
advised that in the opinion of the Commission such indemnification is against
public policy as expressed in the Securities Act and is, therefore,
unenforceable. If a claim for indemnification against such liability (other
than the payment by the Company of expenses incurred or paid by a director,
officer or controlling person of the Company in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
Company will, unless in the opinion of its counsel the matter has been settled
by controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Securities Act and will be governed by the final adjudication
of such issue.

The Company hereby undertakes that:

(1) The undersigned will provide the underwriters at the closing specified
in the underwriting agreement certificates in such denominations and
registered in such names as required by the underwriters to permit prompt
delivery to each purchaser.

(2) For purposes of determining any liability under the Securities Act, the
information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the Company pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed to be part of this registration
statement as of the time it is declared effective.

(3) For the purpose of determining any liability under the Securities Act,
each post-effective amendment that contains a form of prospectus shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to
be the initial bona fide offering thereof.

II-4
<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the Company has
duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Chicago, State of
Illinois, on September 4, 1996.

THE METZLER GROUP, INC.

/s/ James F. Hillman
By___________________________________

James F. Hillman,

Chief Financial Officer

Pursuant to the requirements of the Securities Act of 1933, as amended, this
Registration Statement has been signed by the following persons in the
capacities on the 4th day of September 1996.

SIGNATURE TITLE

Director, Chairman of the
* Board, President and Chief
------------------------------- Executive Officer
Robert P. Maher
(Principal Executive Officer)

/s/ James F. Hillman Chief Financial Officer
------------------------------- (Principal Financial and
James F. Hillman Accounting
Officer)

Director
*
-------------------------------
Gerald R. Lanz

Director
*
-------------------------------
James T. Ruprecht

/s/ James F. Hillman

*By: _____________________

James F. Hillman

Attorney-in Fact

II-5
<PAGE>

EXHIBIT INDEX

<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
<C> <S>
10.9 Stock Purchase Agreement among Richard J. Metzler, David J.
Donovan, Robert P. Maher, James T. Ruprecht, James R. Blomberg,
Stephen R. Goldfield and Gerald R. Lanz dated as of December 15,
1995
10.10 Shareholders' Agreement of Metzler & Associates, Inc. among
Richard J. Metzler, David J. Donovan, Robert P. Maher, James T.
Ruprecht, James R. Blomberg, Stephen R. Goldfield, Gerald R.
Lanz and Metzler & Associates, Inc. dated as of January 1, 1996.
10.11 Amendment to Promissory Note of Richard J. Metzler in the amount
of $725,000 dated September 3, 1996
21.1 Subsidiaries of The Metzler Group, Inc.
23.1 Consent of KPMG Peat Marwick LLP
27.1 Financial Data Schedule
</TABLE>

<PAGE>

EXHIBIT 10.9

STOCK PURCHASE AGREEMENT
------------------------

THIS STOCK PURCHASE AGREEMENT (this "AGREEMENT") dated as of December 15,
1995 among Richard J. Metzler ("SELLER") and each person whose name appears on
the signature page hereto (each, a "PURCHASER" and collectively, "PURCHASERS").

WHEREAS, Seller owns 850 shares of common stock, no par value per share
("COMMON STOCK"), of Metzler & Associates, Inc., an Illinois corporation (the
"COMPANY"), constituting 85% of the issued and outstanding shares of Common
Stock;

WHEREAS, Purchasers are shareholders and key executives of the Company; and

WHEREAS, Seller desires to sell to each Purchaser, and each Purchaser
desires to buy from Seller, the number of shares of Common Stock set forth
opposite such Purchaser's name on Schedule I hereto upon the terms and
conditions hereinafter set forth.

NOW, THEREFORE, in consideration of the foregoing, the mutual promises and
covenants set forth below and other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the parties hereby agree as
follows:

1. Agreement to Purchase and Sell Shares. On and subject to the terms
and conditions of this Agreement, Seller agrees to sell, transfer and assign to
each Purchaser, and each Purchaser agrees to purchase, the number of shares of
Common Stock set forth opposite such Purchaser's name on Schedule I hereto.

2. Purchase Price; Payment. The purchase price for the shares (the
"PURCHASE PRICE") shall be $4,617 per share, payable in the manner set forth on
Schedule I opposite such Purchaser's name.

3. The Closing; Deliveries.

(a) The closing of the transactions contemplated by this Agreement
(the "CLOSING") shall take place at the offices of the Company at 520 Lake Cook
Road, Deerfield, Illinois 60015 on January 1, 1996 or on such other date as the
parties may mutually agree; provided, however, that each Purchaser may defer
payment of the cash portion of the Purchase Price until not later than January
20, 1996 so long as such Purchaser has executed and delivered all other
instruments and documents and complied with all other conditions and covenants
hereunder on or before the date of the Closing (the "CLOSING DATE"). If a
Purchaser elects to defer payment of the cash portion of the Purchase Price in
accordance with the foregoing, Seller shall have the right to hold such
Purchaser's Shares in escrow until such payment is made, and such Shares will be
deemed to have been transferred as of the Closing Date if payment is made on or
before January 20, 1996.
<PAGE>

(b) At the Closing, each party and the Company shall execute and
deliver to the indicated persons the documents set forth opposite their names on
Schedule II hereto and such other documents or instruments as any other party or
the Company may reasonably request.

4. Representations and Warranties of Seller. Seller hereby makes the
following representations and warranties to each Purchaser as of the date hereof
and as of the Closing Date:

(a) Seller is the record and beneficial owner of the shares of Common
Stock being transferred to Purchasers (collectively, the "SHARES");

(b) Seller has good and marketable title to the Shares, free and clear
of any and all liens, claims, options, security interests and encumbrances of
any kind or nature whatsoever;

(c) Seller has full legal right and power to transfer and deliver the
Shares to Purchasers in the manner provided in this Agreement, and, upon
delivery of such Shares pursuant to the terms of this Agreement, Purchasers will
receive good and marketable title thereto, free and clear of any and all liens,
claims, options, security interests and encumbrances of any kind or nature
whatsoever;

(d) This Agreement constitutes, and all other agreements and documents
required to be executed and delivered by Seller hereunder will, when executed
and delivered, constitute, the duly authorized, validly and legally binding
obligations of Seller, enforceable against Seller in accordance with their
terms;

(e) The execution and delivery of this Agreement and all other
agreements and documents required to be executed and delivered hereunder by
Seller, and the consummation of the transactions contemplated hereby and
thereby, do not and will not, when executed and delivered or consummated, result
in a breach of or constitute a default under any agreement or instrument to
which Seller or the Company is a party or by which Seller or the Company may be
bound, nor does such action violate any statute, law, rule or regulation or any
order, writ, injunction or decree of any court or governmental authority;

(f) The Company has no liabilities in respect of any federal, state,
local or other taxes for the year ending December 31, 1994 and years ending
prior thereto, and adequate reserves have been made for liabilities accruing in
respect of such taxes for the period January 1, 1995 through August 31, 1995 (it
being understood that Seller makes no representation or warranty for taxes
resulting from the transactions contemplated hereby or from the operations of
the business subsequent to August 31, 1995); and

(g) No broker, finder, investment banker or other individual or entity
is entitled to any brokerage, finder's or other fee or commission in connection
with the transactions contemplated by this Agreement based on arrangements made
by or on behalf of Seller or the Company.

-2-
<PAGE>

5. Representations and Warranties of Purchaser. Each Purchaser, solely
as to himself, hereby makes the following representations and warranties to
Seller as of the date hereof and as of the Closing Date:

(a) Purchaser has all requisite power and authority to execute,
deliver and perform this Agreement and all other agreements requiring his
execution and delivery hereunder;

(b) This Agreement constitutes, and all other agreements and
documents required to be executed and delivered by Purchaser hereunder will,
when executed and delivered, constitute, the duly authorized, valid and legally
binding obligations of Purchaser and will be enforceable against Purchaser in
accordance with their terms;

(c) The execution and delivery of this Agreement and all other
agreements and documents required to be executed and delivered hereunder by
Purchaser, and the consummation of the transactions contemplated hereby and
thereby, do not and will not, when executed and delivered or consummated,
conflict with, result in a breach of or constitute a default under any agreement
or instrument to which Purchaser is a party or by which Purchaser may be bound,
nor does such action violate any statute, law, rule or regulation or any order,
writ, injunction or decree of any court or governmental authority;

(d) Purchaser is and has been a shareholder and an employee active in
the business of the Company and in the negotiation of this Agreement and the
other agreements referred to herein. Purchaser is a sophisticated investor
knowledgeable of all the risks attendant to an investment in the Company and the
operation of its business.

(e) Purchaser and his representatives have received all information
that they have deemed material to make an informed decision with respect to the
execution of this Agreement, have been given access to all information with
respect to the Company which they have sought and have had all questions fully
answered which they have deemed material to enter into this Agreement;

(f) Purchaser is acquiring his portion of the Shares for investment
solely for Purchaser's own account and not with a view to, or for resale in
connection with, the distribution or other disposition thereof. Purchaser
agrees and acknowledges that all dispositions of shares of Common Stock now or
hereafter owned by Seller will comply with the provisions of this Agreement, the
provisions of that certain Shareholders' Agreement substantially in the form of
Exhibit A hereto (the "SHAREHOLDERS' AGREEMENT") and applicable provisions of
federal and applicable state securities laws.

(g) Purchaser acknowledges that each certificate representing the
Shares shall bear a legend substantially to the following effect:

-3-
<PAGE>

OR OTHER DISPOSITION OF THE SHARES EVIDENCED BY THIS CERTIFICATE IS
RESTRICTED BY THE TERMS OF THAT CERTAIN SHAREHOLDERS' AGREEMENT DATED AS OF
JANUARY 1, 1996 AMONG THE COMPANY AND EACH OF THE SHAREHOLDERS SPECIFIED
THEREIN, WHICH SHAREHOLDERS' AGREEMENT MAY BE EXAMINED AT THE PRINCIPAL
OFFICES OF THE COMPANY. THE SHARES OF COMMON STOCK REPRESENTED BY THIS
CERTIFICATE MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF EXCEPT IN
ACCORDANCE WITH (I) SAID SECURITIES LAWS OR AN APPLICABLE EXEMPTION
THEREFROM AND (II) WITH SAID SHAREHOLDERS' AGREEMENT.

(h) Purchaser acknowledges that:

(i) neither the offer nor sale of the Shares has been registered
under the Securities Act of 1933, as amended (the "SECURITIES ACT"), or any
state securities laws, and Purchaser must continue to bear the economic
risk of the investment in such Common Stock unless the offer and sale of
such Common Stock is subsequently registered under the Securities Act and
all applicable state securities laws or an exemption from such registration
is available;

(ii) Purchaser has no present intent to sell, distribute or
otherwise transfer the Common Stock being acquired by him;

(iii) there is no established market for the Common Stock and it
is not anticipated that there will be any public market for the Common
Stock in the foreseeable future;

(iv) a notation shall be made in the stock transfer records of
the Company indicating that the Common Stock held by Purchaser is subject
to restrictions on transfer and appropriate stop-transfer instructions will
be issued with respect to the Common Stock;

(v) Purchaser has carefully reviewed, is familiar with and
understands the terms and provisions of the Shareholders' Agreement;

(vi) Purchaser (A) has adequate means of providing for his
current financial needs and possible personal contingencies and has no need
for liquidity in Purchaser's investment in the Common Stock, (B) can bear
the economic risk of losing his entire investment in the Common Stock, (C)
has such knowledge and experience in financial matters that Purchaser is
capable of evaluating the relative risks and merits of an investment in the
Common Stock and (D) has determined that the purchase of the Common Stock
is consistent with Purchaser's financial objectives;

(vii) Purchaser is, or will become upon consummation of the
transactions contemplated hereby, an officer, director or key employee of
the Company.

-4-
<PAGE>

(i) No broker, finder, investment banker or other individual or
entity, is entitled to any brokerage, finder's or other fee or commission in
connection with the transactions contemplated by this Agreement based on
arrangements made by or on behalf of Purchaser.

6. Conditions.

(a) The obligation of Seller to consummate the transactions
contemplated by this Agreement shall be subject to the satisfaction or waiver on
or prior to the Closing Date of the following conditions:

(i) each Purchaser shall have performed and complied in all
material respects with the obligations and agreements required to be
performed and complied with by them hereunder on or prior to the Closing
Date;

(ii) the representations and warranties of each Purchaser
contained in this Agreement shall be true and correct in all material
respects as of the Closing Date as if made as of such date;

(iii) no action, suit, claim or proceeding before any court,
governmental agency, commission, or administrative or regulatory authority
shall have been commenced and be pending which seeks to restrain, prevent,
or materially restructure the transactions contemplated hereby or which
otherwise questions the validity or legality of any such transactions; and

(iv) Robert P. Maher shall have purchased all of the shares of
Common Stock owned by J. Russell Hoke II ("HOKE").

(b) The obligation of each Purchaser to consummate the transactions
contemplated by this Agreement shall be subject to the satisfaction or waiver on
or prior to the Closing Date of the following conditions:

(i) Seller shall have performed and complied in all material
respects with all obligations and agreements required to be performed and
complied with by him hereunder on or prior to the Closing Date;

(ii) the representations and warranties of Seller contained in
this Agreement shall be true and correct in all material respects as of the
Closing Date as if made as of such date;

-5-
<PAGE>

(iv) Robert P. Maher shall have purchased all of the shares of
Common Stock owned by Hoke.

7. Indemnification.

(a) Seller shall indemnify and hold harmless each Purchaser, at all
times after the date hereof, against and in respect of: (i) all damages,
deficiencies, claims, losses and expenses resulting from or arising out of any
breach of any of the representations, warranties, covenants and agreements made
by Seller in this Agreement or the other agreements and documents referred to
herein and (ii) all actions, suits, proceedings, demands, assessments,
judgments, costs and expenses (including, without limitation, reasonable
attorneys' fees) incident to any of the foregoing.

(b) Each Purchaser shall indemnify and hold harmless Seller, at all
times after the date hereof, against and in respect of: (i) all damages,
deficiencies, claims, losses and expenses resulting from or arising out of any
breach of any of the representations, warranties, covenants and agreements made
by such Purchaser in this Agreement or the other agreements and documents
referred to herein and (ii) all actions, suits, proceedings, demands,
assessments, judgments, costs and expenses (including, without limitation,
reasonable attorney's fees) incident to any of the foregoing.

(c) Notwithstanding anything herein to the contrary, (i) Seller shall
not be required to indemnify Purchasers until the aggregate amount of all claims
hereunder for indemnification against Seller exceed $50,000 (net of amounts owed
to Seller by Purchasers) and (ii) no Purchaser shall be required to indemnify
Seller until the aggregate amount of all claims for indemnification against such
Purchaser exceed $8,500 (net of amounts owed to such Purchaser by Seller). In
addition, notwithstanding anything herein to the contrary, (i) the maximum
amount Seller shall be liable for hereunder shall be an amount equal to the
Purchase Price for the Shares and (ii) the maximum amount any Purchaser shall be
liable for hereunder is an amount equal to the Purchase Price for his portion of
the Shares, determined in each case without offsetting amounts owed to the
indemnifying party.

(d) (i) If a claim by a third party (including any governmental
authority) which is subject to indemnification hereunder is made against a party
(the "INDEMNIFIED PARTY"), and the Indemnified Party intends to seek indemnity
with respect thereto under this Section, the Indemnified Party shall promptly
notify the indemnifying party (the "INDEMNIFYING PARTY") and each other party
hereto in writing of such claim, setting forth such claim in reasonable detail;
provided, however, that the failure to give such notification shall not relieve
the Indemnifying Party from his obligations hereunder except to the extent that
he was prejudiced thereby.

(ii) The Indemnifying Party may undertake, conduct and control,
through counsel of his own choosing and at his own expense, the settlement or
defense thereof, and the Indemnified Party shall cooperate with the Indemnifying
Party in connection therewith; provided, however, that the Indemnified Party
may, at his own expense, participate in the settlement or defense of such claim
through counsel of his own choosing.

-6-
<PAGE>

(iii) If the Indemnifying Party elects not to undertake, conduct or
control such proceeding, the Indemnifying Party will advance the Indemnified
Party's reasonable attorneys' fees and costs in connection with the Indemnified
Party's defense thereof. So long as the Indemnifying Party acknowledges his
obligation to indemnify the Indemnified Party with respect to such claim and is
reasonably contesting any such claim in good faith, the Indemnified Party shall
not pay or settle any such claim. Notwithstanding the foregoing sentence, the
Indemnified Party shall have the right to pay or settle any such claim, provided
that in such event he shall waive any right to indemnity therefor by the
Indemnifying Party.

(iv) In the event it is finally determined that the Indemnified Party
is not entitled to indemnification hereunder for his conduct, the Indemnified
Party shall promptly reimburse the Indemnifying Party for all costs (including
attorneys' fees) incurred or advanced by him in connection with the defense of
such claim.

(e) All representations, warranties, agreements and indemnities made
by Seller and Purchaser in this Agreement, other than those contained in
Sections 4(a) through 4(c) and 4(f), shall survive the consummation of the
transactions contemplated hereby for a period of one year. The representations,
warranties, agreements and indemnities made by Seller and Purchaser in Sections
4(a) through 4(c) shall survive the consummation of the transactions
contemplated hereby. The representations and warranties contained in Section
4(f) shall survive the consummation of the transactions contemplated hereby for
the time period during which a claim can be made. Except as set forth above,
Seller shall have no other indemnification obligations resulting from the
transactions contemplated hereby.

8. Further Assurances. At any time and from time to time hereafter, each
party shall, without further consideration, execute and deliver to the other
parties such instruments of transfer and shall take such other action as the
other may reasonably request in order to carry out the transfer of the Shares
contemplated by, and the other provisions of, this Agreement.

9. Notices. Any and all notices or other communications provided for
herein shall be in writing or by phone mail message, return receipt requested,
and shall be considered duly given upon the earliest to occur of (i) personal
delivery (including delivery by messenger or overnight courier), (ii) three days
after being mailed by certified or registered mail, return receipt requested,
postage prepaid or (iii) upon delivery by phone mail message, return receipt
requested, followed in reasonable due course by a writing by facsimile or other
method prescribed herein. All written notices shall be addressed to the parties
hereto at their addresses set forth below their respective names on the
signature page hereto, or such other address as any party hereto designates by
written notice to all other parties.

10. Captions and Headings. The captions and headings herein are inserted
only as a matter of convenience and for reference, and in no way define, limit
or describe the scope of this Agreement or the intent of any provision thereof.

11. Governing Law; Exclusive Jurisdiction. This Agreement shall be
construed and enforced in accordance with and interpreted by the internal laws
of the State of Illinois. The parties

-7-
<PAGE>

hereby consent to service of process and to the exclusive jurisdiction of any
appropriate court located in Cook County, Illinois in any action to enforce the
provisions of this Agreement.

12. Waiver. No restriction, condition, obligation or provision contained
in this Agreement shall be deemed to have been abrogated or waived by reason of
any failure to enforce the same, irrespective of the number of violations or
breaches thereof which may occur.

13. Severability. It is the intent and desire of the parties that the
provisions of this Agreement be enforced to the fullest extent permissible under
the laws and public policies as applied in each jurisdiction in which
enforcement of the provisions of this Agreement are sought. If any particular
provision of by this Agreement shall be adjudicated by a court of competent
jurisdiction to be invalid or unenforceable, such provision shall be amended,
without any action on the part of either party hereto, to delete therefrom the
portion so adjudicated to be invalid or unenforceable, such deletion to apply
only with respect to the operation of such provision in the particular
jurisdiction in which such adjudication is made. If any provision of this
Agreement is adjudicated by a court of competent jurisdiction to be invalid or
unenforceable in its entirety, this Agreement shall be amended to delete such
provision therefrom and the remainder of this Agreement shall remain in full
force and effect.

14. Nonassignability. This Agreement shall be binding upon and shall
inure to the benefit of the parties and their respective successors, assigns and
legal representatives. Except as otherwise expressly provided herein, this
Agreement may not be assigned by any party without the written consent all of
the other parties.

15. Counterparts. This Agreement may be executed in counterparts, each of
which shall be considered an original, but all of which shall constitute a
single agreement.

16. Entire Agreement; Amendment. This Agreement, the Schedules and
Exhibits hereto and the other agreements and documents referred to herein
contain the entire agreement between the parties with respect to the
transactions contemplated herein and therein, and supersede all prior agreements
and understandings between the parties relating to the subject matter hereof and
thereof. This Agreement may be altered or amended only by an instrument in
writing signed by each of the parties.

-8-
<PAGE>

IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the
date first above written.

SELLER:
------

--------------------------------
Richard J. Metzler

PURCHASERS:
----------

--------------------------------
David J. Donovan

Address:

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

--------------------------------
Robert P. Maher

Address:

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

--------------------------------
James T. Ruprecht

Address:

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

-9-
<PAGE>

--------------------------------
James R. Blomberg

Address:

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

--------------------------------
Stephen R. Goldfield

Address:

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

--------------------------------
Gerald R. Lanz

Address:

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

Schedules and Exhibits
- ----------------------

Schedule I -- Shares Purchased; Form of Consideration
Schedule II -- Closing Deliveries
Exhibit A -- Form of Shareholders' Agreement
Exhibit B -- Form of Long-Term Note
Exhibit C -- Form of Modified Long-Term Note
Exhibit D -- Form of Pledge Agreement
Exhibit E -- Form of Employment Agreement
Exhibit F -- Form of Stock Option Agreement

-10-
<PAGE>

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

SHARES PURCHASED; FORM OF CONSIDERATION
---------------------------------------

================================================================================
Purchaser Shares Purchased Form of Consideration
--------- ---------------- ---------------------
================================================================================
<S> <C> <C>

David J. Donovan 120 By delivery of a certified or bank
cashier's check in the amount of
$554,040.
- --------------------------------------------------------------------------------
Robert P. Maher 90 By delivery of a certified or bank
cashier's check in the amount of
$415,530.
- --------------------------------------------------------------------------------
James T. Ruprecht 120 By delivery of a certified or bank
cashier's check in the amount of
$554,040.
- --------------------------------------------------------------------------------
Stephen R. Goldfield 140 $196,380 by delivery of a
certified or bank cashier's check,
and the remainder ($450,000) by
delivery of a Secured Promissory
Note substantially in the form of
Exhibit B hereto (the "LONG-TERM
NOTE").
- --------------------------------------------------------------------------------
Gerald R. Lanz 140 $196,380 by delivery of a
certified or bank cashier's check,
and the remainder ($450,000) by
delivery of a Long-Term Note.
- --------------------------------------------------------------------------------
James R. Blomberg 90 $65,530 by delivery of a certified
or bank cashier's check, and the
remainder ($350,000) by delivery
of a Secured Promissory Note
substantially in the form of
Exhibit C hereto (the "MODIFIED
LONG TERM NOTE").
- --------------------------------------------------------------------------------
TOTAL 700 $3,231,900 ($1,981,900 by delivery
of a certified or bank cashier's
check, and $1,250,000 by delivery
of notes).
================================================================================
</TABLE>
<PAGE>

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

CLOSING DELIVERIES
------------------
<TABLE>
<CAPTION>
==========================================================================================
Person Document/Instrument Recipient
==========================================================================================
<S> <C> <C>
Seller Certificate representing the Shares, The Company, for transfer and
together with assignment separate from delivery to the Purchasers.
certificate.
- ------------------------------------------------------------------------------------------
Pledge Agreements in the form of Each of Goldfield, Lanz and
Exhibit D hereto (each, a "PLEDGE Blomberg, respectively.
AGREEMENT").
- ------------------------------------------------------------------------------------------
Employment Agreement in the form of The Company.
Exhibit E hereto (the "EMPLOYMENT
AGREEMENT"), including the
Promissory Note attached as Exhibit A
thereto.
- ------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------
Donovan Certified or bank cashier's check in Seller.
the amount of $554,040.
- ------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------
Maher Certified or bank cashier's check in Seller.
the amount of $415,530.
- ------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------
Ruprecht Certified or bank cashier's check in Seller.
the amount of $554,040.
- ------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------
Goldfield Certified or cashier's check in the Seller.
amount of $196,380.
- ------------------------------------------------------------------------------------------
Long-Term Note. Seller.
- ------------------------------------------------------------------------------------------
Pledge Agreement. Seller.
- ------------------------------------------------------------------------------------------
Pledged Securities with assignment Seller.
separate from certificate.
- ------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------
Lanz Certified or bank cashier's check in Seller.
the amount of $196,380.
- ------------------------------------------------------------------------------------------
Long-Term Note. Seller.
- ------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
==========================================================================================
Person Document/Instrument Recipient
==========================================================================================
<S> <C> <C>
Pledge Agreement. Seller.
- ------------------------------------------------------------------------------------------
Pledged Securities with assignment Seller.
separate from certificate.
- ------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------
Blomberg Certified or cashier's check in the Seller.
amount of $65,530.
- ------------------------------------------------------------------------------------------
Modified Long-Term Note. Seller.
- ------------------------------------------------------------------------------------------
Pledge Agreement. Seller.
- ------------------------------------------------------------------------------------------
Pledged Securities and assignment Seller.
separate from certificate.
- ------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------
Company Shareholders' Agreement. Seller and Purchasers.
- ------------------------------------------------------------------------------------------
Employment Agreement. Seller.
- ------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------
Seller and Shareholders' Agreement. All other parties and the Company.
Purchasers
- ------------------------------------------------------------------------------------------
Stock Option Agreements (pursuant to All other parties.
which Goldfield, Lanz and Blomberg
grant to the other shareholders the
option to acquire their shares upon
default), in the form of Exhibit F
hereto.
==========================================================================================
</TABLE>

II-2

<PAGE>

EXHIBIT 10.10
-------------

SHAREHOLDERS' AGREEMENT
OF
METZLER & ASSOCIATES, INC.
--------------------------

THIS SHAREHOLDERS' AGREEMENT (this "SHAREHOLDERS' AGREEMENT"), is made and
entered into as of the 1st day of January, 1996, by and among JAMES R. BLOMBERG,
DAVID J. DONOVAN, STEPHEN R. GOLDFIELD, GERALD R. LANZ, ROBERT P. MAHER, RICHARD
J. METZLER, JAMES T. RUPRECHT, and METZLER & ASSOCIATES, INC., an Illinois
corporation (the "COMPANY").

W I T N E S S E T H:
- - - - - - - - - -

WHEREAS, as of the date hereof, all of the outstanding shares (the
"Shares") of common stock, no par value ("COMMON STOCK", of the Company are held
as follows:
<TABLE>
<CAPTION>

Number Percentage of
Shareholder of Shares
Shares
- --------------------- --------- --------------
<S> <C> <C>
Richard J. Metzler 150 15%
Robert P. Maher 150 15%
David J. Donovan 150 15%
James T. Ruprecht 150 15%
Stephen R. Goldfield 150 15%
Gerald R. Lanz 150 15%
James R. Blomberg 100 10%
-------- --------------
TOTAL 1,000 100%
</TABLE>
and;

WHEREAS, in order to assure the harmonious management of the affairs of the
Company, the Shareholders desire to enter into this Shareholders' Agreement upon
the terms and conditions hereinafter set forth.

NOW, THEREFORE, in consideration of the premises and the mutual covenants
and agreements of the parties hereinafter contained, each of the parties hereto
hereby agree as follows:
<PAGE>

SECTION 1

Definitions; Etc.
-----------------

1.1 Definitions. Except as otherwise herein expressly provided, the
following terms and phrases shall have the meanings set forth below:

"SHAREHOLDERS' AGREEMENT" shall mean this Shareholders' Agreement, as
originally executed and as amended, modified, supplemented or restated from time
to time, as the context requires.

"BLOMBERG" shall mean James R. Blomberg and any Estate Trust to whom
he transfers Shares.

"BOARD" shall mean the Board of Directors of the Company as
constituted from time to time.

"BONA FIDE PURCHASER" shall mean any Person, other than an affiliate
of the person to whom the offer is made, who or which has (i) delivered a good
faith written offer to purchase all of such Shareholder's Shares; provided,
however, that, such Person has the requisite financial resources necessary, in
the opinion of the Majority Shareholders, to purchase and acquire such
Shareholder's Shares and (ii) agreed in writing to be bound by all of the terms
and provisions of this Shareholders' Agreement.

"CAUSE" shall mean the commission by a Shareholder of an act of fraud
or embezzlement against the Company.

"CHANGE OF CONTROL" shall mean the first to occur of (i) the Transfer
by Shareholders of more than 50% of the then outstanding Common Stock of the
Company in one or more related transactions, (ii) the subsequent issuance of
Common Stock by the Company in one or more related transactions representing
more than 50% of the then-outstanding Common Stock of the Company, other than
pursuant to a stock split, stock dividend or other similar transaction, (iii)
the sale, sale-leaseback or other transfer of all or substantially all of the
assets or property of the Company to an independent third party, (iv) the merger
or consolidation of the Company into another entity in a transaction in which
the Company is not the surviving entity, (v) the dissolution or liquidation of
the Company or (vi) the public offering of Common Stock of the Company.

"CODE" shall mean the Internal Revenue Code of 1986, as amended.

"COMPETITOR" shall mean any Person who, directly or indirectly,
competes with the Company in the electric and gas utility consulting industry.

"DIRECTOR" shall mean an individual appointed as a member of the
Board.

-2-
<PAGE>

"DONOVAN" shall mean David J. Donovan and any Estate Trust to whom he
transfers Shares.

"ESTATE TRUST" shall mean a trust established by a Shareholder for
estate planning purposes, the sole trustee of which is such Shareholder and
which is permitted to be a shareholder of an "S Corporation" (as defined in
Section 1361(b) of the Code).

"GOLDFIELD" shall mean Stephen R. Goldfield and any Estate Trust to
whom he transfers Shares.

"LANZ" shall mean Gerald R. Lanz and any Estate Trust to whom he
transfers Shares.

"LIEN" shall mean any lien, claim, encumbrance or other restriction of
any kind or nature whatsoever.

"MAHER" shall mean Robert P. Maher and any Estate Trust to whom he
transfers Shares.

"MAJORITY SHAREHOLDERS" shall mean Shareholders owning in excess of
50% of the outstanding Common Stock.

"METZLER" shall mean Richard J. Metzler and any Estate Trust to whom
he transfers Shares.

"NET INCOME" shall mean the net income of the Company, as determined
for tax purposes in accordance with the Company's accounting practices after
payment of all bonuses, including, without limitation, those under the Metzler
Employment Agreement.

"NET INSURANCE PROCEEDS" shall mean the aggregate death benefits paid
to the Company in respect of each Shareholder under the policy or policies
described in Section 5.5, net of (i) $750,000 "key man" insurance to be retained
by the Company and (ii) applicable taxes payable by the Shareholders based on
such aggregate proceeds.

"OPTION AGREEMENTS" shall mean those certain Stock Option Agreements
dated as of the date hereof among each Shareholder who delivered a Secured
Promissory Note and the Other Shareholders.

"OTHER AGREEMENTS" shall mean (i) the Stock Purchase Agreement dated
as of the date hereof (the "METZLER STOCK PURCHASE AGREEMENT") among Metzler and
Blomberg, Donovan, Goldfield, Lanz, Maher and Ruprecht, (ii) the Employment
Agreement dated as of the date hereof (the "METZLER EMPLOYMENT AGREEMENT")
between Metzler and the Company, (iii) the Option Agreements, (iv) the Pledge
Agreements, (v) the Secured Promissory Notes and (vi) the other agreements,
instruments and documents entered into in connection with the foregoing.

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<PAGE>

"OTHER SHAREHOLDERS" shall mean the Shareholders other than the
Shareholder or Shareholders selling his or their Shares or taking the other
action described in the relevant Section.

"PERMITTED LIEN" shall mean any Lien in favor of Metzler arising in
connection with the acquisition of such Shares.

"PERSON" shall mean any individual, partnership, corporation, trust,
firm, limited liability company or other entity.

"PLEDGE AGREEMENTS" shall mean those certain Pledge Agreements dated
as of the date hereof among Metzler and each Shareholder who delivered a Secured
Promissory Note.

"PRO RATA SHARE" shall mean, with respect to a Shareholder, the number
of Shares that is equal to the product of (i) the number of Shares available for
acquisition by all Other Shareholders and (ii) the ratio of (A) the number of
Shares held of record by the Shareholder to (B) the aggregate number of Shares
then held of record by all Other Shareholders. Certain provisions regarding
calculation of the Pro Rata Share when a Shareholder is in breach of a material
provision hereof are set forth in Section 8.5(c).

"PURCHASE PRICE" shall mean the purchase price payable by the Other
Shareholders pursuant to Section 5.

"RUPRECHT" shall mean James T. Ruprecht and any Estate Trust to whom
he transfers Shares.

"SECURED PROMISSORY NOTES" shall mean those certain Secured Promissory
Notes delivered by each of Blomberg, Goldfield and Lanz contemporaneously
herewith in connection with the acquisition by such Shareholders of a portion of
their Shares.

"SHAREHOLDER" or "SHAREHOLDERS" shall mean Blomberg, Donovan,
Goldfield, Lanz, Maher, Metzler, Ruprecht and their respective permitted
successors and permitted assigns who become Shareholders pursuant to this
Shareholders' Agreement and, any Person who is a Shareholder of the Company at
the time of reference thereto.

"SUPER-MAJORITY SHAREHOLDERS" shall mean Shareholders owning at least
80% of the outstanding Common Stock.

"TRANSFER" (and any derivatives thereof) shall mean (i) a
Shareholder's voluntary or involuntary sale, assignment, transfer, conveyance,
pledge, hypothecation or other disposition of such Shareholder's Shares and (ii)
any Shareholder's agreement, contract or commitment to do any of the foregoing;
provided, however, that such term shall exclude dispositions as a result of a
Shareholder's death.

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<PAGE>

"TRANSFER NOTICE" shall mean, with respect to a proposed Transfer to a
Bona Fide Purchaser, a written notice stating (i) the relevant Shareholder or
Shareholders' intention to Transfer his or their Shares, (ii) the name, business
and residence address of the Bona Fide Purchaser, (iii) the nature of the
proposed Transfer including the number of Shares to be Transferred and all other
terms of the proposed Transfer, (iv) if the Transfer is for a valuable
consideration, the amount and form of the consideration, and (v) the proposed
time and place of the closing of the proposed Transfer, which shall in no event
be earlier than 60 days or later than 120 days from the date of the Transfer
Notice.

"TWO-THIRDS SHAREHOLDERS" shall mean Shareholders owning at least two-
thirds of the outstanding Common Stock.

1.2 Other Defined Terms. Each of the following terms is defined in
the Section of this Shareholders' Agreement directly opposite such term:

Term Section
---- -------
<S> <C>

Articles of Incorporation 2.1
Bonus Factor 3.2
Bonus Pool 3.2
By-Laws 2.1
Common Stock preamble
Conflict of Interest 7.3
Covenant Not To Compete 7.1
Information 7.2
Metzler Option 6.1
Offered Shares 4.2
Participating Shareholder 4.2(c), 4.4(c)
Permanent Disability 5.6
Remaining Shares 4.2(c)
Selling Shareholder 4.2, 5.1
Shares preamble
Subsequent Notice 4.2(c)
</TABLE>

1.3 "Exhibit, Etc." References to an "Exhibit" or to a "Schedule" are,
unless otherwise specified, to one of the Exhibits or Schedules attached to this
Shareholders' Agreement, and references to a "Section" are, unless otherwise
specified, to one of the Sections of this Shareholders' Agreement.

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<PAGE>

SECTION 2

Governance and Other Corporate Matters
--------------------------------------

2.1 Articles of Incorporation; By-Laws. The Company's Articles of
Incorporation (the "ARTICLES OF INCORPORATION") and By-Laws (the "BY-LAWS"),
each as in effect on the date hereof, are attached hereto as Exhibit A. From and
after the date hereof each Shareholder shall (i) vote the Shares held by him or
it at any meeting of the Shareholders, or in any written consent executed in
lieu of such a meeting of Shareholders, and shall take all actions necessary to
insure that the Articles of Incorporation and By-Laws do not, at any time,
conflict with the provisions of this Shareholders' Agreement and (ii) take all
necessary and required action to cause the Company to amend, or amend and
restate, the Articles of Incorporation and the By-Laws as necessary to
effectuate the purposes of this Shareholders' Agreement.

2.2 Directors.

(a) Election; Nominees. The Shareholders shall vote their Shares at
any regular or special meeting of the Shareholders of the Company called for the
purpose of filling positions on the Board, or in any written consent executed in
lieu of such a meeting of Shareholders, shall take all actions necessary and
shall cause the Directors nominated by them pursuant to this Shareholders'
Agreement to take all actions necessary (including the nomination for election
as Directors of the individuals specified below) to ensure the election to the
Board of the following individuals:

(i) so long as they are respectively shareholders of the Company
and employed by the Company, each of Blomberg, Donovan, Goldfield, Lanz,
Maher, Metzler and Ruprecht;

(ii) each Shareholder who subsequent to the date hereof acquires
at least 3% of the then-outstanding Common Stock, so long as such
Shareholder is an employee of the Company and remains a shareholder of the
Company; and

(iii) such additional individuals nominated by the Super-Majority
Shareholders, whether or not such individuals are shareholders or employees
of the Company.

2.3 Approval of Certain Activities.
------------------------------

(a) Matters Requiring Approval of the Super-Majority Shareholders. The
Company will not take any of the following actions without the approval of the
Super-Majority Shareholders, and each Shareholder will execute and deliver any
document or instrument deemed necessary or desirable by the Super-Majority
Shareholders to permit the Company to take any of the following actions,
provided that a dissenting Shareholder may require a record to be made that such
execution and delivery is being done solely to comply with the terms of this
Agreement:

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<PAGE>

(i) any action for the (A) commencement of a voluntary case
under any applicable bankruptcy, insolvency or similar law now or hereafter
in effect, (B) consent to the entry of any order for relief in an
involuntary case under any such law, (C) consent to the appointment or
taking possession by a receiver, liquidator, assignee, custodian, trustee
or sequestrator (or similar official) of the Company or of any substantial
part of the property thereof, (D) making by the Company of a general
assignment for the benefit of creditors, or (E) making of any other
arrangement or composition with creditors generally to modify the terms of
payment of, or otherwise restructure their obligations;

(ii) any increase, reduction, change in or reclassification of
the authorized or issued capital stock and any issuance of equity
securities, including any issuance of warrants, options, or rights to
directly or indirectly acquire equity securities and any issuance of
securities directly or indirectly convertible into or exchangeable or
exercisable for equity securities;

(iii) any borrowing or making any guarantees of any borrowing
(secured or unsecured) in an aggregate principal amount exceeding
$1,000,000;

(iv) any altering of the Articles or By-laws of the Company;

(v) adopting any resolution to voluntarily liquidate or
dissolve;

(vi) terminating the employment of any Shareholder for any
reason;

(vii) creating any subsidiary;

(viii) the declaration and payment of any dividend, distribution
or other amount or bonus not specified herein (or in the Metzler
Employment Agreement) to the Shareholders; or

(ix) any material modification, change or amendment to any
agreement or arrangement which is the subject of the matters referred to in
subclauses (i) through (viii) above.

(b) Matters Requiring Approval of the Two-Thirds Shareholders. The
Company will not take any of the following actions without the approval of the
Two-Thirds Shareholders, and each Shareholder will execute and deliver any
document or instrument deemed necessary or desirable by the Two-Thirds
Shareholders to permit the Company to take any of the following actions,
provided that a dissenting Shareholder may require a record to be made that such
execution and delivery is being done solely to comply with the terms of this
Agreement:

(i) selling, transferring, leasing, exchanging, pledging or
otherwise disposing of all or substantially all of the Company's assets;

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<PAGE>

(ii) consolidating, merging or amalgamating with, or acquiring
any interest in, any other Person or its assets, other than acquiring
assets whose purchase price does not exceed $150,000 in cash or the fair
market value of other consideration to be paid therefor (it being
understood that the employment or engagement of a Person shall not
constitute an interest in such Person); or

(iii) any material modification, change or amendment to any
agreement or arrangement which is the subject of the matters referred to in
subclauses (i) or (ii) above.

(c) Matters Requiring Approval of the Majority Shareholders. The
Company will not make any capital expenditure in excess of $150,000 without the
approval of the Majority Shareholders, and each Shareholder will execute and
deliver any document or instrument deemed necessary or desirable by the Majority
Shareholders to permit the Company to take such action, provided that a
dissenting Shareholder may require a record to be made that such execution and
delivery is being done solely to comply with the terms of this Agreement.

2.4 Mandatory Dividends. To the extent permitted by law, the Company
shall declare and pay a dividend equal to 40% of the Company's Net Income for
each fiscal year on or before April 15 of the subsequent fiscal year.

2.5 Voting. In order to effectuate the provisions of this Section 2, each
Shareholder hereby agrees, subject to compliance with applicable law, that when
any action or vote is required to be taken by such Shareholder pursuant to
applicable law or this Shareholders' Agreement, such Shareholder shall proceed
with diligence to (i) (a) call, to take all other actions necessary to call and
to cause the Directors to take all actions necessary to call or to cause the
appropriate officers and Directors of the Company to call a meeting of
Shareholders or (b) execute or cause to be executed pursuant to the applicable
laws of the State of Illinois, or any successor statute, a consent in writing in
lieu of any such meeting to effectuate such shareholder action and (ii) vote the
Shares held by him in a manner consistent with the terms and provisions of this
Shareholders' Agreement, subject to his right to require a record to be made of
his dissent.

SECTION 3

Employment of Shareholders
--------------------------

3.1 Employment of Shareholders; Duties of Certain Officers.
------------------------------------------------------

(a) Chairman and Treasurer. Through December 31, 1998, Metzler shall
be employed by the Company as the Chairman and, at least so long as any Secured
Promissory Notes are outstanding, Treasurer pursuant to the terms of the Metzler
Employment Agreement, which employment agreement sets forth certain provisions
relating to restrictions on termination of Metzler's employment, bonuses and a
special change-in-control option, among other things. Thereafter, the

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<PAGE>

Chairman and Treasurer (which may be the same or different Shareholders) of the
Company, if any, shall be determined by the Majority Shareholders.

(b) President and Chief Executive Officer. Through December 31, 1997
but subject to the general right of the Company to terminate the employment of
any Shareholder under Section 3.1(d), Maher shall be employed as the President
and Chief Executive Officer of the Company. Thereafter, the President and the
Chief Executive Officer of the Company (which may be the same or different
Shareholders) shall be determined by the Majority Shareholders. The rights and
duties of the President and the Chief Executive Officer are set forth in the By-
laws.

(c) Other Officers. All other offices of the Company shall be filled
as determined by the Majority Shareholders. Such officers shall have the duties
set forth in the By-Laws or otherwise determined by the Majority Shareholders.

(d) Acknowledgement of "At-Will" Employment. Each Shareholder
acknowledges that (i) his employment by the Company, if any, is on an "at-will"
basis, (ii) nothing contained in this Shareholders' Agreement shall constitute
an employment agreement between the Company and such Shareholder and (iii) his
employment may be terminated by the Company for any reason with the approval of
the Super-Majority Shareholders; provided, however, that certain restrictions on
the Company's ability to terminate the employment of Metzler prior to January 1,
1999 are set forth in the Metzler Employment Agreement.

(e) Base Compensation; Bonus. Each Shareholder shall receive an
annual salary of $175,000 per year, payable in accordance with the Company's
payroll polices from time to time in effect; provided, however, that Metzler's
salary through December 31, 1998 shall be as set forth in the Metzler Employment
Agreement. In addition, the President shall receive an additional $12,000 per
year for administrative duties, also payable in accordance with the Company's
payroll polices from time to time in effect.

3.2 Bonus Pool. For each fiscal year, the Company shall establish a bonus
pool (the "BONUS POOL"), pursuant to which it shall allocate 15% of the first
$3,000,000 of its Net Income (computed before the contribution to the Bonus
Pool) for such fiscal year, which shall be allocated and distributed to the
directors who are Shareholders in accordance with the terms of this Section.
Each director who is a Shareholder shall vote on whether each other such
director shall receive a bonus from the Bonus Pool for the fiscal year. For
each vote a director receives, such director shall receive an amount equal to
the product of (i) the aggregate amount in the Bonus Pool and (ii) the Bonus
Factor. The term "BONUS FACTOR" means the fraction, the numerator of which is
one and the denominator of which is the product of (i) the number of directors
who are Shareholders and (ii) the number of directors who are Shareholders minus
one. By way of illustration, if there is $420,000 in the Bonus Pool and seven
directors who are Shareholders, and a director receives five votes to receive a
bonus and one vote not to receive a bonus, such director shall receive a bonus
of $50,000 ($420,000x5/42) from the Bonus Pool. Pursuant to the foregoing, a
director who is a Shareholder shall not be entitled to cast a vote to receive a
bonus with respect to himself. All amounts in the

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<PAGE>

Bonus Pool which are not paid to the directors who are Shareholders pursuant to
the foregoing methodology shall be re-allocated to Net Income and shall be
eligible to be distributed as a dividend in accordance with Section 2.3(a)(viii)
hereof. The payment of the foregoing bonus shall in no way affect the
calculation or payment of the Annual Bonus as defined and provided for in the
Metzler Employment Agreement.

3.3 Special Payment. In the event of the termination of employment of a
Shareholder in any fiscal year as the result of such Shareholder's death,
Permanent Disability or termination by the Company other than for Cause, such
Shareholder shall be entitled to receive a payment equal to any dividend or
other distribution and, subject to the voting requirements set forth in Section
3.2, bonus in respect of such fiscal year which such Shareholder would have
received had he been a shareholder and employee at the time such dividend and
bonus is declared and paid, pro rated for the number of days of such fiscal year
during which such Shareholder was in fact an employee and Shareholder of the
Company.

3.4 Amendment; Other Payments. Notwithstanding anything herein to the
contrary, the provisions of this Section 3 may not be modified, changed or
amended in any manner, and no other payments shall be made to the Shareholders
other than as a dividend or repayment of a loan or pursuant to the Metzler
Employment Agreement, prior to December 31, 1998, without the approval of all
Shareholders. Subsequent to December 31, 1998, the provisions of this Section 3
may be modified, change or amended, and other payments may be made to the
Shareholders, subject to applicable law, with the approval of the Majority
Shareholders.

3.5 Termination Upon Death. Notwithstanding anything herein to the
contrary, the death of a Shareholder shall be deemed to terminate such
Shareholder's employment, and no successor to such Shareholder or his legal
representative shall be entitled to employment or be deemed an employee of the
Company.

SECTION 4

Restrictions on Transfer
------------------------

4.1 Restrictions.
------------

(a) General Restrictions. Except as otherwise provided herein, no
Shareholder shall at any time Transfer, nor shall any such Shares be
Transferable, voluntarily or involuntarily, by operation of law or otherwise.
Any attempted Transfer not in accordance with the terms and condition of this
Shareholders' Agreement shall be null and void and of no force or effect.

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<PAGE>

(b) Certain Permitted Transfers.

(i) Transfers upon Death. A Shareholder (or his representative)
shall be permitted to Transfer his Shares upon death, subject to the right
of the Company and the Other Shareholders to repurchase such Shares
pursuant to the provisions of Section 5.

(ii) Transfers to Estate Trusts. A Shareholder shall be
permitted to Transfer his Shares to an Estate Trust so long as he retains
the sole right to vote such Shares at all times thereafter; provided,
however, that (i) such Shares shall remain subject to all of the terms and
conditions of this Shareholders' Agreement in the hands of such Estate
Trust and (ii) such Estate Trust shall first deliver to the Company and the
Other Shareholders an agreement to be bound by the terms hereof
substantially in the form of Exhibit C hereto. A Transfer pursuant to this
Section 4.1(b)(ii) shall not relieve the transferring Shareholder of his
obligations under this Shareholders' Agreement, and the Shares shall be
subject to all of the terms and conditions hereof as though they were still
owned by the Shareholder (including, without limitation, the provisions of
Section 5 which would permit or require the Company and/or the Other
Shareholders to purchase such Shares upon the death or Permanent Disability
of the transferring Shareholder).

(iii) Certain Transfers to Metzler. The Other Shareholders
shall be permitted to Transfer a portion of their Shares to Metzler
pursuant to the provisions of Section 6 without complying with the
provisions of Section 4.2.

(iv) Transfers under the Option Agreements. A Shareholder shall
be permitted to Transfer his Shares to the Other Shareholders pursuant to
the terms of the Stock Option Agreement without complying with the
provisions of Section 4.2.

(v) Transfers to Other Shareholders. A Shareholder may Transfer
his shares to one or more Other Shareholders so long as all Other
Shareholders have been offered the opportunity to participate in such
Transfer on the same terms to the extent of their Pro Rata Share. The
procedure for such offer shall be substantially similar to the procedure
for sales to Bona Fide Purchasers under Section 4.2.

(vi) Transfers by the Two-Thirds Shareholders. The Two-Thirds
Shareholders may Transfer all Shares owned by them to any Person without
complying with the provisions of Section 4.2.

(c) Indirect Transfers. No Shareholder may indirectly Transfer, or
procure the indirect Transfer, of such Shareholder's Shares or any right therein
(by way of Transfer of the equity, proxy or other rights or ownership interests
of such Shareholder or otherwise) to any Person without obtaining the prior
written consent of the Other Shareholders (which consent may be given or
withheld, with or without cause, in the sole and absolute discretion of such
Shareholders).

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<PAGE>

(d) No Transfers to Competitors. Notwithstanding the foregoing,
except pursuant to Section 4.1(b)(vi), 4.3 or 4.4, in no event shall any
Shareholder Transfer, or attempt to Transfer, such Shareholder's Shares to any
Competitor (or any successor thereto or any Person controlling, controlled by or
under common control with any such Competitor) of the Company.

(e) Transfers Terminating S Corporation Election. Notwithstanding the
foregoing, except in accordance with Section 4.1(b)(vi), 4.3 or 4.4, in no event
shall a Shareholder Transfer such Shareholder's Shares to a Person who is not
qualified to be a shareholder of an S Corporation.

4.2 Sales to Bona Fide Purchaser; Right of First Refusal. If a Shareholder
(the "SELLING SHAREHOLDER") desires to Transfer all or any portion of his Shares
(the "OFFERED SHARES") to any Bona Fide Purchaser, the Other Shareholders shall
have the right of first refusal to purchase their Pro Rata Share of the Shares
proposed to be Transferred on the same terms and conditions as proposed to be
transferred to the Bona Fide Purchaser.

(a) Transfer Notice. The Selling Shareholder shall deliver a Transfer
Notice to the Other Shareholders not less than sixty (60) days prior to the
proposed effective date of the proposed Transfer.

(b) Exercise of Right. Each Other Shareholder may exercise his right
of first refusal to purchase all, but not less than all, of his Pro Rata Share
of the Offered Shares within thirty (30) days from the date of delivery of the
Transfer Notice by delivering notice to such effect to the Selling Shareholder
and all Other Shareholders. Failure to deliver such notice within such time to
the Selling Shareholder by an Other Shareholder shall be deemed a waiver by such
Other Shareholder of his right of first refusal with respect to the Offered
Shares.

(c) Subsequent Notice and Exercise. If all Other Shareholders do not
subscribe for their respective Pro Rata Share, the Selling Shareholder shall
deliver a written notice (the "SUBSEQUENT NOTICE") to each subscribing Other
Shareholder (collectively, for purposes of this Section 4.2, the "PARTICIPATING
SHAREHOLDERS") indicating the number of unsubscribed Offered Shares (the
"REMAINING SHARES"), confirming the grant to each Participating Shareholder of
the right of first refusal to purchase his Pro Rata Share of the Remaining
Shares (determined by assuming each Participating Shareholder acquired the
number of Offered Shares previously subscribed for by him) and indicating the
number of Remaining Shares constituting such Pro Rata Share. Each Participating
Shareholder may accept the right of first refusal to purchase all, but not less
than all, of his Pro Rata Share of the Remaining Shares by delivering notice to
the Selling Shareholder and the Other Shareholders to such effect within five
(5) business days from the date of delivery of the Subsequent Notice. Failure to
deliver such notice within such time to the Selling Shareholder by a
Participating Shareholder shall be deemed a waiver of such Participating
Shareholder's right of first refusal for such Remaining Shares. If all
Participating Shareholders do not subscribe for their respective Pro Rata Share
of the Remaining Shares, the Selling Shareholder shall offer the unsubscribed
Remaining Shares to the Participating Shareholders who did subscribe for their
Pro Rata Share in accordance

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<PAGE>

with the procedure set forth in this Section until all such Remaining Shares are
subscribed for or no Participating Shareholder subscribes for any Remaining
Shares.

(d) Closing; Payment of Purchase Price. To the extent not
inconsistent with Section 4.2(e) hereof, the Purchase Price shall be payable in
the form and at the time and place as set forth in the Bona Fide Purchaser's
offer (except that no payment need be made until at least thirty (30) days
subsequent to the completion of the procedure described in Section 4.2(c), if
applicable) and the Offered Shares shall be transferred as provided in such
written offer.

(e) Closing of Exercise of Rights of Refusal. At the closing of the
purchase and sale of the Offered Shares to the Participating Shareholders, (A)
the Participating Shareholders shall each deliver to the Selling Shareholder any
and all consideration required pursuant to the terms of the Bona Fide
Purchaser's offer and (B) the Selling Shareholders shall deliver to the Company
for Transfer each Participating Shareholder a stock certificate or certificates
evidencing the Offered Shares being purchased by such Participating Shareholder,
together with an appropriate assignment separate from certificate duly executed
in a proper form to effect the Transfer of such Offered Shares on the books and
records of the Company.

(f) Other Transfer Provisions.

(i) Transfer of Common Stock to Bona Fide Purchaser. If all of
the Offered Shares have not been subscribed for, then the Selling
Shareholder shall have forty-five (45) days thereafter in which to effect
the Transfer of the unsubscribed Offered Shares to the Bona Fide Purchaser
on terms not more favorable than were set forth in the Transfer Notice;
provided that the Bona Fide Purchaser executes and delivers to the Company
and the Other Shareholders an agreement to be bound by the terms hereof
substantially in the form of Exhibit D hereto.

(ii) No Negotiation. While the procedure set forth in this
Section 4.2 is continuing, the Selling Shareholder shall not negotiate or
offer to sell his Shares on terms and conditions more favorable than those
previously offered to the Other Shareholders.

(iii) Failure to Consummate Transfer. If the Selling Shareholder
shall fail to Transfer the Offered Shares within the time period set forth
in Section 4.2(f)(i), then no Transfer of the Offered Shares may be made by
the Selling Shareholder without first re-offering such Shares to the Other
Shareholders in accordance with the provisions of this Section 4.2.

4.3 Rights to Compel Transfer. The rights granted under this Section 4.3
shall, if exercised, supersede the provisions of Sections 4.1(d), 4.1(e), 4.2
and 4.4 hereof.

(a) Grant. At any time after the date hereof the Two-Thirds
Shareholders may require the Other Shareholders to (i) Transfer all of the
Shares then owned by them to a Bona Fide

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<PAGE>

Purchaser (whether by sale, merger or otherwise) for the same consideration per
share and otherwise on the same terms and conditions upon which the Two-Thirds
Shareholders effect the Transfer of their Shares, it being understood that
payments, options granted or other agreements in respect of employment,
consulting or other similar arrangements shall not be deemed part of the
consideration or terms and conditions upon which the Two-Thirds Shareholders
effect the Transfer of their Shares.

(b) Transfer Notice. In the event that the Two-Thirds Shareholders
desire to exercise their rights pursuant to this Section 4.3, they shall deliver
a Transfer Notice to the Other Shareholders at least twenty (20) days in advance
of the proposed Transfer.

(c) Deliveries by Other Shareholders. Within ten (10) days of the
delivery of Transfer Notice, each of the Other Shareholders shall deliver to the
Two-Thirds Shareholder designated in the Transfer Notice (the "DESIGNATED
SHAREHOLDER") such documents necessary to consummate the Transfer, including,
without limitation, to the extent applicable, (i) a stock certificate or
certificates evidencing the Shares held by each such Other Shareholder, together
with an appropriate assignment separate from certificate duly executed in a
proper form to effect the transfer of such Shares from each such Other
Shareholder to the Bona Fide Purchaser on the books and records of the Company
and (ii) a limited power-of-attorney authorizing the Designated Shareholder to
Transfer such Shares on the same terms and conditions as the Two-Thirds
Shareholders Transfer their Shares. In the event that any Other Shareholder
shall fail to deliver such stock certificate(s), assignment separate from
certificate or limited power-of-attorney, the Company shall cause a notation to
be made on its books and records to reflect that Shares held by such Other
Shareholder are bound by the provisions of this Section 4.3 and that such Shares
may be transferred to the Bona Fide Purchaser without such Other Shareholder's
consent or surrender of his Shares for transfer.

4.4 Rights of Inclusion. The rights granted under this Section 4.4 shall,
if exercised, supersede the provisions of Section 4.1(d), 4.1(e) and 4.2 hereof,
but shall be subject to the provisions of Section 4.3 hereof.

(a) Grant. If the Majority Shareholders propose to sell a majority of
the outstanding Shares to a Bona Fide Purchaser, then each Other Shareholder
may, at its sole right and option, require the Majority Shareholders to require
the Bona Fide Purchaser to purchase a pro rata portion of such Other
Shareholder's Shares for the same consideration per share and otherwise upon the
same terms and conditions upon which the Bona Fide Purchaser has offered to
purchase the Majority Shareholders' Shares, it being understood that payments,
options granted or other agreements in respect of employment, consulting or
other similar arrangements shall not be deemed part of the consideration or
terms and conditions of the purchase of the Majority Shareholders' Shares.

(b) Transfer Notice. In the event that the Majority Shareholders
desire to Transfer their Shares to a Bona Fide Purchaser, they shall deliver a
Transfer Notice to the Other Shareholders at least twenty (20) days in advance
of the proposed Transfer.

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<PAGE>

(c) Exercise of Right. Each Shareholder desiring to exercise its
rights pursuant to this Section 4.4 (collectively, for purposes of this Section
4.4, the "PARTICIPATING SHAREHOLDERS") shall deliver to the Majority
Shareholders (i) notice to such effect within fifteen (15) days of his receipt
of the Transfer Notice, (ii) a stock certificate or certificates evidencing all
of the Shares owned by such Participating Shareholder, together with an
appropriate assignment separate from certificate duly executed in a proper form
to effect the Transfer of such Participating Shareholder's Shares to the Bona
Fide Purchaser on the books and records of the Company, and (iii) a limited
power-of-attorney authorizing the person designated in the Transfer Notice to
effect the Transfer of such Participating Shareholder's Shares substantially on
the terms described in the Transfer Notice and in all events on the same terms
under which the Majority Shareholders Transfer their Shares. The failure of a
Shareholder to deliver notice of such Shareholder's desire to exercise its
rights under or to otherwise comply with the provisions of this Section 4.4(c)
shall be deemed to be a waiver of such Shareholder's rights hereunder, and such
Shareholder shall not be deemed to be a Participating Shareholder.

4.5 General Provisions Applicable to Sections 4.2, 4.3 and 4.4.

(a) Completion of Transfer.

(i) Promptly (but in no event later than three business days
after the day of receipt of consideration) after the Transfer pursuant to
Section 4.3 or 4.4, the Two-Thirds Shareholders or the Majority
Shareholders, as the case may be, shall (A) deliver notice thereof to each
Other Shareholder, (B) remit to each Other Shareholder the total
consideration for such Other Shareholders' Shares (including any securities
received in a merger), and (C) furnish to each Other Shareholder such other
evidence of the completion and time of completion of such Transfer and the
terms thereof as may be reasonably requested in writing by such Other
Shareholders.

(ii) As part of the completion of the Transfer contemplated by
Section 4.2, 4.3 or 4.4, each Shareholder shall, to the extent applicable,
represent and warrant to the Bona Fide Purchaser or the Participating
Shareholders, as the case may be, that (A) the Shares being sold by the
Shareholder are free and clear of any Lien (except for any Permitted Lien)
and (B) such Shareholder has not granted any options or similar rights with
respect to such Shares, and, in each case, such Shareholder shall be
required to severally indemnify the Bona Fide Purchaser or the purchasing
Shareholders for losses incurred by him or it as a result of such
Shareholder's breach of any of such representations and warranties.

(b) Failure to Consummate Transfer. If, within 180 days after the
delivery of the Transfer Notice by the Two-Thirds Shareholders or the Majority
Shareholder, as the case may be, the proposed Transfer has not been completed,
the Two-Thirds Shareholders or the Majority Shareholder, as the case may be,
shall return to each of the Other Shareholders the stock certificates,
assignments separate from certificate and powers-of-attorney delivered by them
pursuant to Section 4.3(c) or 4.4(c). Upon the receipt of such materials by such
Other Shareholders, all restrictions on

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Transfer contained in this Shareholders' Agreement with respect to the Shares
owned by the Shareholders shall again be in effect.

SECTION 5

Transfers upon Death, Divorce,
Permanent Disability or Termination of Employment
-------------------------------------------------

5.1 Right to Purchase; Right to Sell.

(a) Death. In the event of a Shareholders' death, the Company and the
Other Shareholders shall have the right to purchase from the deceased
Shareholder, and the deceased Shareholder, or his estate or the trustee of his
Estate Trust, if applicable, shall have the right to sell to the Company or the
Other Shareholders, all of the deceased Shareholder's Shares at the Purchase
Price and upon the terms and conditions set forth in this Section 5. The
foregoing option to purchase and right to sell shall be exercisable first by or
to the Company and, if the Company is unable or elects not to exercise its
option, second by or to the Other Shareholders in accordance with their
respective Pro Rata Shares or in such other proportion as the Other Shareholders
may mutually agree. If either of the foregoing rights are exercised, the
deceased Shareholder shall be deemed to be the "SELLING SHAREHOLDER" under this
Section 5. Notwithstanding the foregoing or the provisions of Section 5.2, in
the event of the death of Metzler during the term of the Metzler Employment
Agreement, the Company shall purchase all of Metzler's Shares pursuant to the
terms of the Metzler Employment Agreement.

(b) Divorce. In the event of the divorce of a Shareholder, the Other
Shareholders shall have the right to purchase all of that portion of the
divorced Shareholder's Shares Transferred to his spouse, if any, at the Purchase
Price and upon the terms and conditions set forth in this Section 5. Each Other
Shareholder may exercise his right with respect to his Pro Rata Share of the
Shares being Transferred or such other proportion as the Other Shareholders may
mutually agree. If the Other Shareholders exercise their rights under this
Section 5.1(b), the spouse of the Shareholder to whom the Shares are being
transferred shall be deemed to be the "SELLING SHAREHOLDER" under this Section
5.

(c) Permanent Disability; Terminations. In the event of a
Shareholder's Permanent Disability or termination of employment for any reason,
the Other Shareholders shall have the right to purchase all of such
Shareholders' Shares at the Purchase Price and upon the terms and conditions
provided in this Section 5. In addition, in the event of a Shareholder's
Permanent Disability or termination of employment other than for Cause, such
Shareholder shall have the right to sell all of his Shares to the Other
Shareholders at the Purchase Price and upon the terms and conditions provided in
this Section 5. The sale of the Shares of the selling Shareholder (the "SELLING
SHAREHOLDER") shall be made to the Other Shareholders in accordance with their
Pro Rata Shares or in such other proportion as the Other Shareholders may
mutually agree.

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5.2 Purchase Price. If the sale of the Selling Shareholder's Shares was
initiated as the result of the Selling Shareholder's divorce, Permanent
Disability or termination of employment by the Selling Shareholder or by the
Company other than for Cause, the Purchase Price for the Selling Shareholder's
Shares shall be equal to (i) 50% of the gross professional fees invoiced by the
Company to its clients during the twelve (12) full calendar months preceding
such event multiplied by (ii) that fraction, the numerator of which is the
number of Shares owned by or being Transferred to the Selling Shareholder and
the denominator of which is the total number of Shares outstanding. If the sale
of the Selling Shareholder's Shares was initiated as the result of the Selling
Shareholder's death, the Purchase Price for the Selling Shareholder's Shares
shall be equal to the greater of (i) the Purchase Price determined pursuant to
the preceding sentence and (ii) $750,000. If the sale of the Selling
Shareholder's Shares was initiated as the result of the Selling Shareholder's
termination of employment by the Company for Cause, the Purchase Price for the
Selling Shareholder's Shares shall be equal to (i) 25% of the gross professional
fees invoiced by the Company to its clients during the twelve (12) full calendar
months preceding such event multiplied by (ii) that fraction, the numerator of
which is the number of Shares owned by the Selling Shareholder and the
denominator of which is the total number of Shares outstanding.

5.3 Payment of Purchase Price. The Purchase Price for the Shares being
Transferred pursuant to this Section 5 shall be payable (i) in the event the
Selling Shareholder's employment is terminated for Cause, by delivery of a five-
year unsecured promissory note substantially in the form of Exhibit E hereto,
(ii) in the event the Selling Shareholders' employment is terminated upon death,
in cash to the extent of the Net Insurance Proceeds (if the Company is not
prohibited by law, contract or otherwise from using such Net Insurance Proceeds
therefor) and the remainder by delivery of a three-year unsecured promissory
note substantially in the form of Exhibit F hereto and (iii) in all other cases
by delivery of a three-year unsecured promissory note substantially in the form
of Exhibit F hereto; provided, however, that in each case an Other Shareholder
may pay cash for some or all of the Purchase Price; provided, further, that in
the event (i) the Shares being acquired are pledged to secure a Secured
Promissory Note and (ii) the Shares are being Transferred other than in
connection with the voluntary termination of such Selling Shareholders'
employment, then the Purchase Price shall be payable in an amount equal to the
then outstanding principal and accrued interest under such Secured Promissory
Note by assumption of such Secured Promissory Note and the remainder of the
Purchase Price shall be payable in the manner specified above (it being
understood that (i) the Shares so acquired shall continue to be pledged to
secure repayment of the Secured Promissory Note, (ii) the Secured Promissory
Note, to the extent assumed, shall be a full recourse obligation of the Person
assuming the Secured Promissory Note and (iii) Metzler may require each Person
assuming the Secured Promissory Note to execute a replacement note and pledge
agreement having substantially the same terms as the obligations assumed).

5.4 Exercise of Rights; Closing. The rights of the Selling Shareholder and
the Other Shareholders and the Company must be exercised, if at all, within
ninety (90) days of their having obtained actual knowledge of the occurrence of
the event giving rise to right. The closing of the purchase and sale of the
Selling Shareholder's Shares under this Section 5 shall occur on a mutually
agreeable date within thirty (30) days from the exercise of the right to
purchase or sell such Shares;

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<PAGE>

provided, however, that such date shall be extended as reasonably necessary upon
the death of a Selling Shareholder to permit the collection of proceeds of any
insurance policy on the life of such Selling Shareholder. At the closing, (i)
the Other Shareholders shall deliver to the Selling Shareholder (A) a certified
check in the amount of the cash portion of the Purchase Price, if any, and (B)
the appropriate promissory note, if any, specified in Section 5.3 and (ii) the
Selling Shareholder shall deliver to the Other Shareholders a stock certificate
or certificates evidencing the number of such Selling Shareholder's Shares
subject to sale to such Other Shareholder, together with an appropriate
assignment separate from certificate duly executed in a proper form to effect
the transfer of such Shares to the purchasing Shareholders on the books and
records of the Company.

5.5 Life Insurance.

(a) Company Right. The Company shall have the right, but not the
obligation, to obtain a life insurance policy or policies on the life of any
Shareholder in such amounts as the Company shall determine is appropriate, in
order to fund all or a part of the Purchase Price. It is currently contemplated
that the Company will obtain insurance in the amount of at least $1,500,000 on
the life of each Shareholder.

(b) Company as Owner. The Company shall be the owner of any such
policy and shall pay the premiums thereon as they fall due; provided, however,
upon reasonable request of a Shareholder, the Company shall use its best efforts
to assure the availability of the Net Insurance Proceeds to discharge the
obligations of the purchasing Shareholders.

(c) Cooperation. The Shareholders agree to cooperate with the Company
in whatever procedures are reasonably required by the issuer of any such
insurance policy in order to issue the same.

(d) Right to Cancel. The Company shall have the right to cancel any
policy of life insurance so purchased at any time, in its sole and absolute
discretion; provided, however, that it shall first offer, to the extent
permitted under the policy, to assign such life insurance to the insured at the
policy's cash value, if any.

(e) Right to Increase or Decrease. The Company may, at any time,
increase or decrease the amount of life insurance to be carried on the life of a
Shareholder, as it deems appropriate; provided, however, that the Company shall
first offer, to the extent permitted under the policy, to assign any portion of
such life insurance being decreased to the insured at the policy's cash value.

(f) Restrictions on Shareholders. Each of the Shareholders agree to
refrain from exercising any of the rights appurtenant to any such life insurance
policy, such as the right to borrow on the policy, the right to change the
beneficiary, the right to assign, or any other right or privilege granted to by
the terms of the policy until such Shareholder has notified the Company of his
intention

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<PAGE>

to do so and has obtained from the Company its written approval of the intended
action (which the Company may grant or withhold in its sole and absolute
discretion).

(g) Status of Insurance Company. The Company and each of the
Shareholders expressly recognize that any insurance company issuing any such
policy is not a party to this Shareholders' Agreement and shall not, as a
condition precedent to the exercise of any of the rights granted by the terms of
its policy, insist upon the performance of any of the terms of this
Shareholders' Agreement. All obligations of any such insurance company shall be
limited and governed solely by the terms of its policy.

(h) Filing of Claims; Use of Proceeds. If the Transfer is occurring
pursuant to the death of a Shareholder and the Company has obtained insurance on
the life of such Shareholder, then the Company shall promptly file a claim with
the issuer of the life insurance policy and collect the proceeds thereof. The
Company shall be entitled to retain all other proceeds from the policy other
than those proceeds required to be made available to the Shareholders under
Section 5.5(b) or used to acquire the shares of a Shareholder under Section 5.3.

5.6 Definition of Permanent Disability. With respect to each Shareholder,
the term "PERMANENT DISABILITY" shall mean and be deemed to have occurred upon
the first to occur of the following events:

(i) the Shareholder having, as a result of a mental or physical
condition, injury, sickness or incapacity, become incapable of
satisfactorily discharging his regular duties as an employee, officer or
director of the Company for three hundred sixty five (365) consecutive days
or for three hundred sixty-five (365) days during any period of eighteen
(18) consecutive months. If the parties disagree on whether a Shareholder
has suffered a Permanent Disability, the question shall be resolved
consistent with the determination of the insurance carrier then providing
disability insurance for the Company (the "CARRIER"). If there is no such
Carrier, or if the Carrier fails or refuses to make such a determination,
then the Company (by action of a majority of its directors at a meeting at
which a quorum is present) and the Shareholder shall promptly and jointly
appoint a medical doctor who shall examine the Shareholder and make such a
determination (or, if they are unable to agree on the selection of a
medical doctor, they shall each appoint a medical doctor, and the two
doctors shall jointly conduct the examination and make the determination),
and the (joint) determination of the doctor(s) shall be binding on the
Company and the Shareholders. If two doctors conduct the examination but
are unable to agree, they shall promptly appoint a third medical doctor to
make such determination, and the decision of such medical doctor shall be
binding on all parties hereto;

(ii) the failure or refusal of a Shareholder to submit to any
examination by the doctor specified in clause (i) above or reasonably
selected by the Carrier within thirty (30) days of receiving a written
request from the Company or the Carrier to do so;

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<PAGE>

(iii) the Shareholder's failure or refusal to agree upon or
appoint a medical doctor or doctors; or the failure or refusal of the
medical doctor or doctors to agree upon a determination or to appoint a
third doctor pursuant to clause (i) above within thirty (30) days on their
respective appointment; or

(iv) the adjudication of such Shareholder as an incompetent or a
disabled person.

SECTION 6

Metzler Option
--------------

6.1 Option to Acquire Shares.

(a) The Metzler Option. The Other Shareholders hereby grant Metzler
the right and option (the "METZLER OPTION") to purchase from such Other
Shareholders in the event a Change of Control occurs on or before December 31,
1998, such number of Shares equal to the difference between (i) such number of
Shares which would equal 30% of the then outstanding Common Stock on a fully
diluted basis, less (ii) the 150 Shares owned by Metzler on the date hereof,
adjusted for all stock splits, stock dividends or other similar transactions
occurring after the date thereof. The Metzler Option shall be exercisable by
Metzler pro rata with respect to each Other Shareholder based on the number of
Shares each Other Shareholder owns in relation to all Other Shareholders. The
provisions of this Section 6 shall supersede, and shall not be subject to the
restrictions or rights of the Other Shareholders under, the provisions of
Section 4.

(b) Notification; Purchase Price. The Company or the Other
Shareholders shall notify Metzler within a reasonable period of time prior to
the occurrence of any Change of Control, and the Metzler Option shall be
exercisable by delivery of notice to the Company to such effect immediately
prior to the Change of Control. The aggregate purchase price for the Shares
subject to the Metzler Option shall be $1.00, and each Other Shareholder shall
be entitled to receive his pro rata share of such $1.00.

(c) Termination of Metzler Option. The Metzler Option shall expire
and cease to be exercisable upon the first to occur of the termination of the
Metzler Employment Agreement pursuant to Section 6 thereof and 12:00 p.m.
December 31, 1998, in each case unless a Change of Control has occurred prior
thereto.

SECTION 7

Certain Covenants
-----------------

7.1 Covenant Not to Compete. Each Shareholder hereby covenants and agrees
(collectively, the "COVENANT NOT TO COMPETE") that he shall not, directly or
indirectly, take any of the following actions (i) so long as such Shareholder is
employed by the Company, (ii) for a period

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<PAGE>

of two years thereafter, but only if such employment is terminated for Cause,
and (iii) with respect to clauses (c) and (d) below only, for a period of one
year thereafter, but only if such employment is terminated voluntarily by the
Shareholder:

(a) initiate the acquisition of or acquire any interest in (either
directly or indirectly, as an employee, officer, director, shareholder, partner,
member, joint venturer, investor, agent, consultant, representative or
otherwise) any Competitor; provided, however, that the Covenant Not To Compete
shall in no way restrict the rights of a Shareholder to hold not more than five
percent of the equity securities of any corporation whose equity securities are
listed on a national securities exchange or are regularly traded in the over-
the-counter market and for which quotations are available on the Nasdaq (or any
successor thereto);

(b) divert or attempt to divert or take advantage of or attempt to
take advantage of any business or opportunities within the scope of the
Company's activities in the electric or gas utility consulting industry;

(c) solicit or attempt to solicit Persons whom the Company invoiced
for services during the preceding twelve (12) month period, except where such
solicitation or attempted solicitation does not concern business activities in
the electric or gas utility consulting industry; or

(d) induce or attempt to induce any employee of the Company to leave
or terminate such employment.

During a Shareholder's employment and after his termination for Cause, the
Covenant Not To Compete shall apply to all areas and with respect to all
Competitors and Persons throughout the world. After a Shareholder's voluntary
termination, the Covenant Not To Compete shall apply to Persons whose principal
place of business or employment is in the United States and its possessions and
territories and Canada.

7.2 Confidential Information.

(a) Treatment of Information. Each Shareholder acknowledges that
during the term of this Shareholders' Agreement the Company will make available
to such Shareholder certain information which is either confidential,
proprietary or otherwise not generally available to the public (such information
is hereinafter referred to as the "INFORMATION"). Each Shareholder agrees that
the Information shall be kept confidential by such Shareholder, will not be used
in any manner which is detrimental to the Company, will not be used other than
in connection with such Shareholder's relationship with the Company and will be
safeguarded by such Shareholder from unauthorized disclosure.

(b) Return of Information. As soon as possible after a Shareholder
ceases to own Shares, such Shareholder will return to the Company all written
Information which has been provided to such Shareholder and such Shareholder
will destroy all copies of any analyses, compilations,

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studies or other documents prepared by such Shareholder or for such
Shareholder's use containing or reflecting any Information.

7.3 Conflict of Interest. Each Shareholder shall, promptly upon his
becoming aware thereof, disclose to the Other Shareholders any interest such
Shareholder may have, directly or indirectly, in any Competitor, including,
without limitation, as an employee, officer, director, shareholder, partner,
investor, joint venturer, agent or representative. The parties acknowledge that
Robert P. Maher and his affiliates have certain interests Ernst & Young, Joseph
Dowling & Associates, Inc., Utilities International, Inc., Robert Maher &
Associates, Inc., d/b/a RM&A, and First National Entertainment Corp., and each
party hereby waives any conflict or rights he or it may have as a result of such
interests.

SECTION 8

Miscellaneous
-------------

8.1 Retention of "S Corporation" Status. Each Shareholder shall take all
action necessary to cause the Company to at all times maintain its status for
federal income tax purposes as an S Corporation including, without limitation,
(i) executing and filing a Form 2553 and any and all other forms, including
amendments thereto, which may be necessary for the Company to be treated as an S
Corporation for federal income tax purposes and (ii) refraining from
transferring such Shareholder's Shares to any Person who is not permitted to be
a shareholder of an S Corporation under the Code.

8.2 Endorsement on Certificates. Each and every certificate evidencing
ownership of Shares shall contain upon its face, or on the reverse thereof, the
following legend or other substantially similar legend:

THE SHARES OF COMMON STOCK REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE
SECURITIES LAWS OF ANY STATE OR OTHER JURISDICTION. IN ADDITION, THE SALE,
TRANSFER, PLEDGE OR OTHER DISPOSITION OF THE SHARES EVIDENCED BY THIS
CERTIFICATE IS RESTRICTED BY THE TERMS OF THAT CERTAIN SHAREHOLDERS'
AGREEMENT DATED AS OF JANUARY 1, 1996 AMONG THE COMPANY AND EACH OF THE
SHAREHOLDERS SPECIFIED THEREIN, WHICH SHAREHOLDERS' AGREEMENT MAY BE
EXAMINED AT THE PRINCIPAL OFFICES OF THE COMPANY. THE SHARES OF COMMON
STOCK REPRESENTED BY THIS CERTIFICATE MAY NOT BE SOLD, TRANSFERRED OR
OTHERWISE DISPOSED OF EXCEPT IN ACCORDANCE WITH (I) SAID SECURITIES LAWS OR
AN APPLICABLE EXEMPTION THEREFROM AND (II) WITH SAID SHAREHOLDERS'
AGREEMENT.

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<PAGE>

Promptly after execution and delivery of this Shareholders' Agreement, if
applicable, each Shareholder agrees to deliver to the Company one or more
certificates evidencing such Shareholder's Shares so that the foregoing legend
may be placed upon its face or the reverse thereof.

8.3 Action by Deceased Shareholder. Any action required or permitted to
be taken by a Shareholder hereunder may be taken by the executor or
administrator of a deceased Shareholder's estate.

8.4 Termination. Upon the first occurrence of any of the following
events, this Shareholders' Agreement shall terminate for all purposes and in all
respects and, except as set forth herein, no party shall have any obligation
hereunder:

(i) insolvency, receivership or dissolution of the Company;

(ii) all of the Shares being owned by a single Shareholder;

(iii) the consummation by the Shareholders of a Transfer of
Shares pursuant to Section 4.1(b)(vi), 4.3 or 4.4 hereof; and

(iv) the voluntary agreement, in writing, of all of the parties
hereto.

In addition, this Agreement shall terminate with respect to a Shareholder
upon his ceasing to be a shareholder of the Company, except that the provisions
of Section 7.1 and 7.2 shall survive such termination.

8.5 Suspension of Rights.

(a) General. In addition to the provisions of Section 8.4, so long as
any Shareholder is in breach of any material provision of this Shareholders'
Agreement (which shall include, without limitation, the existence of any Lien on
such Shareholder's Shares (other than a Permitted Lien)), such Shareholder shall
not be entitled to exercise any of his rights, but shall be subject to all of
his obligations, hereunder.

(b) Voting Rights. The rights of a Shareholder to vote his Shares
shall be suspended during such time as such Shareholder is in breach of a
material provision of this Agreement or ceases to have the sole and exclusive
right to vote his Shares (either as a result of a court order, temporary
disability, power of attorney, proxy, or Transfer to an Estate Trust with
respect to which such Shareholder ceases to be the sole trustee or otherwise).
The rights of a Shareholder to vote his Shares shall also be suspended from such
time as an Event of Default has occurred under (and as defined in) such
Shareholder's Secured Promissory Note, if any, until such time as (i) such Event
of Default has been cured, other than as a result of an amendment to the Secured
Promissory Note or waiver by Metzler of such Event of Default without the
written consent of the Majority Shareholders,

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<PAGE>

or (ii) the Shares have been acquired by another Person in accordance with the
terms hereof or the applicable Option Agreement.

(c) Certain Determinations. Any determination of the number of Shares
outstanding and the holders thereof (whether for purposes of determining the
Super-Majority Shareholders, the Two-Thirds Shareholders, the Majority
Shareholders, the Shareholders' respective Pro Rata Shares or otherwise) at a
time when the voting rights of one or more Shareholders' Shares have been
suspended shall be made as though such Shareholders were not Shareholders and
their Shares were not outstanding.

8.6 Shares Subject to this Shareholders' Agreement. This Shareholders'
Agreement shall apply to, and the term "Shares" shall include, (i) the Shares
held by the Shareholders on the date hereof, (ii) any Shares issued to any
Shareholder as a result of a share dividend or in addition to or upon exchange
for Shares, (iii) any Shares issued to any Shareholder pursuant to such
Shareholder's exercise of an option or warrant, (iv) any Shares issued to a
Shareholder upon conversion of Shares and (v) any shares of Common Stock
otherwise purchased, acquired or issued to any Shareholder. All certificates
evidencing Shares subject to this Shareholders' Agreement shall, on the reverse
thereof, contain the restrictive legend set forth in Section 8.2 or a
substantially similar legend.

8.7 Documentation. Each Shareholder hereby agrees, upon request of any
Other Shareholder to execute and to deliver to the Other Shareholder any and all
documents and other instruments, including, without limitation, appropriate
assignments separate from certificate, which may be necessary or required by
either of the Shareholders to achieve the purchase, sale and transfer of any of
the Shares under and pursuant to this Shareholders' Agreement.

8.8 Notices. Any and all notices or other communications provided for
herein shall be in writing or shall be delivered by phone mail, return receipt
requested, and shall be considered duly given upon the earliest to occur of (i)
personal delivery (including delivery by messenger or overnight courier), (ii)
three days after being mailed by certified or registered mail, return receipt
requested, postage prepaid or (iii) upon delivery by phone mail message, return
receipt requested, followed in reasonable due course by a writing by facsimile
or other method prescribed herein. All written notices shall be addressed to
the parties hereto at their addresses set forth in the Stock Purchase Agreement.
Any party hereto may change his or its address by giving notice to the other
parties hereto as provided herein.

8.9 Pronouns and Headings. As used herein, all pronouns shall include the
masculine, feminine, neuter, singular and plural wherever the context and facts
require such construction. The captions and headings herein are inserted only
as a matter of convenience and for reference, and in no way define, limit or
describe the scope of this Agreement or the intent of any provision thereof.

8.10 Severability. It is the intent and desire of the parties that the
provisions of this Agreement (including, without limitation, the restrictive
provisions of Section 7) be enforced to the fullest extent permissible under the
laws and public policies as applied in each jurisdiction in which

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<PAGE>

enforcement of the provisions of this Agreement are sought. If any particular
provision of by this Agreement shall be adjudicated by a court of competent
jurisdiction to be invalid or unenforceable, such provision shall be amended,
without any action on the part of either party hereto, to delete therefrom the
portion so adjudicated to be invalid or unenforceable, such deletion to apply
only with respect to the operation of such provision in the particular
jurisdiction in which such adjudication is made. If any provision of this
Agreement is adjudicated by a court of competent jurisdiction to be invalid or
unenforceable in its entirety, this Agreement shall be amended to delete such
provision therefrom and the remainder of this Agreement shall remain in full
force and effect.

8.11 Entire Agreement; Amendment. This Agreement, together with the Other
Agreements, contain the entire agreement between the parties with respect to the
transactions contemplated herein and therein, and supersede all prior agreements
and understandings between the parties relating to the subject matter hereof and
thereof (including, without limitation, that certain Third Amended and Restated
Stock Restriction Agreement dated as of January 26, 1995 among the Company and
the shareholders party thereto and any employment agreement, letter agreement or
other understanding regarding employment, all of which have been terminated).
Unless otherwise provided herein, this Agreement may be altered or amended only
by an instrument in writing signed by each of the Shareholders.

8.12 Specific Performance. The parties acknowledge and agree that the
Shares of the Company cannot be readily purchased or sold in the open market,
and that for that reason, among others, the parties will be irreparably damaged
in the event that this Shareholders' Agreement is not specifically enforced.
Should any dispute arise concerning the sale or disposition of any Shares, an
injunction may be issued restraining any sale or disposition pending the
determination of such controversy, without the necessity of posting bond. In
the event of any controversy concerning the right or obligation of a Shareholder
or the Company to sell or purchase the Shares, the rights of the Shareholder and
the Company shall be enforceable in a court of equity by a decree of specific
performance. Such remedy shall, however, be cumulative and not exclusive, and
shall be in addition to any other remedy which the parties may have.

8.13 Governing Law; Exclusive Jurisdiction. This Agreement shall be
construed and enforced in accordance with and interpreted by the internal laws
of the State of Illinois. The parties hereby consent to service of process and
to the exclusive jurisdiction of any appropriate court located in Cook County,
Illinois in any action to enforce the provisions of this Agreement.

8.14 Binding Effect. This Shareholders' Agreement shall be binding upon
and shall inure to the benefit of the parties hereto and their respective heirs,
personal representatives, successors and permitted assigns.

8.15 Counterparts. This Shareholders' Agreement may be executed in one or
more counterparts, each of which shall be deemed an original, and all of which
together shall constitute one and the same instrument.

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<PAGE>

8.16 Attorney's Fees. If any legal action, including an action for
declaratory relief, is brought to enforce any provision of this Shareholders'
Agreement, the prevailing party or parties, as the case may be, shall be
entitled to recover his, its or their respective reasonable attorneys' fees from
non-prevailing party or parties, as the case may be. These fees, which may be
set by the court in the same action or in a separate action brought for that
purpose, are in addition to any other relief to which any prevailing party may
be entitled.

8.17 Consent of Spouse; Insertion in Will. Each married Shareholder, or,
if currently unmarried, each Shareholder upon his marriage, agrees to obtain the
consent and approval of his spouse, by the execution hereof of such spouse, to
all of the terms and provisions of this Shareholders' Agreement. Each
Shareholder agrees to insert in his last will and testament, applicable Estate
Trust or other similar instrument, or execute a codicil or amendment thereto,
directing and authorizing his personal representatives to fulfill and comply
with the provisions hereof and to sell and transfer his Shares in accordance
with the terms and provisions of this Shareholders' Agreement.

* * *

-26-
<PAGE>

IN WITNESS WHEREOF, the parties have executed this Shareholders' Agreement
as of the day and year first above written.

THE COMPANY:
-----------

METZLER & ASSOCIATES, INC.

By:
-------------------------
Its:
------------------------

THE SHAREHOLDERS:
----------------

----------------------------
James R. Blomberg

----------------------------
David J. Donovan

----------------------------
Stephen R. Goldfield

----------------------------
Gerald R. Lanz

----------------------------
Robert P. Maher

----------------------------
Richard J. Metzler

----------------------------
James T. Ruprecht

-27-
<PAGE>

List of Exhibits:
- ----------------

Exhibit A -- Articles and By-Laws
Exhibit B -- Form of Agreement to be Bound by Shareholders' Agreement for Estate
Trusts
Exhibit C -- Form of Agreement to be Bound by Shareholders' Agreement for Bona
Fide Purchaser
Exhibit D -- Form of Five Year Unsecured Promissory Note
Exhibit E -- Form of Three Year Unsecured Promissory Note

-28-
<PAGE>

SPOUSAL CONSENT
---------------

The undersigned, the spouse of one of the Shareholders of Metzler &
Associates, Inc., an Illinois corporation, does hereby consent to the execution
of the foregoing Shareholders' Agreement and the consummation of the
transactions contemplated thereby.

-----------------------------------------
Print Name:
------------------------------

-29-
<PAGE>

EXHIBIT C
---------

AGREEMENT BY ESTATE TRUST TO BE
BOUND BY SHAREHOLDERS' AGREEMENT
--------------------------------

Reference is hereby made to that certain Shareholders' Agreement of Metzler
& Associates, Inc., an Illinois corporation (the "COMPANY"), dated as of January
1, 1996 (the "SHAREHOLDERS' AGREEMENT") among the Company and the shareholders
of the Company parties thereto. Capitalized terms used herein and not otherwise
defined shall have the meanings ascribed to them in the Shareholders' Agreement.

The undersigned, individually and in his capacity as trustee of the
indicated trust, which the undersigned represents and warrants is his Estate
Trust qualified to be a shareholder of an "S Corporation" under the Code,
acknowledges and agrees to be bound by the terms of the Shareholders' Agreement.
The undersigned further represents that he has the sole and exclusive power to
act as trustee under the Estate Trust and acknowledges and confirms that certain
of his rights, including, without limitation his rights to vote such Shares and
to purchase Other Shareholders' Shares, will be suspended if he ceases to have
such sole and exclusive right.

_________________________________________
____________________, individually and in
his capacity as trustee under that
certain Trust under agreement
dated _________________________

Dated:
-----------------------------------

-30-
<PAGE>

EXHIBIT D
---------

AGREEMENT BY BONA FIDE PURCHASER TO BE
BOUND BY SHAREHOLDERS' AGREEMENT
--------------------------------

In consideration for the right to acquire Shares held by
______________________________ (the "SHAREHOLDER") and in order to obtain the
benefit and burdens of the Shareholders' Agreement, the undersigned agrees to be
bound by the terms and conditions of the Shareholders' Agreement as a
Shareholder thereunder.

-----------------------------------------
Print Name:
------------------------------

Dated:
-----------------------------------

SPOUSAL CONSENT
---------------

The undersigned, the spouse of one of the Shareholders of Metzler & Associates,
Inc., an Illinois corporation, does hereby consent to the execution of the
above-referenced Shareholders' Agreement and the consummation of the
transactions contemplated thereby.

-----------------------------------------
Print Name:
------------------------------

Dated:
----------------------------**BAD**

-31-

<PAGE>

EXHIBIT 10.11

AMENDMENT
TO
PROMISSORY NOTE
DATED SEPTEMBER 3, 1996

This Amendment is made as of this 3rd day of September, 1996 (the
"Effective Date") by and between Richard J. Metzler ("Maker"), and Metzler &
Associates, Inc., an Illinois corporation ("Payee").

WHEREAS, Maker executed that certain promissory note dated May 1, 1996 in
the principal amount of $725,000 in favor of Payee (the "Note"); and

WHEREAS, Maker and Payee now desire to amend the Note in certain respects;

NOW THEREFORE, in consideration of the premises set forth above, the terms
and conditions contained herein, and other good and valuable consideration, the
receipt of which is hereby acknowledged, Maker and Payee agree to the following
amendments to the Note:

1. AMENDMENT TO PROMISSORY NOTE. Effective as of the Effective Date, the
Promissory Note is hereby amended as follows:

(a) Section 4 is hereby amended to delete the word "Subject" beginning
the first sentence and to substitute therefor the following language:

Provided that an initial public offering of shares of common stock of
Payee or any successor ("IPO") occurs on or before December 31, 1996,
the entire unpaid principal amount together with any accrued but
unpaid interest shall be due and payable immediately following the
closing of the IPO. If the IPO has not occurred prior to December 31,
1996, subject

(b) Section 6 is hereby amended to delete the word "Each" beginning
the first sentence and to substitute therefor the following language:

If the IPO has not occurred prior to December 31, 1996, each

2. Reference to the Effect on the Note.

(a) On and after the Effective Date, each reference in the Note to
"this Note," "hereunder," "herein" or words of like import shall mean
and be a reference to the Note as amended hereby.

(b) Except as specifically amended above, the Note shall remain in
full force and effect, and is hereby ratified and confirmed by Maker.
<PAGE>

(c) The execution, delivery and effectiveness of this Amendment shall
not, except as expressly provided herein, operate as a waiver of any right,
power, or remedy of Payee, nor constitute a waiver of any provision of the
Note.

3. Headings. Section headings in this Amendment are included herein for
convenience of reference only and shall not constitute a part of this Amendment
for any other purpose.

4. Governing Law. This Amendment shall be governed by and construed in
accordance with the laws of the State of Illinois.

IN WITNESS WHEREOF, this Amendment has been duly executed as of the day and
year first above written.

/s/ Richard J. Metzler
---------------------------------------
Richard J. Metzler

Metzler & Associates, Inc.

By: /s/ Robert P. Maher
-------------------------------------
Title: PRESIDENT
----------------------------------

<PAGE>

EXHIBIT 21.1

LIST OF SUBSIDIARIES

Metzler & Associates, Inc.

<PAGE>

EXHIBIT 23.1

INDEPENDENT AUDITORS' CONSENT

The Board of Directors
The Metzler Group, Inc.:

We consent to the use of our report included herein and to the references to
our firm under the headings "Selected Financial Data" and "Experts" in the
prospectus.

KPMG Peat Marwick LLP

Chicago, Illinois

September 4, 1996

<PAGE>

<ARTICLE> 5
<LEGEND> This schedule contains summary financial information extracted from
financial statements and notes of The Metzler Group, Inc. as of December 31,
1995 and June 30, 1996 and for the year ended December 31, 1995 and the six
months ended June 30, 1996 and is qualified in its entirety by reference to such
financial statements.
</LEGEND>

<S> <C>
<PERIOD-TYPE> YEAR 6-MOS
<FISCAL-YEAR-END> DEC-31-1995 DEC-31-1996
<PERIOD-START> JAN-01-1995 JAN-01-1996
<PERIOD-END> DEC-31-1995 JUN-30-1996
<CASH> 223,235 226,000
<SECURITIES> 0 0
<RECEIVABLES> 2,288,878 4,315,355
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 2,520,052 4,927,653
<PP&E> 719,046 747,153
<DEPRECIATION> 459,520 505,505
<TOTAL-ASSETS> 2,779,578 5,652,634
<CURRENT-LIABILITIES> 2,470,694 2,667,126
<BONDS> 45,886 38,331
<COMMON> 9,714 9,714
0 0
0 0
<OTHER-SE> 233,379 2,773,448
<TOTAL-LIABILITY-AND-EQUITY> 2,779,578 5,652,634
<SALES> 0 0
<TOTAL-REVENUES> 13,459,725 10,856,647
<CGS> 0 0
<TOTAL-COSTS> 6,421,560 5,214,810
<OTHER-EXPENSES> 7,650,047 1,403,341
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 50,893 20,394
<INCOME-PRETAX> (739,232) 4,226,069
<INCOME-TAX> (266,000) 86,000
<INCOME-CONTINUING> (473,232) 4,140,069
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (473,232) 4,140,069
<EPS-PRIMARY> (.05) .43
<EPS-DILUTED> (.05) .43

</TABLE>