METZLER GROUP INC, 424B4, 1996-10-04

METZLER GROUP INC
424B4, 1996-10-04
MANAGEMENT SERVICES

Previous: ARQULE INC, S-1/A, 1996-10-04

Next: JONES EDUCATION NETWORKS INC, S-1/A, 1996-10-04

<PAGE>

PROSPECTUS Filed Pursuant to Rule 424(b)(4)
OCTOBER 4, 1996 Registration No. 333-9019

3,500,000 SHARES

LOGO
COMMON STOCK

Of the 3,500,000 shares of Common Stock offered hereby, 2,300,000 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. See "Underwriting" for information relating to the factors
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."

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

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.

- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRICE UNDERWRITING PROCEEDS PROCEEDS TO
TO THE DISCOUNTS AND TO THE THE SELLING
PUBLIC COMMISSIONS (1) COMPANY (2) STOCKHOLDERS
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Per Share.............. $16.00 $1.12 $14.88 $14.88
Total(3)............... $56,000,000 $3,920,000 $34,224,000 $17,856,000
- --------------------------------------------------------------------------------
</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 525,000
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 $64,400,000, $4,508,000,
$38,464,800 and $21,427,200, 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 October 9, 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. Alpha Publications Ltd.
estimates that in 1994 the market for consulting services to the utility
industry represented approximately 8% of the $20.5 billion total market for
consulting services, and projects a 9% annual growth rate through 2000. Based
upon these data, the Company estimates that the market for consulting services
to the utility industry was approximately $1.8 billion in 1995.

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. 2,300,000 shares
Common Stock offered by the Selling
Stockholders....................... 1,200,000 shares
Common Stock to be outstanding after
the offering....................... 10,300,000 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
Nasdaq National Market symbol....... METZ
</TABLE>
- -------
(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).............. 9,781 9,803
</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 $25,725
Working capital (deficit).................. 2,261 (332) 25,167
Total assets............................... 5,653 5,653 31,152
Obligations under capital lease, less
current portion........................... 22 22 22
Total stockholders' equity................. 2,783 143 25,642
</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."
(4) Pro forma net income per share is based on the weighted average of
9,781,051 shares of common and common stock equivalent shares outstanding
which includes 9,692,134 actual shares outstanding and 88,917 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 9,803,202
shares of common and common stock equivalent shares outstanding which
includes 9,714,285 actual shares outstanding and 88,917 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 2,300,000
shares of Common Stock offered by the Company hereby 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 Company does not have an
employment agreement with any of these executive officers and senior
employees. 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."

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 Services."

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 initial public
offering price of $16.00 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 $17.7 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
66% of the outstanding Common Stock. At $16.00 per share, the Selling
Stockholders' aggregate unrealized gain (before deduction of estimated income
taxes) would be approximately $104.8 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 66% 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 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."

7
<PAGE>

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 was determined by negotiations among management of the Company and the
representative of the Underwriters (the "Representative"). See "Underwriting"
for factors 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 $13.51 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
10,300,000 shares of Common Stock outstanding, of which the 3,500,000 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 2,300,000 shares of
Common Stock offered by the Company hereby, 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 $33.5 million ($37.7 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, which does not include $1,600,000 of Company earnings
distributed in the first six months of 1996, 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 2,300,000 shares of Common Stock
offered by the Company 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, 10,300,000 shares issued
and outstanding as adjusted (1).......................... 10 10
Additional paid-in capital (2)............................ 107 25,606
Retained earnings (3)..................................... 2,666 26
------ -------
Total stockholders' equity.............................. 2,783 25,642
------ -------
Total capitalization.................................. $2,805 $25,664
====== =======
</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 2,300,000 shares of Common Stock
offered by the Company, net of 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 2,300,000 shares of Common Stock 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 $25,642,000 or
$2.49 per share. This amount represents an immediate increase in net tangible
book value of $2.20 per share to existing owners of the Company and an
immediate dilution in net tangible book value per share of $13.51 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>
Initial public offering price per share.......................... $ 16.00
Net tangible book value per share at June 30, 1996............. $0.29
Increase in net tangible book value per share attributable to
new investors................................................. 2.20
Pro forma net tangible book value per share after this offering.. 2.49
-------
Dilution in net tangible book value per share to new investors... $ 13.51
=======
</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:

<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 77.7% $ 117,396 0.3% $ 0.01
New investors(1)........... 2,300,000 22.3 36,800,000 99.7 $16.00
---------- ----- ----------- -----
Total.................... 10,300,000 100.0% $36,917,396 100.0%
========== ===== =========== =====
</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
66.0% of the total number of shares outstanding after this offering
(6,560,000 shares or 62.0% if the Underwriters' over-allotment option is
exercised in full), and will increase the number of shares held by new
investors to 3,500,000 shares or 34.0% of the total number of shares of
Common Stock outstanding after this offering (4,025,000 shares or 38.0% 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."
(4) Pro forma net income per share is based on the weighted average of
9,781,051 shares of common and common stock equivalent shares outstanding
which includes 9,692,134 actual shares outstanding and 88,917 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 9,803,202
shares of common and common stock equivalent shares outstanding which
includes 9,714,285 actual shares outstanding and 88,917 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
(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.
Thereafter, the Company anticipates that its cash requirements related to
future operations and potential acquisitions will be funded with cash
generated from operations and short-term borrowings. The Company currently has
no agreements,

18
<PAGE>

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.

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. Alpha Publications Ltd. estimates
that the market for utility consulting in the U.S. was 8% of the $20.5 billion
total market for consulting services in 1994, and that this market will grow
at a 9% compound annual rate through 2000. Based on these data, the Company
estimates that the market for consulting services to the utility industry was
approximately $1.8 billion in 1995.

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 SERVICES

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
(Entergy Corporation and its affiliates) and the Company's then largest single
client (Texas Utilities Company) 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:
<TABLE>
<S> <C> <C>
Allegheny Power System, Inc. Kansas City Power & Light Pennsylvania Power & Light Co.
Baltimore Gas & Electric Co. Kentucky Utilities Philadelphia Electric Co.
Carolina Power & Light Co. Long Island Lighting Co. Pinnacle West Capital Corp.
Centerior Energy Corp. New England Electric System Public Service Enterprise Group, Inc.
Central and South West Corp. Niagara Mohawk Power Co. Public Service of Colorado
CINergy NIPSCO San Diego Gas & Electric Co.
CMS Energy Corp. Northeast Utilities SCANA Corp.
Commonwealth Edison Co. Northern States Power Co. SCEcorp.
Dominion Resources, Inc. Ohio Edison Co. Texas Utilities Company
Entergy Corporation Oklahoma Gas & Electric Co. The Southern Company
General Public Utilities Corp. Pacific Gas & Electric Co. Western Resources
Houston Industries Incorporated PacifiCorp Wisconsin Energy Corp.
Illinois Power Co.
</TABLE>

25
<PAGE>

Examples of Metzler's engagements, which are representative of the nature of
the Company's services and client relationships, are set forth below:

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 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 experienced consultant attrition of approximately
15% over each of the last two years, predominately at the associate level.

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

26
<PAGE>

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.

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 and profit sharing under the Company's 401(k)
Plan.

Effective as of July 1, 1996, the Board of Directors, which consists solely
of three Named Executive Officers, approved a new compensation program for the
Named Executive Officers. The program 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. The Company
anticipates that the independent members of the Board of Directors, who will
comprise the Compensation Committee, will ratify this compensation plan upon
their appointment within 90 days of the date of this Prospectus. Under the
compensation program, the Company's other senior managers will have annual
base compensation and bonus arrangements similar to the Named Executive
Officers. The Company has no written employment contracts with any of its
executive officers. In the future, the Company's Compensation Committee will
determine the terms of employment for executive officers on an annual basis.

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").

30
<PAGE>

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.

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, subject to an automatic increase
on the first trading day of each calendar year by a number of shares equal to
ten percent of the increase (if any) in the number of shares outstanding on
December 31 of the preceding calendar year over the number of shares
outstanding on January 1 of the preceding calendar year. 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 70% 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 will exercise 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 Shareholders Agreement
was terminated. Pursuant to a Redemption Agreement between the Company and Mr.
Metzler to be effective as of the date of this Prospectus, the Company will
repurchase 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, who was not represented by Company
counsel and was the beneficial owner of only 15% of the Common Stock at the
time, 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 10.7%
Stephen R. Goldfield............. 1,200,000 15.0% 100,000 1,100,000 10.7%
Gerald R. Lanz................... 1,200,000 15.0% 100,000 1,100,000 10.7%
Robert P. Maher(2)............... 1,200,000 15.0% 100,000 1,100,000 10.7%
Richard J. Metzler............... 1,200,000 15.0% 600,000 600,000 5.8%
James T. Ruprecht................ 1,200,000 15.0% 100,000 1,100,000 10.7%
James R. Blomberg................ 800,000 10.0% 100,000 700,000 6.8%
All Directors and Executive
Officers as a group
(8 persons)..................... 8,000,000 100.0% 1,200,000 6,800,000 66.0%
</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 10,300,000 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 116,571 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 10,300,000 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 10,300,000 shares of
Common Stock outstanding. Of these shares, the 3,500,000 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 3,500,000 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 (103,000 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 OF
UNDERWRITERS SHARES
<S> <C>
Donaldson, Lufkin & Jenrette Securities Corporation............. 2,644,000
Bear, Stearns & Co. Inc......................................... 42,000
Alex. Brown & Sons Incorporated................................. 42,000
Cowen & Company................................................. 42,000
Deutsche Morgan Grenfell/C.J. Lawrence Inc...................... 42,000
A.G. Edwards & Sons, Inc........................................ 42,000
Merrill Lynch & Co.............................................. 42,000
Montgomery Securities........................................... 42,000
J. P. Morgan Securities Inc..................................... 42,000
Morgan Stanely & Co. Incorporated............................... 42,000
Oppenheimer & Co., Inc.......................................... 42,000
Robertson, Stephens & Company LLC............................... 42,000
Smith Barney Inc................................................ 42,000
Adams, Harkness & Hill, Inc..................................... 22,000
Robert W. Baird & Co. Incorporated.............................. 22,000
William Blair & Company, L.L.C.................................. 22,000
Brean Murray, Foster Securities Inc............................. 22,000
Chicago Corporation............................................. 22,000
EVEREN Securities Inc........................................... 22,000
Interstate/Johnson Lane Corporation............................. 22,000
Janney Montgomery Scott Inc..................................... 22,000
McDonald & Company Securities, Inc.............................. 22,000
Parker/Hunter Incorporated...................................... 22,000
Pennsylvania Merchant Group Ltd................................. 22,000
Rodman & Renshaw, Inc........................................... 22,000
Ryan, Beck & Co................................................. 22,000
Stifel, Nicolaus & Company, Incorporated........................ 22,000
Tucker Anthony Incorporated..................................... 22,000
Vector Securities International, Inc............................ 22,000
---------
Total......................................................... 3,500,000
=========
</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 $0.67 per
Share. The Underwriters may allow, and such dealers may re-allow, a concession
not in excess of $0.10 per Share to certain other dealers. After this
offering, the offering price and other selling terms may be changed by the
Underwriters.

37
<PAGE>

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 525,000 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 285,000 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 525,000 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.

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 was negotiated among the
Company, the Selling Stockholders and the Representative. Among the factors
considered in determining the initial public offering price of the Common
Stock, in addition to prevailing market conditions, were 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.

38
<PAGE>

ADDITIONAL INFORMATION

The Company has filed with the Commission, Washington, D.C. 20549,
Registration Statements, 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 Statements and the exhibits and schedules to the Registration
Statements. For further information with respect to the Company and the Common
Stock offered hereby, reference is made to the Registration Statements and the
exhibits and schedules filed as a part of the Registration Statements.
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 Statements. Each such statement is
qualified in all respects by such reference to such exhibit. The Registration
Statements, 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 Statements, including the
exhibits and schedules thereto, are 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.

39
<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>

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.

KPMG Peat Marwick LLP

Chicago, Illinois
July 23, 1996

except for paragraph 1 of Note 11,
which is as of October 3, 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 20, 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 (41,969) (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 initial public offering of the Company's common stock.

Prior to the consummation of its 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 9,781,051 common and common equivalent shares
outstanding during the year ended December 31, 1995 and 9,803,202 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 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

During September and October 1996, Metzler & Associates, Inc. amended its
articles of incorporation effecting a 9,714.285 for 1 stock split of the
Company's common stock and an increase in the number of authorized shares of
the Company's common stock to 15,000,000 shares and filed articles of merger
to merge Metzler & Associates, Inc. with a newly formed subsidiary of The
Metzler Group, Inc., whereby Metzler & Associates, Inc. became a wholly-owned
subsidiary of The Metzler Group, Inc. Also in October 1996, The Metzler Group,
Inc. filed an amended and restated certificate of incorporation authorizing
3,000,000 shares of preferred stock of the Company. 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, who, at that time, was the beneficial owner of 15% of the
Company's common stock, to redeem 1,714,285 shares of the shareholder's common
stock. 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. The redemption value per
share was negotiated by the Company's other executive officers, who
collectively owned the remaining 85% of the Company's common stock at the time
of the agreement.

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 Company's initial public 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.................................................... 39
Index to Financial Statements............................................. F-1
</TABLE>

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

UNTIL OCTOBER 29, 1996 (25 DAYS AFTER THE COMMENCEMENT OF THIS OFFERING),
ALL DEALERS EFFECTING TRANSACTIONS IN THE COMMON STOCK, WHETHER OR NOT PARTIC-
IPATING 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.

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

3,500,000 SHARES

LOGO

COMMON STOCK

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

PROSPECTUS

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

DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION

OCTOBER 4, 1996

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