RWD TECHNOLOGIES INC, 424B1, 1997-06-19

RWD TECHNOLOGIES INC
424B1, 1997-06-19
BUSINESS SERVICES, NEC

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<PAGE>

Pursuant to Rule 424(b)(1)
Registration No. 333-21779

PROSPECTUS

3,000,000 SHARES

[LOGO OF RWD TECHNOLOGIES, INC.(R) APPEARS HERE]

COMMON STOCK

All of the 3,000,000 shares of Common Stock offered hereby are being sold by
RWD Technologies, Inc. ("RWD" or the "Company"). Prior to this offering, there
has been no public market for the Common Stock of the Company. See
"Underwriting" for information relating to the determination of the initial
public offering price. The Common Stock has been approved for listing on The
Nasdaq National Market under the symbol "RWDT."

SEE "RISK FACTORS" BEGINNING ON PAGE 6 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE SHARES OF COMMON
STOCK OFFERED HEREBY.

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

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

- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC DISCOUNT(1) COMPANY(2)
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Share................................. $13.00 $0.91 $12.09
Total(3).................................. $39,000,000 $2,730,000 $36,270,000
</TABLE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
(1) See "Underwriting" for a description of the indemnification arrangements
with the Underwriters.
(2) Before deducting expenses payable by the Company estimated at $1,112,000.
(3) The Company and certain Selling Stockholders of the Company have granted
to the Underwriters a 30-day option to purchase up to an aggregate of
450,000 additional shares of Common Stock solely to cover over-allotments,
if any. If all such shares are purchased, the total Price to Public,
Underwriting Discount, Proceeds to Company and Proceeds to Selling
Stockholders will be $44,850,000, $3,139,500, $39,679,380 and $2,031,120,
respectively. See "Underwriting."

The Common Stock is offered by the several Underwriters when, as and if
delivered to and accepted by them and subject to their right to reject orders
in whole or in part. It is expected that delivery of the certificates for the
Common Stock will be made on or about June 24, 1997.

WILLIAM BLAIR & COMPANY MONTGOMERY SECURITIES

THE DATE OF THIS PROSPECTUS IS JUNE 19, 1997
<PAGE>

RWD TECHNOLOGIES, INC.

[GRAPHICS TO BE INSERTED]

WE BRING PEOPLE AND TECHNOLOGY TOGETHER (TM)

RWD'S MISSION IS TO SATISFY OUR CLIENTS BY
ASSISTING WITH THE SUCCESSFUL
IMPLEMENTATION AND OPERATION OF HIGH-
TECHNOLOGY SYSTEMS AND EQUIPMENT. WE
BRING PEOPLE AND TECHNOLOGY TOGETHER(R) BY
FOCUSING ON THE INTEGRATION OF PEOPLE,
ADVANCED TECHNOLOGY, AND SUPPORT SYSTEMS
TO HELP END USERS PERFORM SUCCESSFULLY IN
COMPLEX OPERATIONAL ENVIRONMENTS.

OUR COMMITMENT TO EXCELLENCE IS A
FUNDAMENTAL TENET OF OUR MANAGEMENT
PHILOSOPHY AND IS ACHIEVED THROUGH A
PROCESS OF CONTINUOUS IMPROVEMENT.

The Company intends to furnish to its stockholders annual reports containing
audited financial statements and quarterly reports containing unaudited
financial information for the first three quarters of each year.

CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK,
INCLUDING OVER-ALLOTMENT, STABILIZING AND SHORT-COVERING TRANSACTIONS IN THE
COMMON STOCK AND THE IMPOSITION OF PENALTY BIDS DURING AND AFTER THE OFFERING.
SEE "UNDERWRITING."
<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, all information contained in this
Prospectus (i) assumes that the Underwriters' over-allotment option is not
exercised and (ii) gives effect to the issuance of 5,933,846 shares upon the
exercise of options concurrently with this offering (the "Concurrent
Exercises"). See "Management--Executive Compensation" and "Underwriting."

THE COMPANY

RWD Technologies, Inc. provides a broad range of integrated solutions
designed to improve the productivity and effectiveness of workers in complex
operating environments. As the scope and complexity of technology used by
businesses accelerates and the global business environment becomes more
competitive, companies are increasingly focused on maximizing the return on
their advanced technology investments. To achieve this goal, companies must
ensure their employees receive effective performance support, including the
tools and training to operate these advanced systems effectively. Founded in
1988, the Company initially provided conventional performance support services
such as classroom training and hard copy documentation to plant personnel in
large industrial companies employing complex manufacturing systems and
technologies. In recent years, the Company has expanded its performance support
services to include the design, development and implementation of customized
information technology solutions including Enhanced User Interface ("EUI")
systems, Electronic Performance Support Systems ("EPSS"), Electronic Document
Management Systems ("EDMS"), remote diagnostic systems, sales force automation
and Internet/Intranet applications. More recently, RWD has expanded its
services to include end-user training and performance support services
essential to the effective implementation of enterprise-wide business process
reengineering efforts (particularly SAP software implementation) and lean
manufacturing consulting. All of the Company's services are designed to improve
its clients' product quality, worker productivity and competitiveness and to
ensure an attractive return on the clients' technology investments. The Company
believes its focus on end-user performance, embedded in all its service
offerings, differentiates it from many of its competitors in the performance
support and information technology services marketplaces. The Company's
registered service mark, "We bring people and technology together,"(R)
succinctly describes the Company's activities.

The Company's revenue is generated primarily from Fortune 200 companies
having a need for large, diverse and recurring performance support and
information technology solutions. In 1996, RWD provided services to 74
companies in 23 industries. Among these clients were seven of the Fortune 10
companies and 20 of the Fortune 100 companies. The Company's clients include
Bristol-Myers Squibb, Chevron, Chrysler, Continental Cablevision, Deere &
Company, Detroit Edison, Dow Chemical, Ford, Merck, Procter & Gamble and
Steelcase. Chrysler engagements generated 33.9%, 28.5% and 27.6% of total
revenue in 1995, 1996 and the first quarter of 1997, respectively. Ford
engagements generated 12.4% of total revenue in the first quarter of 1997. No
other client generated more than 10% of total revenue in any of these periods.
Historically, a large percentage of the Company's revenue has come from follow-
on business from its existing clients. For example, in each of the past three
years, more than 80% of the year's total revenue was generated by clients who
had been clients in the previous year; and, in each of these years, aggregate
revenue generated by these repeat clients exceeded the previous year's total
revenue by more than 25%. As the scope of the Company's services has become
more comprehensive, average revenue per client has increased from $424,000 in
1994 to $878,000 in 1996, and the number of clients generating individually
more than $1.0 million of annual revenue increased from seven in 1994 to 19 in
1996.

3
<PAGE>

In 1996, the Company made significant inroads into global markets. The
Company expanded its services to Ford to include the global implementation of
lean manufacturing. To further augment these efforts, the Company expects to
open an office in London in 1998. Moreover, the Company is helping petroleum
companies improve the safety and efficiency of their overseas exploration and
production operations. The Company has begun providing tailored training and
documentation solutions to large companies installing enterprise-wide software
applications in their worldwide operations and has entered into an alliance
with Price Waterhouse to work together to provide implementation services. As a
result of these developments, RWD expects that services to multi-national
clients in their foreign operations will continue to grow.

RWD manages each of its projects using proven state-of-the-art methodologies
and formalized management techniques designed to ensure that each engagement
meets the Company's high standards for quality and client satisfaction as well
as its profitability objectives. The Company believes its structured project
management process, combined with its flexible organizational structure and
substantial commitment to internal training, positions RWD to achieve
sustainable, long-term growth. The Company strives to provide a work
environment and employee reward system that will enable it to attract, develop
and retain highly skilled and motivated professionals. RWD is also committed to
significant and broad-based employee stock ownership, believing this will
maximize employees' dedication to the Company's growth and profitability. In
addition to the co-founders' 59.9% post-offering, fully-diluted equity
ownership of the Company, 434 persons, or 64% of the Company's employees as of
March 31, 1997, held options to purchase, in the aggregate, 17.5% of the post-
offering, fully-diluted equity of the Company.

Total revenue and operating income increased from $12.7 million and $702,000,
respectively, in 1992 to $65.0 million and $8.7 million, respectively, in 1996,
while the number of employees increased from 168 on December 31, 1992 to 648 on
December 31, 1996. The Company believes demand for the types of services RWD
provides has increased rapidly in recent years and will continue to do so as
the gap between technological complexity and unsupported human capability
continues to widen. The Company's growth strategy is designed to enhance its
position as a comprehensive provider of performance support services and
information technology solutions by (i) increasing sales to its existing client
base, (ii) adding new clients and industries, (iii) broadening its range of
service offerings, (iv) expanding the scope of its geographic presence, (v)
maintaining its emphasis on recruiting and employee development and (vi)
exploring complementary acquisitions.

The Company was incorporated in Maryland in January 1988. The Company's
executive offices are located at 10480 Little Patuxent Parkway, Suite 1200,
Columbia, Maryland 21044-3530, and its telephone number is 410-730-4377.

THE OFFERING

<TABLE>
<S> <C>
Shares Offered by the Company....................... 3,000,000 shares
Shares Outstanding Immediately After the Offering... 13,807,586 shares(1)
Use of Proceeds..................................... To repay $3.8 million owed
to two stockholders and for
general corporate purposes,
including working capital
and possible acquisitions
Nasdaq National Market Symbol....................... RWDT
</TABLE>
- --------
(1) Excludes 3,084,210 shares issuable upon exercise of stock options
outstanding on March 31, 1997, at a weighted average exercise price of
$2.56 per share. See "Capitalization" and "Management--Employee Benefit
Plans."

4
<PAGE>

SUMMARY FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE, SHARE AND OPERATING DATA)

<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
--------------------------------------- -------------------
1992 1993 1994 1995 1996 1996 1997
------- ------- ------- ------- ------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenue................ $12,655 $18,418 $29,424 $47,132 $65,006 $ 14,632 $ 19,100
Operating income....... 702 1,607 4,158 6,651 8,737 1,949 3,001
Pro Forma Data(1):
Net income............ $ 217 $ 731 $ 2,384 $ 3,918 $ 5,168 $ 1,133 $ 1,814
Net income per
share(2)............. $ 0.40 $ 0.09 $ 0.14
Weighted average
shares
outstanding(2)....... 13,030 13,030 12,968
OPERATING DATA:
Number of employees (at
end of period)........ 168 222 332 520 648 548 679
Average revenue per
client (000s)......... n/a $ 253 $ 424 $ 636 $ 878 n/a n/a
</TABLE>

<TABLE>
<CAPTION>
MARCH 31, 1997
--------------------------------
PRO
FORMA
PRO AS
ACTUAL FORMA(3) ADJUSTED(3)(4)
------- -------- --------------
<S> <C> <C> <C>
BALANCE SHEET DATA:
Cash and marketable securities...... $ 5,370 $ (350) $31,008
Working capital..................... 13,988 768 35,926
Total assets........................ 33,380 27,660 59,018
Total debt.......................... 3,912 10,412 6,612
Stockholders' equity................ 22,560 5,840 40,998
</TABLE>
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(1) For each of the periods presented, the Company was an S Corporation
and, accordingly, was not subject to federal and certain state
corporate income taxes. The pro forma information has been computed as
if the Company were subject to federal and all applicable state
corporate income taxes for each of the periods presented assuming the
tax rate that would have applied had the Company been taxed as a C
Corporation. See "Dividend Policy and Prior S Corporation Status" and
"Management's Discussion and Analysis of Financial Condition and
Results of Operations--Overview."
(2) Includes that number of shares of Common Stock which, had they been
issued (at the initial public offering price set forth on the cover of
this Prospectus less the underwriting discount), would have generated
cash sufficient to fund the portion of the S Corporation Distribution
in excess of the Company's 1996 net income.
(3) Pro forma to give effect to the (i) cash payment of approximately $9.9
million and issuance by the Company of approximately $6.5 million of
non-interest bearing, demand promissory notes (the "S Corporation
Notes") to its stockholders prior to this offering (collectively, the
"S Corporation Distribution"), representing earnings not previously
distributed to the stockholders, (ii) establishment of an estimated
$4.5 million deferred tax liability, resulting from the Company's
conversion from an S Corporation to a C Corporation and (iii) $4.2
million of cash proceeds to be received by the Company from the
Concurrent Exercises. See "Dividend Policy and Prior S Corporation
Status" and "Management--Executive Compensation--Option Exercises and
Holdings."
(4) Pro forma as adjusted to give effect to the sale of the 3,000,000
shares of Common Stock offered hereby at the initial public offering
price set forth on the cover of this Prospectus and application of the
net proceeds therefrom as described in "Use of Proceeds."

The RWD Technologies, Inc. logo and the phrase, "We bring people and
technology together,"(R) are registered service marks of the Company. All
other trademarks or service marks appearing in this Prospectus are
trademarks or registered service marks of the companies that utilize them.

Certain statements contained in "Risk Factors," "Management's Discussion
and Analysis of Financial Condition and Results of Operations" and
"Business," including statements regarding development of the Company's
services, markets and future demand for the Company's services and other
statements herein regarding matters that are not historical facts, are
forward-looking statements (as defined in the Private Securities Litigation
Reform Act of 1995). Such forward-looking statements include risks and
uncertainties; consequently, actual results may differ materially from those
expressed or implied thereby. Factors that could cause actual results to
differ materially include, but are not limited to, those discussed under
"Risk Factors."

5
<PAGE>

RISK FACTORS

In addition to the other information in this Prospectus, the following
factors should be considered carefully in evaluating an investment in the
shares of Common Stock offered hereby.

Reliance on Key Clients; Industry Concentration. The Company has relied in
the past, and expects to continue to rely for the foreseeable future, on a few
key clients for a majority of its revenue. Chrysler, the Company's largest
client, generated 33.2%, 33.9%, 28.5% and 27.6% of total revenue in 1994,
1995, 1996 and the first quarter of 1997, respectively. Ford engagements
generated 12.4% of total revenue in the first quarter of 1997. The Company's
top five clients in 1994, 1995, 1996 and the first quarter of 1997 generated,
in the aggregate, 62.1%, 57.8%, 51.4% and 54.5% of total revenue, in each of
these respective periods. Automotive industry clients generated an aggregate
of 46.9%, 43.5%, 40.7% and 42.2% of total revenue in 1994, 1995, 1996 and the
first quarter of 1997, respectively. The automotive industry is subject to
cyclical and economic factors beyond the control of the Company which could
negatively affect future demand for the Company's services from automotive
clients. It is also possible that clients will develop or acquire in-house
expertise in services similar to those provided by the Company, thereby
significantly reducing demand for the Company's services. No assurance can be
given that the Company will be able to maintain its existing client base,
maintain or increase the level of revenue generated by its existing clients or
be able to attract new clients. Generally, the Company's engagements,
including those with Chrysler and Ford, have no minimum purchase requirements
and are terminable by the client with little or no notice to the Company. The
loss of one or more of the Company's significant clients, especially Chrysler
or Ford, or a substantial reduction in business from any of its significant
clients, regardless of the reason, is likely to have a materially adverse
effect on the Company. See "Business--Industries and Clients Served."

Fluctuating Results; Project Risks. The Company's operating results have
fluctuated from period to period in the past and may fluctuate significantly
in future periods. These variations result from a number of factors, such as
the number, significance and mix of client projects commenced or completed
during a period and the number of business days in a particular period. It is
difficult to forecast the timing of revenue because project cycles depend on
factors such as the size and scope of assignments and circumstances specific
to particular clients or industries. Third party products and services are
integral to the success of certain Company projects. To the extent third
parties do not deliver effective products and services on a timely basis, the
Company's project results could be negatively impacted. Additionally, employee
utilization rates vary from period to period not only due to changes in the
Company's volume of business but because of the timing of employee vacations,
hiring and training, the amount of time spent by employees on marketing and
project terminations or postponements. In the past, the Company has
experienced some seasonality in its business, with higher levels of revenue
and profitability in the first half of each year. This trend has resulted from
reduced utilization due to holidays and vacations as well as modestly lower
levels of client demand in the second half of the year. Generally, client
engagements, including Chrysler and Ford engagements, are terminable with
little or no notice or penalty, and a client's unanticipated decision to
terminate or postpone a project may result in higher than expected numbers of
unassigned Company professionals or severance costs, either of which could
materially adversely affect the Company's results of operations. The Company's
most significant expenses relate to salaries and benefits for its professional
staff. Since these expenses are generally fixed, the Company's results of
operations in a particular period may be materially adversely affected if
revenue falls below expectations. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations."

Need to Attract and Retain Professional Employees. The Company's continued
success and future growth will depend upon its ability to attract, develop and
retain a sufficient number of highly skilled, motivated professional
employees. Competition for personnel qualified to deliver most of the
Company's services is intense, and many of the companies with which the
Company competes for qualified professionals have substantially greater
financial and other resources than the Company. Furthermore, competition for
qualified personnel can be expected to increase as competition in the
Company's service offerings increases. There can be no assurance that the
Company will be able to recruit, develop and retain a sufficient number of
highly skilled, motivated professionals to compete successfully. The loss of a
significant number of professional personnel is

6
<PAGE>

likely to have a materially adverse effect on the Company's business prospects
and results of operations, particularly its ability to complete existing
projects or secure new projects. See "Business--Company Organization and
Methodologies."

Management of Growth. The Company's rapid growth has placed significant
demands on the Company's management, administrative, operating and financial
resources. The Company's ability to manage future growth will require the
Company to continue to enhance its operating, financial and management
information systems and to expand, develop, motivate and manage effectively a
changing and expanding professional work force. If the Company is unable to
manage growth effectively, the quality of the Company's services, its ability
to retain key personnel and its results of operations are likely to be
materially adversely affected. Should the Company acquire businesses in the
future, there can be no assurance that it will be successful in integrating
the acquired businesses into the Company's infrastructure or retaining their
key professionals. Furthermore, there can be no assurance that the Company's
business will continue to expand. The Company's growth could be adversely
affected by client dissatisfaction with prior Company services, reductions in
clients' spending allocations for services the Company provides, restrictions
placed by clients on services to client competitors, increased competition,
possible pricing or labor cost pressures and general economic trends. Also,
the Company's enterprise-wide reengineering implementation support services
will likely continue to depend, in part, upon its alliance with Price
Waterhouse. Any adverse change in this relationship could materially adversely
affect the Company's ability to generate or increase revenue from these
services. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations," "Business--RWD Growth Strategy" and "--RWD Services."

Risk of Client Dissatisfaction. The Company is subject to potential claims
by dissatisfied clients that Company services or actions by RWD employees did
not achieve the results expected by those clients or adversely impacted the
clients' operations. Any such claim could have a materially adverse effect on
the Company's results of operations and financial condition. The Company's
failure to meet a client's expectations or the client's belief that RWD may
have contributed to operating downtime could damage its relationship with that
client, could cause the client to terminate the Company's engagement with
little or no notice and could damage the Company's reputation, thereby
adversely affecting its ability to attract new or repeat business. See
"Business--Risk Management."

Dependence on Key Personnel. The success of the Company is highly dependent
upon the efforts and abilities of its co-founders, Dr. Robert W. Deutsch, 73,
and Mr. John H. Beakes, 54, the Chief Executive Officer and the Chief
Operating Officer, respectively, as well as its Group Vice Presidents, Messrs.
John E. Lapolla, 44, Kenneth J. Rebeck, 45, and Jeffrey W. Wendel, 42. Each of
these individuals is party to an employment agreement with the Company
containing customary noncompetition, nondisclosure and nonsolicitation
covenants. There can be no assurance that these agreements will prevent the
loss of any of these individuals or Company business. The loss of the services
of any of these key executives could have a materially adverse effect upon the
Company's business, results of operations and financial condition. The Company
does not maintain key man life insurance on these or any other RWD employees.
See "Management."

Budget Overruns. The majority of the Company's contracts are on a time and
materials basis, although many of these contracts contain initial "not-to-
exceed" fees and Company performance obligations. The remainder of the
Company's contracts are on a fixed-price basis, particularly those related to
the Company's information technology services. The failure of the Company to
complete a project to the client's satisfaction within the "not-to-exceed" or
fixed fee exposes the Company to unrecoverable budget overruns, which could
have a materially adverse effect on the Company's business, results of
operations and financial condition. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations."

Risks of Conducting International Operations. The Company expects that
within the next several years, its international operations may increase
significantly. Generally, the cost of doing business abroad is higher for U.S.
businesses than the cost of doing business domestically. Therefore, the
Company could experience a decline in its operating margins as the
significance of its international operations increases. International
operations and

7
<PAGE>

the provision of services in foreign markets are subject to a number of
special risks, including currency exchange rate fluctuations, trade barriers,
exchange controls, national and regional labor strikes, political risks and
risks of increases in duties, taxes and governmental royalties, as well as
changes in laws and policies governing operations of foreign-based companies.
See "Management's Discussion and Analysis of Financial Condition and Results
of Operations" and "Business--RWD Growth Strategy."

Rapid Technological Change; Dependence on New Solutions. The Company's
future success will depend on its ability to gain expertise in technological
advances rapidly as well as to respond quickly to evolving industry trends and
client needs. There can be no assurance that the Company will be successful in
adapting to these advances in technology or in addressing changing client
needs on a timely basis or, if the Company does gain such expertise, that it
will be able to market new services successfully. There can be no assurance
that the Company will satisfactorily complete projects where unproven
technologies or tools are critical to the projects' success. In addition,
there can be no assurance that the services or technologies developed by
others will not significantly reduce demand for the Company's services or
render the Company's services obsolete. See "Business--RWD's Services."

Substantial Competition. The Company's service areas are highly competitive
and are subject to low barriers to entry and rapid change. The Company faces
competition for client assignments from a number of companies having
significantly greater financial, technical and marketing resources and greater
name recognition than the Company. Principal competitors for the Company's
services include the consulting practices of the six largest national
accounting firms as well as professional services groups of many large
technology and management consulting companies. The Company also competes with
smaller service providers whose specific, more narrowly focused service
offerings may be more attractive to potential clients than the Company's
multi-dimensional approach. In addition, clients may elect to use their
internal resources to satisfy their needs for the services the Company
provides. There can be no assurance that the Company will compete successfully
with potential clients' internal resources or with existing or new
competitors. See "Business--Competition."

Limited Protection of Proprietary Expertise, Methodologies and Software. The
Company's success is highly dependent upon its specialized and proprietary
expertise, methodologies and software. To protect proprietary information, the
Company relies only on a combination of trade secret laws, employee
nondisclosure policies and third party confidentiality agreements. A
substantial majority of the Company's employees are not bound by their
nondisclosure agreements once their employment has been terminated, although
the Company believes common law generally prohibits these employees from
disclosing to third parties proprietary information of the Company. There can
be no assurance that the steps taken by the Company to protect its proprietary
rights will be adequate to prevent misappropriation of such rights or that
third parties will not independently develop functionally equivalent or
superior methodologies or software. Additionally, because the Company's
engagements are work-for-hire based, the Company assigns ownership of all
materials the Company develops specifically for its clients to those clients
upon project completion. There can be no assurance, however, that third
parties will not assert infringement claims against the Company in the future
that would result in costly litigation or license arrangements regardless of
the merits of such claims. See "Business--Intellectual Property and Other
Proprietary Rights."

Risks Associated with Acquisition Strategy. One of the elements of the
Company's growth strategy is to pursue acquisitions that could provide well-
trained, high-quality professionals, new service offerings, additional
industry expertise, a broader client base or an expanded geographic presence.
The Company has never made an acquisition, and there can be no assurance that
it will be able to identify acceptable acquisition candidates or complete the
acquisition of any identified candidates. A substantial portion of the
Company's capital resources, including a portion of the net proceeds from this
offering, could be used for these acquisitions. The Company may require
additional debt or equity financings for future acquisitions, which may not be
available on terms favorable to the Company, if at all. There also can be no
assurance that the Company will be able to successfully integrate an
acquisition into the Company's operations or that any acquired business will
be able to be operated profitably by the Company. See "Business--RWD Growth
Strategy."

8
<PAGE>

Control by Principal Stockholder. Dr. Deutsch and members of his family will
beneficially own approximately 72.8% of the shares of Common Stock outstanding
upon completion of this offering. As a result, Dr. Deutsch and his family will
be able to control the outcome of all matters requiring a stockholder vote,
including the election of the entire Board of Directors and the approval of
significant corporate matters such as change of control transactions, thereby
controlling the affairs and management of the Company. See "Principal
Stockholders."

Effect of Anti-Takeover Provisions. The Company's Board of Directors has the
authority to issue preferred stock and to determine the price, rights,
conversion ratios, preferences and privileges of that stock without further
vote or action by the holders of the Common Stock. The rights of the holders
of Common Stock will be subject to, and may be adversely affected by, the
rights, including economic rights, of the holders of any shares of preferred
stock issued in the future. Any such issuance may discourage third parties
from attempting to acquire control of the Company. Furthermore, the Company is
subject to the anti-takeover provisions of the Maryland General Corporation
Law which prohibit the Company from engaging in a "business combination" with
an "interested stockholder" for a period of five years after the date of the
transaction in which the person first becomes an "interested stockholder,"
unless the business combination is approved in a prescribed manner. The
Company is also subject to the control share acquisition provisions of the
Maryland General Corporation Law, which provide that shares acquired by a
person with certain levels of voting power have no voting rights unless
approved by a stockholder vote of two-thirds of the votes entitled to be cast,
excluding shares owned by the acquiror and by the Company's officers and
employee-directors, and in certain circumstances, such shares may be redeemed
by the Company. The application of these statutes and certain other provisions
of the Company's Charter could have the effect of discouraging, delaying or
preventing a change of control of the Company not approved by the Board of
Directors, which could adversely affect the market price of the Company's
Common Stock. See "Description of Capital Stock."

Shares Eligible for Future Sale. Upon completion of this offering, the
Company will have outstanding 13,807,586 shares of Common Stock. Sales of a
substantial number of shares of Common Stock in the public market following
this offering, or the perception that such sales could occur, could adversely
affect the market price for the Company's Common Stock. Substantially all of
the shares to be outstanding upon completion of this offering (other than the
3,000,000 shares being offered hereby) are subject to the lock-up agreements
described below. Of the shares to be outstanding upon completion of this
offering, 10,623,476 shares are "restricted," as that term is defined in the
Securities Act of 1933, as amended (the "Securities Act"). Of these restricted
shares, 4,666,530 have been held for more than one year and, as such, will be
salable upon expiration of the lock-up agreements described below, subject to
certain volume and manner of sale restrictions under Rule 144 of the
Securities Act.

The 3,084,210 shares reserved for issuance upon exercise of options
outstanding on March 31, 1997 and the 891,240 shares reserved for issuance
upon exercise of future grants under the Company's stock option plan will be
registered under the Securities Act 90 days after completion of this offering.
The Company has an additional 175,000 shares of Common Stock reserved for
issuance in connection with its Employee Stock Purchase Plan which the Company
intends to register under the Securities Act no earlier than September 1,
1997. Other than shares subject to the lock-up agreements, shares registered
under the Securities Act will be freely transferable upon issuance unless
acquired by affiliates of the Company. Of the shares subject to outstanding
options, 1,050,270 shares are issuable upon exercise of fully vested options,
with 386,700 of such shares subject to the lock-up agreements described below.
See "Management--Employee Benefit Plans" and "Shares Eligible for Future
Sale."

9
<PAGE>

granted or shares issued in connection with the Company's stock option plan or
unregistered shares issued in connection with any acquisition) during such 180
day period. However, William Blair & Company, L.L.C., may, in its sole
discretion and at any time without notice, release for public sale all or any
portion of these shares subject to such lock-up agreements. See
"Underwriting."

No Prior Market for Common Stock; Possible Volatility of Stock Price. Prior
to this offering, there was no public market for the Common Stock, and there
can be no assurance that an active public market for the Common Stock will
develop or be sustained after the offering. The initial public offering price
was determined by negotiations among the Company and the Representatives of
the Underwriters and may not be indicative of market prices of the Common
Stock after this offering. See "Underwriting." The market price of the Common
Stock may be subject to significant fluctuations in response to variations in
quarterly operating results and other events or factors, such as announcements
of new services by the Company or its competitors and changes in financial
estimates by securities analysts. Moreover, the stock market and the market
prices of the shares of many technology companies in recent years have
experienced significant price and volume fluctuations. These fluctuations
often have been unrelated to the operating performance of specific public
companies. Broad market fluctuations, as well as economic conditions generally
and in technology industries specifically, may adversely affect the market
price of the Common Stock. There can be no assurance that the market price of
the Common Stock will not decline below the initial public offering price.

Dividend Policy; S Corporation Distribution. Until immediately prior to this
offering, the Company was treated as an S Corporation under the Internal
Revenue Code of 1986, as amended (the "Code"). Accordingly, the Company made
periodic distributions to its stockholders in amounts sufficient to enable the
stockholders to pay income taxes on account of the Company's earnings.
Following consummation of this offering, the Company does not anticipate
paying any further cash dividends for the foreseeable future. Immediately
prior to this offering, the Company converted from S Corporation to
C Corporation status. In connection with this conversion, the Company effected
the S Corporation Distribution to its stockholders. As a result of the
S Corporation Distribution, consisting of an aggregate of approximately $9.9
million in cash and $6.5 million of S Corporation Notes, the Company's
retained earnings and stockholders' equity were significantly reduced. In
addition, the Company will record a one-time, non-cash charge against earnings
in the second quarter of 1997 in the amount of approximately $4.5 million,
resulting from a deferred tax liability in connection with the Company's
conversion from S Corporation to C Corporation status. This tax liability will
become due ratably over the four years following conversion. See "Dividend
Policy and Prior S Corporation Status," "Capitalization" and "Management's
Discussion and Analysis of Financial Condition and Results of Operations--
Liquidity and Capital Resources."

Dilution. Investors participating in this offering will incur immediate and
substantial dilution in the tangible book value of their shares. To the extent
that currently outstanding options to purchase Common Stock are exercised,
there will be further dilution. See "Dilution."

10
<PAGE>

USE OF PROCEEDS

The net proceeds to the Company from the sale of the 3,000,000 shares of
Common Stock being offered hereby are estimated to be approximately $35.2
million ($38.6 million if the Underwriters' over-allotment option is exercised
in full). The Company will use $3.8 million of the net proceeds to retire
notes issued to the Company's co-founders to evidence loans made to the
Company at various times from 1988 to 1991, which bear interest at 9% per
annum and mature on March 31, 1998 (the "Stockholder Notes"). The Company will
use the remaining net proceeds (plus the $4.2 million of cash proceeds from
the Concurrent Exercises) for working capital to support the planned growth of
its business and for other general corporate purposes, which may include the
acquisition of complementary businesses. From time to time, the Company
evaluates possible acquisitions, but is not currently considering any specific
acquisition. The Company intends to invest the net proceeds from this offering
in interest-bearing, investment-grade obligations pending application thereof
in the manner described above.

DIVIDEND POLICY AND PRIOR S CORPORATION STATUS

From its inception in January 1988 until immediately prior to completion of
this offering, the Company was subject to taxation under Subchapter S of the
Code. As a result, the net income of the Company, for federal and certain
state income tax purposes, was reported by and taxable directly to the
Company's stockholders during that time rather than to the Company. Primarily
to provide funds for tax obligations payable by its stockholders on account of
the Company's income in 1995 and 1996, the Company made aggregate cash
distributions to its stockholders of $691,300 and $240,500 during 1996 and the
first quarter of 1997, respectively. In connection with its conversion from S
Corporation to C Corporation status, the Company effected the S Corporation
Distribution (consisting of an aggregate of approximately $9.9 million in cash
payments and the issuance of approximately $6.5 million principal amount of S
Corporation Notes) to the Company's stockholders prior to the conversion. The
S Corporation Distribution represents the stockholders' proportionate interest
in Company earnings which had not been distributed to the stockholders prior
to the conversion date. See "Certain Transactions."

Following this offering, the Company does not intend to pay cash dividends
as it intends to retain all earnings to support its planned growth. Any future
dividends will depend upon the Company's results of operations, financial
condition, cash requirements and other factors deemed relevant by the Board of
Directors.

11
<PAGE>

CAPITALIZATION

At March 31, 1997, the following table sets forth: (i) the actual total
short-term debt and total capitalization of the Company; (ii) such short-term
debt and capitalization on a pro forma basis to give effect to the S
Corporation Distribution, the Concurrent Exercises and recognition of an
estimated $4.5 million deferred tax liability resulting from conversion to C
Corporation status; and (iii) such pro forma short-term debt and
capitalization as adjusted to reflect the sale of the 3,000,000 shares of
Common Stock offered hereby and application of the net proceeds therefrom
(including retirement of the Stockholder Notes), after deducting the
underwriting discount and estimated offering expenses. This table should be
read in conjunction with the Company's Financial Statements and related Notes
thereto and other financial information appearing elsewhere in this
Prospectus. See "Use of Proceeds," "Dividend Policy and Prior S Corporation
Status" and "Management's Discussion and Analysis of Financial Condition and
Results of Operations--Liquidity and Capital Resources."

<TABLE>
<CAPTION>
MARCH 31, 1997
-----------------------------
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
------- --------- -----------
(IN THOUSANDS)
<S> <C> <C> <C>
Short-term debt:
S Corporation Notes............................ $ -- $ 6,500 $ 6,500
Current portion of capital lease obligation.... 37 37 37
Stockholder Notes.............................. 3,800 3,800 --
------- ------- -------
Total short-term debt........................ $ 3,837 $10,337 $ 6,537
======= ======= =======
Capital lease obligation, net of current portion. $ 75 $ 75 $ 75
------- ------- -------
Stockholders' equity:
Common Stock, $0.10 par value; 50,000,000
shares authorized; 4,873,740 shares issued and
outstanding actual; 10,807,586 shares issued
and outstanding pro forma; 13,807,586 shares
issued and outstanding pro forma as
adjusted(1)................................... 487 1,081 1,381
Additional paid-in capital..................... 2,764 6,350 41,208
Retained earnings (accumulated deficit)........ 19,309 (1,591) (1,591)
------- ------- -------
Total stockholders' equity................... 22,560 5,840 40,998
------- ------- -------
Total capitalization....................... $22,635 $ 5,915 $41,073
======= ======= =======
</TABLE>
- --------
(1) Actual shares outstanding assumes the Concurrent Exercises had not
occurred and excludes 9,057,210 shares issuable upon exercise of all
options that were outstanding on March 31, 1997. Pro forma and pro forma
as adjusted information assumes the occurrence of the Concurrent
Exercises and excludes the 3,084,210 shares issuable upon exercise of all
other options outstanding on March 31, 1997, having a weighted average
exercise price of $2.56 per share. All share amounts exclude 891,240
shares reserved for issuance upon exercise of future option grants under
the Company's Amended and Restated Equity Participation Plan and 175,000
shares reserved for issuance in connection with the Company's Employee
Stock Purchase Plan. See "Management--Employee Benefit Plans" and Note 5
of Notes to Financial Statements.

12
<PAGE>

DILUTION

At March 31, 1997, the pro forma net tangible book value of the Company was
$5.8 million, or $0.54 per share of Common Stock after giving effect to the S
Corporation Distribution, recognition of an estimated $4.5 million deferred
tax liability resulting from conversion to a C Corporation and the Concurrent
Exercises. Pro forma net tangible book value per share is determined by
dividing the pro forma tangible book value of the Company (total tangible
assets less total liabilities) by the number of outstanding shares of Common
Stock as of that date. After giving effect to the receipt of the net proceeds
to the Company from the sale by the Company of the 3,000,000 shares of Common
Stock offered hereby, the Company's pro forma net tangible book value as of
March 31, 1997 would have been $41.0 million, or $2.97 per share. This
represents an immediate increase in pro forma net tangible book value to
existing stockholders of $2.43 per share and an immediate dilution to new
investors of $10.03 per share. The following table illustrates the per share
dilution:

<TABLE>
<S> <C> <C>
Initial public offering price................................. $13.00
Pro forma tangible book value before offering................. 0.54
Increase attributable to new investors........................ 2.43
----
Pro forma net tangible book value after the offering.......... 2.97
------
Dilution to new investors..................................... $10.03
======
</TABLE>

On a pro forma basis after giving effect to the S Corporation Distribution
and the Concurrent Exercises, the following table summarizes, as of March 31,
1997, differences between existing stockholders and new investors with respect
to the number of shares of Common Stock purchased from the Company, the total
consideration paid and the average price paid per share, before deducting the
underwriting discount and estimated offering expenses:

<TABLE>
<CAPTION>
AVERAGE PRICE
SHARES PURCHASED TOTAL CONSIDERATION PER SHARE
------------------ ------------------- -------------
NUMBER PERCENT AMOUNT PERCENT
---------- ------- ----------- -------
<S> <C> <C> <C> <C> <C>
Existing stockholders...... 10,807,586 78.3% $ 7,430,500 16.0% $ 0.69
New investors.............. 3,000,000 21.7 39,000,000 84.0 13.00
---------- ------ ----------- ------
Total.................... 13,807,586 100.0% $46,430,500 100.0%
========== ====== =========== ======
</TABLE>

At March 31, 1997, there were also outstanding options to purchase an
additional 3,084,210 shares of Common Stock at a weighted average exercise
price of $2.56 per share. To the extent these options are exercised, there
will be further dilution to new investors in the net tangible book value of
their shares. See "Capitalization," "Management--Employee Benefit Plans" and
Note 5 of Notes to Financial Statements.

13
<PAGE>

SELECTED FINANCIAL DATA

The following selected financial data should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," the Company's Financial Statements and related Notes thereto and
other financial information included elsewhere in this Prospectus. The balance
sheet and income statement data at and for the years ended December 31, 1993,
1994, 1995 and 1996, are derived from the Company's Financial Statements,
which have been audited by Arthur Andersen LLP, independent public
accountants. The balance sheet and income statement data at and for the year
ended December 31, 1992 and the three months ended March 31, 1996 and 1997
have been derived from unaudited financial statements of the Company which, in
the opinion of management, include all adjustments, consisting of normal
recurring adjustments, necessary for a fair presentation of the financial
condition and results of operations of the Company. The results of operations
for the three months ended March 31, 1997 are not necessarily indicative of
the results that may be expected for the full year.

<TABLE>
<CAPTION>
THREE MONTHS
ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
-------------------------------------------- ----------------
1992 1993 1994 1995 1996 1996 1997
------- ------- ------- ------- -------- ------- -------
(IN THOUSANDS, EXCEPT PER SHARE AND SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenue............... $12,655 $18,418 $29,424 $47,132 $ 65,006 $14,632 $19,100
Cost of services...... 10,217 14,654 21,751 35,269 48,132 10,863 13,413
------- ------- ------- ------- -------- ------- -------
Gross profit.......... 2,438 3,764 7,673 11,863 16,874 3,769 5,687
General and
administrative
expenses............. 1,736 2,157 3,515 5,212 8,137 1,820 2,686
------- ------- ------- ------- -------- ------- -------
Operating income...... 702 1,607 4,158 6,651 8,737 1,949 3,001
Other income
(expense), net....... (321) (368) (185) (121) (123) (61) 22
------- ------- ------- ------- -------- ------- -------
Income before taxes... 381 1,239 3,973 6,530 8,614 1,888 3,023
Provision for income
taxes................ 34 45 60 168 365 70 100
------- ------- ------- ------- -------- ------- -------
Net income............ $ 347 $ 1,194 $ 3,913 $ 6,362 $ 8,249 $ 1,818 $ 2,923
======= ======= ======= ======= ======== ======= =======
Pro Forma Data(1):
Provision for income
taxes.............. $ 164 $ 508 $ 1,589 $ 2,612 $ 3,446 $ 755 $ 1,209
Net income.......... $ 217 $ 731 $ 2,384 $ 3,918 $ 5,168 $ 1,133 $ 1,814
======= ======= ======= ======= ======== ======= =======
Net income per
share(2)........... $ 0.40 $ 0.09 $ 0.14
Weighted average
shares
outstanding(2)..... 13,030 13,030 12,968
BALANCE SHEET DATA (AT
PERIOD END):
Cash and marketable
securities........... $ 26 $ 2,292 $ 1,726 $ 2,394 $ 5,534 $ 2,540 $ 5,370
Working capital....... 1,908 4,600 7,620 11,439 12,053 11,634 13,988
Total assets.......... 4,466 10,171 14,533 23,658 29,858 26,022 33,380
Total debt............ 3,952 4,677 4,276 6,500 3,925 3,800 3,912
Stockholders' equity
(deficit)............ (712) 2,484 6,397 12,758 20,132 13,914 22,560
</TABLE>
- --------
(1) For each of the periods presented, the Company was an S Corporation and,
accordingly, was not subject to federal and certain state corporate income
taxes. The pro forma information has been computed as if the Company were
subject to federal and all applicable state corporate income taxes for
each of the periods presented assuming the tax rate that would have
applied had the Company been taxed as a C Corporation. See "Dividend
Policy and Prior S Corporation Status" and "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Overview."
(2) Includes that number of shares of Common Stock which, had they been
issued (at the initial public offering price set forth on the cover of
this Prospectus less the underwriting discount), would have generated
cash sufficient to fund the portion of the S Corporation Distribution in
excess of the Company's 1996 net income.

14
<PAGE>

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

OVERVIEW

RWD provides a broad range of integrated solutions designed to improve the
productivity and effectiveness of workers in complex operating environments.
The Company was founded in 1988 by Dr. Robert W. Deutsch, the Company's Chief
Executive Officer, and Mr. John H. Beakes, the Company's Chief Operating
Officer. Since 1991, its third year of operations, the Company has been
profitable in every quarter. Since inception, the Company has significantly
expanded its client base and the breadth of its service offerings. The Company
manages each project using proven state-of-the-art methodologies and
formalized management techniques designed to ensure that each engagement meets
the Company's high standards for quality and client satisfaction as well as
its profitability objectives. The Company's services integrate its
comprehensive expertise in information technology, conventional performance
support, reengineering and lean manufacturing in a coordinated manner,
customized to the individual needs of each client. Total revenue increased by
$17.9 million, or 37.9%, from $47.1 million in 1995 to $65.0 million in 1996.
The Company's operating income increased by $2.1 million, or 31.4%, from $6.7
million in 1995 to $8.7 million in 1996. The Company's total revenue and
operating income increased by $4.5 million, or 30.5%, and $1.1 million, or
54.0%, respectively, from the first quarter of 1996 to the first quarter of
1997.

Almost all of RWD's revenue is generated from professional fees. The
majority of the Company's contracts are on a time-and-materials basis,
although many of these contracts contain initial "not-to-exceed" fees and
Company performance obligations. The remainder of the Company's contracts are
on a fixed-price basis, particularly those related to the Company's
information technology services. All revenue is recognized using the
percentage-of-completion method. The Company typically bills all contracts on
a monthly basis, and senior management reviews outstanding accounts receivable
balances weekly to monitor client satisfaction and collections. Generally, the
Company's engagements, including those with Chrysler and Ford, have no minimum
purchase requirements and are terminable by the client with little or no
notice to the Company. The Company's projects are typically completed in as
few as one to as many as 24 months.

One of the contributing factors to the Company's revenue growth has been the
increase in the breadth of its service offerings. Prior to 1990, the Company
offered conventional performance support services. Since that time, the
Company has added information technology services, including EPSS in 1990, EUI
systems in 1991 and EDMS in 1992, lean manufacturing consulting services and
sales force automation in 1993, enterprise-wide software implementation
support services in 1994 and remote diagnostic systems in 1996. In 1996, RWD
provided services to 74 companies in 23 industries. Chrysler engagements
generated 33.9%, 28.5% and 27.6% of total revenue in 1995, 1996 and the first
quarter of 1997, respectively. These engagements were performed pursuant to
multiple purchase orders, many of which were for related projects and all of
which were governed by the same customary terms and conditions. Ford
engagements, performed pursuant to multiple, independent contracts, generated
an aggregate of 12.4% of total revenue in the first quarter of 1997. No client
other than Chrysler or Ford generated more than 10% of total revenue in any of
these periods. Automotive industry clients generated 43.5%, 40.7% and 42.2% of
total revenue in 1995, 1996 and the first quarter of 1997, respectively.
Historically, a large percentage of the Company's revenue has come from
follow-on business from its existing clients. For example, in each of the past
three years, over 80% of the year's total revenue was generated by clients who
had been significant clients in the previous year; and, in each of those
years, aggregate revenue generated by these repeat clients exceeded the
previous year's total revenue by over 25%. As the scope of the Company's
services has become more comprehensive, average revenue per client has
increased from $424,000 in 1994 to $878,000 in 1996, and the number of clients
generating individually more than $1.0 million of annual revenue increased
from seven in 1994 to 19 in 1996.

Gross profit margins per project and professional staff utilization rates
are critical to the Company's financial performance. The Company manages these
parameters by carefully establishing and monitoring project budgets and
timetables and by closely tracking staffing requirements for projects in
progress and anticipated projects. The status of all projects in progress and
personnel utilization are reviewed twice per month by project managers, first
line supervisors and senior management to ensure client satisfaction and to
monitor performance relative to internal financial and operating expectations.
The number of professionals assigned to a project varies according to the
size, complexity, duration and demands of the project. Professional staff
utilization rates vary

15
<PAGE>

from period to period not only because of variations in the Company's volume
of business but because of the timing of employee vacations, hiring and
training, the amount of time spent by employees on marketing and project
terminations or postponements. In the past, the Company has experienced some
seasonality in its business, with higher levels of revenue and profitability
in the first half of each year. This trend has resulted from reduced
utilization due to holidays and vacations as well as modestly lower levels of
client demand in the second half of the year. Client engagements are generally
terminable with little or no notice or penalty, and a client's unanticipated
decision to terminate or postpone a project may result in higher than expected
unassigned Company professionals or severance expenses.

The principal components of cost of services are compensation and benefits
to the Company's professional staff. Cost of services also includes training
and travel expenses for the Company's professional staff, fees paid to
subcontractors and depreciation of capital equipment provided to the
professional staff. The Company does not maintain a separate marketing or
sales staff, and time devoted by professional personnel to marketing is
included in cost of services as are costs associated with administrative
personnel that directly support the Company's professional staff. General and
administrative expenses are primarily comprised of salaries for corporate,
accounting and other headquarters executive and administrative personnel and
other corporate overhead. During all periods discussed, the Company was an S
Corporation and, accordingly, was not subject to federal or most state
corporate income taxes. Therefore, the provision for income taxes consists
only of state and local income taxes payable directly by the Company,
including a Michigan corporate tax. The pro forma provision for income taxes
assumes the Company was subject to federal, state and local income taxes
applicable to C Corporations and was calculated using effective tax rates of
43.0% and 41.0% in 1992 and 1993, respectively, and 40.0% in each of the
subsequent periods.

RESULTS OF OPERATIONS

The following table sets forth, for the periods indicated, income statement
data expressed as a percentage of revenue and the percentage change in such
items versus the prior comparable period.

<TABLE>
<CAPTION>
PERCENTAGE OF REVENUE
-------------------------------------------
THREE MONTHS
YEAR ENDED DECEMBER 31, ENDED MARCH 31, PERCENTAGE INCREASE (DECREASE)
------------------------- ---------------- ---------------------------------------
FIRST QUARTER
1994 1995 1996 1996 1997 1994 TO 1995 1995 TO 1996 1996 TO 1997
------- ------- ------- ------- ------- ------------ ------------ -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenue................. 100.0% 100.0% 100.0% 100.0% 100.0% 60.2% 37.9% 30.5%
Cost of services........ 73.9 74.8 74.0 74.2 70.2 62.1 36.5 23.5
------- ------- ------- ------- ------- ----- ----- ------
Gross profit............ 26.1 25.2 26.0 25.8 29.8 54.6 42.2 50.9
General and
administrative
expenses............... 12.0 11.1 12.5 12.4 14.1 48.3 56.1 47.6
------- ------- ------- ------- ------- ----- ----- ------
Operating income........ 14.1 14.1 13.5 13.4 15.7 59.9 31.4 54.0
Other income (expense),
net.................... (0.6) (0.3) (0.2) (0.4) 0.1 (35.1) 2.2 (136.4)
------- ------- ------- ------- ------- ----- ----- ------
Income before taxes..... 13.5 13.8 13.3 13.0 15.8 64.4 31.9 60.1
Provision for income
taxes.................. 0.2 0.4 0.6 0.5 0.5 181.8 116.6 42.9
------- ------- ------- ------- ------- ----- ----- ------
Net income.............. 13.3% 13.4% 12.7% 12.5% 15.3% 62.6% 29.7% 60.8%
======= ======= ======= ======= ======= ===== ===== ======
Pro Forma Data:
Provision for income
taxes................. 5.4% 5.5% 5.3% 5.2% 6.3% 64.4% 31.9% 60.1%
Net income............. 8.1% 8.3% 8.0% 7.7% 9.5% 64.4% 31.9% 60.1%
======= ======= ======= ======= ======= ===== ===== ======
</TABLE>

THREE MONTHS ENDED MARCH 31, 1997 COMPARED TO THREE MONTHS ENDED MARCH 31,
1996

Revenue. Revenue increased by $4.5 million, or 30.5%, from $14.6 million in
the first quarter of 1996 to $19.1 million in the first quarter of 1997. The
Company experienced growth in all of its service areas from 1996 to 1997, with
enterprise-wide software implementation support services revenue increasing by
33.3%, from $2.7 million to $3.7 million; lean manufacturing consulting
services revenue increasing by 124.7%, from $1.2 million to $2.8 million;
information technology services revenue increasing by 54.5%, from $3.3 million
to $5.0 million; and conventional performance support services revenue
increasing by 3.3%, from $7.4 million to $7.6

16
<PAGE>

million. Conventional performance support services revenue was affected by a
decrease in the volume of documentation services to the petrochemical industry
offset by new business in the consumer products and pharmaceutical sectors.
Conventional performance support services, enterprise-wide software
implementation support services, information technology services and lean
manufacturing consulting services generated 40.0%, 19.2%, 26.4% and 14.4% of
total revenue, respectively, in the first quarter of 1997.

Revenue from the Company's largest client, Chrysler, increased by 14.1%,
from $4.6 million in the first quarter of 1996 to $5.3 million in the first
quarter of 1997, primarily as a result of increases in information technology
and lean manufacturing consulting services provided by the Company.

Gross Profit. Gross profit increased by $1.9 million, or 50.9%, from $3.8
million in the first quarter of 1996 to $5.7 million in the first quarter of
1997 and increased from 25.8% of total revenue in the first quarter of 1996 to
29.8% of total revenue in the first quarter of 1997. This increase in gross
profit resulted primarily from an increase in professional staff utilization
combined with increases in billing rates.

General and Administrative Expenses. General and administrative expenses
increased by $900,000, or 47.6%, from $1.8 million in the first quarter of
1996 to $2.7 million in the first quarter of 1997. These expenses increased
from 12.4% of total revenue in the first quarter of 1996 to 14.1% of total
revenue in the first quarter of 1997. This increase in general and
administrative expenses as a percentage of revenue resulted from increased
legal and accounting fees, marketing expenses and compensation costs.

Operating Income. As a result of the foregoing, the Company's operating
income increased by $1.1 million, or 54.0%, from $1.9 million in the first
quarter of 1996 to $3.0 million in the first quarter of 1997 and increased
from 13.4% of total revenue in the first quarter of 1996 to 15.7% of total
revenue in the first quarter of 1997.

Other Income (Expense). Other income (expense) was ($60,700) in the first
quarter of 1996 and $22,100 in the first quarter of 1997. In the first quarter
of 1996, this expense consisted primarily of interest expense paid on the
Stockholder Notes and the Company's line of credit, partially offset by
interest income from cash balances. In the first quarter of 1997, other income
consisted primarily of interest income from cash balances, partially offset by
interest expense paid on the Stockholder Notes.

Pro Forma Net Income. Pro forma net income increased by $680,900, or 60.1%,
from $1.1 million in the first quarter of 1996 to $1.8 million in the first
quarter of 1997. Pro forma net income in both periods assumes the Company was
taxed for federal and state income tax purposes as a C corporation at an
effective rate of 40.0%.

YEAR ENDED DECEMBER 31, 1996 COMPARED TO YEAR ENDED DECEMBER 31, 1995

Revenue. Revenue increased by $17.9 million, or 37.9%, from $47.1 million in
1995 to $65.0 million in 1996. The Company experienced growth in each of its
service areas from 1995 to 1996, with enterprise-wide software implementation
support services revenue increasing by 75.8%, from $7.6 million to $13.4
million; lean manufacturing consulting revenue increasing by 99.8%, from $3.8
million to $7.7 million; information technology services revenue increasing by
76.2%, from $9.4 million to $16.5 million; and conventional performance
support services revenue increasing by 4.2%, from $26.3 million to $27.4
million. Conventional performance support services, enterprise-wide software
implementation support services, information technology services and lean
manufacturing consulting services generated 42.1%, 20.7%, 25.4% and 11.8% of
total revenue, respectively, in 1996 compared to 55.8%, 16.2%, 19.9% and 8.1%
of total revenue, respectively, in 1995.

Revenue from the Company's largest client, Chrysler, increased by 16.3%,
from $16.0 million in 1995 to $18.6 million in 1996, primarily as a result of
increases in information technology and lean manufacturing consulting services
provided by the Company.

Gross Profit. Gross profit increased by $5.0 million, or 42.2%, from $11.9
million in 1995 to $16.9 million in 1996 and increased from 25.2% of revenue
in 1995 to 26.0% of revenue in 1996. This increase in the gross margin
resulted from an increase in billing rates charged to clients, partially
offset by a decline in professional staff utilization. In addition,
reimbursable expenses made up a smaller proportion of revenue, increasing the
gross margin because these expenses are reimbursed to the Company generally
without significant mark-up.

17
<PAGE>

General and Administrative Expenses. General and administrative expenses
increased by $2.9 million, or 56.1%, from $5.2 million in 1995 to $8.1 million
in 1996, increasing from 11.1% of revenue in 1995 to 12.5% of revenue in 1996.
This increase in general and administrative expenses as a percentage of
revenue resulted primarily from increased rent associated with expansion of
existing offices and increased depreciation associated with purchases of
furniture, computer and office equipment and leasehold improvements.

Operating Income. As a result of the foregoing, the Company's operating
income increased by $2.1 million, or 31.4%, from $6.7 million in 1995 to $8.7
million in 1996 but declined from 14.1% of revenue in 1995 to 13.5% of revenue
in 1996.

Other Income (Expense). Other expense was $120,500 in 1995 and $123,100 in
1996. In both years, this expense consisted primarily of interest paid on the
Stockholder Notes and the Company's line of credit, partially offset by
interest income from cash balances.

Pro Forma Net Income. Pro forma net income increased by $1.3 million, or
31.9% from $3.9 million in 1995 to $5.2 million in 1996 but declined slightly
from 8.3% of revenue in 1995 to 8.0% of revenue in 1996. Pro forma net income
in 1995 and 1996 assumes the Company was taxed for federal and state income
tax purposes as a C Corporation at an effective rate of 40.0%.

YEAR ENDED DECEMBER 31, 1995 COMPARED TO YEAR ENDED DECEMBER 31, 1994

Revenue. Revenue increased by $17.7 million, or 60.2%, from $29.4 million in
1994 to $47.1 million in 1995. The Company experienced growth in all of its
service areas in 1995 compared to 1994, with enterprise-wide software
implementation support services revenue increasing by 451.8%, from
$1.4 million to $7.6 million; lean manufacturing consulting revenue increasing
by 81.0%, from $2.1 million to $3.8 million; conventional performance support
services revenue increasing by 38.5%, from $19.0 million to $26.3 million; and
information technology services revenue increasing by 35.1%, from $6.9 million
to $9.4 million. Conventional performance support services, enterprise-wide
software implementation support services, information technology services and
lean manufacturing consulting services generated 55.8%, 16.2%, 19.9% and 8.1%
of total revenue, respectively, in 1995, compared to 64.5%, 4.7%, 23.6% and
7.2% of total revenue, respectively, in 1994.

Revenue from the Company's largest client, Chrysler, increased by $6.2
million, or 63.2%, from $9.8 million in 1994 to $16.0 million in 1995,
primarily as a result of increases in conventional performance support
services provided by RWD. The Company also had significant increases in its
information technology services and began providing lean manufacturing
consulting services to Chrysler in 1995, both of which contributed to the
revenue increase.

Gross Profit. Gross profit increased by $4.2 million, or 54.6%, from $7.7
million in 1994 to $11.9 million in 1995 but declined from 26.1% of revenue in
1994 to 25.2% of revenue in 1995. This decline in the gross margin resulted
from increases in training, benefits and other personnel-related costs,
including increased depreciation expense from the purchase of additional
computer equipment for professional staff. The professional staff utilization
rate declined slightly in 1995, which also adversely affected the gross
margin.

General and Administrative Expenses. General and administrative expenses
increased by $1.7 million, or 48.3%, from $3.5 million in 1994 to $5.2 million
in 1995 but declined from 12.0% of revenue in 1994 to 11.1% of revenue in
1995. This decline in general and administrative expenses as a percentage of
revenue resulted primarily from efficiencies achieved in benefits and
professional services expenses, which were offset in part by increased
expenditures to support new services and the opening of additional offices.

Operating Income. As a result of the foregoing, the Company's operating
income increased by $2.5 million, or 59.9%, from $4.2 million in 1994 to $6.7
million in 1995 and remained constant at 14.1% of revenue in both 1994 and
1995.

Other Income (Expense). Other expense decreased from $185,800 in 1994 to
$120,500 in 1995. Interest expense remained relatively constant while the
Company generated more interest income from higher cash balances in 1995.

Pro Forma Net Income. Pro forma net income increased by $1.5 million, or
64.4%, from $2.4 million in 1994 to $3.9 million in 1995 and increased from
8.1% of revenue in 1994 to 8.3% of revenue in 1995. Pro forma net income in
1994 and 1995 assumes the Company was taxed for federal and state income tax
purposes as a C Corporation at an effective rate of 40.0%.

18
<PAGE>

SELECTED QUARTERLY OPERATING RESULTS

The following tables set forth unaudited income statement data for each of
the nine quarters in the period beginning January 1, 1995 and ending March 31,
1997, as well as the percentage of the Company's total revenue represented by
each item. In management's opinion, this unaudited information has been
prepared on a basis consistent with the Company's audited annual financial
statements and includes all adjustments (consisting only of normal recurring
adjustments) necessary for a fair presentation of the information for the
quarters presented, when read in conjunction with the Financial Statements and
related Notes thereto included elsewhere in this Prospectus. The operating
results for any quarter are not necessarily indicative of results for any
future period.

<TABLE>
<CAPTION>
THREE MONTH PERIOD ENDED
-----------------------------------------------------------------------------------------
MARCH 31, JUNE 30, SEPT. 30, DEC. 31, MARCH 31, JUNE 30, SEPT. 30, DEC. 31, MARCH 31,
1995 1995 1995 1995 1996 1996 1996 1996 1997
--------- -------- --------- -------- --------- -------- --------- -------- ---------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenue................ $10,199 $11,838 $12,562 $12,533 $14,632 $15,999 $16,606 $17,769 $19,100
Cost of services....... 7,382 8,628 9,543 9,716 10,863 11,717 12,382 13,170 13,413
------- ------- ------- ------- ------- ------- ------- ------- -------
Gross profit........... 2,817 3,210 3,019 2,817 3,769 4,282 4,224 4,599 5,687
General and
administrative
expenses.............. 1,204 1,329 1,269 1,410 1,820 1,938 2,107 2,272 2,686
------- ------- ------- ------- ------- ------- ------- ------- -------
Operating income....... 1,613 1,881 1,750 1,407 1,949 2,344 2,117 2,327 3,001
Other income (ex-
pense), net........... (48) (30) (19) (24) (61) (48) 4 (18) 22
------- ------- ------- ------- ------- ------- ------- ------- -------
Income before taxes.... 1,565 1,851 1,731 1,383 1,888 2,296 2,121 2,309 3,023
Provision for income
taxes................. 40 48 45 35 70 70 75 150 100
------- ------- ------- ------- ------- ------- ------- ------- -------
Net income............. $ 1,525 $ 1,803 $ 1,686 $ 1,348 $ 1,818 $ 2,226 $ 2,046 $ 2,159 $ 2,923
======= ======= ======= ======= ======= ======= ======= ======= =======
Pro Forma Data (1):
Provision for income
taxes............... $ 626 $ 740 $ 692 $ 554 $ 755 $ 918 $ 848 $ 925 $ 1,209
Net income........... $ 939 $ 1,111 $ 1,039 $ 829 $ 1,133 $ 1,378 $ 1,273 $ 1,384 $ 1,814
======= ======= ======= ======= ======= ======= ======= ======= =======
Net income per share
(2)................. $ 0.09 $ 0.10 $ 0.10 $ 0.11 $ 0.14
Weighted average
shares outstanding
(2)................. 13,030 13,030 13,030 13,030 12,968
<CAPTION>
AS A PERCENTAGE OF REVENUE
-----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenue................ 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of services....... 72.4 72.9 76.0 77.5 74.2 73.2 74.6 74.1 70.2
------- ------- ------- ------- ------- ------- ------- ------- -------
Gross profit........... 27.6 27.1 24.0 22.5 25.8 26.8 25.4 25.9 29.8
General and
administrative
expenses.............. 11.8 11.2 10.1 11.3 12.4 12.1 12.7 12.8 14.1
------- ------- ------- ------- ------- ------- ------- ------- -------
Operating income....... 15.8 15.9 13.9 11.2 13.4 14.7 12.7 13.1 15.7
Other income (ex-
pense), net........... (0.5) (0.3) (0.2) (0.2) (0.4) (0.3) 0.1 (0.1) 0.1
------- ------- ------- ------- ------- ------- ------- ------- -------
Income before taxes.... 15.3 15.6 13.7 11.0 13.0 14.4 12.8 13.0 15.8
Provision for income
taxes................. 0.4 0.4 0.4 0.3 0.5 0.4 0.5 0.8 0.5
------- ------- ------- ------- ------- ------- ------- ------- -------
Net income............. 14.9% 15.2% 13.3% 10.7% 12.5% 14.0% 12.3% 12.2% 15.3%
======= ======= ======= ======= ======= ======= ======= ======= =======
Pro forma data (1):
Provision for income
taxes............... 6.1% 6.3% 5.5% 4.4% 5.2% 5.7% 5.1% 5.2% 6.3%
Net income........... 9.2% 9.3% 8.3% 6.6% 7.7% 8.6% 7.7% 7.8% 9.5%
======= ======= ======= ======= ======= ======= ======= ======= =======
</TABLE>
- --------
(1) For each of the periods presented, the Company was an S Corporation and,
accordingly, was not subject to federal and certain state corporate income
taxes. The pro forma information has been computed as if the Company were
subject to federal and all applicable state corporate income taxes for
each of the periods presented assuming the tax rate that would have
applied had the Company been taxed as a C Corporation. See "Dividend
Policy and Prior S Corporation Status" and "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Overview."
(2) Includes that number of shares of Common Stock which, had they been issued
(at the initial public offering price set forth on the cover of this
Prospectus less the underwriting discount), would have generated cash
sufficient to fund the portion of the S Corporation Distribution in excess
of the Company's 1996 net income.

19
<PAGE>

LIQUIDITY AND CAPITAL RESOURCES

The Company's primary capital need is for working capital and capital
expenditures necessary to support its growth. Since its inception, the Company
has financed its operations and capital expenditures primarily with cash flow
from operations and approximately $3.8 million in stockholder debt and $3.0
million in equity provided by the Company's co-founders. This stockholder debt
and equity was primarily provided from 1988 through 1991. See "Certain
Transactions."

The Company's cash and marketable securities were $5.4 million at March 31,
1997, compared to $5.5 million at December 31, 1996, $2.4 million at December
31, 1995 and $1.7 million at December 31, 1994. Increases in cash and
marketable securities were attributable primarily to increases in cash
provided by operations, partially offset by investments in equipment necessary
to support the Company's increasing number of employees. The Company's working
capital was $14.0 million at March 31, 1997, $12.1 million at December 31,
1996, $11.4 million at December 31, 1995 and $7.6 million at December 31,
1994.

The Company's operating activities provided cash of $1.5 million for the
quarter ended March 31, 1997, compared to $4.3 million for the same period in
1996. The lower levels of cash from operations in the first quarter of 1997
resulted from the difference in the timing of billings and collections in the
first quarter of 1997 compared to the first quarter of 1996. The Company's
operating activities provided cash of $11.9 million in 1996 compared to $3.0
million in 1995 and $459,000 in 1994. These increases in cash provided by
operations resulted from higher net income, depreciation and accounts payable,
partially offset in 1995 by increases in contract accounts receivable balances
at year-end.

Investing activities provided cash of $494,800 in the quarter ended March
31, 1997, compared to the use of $1.4 million for the same period in 1996.
Increases in cash provided from investing activities resulted primarily from
the sale of marketable securities, partially offset by the purchase of
computer and office equipment. Investing activities used cash of $5.0 million
in 1996, compared to $4.0 million in 1995 and $1.2 million in 1994. Cash used
in investing activities consisted primarily of purchases of computer and
office equipment, office furniture and leasehold improvements.

Financing activities used cash of $682,900 in the quarter ended March 31,
1997, compared to the use of $2.7 million for the same period in 1996.
Financing activities used cash of $3.8 million in 1996, compared to providing
$1.4 million of cash in 1995 and $459,000 in 1994. In all periods, financing
activities consisted primarily of borrowings and repayments under the
Company's line of credit. In the first quarter of 1997, Common Stock was
repurchased by the Company from departing employees for $301,500 pursuant to
stock restriction agreements. In addition, the Company distributed an
aggregate of $240,500 to pay stockholder taxes on 1996 S Corporation earnings.
In 1996, Common Stock was repurchased by the Company from departing employees
for $214,100 pursuant to stock restriction agreements. In addition, the
Company distributed an aggregate of $691,300 to its stockholders to enable
them to pay income taxes on the Company's 1995 S Corporation earnings.

The Company has a $7.5 million unsecured revolving line of credit with a
commercial bank, which bears interest at the 30-day LIBOR rate, plus 1.75%
(7.48% on March 31, 1997). The Company utilizes this line of credit to finance
a portion of its working capital needs. There was a $476,200 outstanding
balance on December 31, 1994, a $2.7 million outstanding balance on December
31, 1995 and no balance outstanding on December 31, 1996 or March 31, 1997.

In connection with its conversion to C Corporation status effected
immediately prior to this offering, the Company made the S Corporation
Distribution. Approximately $4.8 million of the S Corporation Distribution was
paid in cash in April 1997, approximately $5.1 million was paid in cash from
the Company's working capital immediately prior to this offering, and
approximately $6.5 million was paid by issuance of the S Corporation Notes.
The Company expects to repay the S Corporation Notes from operating cash flows
during 1997. In addition, the Company intends to repay the $3.8 million of
Stockholder Notes from the net proceeds of this offering.

20
<PAGE>

The Company will record a one-time, non-cash charge against earnings in the
second quarter of 1997 in the amount of approximately $4.5 million, resulting
from a deferred tax liability in connection with the Company's conversion from
S Corporation to C Corporation status. This tax liability will become due
ratably over the four years beginning in 1997.

During 1997, the Company expects to make between $4.0 million and $5.0
million in capital expenditures, primarily for office furniture, computer and
office equipment and leasehold improvements to support the anticipated growth
in its professional and administrative staff. Capital expenditures in the
first quarter of 1997 were $1.0 million. Capital expenditures currently are
expected to be funded from available cash, although the Company may consider
alternative financing methods, such as equipment leases or asset-based
borrowings.

The Company believes the net proceeds from this offering and the $4.2
million in cash proceeds from the Concurrent Exercises, together with its
current cash balances, cash provided by future operations and its line of
credit, will be sufficient to meet the Company's working capital and cash
needs for at least the next 12 months.

EFFECTS OF INFLATION

Inflation has not had a significant effect on the Company's business during
the past three years. The Company cannot predict what effect, if any,
inflation may have on its future results of operations.

21
<PAGE>

BUSINESS

INTRODUCTION

RWD Technologies, Inc. provides a broad range of integrated solutions
designed to improve the productivity and effectiveness of workers in complex
operating environments. As the scope and complexity of technology used by
businesses accelerates and the global business environment becomes more
competitive, companies are increasingly focused on maximizing the return on
their advanced technology investments. To achieve this goal, companies must
ensure their employees receive effective performance support, including the
tools and training to operate these advanced systems effectively. Founded in
1988, the Company initially provided conventional performance support services
such as classroom training and hard copy documentation to plant personnel in
large industrial companies employing complex manufacturing systems and
technologies. In recent years, the Company has expanded its performance
support services to include the design, development and implementation of
customized information technology solutions including Enhanced User Interface
("EUI") systems, Electronic Performance Support Systems ("EPSS"), Electronic
Document Management Systems ("EDMS"), remote diagnostic systems, sales force
automation and Internet/Intranet applications. More recently, RWD has expanded
its services to include end-user training and performance support services
essential to the effective implementation of enterprise-wide business process
reengineering efforts (particularly SAP software implementation) and lean
manufacturing consulting. All of the Company's services are designed to
improve its clients' product quality, worker productivity and competitiveness
and to ensure an attractive return on its clients' technology investments. The
Company's services integrate its comprehensive expertise in information
technology, conventional performance support, reengineering and lean
manufacturing in a coordinated manner, customized to the individual needs of
each client. The Company believes its focus on end-user performance, embedded
in all its service offerings, differentiates the Company from many of its
competitors in the performance support and information technology services
marketplaces. The Company's registered service mark, "We bring people and
technology together,"(R) succinctly describes the Company's activities.

RWD was founded in January 1988 by Dr. Robert W. Deutsch and Mr. John H.
Beakes. For the 21 years prior to founding RWD, Dr. Deutsch was the Chief
Executive Officer of General Physics Corporation ("General Physics"), a
company he founded while a Professor of Nuclear Science and Engineering at The
Catholic University of America in Washington, D.C. During Dr. Deutsch's
tenure, General Physics became a leading provider of plant operator training
services to the nuclear power industry and professional services to the
defense industry. General Physics completed an initial public offering in 1982
and by 1987 had grown to 1,700 employees, with annual revenue of $115 million.
Mr. Beakes is a graduate of the U.S. Naval Academy and served for eight years
in the U.S. Navy's Nuclear Submarine Service. He joined General Physics in
1974 and had advanced to the position of Executive Vice President and Chief
Operating Officer by 1985. A change of control and resulting shift in
operating philosophy precipitated Dr. Deutsch's and Mr. Beakes's decision to
leave General Physics at the end of 1987.

Based on their experience at General Physics, Dr. Deutsch and Mr. Beakes
believed large U.S. industrial companies were making substantial investments
in automation and other advanced operating technologies but achieving
relatively low returns on these investments. They concluded this was the
result of plant workers having inadequate training and performance support
systems. Dr. Deutsch and Mr. Beakes formed RWD with the objective of applying
to large U.S. industrial companies the performance support methodologies
proven to be successful in the nuclear power industry. The Company's first
significant client was Chrysler. The Company's client list has grown to
include other clients in the automotive industry as well as clients in the
chemical, consumer products, pharmaceutical and telecommunications industries,
among others. In 1996, RWD provided services to 74 companies in 23 industries.
Among these clients were seven of the Fortune 10 companies and 20 of the
Fortune 100 companies. The Company's clients include Bristol-Myers Squibb,
Chevron, Chrysler, Continental Cablevision, Deere & Company, Detroit Edison,
Dow Chemical, Ford, Merck, Procter & Gamble and Steelcase. Chrysler
engagements generated 33.9%, 28.5% and 27.6% of total revenue in 1995, 1996
and the first quarter of 1997, respectively. Ford engagements generated 12.4%
of total revenue in the first quarter of 1997. No other client generated more
than 10% of total revenue in any of these periods.

22
<PAGE>

BUSINESS OPPORTUNITIES

In recent years, the scope and complexity of technology used by businesses
worldwide have grown rapidly, outpacing the typical worker's unsupported
capability to understand and operate this technology. This widening gap
between technological complexity and worker competence significantly limits a
company's ability to realize the full benefits of its technology investments.
RWD believes this trend has accelerated the demand for a variety of
performance support tools. These tools include customized performance-based
training programs, custom-designed job aids and software systems for task
support, all of which accelerate the time to competency for end users.

Workers operating highly complex and expensive equipment are critical to a
company's productivity and competitiveness. Companies are faced with the
challenge of ensuring their work forces have the skills necessary to maximize
productivity. This is often in an environment of high labor turnover, constant
upgrading of technologies and retirement of senior employees whose knowledge
has been critical to operations. Workers are supported by operating,
maintenance and reference materials and training which often are poorly
designed, contain extraneous information, are difficult to update and modify
and are delivered inefficiently. With rapid advances in software technology,
including the transition from mainframe to distributed client/server
environments and the development of Internet/Intranet technologies, companies
increasingly seek support systems that are user friendly and reduce worker
time to competency while increasing their productivity. Information technology
solutions such as EUI systems, EPSS and EDMS are designed to provide end users
with critical, real-time information, in order to allow them to operate and
maintain equipment employing a wide range of advanced technologies safely and
efficiently.

Rapid technological advancements during the past several years have
contributed to heightened global competition in virtually all industries. This
global competition has provided the impetus for companies to reengineer
business processes, information systems and individual workers' job functions
to improve productivity and responsiveness to market trends. For example, a
growing number of large companies have begun to implement enterprise-wide
software systems such as SAP, a state-of-the-art software system designed to
integrate all of the critical functions of a company's global operations.
These systems involve the redesign of business processes as well as job
functions in long-term implementation processes typically costing millions of
dollars. High-quality training and performance support for workers are
critical to the success of business reengineering and to the effective ongoing
use of enterprise-wide systems.

Increased global competition has also provided the impetus for many
companies to maximize the efficiency of their operations and redesign their
manufacturing functions. When properly implemented, lean manufacturing, a
system developed by the Japanese, has been demonstrated to provide substantial
improvements in cost, quality and productivity compared to traditional mass
production methods. These improvements are achieved through a system of
changes affecting all aspects of production, including inventory controls,
production line operations, equipment configuration and preventive maintenance
and training. Increasingly, large manufacturing enterprises are seeking
specialized expertise to assist them in obtaining the efficiencies available
through the effective implementation of lean manufacturing.

23
<PAGE>

RWD OPERATING STRATEGY

To address these business opportunities, RWD has developed the following
operating strategies:

. Focus on Enhancing End-User Performance. Since its inception, RWD has
focused its efforts on enhancing the performance of end users employing
advanced technologies in complex operating environments. This focus is
based on the Company's belief that end-user performance is the single
most important factor enabling a business enterprise to achieve product
or service quality and profitability. By concentrating its efforts on
the end user, RWD strives to provide services that produce tangible
improvements in its clients' productivity and a high return on their
advanced technology investments.

. Provide Broad Range of Services. The Company's current service offerings
include conventional performance support, information technology
solutions, enterprise-wide software implementation support and lean
manufacturing consulting. The Company intends to adapt and expand its
service offerings in response to emerging needs in the marketplace and
through the application of evolving technologies.

. Build Long-Term Relationships with Large Companies. The Company targets
Fortune 200 companies because these organizations have diverse and
recurring performance support needs and the competitive incentives and
financial resources to justify utilizing RWD's services. RWD believes
there is an economic incentive for these companies to enter into
partnership relationships with RWD covering a wide range of services
which are not part of their core competencies. The Company's ability to
achieve a high degree of understanding of a client's operations and work
force needs enables RWD to provide valuable, as-needed services to the
client on a recurring basis.

. Maintain and Improve Standardized Work Processes. The development and
utilization of structured and standardized work processes have been
integral to the Company's success to date. The Company's internally
developed methods for project management and its standardized tools for
developing performance-based training programs and customized software
and documentation are integral to the Company's ability to deliver
consistent, high-quality solutions and successfully manage its growth.

. Provide Supportive Organizational Structure and Reward System. A
critical element of the Company's success has been its ability to
attract, develop and retain a highly skilled and motivated professional
staff. Extensive technical and management training together with a
project management certification program enable RWD professionals to
expand their skills and attain increasing levels of responsibility. The
Company believes providing employees with a challenging and fulfilling
work environment, a competitive compensation structure and broad-based
equity ownership will continue to maximize their commitment to the
Company's growth and profitability.

RWD GROWTH STRATEGY

The Company's growth strategy is designed to improve its position as a
comprehensive provider of performance support services and information
technology solutions by:

. Increasing Sales to Existing Client Base. The Company believes
significant opportunities exist to provide Company services to
additional divisions within its existing clients and to market other RWD
services to client divisions already served. As the scope of the
Company's services has become more comprehensive, average revenue per
client has increased from $424,000 in 1994 to $878,000 in 1996, and the
number of clients generating individually more than $1.0 million of
annual revenue grew from seven in 1994 to 19 in 1996. The Company
believes that, by consistently providing high-quality, value-added
services, revenue from its existing client base will continue to
increase.

. Providing Current Service Offerings to New Clients and Industries. RWD
targets industries that employ advanced and rapidly changing
technologies and complex, capital-intensive processes. The Company often
leverages expertise gained in one industry to expand its client base
within that industry and to target clients in other industries.
Currently, the Company is seeking to expand its presence, or establish
new client relationships, with companies in the consumer products,
pharmaceutical, healthcare, semiconductor and airline industries.

24
<PAGE>

. Broadening Range of Services. RWD intends to continue to broaden its
service offerings to meet client demands, thereby further establishing
itself as a leading provider of a comprehensive range of performance
support services. The Company is committed to monitoring emerging
technologies and incorporating appropriate advances into RWD's service
offerings. The Company's New Products and Services Committee manages and
allocates funds for the Company's internal research and development
efforts as well as cultivates relationships with various universities
and their faculties to facilitate expansion of RWD's service offerings.

. Expanding Geographic Presence. The Company currently serves clients
located across the United States and has provided services to European,
Asian and South American operations of several U.S.-based clients. The
Company has expanded the number of its offices from three in 1992 to 10
as of the date of this Prospectus. The Company intends to continue its
"pull" expansion strategy, opening U.S. offices in locations where there
exist significant ongoing client needs. The Company will apply this same
strategy to the pursuit of international engagements with multi-national
clients, establishing overseas offices based upon client requirements.
RWD expects to open its first overseas office in London in 1998.

. Maintaining Emphasis on Recruiting and Employee Development. The ability
to attract, develop and retain a highly skilled professional staff is
critical to the growth and future success of RWD. The Company intends to
continue to expand and refine its recruiting process to attract the best
available work force. RWD has developed a series of rigorous training
programs, in which its professional staff is encouraged to participate.
These programs are designed to teach technical, management and business
skills to both entry level and experienced personnel.

. Exploring Complementary Acquisitions. The Company will evaluate the
acquisition of complementary businesses that could act as a source of well-
trained, high-quality professionals, new service offerings, additional
industry expertise, a broader client base or an expanded geographic
presence.

RWD'S SERVICES

The Company's core services are as follows:

Conventional Performance Support. RWD provides a broad range of conventional
end-user performance support services. These services include designing and
presenting classroom and plant-floor training; developing and managing hard
copy training materials, technical procedures and documentation; designing and
developing customized job aids; and acting as plant-floor consultants to ensure
proper integration of equipment and systems and reduction of plant down-time.
The Company believes it is essential that the delivery systems used to impart
knowledge to workers be cost effective and readily accepted by workers.
Personnel who operate and maintain high technology equipment often have little
experience using computers or other advanced technologies. For these workers,
conventional training is generally preferable to computer-based training, and
hard copy documentation is preferable to on-line documentation. RWD uses a
performance-based approach to training which focuses on streamlining training
content to include only the information required to perform each task
effectively. The Company's training materials make extensive use of graphical
representations of information. The Company believes these "mental models" are
particularly effective in facilitating quick and accurate comprehension and
decreasing training delivery costs.

RWD's documentation services are integral and complementary to its
performance-based training approach. These services include data collection and
the creation, management and distribution of engineering, operating and
technical information. Documentation services also include upgrading existing
documentation and capturing "best operating" practices, which are then
presented concisely in steps that are accurate, user-focused, easy to follow
and error resistant. RWD documentation services make extensive use of graphics
to illustrate how equipment operates and create technical descriptions that
help personnel develop strong cognitive models of the equipment they operate.

RWD's conventional performance support services are delivered primarily to
manufacturing and process industries. A significant portion of these services
is provided to the automotive industry in connection with the

25
<PAGE>

launch of new and redesigned vehicles. In addition, the Company provides
training courses for engineers, operators and maintenance and laboratory
personnel that support new technologies in the petroleum, chemical, consumer
products and other industries. Conventional performance support services are
also provided to assist clients in complying with regulatory requirements such
as OSHA safety regulations in the petroleum and chemical industries and in
obtaining ISO quality certification. RWD has earned a number of distinguished
service awards, including Chrysler's Gold Pentastar award which it received in
the three most recent years awarded, 1994, 1995 and 1996. This award is given
annually to fewer than 2% of Chrysler's 2,200 non-production service
providers. The Company believes its expertise in conventional performance
support services provides a foundation for all its other services and serves
as an effective first step in assisting clients in their migration to more
advanced performance support technologies. Conventional performance support
services generated $26.3 million, or 55.8%, $27.4 million, or 42.1%, and $7.6
million, or 40.0%, of total revenue in 1995, 1996 and the first quarter of
1997, respectively.

The following are examples of the Company's conventional performance support
projects:

. Since 1990, RWD has worked together with a large U.S. automobile
manufacturer to provide technical training to the manufacturer's plant-
floor workers in locations worldwide. This training is designed to
increase worker competency in connection with the launch of new and
redesigned vehicles. RWD's customized performance-based training
programs have resulted in significantly reduced classroom time and
training costs. RWD instructors also function as plant-floor
consultants, engaging in systems integration and preparing workers to
trouble-shoot malfunctioning equipment.

. A major oil company engaged RWD to assist it in increasing refinery run
times and reducing the frequency and duration of unit shutdowns. To
accomplish this goal, the Company developed user-friendly, task-oriented
operating manuals, procedures and performance-based training courses.
RWD also helped the client develop a laboratory calibration and
maintenance program.

Information Technology. The Company's information technology services
include the design and implementation of customized Enhanced User Interface
("EUI") systems, Electronic Performance Support Systems ("EPSS") and
Electronic Document Management Systems ("EDMS"), all of which give the end
user easy access to information critical to operating advanced technology
effectively. These information technology solutions and services include
client/server applications development, implementation and support;
Internet/Intranet technology solutions; software development; and systems
integration. The Company's information technology services incorporate
multimedia, detailed graphics and animation to generate intelligent learning
tools and systems to support human performance. RWD provides information
technology services to clients in a number of industries such as automotive,
public utilities, cable television, telecommunications, pharmaceutical, hotel
and financial services. RWD has designed and implemented EUI-based
client/server systems for remote workers in the office furniture,
pharmaceutical, publishing and agricultural machinery industries. RWD also
designs and implements remote diagnostic systems and sales force automation
systems and works with document management software manufacturers to provide
comprehensive enterprise-wide EDMS solutions. In addition, RWD is involved in
several projects which rely on Internet technology as a platform for
communication and information transfer in a variety of industries. These
projects include developing Intranets, designing remote diagnostic information
systems and related projects. Information technology services generated $9.4
million, or 19.9%, $16.5 million, or 25.4%, and $5.0 million, or 26.4%, of
total revenue in 1995, 1996 and the first quarter of 1997, respectively.

The following are examples of the Company's information technology projects:

. An international hotel chain using a text-based, computer reservation
system engaged the Company to design an EUI system to enable the
client's reservations center operators to handle incoming calls more
quickly and to market the chain's services more effectively. RWD
designed an EUI system that was integrated with the client's existing
reservation system, resulting in an intuitive graphical interface. This
replaced the existing system which required the operator to utilize up
to 12,000 different codes. The Company's EUI system significantly
shortened operator training time, time to competency and call handling
time, thereby resulting in increased caller satisfaction and improved
overall sales effectiveness. The chain's 1,800 reservation agents now
use the Company's EUI system to annually log approximately 25 million
calls worldwide.

26
<PAGE>

. A major pulp and paper manufacturer, faced with the challenge of
transferring expert-level knowledge from its most experienced operators
to its newer workers, selected RWD to design and implement a stand-alone
EPSS. This EPSS is designed to reduce plant down-time and improve
product quality by providing job-related practical knowledge and
structured training information to all operators on the plant floor,
whenever needed. This "just-in-time" information system includes
operating procedures, equipment and process chemistry information,
problem-solving guidance and training. The system uses text, photos,
graphics, animation and video to explain concepts and provide
information.

. A consortium of major oil companies and a foreign government needed to
manage more than 150,000 technical documents to construct and safely
operate a large offshore oil platform. RWD designed an extensive EDMS
that incorporated intuitive navigational strategies so end users could
readily access the required documents. End users accustomed to eight-to-
ten minute document retrieval times now experience an on-screen document
delivery rate of four seconds, with printouts available in less than one
minute.

Enterprise-Wide Reengineering Support. Capitalizing on its end-user focus
and performance support expertise, RWD has developed a rapidly growing service
area supporting the implementation of enterprise-wide software applications,
principally SAP. The Company uses its standardized performance-based training
approach to support multi-year, high-cost, enterprise-wide software
implementation efforts of Fortune 500 companies. This approach is designed to
ensure that system end users have the knowledge and tools necessary to operate
effectively during enterprise-wide software implementations. As with its other
support services, the Company's software implementation support tools include
on-line help systems that provide end users with immediate access to
information specific to their identified tasks.

RWD has entered into a strategic alliance with Price Waterhouse, an
international consulting firm and leading provider of enterprise-wide software
implementation services. Under this non-binding arrangement, the Company
provides performance support services in joint software implementation
engagements with Price Waterhouse. The Company believes this arrangement
represents a substantial opportunity to expand its client base in this service
area. Through this relationship, Price Waterhouse and the Company have worked
together to assist two pharmaceutical companies, three high-technology
companies and one consumer products company in their enterprise-wide software
implementation efforts. The Company began 1996 with five significant
enterprise-wide software implementation training and documentation clients and
ended the year with 13 such clients. Enterprise-wide software implementation
support services generated $7.6 million, or 16.2%, $13.4 million, or 20.7%,
and $3.7 million, or 19.2%, of total revenue in 1995, 1996 and the first
quarter of 1997, respectively.

The following is an example of the Company's enterprise-wide software
implementation training and documentation projects:

. An international chemical company engaged RWD to provide performance
support to the client's employees during its multi-year, global
implementation of SAP enterprise-wide software. RWD prepared and
presented classroom and on-the-job materials and training. Each training
course contained an appropriate level of concepts, a series of job aids
and scenario-based, hands-on exercises that made the SAP software easier
for the employees to understand and use. RWD also designed on-line
support tools that provide users with immediate access to information
specific to their tasks. Deploying RWD training and support materials
has resulted in reduced time spent in training and has improved time to
competency of the client's end users.

Lean Manufacturing Consulting. RWD is a leading provider of lean
manufacturing expertise to U.S. industry. The Company's lean manufacturing
consulting services include developing and deploying entire production systems
as well as designing and presenting specialized lean manufacturing training
workshops to illustrate and teach the benefits of lean manufacturing. The
objective of lean manufacturing is to achieve world-class quality and cost
performance based on continuous improvement and the elimination of waste. The
major components for lean manufacturing, a system developed and refined by the
Japanese, include high machine reliability, level production, just-in-time
material control, "stop-the-line" operating procedures and the human systems
that support this manufacturing philosophy. This system utilizes specific,
simple-to-understand tools,

27
<PAGE>

including mistake-proofing, standardized work procedures and housekeeping
techniques. RWD provides lean manufacturing implementation guidance through a
team of experts who have substantial experience using and deploying this
systems approach to manufacturing. Lean manufacturing consulting services
generated $3.8 million, or 8.1%, $7.7 million, or 11.8%, and $2.8 million, or
14.4%, of total revenue in 1995, 1996 and the first quarter of 1997,
respectively.

The following is an example of the Company's lean manufacturing consulting
projects:

. In planning to manufacture a new engine at its plant in Europe, a large
automobile manufacturer projected initial personnel requirements based
on a traditional mass manufacturing approach. The manufacturer then
asked RWD to work with the manufacturer's managers to assess the changes
in processes that could be made by applying lean manufacturing
principles. The critical issues facing the RWD team were reengineering
the material supply system and eliminating excess labor time within the
production process. RWD placed a team of experienced lean manufacturing
personnel on site to perform the necessary assessments and then to
implement the recommended lean manufacturing approaches on the engine
production line. Based on the early success of the Company's initial
five-month effort and other services provided by RWD, the client has
asked RWD to help implement lean manufacturing concepts in all of its
European operations.

INDUSTRIES AND CLIENTS SERVED

The Company has provided services to clients in the following 23 industries:

<TABLE>
<CAPTION>
INDUSTRIES
<S> <C> <C>
Agricultural Machinery Entertainment Petroleum
Automotive Manufacturing Financial Services Pharmaceutical
Automotive Components Healthcare Publishing
Chemical Hotel Pulp and Paper
Communications Equipment Insurance Restaurant
Computer Systems Metal Fabrication Software Applications
Consumer Products Office Furniture Telecommunications
Electric Utilities Package Delivery
</TABLE>

The following is a list of representative clients served by the Company
during 1996. These clients generated, in the aggregate, approximately 90% of
the Company's 1996 revenues.

CLIENTS
<S> <C> <C>
Applebee's International, Inc. Ford Motor Company Lyondell Petrochemical Company
Blandin Paper Company Frito-Lay, Inc. Merck & Co., Inc.
Boston Edison Company Gannett Media Technologies Merrill Lynch, Pierce, Fenner & Smith
Bristol-Myers Squibb Company International Incorporated
Chevron U.S.A. Products Company General Motors Corporation Mobil Oil Corporation
Chrysler Corporation Georgia-Pacific Corporation Price Waterhouse, LLP
CIGNA Company Hibernia Management and The Procter & Gamble Company
Continental Cablevision, Inc. Development Company Ltd. Rhone Poulenc-Rorer
Deere & Company Hitachi America Ltd Southern Natural Gas
The Detroit Edison Company Hoechst Marion Roussel, Inc. Steelcase, Inc.
The Dow Chemical Company Houston Lighting & Power Company UAW Ford
First Data Corporation Kraft Foods, Inc Visa Interactive, Inc.
</TABLE>

28
<PAGE>

Chrysler, the Company's largest client, generated 33.2%, 33.9%, 28.5% and
27.6% of total revenue in 1994, 1995, 1996 and the first quarter of 1997,
respectively. Ford generated 12.4% of total revenue in the first quarter of
1997. No other client generated more than 10% of total revenue in any of these
periods. The Company's top five clients in 1994, 1995, 1996 and the first
quarter of 1997 generated an aggregate of 62.1%, 57.8%, 51.4% and 54.5% of
total revenue in each of these respective periods. Automotive industry clients
generated an aggregate of 46.9%, 43.5%, 40.7% and 42.2% of total revenue in
1994, 1995, 1996 and the first quarter of 1997, respectively.

COMPANY ORGANIZATION AND METHODOLOGIES

Adaptable Organizational Structure. The Company's organizational structure
provides its employees with clearly defined roles and accountability across
all levels of the organization. This well-defined structure is formally
evaluated on a semi-annual basis and modified as necessary to adapt to
changing client demands, introduction of new services and expansion and
diversification of the Company's client base. The Company has a divisional
structure, with each division organized into five tiers: Team Members, Team
Leaders, Managers, Directors and a Vice President. Specifically defined
responsibilities, communicated through formal training programs and review
processes, exist at each level. Each Team Leader, Manager, Director and Vice
President generally has no more than five individuals reporting directly to
him or her. All professionals in each division are involved directly in client
engagements. The Company believes its flexible, adaptable organizational
structure and formal periodic evaluations of this structure are important
elements in successfully managing the rapid growth of its business and its
ability to adapt to changing market demands while maintaining profitability
and high-quality services.

Project Management. RWD's project management process is critical to the
Company's ability to satisfy its clients. The Company's project management
process is utilized throughout all phases of an engagement and includes
controls and review processes designed to ensure each project is delivered in
a high-quality, cost-effective and timely manner. The project manager has
primary responsibility for the success of the engagement, including managing
project costs and staff schedules, service quality and the client
relationship. The project manager is supported in these efforts by the project
director, a designated senior individual with extensive project management
experience. The project management process includes processes for identifying
and assessing project risks as well as mechanisms designed to facilitate the
project manager's communication of project difficulties to the project
director and senior management before difficulties escalate. In addition, the
process places significant emphasis on client feedback through regular client
"alignment meetings." These client review meetings are utilized to ensure
continuous agreement on project goals and expectations, leading ultimately to
client satisfaction with the results. Once an engagement is completed, the
Company assesses the extent to which the project team met client expectations,
evaluates the effectiveness of RWD's project management process and uses this
analysis to support the Company's continuous improvement process. Project
managers are certified only after completing a rigorous one-year training
process that includes classroom and on-the-job training and an oral
examination before senior management. All RWD engagements are managed by a
certified project manager (or by an in-training project manager working under
the supervision of a certified project manager) and a project director. In
addition, all levels of management maintain technical proficiency to enable
them to direct projects.

Technical and Management Skills and Training. The Company's employees have
diverse educational and employment backgrounds, including engineering,
advanced manufacturing, computer systems analysis and design, technical
writing and editing and graphic arts. Many have advanced degrees in a wide
range of technical disciplines, including chemical, computer systems,
electrical, industrial, mechanical, nuclear and software engineering;
instructional system design; and organizational development. This breadth of
expertise enables the Company's professionals to interact with and understand
the performance challenges encountered by client personnel across a broad
range of industries. The Company employed 679 persons, including a
professional staff of 553 persons, as of March 31, 1997.

The Company's use of internally-developed, standardized tools and
methodologies and its strict adherence to a structured project management
process enable the Company to deliver consistent, high-quality services while
rapidly increasing the size of its work force. The Company places significant
emphasis on training its employees to understand and utilize the Company's
service methodologies and management processes. The Company uses

29
<PAGE>

a combination of internally developed and externally provided courses to
provide this training. Employees are encouraged to become trained in the
Company's proprietary service methodologies. Employees also participate in
internal and external training in specific technologies such as enterprise-
wide software implementation, object- oriented design, relational database
design, software configuration management, software programming languages
(e.g., Visual C++, SmallTalk, Visual Basic, MacApp, Java and JavaScript) and
document management software. In addition, employees are encouraged and
provided with financial support to enroll in advanced training and degree
programs to increase their technical and management capabilities.

Recruiting and Employee Retention. RWD places significant emphasis on
attracting, developing and retaining a highly skilled and motivated work
force. The Company recruits personnel through a variety of methods, including
on-campus recruiting, postings at conferences and advertising in newspapers
and technical publications. The Company actively recruits entry-level
personnel at selected college campuses and maintains a web site which includes
information targeted to college recruits. The Company has a policy of
promoting from within whenever appropriate and also actively recruits
employees with in-depth expertise in technical areas in which the Company
currently provides services or expects to provide services in the future. From
time to time, the Company utilizes technical recruiters to fill specific
staffing needs. The Company engages a limited number of technical personnel on
a consulting basis when appropriate to support particular client needs.

The Company's culture, its emphasis on training and the design of its
compensation structure have been coordinated to attract, develop and retain
qualified and motivated professionals. The Company's culture is captured and
communicated through its Mission, Values and Guiding Principles. Senior
management expends significant effort in communicating these principles to new
employees and to incorporating these values into the day-to-day operation of
the Company. The Company believes this effort has played a significant role in
maintaining its culture and guiding the actions of its employees. The Company
also strives to provide a challenging work environment and competitive
employee reward system. Additionally, the Company is committed to significant
and broad-based employee stock ownership, believing this maximizes employees'
dedication to the Company's growth and profitability. In addition to the co-
founders' 59.9% post-offering, fully-diluted equity ownership of the Company,
434 persons, or 64% of the Company's employees as of March 31, 1997, held
options to purchase, in aggregate, 17.5% of the post-offering, fully-diluted
equity of the Company.

The Company's turnover rate in 1995 and 1996 was approximately 17.4% and
14.2%, respectively. The Company considers its culture, morale and employee
motivation to be excellent and a key component of its success to date.

Sales and Marketing. All RWD business is developed by senior management and
the technical personnel who manage client relationships and develop solutions
for clients rather than through a dedicated sales force. RWD professionals who
have worked closely with clients to solve complex technical problems are best
able to understand and communicate the Company's skills and services to
existing and prospective clients. This approach also contributes to the
Company's ability to establish and maintain long-term client relationships. In
addition to supporting existing client relationships, RWD's senior management
markets the Company's services at industry trade shows and delivers
presentations and papers at conferences. As a result, potential clients in new
and currently served industries have an opportunity to learn more about
Company services. The Company actively seeks to leverage existing client and
strategic relationships to increase its exposure within and across industries
and ultimately expand its client base. The Company also distributes a
quarterly newsletter that highlights results of RWD projects to approximately
12,000 personnel of existing and potential clients. Finally, RWD works closely
with software vendors to generate engagements in which their software products
are incorporated into RWD solutions.

COMPETITION

The Company's service areas are highly competitive and subject to both low
barriers to entry and rapid change. The Company faces competition for client
assignments from a number of companies having significantly greater financial,
technical and marketing resources and greater name recognition than the
Company. Principal

30
<PAGE>

competitors for the Company's services include consulting practices of the six
largest national accounting firms as well as professional services groups of
many large technology and management consulting companies. The Company also
competes with smaller regional or local service providers whose specific, more
narrowly focused service offerings may be more attractive to potential clients
of the Company. In addition, clients may elect to use internal resources to
satisfy their needs for the services the Company provides. The Company
believes that the principal competitive factors in its industry are quality of
service, breadth of service offerings, reputation of the service provider and
price. The Company believes it competes effectively with respect to each of
these factors.

INTELLECTUAL PROPERTY AND OTHER PROPRIETARY RIGHTS

The Company relies upon a combination of nondisclosure and other contractual
arrangements and trade secret, copyright and trademark laws to protect its
proprietary rights. The Company generally enters into confidentiality
agreements with its employees and clients, thereby seeking to limit
distribution of proprietary information. A substantial majority of the
Company's employees are not bound by their nondisclosure agreements once their
employment has been terminated, although the Company believes common law
generally prohibits these employees from disclosing to third parties
proprietary information of the Company. In the near future, the Company will
require all of its employees to execute confidentiality and non-solicitation
agreements with terms extending beyond employment with the Company. There can
be no assurance that the steps taken by the Company in this regard will be
adequate to deter misappropriation of proprietary information or that the
Company will be able to detect unauthorized use of and take appropriate steps
to enforce its intellectual property rights.

Software developed and other materials prepared by RWD in connection with
client engagements are usually assigned to the clients. The Company retains
the right to its general know-how and general applications such as software
diagnostic and development tools.

The RWD Technologies, Inc. logo and the phrase, "We bring people and
technology together,"(R) are registered service marks of the Company. Certain
of the Company's methodologies are service marks of the Company. The Company
holds no patents. The Company may file additional copyright applications for
certain software it develops in the future.

FACILITIES

RWD leases approximately 85,000 square feet of space for its executive
offices at 10480 Little Patuxent Parkway, Columbia, Maryland. This lease
expires on December 31, 2003. The Company also leases nine additional offices
covering an aggregate of approximately 59,000 square feet in Atlanta, Georgia;
Auburn Hills, Michigan; Cincinnati, Ohio; Dearborn, Michigan; Houston, Texas;
Huntsville, Alabama; Lexington, Kentucky; Princeton, New Jersey and
Sacramento, California. Each of these offices is located near one or more
significant clients of the Company, and none of these leases expires prior to
December 31, 1997. Aggregate annual rent for the Company's corporate
headquarters and satellite offices is approximately $2.5 million. The
Company's strategy is to locate offices in areas where it has significant
client work. From time to time, the Company uses office space provided at
client sites to facilitate performance of its services and maximize client
contact. The Company expects to open an office in London in 1998. The Company
anticipates that additional office space will be required within the next 12
months and believes appropriate facilities can be leased at locations
convenient to its existing offices and headquarters.

RISK MANAGEMENT

The Company is subject to potential claims by dissatisfied clients that
Company services did not achieve the results expected by those clients or that
errors or omissions by the Company's employees contributed to disruptions in
the clients' operations. To mitigate this risk, RWD seeks to clearly
articulate, prior to commencement of each project, both the scope of services
to be provided and the solution to be achieved. The Company holds regular
progress meetings with each client while services are being provided so that
any problems can be discovered as early in the project as possible and then
corrected. This procedure is intended to allow RWD to regularly ascertain and
meet client expectations during all various phases of each project. In
addition, RWD's standard contract terms limit the Company's liability to the
amount of the fee payable to RWD under the contract. Despite these procedures,
it is possible that the Company may become subject to a claim from a
dissatisfied client although the Company has never been subject to litigation
by a client arising out of RWD's services.

31
<PAGE>

The Company carries comprehensive liability and property damage insurance in
amounts it considers sufficient to cover these types of potential losses.
However, the Company is self-insured against any other claims by clients
related to services provided by RWD.

From time to time, the Company is a party to routine litigation in the
ordinary course of business. However, the Company is not currently a party to
any material litigation.

MANAGEMENT

The following table sets forth information regarding the executive officers,
directors and other significant employees of the Company:

<TABLE>
<CAPTION>
AGE POSITION
EXECUTIVE OFFICERS AND DIRECTORS (1): --- --------
<S> <C> <C>
Dr. Robert W. Deutsch... 73 Chairman of the Board of Directors, Chief Executive
Officer
John H. Beakes.......... 54 President, Chief Operating Officer, Director
John E. Lapolla......... 44 Group Vice President--Manufacturing Performance Support,
Director
Kenneth J. Rebeck....... 45 Group Vice President--Technology Transfer, Director
Jeffrey W. Wendel....... 42 Group Vice President--Information Technology, Director
Ronald E. Holtz......... 39 Vice President, Chief Financial Officer, Secretary,
Director
Dr. David J. Deutsch.... 43 Director
Jerry P. Malec.......... 54 Director-nominee
Robert T. O'Connell(2).. 58 Director-nominee

OTHER OFFICERS AND EMPLOYEES:

Daniel A. Cantwell...... 45 Vice President--Chrysler Training and Performance Support
Division
Robert B. Gosline, Jr... 54 Vice President--Chief Information Officer
Wade A. Martin.......... 38 Vice President--Performance Technology Services Division
Vincent Marucci, Jr. ... 39 Vice President--Information Technology Division
R. Butler Newman........ 40 Vice President--Business Development
Deborah T. Ung.......... 34 Vice President--Enterprise-Wide Reengineering Support
Dr. Steven M. Miller.... 41 Chief Technical Officer
James V. Thomas......... 53 Director of Lean Manufacturing
</TABLE>
- --------
(1) The Company is actively engaged in the search for one additional director
who is not affiliated with the Company or any of its directors or
officers. Within 90 days after this offering, this individual will be
elected to serve on the Company's Board of Directors and, together with
Mr. Malec, will serve on the Audit and Compensation Committees of the
Board.
(2) Mr. O'Connell has served as a special consultant to the Board since June
1, 1997 and will continue to serve in this capacity until August 1, 1997,
at which time he will be appointed Senior Vice President--Strategic
Business Planning.

Each director holds office until his successor is duly elected and
qualified, or until his earlier death, resignation or removal. Pursuant to the
Company's Charter and By-Laws, the Board of Directors is classified into three
classes. Dr. Robert W. Deutsch and Messrs. Holtz and Rebeck serve in the class
whose term expires in 1998; Messrs. Beakes and Lapolla serve in the class
whose term expires in 1999; and Dr. David J. Deutsch and Mr. Wendel serve in
the class, the term of which expires in 2000. Upon expiration of the initial
term of each class of directors, directors comprising such class will be
elected to a three-year term at the next succeeding Annual Meeting of
Stockholders. Upon completion of this offering, Mr. Malec and Mr. O'Connell
will serve in the class of directors whose term expires in 2000 and the other
outside director, who has not yet been selected, will serve in the class whose
term expires in 1999. Following this offering, officers will be elected by the
Board of Directors immediately following each annual stockholders' meeting and
will serve at the discretion of the Board of Directors until their successors
are elected or their earlier removal or resignation.

32
<PAGE>

EXECUTIVE OFFICERS AND DIRECTORS

Dr. Robert W. Deutsch co-founded the Company in January 1988 and has been
Chairman of the Board and Chief Executive Officer since that time. Dr. Deutsch
founded General Physics Corporation in 1966 and was its Chairman, President
and Chief Executive Officer until 1987. From 1963 to 1971, Dr. Deutsch was
Chairman and Professor of Nuclear Science and Engineering at The Catholic
University of America. Dr. Deutsch has a B.S. in Physics from the
Massachusetts Institute of Technology, a Ph.D. in Physics from the University
of California, is a member of the National Academy of Engineering and is a
registered Professional Engineer.

John H. Beakes co-founded the Company with Dr. Deutsch and has been Chief
Operating Officer and a director since January 1988 and President since July
1995. From 1974 to 1988, Mr. Beakes was employed by General Physics, most
recently as Executive Vice President and Chief Operating Officer. Prior to
1974, Mr. Beakes served in the Nuclear Submarine Service of the United States
Navy, most recently as Chief Engineer of the USS George Bancroft. Mr. Beakes
received his B.S. from the U.S. Naval Academy, his M.S. in Environmental
Engineering from The Johns Hopkins University and is a registered Professional
Engineer.

John E. Lapolla joined the Company in 1988, has been Group Vice President of
Manufacturing Performance Support since 1995 and has been a director since
1992. From 1970 until 1988, Mr. Lapolla was employed by General Motors
Corporation, most recently as Divisional New Technology Training Coordinator
responsible for technical training for 35 manufacturing plants. Mr. Lapolla
received his B.S. in Industrial Engineering from the General Motors Institute
and is a Senior Member of the Society of Manufacturing Engineers.

Kenneth J. Rebeck joined the Company in 1988, has been Group Vice President
of Technology Transfer since 1995 and has been a director since 1992.
Previously, he served as the Company's Chief Engineer. From 1978 until 1988,
Mr. Rebeck was employed by General Physics Corporation in a variety of
professional and management capacities, including Project Director for a major
NASA Pressure Vessel Recertification Program and Chief Engineer and Director,
High Technology Activities. Mr. Rebeck received his B.S. in Nuclear
Engineering from the State University of New York at Buffalo, his M.S. in
Nuclear Science and Engineering from Carnegie-Mellon University and is a
registered Professional Engineer.

Jeffrey W. Wendel joined the Company in 1994 and serves as Group Vice
President of the Information Technology Division and a director of the
Company. Prior to joining the Company, Mr. Wendel was the Director of Process
Simulation for S3 Technologies, Inc., where he managed software projects for
the petrochemical, natural gas and nuclear power industries from 1990 to 1994.
From 1989 to 1990, Mr. Wendel was Director of Simulation Technology for that
company. Mr. Wendel received his B.S. in Systems Engineering from the U.S.
Naval Academy and his M.B.A. in management from Loyola College.

Ronald E. Holtz joined the Company in January 1996 and serves as Vice
President, Chief Financial Officer and a director. Prior to joining the
Company, Mr. Holtz was a Manager in Ernst & Young LLP's Financial Advisory
Services group from 1992 to 1995. From 1990 to 1992, Mr. Holtz was employed by
the Michael D. Dingman Center For Enterpreneurship at the University of
Maryland in a variety of project management capacities. Prior to 1990, Mr.
Holtz was a Construction Manager for The Artery Organization Inc., a
commercial real estate development company. Mr. Holtz received his B.A. in
Mathematics from the University of Wisconsin and his M.B.A. in Finance from
the University of Maryland. Mr. Holtz is a certified public accountant.

Dr. David J. Deutsch has been a director since July 1993. He is a Lecturer
in Mathematics at Boston University's Department of Mathematics, and prior
thereto he was a Senior Research Consultant at Boston University's Information
Technology Department where he was engaged in scientific software design and
algorithm development on parallel architecture machines. He received his B.S.
in Mathematics from the University of Maryland and his M.S. and Ph.D in
Applied Mathematics from Boston University.

Jerry P. Malec is a director nominee whose election to the Board of
Directors will become effective upon completion of this offering. Since 1994,
Mr. Malec has been President and Chief Executive Officer of Checkmate
Electronics, Inc., a developer and manufacturer of check and credit card fraud
prevention and verification systems. Mr. Malec received his B.S. degree in
Economics from Wayne State University. Mr. Malec previously held executive
positions at Apple Computers, MICOM Systems and IBM.

33
<PAGE>

Robert T. O'Connell is a director nominee whose election to the Board of
Directors will become effective upon completion of this offering. Mr.
O'Connell will also serve as a special consultant to the Board from June 1,
1997 until August 1, 1997, at which time he will be appointed Senior Vice
President of Strategic Business Planning. From 1995 to 1997, Mr. O'Connell
served as Senior Vice President and Chief Staff Officer of EMC Corporation, a
leading provider of intelligent enterprise storage and retrieval technology.
Between 1965 and 1994, Mr. O'Connell held several positions in General Motors
Corporation, including Chairman and Chief Executive Officer of General Motors
Acceptance Corporation Financial Services and Chief Financial Officer of
General Motors Corporation. Mr. O'Connell received his B.A. degree in
Economics from Yale University and his M.B.A. in Finance from the Harvard
Graduate School of Business Administration.

OTHER OFFICERS AND EMPLOYEES

Daniel A. Cantwell joined the Company in 1991 and serves as Vice President
of the Chrysler Training and Performance Support Division. Prior to joining
the Company, Mr. Cantwell was employed by Chrysler from 1984 to 1991 as a
Senior Technical Training Specialist. Mr. Cantwell received his B.A.S. in
Robotics and Flexible Automation from Sienna Heights College.

Robert B. Gosline, Jr. joined the Company in 1988 and serves as Vice
President and Chief Information Officer, where he directs activities in
strategic information system planning and implementation. Prior to joining the
Company, Mr. Gosline was employed by General Physics from 1975 to 1988, and
prior thereto served as a nuclear submarine officer in the U.S. Navy. Mr.
Gosline received his B.S. from the U.S. Naval Academy and his M.S. in Computer
Science from The Johns Hopkins University.

Wade A. Martin joined the Company in 1990 and serves as Vice President of
the Performance Technology Services Division. Prior to joining the Company,
Mr. Martin was employed by General Physics from 1983 to 1990 as Supervisor of
Maintenance Engineering. From 1977 to 1983, Mr. Martin served on the USS
Eisenhower. Mr. Martin received his A.S., with a concentration in Engineering
Technology, from the University of the State of New York and is a graduate of
the U.S. Navy Nuclear Power Program.

Vincent Marucci, Jr. joined the Company in 1992 and serves as Vice President
of the Information Technology Division. Prior to joining the Company, Mr.
Marucci served as an active duty U.S. Army officer. His assignments included
information systems design and development for one of the Army's Artificial
Intelligence Centers and as an instructor in Mathematics and Computer Science
at the U.S. Military Academy. Mr. Marucci received an M.S. in Computer Science
and an M.S. in Operations Research from Stanford University and his B.S. from
the U.S. Military Academy.

R. Butler Newman joined the Company in 1988 and serves as Vice President of
Business Development. Prior to joining the Company, Mr. Newman was employed by
General Physics from 1986 to 1988. Mr. Newman received his B.S. from the U.S.
Naval Academy.

Deborah T. Ung joined the Company in 1989 and serves as Vice President of
the Enterprise-Wide Reengineering Support Division. Prior to joining the
Company, Ms. Ung was employed by General Physics in a variety of project
management capacities from 1985 to 1988. Ms. Ung received her B.S. in
Environmental Health from Purdue University.

Dr. Steven M. Miller joined the Company in 1995 and serves as Chief
Technical Officer. Prior to joining the Company, Dr. Miller was employed by
Fujitsu Limited from 1989 to 1995, most recently as Director of Manufacturing
Engineering in Richardson, Texas at Fujitsu's main telecommunications business
unit from 1992 to 1995. Dr. Miller received his B.S. in Systems Science and
Engineering from the University of Pennsylvania and his M.S. in Statistics and
Ph.D. in Engineering and Public Policy from the Carnegie-Mellon University.

James V. Thomas joined the Company in January 1996 and serves as the
Director of Lean Manufacturing. Prior to joining the Company, Mr. Thomas was
plant manager or operations manager for Kuhlman Electric Corp., Dannelly Corp.
and Danaher Tool Group where he was responsible for converting certain of
their

34
<PAGE>

operations from conventional mass production to lean manufacturing. Mr. Thomas
studied extensively with developers of the Toyota Production System, the basis
of lean manufacturing.

Dr. David J. Deutsch is Dr. Robert W. Deutsch's son. There are no other
family relationships among any of the executive officers or directors of the
Company.

DIRECTOR COMPENSATION

Prior to this offering, directors received no compensation for their service
on the Board of Directors. Upon completion of this offering, each director who
is not an employee of the Company will receive (i) an annual retainer to be
paid at the beginning of each year in shares of Common Stock having a fair
market value of $10,000 on the date of issuance; (ii) $1,000 in cash for each
Board of Directors and Board Committee meeting attended and (iii) cash
reimbursement for expenses incurred in connection with their service as
directors.

Upon his or her first election to the Board of Directors, each director who
is not an employee of the Company will be granted an option to purchase 12,000
shares of Common Stock under the Company's Amended and Restated Equity
Participation Plan (the "Option Plan"). Options granted to outside directors
will vest ratably over a three year period beginning one year after the date
of grant and will have an exercise price equal to the fair market value of the
Common Stock on the date of grant. Each such non-employee director also will
be eligible to receive additional options at the end of each year of service
based on the financial performance of the Company and the contribution of the
individual director. See "--Employee Benefit Plans."

BOARD COMMITTEES

The Board of Directors has established an Audit Committee, a Compensation
Committee and a Technical and Business Review Committee. Effective upon their
election to the Board of Directors, Mr. Malec and the other independent
director will serve as the members of the Audit Committee and the Compensation
Committee. Dr. David J. Deutsch and Messrs. Lapolla, Rebeck and Wendel will
serve as the Technical and Business Review Committee. The Audit Committee's
principal functions will include making recommendations to the Board regarding
the annual selection of independent public accountants, reviewing the proposed
scope of each annual audit and reviewing the recommendations of the
independent public accountants as a result of their audit of the Company's
financial statements. The Compensation Committee's principal function will be
to establish the compensation of officers of the Company and to establish and
administer the Company's compensation programs, including the grant of options
under the Company's Equity Participation Plan. The Technical and Business
Review Committee's principal function will be to evaluate Company performance
in the areas of quality and profitability on major contracts. The Board of
Directors may from time to time establish other committees to facilitate the
management of the Company.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION IN COMPENSATION
DECISIONS

Prior to this offering, the Company has had no separate Compensation
Committee or other committee performing equivalent functions. As a result,
compensation matters were performed by the Board of Directors or senior
management. None of the directors expected to serve on the Compensation
Committee is an employee of the Company, and neither the Chief Executive
Officer nor any other executive officer will serve on the Compensation
Committee. No director or executive officer of the Company is a director or
executive officer of any other corporation that has a director or executive
officer who is also a director of the Company.

35
<PAGE>

EXECUTIVE COMPENSATION

Summary Compensation. The following table sets forth information with
respect to the annual and long-term compensation earned in 1996 by the Chief
Executive Officer and the four other executive officers whose annual salary
and bonus exceeded $100,000 in 1996 (collectively, the "Named Executive
Officers"):

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
LONG-TERM
COMPEN-
SATION
ANNUAL COMPENSATION AWARDS
-------------------------- ----------
NUMBER OF
SHARES ALL OTHER
UNDERLYING COMPENSATION
NAME AND PRINCIPAL POSITION SALARY BONUS OTHER(1) OPTIONS (2)
- --------------------------- -------- -------- -------- ---------- ------------
<S> <C> <C> <C> <C> <C>
Dr. Robert W. Deutsch....... $150,000 $250,000 $489,476 -- $17,031
Chief Executive Officer
John H. Beakes.............. 220,000 75,000 21,284 -- 23,402
President and Chief
Operating Officer
John E. Lapolla............. 150,000 30,000 -- 15,000 14,389
Group Vice President
Kenneth J. Rebeck........... 150,000 45,000 -- 15,000 15,143
Group Vice President
Jeffrey W. Wendel........... 100,000 30,000 -- 30,000 11,209
Group Vice President
</TABLE>
- --------
(1) Represents S Corporation distributions made to enable the recipients to
pay Federal income tax on the Company's earnings.
(2) Includes annual car allowances, premiums for life and medical insurance
and contributions by the Company to its 401(k) Plan on behalf of each of
the Named Executive Officers. The life insurance policies upon which the
Company pays the premiums are split-dollar policies.

Employment Agreements. The Company has entered into Employment Agreements
with Dr. Robert W. Deutsch and each of Messrs. Beakes, Lapolla, Rebeck and
Wendel. Each of the Employment Agreements has an initial term of three years
and is automatically renewed thereafter for successive one year terms until
terminated by either the Company or the employee. The employment agreements
provide for initial annual salaries of $150,000, $220,000, $150,000, $150,000
and $150,000 for Dr. Deutsch and Messrs. Beakes, Lapolla, Rebeck and Wendel,
respectively, subject to annual adjustment at the discretion of the Board of
Directors, and provides for annual cash bonuses in amounts determined by the
Board of Directors. The Employment Agreements contain confidentiality
provisions and one year covenants-not-to-compete following termination or
expiration of employment (as defined in the Employment Agreements). In the
event of a "change in control" of the Company (as defined in the Employment
Agreements) followed by the termination of employment by the employee for
"good reason" (as defined in the Employment Agreements), the affected employee
would be entitled to three times his average annual compensation during the
last three complete years prior to such change in control.

36
<PAGE>

Option Grants. The following table sets forth information regarding options
to purchase shares of the Common Stock granted to the Named Executive Officers
during 1996.

OPTION GRANTS DURING 1996

<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
---------------------------------------------
NUMBER OF
SECURITIES PERCENT OF POTENTIAL REALIZED VALUE AT
UNDERLYING TOTAL OPTIONS EXERCISE ASSUMED ANNUAL RATES OF
OPTIONS GRANTED TO PRICE PER EXPIRATION STOCK PRICE APPRECIATION FOR
NAME GRANTED EMPLOYEES SHARE(1) DATE OPTION TERM(2)
- ---- ---------- ------------- --------- ---------- -----------------------------
5% 10%
-------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Dr. Robert W. Deutsch... --
John H. Beakes.......... --
John E. Lapolla......... 15,000 1.4% $6.00 12/31/2007 $ 243,516 $ 466,358
Kenneth J. Rebeck....... 15,000 1.4 6.00 12/31/2007 243,516 466,358
Jeffrey W. Wendel....... 30,000 2.8 6.00 12/31/2007 487,032 932,716
</TABLE>
- --------
(1) The exercise price equaled the fair market value of the Common Stock as
determined by the Board of Directors on the date of grant. The exercise
price is payable in cash or by delivery of shares of Common Stock having a
fair value equal to the exercise price of options exercised.
(2) The assumed annual rates of appreciation of 5% and 10% would result in the
price of the Common Stock increasing to $22.23 and $37.09 respectively,
from the initial public offering price set forth on the cover of this
Prospectus during the 11 year term of the options. The vesting of unvested
options may be accelerated at any time by the Company. The 5% and 10%
assumed annual rates of stock price appreciation used to calculate
potential gains to optionees are mandated by the rules of the U.S.
Securities and Exchange Commission. The potential realizable value does
not represent the Company's prediction of its stock price performance.
There can be no assurance that the stock price will actually appreciate
over the 11 year option term at the assumed 5% and 10% levels or at any
other level.

Option Exercises and Holdings. The following table sets forth information
concerning the number and exercise price of the options to purchase Common
Stock exercised by the Named Executive Officers during 1996 and the number and
value of unexercised options to purchase Common Stock held at the end of 1996
by the Named Executive Officers. Concurrently with this offering, Dr. Deutsch
intends to exercise options to purchase 5,370,000 shares of Common Stock, at
an aggregate exercise price of approximately $4.2 million, paid in cash, and
Mr. Beakes intends to exercise options to purchase 603,000 shares of Common
Stock on a cashless basis by surrender to the Company of 39,154 shares of
Common Stock, which shares have a fair value of $509,000 (based on the initial
public offering price for the Common Stock set forth on the cover of this
Prospectus), equaling the aggregate exercise price of the options so
exercised.

OPTION EXERCISES AND YEAR-END OPTION VALUES

<TABLE>
<CAPTION>
NUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED
EXERCISABLE/ IN-THE-
SHARES UNEXERCISABLE MONEY
ACQUIRED VALUE OPTIONS AT OPTIONS AT
NAME UPON EXERCISE REALIZED(1) YEAR-END(2) YEAR-END(1)
- ---- ------------- ----------- ------------- -----------
<S> <C> <C> <C> <C>
Dr. Robert W. -- $ -- 5,370,000(E) $65,630,000(E)
Deutsch(3)............. -- (U) -- (U)
John H. Beakes(3)....... 9,000 111,000 664,800(E) 8,090,900(E)
76,200(U) 934,600(U)
John E. Lapolla......... -- -- 51,900(E) 639,100(E)
98,100(U) 1,115,900(U)
Kenneth J. Rebeck....... -- -- 52,800(E) 650,800(E)
97,200(U) 1,104,800(U)
Jeffrey W. Wendel....... -- -- -- (E) -- (E)
39,000(U) 318,000(U)
</TABLE>
- --------
(1) Value equals the per share initial public offering price set forth on the
cover of this Prospectus less the per share exercise price.
(2) (E) = Exercisable; (U) = Unexercisable.
(3) Assumes the Concurrent Exercises had not been exercised as of December 31,
1996.

37
<PAGE>

EMPLOYEE BENEFIT PLANS

Amended and Restated 1988 Equity Participation Plan. The Company's Amended
and Restated Employee Equity Participation Plan (the "Plan") was originally
adopted as of January 1, 1989. Under the Plan, the Compensation Committee of
the Board of Directors is authorized to grant options to purchase shares of
Common Stock to any consultant, employee, officer or director of the Company
as compensation for services rendered or contributions made to the Company.
There are an aggregate of 4,065,000 shares reserved for issuance upon exercise
of options granted under the Plan. Employee options vest ratably over a five
year period, generally beginning on the second January 1 after the option is
granted. All options granted to date under the Plan are non-qualified options
(as described below) and expire on December 31st, ten years after the first
vesting date, unless terminated earlier as a result of termination of
employment or, in the case of outside directors, upon their removal for cause
or voluntary resignation from the Board of Directors. As of March 31, 1997,
options to purchase an aggregate of 3,076,050 shares of Common Stock under the
Plan, at a weighted average exercise price of $2.56 per share, were held by
435 employees of the Company. Of this amount, options to purchase 1,043,910
shares will be exercisable as of the date of this Prospectus and options to
purchase an additional 563,670 and 521,700 shares of Common Stock will become
exercisable on January 1, 1998 and January 1, 1999, respectively, assuming the
March 31, 1997 option holders remain employees of the Company. Plan options to
purchase 97,710 shares had been exercised on or before March 31, 1997, at a
weighted average exercise price of $0.71 per share.

Under the Plan, the Compensation Committee has the authority to select the
persons to whom Plan options are granted and to determine the terms of each
Plan option, including (i) the number of shares of Common Stock subject to
such option; (ii) when the option becomes exercisable; (iii) whether the
option is intended to qualify as an incentive stock option within the meaning
of Section 422 of the Code ("incentive stock options") or not ("non-qualified
options"); (iv) the option exercise price, which, in the case of incentive
stock options, must be at least 100% (110% in the case of incentive stock
options granted to a shareholder owning more than 10% of the Common Stock),
and in the case of non-qualified options, must be at least 85% of the fair
market value of the Common Stock as of the date of the grant; and (v) the
duration of the option, which, in the case of incentive stock options, may not
exceed ten years (five years in the case of incentive stock options granted to
a shareholder owning more than 10% of the Common Stock). The Company does not
intend to grant options under the Plan in the future having exercise prices at
less than fair market value of the shares underlying the options on the date
of grant.

401(k) Savings Plan. The Company maintains the RWD Savings and Investment
Plan, a defined contribution pension plan with a cash or deferred arrangement
as described in Section 401(k) of the Internal Revenue Code of 1986, as
amended (the "401(k) Plan"). The 401(k) Plan is intended to qualify under
Section 401(a) of the Code, so that contributions, and income earned thereon,
are not taxable to employees until withdrawn. All regular full-time Company
employees over the age of 21 are eligible to participate in the 401(k) Plan.
The 401(k) Plan provides that each participant may make elective pre-tax
salary deferrals up to 15% of his or her annual compensation, subject to
statutory limits. The Company also may make discretionary annual matching
contributions in amounts determined by the Board of Directors, subject to
statutory limits. The Company's policy is to base its contributions on Company
profitability. The Trustee of the 401(k) Plan invests each employee's account
at the direction of the employee, who may choose among several investment
alternatives, which do not include shares of the Company's Common Stock. The
Company made aggregate contributions to the 401(k) Plan of $499,000, $1.1
million and $1.1 million on account of 1994, 1995 and 1996, respectively.

Employee Stock Purchase Plan. The Company has adopted an Employee Stock
Purchase Plan (the "Stock Purchase Plan"), subject to stockholder approval.
The Stock Purchase Plan is intended to qualify as an "employee stock purchase
plan" under Section 423 of the Code. All regular full-time employees of the
Company (including officers), and all other employees whose customary
employment is for more than 20 hours per week are eligible to participate in
the Stock Purchase Plan. Directors who are not employees are not eligible. A
maximum of 175,000 shares of the Company's Common Stock are reserved for
issuance under the Stock

38
<PAGE>

Purchase Plan and available for purchase thereunder, subject to anti-dilution
adjustments in the event of certain changes in the capital structure of the
Company.

Under the Stock Purchase Plan, offerings will be made at the beginning of
each offering period ("Offer Period") commencing no earlier than September 1,
1997. During each Offer Period, deductions are to be made from the pay of
participants (in accordance with their authorizations) and credited to their
accounts under the Stock Purchase Plan. The price per share at which shares of
Common Stock are to be purchased pursuant to the Stock Purchase Plan for any
Offer Period will be no less than 85% of the then fair market value of the
Common Stock.

CERTAIN TRANSACTIONS

At various times from 1988 to 1991, the Company borrowed an aggregate of
$3.6 million from Dr. Robert W. Deutsch, the Company's Chairman of the Board
and Chief Executive Officer, and $200,000 from Mr. Beakes, the Company's
President and Chief Operating Officer, in each case to provide the Company
with working capital (collectively, the "Stockholder Notes"). The Stockholder
Notes mature on March 31, 1998 and bear interest at 9% per annum. In the three
year period ended December 31, 1996, the Company made aggregate interest
payments to Dr. Deutsch and Mr. Beakes of approximately $1.0 million. The
Company intends to use approximately $3.8 million of the net proceeds from
this offering to retire the Stockholder Notes.

From its inception in January 1988 until immediately prior to this offering,
the Company was subject to taxation under Subchapter S of the Code. As a
result, the net income of the Company, for federal and certain state income
tax purposes, was reported by and taxable directly to the Company's
stockholders during that time rather than to the Company. Primarily to provide
funds for tax obligations payable by its stockholders on account of the
Company's income in 1995 and 1996, the Company made aggregate cash
distributions to its stockholders of $691,300 and $240,500 during 1996 and the
first quarter of 1997, respectively. In connection with its conversion from S
Corporation to C Corporation status, the Company effected the S Corporation
Distribution (consisting of an aggregate of approximately $9.9 million in cash
payments and the issuance of approximately $6.5 million principal amount of S
Corporation Notes) to the Company's stockholders prior to the conversion. The
S Corporation Distribution represents the stockholders' proportionate interest
in Company earnings which had not been distributed to the stockholders prior
to the conversion date. Dr. Robert W. Deutsch, Mr. John H. Beakes, Dr. David
J. Deutsch and Mrs. Jane W. Brown (Dr. Robert W. Deutsch's daughter) received
approximately 71%, 3%, 3% and 3%, respectively, of the 1996 and first quarter
1997 cash distributions and received approximately the same percentage of the
S Corporation Distribution. The S Corporation Notes are non-interest bearing
demand notes which the Company expects to retire during 1997.

39
<PAGE>

PRINCIPAL STOCKHOLDERS

The following table sets forth information as of March 31, 1997, with
respect to the beneficial ownership of the Common Stock (including shares
issuable upon the exercise of outstanding options that are exercisable as of
that date or within 60 days thereafter) by (i) each person who owns
beneficially more than 5% of the Common Stock, (ii) each of the directors of
the Company, (iii) the Chief Executive Officer and each of the Named Executive
Officers, and (iv) all directors and executive officers as a group. Unless
otherwise indicated, each named person exercises sole voting and investment
power. The information below assumes the Concurrent Exercises had been
effected as of March 31, 1997.

<TABLE>
<CAPTION>
SHARES SHARES
BENEFICIALLY OWNED BENEFICIALLY OWNED
PRIOR TO OFFERING AFTER OFFERING
------------------ ------------------
NAME OF BENEFICIAL OWNER(1) NUMBER PERCENT NUMBER PERCENT
- --------------------------- ---------- ------- ---------- -------
<S> <C> <C> <C> <C>
Robert W. Deutsch(2)..................... 9,270,000 85.8% 9,270,000 67.2%
John H. Beakes(3)........................ 792,446 7.3 792,446 5.7
David J. Deutsch(4)...................... 615,000 5.7 615,000 4.5
Jane C. Brown(4)......................... 615,000 5.7 615,000 4.5
John E. Lapolla(5)....................... 76,500 * 76,500 *
Kenneth J. Rebeck(5)..................... 76,800 * 76,800 *
Jeffrey W. Wendel(5)..................... 1,800 * 1,800 *
Ronald E. Holtz (5)...................... 600 * 600 *
All directors and officers as a group (6)
(7 persons)............................. 10,833,146 98.1 10,833,146 77.1
</TABLE>
- --------
* Less than 1%.
(1) The address of each stockholder listed in the table is c/o RWD
Technologies, Inc., 10480 Little Patuxent Parkway, Suite 1200, Columbia,
Maryland 21044-3530.
(2) Includes 450,000 shares owned by Mrs. Florence Deutsch, Dr. Robert
Deutsch's wife, as to which Dr. Robert Deutsch disclaims beneficial
ownership.
(3) Includes 78,600 shares issuable upon exercise of currently exercisable
options. Mr. Beakes has granted the Underwriters an option to purchase
150,000 shares of Common Stock to cover over-allotments, if any. See
"Underwriting." To the extent the Underwriters' over-allotment option is
exercised in full, the number of shares of Common Stock and percentage of
total number of outstanding shares of Common Stock beneficially owned by
Mr. Beakes will be reduced to 642,446 and 4.6%, respectively.
(4) Includes an aggregate of 450,000 shares held in trusts for the children of
Mrs. Jane Brown and Dr. David Deutsch, for which Mrs. Jane Brown and Dr.
David Deutsch serve as co-trustees. Mrs. Jane Brown and Dr. David J.
Deutsch are Dr. Robert W. Deutsch's children.
(5) Consists of currently exercisable options.
(6) Excludes Messrs. Malec and O'Connell, who will not become directors until
this offering is consummated. Also excludes an aggregate of approximately
2,309 shares of Common Stock to be issued to the outside directors upon
completion of this offering. Also excludes 30,000 shares of Common Stock
issuable upon options which were granted to Mr. O'Connell in June 1997 in
connection with his employment with the Company, all of which options
vested upon grant and have a per share exercise price of $13.00.

40
<PAGE>

DESCRIPTION OF CAPITAL STOCK

The Company's Charter authorizes the Company to issue up to 50,000,000
shares of Common Stock, $.10 par value per share. As of the date of this
Prospectus, there were 10,807,586 shares of Common Stock outstanding, held of
record by 48 persons. In addition, on March 31, 1997, there were outstanding
options to acquire up to an additional 3,084,210 shares of Common Stock.

COMMON STOCK

Holders of the Common Stock are entitled to one vote per share on all
matters submitted to the stockholders for a vote. There are no cumulative
voting rights in the election of directors. Subject to the prior rights of any
outstanding preferred stock, the shares of Common Stock are entitled to
receive such dividends as may be declared and paid by the Board of Directors
out of funds legally available therefor and to share, ratably, in the net
assets, if any, of the Company upon liquidation. The stockholders have no
preemptive rights to purchase any shares of the Company's capital stock. All
outstanding shares of Common Stock are, and the shares of Common Stock offered
hereby will be, when issued and paid for, duly authorized, validly issued,
fully paid and nonassessable.

PREFERRED STOCK

The Board of Directors, without further action by the holders of the Common
Stock, is authorized to classify any shares of its authorized but unissued
Common Stock as preferred stock in one or more series, from time to time. With
respect to each series, the Board of Directors determines the number of shares
constituting such series, the dividend rate on the shares of each series,
whether such dividends shall be cumulative and the relation of such dividends
to any dividends payable on any other class of stock, whether the shares of
each series shall be redeemable and the terms thereof, whether the shares
shall be convertible into Common Stock and the terms thereof, the amount per
share payable on each series or other rights of holders of such shares on
liquidation or dissolution of the Company, the voting rights, if any, of
shares of each series and any other rights and privileges not in conflict with
the Company's charter and any qualifications, limitations or restrictions
thereof. There are no shares of preferred stock outstanding, and the Board of
Directors has no present intention to issue any preferred stock.

The availability of preferred stock, while providing desirable flexibility
in connection with possible acquisitions and other corporate purposes, could
have the effect of discouraging takeover proposals, and the issuance of
preferred stock could have the effect of delaying or preventing a change in
control of the Company not approved by the Board of Directors.

ANTI-TAKEOVER PROVISIONS OF CHARTER AND BY-LAWS

The Company's Charter provides for a Board of Directors of three classes,
with the initial classes having one, two and three year terms, respectively,
and thereafter staggered three year terms. Under the Charter, directors may be
removed for cause only upon the affirmative vote of at least 80% of the shares
of capital stock entitled to vote in the election of directors. Under the By-
Laws, the number of directors is currently fixed at nine, which number may be
changed only upon the vote of two-thirds of the directors then in office.

The Company's Charter and By-Laws require that any stockholder proposal
relating to the nomination of a director must be delivered to the Company's
Secretary no more than 90 days nor less than 60 days prior to the Annual
Meeting of Stockholders at which such nominee will be voted upon.

The foregoing provisions of the Charter and all provisions of the By-Laws
may be amended or repealed by the stockholders only upon the affirmative vote
of at least 80% of the shares of capital stock entitled to vote thereon. The
By-Laws also may be amended or repealed by the Board of Directors only upon
the vote of at least two-thirds of the directors then in office. These
provisions of the Charter and By-Laws could have the effect of discouraging
takeover proposals and delaying or preventing a change in control of the
Company not approved by the Board of Directors.

41
<PAGE>

BUSINESS COMBINATIONS

Under Section 3-601, et seq. of the Maryland General Corporation Law (the
"Business Combination Statute"), certain "business combinations" (including
mergers or similar transactions subject to a statutory stockholder vote and
additional transactions involving transfers of assets or securities in
specific amounts) between a Maryland corporation subject to the Business
Combination Statute and any person who beneficially owns 10% or more of the
voting power of the corporation's shares or any affiliate of the corporation
who, at any time within the preceding two years, was the beneficial owner of
10% or more of the voting power of the then-outstanding voting stock of the
corporation (an "Interested Stockholder"), or an affiliate thereof, are
prohibited for five years after the most recent date on which the Interested
Stockholder became an Interested Stockholder unless an exemption is available.
Thereafter, any such business combination must be recommended by the board of
directors of the corporation and approved by the affirmative vote of at least:
(i) 80% of the votes entitled to be cast by all holders of outstanding voting
shares of the corporation; and (ii) two-thirds of the votes entitled to be
cast by holders of outstanding voting shares of the corporation other than
shares held by the Interested Stockholder with whom the business combination
is to be effected, unless the corporation's stockholders receive a minimum
price (as described in the Business Combination Statute) for their shares and
the consideration is received in cash or in the same form as previously paid
by the Interested Stockholder for its shares. The Business Combination Statute
does not apply, however, to business combinations that are (a) exempted in the
corporation's charter prior to the time the corporation became subject to the
Business Combination Statute or (b) approved or exempted by the board of
directors prior to the time that the Interested Stockholder becomes an
Interested Stockholder. After a corporation becomes subject to the Business
Combination Statute, in order to amend the corporation's charter to elect not
to be subject to the foregoing requirements with respect to one or more
Interested Stockholders, the affirmative vote of at least 80% of the votes
entitled to be cast by all holders of outstanding shares of voting stock and
two-thirds of the votes entitled to be cast by holders of outstanding shares
of voting stock who are not Interested Stockholders is required.

Generally the Company is subject to the provisions of the Business
Combination Statute; however, the Company's Charter exempts from the Business
Combination Statute any future "business combinations" between the Company and
Dr. Robert W. Deutsch or members of his immediate family.

CONTROL SHARE ACQUISITIONS

Section 3-701 et seq. of the Maryland General Corporation Law provides that
"control shares" of a Maryland Corporation acquired in a "control share
acquisition" have no voting rights except to the extent approved by a vote of
two-thirds of the votes entitled to be cast on the matter, excluding shares of
stock owned by the acquiror or by officers or directors who are employees of
the corporation. "Control shares" are voting shares of stock which, if
aggregated with all other such shares of stock previously acquired by the
acquiror, or in respect of which the acquiror is able to exercise or direct
the exercise of voting power except solely by virtue of a revocable proxy,
would entitle the acquiror to exercise voting power in electing directors
within one of the following ranges of voting power: (i) one-fifth or more but
less than one-third; (ii) one-third or more but less than a majority or (iii)
a majority of all voting power. Control shares do not include shares the
acquiring person is then entitled to vote as a result of having previously
obtained stockholder approval. A "control share acquisition" means the
acquisition of control shares, subject to certain exceptions.

A person who has made or proposes to make a control share acquisition, upon
satisfaction of certain conditions (including an undertaking to pay expenses
and delivery of an "acquiring person statement"), may compel the corporation's
board of directors to call a special meeting of stockholders to be held within
50 days of demand to consider the voting rights of the shares. If no request
for a meeting is made, the corporation may itself present the question at any
stockholders meeting.

Unless the charter or bylaws provide otherwise, if voting rights are not
approved at the meeting or if the acquiring person does not deliver an
acquiring person statement within 10 days following a control share

42
<PAGE>

acquisition then, subject to certain conditions and limitations, the
corporation may redeem any or all of the control shares (except those for
which voting rights have previously been approved) for fair value determined,
without regard to the absence of voting rights for the control shares, as of
the date of the last control share acquisition or of any meeting of
stockholders at which the voting rights of such shares are considered and not
approved. Moreover, unless the articles or bylaws provide otherwise, if voting
rights for control shares are approved at a stockholders' meeting and the
acquiror becomes entitled to exercise or direct the exercise of a majority or
more of all voting power, other stockholders may exercise appraisal rights.
The fair value of the shares as determined for purposes of such appraisal
rights may not be less than the highest price per share paid by the acquiror
in the control share acquisition.

The control share acquisition statute does not apply to shares acquired in a
merger, consolidation or share exchange if the corporation is a party to the
transaction, or to acquisitions approved or exempted by the charter or bylaws
of the corporation. The Company's Charter exempts the applicability of the
control share acquisitions made by Dr. Robert W. Deutsch and members of his
immediate family.

The Business Combination Statute and the control share acquisition statute
could have the effect of discouraging takeover proposals and delaying or
preventing a change of control of the Company not approved by its Board of
Directors.

TRANSFER AGENT AND REGISTRAR

The Transfer Agent and Registrar for the Common Stock is American Stock
Transfer & Trust Company, New York, New York.

43
<PAGE>

SHARES ELIGIBLE FOR FUTURE SALE

Upon completion of this offering, the Company will have outstanding
13,807,586 shares of Common Stock. Sales of a substantial number of shares of
Common Stock in the public market following this offering, or the perception
that such sales could occur, could adversely affect the market price for the
Company's Common Stock. Substantially all of the shares to be outstanding upon
completion of this offering (other than the 3,000,000 shares being offered
hereby) are subject to the lock-up agreements described below. Of the shares
to be outstanding upon completion of this offering, 10,623,476 shares are
"restricted," as that term is defined in the Securities Act of 1933, as
amended (the "Securities Act"). Of these restricted shares, 4,666,530 have
been held for more than one year and, as such, will be salable upon expiration
of the lock-up agreements described below, subject to certain volume and
manner of sale restrictions under Rule 144 of the Securities Act.

All directors, executive officers, principal stockholders and certain other
officers of the Company who hold in the aggregate 10,798,346 shares of Common
Stock (plus options to purchase an aggregate of 819,000 shares), have agreed
not to sell or otherwise dispose of any of their shares or options for a
period of 180 days after the date of this Prospectus without the prior written
consent of William Blair & Company, L.L.C. The Company has also agreed not to
issue, sell or otherwise dispose of any of its shares or grant any options
(other than options granted or shares issued in connection with its stock
option plan or unregistered shares issued in connection with any acquisition)
during such 180 day period. However, William Blair & Company, L.L.C., may, in
its sole discretion and at any time without notice, release for public sale
all or any portion of these shares subject to such lock-up agreements. See
"Underwriting."

In general, under Rule 144 as currently in effect, a person (or persons
whose shares are aggregated) is entitled to sell restricted shares if at least
one year has passed since the later of the time such shares were acquired from
the Company or any affiliate of the Company. Rule 144 provides, however, that
within any three-month period such person may only sell up to the greater of:
(i) 1% of the then outstanding shares of the Common Stock (approximately
138,000 shares immediately following this offering) or (ii) the average weekly
trading volume in the Common Stock during the four calendar weeks immediately
preceding the date on which notice of the sale is filed with the Commission.
Sales under Rule 144 are also subject to certain manner-of-sale provisions and
notice requirements and to the availability of current public information
about the Company. All shares held by persons who are deemed to be affiliates
of the Company are subject to the volume limitations and other requirements of
Rule 144 regardless of how long the shares have been owned or how they were
acquired. Restricted shares held by non-affiliates of the Company for more
than two years can be sold without limitation under Rule 144.

Prior to the offering, there was no public market for the Common Stock, and
no prediction can be made as to the effect, if any, that future sales of
Common Stock or the availability of shares of Common Stock for future sale
will have on the market price of the Common Stock prevailing from time to
time. Sales of substantial amounts of Common Stock following this offering, or
the perception that such sales could occur, could adversely affect prevailing
market prices of the Common Stock and could impair the Company's ability to
raise capital through an offering of its equity securities.

44
<PAGE>

UNDERWRITING

The several Underwriters named below (the "Underwriters"), for which William
Blair & Company, L.L.C. and Montgomery Securities are acting as
representatives (the "Representatives"), have severally agreed, subject to the
terms and conditions set forth in the Underwriting Agreement by and among the
Company and the Underwriters (the "Underwriting Agreement"), to purchase from
the Company, and the Company has agreed to sell to each of the Underwriters,
the respective number of shares of Common Stock set forth opposite each
Underwriter's name in the table below.

<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITERS SHARES
- ------------ ---------
<S> <C>
William Blair & Company, L.L.C. ...................................... 800,000
Montgomery Securities................................................. 800,000
Alex. Brown & Sons Incorporated....................................... 80,000
Dillon, Read & Co. Inc................................................ 80,000
Donaldson, Lufkin & Jenrette Securities Corporation................... 80,000
Goldman, Sachs & Co................................................... 80,000
Hambrecht & Quist LLC................................................. 80,000
Morgan Stanley & Co. Incorporated..................................... 80,000
Oppenheimer & Co., Inc................................................ 80,000
Robertson, Stephens & Company LLC..................................... 80,000
Schroder Wertheim & Co. Incorporated.................................. 80,000
Smith Barney Inc...................................................... 80,000
Adams, Harkness & Hill, Inc........................................... 30,000
Advest, Inc........................................................... 30,000
Robert W. Baird & Co. Incorporated.................................... 30,000
George K. Baum & Company.............................................. 30,000
Ferris, Baker Watts, Incorporated..................................... 30,000
First of Michigan Corporation......................................... 30,000
Friedman, Billings, Ramsey & Co., Inc................................. 30,000
Furman Selz LLC....................................................... 30,000
Gerard Klauer Mattison & Co., Inc..................................... 30,000
Hanifen, Imhoff Inc. ................................................. 30,000
Howe Barnes Investments, Inc.......................................... 30,000
Janney Montgomery Scott Inc. ......................................... 30,000
Johnston, Lemon & Co. Incorporated.................................... 30,000
Legg Mason Wood Walker, Incorporated.................................. 30,000
McDonald & Company Securities, Inc. .................................. 30,000
Mesirow Financial..................................................... 30,000
Needham & Company, Inc................................................ 30,000
The Robinson-Humphrey Company, Inc.................................... 30,000
Unterberg Harris...................................................... 30,000
Wheat First Butcher Singer............................................ 30,000
---------
Total............................................................. 3,000,000
=========
</TABLE>

In the Underwriting Agreement, the Underwriters have agreed, subject to the
terms and conditions set forth therein, to purchase all of the Common Stock
being sold pursuant to the Underwriting Agreement if any of the Common Stock
being sold pursuant to the Underwriting Agreement (excluding shares covered by
the over-allotment option granted therein) is purchased. In the event of a
default by any Underwriter, the Underwriting Agreement provides that, in
certain circumstances, the purchase commitments of the non-defaulting
Underwriters shall be increased or the Underwriting Agreement may be
terminated.

45
<PAGE>

The Representatives have advised the Company that the Underwriters propose
to offer the Common Stock to the public initially at the public offering price
set forth on the cover page of this Prospectus and to selected dealers at such
price less a concession of not more than $0.50 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 commencement of the initial public
offering, the public offering price and other selling terms may be changed by
the Representatives.

The Company and three stockholders (the "Selling Stockholders") have granted
to the Underwriters an option, exercisable within 30 days after the date of
this Prospectus, to purchase up to an aggregate of 282,000 and 168,000
additional shares of Common Stock, respectively, to cover over-allotments, at
the same price per share to be paid by the Underwriters for the other shares
offered hereby. If the Underwriters purchase any such additional shares
pursuant to this option, each of the Underwriters will be committed to
purchase such additional shares in approximately the same proportion as set
forth in the table above. If less than all of such additional shares are
purchased, the Underwriters will purchase such shares first from the Selling
Stockholders, pro rata, and then from the Company. The Underwriters may
exercise the option only for the purpose of covering over-allotments, if any,
made in connection with the distribution of the Common Stock offered hereby.

The directors, executive and certain other officers and principal
stockholders of the Company who hold in the aggregate 10,798,346 shares of
Common Stock (plus options to purchase an additional 819,000 shares of Common
Stock) and the Company have agreed that for a period of 180 days after the
date of this Prospectus, without the prior written consent of William Blair &
Company, L.L.C., they will not offer, sell, contract to sell, grant any option
to purchase or otherwise dispose of any Common Stock or securities convertible
or exchangeable into, or exercisable for, Common Stock. However, the Company
may grant options under the Plan and issue unregistered shares in connection
with any acquisition during the lock-up period. The Company also has agreed
not to file or cause to be filed any registration statement with the
Securities and Exchange Commission (the "Commission") related to shares
issuable under the Plan for a period of 90 days after completion of this
offering.

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

The Representatives have informed the Company that the Underwriters will not
confirm, without client authorization, sales to their client accounts as to
which they have discretionary authority.

Prior to this offering, there was no public market for the Common Stock of
the Company. Consequently, the initial public offering price for the Common
Stock was determined by negotiations among the Company and the
Representatives. Among the factors which were considered in such negotiations
were the prevailing market conditions, the results of operations of the
Company in recent periods, the market capitalizations and stages of
development of other companies which the Company and the Representatives
believed to be comparable to the Company, estimates of the business potential
of the Company, the present state of the Company's development and other
factors which were deemed relevant.

During and after the offering, the Underwriters may purchase and sell the
Common Stock in the open market in order to facilitate the offering.
Specifically, the Underwriters may over-allot or otherwise create a short
position in the Common Stock for their own account by selling more shares of
Common Stock than have been sold to them by the Company pursuant to the
Underwriting Agreement. The Underwriters may elect to cover any such short
position by purchasing shares of Common Stock in the open market or by
exercising the over-allotment option granted to them by the Company and the
Selling Stockholders. The Underwriters also may impose a penalty bid, whereby
selling concessions allowed to syndicate members or other broker-dealers in
respect of shares of Common Stock sold in the offering for their account may
be reclaimed by the syndicate if such shares are repurchased by the syndicate
in stabilizing or covering transactions.

46
<PAGE>

The activities described above may stabilize, maintain or otherwise affect
the market price of the Common Stock and make such price higher than it might
otherwise be in the open market. The imposition of a penalty bid may also
affect the price of the Common Stock to the extent that it discourages resales
thereof. These activities, if commenced, may be discontinued at any time
without notice and may be effected on the Nasdaq Stock Market or otherwise.
Neither the Company nor any of the Underwriters makes any representation or
prediction as to whether the Underwriters will engage in such transactions or
choose to discontinue any transactions engaged in or the direction or
magnitude of any effect that such transactions may have on the price of the
Common Stock.

LEGAL MATTERS

The legality of the issuance of the Common Stock offered hereby and certain
other matters will be passed upon for the Company and the Selling Stockholders
by Piper & Marbury L.L.P., Baltimore, Maryland. Certain legal matters will be
passed upon for the Underwriters by Jones, Day, Reavis & Pogue, Chicago,
Illinois. Robert M. Goldman, of counsel to Piper & Marbury L.L.P., owns 15,000
shares of Common Stock.

EXPERTS

The audited financial statements and schedule of the Company included in
this Prospectus and elsewhere in the Registration Statement have been audited
by Arthur Andersen LLP, independent public accountants, as indicated in their
reports with respect thereto, and are included herein in reliance upon the
authority of said firm as experts in giving said reports.

ADDITIONAL INFORMATION

The Company is not currently subject to the information requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"). As a result
of this offering, the Company will be required to file reports and other
information with the Securities and Exchange Commission pursuant to the
informational requirements of the Exchange Act.

The Company has filed with the Commission, in Washington, D.C., a
Registration Statement on Form S-1 under the Securities Act with respect to
the shares of Common Stock offered hereby. This Prospectus does not contain
all of the information set forth in the Registration Statement and the
exhibits and schedules thereto. For further information with respect to the
Company and the Common Stock offered hereby, reference is made to the
Registration Statement and the exhibits and schedules filed therewith.
Statements contained in this Prospectus as to the contents of any contract or
any other document referred to are not necessarily complete, and in each
instance reference is made to the copy of such contract or other document
filed as an exhibit to the Registration Statement, each such statement being
qualified in all respects by such reference. A copy of the Registration
Statement, and the exhibits and schedules thereto, may be inspected without
charge at the public reference facilities maintained by the Securities and
Exchange Commission in Room 1024, 450 Fifth Street, N.W., Washington, D.C.
20549, and at the regional offices of the Commission located at Seven World
Trade Center, New York, New York 10048 and Citicorp Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661, and copies of all or any part of
the Registration Statement may be obtained from the Commission upon payment of
a prescribed fee. This information is also available from the Commission's
Internet web site at http://www.sec.gov. The Registration Statement, including
all exhibits thereto and amendments thereof, will be filed with the Commission
through EDGAR.

47
<PAGE>

RWD TECHNOLOGIES, INC.

INDEX TO FINANCIAL STATEMENTS

<TABLE>
<S> <C>
Report of Independent Public Accountants................................... F-2
Balance Sheets as of December 31, 1995 and 1996, March 31, 1997 (unaudited)
and March 31, 1997
(pro forma unaudited)..................................................... F-3
Statements of Income for the years ended December 31, 1994, 1995 and 1996
and for the three months ended March 31, 1996 and 1997 (unaudited)........ F-4
Statements of Changes in Stockholders' Equity for the years ended December
31, 1994, 1995 and 1996 and for the three months ended March 31, 1997
(unaudited)............................................................... F-5
Statements of Cash Flows for the years ended December 31, 1994, 1995 and
1996 and for the three months ended March 31, 1996 and 1997 (unaudited)... F-6
Notes to Financial Statements.............................................. F-7
</TABLE>

F-1
<PAGE>

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Board of Directors of
RWD Technologies, Inc.:

We have audited the accompanying balance sheets of RWD Technologies, Inc. (a
Maryland corporation) as of December 31, 1995 and 1996, and the related
statements of income, changes in stockholders' equity and cash flows for each
of the three years in the period ended December 31, 1996. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

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

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of RWD Technologies, Inc. as
of December 31, 1995 and 1996, and the results of its operations and its cash
flows for each of the three years in the period ended December 31, 1996, in
conformity with generally accepted accounting principles.

Baltimore, Maryland
Arthur Andersen LLP
January 31, 1997

F-2
<PAGE>

RWD TECHNOLOGIES, INC. BALANCE SHEETS

<TABLE>
<CAPTION>
DECEMBER 31,
------------------------
1995 1996 MARCH 31, 1997
----------- ----------- ------------------------
(PROFORMA
(UNAUDITED) UNAUDITED)
<S> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash..................... $ 390,900 $ 3,530,600 $ 4,869,500 $ (850,500)
Investments, held-to-ma-
turity.................. 2,003,100 1,502,300 -- --
Investments, available-
for-sale................ -- 500,600 500,200 500,200
Contract accounts
receivable, net of
allowance for doubtful
accounts of $412,300,
$383,700 and $477,300,
respectively............ 11,448,800 11,981,600 11,627,600 11,627,600
Costs and estimated
earnings in excess of
billings on uncompleted
contracts............... 3,839,800 3,331,400 6,930,400 6,930,400
Prepaid expenses and oth-
er...................... 856,900 849,500 806,000 806,000
----------- ----------- ----------- -----------
Total Current Assets... 18,539,500 21,696,000 24,733,700 19,013,700
----------- ----------- ----------- -----------
FIXED ASSETS:
Furniture and fixtures... 2,627,900 4,826,300 5,039,600 5,039,600
Office equipment......... 835,500 1,448,300 1,558,300 1,558,300
Computer equipment....... 3,940,300 5,594,400 6,221,200 6,221,200
Leasehold improvements... 280,400 725,900 818,900 818,900
----------- ----------- ----------- -----------
Total Fixed Assets..... 7,684,100 12,594,900 13,638,000 13,638,000
Less-Accumulated depreci-
ation and amortization.. (2,638,600) (4,718,000) (5,435,600) (5,435,600)
----------- ----------- ----------- -----------
Net Fixed Assets....... 5,045,500 7,876,900 8,202,400 8,202,400
----------- ----------- ----------- -----------
OTHER ASSETS............... 73,100 285,500 444,300 444,300
----------- ----------- ----------- -----------
Total Assets......... $23,658,100 $29,858,400 $33,380,400 $27,660,400
=========== =========== =========== ===========
LIABILITIES AND STOCKHOLD-
ERS' EQUITY
CURRENT LIABILITIES:
Accounts payable......... $ 254,000 $ 652,800 $ 953,300 $ 953,300
Accrued payroll and oth-
er...................... 1,675,500 1,641,500 1,959,300 1,959,300
Accrued vacation payable. 610,400 817,400 1,040,200 1,040,200
Billings in excess of
costs and estimated
earnings on uncompleted
contracts............... 1,860,500 2,689,300 2,955,600 2,955,600
Deferred tax liability... -- -- -- 1,000,000
Borrowings under line of
credit.................. 2,700,000 -- -- --
S Corporation Notes...... -- -- -- 6,500,000
Current portion of capi-
tal lease obligation.... -- 41,600 37,500 37,500
Related party debt....... -- 3,800,000 3,800,000 3,800,000
----------- ----------- ----------- -----------
Total Current Liabili-
ties.................. 7,100,400 9,642,600 10,745,900 18,245,900
NONCURRENT LIABILITIES:
Long-term related party
debt.................... 3,800,000 -- -- --
Capital lease obligation,
net of current portion.. -- 83,400 74,700 74,700
Deferred tax liability... -- -- -- 3,500,000
----------- ----------- ----------- -----------
Total Liabilities...... 10,900,400 9,726,000 10,820,600 21,820,600
----------- ----------- ----------- -----------
COMMITMENTS AND CONTINGEN-
CIES
STOCKHOLDERS' EQUITY:
Common stock, $.10 par
value; authorized--
50,000,000 shares; is-
sued and outstanding--
4,849,110, 4,859,640,
4,873,740 and
10,807,586, respective-
ly...................... 484,900 486,000 487,400 1,080,800
Additional paid-in capi-
tal..................... 2,747,900 2,753,800 2,763,100 6,349,700
Retained earnings........ 9,524,900 16,892,600 19,309,300 (1,590,700)
----------- ----------- ----------- -----------
Total Stockholders' Eq-
uity.................. 12,757,700 20,132,400 22,559,800 5,839,800
----------- ----------- ----------- -----------
Total Liabilities and
Stockholders' Equi-
ty.................. $23,658,100 $29,858,400 $33,380,400 $27,660,400
=========== =========== =========== ===========
</TABLE>

The accompanying notes are an integral part of these statements.

F-3
<PAGE>

RWD TECHNOLOGIES, INC.

STATEMENTS OF INCOME

<TABLE>
<CAPTION>
THREE MONTHS
ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
------------------------------------- -----------------------------
1994 1995 1996 1996 1997
----------- ----------- ----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenue................. $29,423,900 $47,131,600 $65,005,500 $14,631,600 $19,099,500
Cost of services........ 21,750,800 35,268,900 48,131,300 10,862,900 13,412,900
----------- ----------- ----------- ----------- -----------
Gross profit............ 7,673,100 11,862,700 16,874,200 3,768,700 5,686,600
General and administra-
tive expenses.......... 3,514,700 5,212,100 8,137,500 1,820,100 2,686,000
----------- ----------- ----------- ----------- -----------
Operating income........ 4,158,400 6,650,600 8,736,700 1,948,600 3,000,600
Interest expense........ (339,900) (342,800) (388,600) (94,200) (94,800)
Interest and other in-
come................... 154,100 222,300 265,500 33,500 116,900
----------- ----------- ----------- ----------- -----------
Income before taxes..... 3,972,600 6,530,100 8,613,600 1,887,900 3,022,700
Provision for income
taxes.................. 59,800 168,500 364,900 70,000 100,000
----------- ----------- ----------- ----------- -----------
Net income............ $ 3,912,800 $ 6,361,600 $ 8,248,700 $ 1,817,900 $ 2,922,700
=========== =========== =========== =========== ===========
Pro Forma Information
(unaudited):
Income before taxes,
as
reported............. $ 3,972,600 $ 6,530,100 $ 8,613,600 $ 1,887,900 $ 3,022,700
Pro forma income tax
provision to
recognize C
Corporation provision
for income taxes .... 1,589,000 2,612,000 3,445,500 755,200 1,209,100
----------- ----------- ----------- ----------- -----------
Pro forma net in-
come............... $ 2,383,600 $ 3,918,100 $ 5,168,100 $ 1,132,700 $ 1,813,600
=========== =========== =========== =========== ===========
Pro forma net income
per share............ $ 0.19 $ 0.32 $ 0.40 $ 0.09 $ 0.14
=========== =========== =========== =========== ===========
Weighted average
shares
outstanding.......... 12,348,500 12,348,300 13,030,000 13,030,000 12,968,300
=========== =========== =========== =========== ===========
</TABLE>

The accompanying notes are an integral part of these statements.

F-4
<PAGE>

RWD TECHNOLOGIES, INC.

STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

FOR THE YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996 AND

FOR THE THREE MONTHS ENDED MARCH 31, 1997 (UNAUDITED)

<TABLE>
<CAPTION>
RETAINED
ADDITIONAL EARNINGS
COMMON PAID-IN (ACCUMULATED
STOCK CAPITAL DEFICIT)
-------- ---------- ------------
<S> <C> <C> <C>
BALANCE, DECEMBER 31, 1993.................. $484,900 $2,748,500 $ (749,500)
Stock options exercised................... -- 400 --
Common stock repurchased.................. -- (300) --
Net income................................ -- -- 3,912,800
-------- ---------- -----------
BALANCE, DECEMBER 31, 1994.................. 484,900 2,748,600 3,163,300
Stock options exercised................... -- 300 --
Common stock repurchased.................. -- (1,000) --
Net income................................ -- -- 6,361,600
-------- ---------- -----------
BALANCE, DECEMBER 31, 1995.................. 484,900 2,747,900 9,524,900
Stock options exercised................... 4,600 26,800 --
Common stock repurchased.................. (3,500) (20,900) (189,700)
Stockholder distributions................. -- -- (691,300)
Net income................................ -- -- 8,248,700
-------- ---------- -----------
BALANCE, DECEMBER 31, 1996.................. 486,000 2,753,800 16,892,600
Stock options exercised................... 6,400 40,300 --
Common stock repurchased.................. (5,000) (31,000) (265,500)
Stockholder distributions................. -- -- (240,500)
Net income................................ -- -- 2,922,700
-------- ---------- -----------
BALANCE, MARCH 31, 1997 (unaudited)......... $487,400 $2,763,100 $19,309,300
======== ========== ===========
</TABLE>

The accompanying notes are an integral part of these statements.

F-5
<PAGE>

RWD TECHNOLOGIES, INC.

STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
------------------------------------- ------------------------
1994 1995 1996 1996 1997
----------- ----------- ----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM
OPERATING ACTIVITIES:
Net income........... $ 3,912,800 $ 6,361,600 $ 8,248,700 $ 1,817,900 $ 2,922,700
Adjustments to recon-
cile net income to
net cash from oper-
ating activities--
Depreciation and
amortization...... 568,500 1,179,800 2,232,400 455,600 722,700
(Gain) loss on sale
of fixed assets... (1,700) 6,000 31,600 12,500 (24,200)
(Increase) decrease
in contract ac-
counts receivable,
net............... (2,922,900) (3,652,900) (532,800) 1,898,700 354,000
(Increase) decrease
in costs and esti-
mated earnings in
excess of billings
on uncompleted
contracts......... (885,600) (1,826,200) 508,400 (3,563,700) (3,599,000)
(Increase) decrease
in prepaid ex-
penses and other.. (202,900) (436,500) 7,400 408,600 43,400
Increase in
payables and ac-
crued expenses.... 193,800 806,000 571,800 (144,300) 841,100
(Decrease) increase
in billings in
excess of costs
and estimated
earnings on
uncompleted
contracts......... (203,000) 593,800 828,800 3,389,400 266,300
----------- ----------- ----------- ----------- -----------
Net cash from op-
erating activi-
ties............ 459,000 3,031,600 11,896,300 4,274,700 1,527,000
----------- ----------- ----------- ----------- -----------
CASH FLOWS FROM INVEST-
ING ACTIVITIES:
Purchase of invest-
ments............... (6,501,800) (2,272,200) (2,002,900) -- --
Proceeds from maturi-
ties of investments. 6,739,300 1,995,300 2,003,100 1,100 1,502,700
Purchase of fixed as-
sets................ (1,433,000) (3,738,100) (4,961,300) (1,419,200) (1,049,100)
(Increase) decrease
in other assets..... (37,600) 3,400 (50,000) (10,900) 16,100
Proceeds from sale of
fixed assets........ 10,900 7,300 8,400 1,500 25,100
----------- ----------- ----------- ----------- -----------
Net cash from in-
vesting activi-
ties.............. (1,222,200) (4,004,300) (5,002,700) (1,427,500) 494,800
----------- ----------- ----------- ----------- -----------
CASH FLOWS FROM FINANC-
ING ACTIVITIES:
Increase (decrease)
in cash overdraft... 859,500 (859,500) -- -- --
Net (payments)
borrowings under
line of credit...... (400,700) 2,223,800 (2,700,000) (2,700,000) --
Principal portion
paid on capital
lease obligation.... -- -- (17,500) -- (12,800)
Shareholder distribu-
tions............... -- -- (691,300) -- (240,500)
Issuance of common
stock............... 400 300 31,400 200 46,700
Purchase of common
stock............... (300) (1,000) (214,100) -- (301,500)
Public offering issu-
ance costs.......... -- -- (162,400) -- (174,800)
----------- ----------- ----------- ----------- -----------
Net cash from fi-
nancing activi-
ties.............. 458,900 1,363,600 (3,753,900) (2,699,800) (682,900)
----------- ----------- ----------- ----------- -----------
NET (DECREASE) INCREASE
IN CASH............... (304,300) 390,900 3,139,700 147,400 1,338,900
CASH, beginning of pe-
riod.................. 304,300 -- 390,900 390,900 3,530,600
----------- ----------- ----------- ----------- -----------
CASH, end of period.... $ -- $ 390,900 $ 3,530,600 $ 538,300 $ 4,869,500
=========== =========== =========== =========== ===========
SUPPLEMENTAL DISCLO-
SURE:
Income taxes paid.... $ -- $ 270,400 $ 334,600 $ 33,900 $ 3,600
=========== =========== =========== =========== ===========
Interest expense
paid................ $ 339,900 $ 342,800 $ 388,600 $ 94,300 $ 92,500
=========== =========== =========== =========== ===========
</TABLE>

In 1996, the Company entered into a $142,500 capital lease.

The accompanying notes are an integral part of these statements.

F-6
<PAGE>

RWD TECHNOLOGIES, INC.

NOTES TO FINANCIAL STATEMENTS

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

Organization and Business

RWD Technologies, Inc. (the "Company") was incorporated on January 22, 1988,
in the State of Maryland. The Company provides a broad range of integrated
solutions designed to improve the productivity and effectiveness of workers in
complex operating environments.

The Company's operations depend, among other things, upon the Company's
ability to attract, develop and retain a sufficient number of highly skilled
professional employees. In addition, the Company's revenue is generated from a
limited number of clients in specific industries. Future operations may be
affected by its ability to retain these clients, and cyclical and economic
factors that could impact those industries. An evaluation of the Company's
operations should also include consideration of the "Risk Factors" described
in the Prospectus related to the Company's contemplated public offering.

Basis of Presentation

The accompanying financial statements are presented on the accrual basis of
accounting in accordance with generally accepted accounting principles. 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 disclosure of
contingent assets and liabilities as of the date of the financial statements
and the reported amounts of total revenue and expenses during the reporting
period. While actual results could differ from those estimates, management
believes that actual results will not be materially different from amounts
provided in the accompanying financial statements.

Contemplated Initial Public Offering (IPO)

The Company is currently contemplating an IPO. Prior to the IPO, the Company
will make an approximate $16,400,000 S Corporation distribution in the form of
a cash payment of approximately $9,900,000 and the issuance of approximately
$6,500,000 of non-interest bearing, demand promissory notes, representing
earnings not previously distributed to the stockholders. The proceeds of the
IPO will be used to retire the $3,800,000 of stockholder notes currently
outstanding, and the Company will use the remaining proceeds for working
capital to support the planned growth of its business and for other general
corporate purposes.

Investments

Investments as of December 31, 1995, 1996, and March 31, 1997 consisted of
U.S. government securities of $2,003,100, $2,002,900 and $500,200,
respectively. In accordance with Statement of Financial Accounting Standards
(SFAS) No. 115, "Accounting for Certain Investments in Debt and Equity
Securities," all investments are classified as held-for-maturity except for
those having an aggregate value of $500,600 as of December 31, 1996 and
$500,200 as of March 31, 1997 which are classified as available-for-sale.
Investments classified as held-to-maturity are recorded at amortized cost and
investments classified as available-for-sale are recorded at market value. The
amortized cost approximated market value for all investments as of December
31, 1995 and 1996 and March 31, 1997.

Financial Instruments

Financial instruments as of December 31, 1995 and 1996 and March 31, 1997
consist of cash, investments, receivables, accounts payable, borrowings under
line of credit, related party debt and a capital lease obligation, for all of
which the carrying amounts approximate market value.

F-7
<PAGE>

RWD TECHNOLOGIES, INC.

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

Fixed Assets

Fixed assets are stated at cost. Depreciation and amortization is computed
using the straight-line method based on the estimated useful lives, as
follows:

<TABLE>
<S> <C>
Furniture and fixtures....................................... 7 years
Office equipment............................................. 5 years
Computer equipment........................................... 3-5 years
Leasehold improvements....................................... 7-10 years
</TABLE>

The depreciation and amortization expenses for 1994, 1995, 1996 and the
three months ended March 31, 1996 and 1997, were $568,500, $1,179,800,
$2,232,400, $455,600 and $722,700, respectively.

Revenue Recognition

Almost all of RWD's revenue is generated from professional fees. The
majority of the Company's contracts are on a time-and-materials basis,
although many of the contracts contain initial "not-to-exceed" fees and
Company performance obligations. The remainder of the Company's contracts are
on a fixed-bid basis. Revenue is recognized using the percentage of completion
method. The Company's contracts generally vary in length from one to 24
months.

Earned revenue is based on the percentage that direct labor and other
contract costs incurred to date bear to total estimated costs, after giving
effect to the most recent estimates of total cost. The cumulative impact of
revisions in total cost estimates during the progress of work is reflected in
the period in which these changes become known. Earned revenue reflects the
original contract price adjusted for agreed-upon claim and change order
revenue, if any. Losses expected to be incurred on jobs in process, after
consideration of estimated minimum recoveries from claims and change orders,
are charged to income as soon as such losses are known.

Significant Clients

Automobile industry clients generated an aggregate of 46.9%, 43.5% and 40.7%
of the Company's total revenue in 1994, 1995 and 1996, respectively and 42.1%
and 42.2% of the Company's total revenue in the three months ended March 31,
1996 and 1997, respectively. Sales to one client during 1994, 1995, 1996 and
the three months ended March 31, 1996 and 1997 were approximately 33.2%,
33.9%, 28.5%, 31.6% and 27.6% of total revenue in each of these respective
periods. Sales to another client were approximately 12.4% in the three months
ended March 31, 1997. No other client represented more than 10% of the
Company's total revenue in any of these periods.

Segment Information

The Company operates within one industry segment.

Income Taxes

Historically, the Company has elected to be taxed under the provisions of
Subchapter S of the Internal Revenue Code which provide that, in lieu of
corporate, federal and some state income taxes, the stockholders are taxed on
their proportionate share of the Company's taxable income. In connection with
the IPO of the Company's common stock, the Company will be taxed as a C
Corporation. As a result of the Company's Subchapter S election, the
accompanying statements of income do not include an income tax provision for
federal and most state income taxes; however, pro forma adjustments to reflect
a total provision for income taxes have been made. The pro forma adjustments
have been made in accordance with Statement of Financial Accounting Standards
No. 109, "Accounting for Income Taxes", at an effective rate of 40.0% for
1994, 1995 and 1996 and for the three months ended March 31, 1996 and 1997,
which is the tax rate which would have been in effect had the Company been
taxed as a C Corporation.

Earnings Per Share

Pro forma earnings per share are based on the weighted average number of
common and dilutive common equivalent shares for stock options outstanding
during the period the calculation is made. Dilutive common

F-8
<PAGE>

RWD TECHNOLOGIES, INC.

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

equivalent shares consist of shares issuable upon the exercise of stock
options, using the treasury stock method and the estimated IPO price of $13.00
per share. The options outstanding as of December 31, 1996 were assumed to be
outstanding for all of 1995 and 1996. The majority stockholder plans to
exercise options to acquire 5,370,000 shares concurrent with the completion of
the IPO. The majority stockholder's options are included in the weighted
average shares outstanding as if the 5,370,000 shares were outstanding for all
periods presented. The weighted average shares outstanding for 1996 and the
first quarter of 1997 include the pro forma effect of shares that would have
had to have been issued (at an assumed public offering price of $13.00 less
the underwriting discount expenses) to generate sufficient cash to fund the
portion of the approximately $16.4 million S Corporation Distribution that is
in excess of the net income for the year ended December 31, 1996. While this
assumption is being made to calculate the weighted average shares outstanding
for 1996 and the first quarter of 1997, the Company plans to use operating
cash flows, and not IPO proceeds, to fund the $16.4 million distribution. The
weighted average shares outstanding is calculated as follows:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------- THREE MONTHS ENDED
1994 1995 1996 MARCH 31, 1997
---------- ---------- ---------- ------------------
<S> <C> <C> <C> <C>
Common stock............... 4,850,500 4,850,300 4,857,800 4,873,700
Dilutive effect of majority
stockholder options to be
exercised................. 5,370,000 5,370,000 5,370,000 5,370,000
Dilutive effect of
remaining common
equivalent shares(i)...... 2,128,000 2,128,000 2,128,000 2,050,400
Dilutive effect of assumed
IPO shares for
distribution.............. -- -- 674,200 674,200
---------- ---------- ---------- ----------
Weighted average shares
outstanding............... 12,348,500 12,348,300 13,030,000 12,968,300
========== ========== ========== ==========
</TABLE>
- --------
(i) The dilutive effect of remaining common equivalent shares includes the
estimated 563,846 shares that will be issued upon exercise of 603,000
options on a cashless basis concurrent with the IPO (See Note 1, Pro Forma
Balance Sheet disclosure).

Stock Split

The Company effected a three for one stock split, effective at the close of
business on March 21, 1997. All share data included in the accompanying
financial statements and notes thereto are as if the stock split had occurred
prior to the periods presented.

New Accounting Standards

In March 1995, the Financial Accounting Standards Board issued SFAS No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets
to be Disposed Of." SFAS No. 121 requires that long-lived assets and certain
identifiable intangibles to be held and used by an entity be reviewed for
impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. SFAS No. 121 is effective
for financial statements with fiscal years beginning after December 15, 1995.
The adoption of SFAS No. 121 as of January 1, 1996 had no impact on the
Company's financial position or results of operations.

In October 1995, the Financial Accounting Standards Board issued SFAS No.
123, "Accounting for Stock Based Compensation." With respect to stock options
granted to employees, SFAS No. 123 permits companies to continue using the
accounting method promulgated by the Accounting Principles Board Opinion No.
25 ("APB No. 25"), "Accounting for Stock Issued to Employees," to measure
compensation expense or to adopt the fair value based method prescribed by
SFAS No. 123. If APB No. 25's method is continued, pro forma disclosures are
required as if SFAS No. 123 accounting provisions were followed. Management
has elected to continue to measure compensation expense under APB No. 25, with
pro forma footnote disclosures of the expense under the SFAS No. 123 method.
(See Note 5).

F-9
<PAGE>

RWD TECHNOLOGIES, INC.

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

During early 1997, the Financial Accounting Standards Board issued SFAS No.
128, "Earning Per Share," which becomes effective December 15, 1997, and as to
which early adoption is not permitted. Under SFAS No. 128, a company will be
required to disclose basic earnings per share (with the principal difference
from current disclosure being that common stock equivalence will not be
considered in the compilation of basic earnings per share) and diluted
earnings per share. The adoption of this pronouncement will require
restatement of all prior period earnings per share data presented.

Pro Forma Balance Sheet

The (unaudited) pro forma balance sheet as of March 31, 1997 gives pro forma
effect to (i) the S Corporation Distribution (as previously discussed) and the
estimated deferred income tax liability that will be recorded when the Company
converts to a C Corporation (as previously discussed) and (ii) the majority
stockholder's concurrent exercise of 5,370,000 options for an aggregate
exercise price of $4.2 million and another founding stockholder's exercise of
non-compensatory options to purchase 603,000 shares on a cashless basis,
resulting in the issuance to him of 563,846 shares.

2. COSTS AND ESTIMATED EARNINGS ON CONTRACTS IN PROCESS:

<TABLE>
<CAPTION>
AS OF DECEMBER 31,
-----------------------
1995 1996 AS OF MARCH 31, 1997
----------- ----------- --------------------
<S> <C> <C> <C>
Cost incurred and estimated
earnings on uncompleted
contracts........................ $39,721,500 $59,311,700 $76,741,400
Less: Billings to date on
uncompleted contracts............ 37,742,200 58,669,600 72,766,600
----------- ----------- -----------
Net unbilled revenue............ $ 1,979,300 $ 642,100 $3,974,800
=========== =========== ===========
Included in the accompanying
balance sheets under the
following captions:
Costs and estimated earnings in
excess of billings on
uncompleted contracts.......... $ 3,839,800 $ 3,331,400 $ 6,930,400
Billings in excess of costs and
estimated earnings on
uncompleted contracts.......... 1,860,500 2,689,300 2,955,600
----------- ----------- -----------
$ 1,979,300 $ 642,100 $ 3,974,800
=========== =========== ===========
</TABLE>
Generally, contracts provide for the billing of costs incurred and estimated
fees on primarily a monthly basis. Amounts incurred in "costs and estimated
earnings in excess of billings on uncompleted contracts" in the accompanying
financial statements will be billed within twelve months of the balance sheet
date.

3. DEBT:

Debt consists of the following as of December 31, 1995 and 1996 and March
31, 1997:
<TABLE>
<S> <C>
Note payable--9.0%, due March 31, 1998, unsecured.............. $ 200,000
Note payable--9.0%, due March 31, 1998, unsecured.............. 3,600,000
----------
Total........................................................ $3,800,000
==========
</TABLE>
The notes payable listed above are payable to two officers of the Company
who are principal stockholders of the Company. Interest expense on these loans
from stockholders was $338,600, $342,000, $342,000, $85,500 and $85,500 in
1994, 1995 and 1996 and the three months ended March 31, 1996 and 1997,
respectively. The Company intends to retire the existing notes payable
concurrent with the proposed IPO.

The Company has a line of credit agreement with a bank which extends to
working capital (Facility A) and vehicle and equipment purchases or leases
(Facility B). Facility A is an unsecured line of $7,500,000. Facility B

F-10
<PAGE>

RWD TECHNOLOGIES, INC.

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

is secured by the specific vehicles or equipment being leased or purchased and
advances under this $250,000 line are limited to 80% of the cost of assets
purchased or 100% of the cost of assets leased. Interest under this agreement
is at the 30-day LIBOR rate, plus 1.75%. During 1994, 1995 and 1996 and the
three months ended March 31, 1996 and 1997, the average outstanding balance,
the highest balance outstanding, the weighted average interest rates and the
interest rate at end of period were as follows:

<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED DECEMBER 31, ENDED MARCH 31,
-------------------------------- -------------------
1994 1995 1996 1996 1997
-------- ---------- ---------- ---------- -------
<S> <C> <C> <C> <C> <C>
Average month-end
outstanding balance.... $ 66,900 $ 225,000 $ 58,300 $ 233,300 $ --
Highest balance
outstanding............ $476,200 $2,700,000 $2,700,000 $1,400,000 $ --
Weighted average
interest rates......... 6.4% 7.8% 7.2% 7.2% n/a
Interest rate at end of
period................. 7.9% 7.7% 7.4% 7.2% 7.5%
</TABLE>

4. COMMITMENTS AND CONTINGENCIES:

Commitments

The Company leases its office facilities under various operating leases
which expire through December 31, 2003. The leases require the Company to pay
for a portion of common area maintenance expenses and real estate taxes. Rent
expense was $660,200, $1,265,800, $2,016,000, $500,700 and $546,000 in 1994,
1995 and 1996 and the three months ended March 31, 1996 and 1997,
respectively. During 1996, the Company entered into a capital lease obligation
for a copy machine. Future minimum payments under these operating and capital
leases, as of March 31, 1997, were as follows:

<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31, CAPITAL LEASE OPERATING LEASES
------------------------ ------------- ----------------
<S> <C> <C>
1997 (remaining).......................... $ 53,500 $1,692,200
1998...................................... 66,300 2,346,400
1999...................................... 33,100 2,199,100
2000...................................... -- 1,970,500
2001...................................... -- 1,500,400
2002 and thereafter....................... -- 2,718,800
--------
Total minimum lease payments............ 152,900
Less: Amounts representing imputed interest... 40,700
--------
Present value of net minimum payments... 112,200
Less: Current portion......................... 37,500
--------
$ 74,700
========
</TABLE>

The Company has entered into employment agreements with certain key
employees with initial terms of three years, subject to successive one year
renewals.

Litigation

The Company is party to various litigation arising in the ordinary course of
its business. It is management's opinion, after consultation with its legal
counsel, that none of the outcomes of these claims, whether individually or in
the aggregate, will have a material adverse effect on the Company's financial
position or results of operations.

F-11
<PAGE>

RWD TECHNOLOGIES, INC.

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

5. STOCK OPTION AND PURCHASE AGREEMENTS:

The Company has entered into various stock option agreements with key
employees. The options granted under these agreements expire at the earlier of
termination of employment or ten years from the date of grant.

The Company has also instituted a stock option plan whereby the Board of
Directors, at its discretion, can award employees and outside directors
options to purchase shares of the Company's common stock. Options for
4,065,000 shares are authorized under the plan. The options granted to
employees under this plan vest over five years at a rate of 20% per year and
expire at the earlier of termination of employment or December 31, ten years
after the first vesting date. The options granted to outside directors will
vest ratably over a three year period, beginning one year after grant, and
will expire at the earlier of termination or ten years after the first vesting
date.

During 1995, the Financial Accounting Standards Board issued SFAS No. 123,
"Accounting for Stock Based Compensation," which defines a fair value based
method of accounting for an employee stock option or similar equity
instrument. This statement allows an entity to continue to measure
compensation cost for those plans using the method of accounting prescribed by
the Accounting Principles Board Opinion No. 25 ("APB No. 25"), "Accounting for
Stock Issued to Employees." Entities electing to remain with the accounting in
APB No. 25 must make pro forma footnote disclosures of net income and earnings
per share, as if the fair value based method of accounting defined in this
Statement had been applied.

The Company has elected to account for its stock-based compensation plans in
accordance with APB No. 25, under which no compensation cost has been
recognized. The Company has computed for pro forma disclosure purposes the
value of all compensatory options granted during 1995 and 1996, using the
Black-Scholes option pricing model as prescribed by SFAS No. 123. There were
no options granted during the first quarter of 1997. During 1995, the Company
issued noncompensatory stock options to its founding stockholders. The
following assumptions were used for grants:

<TABLE>
<CAPTION>
1995 1996
-------- --------
<S> <C> <C>
Risk-free interest rate (range)........................ 5.4%-7.8% 6.2%-6.7%
Expected dividend yield................................ 0.0% 0.0%
Expected lives......................................... 5 years 5 years
Expected volatility.................................... 42.0% 42.0%
</TABLE>

Options were assumed to be exercised upon vesting for the purposes of this
valuation. Adjustments are made for options forfeited prior to vesting. Had
compensation costs for compensatory options been determined consistent with
SFAS No. 123, the Company's pro forma net income and earnings per share
information reflected on the accompanying statements of income would have been
reduced to the following "as adjusted" amounts:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER THREE MONTHS ENDED
31, MARCH 31,
--------------------- ---------------------
1995 1996 1996 1997
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Net Income:
As reported in pro forma informa-
tion............................ $3,918,100 $5,168,100 $1,132,700 $1,813,600
As adjusted...................... $3,881,700 $5,038,800 $1,100,400 $1,705,400
Earnings Per Share:
As reported in pro forma informa-
tion............................ $0.32 $0.40 $0.09 $0.14
As adjusted...................... $0.32 $0.39 $0.09 $0.13
</TABLE>

The Company's stock did not actively trade during 1995, 1996 or the first
quarter of 1997.

F-12
<PAGE>

RWD TECHNOLOGIES, INC.

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

The following table summarizes all stock option and purchase right activity
in 1994, 1995, 1996 and the three months ended March 31, 1997.

<TABLE>
<CAPTION>
KEY PARTY OPTION
AGREEMENTS EMPLOYEE PLAN EXERCISE PRICE
NUMBER OF SHARES NUMBER OF SHARES PER SHARE
---------------- ---------------- --------------
<S> <C> <C> <C>
Outstanding as of December
31, 1993.................. 3,912,000 728,100 $ 0.67
Granted.................. -- 557,100 0.67
Exercised................ -- (660) 0.67
Terminated............... -- (147,000) 0.67
--------- ---------
Outstanding as of December
31, 1994.................. 3,912,000 1,137,540 0.67
Granted.................. 2,125,740 1,464,750 0.67-1.00
Exercised................ -- (450) 0.67
Terminated............... (37,500) (298,590) 0.67-1.00
--------- ---------
Outstanding as of December
31, 1995.................. 6,000,240 2,303,250 0.67-1.00
Granted.................. -- 1,069,350 6.00
Exercised................ (10,080) (36,150) 0.67-1.00
Terminated............... -- (132,450) 0.67-1.00
--------- ---------
Outstanding as of December
31, 1996.................. 5,990,160 3,204,000 0.67-6.00
Exercised................ (9,000) (55,350) 0.67-1.00
Terminated............... -- (72,600) 0.67-6.00
--------- ---------
Outstanding as of March 31,
1997 (unaudited).......... 5,981,160 3,076,050 0.67-6.00
========= =========
</TABLE>

Weighted average fair value of options granted for the years ended December
31, 1995 and 1996 was $0.43 and $2.78, respectively.

In connection with the proposed IPO, certain stockholders intend to exercise
outstanding options held.

The Company adopted an Employee Stock Purchase Plan (the "Stock Purchase
Plan"), subject to stockholder approval. The Stock Purchase Plan is intended
to qualify as an "employee stock purchase plan" under Section 423 of the Code.
All regular full-time employees of the Company (including officers), and all
other employees whose customary employment is for more than 20 hours per week
are eligible to participate in the Stock Purchase Plan. Directors who are not
employees are not eligible. A maximum of 175,000 shares of the Company's
Common Stock are reserved for issuance under the Stock Purchase Plan and
available for purchase thereunder, subject to anti-dilution adjustments in the
event of certain changes in the capital structure of the Company.

6. RETIREMENT SAVINGS PLAN:

The Company has a Retirement Savings Plan (401(k) plan) whereby employees
may contribute up to the limits established by the Internal Revenue Service.
The Company, at the discretion of the Board of Directors, will match employee
contributions up to 15%. The Company's contribution expense during 1994, 1995
and 1996 and the three months ended March 31, 1996 and 1997 was $498,800,
$1,100,900, $1,102,400, $240,300 and $330,000, respectively.

F-13
<PAGE>

RWD TECHNOLOGIES, INC.

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

7. INCOME TAXES:

In connection with the Company's change in tax election, the Company will
record a deferred income tax liability and corresponding income tax expense
arising from a change in the Company's tax status and a change from the cash
basis to the accrual basis of accounting for tax purposes. Beginning with this
change, the Company will provide for deferred income taxes under the asset and
liability method of accounting. This method requires the recognition of
deferred income taxes based upon the tax consequences of "temporary
differences" by applying enacted statutory tax rates applicable to future
years to differences between the financial statements carrying amounts and the
tax basis of existing assets and liabilities.

A reconciliation of the statutory tax to the effective tax for the years
ended December 31, 1994, 1995 and 1996 is as follows:

<TABLE>
<CAPTION>
1994 1995 1996
----------- ----------- -----------
<S> <C> <C> <C>
Statutory tax (at 34%
rate).................... $ 1,350,700 $ 2,220,200 $ 2,928,600
State taxes, net of fed-
eral benefit............. 210,500 346,100 456,500
Effect of S corporation
income taxes............. (1,539,300) (2,455,100) (3,092,200)
Other..................... 37,900 57,300 72,000
----------- ----------- -----------
Provision for income
taxes.................. $ 59,800 $ 168,500 $ 364,900
=========== =========== ===========
</TABLE>

The Company's estimated effective tax rate for the year ending December 31,
1997 is 40%, which was the rate used for the pro forma statement of income for
the three months ended March 31, 1997.

F-14
<PAGE>

DEDICATED TO HELPING CLIENTS COMPETE
BY FOCUSING ON END-USER PERFORMANCE

[PHOTO APPEARS HERE] PLANT FLOOR TRAINING
RWD provides performance-based training programs for
plant-floor workers at a large U.S. automobile
manufacturer. As a result of the company's efforts,
worker competency has increased while classroom time
and training costs have dramatically decreased.

[PHOTO APPEARS HERE] CALL CENTER SYSTEMS
RWD developed and deployed an easy-to-use room
reservation system for an international hotel chain
that annually answers 25 million calls for properties
worldwide. The new system significantly reduced
operator training time, time-to-competency, and
overall call handling time.

[PHOTO APPEARS HERE] ENTERPRISE-WIDE SOFTWARE IMPLEMENTATIONS
An international chemical company engaged RWD to
develop an on-line reference system, training and
documentation materials, and job aids for end users
of their SAP software, worldwide. These tools greatly
increased end-user productivity, reduced classroom
training time, and decreased time-to-competence.

[PHOTO APPEARS HERE] GLOBAL LEAN MANUFACTURING
A large automobile manufacturer asked RWD to apply
lean manufacturing principles to their European
engine production line to reduce supply system and
labor inefficiencies. Based on the Company's early
success and other services RWD provided to this
client, RWD is assisting the client in implementing
lean manufacturing concepts in all of its European
operations.

[PHOTO APPEARS HERE] CUSTOM INFORMATION SYSTEMS EMBEDDED FOR
"JUST-IN-TIME" ACCESS
RWD developed and deployed a "just-in-time"
information system for a major pulp and paper
manufacturer, designed to capture and share expert-
level knowledge with new plant-floor workers. This
Embedded Performance Support System (EPSS) is
designed to reduce plant downtime and improve overall
product quality.

[PHOTO APPEARS HERE] WORKFLOW PROCESS REDESIGN AND TRAINING
A major oil company asked RWD to develop task-
oriented operating manuals, procedures, and
performance-based training courses. RWD designed
process improvements to support the client's efforts
to increase refinery run times and decrease the
frequency and duration of unit shutdowns.

[PHOTO APPEARS HERE] OPERATION AND SAFETY DOCUMENT MANAGEMENT
RWD developed a sophisticated Electronic Document
Management System (EDMS) to help a consortium of
major oil companies manage more than 150,000
operation and safety documents. Document retrieval
times were reduced from approximately 10 minutes
to under one minute.

[LOGO OF RWD TECHNOLOGIES APPEARS HERE]

<PAGE>

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NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFOR-
MATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PRO-
SPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE
RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY UNDERWRITER. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER
TO BUY ANY OF THE SHARES OFFERED HEREBY TO ANY PERSON IN ANY JURISDICTION IN
WHICH THE OFFER OR SOLICITATION IS NOT AUTHORIZED, OR IN WHICH THE PERSON MAK-
ING THE OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO, OR TO ANY PERSON TO
WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF
THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL CREATE ANY IMPLICATION THAT
INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE
HEREOF.

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TABLE OF CONTENTS

<TABLE>
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<S> <C>
Prospectus Summary........................................................ 3
Risk Factors.............................................................. 6
Use of Proceeds........................................................... 11
Dividend Policy and Prior S Corporation Status............................ 11
Capitalization............................................................ 12
Dilution.................................................................. 13
Selected Financial Data................................................... 14
Management's Discussion and Analysis of Financial Condition and Results of
Operations............................................................... 15
Business.................................................................. 22
Management................................................................ 32
Certain Transactions...................................................... 39
Principal Stockholders.................................................... 40
Description of Capital Stock.............................................. 41
Shares Eligible for Future Sale........................................... 44
Underwriting.............................................................. 45
Legal Matters............................................................. 47
Experts................................................................... 47
Additional Information.................................................... 47
Index to Financial Statements............................................. F-1
</TABLE>

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UNTIL JULY 14, 1997 (25 DAYS AFTER THE COMMENCEMENT OF THIS OFFERING) ALL
DEALERS EFFECTING TRANSACTIONS IN THE COMMON STOCK OFFERED HEREBY, WHETHER OR
NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPEC-
TUS. 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.

3,000,000 SHARES

[LOGO OF RDW TECHNOLOGIES, INC.(R) APPEARS HERE]

COMMON STOCK

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PROSPECTUS

JUNE 19, 1997

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WILLIAM BLAIR & COMPANY

MONTGOMERY SECURITIES

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