CONVERGENT GROUP CORP, S-1/A, 2000-07-10

CONVERGENT GROUP CORP
S-1/A, 2000-07-10
BUSINESS SERVICES, NEC

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<PAGE> 1

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 10, 2000

REGISTRATION NO. 333-30586
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

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AMENDMENT NO. 3

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

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CONVERGENT GROUP CORPORATION
(Exact name of registrant as specified in charter)

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DELAWARE 7371 84-1264004
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification Number)
</TABLE>

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6399 SOUTH FIDDLER'S GREEN CIRCLE, SUITE 600
ENGLEWOOD, CO 80111
(303) 741-8400
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)

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GLENN E. MONTGOMERY, JR.
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
CONVERGENT GROUP CORPORATION
6399 SOUTH FIDDLER'S GREEN CIRCLE, SUITE 600
ENGLEWOOD, CO 80111
(303) 741-8400
(Name, address, including zip code, and telephone number, including area code,
of agent for service of process)

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With copies to:

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<S> <C>
JAMES M. LURIE, ESQ. NEIL WOLFF, ESQ.
O'SULLIVAN GRAEV & KARABELL, LLP WILSON SONSINI GOODRICH & ROSATI
30 ROCKEFELLER PLAZA PROFESSIONAL CORPORATION
NEW YORK, NEW YORK 10112 650 PAGE MILL ROAD
(212) 408-2400 PALO ALTO, CALIFORNIA 94304
(650) 493-9300
</TABLE>

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

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

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PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS AMOUNT TO BE OFFERING PRICE AGGREGATE OFFERING AMOUNT OF
OF SECURITIES TO BE REGISTERED REGISTERED(1) PER UNIT PRICE(1) REGISTRATION FEE
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Common stock, $.001 par value....... 6,900,000 $10.00 $69,000,000 $32,941(2)
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(1) Includes 900,000 shares that the Underwriters have the option to purchase
from the Company and two selling stockholders solely to cover
over-allotments, if any.

(2) Previously paid.

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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SUCH SECTION 8(a),
MAY DETERMINE.
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<PAGE> 2

The information in this prospectus is not complete and may be changed.
We may not sell these securities until the registration statement filed
with the Securities and Exchange Commission is effective. This
prospectus is not an offer to sell these securities and we are not
soliciting offers to buy these securities in any state where the offer
or sale is not permitted.

SUBJECT TO COMPLETION, DATED JULY 10, 2000

[CONVERGENT GROUP LOGO]

6,000,000 SHARES

COMMON STOCK

Convergent Group Corporation is offering 6,000,000 shares of its common
stock. This is our initial public offering and no public market currently exists
for our shares. Our common stock has been approved for quotation on the Nasdaq
National Market under the symbol "CVGP," subject to notice of issuance. We
anticipate that the initial public offering price will be between $8.00 and
$10.00 per share.

Concurrent with the closing of this offering, we will sell 981,801
additional shares of our common stock to Cinergy Communications, Inc., an
affiliate of Cinergy Corp., one of our principal utility clients, for an
aggregate purchase price of approximately $6.0 million based on an assumed
initial public offering price of $9.00 per share.

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INVESTING IN OUR COMMON STOCK INVOLVES RISKS. SEE "RISK FACTORS" BEGINNING
ON PAGE 7.
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PER SHARE TOTAL
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UNDERWRITTEN PUBLIC OFFERING:
Public Offering Price....................................... $ $
Underwriting Discounts and Commissions...................... $ $
Proceeds to Convergent Group................................ $ $
CONCURRENT PRIVATE PLACEMENT: .............................. $ $
AGGREGATE PROCEEDS TO CONVERGENT GROUP: .................... $
</TABLE>

THE SECURITIES AND EXCHANGE COMMISSION AND STATE SECURITIES REGULATORS HAVE
NOT APPROVED OR DISAPPROVED THESE SECURITIES, OR DETERMINED IF THIS PROSPECTUS
IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.

Two selling stockholders have granted the underwriters a 30-day option to
purchase up to 669,000 outstanding shares of common stock and Convergent Group
has granted the underwriters a 30-day option to purchase an additional 231,000
shares of common stock to cover over-allotments. If such options are exercised
in full, the total Public Offering Price, Underwriting Discounts and
Commissions, Proceeds to Convergent Group and Proceeds to the Selling
Stockholders from the Underwritten Public Offering will be $ , $ ,
$ , and $ , respectively, and the Aggregate Proceeds to Convergent Group
will be $ . FleetBoston Robertson Stephens Inc. expects to deliver the
shares of common stock to purchasers on , 2000.

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ROBERTSON STEPHENS
DONALDSON, LUFKIN & JENRETTE
WIT SOUNDVIEW
The date of this prospectus is , 2000
<PAGE> 3

[GRAPHIC]
[FRONT FOLD OUT GRAPHIC DESCRIPTION]

In the upper left hand corner is the Company's logo. Immediately below is
the title of the foldout, which reads: "Transforming to the Digital Enterprise."
In the center of the foldout are four square boxes of equal size entitled, from
left to right: "Architect Infrastructure for eBusiness," "Integrate Existing
Applications," "Deploy Integrated Solutions Across the Enterprise," and "Exploit
Digital Opportunities."

The first box contains eight small unattached cubes. As the reader moves
across the page from left to right, the cubes converge further in each box into
a single large cube, which appears in the rightmost box in the foldout. To the
left of the first box are the following eight lines, which represent each of the
small eight cubes in the box: "Field Workforce Management," "Customer
Relationship Management," "Sales and Marketing," "Financial Systems," "Energy
Delivery Management," "Work Process Management," "Facilities Management" and
"Human Resource Management." Wording below the first box reads: "Architect the
IT infrastructure required to support the business processes and information
content required for the digital business environment." Wording below the second
box reads: "Install and customize our proprietary Model Office as a working
solution for enterprise integration." Wording below the third box reads: "Deploy
solutions to provide on-line access to information from across the enterprise."
Wording below the fourth box reads: "Complete transformation to digital
enterprise and develop intranet, internet and extranet applications that provide
on-line access for decision makers, partners, suppliers and customers." Across
the bottom of the page is a series of interconnected cubes running across the
page.
<PAGE> 4

[CONVERGENT GROUP LOGO]
[FRONT INSIDE COVER GRAPHIC DESCRIPTION]

In the upper half of the page is a picture of city buildings in a circle.
Three arrows point to the circle. One arrow is entitled "Deregulation," one
arrow is entitled "Internet" and one arrow is entitled "Service Demands." Two
arrows come out of the circle. The first arrow points to a box entitled "Digital
Utility" and the second arrow points to a box entitled "Government Gateway." The
"Digital Utility" box on the left contains a picture of a light bulb, a picture
of a power grid and the letters "UTIL." The "Government Gateway" box on the
right contains a picture of a government building, a picture of the scales of
justice and the letters "GOV." The Company logo is in the lower right hand
corner.

YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS PROSPECTUS. WE
AND THE SELLING STOCKHOLDERS HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH
INFORMATION DIFFERENT FROM THAT CONTAINED IN THIS PROSPECTUS. WE ARE OFFERING TO
SELL, AND SEEKING OFFERS TO BUY, SHARES OF COMMON STOCK ONLY IN JURISDICTIONS
WHERE OFFERS AND SALES ARE PERMITTED. SUBJECT TO OUR OBLIGATION TO AMEND OR
SUPPLEMENT THIS PROSPECTUS AS REQUIRED BY LAW AND THE RULES OF THE SECURITIES
AND EXCHANGE COMMISSION, THE INFORMATION CONTAINED IN THIS PROSPECTUS IS
ACCURATE ONLY AS OF THE DATE OF THIS PROSPECTUS, REGARDLESS OF THE TIME OF
DELIVERY OF THIS PROSPECTUS OR OF ANY SALE OF OUR COMMON STOCK.

UNTIL , 2000 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL
DEALERS THAT BUY, SELL OR TRADE OUR COMMON STOCK, WHETHER OR NOT PARTICIPATING
IN THIS OFFERING, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS REQUIREMENT IS
IN ADDITION TO THE DEALERS' OBLIGATION TO DELIVER A PROSPECTUS WHEN ACTING AS
UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
<PAGE> 5

TABLE OF CONTENTS

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PAGE
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Summary..................................................... 2
Risk Factors................................................ 7
Concurrent Private Placement................................ 20
Use of Proceeds............................................. 21
Dividend Policy............................................. 22
Capitalization.............................................. 23
Dilution.................................................... 24
Selected Consolidated Financial Data........................ 26
Management's Discussion and Analysis of Financial Condition
and Results of Operations................................. 28
Business.................................................... 40
Management.................................................. 55
Certain Transactions........................................ 62
Principal and Selling Stockholders.......................... 65
Description of Capital Stock................................ 68
Shares Eligible for Future Sale............................. 72
Underwriting................................................ 74
Legal Matters............................................... 76
Experts..................................................... 76
Where You Can Find More Information......................... 77
Index to Consolidated Financial Statements.................. F-1
</TABLE>

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Convergent Group, the Convergent Group logo, The Digital Utility,
Government Gateway, Solutions for the Digital Economy and Model Office are
service marks of Convergent Group Corporation, and Energy Network Object Model
and Asset Object Model are trademarks of Convergent Group Corporation. All other
service marks and trademarks referred to in this prospectus are the property of
their respective owners.

1
<PAGE> 6

SUMMARY

This summary highlights information contained elsewhere in this prospectus.
You should read the entire prospectus carefully, including Risk Factors, before
investing in our common stock.

CONVERGENT GROUP CORPORATION

OUR BUSINESS

We are a provider of consulting, software engineering, systems integration
and project management services that enable our utility and local government
clients to implement Internet-based business solutions, also known as eBusiness
solutions. These solutions enable our clients to transform their organizations
into digital business environments that integrate data from various isolated
sources to create a single, Web-based point of entry through which internal
decision-makers, business partners, suppliers, customers and constituents can
access business information on a real-time basis. By combining our use of
existing and emerging digital technologies with our business expertise in the
utility and local government sectors, we are able to help our clients increase
revenues, reduce costs, improve customer services, ensure service reliability,
improve resource management and exploit their information assets.

We work with our clients through all phases of their eBusiness
transformation process. Throughout this process we:

- Engineer -- with our clients' input, an information technology
infrastructure and internal business processes that tailor our
proprietary Digital Utility and Government Gateway eBusiness frameworks
to our clients' particular needs;

- Build -- the infrastructure, systems and processes with minimal
disruption to our clients' organizations and provide comprehensive
training and change management services; and

- Manage -- our solutions for our clients to help them minimize the
internal resources they must commit to maintain their systems and to help
them maximize their return on investment.

The two large vertical markets we address, utilities and local governments,
have only recently begun converting their traditional customer service and
business models to eBusiness platforms. We were one of the first companies to
integrate energy and service delivery management systems in our core markets. We
have completed engagements for clients such as Alliant Energy Corporation,
Cinergy Corp., City of Indianapolis, Indiana and Citizens Utility Company.
During the past five years, we have completed over 270 major information
technology engagements.

OUR OPPORTUNITY

According to International Data Corporation, Internet services expenditures
by the U.S. utilities industry, one of the five largest vertical markets in the
United States, are estimated to grow from approximately $345 million in 1999 to
approximately $2.0 billion by 2003, representing a 55% compound annual growth
rate. As the industry continues the process of deregulation, gas and electric
utilities face a new, highly-competitive marketplace in which success will
require that they enhance the nature, quality and efficiency of their services.
International Data Corporation also estimates that government spending on
Internet services will grow from approximately $505 million in 1999 to
approximately $2.8 billion by 2003, representing a 55% compound annual growth
rate. We believe that that growth is being driven by the fact that governments
face demands from their constituents to transition from labor-intensive,
paper-based processes which rely on incompatible computer and telephone systems
to processes which consume fewer resources, maintain or improve service levels,
speed response to constituent demands and allow real-time access to information
by administrators, policy-makers and constituents. We believe that because of
those demands as well as the opportunities afforded by the Internet, utilities
and local governments now realize that they must deliver functional, Web-based
integrated services to their business partners, suppliers, customers and
constituents.

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OUR SOLUTION

Our objective is to transform the operations of our utility and local
government clients from paper-based processes into seamless, digital business
environments, which we call the "Digital Utility" and "Government Gateway." Both
the Digital Utility and the Government Gateway enable our clients to integrate
their core functions, such as maintaining their extensive physical
infrastructures of wires, pipes, roads and sewage systems, with the data
supporting front and back office functions such as customer relationship
management and billing and application processing.

OUR STRATEGY

Our strategic goal is to be the global leader in eBusiness services serving
the utility and local government markets. In order to achieve this goal, we
intend to:

- differentiate ourselves from our potential competitors by capitalizing on
and deepening our industry expertise;

- expand our Internet-based customer relationship management (eCRM) service
offerings by introducing new eCRM service offerings and instituting
partnerships with leading eBusiness and eCRM software companies;

- respond quickly to changing market conditions and evolving client needs
by expanding our repeatable eBusiness components library through the
addition of components based on emerging Internet technologies;

- increase brand awareness by launching an aggressive multi-media marketing
campaign to build brand recognition of our Digital Utility and Government
Gateway solutions;

- recruit and retain highly-qualified professionals by offering them
continuing exposure to new and developing technologies as well as
competitive compensation plans; and

- continue geographic expansion by pursuing both domestic and international
business opportunities and strengthening our long-term client
relationships.

DEPENDENCE ON PRINCIPAL CLIENTS

We derive a significant portion of our revenues from a limited number of
clients. In 1997, our five largest clients accounted for approximately 54% of
our revenues, with Cinergy Corp. representing 15%, Alliant Energy Corporation
representing 14% and Tucson Electric Power representing 10% of our revenues. In
1998, our five largest clients accounted for approximately 59% of our revenues,
with Cinergy representing 20%, Alliant representing 16% and Citizens Utilities
Company representing 11% of our revenues. In 1999, our five largest clients
accounted for approximately 49% of our revenues, with Cinergy representing 18%,
and Alliant and Citizens Utilities each representing 9% of our revenues.
Additionally, approximately 84% of our total revenues in 1997 and 78% of our
total revenues in each of 1998 and 1999 were derived from contracts with our
utility clients.

CORPORATE INFORMATION

We were incorporated in Delaware in April 1994. Our principal executive
offices are located at 6399 South Fiddler's Green Circle, Suite 600, Englewood,
Colorado 80111, and our telephone number is (303) 741-8400. Our Web site is
located at www.convergentgroup.com. Information contained on our Web site does
not constitute part of this prospectus.

3
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THE OFFERING

Common stock offered by Convergent
Group................................... 6,000,000 shares

Common stock to be outstanding after
this offering........................... 44,464,957 shares

Use of proceeds......................... To repay outstanding indebtedness,
to pay certain fees to one of our
principal stockholders and for
working capital and general
corporate purposes.

Nasdaq National Market symbol........... CVGP

The number of shares to be outstanding after this offering is based on the
number of shares outstanding on March 31, 2000 after giving effect to:

- the issuance between April 1, 2000 and June 15, 2000 of 113,066 shares of
common stock upon the exercise of stock options;

- the issuance in a private placement in June 2000 of 1,237,000 shares of
common stock to Cinergy Communications, Inc. for $10,000,000; and

- the issuance of additional shares of our common stock to Cinergy
Communications in a private placement to occur concurrently with the
closing of this offering in an amount, currently estimated at 981,801
shares, such that it will own 4.99% of the common stock to be outstanding
after this offering. The private placement transactions with Cinergy
Communications are described in detail under "Concurrent Private
Placement."

The common stock to be outstanding after the offering excludes:

- 3,141,987 shares issuable upon the exercise of options outstanding as of
March 31, 2000 at a weighted average exercise price of $0.13 per share;
and

- 2,163,931 shares reserved for future grant under our stock option plan.

Unless otherwise indicated, all share and per share information in this
prospectus gives effect to:

- the declaration of a 1-for-2 reverse stock split of the common stock to
be effected before the completion of this offering; and

- the conversion of all outstanding shares of our preferred stock into
21,243,850 shares of common stock at the time of the closing of this
offering, based on a conversion rate of 0.5 shares of common stock for
each share of preferred stock. Substantially all of the preferred stock
was issued in our August 1999 recapitalization at a purchase price of
$1.08 per share, equivalent to $2.16 per share of common stock issuable
on conversion of the preferred stock. The remaining shares of preferred
stock were issued during the first quarter of 2000 in exchange for an
equal number of shares of common stock before giving effect to the
reverse stock split.

Except as otherwise indicated in this prospectus, we have presented
information in this prospectus based on the assumption that the underwriters do
not exercise their over-allotment option.

4
<PAGE> 9

SUMMARY FINANCIAL DATA
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)

The following table sets forth our summary historical financial data. You
should read this information together with our consolidated financial statements
and the notes to those statements included in this prospectus and the
information under "Selected Consolidated Financial Data" and "Management's
Discussion and Analysis of Financial Condition and Results of Operations."

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(1) All periods presented reflect certain reclassifications, disclosures and
restatements which have been made to conform to the requirements of the
Securities and Exchange Commission.

(2) Results for 1995 and 1996 include revenues from our discontinued graphic
data systems software product line. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations."

(3) Results for 1996 reflect a restructuring charge, the write-off of goodwill
and loss on impairment of assets, principally relating to the
discontinuation of our GDS software product line.

(4) Results for 1999 reflect $23.2 million of charges associated with our August
1999 recapitalization, including recapitalization costs of $7.1 million,
employee stock compensation expense of $12.2 million and consulting
agreement termination costs of $3.9 million.

(5) Reflects in 1999 a one time adjustment of $13.1 million or $0.92 per share
(basic and diluted) and $0.48 per share (pro forma basic and pro forma
diluted) related to the purchase in our recapitalization of previously
outstanding preferred stock for less than its stated redemption value. All
years presented and the three month period ended March 31, 1999 reflect
accretion of the previously outstanding preferred stock to its stated
redemption value. See Note H of Notes to Consolidated Financial Statements.

(6) Reflects the automatic conversion of each outstanding share of preferred
stock into 0.5 shares of our common stock on consummation of this offering
as if these shares were outstanding from their date of issuance.

5
<PAGE> 10

The following table is a summary of our consolidated balance sheet at March
31, 2000. The "as adjusted" column gives effect to:

- the conversion of all outstanding shares of our preferred stock into
common stock as of the closing of this offering;

- the sale by us of 6,000,000 shares of common stock in this offering after
deducting estimated underwriting discounts and commissions and offering
expenses payable by us, assuming an initial public offering price of
$9.00 per share and the application of the net proceeds thereof as
discussed under "Use of Proceeds";

- the sale of 1,237,000 shares of common stock in June 2000 to Cinergy
Communications, Inc. for $10,000,000; and

- the sale of 981,801 shares of common stock to Cinergy Communications,
Inc. in the concurrent private placement for an aggregate purchase price
of approximately $6.0 million based on the assumed initial public
offering price set forth above.

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MARCH 31, 2000
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ACTUAL AS ADJUSTED
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CONSOLIDATED BALANCE SHEET DATA:
Cash and cash equivalents................................. $ 2,358 $39,853
Working capital (deficit)................................. 5,257 42,752
Total assets.............................................. 29,636 67,131
Long-term debt (net of deferred acquisition costs)........ 21,770 --
Total stockholders' equity (deficit)...................... (11,207) 52,588
</TABLE>

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<PAGE> 11

RISK FACTORS

An investment in our common stock involves a high degree of risk. You
should consider carefully the following risks, together with the other
information contained in this prospectus, before you decide to purchase our
common stock. If any of the following risks actually occur, our business,
results of operations and financial condition would likely suffer. This could
cause the market price of our common stock to decline, and you could lose all or
part of the money you paid to purchase our common stock.

RISKS RELATED TO THIS OFFERING

OUR EXECUTIVE OFFICERS, DIRECTORS AND MAJOR SHAREHOLDERS WILL RETAIN SIGNIFICANT
CONTROL OVER US AFTER THIS OFFERING, WHICH WILL ALLOW THEM TO CONTROL THE
OUTCOME OF MATTERS SUBMITTED TO THE SHAREHOLDERS FOR APPROVAL

Upon completion of this offering and the concurrent private placement, our
directors, executive officers and 5% stockholders will own, in the aggregate,
approximately 75.2% of our outstanding common stock, or 73.3% if the
underwriters exercise their over-allotment options in full. If the shares
purchased and to be purchased by Cinergy Communications, Inc., representing
4.99% of the common stock to be outstanding after the offering are also
included, the foregoing percentages would be approximately 80.2% and 78.2%,
respectively. As a result, these stockholders, if they act together, will be
able to control all matters requiring stockholder approval, including the
election of directors and the approval of significant corporate transactions,
such as acquisitions, and to block an unsolicited tender offer. This
concentration of ownership could have the effect of delaying, deferring or
preventing a change in control of our company or impeding a merger,
consolidation, takeover or other business combination which you, as a
stockholder, may otherwise view favorably. See "Principal and Selling
Stockholders."

WE EXPECT THE MARKET PRICE OF OUR COMMON STOCK TO BE VOLATILE, AND IT MAY DROP
UNEXPECTEDLY

Our initial public offering price will be determined through negotiations
among us, the selling stockholders and the representatives of the underwriters
based on factors that may not be indicative of future market performance. Our
initial public offering price may bear no relationship to the price at which our
common stock will trade upon completion of this offering. An active public
market for our common stock may not develop or be sustained after this offering,
and the market price could fall below the initial public offering price. If an
active public market for our common stock does not develop or is not sustained,
it may be difficult for you to sell your shares of common stock at a price that
is attractive to you.

The market price of our common stock after this offering may vary
significantly from the initial offering price in response to a number of
factors, some of which are beyond our control, including the following:

- changes in financial estimates or investment recommendations by
securities analysts relating to our stock;

- changes in market valuations of other electronic commerce software and
service providers or electronic businesses;

- announcements by us or by our competitors of significant contracts,
acquisitions, strategic partnerships, joint ventures or capital
commitments;

- loss of major clients;

- additions or departures of key personnel; and

- fluctuations in the stock market price and volume of traded shares
generally, especially fluctuations in the traditionally volatile
technology sector.

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<PAGE> 12

In the past, securities class action litigation has often been brought
against a company following periods of volatility in the market price of its
securities. We may in the future be the target of similar litigation. Securities
litigation could result in substantial costs and divert management's attention
and resources, which could seriously harm our business and the market price of
our common stock.

THE FUTURE SALE OF SUBSTANTIAL AMOUNTS OF OUR COMMON STOCK MAY NEGATIVELY AFFECT
OUR STOCK PRICE

The market price of our common stock could drop as a result of sales of a
large number of shares of our common stock in the market after this offering, or
the perception that large sales could occur. These factors also could make it
more difficult for us to raise funds through future offerings of our common
stock.

There will be 44,464,957 shares of common stock outstanding immediately
after this offering and the concurrent private placement. All of the shares sold
in this offering will be freely transferable without restriction or further
registration under the Securities Act, except for shares purchased by our
"affiliates" as defined in Rule 144 of the Securities Act. The remaining
38,464,957 shares, including the shares to be owned by Cinergy Communications,
will be "restricted securities" as defined in Rule 144. These restricted
securities may be sold in the future without registration under the Securities
Act to the extent permitted under Rule 144, Rule 701 or an exemption under the
Securities Act. In addition, persons holding an aggregate of 36,707,625 of these
restricted securities after the offering will have registration rights that
could allow these holders to sell all of their shares freely through a
registration statement filed under the Securities Act. In connection with this
offering, holders of approximately 36.6 million shares of restricted securities
have agreed not to sell their shares without the prior written consent of
FleetBoston Robertson Stephens Inc. for a period of 180 days from the date of
this prospectus.

After this offering, we will have 5,305,918 shares of common stock reserved
for issuance under our stock option plan, of which options to purchase 3,141,987
shares are subject to currently outstanding options as of March 31, 2000 after
giving effect to option exercises through June 15, 2000. Following this
offering, we intend to file a registration statement on Form S-8 to register
these shares.

WE ARE CURRENTLY UNABLE TO SPECIFY THE SPECIFIC USES TO WHICH A SUBSTANTIAL
PORTION OF THE NET PROCEEDS FROM THIS OFFERING AND THE CONCURRENT PLACEMENT WILL
BE APPLIED AND, IF WE FAIL TO USE THESE NET PROCEEDS EFFECTIVELY, OUR OPERATING
RESULTS, BUSINESS AND PROSPECTS FOR FUTURE GROWTH COULD SUFFER

You will be relying on our management regarding the application of a
substantial portion of the proceeds of this offering, the concurrent private
placement and the sale of our stock in June 2000 to Cinergy Communications, Inc.
After repaying outstanding indebtedness and making a payment to one of our
principal stockholders with a portion of the net proceeds of this offering and
the concurrent private placement, we expect to use the remaining net proceeds
from this offering, the concurrent private placement and the sale of our stock
in June 2000 to Cinergy Communications, totaling approximately $37.5 million,
for working capital and general corporate purposes, but we are unable to
identify the specific uses to which the remaining net proceeds will be applied.
Accordingly, our management will have broad discretion with respect to the
expenditure of the proceeds. If we fail to apply the net proceeds of this
offering, the concurrent private placement and the sale of our stock in June
2000 to Cinergy Communications, Inc. effectively, our operating results,
business and prospects for future growth could suffer.

YOU WILL SUFFER SUBSTANTIAL DILUTION IN THE NET TANGIBLE BOOK VALUE OF THE
COMMON STOCK YOU PURCHASE

The initial public offering price is expected to be substantially higher
than the pro forma net tangible book value per share of the outstanding common
stock immediately after the offering. Accordingly, based on an assumed initial
public offering price of $9.00 per share, purchasers of common stock in this
offering will experience immediate and substantial dilution of approximately
$7.81 in the net tangible book value of the common stock. In addition, there
were 3,255,053 stock options outstanding as of March 31, 2000. If all of these
options were exercised on the date of the closing of this offering, investors
purchasing shares in this offering would suffer total dilution of $7.89 per
share.

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BECAUSE WE HAVE VARIOUS MECHANISMS IN PLACE TO DISCOURAGE TAKEOVER ATTEMPTS, A
CHANGE IN CONTROL OF US THAT A STOCKHOLDER MAY CONSIDER FAVORABLE COULD BE
PREVENTED

Provisions of our restated certificate of incorporation and amended bylaws
may discourage, delay or prevent a change in control of our company that a
stockholder may consider favorable. These provisions include:

- authorizing the issuance of "blank check" preferred stock that could be
issued by our board of directors to increase the number of outstanding
shares and thwart a takeover attempt;

- a classified board of directors with staggered, three-year terms, which
may lengthen the time required to gain control of our board of directors;

- prohibiting cumulative voting in the election of directors, which would
otherwise allow less than a majority of stockholders to elect director
candidates;

- requiring super-majority voting to effect particular amendments to our
restated certificate of incorporation and amended bylaws;

- limitations on who may call special meetings of stockholders;

- prohibiting stockholder action by written consent, thereby requiring all
actions to be taken at a meeting of the stockholders; and

- establishing advance notice requirements for nominations of candidates
for election to the board of directors or for proposing matters that can
be acted upon by stockholders at stockholder meetings.

In addition, Section 203 of the Delaware General Corporation Law may
discourage, delay or prevent a change in control of our company.

RISKS RELATED TO OUR OPERATING RESULTS

OUR SUCCESS DEPENDS ON A LIMITED NUMBER OF SIGNIFICANT CLIENTS, AND OUR REVENUES
COULD BE REDUCED BY THE LOSS OF A MAJOR CLIENT OR SIGNIFICANT PROJECT

We have derived, and believe that we will continue to derive, a significant
portion of our revenues from a limited number of large client projects. In 1998,
our five largest clients accounted for approximately 59% of our revenues, with
Cinergy Corp. representing 20%, Alliant Energy Corporation representing 16% and
Citizens Utilities Company representing 11% of our revenues. In 1999, our five
largest clients accounted for approximately 49% of our revenues, with Cinergy
representing 18%, and Alliant and Citizens Utilities, each representing 9% of
our revenues. The volume of work performed for specific clients is likely to
vary from year to year, and a major client in one year may not contract with us
in a subsequent year. If we lose any major clients or any of our clients cancel
or significantly reduce a large project's scope, our revenues, profits and cash
flows could be significantly reduced.

OUR QUARTERLY REVENUES AND OPERATING RESULTS ARE VOLATILE DUE TO MANY FACTORS,
SO OUR PAST PERFORMANCE IS NOT A GOOD INDICATOR OF FUTURE PERFORMANCE

Our quarterly revenues and operating results are difficult to predict. Our
quarterly operating results have varied in the past and are likely to vary
significantly from quarter to quarter. As a result, we believe that
period-to-period comparisons of our results of operations are not a good
indicator of our future performance. Any unexpected reduction in revenues for a
particular quarter could cause our quarterly operating results to be below the
expectations of public market analysts or investors. In this event, the trading
price of our common stock may fall significantly. A number of factors, primarily
arising from the nature of the services we provide to our clients, are likely to
cause these variations, including:

- Size, Scope and Timing of Projects. The size, scope and timing of the
projects in which we are engaged varies significantly. A few large
projects represent a significant percentage of our revenues
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in each quarter. Because the decision to use our services often involves
strategic decisions within a client's organization, we cannot easily
predict or control the quarter in which we will start a new client
engagement. Existing clients may decide to delay starting a new project
for several quarters after finishing a prior portion of a project with
little or no advance notice of the delay to us. As a result, we could be
given notice during a quarter that we will not start projects which we
had previously expected to start, resulting in flat or declining revenues
on a quarter-to-quarter basis. This could result in short-term losses
even if we expect to start the project and recognize the revenues in the
future.

- Project Delays. If we experience delays in connection with a client
project, we may not be able to recognize revenues for the project until
after we have completed the delayed work.

- Employee Underutilization. Personnel and related costs constitute the
substantial majority of our expenses. To maintain our profitability, we
must keep our employees working at or near their full capacity. We
establish our expenses in advance of any particular quarter. Thus, an
unanticipated termination of a major project, a client's decision not to
proceed to the next stage of a project or the completion during a quarter
of several major client projects could result in employee downtime, which
could significantly reduce our profits. Unanticipated variations in the
number, or progress toward completion, of the projects in which we are
engaged could reduce employee utilization rates, which could, in turn,
cause significant variations in operating results in any particular
quarter and could result in losses for that quarter.

- Retention of Personnel. We may contract with a client to provide
particular services, yet be unable to provide the services or be forced
to delay our completion of the project if we are unable to attract, train
and retain skilled management, strategic, technical, design, sales,
marketing and support professionals.

- Compensation Expense. Four of our officers hold options which vest on
achievement of performance goals, which will result in compensation
expense if the goal is achieved, reducing our reported profits. Our
executive officers and several of our key employees have received below-
market value stock options which will vest over time or through the
achievement of specified performance goals established by the executive
officers, employees and us. The associated compensation expense may cause
our results in a quarter to be materially lower than if the grant had
been made at fair market value.

WE WILL INCUR SUBSTANTIAL STOCK-BASED COMPENSATION EXPENSE IN FUTURE PERIODS
WHICH WILL LOWER OUR REPORTED OPERATING RESULTS

We will incur substantial stock-based compensation expense in future
periods representing non-cash charges incurred as a result of the issuance of
stock options prior to this offering which will lower our reported operating
results. Deferred compensation expense related to stock options granted to
officers and employees with exercise prices below the fair market value of our
common stock on the date of grant will be approximately $3.2 million for the
nine months ending December 31, 2000, $3.6 million in 2001, $2.9 million in
2002, $2.2 million in 2003 and $3.0 million in 2004. In addition, as a result of
granting options which vest over the next five years based on the achievement of
performance targets, there could be additional non-cash compensation expense of
up to $962,000 over the next five years.

WE COULD LOSE MONEY UNDER OUR FIXED-PRICE CONTRACTS IF WE DO NOT ESTIMATE ALL OF
OUR COSTS ACCURATELY

In 1998 and 1999, fixed-price contracts accounted for 99% and 91% of our
revenues, respectively. We only maintain our profit margins or make a profit at
all on a fixed-price contract if we keep our costs at the level we estimate
before we begin a project. If our costs are higher than we expected, because,
for example, we need to increase the size of our project team, we are not
entitled to any additional compensation under a fixed-price contract. Therefore,
we assume the financial risk for correctly estimating the costs and resources
needed to complete the project. As a result, our failure to accurately estimate
the resources required for a project or our failure to complete our contractual
obligations in a manner
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consistent with the project plan upon which the fixed-price contract was based
would result in an unprofitable engagement. If the contract were large enough,
this could adversely affect our overall profitability. We have been required to
commit additional resources to complete particular projects, which has on
occasion resulted in losses on those projects. We may experience similar
situations in the future. In addition, for some projects we may fix the price
before the design specifications are finalized, which could result in a fixed
price that turns out to be too low and therefore would adversely affect our
profitability on the engagement.

OUR CLIENTS' ABILITY TO TERMINATE THEIR CONTRACTS ON SHORT NOTICE MAKES IT
DIFFICULT TO ACCURATELY PREDICT OUR REVENUES

Our clients retain us on a project-by-project basis. Because large client
projects often involve multiple engagements, there is a risk that a client may
choose not to retain us for additional stages of a project or that the client
will cancel or delay additional planned projects. Cancellations or delays could
result from factors unrelated to our work product or the progress of the
project. In addition, our existing clients can generally reduce the scope of or
cancel their use of our services without penalty and with little or no notice.
Substantially all of our contracts with our clients are terminable by our
clients for convenience and upon short notice, generally 30 days or less. We
cannot, however, reduce our costs as quickly or as easily as our clients can
cancel their contracts with us. If a client were to terminate its contract with
us with little or no notice, our revenues would decline and our gross margin in
the quarter of cancellation would be reduced.

WE RELY ON A SINGLE SUBCONTRACTOR TO PERFORM ALL OF OUR DATA CONVERSION
SERVICES, AND IF THIS SUBCONTRACTOR IS UNAVAILABLE, WE MAY EXPERIENCE PROJECT
DELAYS, INCREASED COSTS AND REDUCED PROFITS

We derived 18% of our revenues for 1998 and 25% of our revenues for 1999
from data conversion services. We do not perform these services ourselves;
instead, we subcontract these services to a third party and supervise its work.
We principally use one subcontractor, Analytical Surveys, Inc., to provide most
of our data conversion services. This subcontractor's ability to render services
to us may be limited by factors beyond our control, such as high turnover or
personnel shortages within its organization. If this subcontractor were not able
to render services to us for any reason, we may not be able to find suitable
replacements on a timely basis. Our loss of our subcontractor's services could
result in project delays and increased costs associated with switching
subcontractors during a project. Such delays or increased costs could harm our
revenues, cash flows and profits.

OUR FAILURE TO MEET CLIENT EXPECTATIONS, OR DEFICIENCIES IN OUR PERFORMANCE
UNDER SOME CONTRACTS, COULD RESULT IN LOSSES, CONTRACT TERMINATION, NEGATIVE
PUBLICITY OR FINANCIAL PENALTIES

We engineer, build and manage business systems and other applications that
are often critical to our clients' businesses. Any defects or errors in our work
product or any failure to meet our clients' expectations could result in any of
the following:

- delayed or lost revenues because our clients refuse to pay our fees, or
because they stop requesting our services;

- requirements to provide additional services to a client at no charge;

- negative publicity regarding us and our services, which could harm our
reputation and adversely affect our ability to attract and retain
clients; and

- claims for substantial damages against us, regardless of our
responsibility for the failure.

While our contracts with clients contain provisions which attempt to limit
our liability for damages, these provisions may not be enforced or may not fully
limit our liability in the event we are sued. Furthermore, our general liability
insurance coverage may not cover one or more large claims, or the insurer may
disclaim coverage as to any future claim.

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RISKS RELATED TO OUR MARKETS

OUR REVENUES AND PROFITABILITY WILL DECLINE IF OUR TARGET MARKETS EXPERIENCE
FINANCIAL DIFFICULTIES

Utilities have large fixed cost bases and often face limits in their
pricing flexibility, so an economic downturn could result in broad cancellations
of discretionary projects. Approximately 78% of our total revenues in each of
1998 and 1999 were derived from contracts with our utility clients. Local
governments derive a significant portion of their revenues from sales and other
taxes, which decline when the economy slows down. Approximately 22% of our total
revenues in each of 1998 and 1999 were derived from contracts with our local
government clients. Because public entities have little ability to increase
revenues by changing taxes in the short term, any decline in the amount of tax
collected by them could result in deferred or cancelled projects as these
clients attempt to preserve their core operations. As a result, these clients
may substantially reduce their information technology and related budgets.

THE MARKET FOR EBUSINESS TRANSFORMATION SERVICES IS NEW, MAY NOT DEVELOP AS
QUICKLY OR AS FULLY AS WE ANTICIPATE, AND ITS VIABILITY MAY DEPEND ON FACTORS
BEYOND OUR CONTROL

A viable market for eBusiness transformation services may not emerge or be
sustainable. If a viable and sustainable market for our services does not
develop, our revenues and the growth of our business could be seriously harmed.
Even if an eBusiness transformation services market develops, we may not be able
to differentiate our services from those of our competitors, which could also
adversely affect our revenues, operating margins and the growth of our business.
Industry analysts have made many predictions concerning the growth of the
Internet as a business medium. These predictions should not be relied upon. If
the market for eBusiness transformation services fails to develop, or develops
more slowly than expected, our business may be negatively impacted.

IF THE INTERNET INFRASTRUCTURE FAILS TO DEVELOP OR BE ADEQUATELY MAINTAINED,
CLIENTS MAY LOSE INTEREST IN OUR WEB-BASED SOLUTIONS

Our success depends in part on the increase in Internet usage generally and
in particular as a means for people and businesses to access and disperse
information electronically. The rate at which the general public and businesses
adapt to the use of the Internet as a viable medium may decrease for a number of
reasons, including:

- network infrastructure which cannot support increased Internet traffic
levels and increased bandwidth requirements;

- delays in the development of Internet-enabling technologies and
performance improvements;

- delays in the development or adoption of new standards and protocols
required to handle increased levels of Internet activity;

- delays in the development of the security and authentication technology
necessary to provide secure transmission of confidential information;

- changes in, or insufficient availability of, home or office access to
telecommunications services to support the Internet; and

- failure to meet the public's expectations in providing information and
services over the Internet.

If the public's use of the Internet declines, our clients will have less
interest in transforming their activities to eBusiness platforms, and their
demand for our services could significantly decrease, which would decrease our
revenues and force us to find new markets for our services.

GOVERNMENTAL REGULATION OF THE INTERNET MAY RESTRICT THE OPERATION AND GROWTH OF
OUR BUSINESS

There are currently few laws or regulations on Internet communications or
commerce. Laws and regulations may be adopted in the future, however, that
address Internet-related issues such as user
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privacy, pricing, and the characteristics and quality of products and services.
An increase in regulation or the application of existing laws to the Internet
could significantly increase our cost of operations and harm our business.

CHANGES IN THE UTILITY REGULATORY ENVIRONMENT COULD AFFECT OUR CLIENTS AND HAVE
AN ADVERSE EFFECT ON OUR REVENUES

As the utility industry continues to deregulate, our utility clients are
faced with increasing competition from other utility providers, which we believe
has led to increased demand for our services. If governments were to decrease
the rate at which the industry is deregulating, or to reverse the trend of
deregulation altogether, the demand for our services could decline.

In addition, our utility clients are subject to extensive regulations under
laws of the United States and the states in which they offer services. The
failure of our utility clients to comply with these regulatory requirements
could lead to revocation, suspension or loss of licensing status, termination of
contracts and legal and administrative enforcement actions. If a client were to
suffer these consequences, its business would be adversely affected and that
could cause the client to cancel or delay discretionary expenditures such as our
work for the client, thereby reducing our revenues. The regulatory agencies
governing our utility clients' activities have substantial discretion in
evaluating the permissibility of our utility clients' current and future
activities. If a regulatory agency determines that a client's expenditures on
our services should not be made, or that the expenditures cannot be reflected in
the cost structure which underlies the client's rates to its end users, then the
client would reduce its use of our services, which would result in a reduction
in our revenues.

RISKS RELATED TO OUR TECHNOLOGIES

IF WE ARE UNABLE TO INTEGRATE NEW TECHNOLOGIES AND INDUSTRY STANDARDS
EFFECTIVELY, OUR REVENUES, PROFITS AND CASH FLOWS MAY DECREASE

We must continue to improve the responsiveness, functionality and features
of our solutions in accordance with industry standards and to address the
increasingly sophisticated technological needs of our clients. Our ability to do
this depends, in part, on our ability to:

- Adapt our Solutions to Developing Technologies. We must continue to
develop our technical expertise and, in the process, adapt our solutions
to new technologies which are designed to replace the current Internet
structure around which our solutions are based. These new technologies
may include the use of broadband-based Internet technologies and the
development and adoption of new standard generalized markup language
applications such as XML.

- Maintain Relationships with Suppliers. We use third party software and
applications to create our solutions. These third parties often have not
designed their products specifically for our or our clients' use, and
they could, with no notice to us, substantially modify their products. We
may not have the technical expertise to use these modified products, or
these products may no longer serve our purposes. Moreover, a third party
software or applications developer could choose to discontinue products
that are important to our solutions. If this situation occurred, we would
have to develop new technological expertise, either internally or by
hiring additional professional staff, or find suitable substitutes. As a
result, our costs may increase and our profits may decrease.

- Continue to use Best-in-Class Technologies. We advertise that our
solutions incorporate what we believe to be industry "best-in-class"
third party products and components. If industry standards change too
quickly, or if new or unknown industry participants develop superior
products and components, we may not have the technological expertise
necessary to include these new "best-in-class" products and components in
our solutions.

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We may not be successful in responding to the above technological and industry
challenges in a timely and cost-effective manner. If we are unable to integrate
new technologies and industry standards effectively, our revenues, profits and
cash flows may decrease. In addition, we may be required to hire and retain
additional personnel who have expertise in these areas, thus increasing our cost
structure.

IF WE ARE UNABLE TO EFFICIENTLY REUSE SOFTWARE CODE AND METHODOLOGIES, WE MAY
NOT BE ABLE TO DELIVER OUR SERVICES RAPIDLY AND COST-EFFECTIVELY

Our business model depends to a significant extent on our ability to reuse
software code and methodologies that we develop in the course of client
engagements. If we are unable to negotiate contracts which permit us to reuse
codes and methodologies used or developed during a client engagement, our
business model will be significantly affected and our ability to rapidly and
cost-effectively deploy solutions for our clients will be adversely affected. If
this occurs, we will lose some of the competitive advantages which we believe
our current business model enjoys.

Some of our contracts have granted to our clients the rights to specific
portions of the intellectual property developed in the course of that client's
project. As a result, in order to use that intellectual property in future
engagements we must license it back from the client. If we are unable to agree
on the terms of the license, we may incur unanticipated expenses when developing
solutions for new clients.

WE MAY NOT BE ABLE TO FULLY PROTECT OUR INTELLECTUAL PROPERTY AND PROPRIETARY
RIGHTS

If we are unable to fully protect our intellectual property and proprietary
rights, we may lose our competitive advantage or face increased competition. Our
success depends largely on the proprietary methodologies and other intellectual
property that we develop during the course of client engagements. We rely upon a
combination of trade secret, nondisclosure and other contractual arrangements,
and copyright and trademark laws to protect our proprietary rights. None of our
intellectual property has been patented. We enter into confidentiality
agreements with our employees, generally require that our clients enter into
confidentiality agreements, and limit access to and distribution of our
proprietary information. However, the steps we have taken to protect our
proprietary rights may not be adequate to deter misappropriation of our
intellectual property. In addition, we may not be able to detect unauthorized
use of our intellectual property and take appropriate steps to enforce our
rights.

Existing trade secret and copyright laws afford us only limited protection.
Third parties may attempt to disclose, obtain or use our solutions or
technologies. Others may independently develop and obtain patents or copyrights
for technologies that are similar or superior to our technologies. If that
happens, we may need to license these technologies and we may not be able to
obtain licenses on reasonable terms, if at all.

Laws and enforcement practices relating to the protection of intellectual
property in many foreign countries are weaker and less reliable than in the
United States. Thus, as our business expands into foreign countries, risks
associated with protecting our intellectual property will increase.

WE MAY BE SUBJECT TO LITIGATION IF ANOTHER PARTY CLAIMS THAT WE HAVE INFRINGED
UPON ITS INTELLECTUAL PROPERTY RIGHTS

The tools, techniques, methodologies, programs and components we use to
provide our services may infringe upon the intellectual property rights of
others, although we are not currently aware of any instances of infringement.
The U.S. Patent and Trademark Office has only recently started granting patents
in our area of specialization, and can issue patents with broad claims on which
our services or software could infringe. Since U.S. patent applications are not
disclosed until the patent issues, we might invest to develop a portion of our
business and then discover that we cannot pursue this business without a license
from another party. Infringement claims generally result in significant legal
and other costs and may distract management from running our core business.
Royalty payments under licenses from third parties, if available, would increase
our costs. If a license were not available we might not be able to continue

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providing a particular product or service, which would reduce our revenues.
Additionally, developing non-infringing technologies would increase our costs.

RISKS RELATED TO OUR GROWTH PLAN

FAILURE TO MANAGE OUR GROWTH MAY RESULT IN LOST REVENUES, DECREASED OPERATING
PROFITS AND POTENTIAL NET LOSSES

If we do not manage our growth, our revenues and operating profits may
decrease and we may incur net losses. We have grown rapidly and continue to hire
new employees and open offices in new geographic markets. Our integration,
consulting and other services' revenues increased approximately 35% in 1998 and
42% in 1999. Our headcount has grown from 166 as of January 1, 1998 to 243 as of
December 31, 1999, and is expected to grow significantly over the next 12 to 18
months. Some members of our senior management team have only recently joined us.
In addition, we recently opened offices in Boston, Massachusetts; London,
England and Brisbane, Australia.

Our growth has placed, and will continue to place, a significant strain on
our management and our operating and financial systems. Our personnel, systems,
procedures and controls may be inadequate to support our future operations. In
order to accommodate the increased number of engagements, the number of clients
and the increased size of our operations, we will need to hire, train and
integrate into our business a large number of personnel to manage our current
engagements and to manage our operations going forward. We will also need to
improve our financial and management controls, reporting systems and operating
systems. We currently plan to redesign several internal systems, including our
recruiting and engagement management systems. We may encounter difficulties in
developing and implementing these new systems, which could seriously harm our
results of operations. In addition, our future success will depend in large part
on our ability to continue to set fixed-price fees accurately, maintain high
rates of employee utilization and maintain project quality, particularly if the
average size of our projects continues to increase.

Our management has limited experience managing a business of our size and
no experience managing a public company. Managing a publicly traded company will
create additional responsibilities for our management, which may require us to
hire additional personnel.

IF WE ARE UNABLE TO ATTRACT, TRAIN AND RETAIN QUALIFIED EMPLOYEES, OUR RESULTS
OF OPERATIONS MAY DECREASE AND OUR FUTURE GROWTH MAY BE HINDERED

We expect to significantly expand our employee base in order to satisfy the
expected growth in our business. Accordingly, our future success depends in
large part on our ability to hire, train, motivate and retain highly skilled
employees. Any inability to hire, train and retain a sufficient number of
qualified employees could hinder our growth. Skilled personnel are in short
supply, and this shortage is likely to continue for some time. As a result,
competition for these people is intense, and we may have difficulty finding and
retaining qualified personnel. In addition, the stock option component of our
compensation package may be viewed as less valuable after this offering, which
may make it more difficult to hire employees after the offering than experienced
prior to this offering. Consequently, we may have more difficulty hiring
qualified employees after this offering than previously experienced. Moreover,
even if we are able to expand our employee base, the costs incurred to attract
and retain additional employees may reduce our operating margins.

IF OUR EFFORTS TO DEVELOP BRAND AWARENESS OF OUR SERVICES AND SOLUTIONS AND
INTRODUCE NEW SERVICE OFFERINGS ARE NOT SUCCESSFUL, OUR REVENUES AND OPERATING
PROFITS MAY DECREASE

An important element of our business strategy is to develop and maintain
widespread awareness of our Digital Utility and Government Gateway brand names.
Historically, we have not invested in promoting brand awareness and our early
efforts to do so may not be successful. Brand promotion is a long-term
investment and is not expected to result in short-term revenue increases. To
promote our brand names, we plan to increase our marketing expenses, which may
cause our operating margins to decline. Moreover, our

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brands may be closely associated with the success or failure of some of our
high-profile clients. As a result, the failure or difficulties of one of our
high-profile clients may damage our brands. If we fail to successfully promote
and maintain our brand names or incur significant related expenses, our
operating margins and our growth may decline. In addition, we have recently
introduced new Internet-based customer relationship management service
offerings. If these new service offerings or future new service offerings do not
meet client expectations, our revenues and operating profits may decrease.

COMPETITION FROM BIGGER, MORE ESTABLISHED COMPETITORS WHO HAVE GREATER FINANCIAL
RESOURCES COULD RESULT IN PRICE REDUCTIONS, REDUCED PROFITABILITY AND LOSS OF
MARKET SHARE

Competition in the eBusiness services market is intense. If we fail to
compete successfully against current or future competitors, our business,
financial condition and operating results would be seriously harmed. We
currently compete against Internet service firms, systems integration firms,
management consulting firms, companies selling electronic commerce hardware,
software, services and solutions, and the internal IT departments of companies
seeking to engage in electronic commerce. We expect competition to persist and
intensify in the future. We compete against companies with longer operating
histories, larger client bases, larger professional staffs, greater brand
recognition and greater financial, technical, marketing and other resources than
we have. This may place us at a disadvantage in responding to our competitors'
pricing strategies, technological advances, advertising campaigns, strategic
partnerships and other initiatives. We may be unable to compete successfully
with existing or new competitors. In addition, many of our current and potential
clients may decide for financial or other reasons to use their internal
information technology departments rather than retain our services.

Although the industry expertise required to enter our market is high, the
technical barriers to entry are low, and we expect other companies to enter our
market. We expect that competition will intensify in the future. Some large
information technology consulting firms have announced that they will focus more
resources on business opportunities in our target markets. Because we contract
with our clients on a project-by-project basis, we compete for engagements at
each successive stage of the eBusiness transformation process, and we may not be
retained by our existing or future clients on later stages of work.

Current and potential competitors also have established or may establish
cooperative relationships among themselves or with third parties to increase
their ability to address client needs. Accordingly, it is possible that new
competitors or alliances among competitors may emerge, reducing our market share
and thereby reducing our revenues and profits.

Historically, only a small percentage of our client engagements resulted
from a competitive bidding process or other request for proposal process. We
believe we have been successful in past competitive bid processes because of our
significant domain and business expertise and notwithstanding that we may not
have submitted the lowest priced proposal. However, if a significant number of
our current or prospective clients decided to adopt a general policy of
conducting a competitive bidding process, pricing considerations may become a
more significant competitive factor.

WE DEPEND ON OUR KEY PERSONNEL, AND THE LOSS OF OUR KEY PERSONNEL COULD
ADVERSELY AFFECT OUR BUSINESS

We believe that our success will depend on the continued employment of our
executive management team, principally Glenn E. Montgomery, Jr., our Chairman
and Chief Executive Officer. This dependence is particularly important to our
business because personal relationships are a critical element of obtaining and
maintaining client engagements. The loss of one or more members of our executive
management team could seriously harm our future sales. In addition, if any of
these key employees joins a competitor or forms a competing company, some of our
clients might choose to use the services of that competitor or new company
instead of our own. Furthermore, our clients or other companies seeking to
develop in-house business capabilities may hire away some of our key employees.
This would not only result in the loss of key employees but could also result in
the loss of a client relationship or a new business opportunity.

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IF OUR INTERNATIONAL EXPANSION PLANS DO NOT SUCCEED, THE GROWTH OF OUR BUSINESS
MAY SUFFER AND WE COULD POTENTIALLY LOSE THE INVESTMENT WE MADE IN THESE
OPERATIONS

A key element of our strategy is to expand our operations into
international markets. We have recently opened offices in London, England and
Brisbane, Australia, and we currently have professionals operating in Canada,
Brazil, New Zealand, Korea, the United Kingdom, Australia and South Africa. We
have only limited experience in marketing, selling and delivering our services
internationally, and we may have difficulty managing our international
operations because of distance, language and cultural differences. If we do not
expand our revenues through these international operations, we will suffer
losses due to the costs of starting and operating internationally, and could
potentially lose the investment we make.

Other risks related to our international operations include:

- Currency Exchange Rates. If we are compensated for our services overseas
in U.S. dollars, we may need to convert these funds into the local
currency in order to pay our employees and foreign taxes. Alternatively,
if we are compensated for our services in the applicable local currency,
we may need to convert that currency into U.S. dollars in order to pay
U.S. taxes. In either event, fluctuations in currency exchange rates
could adversely affect our revenues and operating margins.

- Autonomy and Integration of International Offices. Currently our
operations are managed from our Colorado office, but as we continue to
expand we may grant an amount of autonomy to our international offices.
If we grant autonomy to any of these offices, we may experience
difficulties integrating their operations with our U.S. operations. This
problem could divert the attention of management and cause unforeseen
delays in the collection of revenues.

- Export of Technology. We may be subject to restrictions on the import and
export of sensitive U.S. technologies, including data security and
encryption technologies that we may wish to use in the solutions we
develop for our foreign clients. These restrictions may limit the amount
of business we are able attract in our international markets.

- Differing Regulatory Requirements. The legal and regulatory requirements
of countries in which we currently conduct business, or in which we wish
to conduct business in the future, may differ from those in the U.S.,
particularly in the areas of tax and labor laws. As a result, we may
incur additional legal expenses complying with these laws and
regulations. In addition, laws relating to the protection and enforcement
of intellectual property rights in many foreign countries are not as
advanced as in the United States.

- Political and Economic Instability. Some countries in which we conduct
business have experienced political and economic instability in the past,
and may continue to experience political and economic instability in the
future. If a country in which we conduct business experiences political
and/or economic instability, our operations in that country may be
adversely affected. We may experience a decrease in revenue and
profitability and may need to discontinue our operations in that country.
In extreme circumstances, we may lose the full amount of our investment
as a result of this instability.

FUTURE ACQUISITIONS OR INVESTMENTS COULD DISRUPT OUR ONGOING BUSINESS, DISTRACT
OUR MANAGEMENT AND EMPLOYEES, INCREASE OUR EXPENSES AND ADVERSELY AFFECT OUR
BUSINESS

A portion of our future growth may be accomplished by acquiring existing
businesses, products or technologies. If we identify an appropriate acquisition
candidate, we may not be able to negotiate the terms of the acquisition
successfully, finance the acquisition, or integrate the acquired business,
products or technologies into our existing business and operations. Further,
completing a potential acquisition and integrating an acquired business may
cause significant diversions of management time and resources.

If we consummate one or more significant acquisitions in which the
consideration consists of stock or other securities, your ownership interest
could be significantly diluted. If we were to proceed with one or more
significant acquisitions in which the consideration included cash, we could be
required to use a

17
<PAGE> 22

substantial portion of our available cash, including proceeds of this offering,
to consummate the acquisition. Acquisition financing may not be available on
favorable terms, or at all. In addition, we may be required to amortize
significant amounts of goodwill and other intangible assets in connection with
future acquisitions, which would have an adverse effect on our future operating
results.

WE MAY BECOME SUBJECT TO LITIGATION IN CONNECTION WITH THE HIRING OF PARTICULAR
EMPLOYEES

Some companies have adopted a strategy of suing or threatening to sue
former employees and their new employers for the alleged breach of an employment
agreement. As we hire new employees from our current or potential competitors,
we may become a party to one or more lawsuits involving the former employment of
an employee. Any future litigation against us or our employees, regardless of
the outcome, may result in substantial costs and expenses to us and may divert
management's attention away from the operation of our business.

WE MAY BE UNABLE TO ENFORCE THE CONFIDENTIALITY AND NON-COMPETITION RESTRICTIONS
IN SOME OF OUR EMPLOYEES' EMPLOYMENT AGREEMENTS IF THOSE EMPLOYEES LEAVE US

The confidentiality and non-competition restrictions in some of our
employment agreements with our executive officers and other employees may not be
enforced in the event the executive or employee leaves us because courts in some
jurisdictions view these restrictions unfavorably or as overreaching. If these
confidentiality and non-competition restrictions are not enforced or the scope
of the restriction is limited, we may lose our competitive advantage or face
unexpected competition as a result of the disclosure or use of our proprietary
knowledge, practices and procedures. Our employees, including key technical
personnel, may leave us to join our competitors or start new businesses which
may compete with us. Although members of our executive management team and
particular employees are generally subject to confidentiality restrictions, and
although some members of our executive management team are also subject to
non-competition restrictions, we may be unable to legally enforce these
restrictions or otherwise prevent the unauthorized disclosure or use of our
proprietary knowledge, practices and procedures if these employees leave us.

IF WE ARE UNABLE TO OBTAIN ADDITIONAL FINANCING AS AND WHEN REQUIRED, OUR
BUSINESS, RESULTS OF OPERATIONS AND FINANCIAL CONDITION COULD BE HARMED

We may need to raise additional funds in the future in order to fund more
aggressive brand promotion or more rapid expansion, to develop new or enhanced
services, to respond to competitive pressures or to make acquisitions.
Additional financing may not be available on terms favorable to us, and may not
be available at all. If adequate funds are not available on acceptable terms, we
may be unable to fund our expansion, successfully promote our brand, take
advantage of acquisition opportunities, develop or enhance our services or
respond to competitive pressures, any of which could seriously harm our
business, results of operations and financial condition. If we raise additional
funds by issuing equity securities, the newly issued securities may have rights
superior to those of the common stock and stockholders may experience dilution
of their ownership interests. If we raise additional funds by issuing debt, we
may be subject to limitations on the payment of dividends.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS; MARKET DATA

This prospectus contains forward-looking statements that involve risks and
uncertainties. Discussions containing forward-looking statements may be found in
the material set forth under "Summary," "Risk Factors," "Management's Discussion
and Analysis of Financial Condition and Results of Operations" and "Business" as
well as in this prospectus generally. We generally use words such as "believes,"
"intends," "expects," "anticipates," "plans," and similar expressions to
identify forward-looking statements. You should not place undue reliance on
these forward-looking statements. Our actual results could differ materially
from those expressed or implied in the forward-looking statements for many
reasons, including the risks described under "Risk Factors" and elsewhere in
this prospectus.

18
<PAGE> 23

Although we believe that the expectations reflected in the forward-looking
statements are reasonable, they relate only to events as of the date on which
the statements are made, and we cannot assure you that our future results,
levels of activity, performance or achievements will meet these expectations.

This prospectus contains data related to the Internet professional services
industry and estimates regarding its size and growth. These market data have
been included in studies published by the market research firm of International
Data Corporation. These data include projections that are based on a number of
assumptions, including increasing worldwide business use of the Internet, the
growth in the number of Web access devices per user, the absence of any failure
of the Internet and the continued improvement of security on the Internet. If
any of these assumptions is incorrect, actual results may differ from the
projections based on those assumptions and these markets may not grow at the
rates projected by these data, or at all. The failure of these markets to grow
at these projected rates may harm our business and the market price of our
common stock.

19
<PAGE> 24

CONCURRENT PRIVATE PLACEMENT

We have entered into a stock purchase agreement, as amended, with Cinergy
Communications, Inc., a wholly owned subsidiary of Cinergy Corp., one of our
principal utility customers. Under this agreement, Cinergy Communications
purchased 1,237,000 shares of our common stock on June 15, 2000 for $10,000,000
and has agreed to purchase concurrently with the closing of this offering
additional shares of our common stock so that it will own in the aggregate 4.99%
of our common stock to be outstanding after this offering. Cinergy
Communications will purchase the additional shares at a per share price equal to
80% of the initial public offering price per share, except that the aggregate
purchase price for the additional shares will in no event exceed $10,000,000. In
addition, if the market value of our outstanding common stock after this
offering based on the initial public offering price is less than $500,000,000,
then the purchase price for the additional shares to be purchased concurrently
with the closing of this offering will be reduced so that the average purchase
price for all shares to be owned by Cinergy Communications will equal 80% of the
initial public offering price.

Based on the number of shares of common stock outstanding as of March 31,
2000, after giving effect to the sale of the 1,237,000 shares to Cinergy
Communications in June 2000, the conversion of our outstanding preferred stock
into common stock upon the closing of this offering and the shares being sold by
us in this offering, we expect that Cinergy Communications will purchase an
additional 981,801 shares of our common stock in the concurrent private
placement. Based on an assumed initial public offering price of $9.00, the
aggregate market value of our outstanding common stock would be less than
$500,000,000. As a result, the aggregate purchase price for the 981,801 shares
purchased by Cinergy Communications is approximately $6.0 million. Since Cinergy
Communications will purchase the additional shares directly from us in the
concurrent private placement, the underwriters will not receive any discount or
commission on the sale of the shares. The closing of this concurrent private
placement is contingent on, and will close simultaneously with, the closing of
this offering.

The shares sold to Cinergy Communications in June 2000 were not, and the
shares being sold in the concurrent private placement will not be, registered
for immediate sale under the Securities Act and, subject to certain limited
exceptions involving a sale of us or a change of control, Cinergy Communications
has agreed not to sell its shares of our common stock for a period of 180 days.
We have also entered into a registration rights agreement with Cinergy
Communications pursuant to which Cinergy Communications will be able to have its
shares of our common stock registered for resale under the Securities Act at
various times in the future. See "Shares Eligible for Future
Sale -- Registration Rights."

In connection with the purchase of our common stock by Cinergy
Communications, Cinergy Corp. has entered into a new service contract with us
under which we will provide professional services to Cinergy Corp. over the next
two years. The total scope of work under the new contract is currently estimated
at $40 million and we are now embarking on the initial $16 million phase of the
contract. For accounting purposes the Company will allocate additional
consideration to the sale of its common stock to Cinergy Communications so that
with respect to the 1,237,000 shares sold in June 2000 the recognized proceeds
will equal 90% of the IPO price and with respect to the shares to be sold
concurrently with this offering the recognized proceeds will equal the IPO
price. Based on an assumed initial public offering price of $9.00 per share and
the sale of 981,801 shares in the concurrent private placement, the aggregate
amount of additional consideration to be allocated to the sale of shares to
Cinergy Communications for accounting purposes will be approximately $2.9
million. This additional amount allocated will be amortized as a reduction of
revenues over the life of the service contract described above because the
discount received by Cinergy Communications on its share purchase is viewed as
an incentive for Cinergy Corp. to enter into the service contract.

20
<PAGE> 25

USE OF PROCEEDS

We estimate that the net proceeds to be received by us from this offering
will be approximately $47.8 million, assuming an initial public offering price
of $9.00 per share and after deducting estimated underwriting discounts and
commissions and expenses payable by us. If the underwriters' overallotment
option is exercised in full, we estimate that the net proceeds to be received by
us will be approximately $49.8 million. We will not receive any proceeds from
the sale of common stock to be sold by the selling stockholders if the
overallotment option is exercised; however, out of the proceeds Mr. Montgomery
receives from any shares sold upon exercise of the overallotment option, he will
repay his outstanding loan from us plus accrued interest. See "Certain
Transactions -- Loan to Glenn E. Montgomery, Jr."

Based on the assumed initial public offering price of $9.00 per share, we
will receive approximately $6.0 million of proceeds from the sale of our common
stock to Cinergy Communications, Inc. in the concurrent private placement. We
received $10,000,000 from the sale of our common stock to Cinergy Communications
in June 2000.

We intend to use a portion of the proceeds we receive from this offering
and the concurrent private placement to repay outstanding indebtedness under our
revolving credit facility plus accrued interest. At March 31, 2000, outstanding
borrowings under this agreement totaled approximately $21.8 million. Borrowings
under the facility bear interest, at our option, at either a floating rate based
on LIBOR or on the lending bank's prime rate. At March 31, 2000, borrowings
under the facility bore interest at a blended rate of 9.27% per annum.
Borrowings under the facility were used to partially fund the purchase of our
previously outstanding Series A and Series B Preferred Stock and Class A Common
Stock in connection with our 1999 recapitalization. Borrowings under the
facility mature on August 12, 2003. See "Certain Transactions -- 1999
Recapitalization." We also intend to use a portion of the proceeds we receive
from this offering and the concurrent private placement to pay to InSight
Capital Partners, one of our largest stockholders, certain fees due it. Through
affiliated entities, InSight acquired a 22.9% interest in us as part of our 1999
recapitalization. In connection with negotiating the terms of the
recapitalization, we agreed to pay to InSight a fee at the time of our initial
public offering and a fee for management and strategic advice provided by
InSight to us up through the date of the initial public offering. Based on the
number of shares of common stock expected to be outstanding upon consummation of
this offering and assuming an initial offering price of $9.00 per share, the fee
payable to InSight Capital Partners will be approximately $4.0 million. See
"Certain Transactions -- InSight Capital Partners Transaction Fee."

We intend to use the remaining net proceeds we receive from this offering,
the concurrent private placement and the sale of our common stock in June 2000
to Cinergy Communications for working capital and general corporate purposes,
including advertising and marketing our brands and expanding our sales, project
management and marketing staffs. We believe that cash from operations,
borrowings available under our revolving credit facility or a new credit
facility and the net proceeds of this offering, the concurrent private placement
and the sale of our common stock in June 2000 to Cinergy Communications, after
payment of the InSight fees and repayment of amounts outstanding under our
revolving credit facility, will be sufficient to meet our working capital and
capital expenditure requirements for at least the next twelve months.

Except for the repayment of outstanding indebtedness and the payment of the
fee to InSight Capital Partners, we have not identified any specific expenditure
plans with respect to the proceeds we received from the June 2000 sale of common
stock to Cinergy Communications and which we will receive from this offering and
the concurrent private placement, and our management will have broad discretion
in the application of these net proceeds. A portion of the net proceeds may be
used to acquire or invest in complementary businesses, technologies, products or
services or to invest in geographic expansion. Although we are not contemplating
any specific acquisitions at this time and no portion of the net proceeds has
been allocated for any acquisition, we evaluate acquisition opportunities on an
ongoing basis. Pending use, we intend to invest the net proceeds in interest
bearing, investment-grade instruments, certificates of deposit or direct or
guaranteed obligations of the United States.

21
<PAGE> 26

DIVIDEND POLICY

We have never declared or paid any dividends on our common stock. We do not
anticipate paying any cash dividend in the foreseeable future. We currently
intend to retain future earnings, if any, to finance operations and the
expansion of our business. Any future determination to pay cash dividends will
be at the discretion of our board of directors and will be dependent upon our
financial condition, operating results and capital requirements and other
factors that our board of directors deems relevant.

22
<PAGE> 27

CAPITALIZATION

The following table sets forth our capitalization as of March 31, 2000:

- on an actual basis;

- on a pro forma basis to reflect the conversion of all outstanding shares
of our preferred stock into common stock that will occur upon
consummation of this offering; and

- on a pro forma as adjusted basis to reflect

-- the sale of 6,000,000 shares of common stock by us in this offering,
after deducting estimated underwriting discounts and commissions and
offering expenses, assuming an initial public offering price of $9.00
per share;

-- the sale of 1,237,000 shares of our common stock in June 2000 to
Cinergy Communications, Inc. for $10,000,000; and

-- the sale of 981,801 shares of our common stock to Cinergy
Communications in the concurrent private placement for approximately
$6.0 million based on the assumed initial public offering price set
forth above.

This information should be read together with our consolidated financial
statements and related notes appearing elsewhere in this prospectus.

<TABLE>
<CAPTION>
AS OF MARCH 31, 2000
----------------------------------
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
-------- --------- -----------
(IN THOUSANDS, EXCEPT SHARE DATA)
<S> <C> <C> <C>
Long-term debt (net of deferred acquisition costs).......... $ 21,770 $ 21,770 $ --
Stockholders' equity (deficit):
Preferred Stock, $.001 par value; 75,000,000 shares
authorized; 42,487,701 shares issued and outstanding;
and no shares issued and outstanding pro forma and pro
forma as adjusted...................................... 42 -- --
Common Stock, $.001 par value; 125,000,000 shares
authorized; 14,889,240 shares issued and outstanding;
36,133,090 shares issued and outstanding pro forma; and
44,351,891 shares issued and outstanding pro forma as
adjusted............................................... 15 36 44
Additional paid-in capital................................ 69,205 69,226 133,013
Deferred compensation..................................... (14,852) (14,852) (14,852)
Accumulated deficit....................................... (65,929) (65,929) (65,929)
Accumulated other comprehensive income.................... 312 312 312
-------- -------- --------
Total stockholders' equity (deficit)................. (11,207) (11,207) 52,588
-------- -------- --------
Total capitalization.............................. $ 10,563 $ 10,563 $ 52,588
======== ======== ========
</TABLE>

This table excludes the following:

- 3,255,053 shares issuable upon exercise of stock options outstanding as
of March 31, 2000, of which 113,066 shares were issued upon exercise of
options through June 15, 2000; and

- 2,163,931 shares available for future grant or issuance under our stock
option plan as of March 31, 2000.

23
<PAGE> 28

DILUTION

Our pro forma net tangible book value (deficit) as of March 31, 2000 was
$(11.2) million, or $(0.31) per share of common stock. Pro forma tangible book
value (deficit) per share equals our total tangible assets minus our total
liabilities, divided by the total number of shares of common stock outstanding
as of March 31, 2000, assuming conversion of all outstanding shares of our
preferred stock into shares of common stock upon closing of this offering. After
giving effect to the sale by us of:

- 6,000,000 shares in this offering, assuming an initial public offering
price of $9.00 per share, and after deducting estimated underwriting
discounts and commission and offering expenses;

- 1,237,000 shares of our common stock in June 2000 to Cinergy
Communications, Inc. for $10,000,000; and

- 981,801 shares of our common stock to Cinergy Communications in the
concurrent private placement for approximately $6.0 million based on the
assumed initial public offering price set forth above,

our pro forma net tangible book value at March 31, 2000 would have been
approximately $52.6 million, or $1.19 per share of common stock. This represents
an immediate increase in pro forma net tangible book value (deficit) of $1.50
per share to existing stockholders and an immediate dilution of $7.81 per share
to new investors purchasing shares in this offering. The following table
illustrates this per share dilution:

<TABLE>
<S> <C> <C>
Assumed initial public offering price....................... $ 9.00
Pro forma net tangible book value (deficit) per share at
March 31, 2000......................................... $(0.31)
Increase per share attributable to this offering.......... 1.50
Pro forma net tangible book value (deficit) per share after
this offering............................................. 1.19
------
Dilution per share to new investors......................... $ 7.81
======
</TABLE>

If the underwriters' overallotment option is exercised in full, investors
purchasing shares in this offering would suffer total dilution of $7.78 per
share.

The foregoing table and calculations exclude 3,255,053 shares of our common
stock issuable upon exercise of options outstanding at March 31, 2000 at a
weighted average exercise price of $0.13 per share. If all of these options were
exercised on the date of the closing of this offering, investors purchasing
shares in this offering would suffer total dilution of $7.89 per share ($7.85
per share if the underwriters' overallotment option is exercised in full).
Options to purchase 113,066 shares were exercised in the second quarter of 2000
through June 15, 2000.

The following table summarizes, on a pro forma basis as of March 31, 2000
to give effect to the automatic conversion of all outstanding shares of our
preferred stock into common stock upon the closing of this offering, the total
number of shares of common stock purchased from us, the total consideration paid
to us and the average price paid per share by the existing stockholders, by
Cinergy Communications and by new investors purchasing shares in this offering,
assuming an initial public offering price of $9.00 per share:

<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
-------------------- ---------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
---------- ------- ------------ ------- -------------
<S> <C> <C> <C> <C> <C>
Existing stockholders............. 36,133,090 80.3% $ 47,039,000 40.2% $ 1.30
Cinergy Communications, Inc. ..... 2,218,801 4.9 15,975,367 13.6 $ 7.20
New investors..................... 6,000,000 13.3 54,000,000 46.1 $ 9.00
Shares issuable upon exercise of
options to officers and
directors....................... 669,357 1.5 61,581 0.1 $ 0.09
---------- ----- ------------ -----
Total................... 45,021,248 100.0% $117,075,948 100.0%
========== ===== ============ =====
</TABLE>

24
<PAGE> 29

If the underwriters' over-allotment option is exercised in full, the number
of shares of common stock held by existing shareholders will be reduced to
35,464,090, or 79.3% of the total number of shares of common stock to be
outstanding after this offering, and the number of shares of common stock held
by new investors will increase to 6,900,000 shares, or 15.4% of the total number
of shares of common stock to be outstanding after this offering. See "Principal
and Selling Stockholders."

The foregoing table and calculations exclude 2,585,696 shares of common
stock issuable on exercise of options outstanding at March 31, 2000 which are
held by persons who are not officers or directors and 2,163,931 shares of common
stock that are reserved for future issuance under our stock option plan at March
31, 2000.

This offering will benefit our existing stockholders by creating a public
market for our common stock.

25
<PAGE> 30

SELECTED CONSOLIDATED FINANCIAL DATA

The selected consolidated financial data as of December 31, 1998 and
December 31, 1999 and for each of the years in the three-year period ended
December 31, 1999 come from our consolidated financial statements which have
been audited by Grant Thornton LLP, our independent public accountants, and are
included elsewhere in this prospectus. The selected consolidated financial data
at December 31, 1997 and as of and for the years ended December 31, 1995 and
1996 come from our consolidated financial statements which are not included in
this prospectus. The selected consolidated financial data at March 31, 2000 and
for the three-month periods ended March 31, 1999 and March 31, 2000 come from
our unaudited consolidated financial statements included elsewhere in this
prospectus. The balance sheet data at March 31, 1999 comes from our unaudited
consolidated financial statements which was not included in this prospectus. In
the opinion of our management the unaudited consolidated financial data reflect
all adjustments (which include only normal recurring adjustments) necessary to
present fairly the financial position and results of operations for the
unaudited periods. The data set forth below should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and our consolidated financial statements and related notes
appearing elsewhere in this prospectus. Historical results are not necessarily
indicative of future results and results for interim periods are not necessarily
indicative of results for the entire year.

26
<PAGE> 31

<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEARS ENDED DECEMBER 31(1), MARCH 31(1),
-------------------------------------------------------------- -----------------------
1995(2) 1996(2)(3) 1997 1998 1999 1999 2000
---------- ---------- ---------- ---------- ---------- ---------- ----------
(IN THOUSANDS, EXCEPT SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues:
Integration, consulting and other
services.......................... $ 19,966 $ 27,406 $ 21,517 $ 28,957 $ 41,029 $ 9,283 $ 13,552
Subcontractor and other revenue..... 38,014 24,336 19,339 18,458 25,581 5,526 5,081
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total revenues.................. 57,980 51,742 40,856 47,415 66,610 14,809 18,633
Cost of revenues:
Cost of integration, consulting and
other services (exclusive of $143
and $19 in 1999 and the March 31,
2000 period, respectively,
reported below as employee stock
compensation expense)............. 20,334 16,608 17,326 17,564 22,296 5,153 6,601
Cost of subcontractor and other
revenue........................... 20,402 12,731 13,010 13,959 20,205 4,345 3,963
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total cost of revenues.......... 40,736 29,339 30,336 31,523 42,501 9,498 10,564
---------- ---------- ---------- ---------- ---------- ---------- ----------
Gross profit.......................... 17,244 22,403 10,520 15,892 24,109 5,311 8,069
Selling, general, and administrative
expenses............................ 23,027 26,397 11,574 12,123 16,855 3,867 7,473
(exclusive of $12,094 and $601 in 1999
and the March 31, 2000 period,
respectively, reported below as
employee stock compensation expense)
Recapitalization costs................ -- -- -- -- 7,098 -- --
Employee stock compensation expense... -- -- 8 12 12,237 -- 620
Consulting agreement termination
costs............................... -- -- -- -- 3,920 -- --
Loss from disposal of assets.......... -- -- -- 93 -- -- --
Research and development.............. 5,124 5,925 173 -- -- -- --
Gain (loss) from restructuring........ -- 7,901 (1,218) (95) -- -- --
Loss on impaired assets............... -- 8,459 -- -- -- -- --
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total operating expenses........ 28,151 48,682 10,537 12,133 40,110 3,867 8,093
---------- ---------- ---------- ---------- ---------- ---------- ----------
Operating income (loss)............... (10,907) (26,279) (17) 3,759 (16,001) 1,444 (24)
Other income (loss):
Net interest income (expense)....... (154) (474) (1,088) 57 (602) 15 (444)
---------- ---------- ---------- ---------- ---------- ---------- ----------
Income (loss) before income taxes... (11,061) (26,753) (1,105) 3,816 (16,603) 1,459 (468)
Income tax benefit (expense).......... -- -- -- 1,861 1,347 128 (431)
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net income (loss)..................... (11,061) (26,753) (1,105) 5,677 (15,256) 1,587 (899)
========== ========== ========== ========== ========== ========== ==========
Preferred stock adjustments(4)........ (3,256) (802) (776) (853) 12,432 (207) --
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net income (loss) attributable to
common shareholders................. $ (14,317) $ (27,555) $ (1,881) $ 4,824 $ (2,824) $ 1,380 $ (899)
========== ========== ========== ========== ========== ========== ==========
Net income (loss) per share:
Basic net income (loss) per
share(4).......................... $ (0.97) $ (1.42) $ (0.12) $ 0.32 $ (0.20) $ 0.09 $ (0.06)
========== ========== ========== ========== ========== ========== ==========
Diluted net income (loss) per
share(4).......................... $ (0.97) $ (1.42) $ (0.12) $ 0.20 $ (0.20) $ 0.06 $ (0.06)
========== ========== ========== ========== ========== ========== ==========
Weighted average common shares
outstanding:
Basic average shares................ 14,709,120 19,462,165 16,234,348 15,135,368 14,310,546 15,478,085 14,487,160
========== ========== ========== ========== ========== ========== ==========
Diluted average shares.............. 14,709,120 19,462,165 16,234,348 23,771,852 14,310,546 23,634,615 14,487,160
========== ========== ========== ========== ========== ========== ==========
Pro forma basic net income (loss) per
share(4)(5)........................... -- -- -- -- $ (0.10) -- $ (0.03)
Pro forma diluted net income (loss) per
share(4)(5)........................... -- -- -- -- $ (0.10) -- $ (0.03)
Pro forma weighted average number of
shares used in calculating pro forma
net income (loss) per share(5):
Basic average shares.................. -- -- -- -- 27,424,410 -- 35,731,010
Diluted average shares................ -- -- -- -- 27,424,410 -- 35,731,010
CONSOLIDATED BALANCE SHEET DATA:
Cash and cash equivalents............. $ 2,918 $ 1,755 $ 2,092 $ 4,958 $ 1,596 $ 1,280 $ 2,358
Working capital (deficit)............. (4,638) (12,411) (8,666) (490) 5,932 246 5,257
Total assets.......................... 42,253 23,861 13,511 17,977 26,707 17,172 29,636
Long-term debt (net of deferred
acquisition costs).................. 695 2,830 1,725 -- 21,753 -- 21,770
Total stockholders' equity
(deficit)........................... (13,118) (34,719) (36,734) (28,820) (11,035) (27,648) (11,207)
</TABLE>

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

(1) All periods presented reflect certain reclassifications, disclosures and
restatements which have been made to conform to the requirements of the
Securities and Exchange Commission.

(2) Results for 1995 and 1996 include revenues from our discontinued GDS
software product line. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations."

(3) Our 1996 financial statements were restated for the write-off of goodwill.
No opinion was expressed on the restated financial statements.

(4) Reflects in 1999 a one-time adjustment of $13.1 million or $0.92 per share
(basic and diluted) and $0.48 per share (pro forma basic and pro forma
diluted) related to the purchase in our recapitalization of previously
outstanding preferred stock for less than its stated redemption value. All
years presented and the three month period ended March 31, 1999 reflect
accretion of the previously outstanding preferred stock to its stated
redemption value. See Note H of Notes to Consolidated Financial Statements.

(5) Reflects the automatic conversion of each outstanding share of preferred
stock into 0.5 shares of our common stock on consummation of this offering
as if these shares were outstanding from their date of issuance.

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<PAGE> 32

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

The following discussion of our financial condition and results of
operations should be read in conjunction with the financial statements included
in this prospectus. This discussion includes forward-looking statements that
involve risks and uncertainties. Please see "Cautionary Note Regarding Forward
Looking Statements; Market Data."

OVERVIEW

We provide professional services that enable utilities and local
governments to implement eBusiness solutions that transform their organizations
from paper-based operations into digital business environments. Our solutions
provide our clients with the ability to integrate data from various sources in
order to provide real-time responses to internal and external information
requirements.

Utility Graphics Consulting Corporation, the predecessor of Convergent
Group, was founded in 1985. UGC provided both automated mapping and facilities
management services and geographic information systems (GIS) consulting
services. In 1994, UGC merged with Graphic Data Systems Corporation, a GIS
software product company, to form Convergent Group. Following the merger, we
initially pursued opportunities in the GIS market, developing and marketing
Graphic Data Systems' computer-aided design and GIS products, which we called
"GDS" software. However, after two years of unsuccessful operations, we
discontinued operations of the GDS software group in 1996. Since that time we
have focused solely on the development of information technology solutions for
the utility and local government markets.

We derive the majority of our revenue from our professional services which
include consulting and software integration. Our consulting services consist of
evaluating existing information systems, recommending solutions and components
including hardware and software to transition to real-time information digital
environments, analyzing the cost and benefit, developing the strategies to
implement digital environments and training personnel to transition the change.
Integration services consist of developing specific software code or employing
our previously developed code, which is our intellectual property, to integrate
new software into new or existing systems. These professional services are
included in integration, consulting and other services revenue.

Subcontractor and other revenue includes data conversion services and
computer hardware and software revenue, each of which can be a portion of the
solution we provide our client. Data conversion has historically been performed
principally through a single subcontractor whom we manage as part of delivering
our solutions for our clients. We have recently begun using several other
subcontractors for new client engagements. We act as a value added reseller for
some computer hardware and software manufacturers. We expect revenue from data
conversion services to decline in future years as a percent of our overall
revenues.

We expect that we will derive an increasing percentage of our revenues from
consulting and integration services in future periods. We provide most of our
hardware and software procurement and data conversion services during the
earlier stages of a client engagement, and once we have completed these services
for a client, the client's further requirements for these services are
substantially lower. Thus, when existing clients retain us for subsequent
projects, it will increasingly be to provide consulting and integration software
and eBusiness services.

We derive revenues from our professional services through fixed-price,
fixed-time contracts, obtained mainly on a non-competitive bid basis. To
determine our fixed price, we first evaluate a client's current information
technology resources and its projected requirements. We then prepare a detailed
scope of work that addresses the client's stated requirements. After the client
approves the project, we determine the costs of the various project components,
including those for professional services, hardware, software and data
conversion. These costs are then reviewed internally by our pricing committee,
and the completed contract is delivered to the client for approval. Under most
contracts we require that the client pay a project initiation fee to cover the
mobilization of the project team. Typically, project initiation fees are

28
<PAGE> 33

charged in connection with projects which include a significant amount of
consulting and/or integration costs. We recognize revenue from fixed-price
contracts on the basis of the estimated percentage-of-completion of services
rendered or when the services have been performed, and losses, if any, are
accrued when they become known and/or are reasonably determinable. Clients are
generally invoiced on a monthly basis. Payment is due in 30 days.

Our projects vary in size and scope. In 1998, our five largest clients
accounted for approximately 59% of our revenues, with Cinergy Corp. accounting
for approximately 20%, Alliant Energy Corporation accounting for approximately
16% and Citizens Utilities accounting for approximately 11% of revenues during
this period. In 1999, our five largest clients accounted for approximately 49%
of our revenues, with Cinergy accounting for approximately 18% and Alliant and
Citizens Utilities, each accounting for approximately 9% of revenues during this
period. We expect that our client base will continue to expand and that the
concentration of revenues among a small number of large clients will decrease.
This decrease in concentration is a result of both an industry trend toward
shorter project life cycles and our diversification in markets outside the
United States, particularly in Europe, the Asia-Pacific region, and South
America. Our current average project term is approximately two years. We expect
that this period will decrease to twelve to eighteen months in the future as a
result of the implementation of our rapid performance modeling methodology. In
addition, as a result of rapid changes in the software and information
processing technology industries, our clients are replacing their information
technology systems more frequently than in the past, thereby shortening their
requirements for delivery and completion.

Our most significant operating expenses for integration, consulting and
other services consist of project personnel costs, including compensation,
benefits and project-related travel expenses. We expect to increase the number
of professional staff significantly during 2000 and in future years to support
our expected revenue growth in this area. As a result of this growth, we expect
our direct cost of integration, consulting and other services revenue to
increase significantly. In addition, we expect the personnel cost of each
professional staff member to increase as the solutions we deliver become more
complex and require our staff members to obtain additional training. Members of
our professional staff are highly trained and we expect that salary and benefit
costs will increase as we strive to maintain our competitive position. Although
these direct costs are expected to increase, we expect our gross profit margins
on our integration, consulting and other services revenue to increase due to
improved delivery efficiencies achieved through the use of our internally
developed software solutions and our Rapid Performance Modeling methodology.
Rapid Performance Modeling is the methodology we employ to speed the delivery of
integration software solutions to our clients and to reduce our professional
service costs. At the outset of each engagement, we identify the components used
in previously developed software that can be used to satisfy the new client's
requirements. We deliver the core code of these previously developed software
components to our client, customize the code to meet the client's solution
requirements and eliminate the professional labor cost associated with
redeveloping the core software code.

Expenses related to subcontractor and other revenue include software,
hardware and subcontractor costs. We expect costs of software and hardware to
decrease as a percentage of revenue. Data conversion services are labor
intensive and generate low gross profit margins. We plan to improve our profit
margins on these services by better managing our subcontractors and by engaging
additional subcontractors. Data migration services, which will be included in
integration consulting and other services revenues, are less labor intensive
than data conversion services but require a higher degree of technical skill. As
a result of our personnel growth and accompanying enhanced internal
capabilities, we believe that we can realize higher profit margins on data
migration services than on data conversion services by performing these services
internally.

Selling, general and administrative expenses are expected to increase
during 2000 due to the opening of new sales and marketing offices in the United
Kingdom and Australia, each of which were opened during the first quarter of
2000. Selling expenses are also expected to increase due to our efforts to
develop brand name recognition through the aggressive marketing of our Digital
Utility and Government Gateway solutions. In addition, administrative costs are
expected to increase as a percentage of revenue as we hire additional management
personnel to manage our growth.
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<PAGE> 34

Due to the historic lack of profitability from the sales of our GDS
software product and the significant research and development costs related to
its continuing development, we discontinued all further development and sale of
the product in December 1996, recording a restructuring charge of $16.3 million
relating to asset write-offs and obligations in excess of expected revenue. We
now have no material revenues or expenses associated with this software product.

In August 1999, we completed a recapitalization in which we repurchased all
of the preferred and common stock previously held by our two largest
shareholders. We raised $45.5 million in the recapitalization through the sale
of preferred equity, and obtained a $25.0 million revolving credit facility,
from which $22.0 million was borrowed in connection with the recapitalization.
Total recapitalization expenses of $23.2 million included $3.9 million paid to
terminate a consulting agreement with a former stockholder, approximately $1.0
million used to pay cash bonuses, $12.3 million of non-cash employee stock
issuance expenses, $2.4 million used to terminate existing employment
agreements, $3.5 million used to retire performance obligations and $200,000
used to pay legal, accounting and termination fees. These expenses represented a
one time charge against our operating income. In connection with the
recapitalization, we issued $9.1 million of stock and stock options. The stock
and options were issued as an incentive to our employees and we recorded the
issuance as a non-cash operating expense. For further information regarding the
recapitalization, see "Certain Transactions -- 1999 Recapitalization."

We have recorded deferred compensation expense with respect to options
outstanding at March 31, 2000 with exercise prices below the fair market value
of our common stock at the date of grant of $14,852,000, which we expect to
recognize as compensation expense in future periods as follows:

<TABLE>
<CAPTION>
DEFERRED COMPENSATION
PERIOD EXPENSE
------ ---------------------
<S> <C>
Nine Months Ending December 31, 2000........................ $3,186,000
Year Ending December 31, 2001............................... 3,557,000
Year Ending December 31, 2002............................... 2,888,000
Year Ending December 31, 2003............................... 2,202,000
Year Ending December 31, 2004............................... 3,007,000
Year Ending December 31, 2005............................... 12,000
</TABLE>

In addition, as a result of the granting of options which vest over the next
five years based on the achievement of performance targets established by our
board of directors, there could be additional non-cash compensation expense of
up to $962,000 over the next five years. The foregoing compensation amounts will
be reduced if employees terminate employment prior to their options having fully
vested.

We plan to continue to expand our operations by hiring additional
professional staff members and other employees, and adding new offices, systems
and other infrastructure. The resulting increase in operating expenses would
harm our operating results if our revenues do not increase to support such
expenses. Based on all of the foregoing, we believe that our quarterly revenue
and operating results are likely to vary significantly in the future and that
period-to-period comparisons of our operating results are not necessarily
meaningful and should not be relied on as indications of future performance.

In the quarter in which this offering is consummated we will record an
additional operating expense related to the fee payable to InSight Capital
Partners. See "Certain Transactions -- InSight Capital Partners Transaction
Fees." Based on the number of shares of common stock expected to be outstanding
upon consummation of this offering, and assuming an initial public offering
price of $9.00 per share, the fee payable to InSight will be approximately $4.0
million.

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<PAGE> 35

RESULTS OF OPERATIONS

The following table sets forth the percentage of total revenues of specific
consolidated financial data for the periods indicated:

<TABLE>
<CAPTION>
THREE MONTHS
ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
----------------------------------------- --------------
1995 1996 1997 1998 1999 1999 2000
----- ----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues:
Integration, consulting and
other services............... 34.4% 53.0% 52.7% 61.1% 61.6% 62.7% 72.7%
Subcontractor and other
revenue...................... 65.6 47.0 47.3 38.9 38.4 37.3 27.3
----- ----- ----- ----- ----- ----- -----
Total revenues.......... 100.0 100.0 100.0 100.0 100.0 100.0 100.0
Cost of revenues:
Cost of integration, consulting
and other services........... 35.1 32.1 42.4 37.0 33.5 34.8 35.4
Cost of subcontractor and other
revenue...................... 35.2 24.6 31.8 29.4 30.3 29.3 21.3
----- ----- ----- ----- ----- ----- -----
Total cost of
revenues.............. 70.3 56.7 74.2 66.4 63.8 64.1 56.7
----- ----- ----- ----- ----- ----- -----
Gross profit...................... 29.7 43.3 25.8 33.6 36.2 35.9 43.3
Expenses:
Selling, general, and
administrative expenses...... 39.7 51.0 28.3 25.6 25.3 26.1 40.1
Recapitalization costs.......... -- -- -- -- 10.7 -- --
Employee stock compensation
expense...................... -- -- -- -- 18.4 -- 3.3
Consulting agreement termination
costs........................ -- -- -- -- 5.9 -- --
(Gain) loss from
restructuring................ -- 15.3 (2.9) (0.2) -- -- --
Loss from disposal of assets.... -- 16.3 -- 0.2 -- -- --
Research and development........ 8.8 11.5 0.4 -- -- -- --
----- ----- ----- ----- ----- ----- -----
Total expenses.......... 48.5 94.1 25.8 25.6 60.3 26.1 43.4
----- ----- ----- ----- ----- ----- -----
Operating income
(loss)................ (18.8) (50.8) -- 8.0 (24.1) 9.8 (0.1)
Other income (loss):
Interest income (expense)....... (0.2) (0.9) (2.7) 0.1 (0.9) 0.1 (2.4)
Income (loss) before
taxes................. (19.0) (51.7) (2.7) 8.1 (25.0) 9.9 (2.5)
----- ----- ----- ----- ----- ----- -----
Income tax benefit
(expense)............. -- -- -- 3.9 2.0 0.9 (2.3)
----- ----- ----- ----- ----- ----- -----
Net income (loss)....... (19.0) (51.7) (2.7) 12.0 (23.0) 10.8 (4.8)
===== ===== ===== ===== ===== ===== =====
Preferred stock adjustments....... (5.6) (1.5) (1.9) (1.8) 18.7 (1.4) --
----- ----- ----- ----- ----- ----- -----
Net income (loss)
available to common
stockholders.......... (24.6)% (53.2)% (4.6)% 10.2% (4.3)% 9.4% (4.8)%
===== ===== ===== ===== ===== ===== =====
</TABLE>

THREE MONTHS ENDED MARCH 31, 1999 AND 2000

Revenues. Revenues increased 25.8% from $14.8 million for the three months
ended March 31, 1999 to $18.6 million for the three months ended March 31, 2000.
This increase was due to growth in integration, consulting and other services
revenue of $4.3 million, offset by a decrease in subcontractor and other revenue
of $400,000. Revenue from integration, consulting and other services increased
46.0% from $9.3 million for the three months ended March 31, 1999 to $13.6
million for the three months ended March 31, 2000. The increase in revenue from
integration, consulting and other services was due to an

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<PAGE> 36

increase in the number of engagements and increase in the scope of engagements
for the three months ended March 31, 2000 over 1999. The decrease in
subcontractor and other revenue was primarily attributable to a decrease in data
conversion services performed offset in part by an increase in third party
software sold. Revenue from data conversion decreased by approximately $800,000
from $3.3 million for the three months ended March 31, 1999 to $2.5 million for
the three months ended March 31, 2000. Third party software revenue increased by
$300,000 from $1.0 million for the three months ended March 31, 1999 to $1.3
million for the three months ended March 31, 2000. We expect that data
conversion revenue will decline as a percentage of revenue during future
quarters.

Gross Profit. Gross profit increased by 51.9% from $5.3 million for the
three months ended March 31, 1999 to $8.1 million for the three months ended
March 31, 2000. Our gross profit margin from integration, consulting and other
services revenue increased from 44.5% for the three months ended March 31, 1999
to 51.3% for the three months ended March 31, 2000. This increase is primarily
attributable to revenue from sales of software developed during previous
engagements which because of our Rapid Performance Modeling approach was usable
for new engagements. The cost of developing this reusable software was
substantially expensed against the engagements as part of cost of revenues
during 1999. Rapid Performance Modeling allows us to eliminate redundant cost of
developing core software code for similar business applications and was deployed
during the second half of 1999. Gross profit and gross profit margin for the
three months ended March 31, 2000 does not include approximately $19,000
reported as employee stock compensation expense.

Gross profit from subcontractor and other revenue decreased 5.3% from $1.2
million for the three months ended March 31, 1999 to $1.1 million for the three
months ended March 31, 2000. Our gross profit margin on subcontractor and other
revenue increased by 0.6% from 21.4% during the three months ended March 31,
1999 to 22.0% for the three months ended March 31, 2000. The primary reason for
this increase is the shift in revenue mix from lower margin conversion revenue
to higher margin third party software revenue. Our revenue from third party
software is dependent upon our customers' and the projects' scheduled delivery
requirements. We expect third party software revenue to fluctuate from quarter
to quarter.

Operating Expenses. Excluding $600,000 of employee stock compensation
expense for the three months ended March 31, 2000, total operating expenses
increased 93.3% from $3.9 million during the three months ended March 31, 1999
to $7.5 million for the three months ended March 31, 2000. This increase
reflects an increase in selling, general and administrative personnel and
related expense. Our selling, general and administrative headcount increased by
66.1% from 59 for the three months ended March 31, 1999 to 98 for the three
month's ended March 31, 2000. This increase was due primarily to hiring
additional sales and marketing personnel to cultivate and develop additional
customers and the expenses incurred in connection with opening, during the
fourth quarter of 1999, a new office in Boston, Massachusetts. In addition, we
added administrative personnel to recruit professional and technical personnel
and to manage our hiring process.

Net Interest Income (Expense). Net interest income for the three months
ended March 31, 1999 of $15,000 compared to net interest expense of $444,000 for
the three months ended March 31, 2000. This increase in interest expense was due
to interest payable on $22.0 million borrowed under our revolving credit loan
facility in connection with our 1999 recapitalization.

Income (Loss) Before Taxes. Our income (loss) before provision (benefit)
for income taxes decreased from $1.5 million for the three months ended March
31, 1999 to $(500,000) for the three months ended March 31, 2000. This decrease
is primarily due to the increase in selling, general and administrative expenses
and approximately $600,000 of employee stock compensation amortization in the
three months ended March 31, 2000.

Income Tax Benefit (Expense). The income tax benefit for the three months
ended March 31, 1999 was $100,000, compared to an income tax provision of
$(400,000) for the three months ended March 31, 2000. Income tax benefit was
recorded to the extent we expected to realize a tax benefit from the use of our
net operating losses in future periods. We believe that, based upon our history
of operations, recording

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<PAGE> 37

a tax benefit for more than the amount we expect to realize in our next fiscal
year would be inappropriate. Based upon our expectations for the remaining
portion of this year and our fiscal year 2001 and limitations placed on the use
of our net operating losses by the Internal Revenue Code and Regulations, we
have reduced our deferred tax asset to reflect the asset we believe will be
allowable under these limitations to offset income taxes for the current and our
next fiscal year.

Net Income (Loss). As a result of the foregoing factors, we incurred a net
loss of $(900,000) for the three months ended March 31, 2000 as compared to net
income of $1.6 million for the three months ended March 31, 1999. For the three
months ended March 31, 1999, we also recorded $(200,000) of accretion related to
our previously outstanding mandatorily redeemable preferred stock.

YEARS ENDED DECEMBER 31, 1998 AND 1999

Revenues. Revenues increased 40.5% from $47.4 million for the year ended
December 31, 1998 to $66.6 million for the year ended December 31, 1999. This
increase was due to growth in both integration, consulting and other services
revenue and subcontractor and other revenue. Revenues from integration,
consulting and other services increased 41.7% from $29.0 million for the year
ended December 31, 1998 to $41.0 million for the year ended December 31, 1999.
Revenues from subcontractors and other revenue increased 38.6% from $18.5
million for the year ended December 31, 1998 to $25.6 million for the year ended
December 31, 1999. Revenues from subcontractors increased 101% from $8.3 million
for the year ended December 31, 1998 to $16.8 million for the year ended
December 31, 1999. This increase was due to an increase in the number of
engagements requiring data conversion services and performance improvements of
our subcontractor on those engagements during 1999. Hardware and software
revenue decreased by 19.6% from $6.6 million for the year ended December 31,
1998 to $5.3 million for the year ended December 31, 1999 due to the decrease in
the number of engagements requiring hardware and software deliveries.

Gross Profit. Gross profit increased 51.7% from $15.9 million for the year
ended December 31, 1998 to $24.1 million for the year ended December 31, 1999.
Gross profit from integration, consulting and other services revenue increased
64.4% from $11.4 million for the year ended December 31, 1998 to $18.7 million
for the year ended December 31, 1999. Our gross profit margin from integration,
consulting and other services revenue increased from 39.3% for the year ended
December 31, 1998 to 45.7% for the year ended December 31, 1999. Gross profit
and gross profit margin in 1999 from integration, consulting and other services
does not reflect approximately $143,000 reported as employee stock compensation
expense. The increase in gross profit and gross profit margin reflects the
implementation during 1999 of our Rapid Performance Modeling project approach,
which decreased the cost of delivering our services. The implementation of Rapid
Performance Modeling in 1999 allowed us to eliminate redundant costs of
developing core software code for similar business applications. Rapid
Performance Modeling was deployed during the second half of 1999 on eleven new
projects, reducing professional services costs by approximately $1.4 million.

Gross profit from subcontractor and other revenue increased 19.5% from $4.5
million for the year ended December 31, 1998 to $5.4 million for the year ended
December 31, 1999. The gross profit margin on subcontractor and other revenue
decreased from 24.4% for the year ended December 31, 1998 to 21.0% for the year
ended December 31, 1999. This decrease was due to a shift in revenue from higher
margin hardware and software sales to lower margin subcontractor revenue. Gross
profit margin on subcontractor revenue increased to 10.6% for the year ended
December 31, 1999 from 5.9% for the year ended December 31, 1998 primarily due
to revenue from contracts on new conversion engagements on which we realized an
improvement in our gross profit margin. Gross profit margin on software and
hardware revenue increased marginally by 1.3% to 37.9% for the year ended
December 31, 1999 from 36.6% for the year ended December 31, 1998.

Operating Expenses. Excluding $23.3 million in costs associated with our
recapitalization, total operating expenses increased 38.9% from $12.1 million
for the year ended December 31, 1998 to $16.9 million for the year ended
December 31, 1999. This increase reflected an increase in selling, general

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<PAGE> 38

and administrative expense resulting from expenses incurred in connection with
our initiation of customer relationship management services, the opening of a
new office in Boston, Massachusetts, and hiring additional management, marketing
and technical personnel to support the growth in our business.

Net Interest Income (Expense). Net interest income of $100,000 for the year
ended December 31, 1998 compared to net interest expense of $600,000 for the
year ended December 31, 1999. This decrease was due to the interest payable on
the $22.0 million borrowed under our revolving credit loan facility in
connection with our recapitalization.

Income (Loss) Before Taxes. Our income (loss) before provision (benefit)
for income taxes decreased from $3.8 million for the year ended December 31,
1998 to $(16.6) million for the year ended December 31, 1999. Excluding costs
associated with our recapitalization, income before taxes would have increased
74.3% from $3.8 million for the year ended December 31, 1998 to $6.7 million for
the year ended December 31, 1999.

Income Tax Benefit. The income tax benefit was $1.9 million for the year
ended December 31, 1998, compared to an income tax benefit of $1.3 million for
the year ended December 31, 1999. Income tax benefit is recorded to the extent
we expect to realize a tax benefit from the use of our net operating losses in
future periods. We recorded a deferred tax asset at December 31, 1998 based on
our estimated taxable earnings for 1999. At December 31, 1999, the deferred tax
asset was increased based on our estimated taxable earnings for the year ended
December 31, 2000. We believe that, based on our history of operations,
recording a tax benefit for more than the amount we expected to realize in our
next fiscal year would be inappropriate. However, we believe that there is
sufficient positive evidence of near term earnings to conclude that it is more
likely than not that the recognized deferred tax asset will be realized.

At December 31, 1999 we had net operating loss carryforwards for U.S.
federal income tax purposes of $33.1 million which expire at various dates
between 2008 and 2019. As a result of limitations placed on utilization of these
net operating loss carryforwards by Section 382 of the Internal Revenue Code,
our utilization of these net operating loss carryforwards will be limited to
approximately $3.8 million per year. We also had approximately $7.0 million of
foreign net operating loss carryforwards, principally resulting from our former
operations in the United Kingdom. These net operating losses carry forward
indefinitely and will be available to offset future operating profits, if any,
in the United Kingdom.

Net Income (Loss). We incurred a net loss of $15.3 million for the year
ended December 31, 1999, as compared to net income of $5.7 million for the year
ended December 31, 1998. Excluding the costs associated with our
recapitalization (net of tax benefits), we would have realized net income of
$8.0 million in 1999. We also recorded in 1999 and 1998 adjustments related to
our previously outstanding mandatorily redeemable preferred stock of $12.4
million and $(900,000), respectively. The increase in 1999 reflects our
repurchase in our recapitalization of our previously outstanding preferred stock
at less than its then accreted value.

YEARS ENDED DECEMBER 31, 1997 AND 1998

Revenues. Revenues increased 16.1% from $40.9 million for the year ended
December 31, 1997 to $47.4 million for the year ended December 31, 1998,
reflecting an increase in integration, consulting and other services revenues of
34.6% from $21.5 million for the year ended December 31, 1997 to $29.0 million
for the year ended December 31, 1998. The increase in integration, consulting
and other services revenue was due to an increase in the number and size of our
client engagements and an increase in the scope of our engagements.
Subcontractor and other revenue decreased 4.6% from $19.3 million for the year
ended December 31, 1997 to $18.5 million for the year ended December 31, 1998.
Revenues from subcontractors increased 270.6% from $2.3 million for the year
ended December 31, 1997 to $8.3 million for the year ended December 31, 1998.
This increase was due to an increase in the number and scope of services on
engagements requiring data conversion services. Hardware and software revenue
decreased by 44.3% from $11.8 million for the year ended December 31, 1997 to
$6.6 million for the year ended December 31, 1998. This decrease was primarily
due to a decrease in third party software purchases,

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<PAGE> 39

which were required during the year ended December 31, 1997 to replace the GDS
software which we had sold or had committed to sell in 1996.

Gross profit. Gross profit increased 51.1% from $10.5 million for the year
ended December 31, 1997 to $15.9 million for the year ended December 31, 1998.
This increase was due primarily to an increase in gross profit from integration,
consulting, and other services revenue. Gross profit from integration,
consulting and other services revenue increased 172% from $4.2 million for the
year ended December 31, 1997 to $11.4 million for the year ended December 31,
1998. Our gross profit margin on integration, consulting and other services
revenue increased from 19.5% for the year ended December 31, 1997 to 39.3% for
the year ended December 31, 1998. These increases were primarily due to the
absence in 1998 of approximately $1.6 million of costs incurred in 1997 in
excess of the $1.0 million reserve existing at December 31, 1996 for project
rework required as a result of the discontinuance of our GDS software product
group in 1996. As part of the discontinuance, we transitioned our clients, at
our expense, from GDS software to compatible third-party software. This
replacement and rework was substantially completed during 1997. The majority of
our rework cost resulted from substituting third party software for GDS
software. We found that the third party software did not have the same
functionality as the GDS software, and, as a result, we incurred unexpected
costs in connection with the modification of the third party software to meet
our commitments to these clients. These costs were not fully estimatable at the
end of 1996.

Gross profit from subcontractor and other revenue decreased 28.9% from $6.3
million for the year ended December 31, 1997 to $4.5 million for the year ended
December 31, 1998. The gross profit margin on subcontractor and other revenue
decreased from 32.7% for the year ended December 31, 1997 to 24.4% for the year
ended December 31, 1998. Gross profit margin on subcontractor revenue decreased
marginally by 0.8% to 5.9% for the year ended December 31, 1998 from 6.7% for
the year ended December 31, 1997. Gross profit margin on software and hardware
revenue increase by 7.3% to 36.6% for the year ended December 31, 1998 from
29.3% for the year ended December 31, 1997. This increase in gross profit margin
was due to our ability to negotiate improved discounts on value added reseller
agreements with our vendors during 1998, which were not available during 1997
due to our need to quickly satisfy commitments to replace GDS software during
that year.

Operating Expenses. Operating expenses increased 15.1% from $10.5 million
for the year ended December 31, 1997 to $12.1 million for the year ended
December 31, 1998. Operating expenses for each of the years ended December 31,
1998 and 1997 include reversals of $100,000 and $1.2 million, respectively, of
the restructuring reserve established in 1996 in connection with the
discontinuance of our GDS software product group. The restructuring reserve was
reversed primarily during 1997 to reflect the sale of assets associated with our
discontinued GDS product line. See Note M to the Notes to Consolidated Financial
Statements. There was no restructuring reserve balance remaining at December 31,
1998. Excluding the effect of the reversals, operating expenses increased 4.0%
from $11.8 million for the year ended December 31, 1997 to $12.2 million for the
year ended December 31, 1998. This increase was due primarily to a 4.7% increase
in selling, general and administrative expenses from $11.6 million for the year
ended December 31, 1997 to $12.1 million for the year ended December 31, 1998.
This increase resulted from the increase in the number of our sales, marketing
and administrative employees and related personnel costs.

Net Interest Income (Expense). Net interest expense of $1.1 million for the
year ended December 31, 1997 compared to net interest income of $100,000 for the
year ended December 31, 1998. This increase reflected the elimination of
interest expense on approximately $4.7 million of long-term debt which was
converted into shares of our previously outstanding preferred stock. See Note H
to the Notes to Consolidated Financial Statements.

Income (Loss) Before Taxes. Our income (loss) before benefit for income
taxes increased by $4.9 million from $(1.1) million for the year ended December
31, 1997 to $3.8 million for the year ended December 31, 1998. This increase was
due primarily to improved gross profit from integration, consulting, and other
services revenue.

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<PAGE> 40

Income Tax Benefit. The income tax benefit was $1.9 million for the year
ended December 31, 1998. We recorded a deferred tax asset at December 31, 1998
based on our estimated taxable earnings for 1999. No income tax benefit was
recorded for the year ended December 31, 1997 as we did not believe there was
sufficient positive evidence of near term earnings to conclude that a deferred
tax asset would be realized. Income tax benefit is recorded to the extent we
expect to realize a tax benefit from the use of our net operating losses in
future periods.

Net Income (Loss). We realized net income of $5.7 million for the year
ended December 31, 1998, an increase of $6.8 million over a net loss of $(1.1)
million for the year ended December 31, 1997. This increase is due primarily to
an increase in gross profits of $5.4 million, a reduction in interest expense of
$1.1 million, and our income tax benefit recorded for the year ended December
31, 1998. We also recorded in 1998 and 1997 accretion related to our previously
outstanding mandatorily redeemable preferred stock of $(900,000) and $(800,000),
respectively.

QUARTERLY OPERATIONS DATA

The following table sets forth specific unaudited quarterly operations data
for 1998, 1999 and the first quarter of 2000. In our opinion, this data reflects
all adjustments, consisting only of normal recurring adjustments, necessary for
a fair presentation of the data. The results of operations for any quarter are
not necessarily indicative of the results of operations for a full year or any
future period. We expect our quarterly operating results to vary significantly
in future periods. See "Risk Factors -- Risks Related to our Operating Results."
<TABLE>
<CAPTION>
QUARTERS ENDED
------------------------------------------------------------------------------------------
MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31, MARCH 31, JUNE 30, SEPTEMBER 30,
1998 1998 1998 1998 1999 1999 1999
--------- -------- ------------- ------------ --------- -------- -------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues:
Integration,
consulting and
other services..... $ 6,025 $ 7,280 $ 7,471 $8,181 $9,283 $10,366 $10,724
Subcontractor and
other revenue...... 4,233 3,567 5,170 5,488 5,526 5,936 6,925
-------- -------- -------- ------ ------ ------- -------
Total
revenues..... 10,258 10,847 12,641 13,669 14,809 16,302 17,649
Cost of revenues:
Cost of integration,
consulting and
other services..... 3,721 4,244 4,144 5,455 5,153 5,865 5,600
Cost of subcontractor
and other
revenue............ 3,459 3,004 3,493 4,003 4,345 4,719 5,731
-------- -------- -------- ------ ------ ------- -------
Total cost of
revenues..... 7,180 7,248 7,637 9,458 9,498 10,584 11,331
-------- -------- -------- ------ ------ ------- -------
Gross profit........... $ 3,078 $ 3,599 $ 5,004 $4,211 $5,311 $ 5,718 $ 6,318

<CAPTION>
QUARTERS ENDED
------------------------
DECEMBER 31, MARCH 31,
1999 2000
------------ ---------
(IN THOUSANDS)
<S> <C> <C>
Revenues:
Integration,
consulting and
other services..... $10,656 $13,552
Subcontractor and
other revenue...... 7,194 5,081
------- -------
Total
revenues..... 17,850 18,633
Cost of revenues:
Cost of integration,
consulting and
other services..... 5,678 6,601
Cost of subcontractor
and other
revenue............ 5,410 3,963
------- -------
Total cost of
revenues..... 11,088 10,564
------- -------
Gross profit........... $ 6,762 $ 8,069
</TABLE>

Cost of revenue as a percentage of revenue may vary from one quarter to
another due to a shift in our engagement revenue mix or revisions in our
estimates of the costs required to complete our engagements. Short-term
engagements, less than one year in duration, may cause significant variations in
cost of revenue, resulting in fluctuations in quarterly gross profit. Quarterly
results may be adversely affected by short term consulting engagements we
undertake that result in nominal gross profit and represent our investment in a
client which we believe will engage us for systems integration services.
Alternatively, we may undertake short term engagements and realize gross profit
that causes our quarterly gross profit to exceed other quarters' gross profit
due to our efficiencies, use of Rapid Performance Modeling or value added, high
gross profit invoicing. We may also change our estimate of cost we expect to
incur on long term engagements. These changes may have either a positive or
negative affect on the quarter in which the revisions are made causing the gross
profit for that quarter to fluctuate from previously reported quarters.

Gross profit through the first three quarters of 1998 improved due to
increased headcount, improvement in utilization, and an increase in our billing
rates. During the quarter ended December 31,

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<PAGE> 41

1998, utilization decreased due to holiday and vacation time taken by our
professional staff, thereby increasing the cost of integration, consulting and
other services and reducing gross profit as a percentage of revenue from the
previous two quarters. During 1999, gross profit as a percentage of revenue
remained constant with the exception of the fourth quarter. Professional staff
headcount increased during the year and utilization rates remained constant with
the exception of the fourth quarter. Utilization during the fourth quarter of
1999 decreased due to holiday and vacation time taken by our professional staff
and the negative impact on billable hours charged to projects as a result of
relocating our workforce to a new office building. Gross profit in the fourth
quarter improved due to the delivery and installation of intellectual property
to two customers, the cost of development of which had been expensed in prior
quarters due to our Rapid Performance Modeling approach.

We do not believe our business is seasonal. However, we experienced a
slight decrease in our integration, consulting and other services revenue during
the fourth quarter of 1999 due to downtime resulting from the relocation of our
operations in October 1999.

LIQUIDITY AND CAPITAL RESOURCES

We have financed our operations and investments in property and equipment
primarily through the sale of equity securities, bank borrowings, capital lease
financings and cash generated through operations.

Cash provided by (used in) operating activities increased from $(3.2)
million for the three months ended March 31, 1999 to $1.6 million for the three
months ended March 31, 2000. This increase resulted from our net loss of
$900,000 in the first quarter of 2000, which was offset by an increase in
accounts payable and accrued expenses of $3.3 million for 2000, compared to our
net income of $1.6 million in the first quarter of 1999, which was reduced by
cash used due to a $2.2 million increase in receivables and unbilled revenue and
customer deposits.

Cash provided by (used in) operating activities decreased from $3.9 million
for the year ended December 31, 1998 to $(12.7) million for the year ended
December 31, 1999. This decrease resulted from our net loss of $15.3 million for
1999 compared to our net income of $5.7 million in 1998 and an increase in
receivables and unbilled revenues generated as a result of our revenue growth.
Accounts receivable and unbilled revenue balances increased by $7.7 million from
$7.8 million at December 31, 1998 to $15.5 million at December 31, 1999, and
increased by $1.4 million to $16.9 million at March 31, 2000. The increases in
accounts receivable and unbilled revenue is a result of an increase in the
number of contracts and the revenue recognized. Our contracts often include
hardware, software, integration services and data conversion services. Clients
are billed for hardware and software upon delivery. Integration service revenue
and data conversion revenue is recognized based on the work accomplished, which
does not necessarily parallel billings to our customer, resulting in unbilled
revenue. Some of our contracts provide invoicing on a fixed schedule independent
of service deliveries. Other contracts provide for invoicing on a percent
complete basis that parallels our revenue recognition. Unbilled revenue
increased by $3.1 million from $3.3 million at December 31, 1998 to $6.4 million
at December 31, 1999, and increased $5.3 million to $11.7 million at March 31,
2000. This increase is primarily due to our billing cycle which is one month in
arrears for services and results in at least one month of services revenue
reported as unbilled revenue on the balance sheet. Amounts representing the
recognized sales value of performance that had not been billed and were not then
billable to customers were $2.6 million at December 31, 1998, $4.7 million at
December 31, 1999, and $5.3 million at March 31, 2000.

The days outstanding for accounts receivable and unbilled revenues
increased from 65 days at December 31, 1998 to 73 days at December 31, 1999. The
primary reason for this increase in days outstanding is due to payment delays on
subcontract conversion revenues which had the effect of increasing our unbilled
revenue by approximately $636,000 from 1998 to 1999. The days outstanding for
accounts receivable and unbilled revenues increased from 61 days at March 31,
1999 to 77 days at March 31, 2000. The primary reason for this increase in days
outstanding is an increased collection cycle for accounts receivable of 6 days
and to payment delays on subcontract conversion revenues which has increased our
unbilled revenue days outstanding by 10 days.

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<PAGE> 42

The balance in the allowance for doubtful accounts decreased between 1998
and 1999 and between March 31, 1999 and March 31, 2000 as a result of bad debts
charged against the allowance relating to GDS software maintenance. We maintain
a de minimus allowance for doubtful accounts for our system integration
projects. We believe that our accounts receivable from our system integration
clients, primarily large stable utilities and government enterprises, represent
nominal credit risk. We realized no bad debt expense on any system integration
or consulting engagement during our fiscal years 1998 and 1999 or during the
first quarter of 2000.

Cash provided by operating activities increased from $2.7 million for the
year ended December 31, 1997 to $3.9 million for the year ended December 31,
1998. This increase resulted from the decrease in cash required to satisfy
severance, committed office lease, and equipment rental expenses associated with
the discontinuance of our GDS software product group.

Net cash provided by (used in) financing activities increased from
$(200,000) for the three months ended March 31, 1999 to $100,000 for the three
months ended March 31, 2000. Cash provided by financing activities for the three
months ended March 31, 2000 resulted from the repurchase of common stock of
$200,000 and the exercise of employee stock options of $100,000. During the
three months ended March 31, 1999, cash used in financing activities was
primarily due to $0.3 million to repurchase outstanding common stock for our
employee stock option plan.

Net cash provided by (used in) financing activities increased from a
nominal amount for the year ended December 31, 1998 to $11.1 million for the
year ended December 31, 1999. This increase resulted from net borrowings on our
revolving credit line of $22.0 million, offset by distributions to shareholders
of $7.3 million in connection with our recapitalization. Net cash provided by
(used in) financing activities decreased from $(1.8) million for the year ended
December 31, 1997 to a nominal amount for the year ended December 31, 1998. This
decrease was due to cash payments in 1997 used to repay both the $1.0 million
outstanding obligation on our then existing line of credit and the $800,000
outstanding in connection with other debt obligations.

Our capital expenditures were $1.8 million for the year ended December 31,
1999, $1.0 million for the year ended December 31, 1998 and $600,000 for the
year ended December 31, 1997. Approximately $200,000 of capital expenditures
during 1999 were used to replace or upgrade existing property and equipment.
Additional expenditures in 1999 were used to purchase new property and equipment
needed as a result of the increase in personnel, the addition of new operating
and administrative hardware and software systems and the opening of additional
offices. Our capital expenditures were $900,000 for the three months ended March
31, 2000 and were used primarily to purchase new personal computer hardware and
software as a result of the increase in our headcount. Capital expenditures for
2000 are expected to be approximately $5.0 million. The majority of capital
expenditures for 2000 are projected to cover the purchase of additional software
and hardware for employees we expect to hire during the year.

Cash and cash equivalents decreased from $5.0 million for the year ended
December 31, 1998 to $1.6 million for the year ended December 31, 1999. This
decrease resulted from cash expended to complete our recapitalization, including
$3.9 million used to terminate the consulting agreement. Cash and cash
equivalents increased to $2.4 million at March 31, 2000.

In connection with our August 1999 recapitalization, we entered into a
Revolving Credit Loan Agreement with Fleet Bank which provides a line of credit
of up to $25.0 million. We borrowed $22.0 million under the agreement during
1999 to partially fund the purchase of our previously outstanding Series A and
Series B Preferred Stock and Class A Common Stock. At our option, interest on
borrowings under this credit facility are based on either the LIBOR rate plus
2.5% or the prime rate plus 0.75%. As of March 31, 2000, $20.0 million of our
outstanding balance bears interest under the LIBOR rate option, and the
remaining $2.0 million bears interest under the prime rate option. The effective
blended interest rate on borrowings at March 31, 2000 was 9.27%. The agreement
includes covenants relating to the maintenance of specific financial ratios,
including minimum interest coverage, debt service and current assets ratios and
limitations on additional debt. We were in compliance with all covenants at
December 31, 1999. At March 31, 2000, we exceeded by two days one covenant which
requires us to maintain our days
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<PAGE> 43

outstanding for accounts receivable and unbilled revenues at 75 days or less. We
obtained a waiver of this covenant and expect to be in compliance with all of
the loan covenants at June 30, 2000. We will use a portion of the net proceeds
from this offering to repay amounts due under the agreement. Also in connection
with the recapitalization, we issued $44.9 million, net of issuance costs, of
convertible preferred stock to fund the purchase of our Series A and Series B
Preferred Stock and Class A Common Stock.

We believe that cash provided from operations, borrowings available under
our revolving credit loan facility or a new credit facility and the net proceeds
of this offering, the concurrent private placement and the June 2000 sale of
common stock to Cinergy Communications, Inc. will be sufficient to meet working
capital and capital expenditure requirements for at least the next twelve
months. Thereafter, we may need to raise additional funds through public or
private financing, or make other arrangements to fund our operations and
potential acquisitions, if any. We cannot assure you that any financings or
other arrangements will be available in amounts or on terms acceptable to us or
at all, and any financings or other arrangements could place operating or other
restrictions on us. Our inability to raise capital when needed could seriously
harm the growth of our business and results of operations. If additional funds
are raised through the issuance of equity securities, the percentage ownership
of our stockholders would be reduced. Furthermore, these equity securities could
have rights, preferences or privileges senior to those of our common stock.

YEAR 2000 COMPLIANCE

Many currently installed computer systems and software products are coded
to accept or recognize only two-digit entries in the date code field. However,
these systems and software products now need to accept four-digit entries to
distinguish 21st century dates from 20th century dates. While computer systems
and software used by many utilities and local governments have been upgraded to
comply with these year 2000 requirements, existing systems and software at some
of these entities may still need to be upgraded to comply with these year 2000
requirements or risk system failure or miscalculations which could cause
disruptions of normal business activities.

As of the date of this prospectus, we have not experienced any year 2000
problems and are not aware of any material 2000 problems experienced by our
clients or potential clients.

We funded our year 2000 plan from operating cash flows and have not
separately accounted for these costs in the past. To date, these costs have not
been material.

QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

We currently provide our services to clients located in North America, and
to a lesser extent, Europe, South America and the Asia-Pacific region. As a
result, our financial results could be affected by factors such as changes in
foreign currency exchange rates or weak economic conditions in foreign markets.
As all of our contracts with clients currently provide that payments to us be
made in U.S. dollars, a strengthening of the dollar could make our services less
competitive in foreign markets. We do not expect any material adverse effect on
our consolidated financial position, results of operations or cash flows due to
movements in any specific foreign currency. We currently do not use financial
instruments to hedge foreign denominated operating expenses, but we intend to
assess the need to utilize financial instruments to hedge currency exposures on
an ongoing basis. We do not enter into derivative or other financial instruments
for trading or speculative purposes. Our interest income is sensitive to changes
in the general level of U.S. interest rates, particularly since the majority of
our investments are in short-term instruments. Due to the short-term nature of
our investments, we believe that there is no material risk exposure. Our long
term debt bears interest at variable rates based on LIBOR or the prime rate. As
a result, interest rate changes generally do not affect the fair market value of
our variable rate debt but do impact future earnings and cash flows, assuming
other factors are held constant.

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<PAGE> 44

BUSINESS

OVERVIEW

We work with our clients through all phases of their eBusiness
transformation process. Throughout this process we:

- Engineer -- with our client's input, an information technology
infrastructure and internal business processes that tailor our
proprietary Digital Utility and Government Gateway eBusiness frameworks
to our clients' particular needs;

- Build -- the infrastructure, systems and processes with minimal
disruption to our clients' organizations and provide comprehensive
training and change management services; and

- Manage -- our solutions for our clients to help them minimize the
internal resources they must commit to maintain their systems and to help
them maximize their return on investment.

The two large vertical markets we address, utility and local governments,
have only recently begun converting their traditional customer service and
business models to Internet-based eBusiness platforms. We were one of the first
companies to integrate energy and service delivery management systems in our
core markets. We have completed engagements for clients such as Allegheny Power,
Alliant Energy Corporation, Cinergy Corp., Citizens Utilities Company, Southern
California Edison Company, and the City of Indianapolis, Indiana. During the
past five years, we have completed over 270 major information technology
engagements.

INDUSTRY BACKGROUND

Evolution of the Internet and eBusiness. Commercial Internet use is
expanding rapidly, both in terms of the number of users and the ways in which
organizations use the Internet. The initial commercial use of the Internet was
as a static informational and advertising medium. Web sites had little ability
to automate business processes or execute transactions and thus remained
separate from core business systems, which, in turn, had not been designed to
communicate with standards-based Internet software. Today, organizations faced
with growing competition, deregulation, and globalization pressures seek to
transform their Web sites and intranet and extranet applications from simple
marketing tools into advanced software applications that support core business
processes. In order to accomplish this transformation, organizations are
rebuilding and upgrading their information technology systems to transact
directly, seamlessly and instantaneously with customers, constituents,
suppliers, partners and distributors. This new medium of interaction, commonly
referred to as eBusiness, is rapidly creating new markets, communications
channels and revenue opportunities while enabling organizations to reduce costs,
improve operating efficiencies and improve customer relationship management.

To automate all of the functions associated with an eBusiness environment,
organizations cannot simply link Internet customers, constituents, suppliers,
business partners and distributors directly to their existing internal systems,
which were designed for a static environment in which a defined number of
specifically trained employees performed very specific functions such as
billing, service scheduling or records management. With each internal system
serving a distinct independent function, it is extremely

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<PAGE> 45

difficult for a customer or constituent to have a user-friendly,
customer-service-focused experience without significant integration of existing
internal systems.

To integrate their existing internal systems, organizations need an
advanced technology approach in which "business logic," a set of business
procedures and rules, is built into a set of core software applications that
bridges these existing systems with the Internet. These core software
applications handle business functions that previously could only be executed by
specially trained personnel. A successful eBusiness system must present on-line
functions to customers in a simple format, yet provide comprehensive access to
all of the information and transactional capabilities the organization has to
offer. In addition, the software systems that integrate the Internet with the
existing internal systems must be carefully designed to handle large volumes of
Internet traffic and ensure around the clock reliability. These software systems
must use a component-based design which is flexible and extendable to meet the
needs of the organization as it grows.

Organizations are increasingly turning to outside professional Internet
solutions providers to create and manage these systems. The primary advantages
of outside solutions providers are their comparative expertise, speed,
efficiency and reduced risk. Internal information technology departments, for
example, primarily maintain and troubleshoot legacy systems. This involves
minimal exposure to the Internet and other rapidly developing technologies and
little experience designing and integrating new systems. Compared to internal
departments, outside solutions providers, who can often reapply the components,
techniques and methodologies they developed on similar complex information
technology projects, can identify possible solutions more easily, design and
implement these solutions more quickly, and be more assured that a solution will
actually work. In addition, outside professional Internet solutions providers
can often offer more objective advice, free of internal cultural or political
pressures. The combination of these factors has created a significant and
growing demand for third-party Internet professional service providers.
International Data Corporation has forecasted that the market for Internet
professional services worldwide will grow from $7.8 billion in 1998 to $78.5
billion by 2003.

OUR CORE MARKETS

According to International Data Corporation, the U.S. utilities industry,
one of the five largest vertical markets in the United States, is estimated to
have spent approximately $345 million on Internet services in 1999. That number
is estimated to grow to approximately $2.0 billion by 2003, representing a 55%
compound annual growth rate. As the industry continues the process of
deregulation, gas and electric utilities face the need to simultaneously:

- increase revenues;

- improve customer satisfaction to retain consumers who now can switch
energy providers;

- capitalize on their well developed service delivery infrastructures and
established customer relationships to cross-sell a diverse package of
customer services with other service providers such as cable television
and telephone companies;

- drive down costs as competitive pricing replaces the historic regulatory
cost-plus pricing model;

- differentiate and extend their product lines and services to compete on
factors other than price; and

- obtain and rapidly distribute information about their service networks on
a real-time basis, particularly during emergencies or power outages.

Local governments in the United States also represent a significant segment
of the economy. According to International Data Corporation, government spending
on Internet services is estimated to have been approximately $505 million in
1999. That number is estimated to grow to approximately $2.8 billion by 2003,
representing a 54% compound annual growth rate. Local governments generally

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<PAGE> 46

continue to employ labor-intensive, paper-based processes which rely on
incompatible computer and telephone systems. Local governments face demands from
their individual and business constituents to:

- consume fewer resources while maintaining service levels, in order to
free up tax revenues for social and other services;

- speed the processing of licenses and permits and simultaneously reduce
the occurrence of errors in processing, both to enhance constituent
satisfaction and to compete for expanding and relocating businesses; and

- allow real-time access to information by administrators and policy
makers.

To respond to these demands, utilities and local governments are seeking
ways to improve customer and constituent satisfaction and reduce costs by giving
themselves, their business partners, their suppliers and their customers and
constituents better access to integrated business processes. Utilities and local
governments have realized how the Internet can help service-oriented businesses
achieve their goals, and they now realize that they must deliver functional,
Web-based integrated services to their clients, business partners, suppliers and
constituents.

THE OPPORTUNITY

We believe that many Internet professional service providers lack the
substantive industry expertise required to transform utilities and local
governments into digital business environments. Traditional third-party
enterprise-level planning solutions, for example, integrate support functions
such as financial administration and customer service, but do not integrate core
functions such as work management or land and facilities management. Utilities
and local governments need solutions that are built around their core
functions -- maintaining their extensive, constantly changing physical
infrastructures of wires, pipes, roads and sewage systems -- but are also linked
to their front and back office functions. A complete eBusiness solution for
utilities and local governments must thus integrate the data that supports their
core operations with the data that supports their front and back office
functions -- data that often resides in different departments, on different
databases and on different information systems.

Thus, while Internet professional service providers may possess the
technology and resources that utility and local governments seek, few have the
substantive understanding of the disparate information systems that support a
utility's or local government's core operations required to provide a complete
eBusiness solution for these organizations. Furthermore, developing that domain
expertise is not easily accomplished. As a result, there is substantial unmet
demand for solutions providers who can combine sophisticated technological and
resource expertise with deep knowledge of the utility industry or the public
sector.

THE CONVERGENT SOLUTION

Relying upon our substantial knowledge of, and expertise in, the utility
industry and the public sector, our services help utilities and local
governments to transform their organizations into digital business environments
that can integrate data and processes from various sources to provide real-time
responses to internal and external information requirements. Our solutions are
based on our proprietary Model Office, a component based working solution which
enables us to address our clients' specific organizational goals and to create
our Digital Utility and Government Gateway solutions, which transform our
clients' paper-based processes into seamless, digital business environments.

We design and implement processes that integrate our clients' core
functions with the data supporting front and back office functions, such as
customer relationship management and billing. The result is a single,
integrated, digital system through which internal decision makers, business
partners, customers and constituents can access business information on a
real-time basis.

Our solutions include our business process redesign and change management
services. Our business process redesign services focus our clients' executive
management on how improvements in their
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<PAGE> 47

information technology systems can transform strategic decision making processes
and relationships with customers or constituents, business partners and
suppliers. Our change management services educate individuals within our
clients' organizations on how changes in business processes will change the way
they perform their daily jobs. We help our clients manage their solutions by
providing ongoing technical support and release updates, offering application
hosting services and offering workshops that allow our clients to learn how
their industry peers are using their information technology resources to improve
their business processes and expand their business opportunities.

We deliver our solutions using our proprietary Rapid Performance Modeling
(RPM) delivery methodology -- a project approach that relies on repeatable
processes and methodologies to combine corporate knowledge and industry best
practices and quality methods. These best practices services and tools provide
the backbone for all of our project-related engagements, and can be adapted to
address our clients' specific strategic needs. Solutions components developed on
any specific project can then be reused in future projects, providing us with an
expanded methodology base. We believe that our use of component engineering and
integration techniques provides repeatable, demonstrated functionality to our
clients at accelerated speed and reduced risk compared to more traditional
development approaches.

STRATEGY

Our strategic goal is to be the global leader in eBusiness services serving
the utility and local government markets. The key elements of our corporate
growth strategy include the following:

Capitalize on Our Industry Expertise. We believe that our in-depth
expertise in the utility and local government markets gives us the background to
focus on our clients' most complex, mission-critical problems. Members of our
senior management and sales and project management teams have an average of
fourteen years of utility or public sector consulting and systems integration
experience, and came to us directly from, or have experience working in, the
industries we serve. Our specific industry expertise benefits us and our clients
at each phase of our solutions delivery process by reducing the learning curve
on new engagements, improving efficiency of implementation and reducing project
delivery times. Accordingly, we will continue to emphasize our industry
expertise to differentiate ourselves from our potential competitors.

Expand Internet-Based Customer Relationship Management (eCRM) Service
Offerings and Enhance our Consulting and Internet Service Offerings. As
utilities and local governments seek ways to improve customer and constituent
satisfaction and retention, we will introduce services to meet this need. We are
introducing several new eCRM service offerings, including front office
customer-facing systems enabled by Internet technology. To quickly develop our
expertise and market presence in this area, we have instituted partnerships with
leading eBusiness and eCRM software companies, including Quintus and Vignette,
as well as several other software vendors focused on eBusiness functionality for
the utility and local government markets.

We believe that the leaders in the eBusiness solutions market must be able
to respond quickly to changing market conditions and evolving client needs. To
meet this need, we have developed a corporate intranet that contains a library
of reusable software objects, templates, frameworks, and methodologies we have
developed during our client engagements. These repeatable solutions reduce our
development time and increase our productivity and profitability. We intend to
continuously expand our repeatable eBusiness components library by adding
components based on emerging Internet technologies, particularly in the area of
enhanced applications for customer relationship management and application
maintenance services and hosting.

Broaden Client Relationships. Successful completion of relatively small,
early-stage projects has enabled us to gain much broader, comprehensive
follow-on engagements. A key component of our strategy is to establish
credibility with clients through the successful execution of these smaller,
early-stage projects and to capitalize upon that performance to obtain the
mandate for our clients' larger, business-critical projects.

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Increase Brand Awareness. We have recently launched an aggressive
multi-media marketing campaign to build brand recognition of our Digital Utility
and Government Gateway solutions within their respective markets. We believe
that our success in developing name recognition of our solutions will increase
our visibility with potential clients, industry partners and prospective
employees. We believe that maintaining a reputation for delivering innovative
eBusiness solutions and client satisfaction will enhance our ability to win
sole-source repeat business from our existing clients and attract new clients
through increased referral-driven sales and strong references.

Recruit and Retain Highly Qualified Professionals. Our growth and our
ability to provide strategic eBusiness solutions are based largely on our
ability to attract, develop and retain experienced professionals through our
employee care programs. Our strategy is to expand our existing expertise by
hiring and retaining senior professionals from within our core markets. We
strive to maintain a team-oriented and results-driven culture that offers
energetic professionals exposure to cutting-edge technologies and provides
incentives through competitive compensation plans. We provide learning
opportunities on a continuing basis to expand our employees' ability to deliver
innovative and effective solutions to our clients' rapidly changing
technological environment.

Continue Geographic Expansion. Our clients are based throughout North
America and in Brazil, New Zealand, Korea, the United Kingdom, Australia and
South Africa. In order to expand our global operations we have opened offices in
London, England and Brisbane, Australia. We believe that demand for eBusiness
solutions in the utility and public sector industries is growing rapidly, and
that this demand will create opportunities for us to continue to grow, both in
the United States and globally. We believe that having a regional presence to
serve our utility and public sector clients will help us to develop and
strengthen long-term client relationships and enable us to respond quickly to
our clients' needs.

BUILDING THE DIGITAL ENTERPRISE

eBusiness transformation involves developing and integrating various
systems and processes within an enterprise to provide online, real-time access
to information. Our proprietary Rapid Performance Modeling (RPM) delivery
methodology serves as a roadmap to design, build and manage our eBusiness
solutions. We use our RPM methodology in our projects to manage project scope
and customer expectations and to deliver timely solutions on budget. RPM offers
repeatable approaches to eBusiness transformation, allowing for rapid adoption
of best practices and reinforces consistent quality across all projects. It
provides for quality assurance with unit, integration and systems testing
procedures throughout design, development and deployment to ensure that the
solutions we deliver meet our quality standards and our clients' business needs.
We continually seek to evolve our RPM methodology based on project experiences
that identify and supplement industry best practices.

The key components of our RPM methodology are to:

- evaluate our client's business vision, culture, commitment to technology
solutions and existing information technology infrastructure and
resources;

- present a detailed cost-benefit analysis of the recommended solution that
quantifies costs (such as hardware, software and applications procurement
and development, internal resource requirements and system maintenance),
benefits (such as revenue generation and productivity) and timing;

- customize repeatable components from our prior solutions and develop
specialty applications to suit our client's particular needs;

- develop a deployment impact strategy that outlines key processes, tasks,
communications, coordination and logistical elements for enterprise-wide
deployment with minimal disruption to the organization;

- test all systems hardware and software components, system integration and
capacity against specifications; and

- establish communications channels to support deployment and
administration of our solutions.
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eBusiness Information Technology Infrastructure. We engineer, build and
manage the information technology infrastructure necessary for eBusiness. To
support eBusiness, an information technology infrastructure must allow data from
a variety of disparate internal and external data environments to flow
seamlessly throughout an organization, its supply chain and its customer base.
To accomplish this, we have customized what we determined to be best-in-class
third party commercial software packages to create our proprietary Energy
Network Object Model and our Asset Object Model -- the backbone of our clients'
information technology infrastructures. These components provide standard,
repeatable procedures to move interrelated but isolated data from different
databases to support common energy delivery and asset management applications
such as permitting, public records management, outage and distribution
management and mobile dispatch and field service. By providing real-time access
to the data our clients' employees need to perform their functions, these
components eliminate the need to manually coordinate interrelated functions
before performing work or delivering services, resulting in quicker customer and
constituent response times. As we build and integrate the information technology
infrastructure around our object models, we license our repeatable components to
our clients and design and write specialty applications software programs for
them. These programs are intended to enhance the capabilities of third party
commercial software and integrate this software into the network environment.

We provide comprehensive data management services at this phase of the
eBusiness transformation process. We analyze an organization's data resources to
determine whether they will be sufficient to support the organization's
eBusiness requirements. Due to similar data requirements among clients within
the same industry, if a particular client requires additional data sourcing, we
can generally license data model components we have developed from prior
projects. We also offer data migration services to integrate data into our
network environment, and perform data integrity and acceptance testing to verify
that all data performs as intended within this environment.

eBusiness Process Integration. Our goals for this phase of the eBusiness
transformation process are to customize our repeatable solutions to meet our
clients' specific needs and to focus our clients on how they can best use their
new information technology resources to provide real-time information to
internal decision makers, business partners, customers and constituents. Our
Model Office is a working, integrated model of our solution based on best
practices and processes we have developed from hundreds of prior projects.
Working with the Model Office helps initiate an interactive process with us and
allows our clients to experiment with working solutions adopted by their
industry peers. This interaction allows us to perform what we call "gap
analysis" on two distinct but related levels. At the technology and systems
architecture level, we can identify gaps between the functionality provided by
our pre-packaged solution and our clients' requirements. As we identify these
gaps, we engineer, build, test and implement the additional features, components
and functionalities we need to complete our clients' solutions. To do so, we
combine third party hardware and software with our internally developed software
applications.

At the strategic level, we help our clients to understand the wider
organizational and cultural implications of their new technology systems as
these systems simplify, automate and expand current business processes. As our
clients identify these wider implications, we use our extensive industry
expertise to help our clients redesign their business processes to adapt to an
eBusiness environment and to prepare individuals within their organization for
this transformation. Gap analysis is a dynamic process -- as we redesign a
client's information technology infrastructure, organizations need new business
processes to use this technology, and as we redesign business processes, clients
identify new technology requirements.

Deployment. Our goal for the deployment phase is to transition our solution
from testing to implementation with minimal disruption to our client's
organization. This "change over" process requires extensive component,
integration and systems testing and application development to verify that the
solution conforms to design specifications and our client's business needs. We
provide system documentation and establish communications channels to support
deployment and administration of our solutions. Our training services teach
individuals to use their new information technology resources as intended.

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Exploiting the Digital Enterprise. We develop Internet, intranet and
extranet-based applications that allow decision makers, business partners,
suppliers and customers or constituents to exploit their greater access to
enterprise-wide, real-time data, including:

- intranet-based solutions that allow our clients to develop management
decision support tools that can capture and analyze data from a broader
variety of sources within the organization;

- extranet-based solutions that provide organizations and their business
partners and suppliers with automated, secure communications and
transactions systems that can replace paper-based ordering, invoicing and
billing processes and telephone-based sales support; and

- Internet-based solutions that expedite service delivery, such as
self-application and scheduling of services, provide online customer
service, such as outage and permit approval status updates, capture user
information to evaluate cross-selling opportunities and create positive
user experiences that enhance customer satisfaction.

We have recently introduced a variety of customer relationship management
programs and applications for the digital enterprise, such as:

- Internet-based customer care and customer interaction applications that
integrate voice, text and video-based customer data to supplement
traditional customer call center resources. We intend to develop and
write the integration software needed to support these applications and
integrate them with the client's database;

- Internet, intranet and extranet-based field sales automation applications
such as customer contact management applications. These applications will
allow sales and account managers to update customer information remotely
and give them and their entire sales teams access to real-time customer
information; and

- Internet, intranet and extranet-based integrated customer and market
intelligence applications designed to enable sales and account managers
to perform target marketing, identify cross-selling opportunities and
manage customer relationships.

We also conduct digital economy workshops that allow our clients to learn
how their industry peers are utilizing their information technology resources to
improve their business processes and expand their business opportunities.

SELECTED SERVICES

To help our clients build their digital enterprises, we offer the following
services:

- Program Management. These services provide standards and parameters to
control project quality, scope, schedule and cost. As part of our program
management service, we provide a detailed, written scope of work for all
project activities which formalizes acceptance of project scope and
controls changes to project scope.

- Business Process and Workflow Redesign. Through process and workflow
redesign workshops, we identify functional workflow diagrams and
associated system requirements for optimal system performance. We also
provide change management planning and communications planning to ensure
acceptance of new process design.

- Strategic Technology Consulting. We develop a phased IT implementation
solutions plan that gives our clients a detailed roadmap for rollout of
technological components. To do so, we assess how existing technologies
support future business visions and drivers and develop a schedule for
synchronizing system software implementation with infrastructure
technology deployment.

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- Database Modeling. We design a database model to address the required
functionality for our client's systems, transform the model into a
physical representation of the data and then create and configure the
client's database according to the data model requirements.

- Solutions Testing and Quality Assurance. We develop plans for and conduct
requirements validation, design review, code review, unit testing, system
testing, integration testing, regression testing, acceptance testing and
operational testing.

- Solutions Deployment. We develop a work process cut-over plan to ease
transition to the new system. This plan includes identification of new
roles and tasks within normal workflows that support new operations
processes and a strategy for transitioning new processes around
third-party relationships. We also develop a deployment impact strategy
to outline the necessary processes, tasks, communication, coordination
and logistical elements for a successful implementation.

- Solutions Training. We develop detailed plans for custom on-site
training, role-specific training, simulated use case scenarios and
self-guided, computer-based training, all intended to help system users
understand how the new system affects and can improve their work
processes.

- Operational Support. We provide a dual support environment at the client
site and through our Denver-based help desk and develop a client support
plan and problem reporting procedures. We also provide network
performance and monitoring support.

- Applications Hosting. In collaboration with our business partners, we
offer application hosting services and comprehensive agency services,
including ISP branding.

REPEATABLE SOFTWARE COMPONENT LIBRARY

We have developed an information technology infrastructure that supports
our internal computer network, Web site, intranet and extranet. A key component
of our knowledge base is a workbench of reusable software objects, templates and
frameworks from our client engagements which continues to grow as we complete
additional projects. This knowledge base, which enables us to reuse our
accumulated experience, is a critical resource for both our software engineers
and project managers. This real-time access to information enables our software
engineers to condense the delivery time and to mitigate the potential problems
of a project by identifying those techniques, components, technologies and
methodologies that have been successfully employed in similar systems. In
addition, by providing information on project progress and client needs, the
knowledge base helps project managers prepare for client meetings and project
reviews. Access to this resource is available to all of our employees through
our corporate intranet.

Although we own the majority of the intellectual property that we develop,
some of our contracts grant to our client the rights to specific portions of the
intellectual property developed in the course of that client's project. As a
result, in order to use that intellectual property in future engagements we must
license it back from the client.

We continually evaluate new products to identify advanced technologies and
disseminate this information throughout our company. We believe that our
technology commitment allows our software engineers to employ the latest proven
software engineering tools, multi-tier systems and frameworks. By pre-screening
all of our tools and technologies, we are able to design advanced systems and
consistently deliver proven results on critical business projects. Our
technology professionals have industry leading experience in technologies
including XML, Java, C++, Internet application servers, Distributed Objects
including CORBA and DCom, and Relational and Object Database Management Systems.

CLIENTS

We target medium-sized and large organizations within the utilities and
local governments markets. For example, within the local government market, we
target cities with a population of at least 75,000 residents and counties with a
population of at least 100,000 residents. In the utility market, we

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target utilities serving between 250,000 and 2 million utility customers. As of
December 31, 1999, we had approximately 60 ongoing client engagements. In 1997,
our five largest clients accounted for approximately 54% of our revenues, with
Cinergy Corp. accounting for 15%, Alliant Energy Corp. accounting for 14% and
Tucson Electric Power accounting for 10% of our revenues. In 1998, our five
largest clients accounted for approximately 59% of our revenues, with Cinergy
accounting for 20%, Alliant accounting for 16% and Citizens Utilities Company
accounting for 11% of our revenues. In 1999, our five largest clients accounted
for approximately 49% of our revenues, with Cinergy accounting for 18% and each
of Alliant and Citizens Utilities accounting for 9% of our revenues. At the
present time, we continue to provide services to each of Cinergy, Alliant and
Citizens Utilities. Our new services contract with Cinergy runs through March
31, 2003; our current contract with Alliant runs through July 31, 2000; and our
current contract with Citizens Utilities runs through April 30, 2001.
Historically, we have derived the majority of our revenues from our utility
clients, and approximately 84% of our total revenues in 1997 and 78% of our
total revenues in each of 1998 and 1999 were derived from contracts with our
utility clients. As a company, we have completed over 270 information technology
and systems integration engagements during the last five years, each of which
generated over $100,000 dollars in revenue.

We typically enter into fixed-price arrangements with our clients and we
plan to continue to do so in the future. These arrangements are generally
comprised of two components: a fixed price component covering initial design,
installation and maintenance services and an estimated price component covering
optional services which may be purchased by the client after the initial phase
has been completed. Substantially all of our contracts with our utility and
local government clients are terminable by our clients for convenience and upon
short notice, generally 30 days or less.

In 1999, our ten largest clients in each of our utility and local
government markets, by revenue, were:

UTILITIES

Alliant Energy Corporation

Austin Energy

Central Illinois Light Company

Cinergy Corp.

Citizens Gas & Coke Utility

Citizens Utilities Company

Kentucky Utilities

Ontario Hydro

Piedmont Natural Gas Company

SIGCORP, Inc. (Southern Indiana Gas Corporation)

LOCAL GOVERNMENTS

City of Auckland (New Zealand)

City of Columbus (Ohio)

City of Indianapolis (Indiana)

City of Mesa (Arizona)

City of Portland (Oregon)

City of Tallahassee (Florida)

Denver Water Board (Colorado)

Eagle County (Colorado)

Grand Valley Metropolitan Council/REGIS
project (Michigan)

Mecklenburg County (North Carolina)

The following table sets forth information regarding the geographic source
of our revenues as a percent of total revenue for each of the last three fiscal
years:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------
GEOGRAPHIC SOURCE 1997 1998 1999
----------------- ----- ----- -----
<S> <C> <C> <C>
United States............................................... 90.0% 97.0% 92.0%
Europe...................................................... 7.0 2.0 0.4
Canada...................................................... 3.0 1.0 6.3
Other....................................................... -- -- 1.3
Total............................................. 100% 100% 100%
</TABLE>

SELECTED CLIENT CASE STUDIES

The following case studies provide examples of the services we provide to
our clients.

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Cinergy

Client: Cinergy Corp., created in 1994 through the merger of The Cincinnati
Gas & Electric Co., PSI Energy, Inc., The Union Light, Heat and Power Co. and
Lawrenceburg Gas Co., is one of the nation's largest diversified energy
companies. Its utility subsidiaries serve more than 1.4 million electric and
470,000 gas customers in Ohio, Indiana and Kentucky. Cinergy's international
business unit, Cinergy Global Resources, has assets in power generation,
transmission and distribution projects in the Czech Republic, Spain, the United
Kingdom, Zambia, Bangladesh, Estonia and the United States.

Challenge: Faced with combining the operations of the merged utility
companies and preparing for a highly competitive deregulated business
environment, Cinergy sought a business solution which would enhance customer
service, reduce operations and maintenance costs and improve the productivity
and effectiveness of its work force.

Solution: We are delivering a mission-critical application initiative
called EDSIP, an acronym for Energy Delivery Systems Integration Program for
Cinergy's United States operations. EDSIP is designed to support streamlined
post-merger work processes and integrate and consolidate more than 40 previously
disparate information systems used by Cinergy's Energy Delivery business unit.
As Cinergy developed the vision and strategic plan for EDSIP, we conducted a
needs analysis and technical gap analysis, and developed and deployed a
technology implementation plan. The EDSIP initiative includes a geographic
information system, a work management system, a resource allocation/computer
aided dispatch system, a trouble call/outage management system, an energy
delivery asset system and a distribution planning system. Beginning with a
consulting assignment in 1996, we have developed a strategic systems
implementation plan for Cinergy that has led to a multi-year, multi-million
dollar engagement.

As a result of the success of the EDSIP project, we contracted with Cinergy
to create a strategic technology deployment plan to help Cinergy compete
effectively in the Internet and deregulated utility economy. This engagement
addressed high priority initiatives designed to provide Cinergy with an
additional competitive advantage in a 6 to 18 month timeframe, enabling Cinergy
to develop scaleable eBusiness applications to respond to rapid business changes
over the next 2 to 5 years.

Cinergy has recently accepted our eBusiness strategic deployment plan
recommendations and approach for a scope of work currently estimated at $40
million over the next two years. We are now embarking on the initial phase of
the project, a $16 million, 18 month scope of work that will result in
incremental deliverables in three phases. The eBusiness project scope includes
development of a system architecture and Web-based infrastructure to support
rapid deployment of Web-based applications that include self application and
scheduling of services, account information access and update, on-line
processing of land development site plans and service scheduling, and customer
choice energy decision tools such as real-time access to energy usage, load
profile and bill estimation, and online energy purchase transactions. The
Digital Utility system architecture also supports extended customer relationship
management (CRM) functionality and Web enablement for Cinergy's call centers,
providing a blended media contact environment supporting the management and
integration of voice and Internet-based communications channels with customers.

Impact. The EDSIP project has eliminated multiple visits to job sites and
reduced service delivery times. The integrated solution has enabled
multi-tasking of the workforce and a decrease in job specialization. Information
technology support costs have been reduced through the replacement of over 30
software packages with five integrated technologies. An EDSIP business case,
which we developed jointly with Cinergy, projects substantial cost savings
through a combination of work consolidation, reduction in overtime pay and paper
processing, and improved productivity through cycle time reduction.

Alliant

Client: Alliant Energy Corporation was formed in 1997 through the merger of
IES Industries Inc., Interstate Power Co. and WPL Holdings, Inc. Through its
utility subsidiaries, Alliant provides electric, natural gas, water and steam
energy to more than one million customers in Iowa, Illinois, Minnesota and
Wisconsin. Anticipating progressive deregulation and enhanced competition,
Alliant has taken steps to
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position itself for continued growth and sustainable long-term shareholder
value, including the formation of Alliant Corporate Services, Inc., which
provides services to all the companies within the Alliant family.

Challenge: Alliant's primary business challenge was to integrate three
separate business processes into one and to position the merged enterprise to
compete in a rapidly changing deregulated business environment.

Solution: We implemented a process improvement program called Vision
IMPACT. The project involved the design and deployment of an integrated
technology architecture to support energy delivery process redesign objectives.
Vision IMPACT integrates four major new information systems that support
distribution operations: outage management, work management, mobile work force
management/dispatch and geographic information management. Vision IMPACT also
integrates these new distribution operations systems with the legacy systems of
each of the pre-merger companies, including the materials management system,
customer information system, system planning and property accounting system.

Prior to the formation of Alliant, we were consulting with IES Industries
to develop its strategic systems integration plan. During and after the project,
Alliant retained Convergent Group to develop a strategy to integrate information
technology systems from the merger partners to support combined business
processes. Our IES Vision IMPACT project was a multi-year contract for a scope
of work in excess of $15 million. Our successful partnership with IES has
resulted in additional post-merger follow-on contracts with Wisconsin Power and
Light Company and Interstate Power Co. for a scope of work in excess of $6
million.

Impact: The Vision IMPACT integrated technologies were designed to provide
Alliant staff rapid access to the data and tools they need to respond more
efficiently to emergencies, answer customers' inquiries with more accurate and
timely information, eliminate work order backlog and increase employee safety.
Benefits include the ability to make real-time customer appointment commitments
and conduct automated energy outage analysis. In addition, information via
computer-aided dispatch with in-truck mobile data terminals for rapid customer
responses is now available.

City of Indianapolis/Marion County

Client: The joint City of Indianapolis/Marion County, Indiana government,
representing a population in excess of 1.0 million, embarked on an ambitious
effort to re-engineer and fully automate their core business processes in order
to serve their constituents in both the public and private sectors.

Challenge: The City/County needed to find a system that would lead to a
Web-based solution and would enable the public, developers and contractors to
more effectively and efficiently conduct business in Indianapolis. Permit and
inspection operations are information intensive. Developers, contractors and
others submit plans and application documents that must be examined,
distributed, approved and archived by city and county staff members.
Complicating matters was the fact that information required by these
constituents was stored at multiple locations and in multiple formats. Such
processes often required months of submissions, resubmissions, rescheduled
appointments and downtime.

Solution: After conducting a review of current business processes, we
embarked on a six-year, $18 million partial outsourcing initiative designed to
bring critical city and county property data and government-provided services to
the desktops of the city's and county's employees and their local constituents
through solutions that are a piece of our "Government Gateway." In order to
provide a comprehensive solution which would enable the City/County to
streamline processes that impact the public, developers and contractors in
Indianapolis, we developed a technology infrastructure and Web-based
applications to deliver the right information to the right people at the right
time.

The integrated systems use a geographic information system (GIS) as a
central data hub. The system's data model links key operations to a specific
property, infrastructure or facility, and employees can use their desktop
computer to view accurate, updated information over the network and respond to
citizen or developer inquiries in real-time.

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Impact: Two project application examples illustrate the business value we
have delivered:

- A "snowfighter" application can track the locations of snow plows,
determine optimal snow plow routes, issue work orders, calculate the cost
to clear city streets and create up-to-the-minute maps showing which
routes have been cleared most recently. The system can also be used to
answer inquiries from the public, such as the status of snow clearing
procedures in specific neighborhoods, and the information tracked by the
system will eventually be available to the public via the Internet.

- An integrated permitting application aimed at improving customer service
in one of the city's most visible areas improves efficiency, reduces
paperwork and cuts the waiting time for customers by as much as half as a
result of the ability to file, obtain, review and approve permit
applications electronically. This project now makes it possible to
complete an entirely Web-based system.

We have also deployed tools which maintain, analyze and report critical
data required by city and county organizations and provide enhanced data access
by both the general public and business communities. The system will ultimately
make it possible to provide information access to citizens of the city and
county via personal Web access or kiosks located in public buildings. Access to
the information will be delivered through Internet connections, thereby
providing a "Government Gateway" to a vast array of city and county information
and services.

Grand Valley Metropolitan Council/REGIS Agency

Client: The Grand Valley Metropolitan Council is a forum for the local
governments of 21 towns and counties in western Michigan, representing a
population in excess of one million, to discuss and collaborate on issues of
mutual interest. In 1996 the Council formed the Regional Geographic Information
System (GIS)/Regis agency, and with the assistance of Convergent Group created a
plan to develop one of the largest regional geographic information systems in
the country.

Challenge: The primary challenges faced by the Council were to eliminate
the inefficiencies surrounding the search for government information and to
eliminate the redundant procedures used to process and record map-related data
within the 21 government organizations.

Solution: We were initially engaged to develop a prototype application
system covering a limited geographical area. This prototype would demonstrate
how this system could satisfy the integrated data management needs of a number
of government entities and personnel, including planning and development
departments, utilities (including water, sanitary sewer, storm sewer and
electric), assessors, public safety officials, parks and recreation employees,
clerks, engineers, and zoning planners.

After testing the prototype, the Council engaged us for a multi-year $7
million contract to develop the system for the entire 865-square-mile region.
When this system becomes fully operational in 2002, the network will have 15 to
20 servers and 300 to 500 workstations for accessing an integrated database of
geographic-based information. In addition, the Council has selected us to
implement a $5 million property tax administration system to reengineer the
processes by which property taxes are collected, administered and distributed
within 33 cities and townships in Kent County.

Impact: The system will enable government employees to work more
efficiently and to cooperate with each other on regional transportation and
planning projects. The system also enables standard data submission from
contractors, eliminates redundant data entry and decreases public request
response time. The system's cost-benefit estimate, developed jointly by
Convergent Group and the Council, projects substantial cost savings over the
next 15 years.

SALES AND MARKETING

We employ a team selling approach in which each member of our project team
treats each meeting with clients as an opportunity to showcase the full range of
services we offer. Project team members collaborate with business unit
professionals and management to identify prospects, conduct sales and

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manage client relationships. Our sales teams' extensive industry contacts allow
us to generate sales leads at the highest management and information technology
decision-making levels. Our industry expertise allows us to generate sole source
sales opportunities in which clients approach us to define a solution for them
rather than inviting us to submit proposals to implement solutions they
developed themselves.

We generate substantial sole source repeat business from existing clients
who want to expand on prior service offerings and projects. To help develop this
potential, we assign senior executives to support and expand client
relationships. Existing clients are also a valuable sales channel for new
business. To expand our client base and develop awareness of our Digital Utility
and Government Gateway service offerings, we participate in industry trade
shows, publish industry specific articles and books authored by our senior
executives and market information about our services directly to senior
management and information technology executives at utilities and public sector
organizations. We recently launched an industry wide marketing campaign to
promote awareness of our Digital Utility and Government Gateway solutions.

COMPETITION

Although the market for eBusiness solutions is relatively new, it is
already highly competitive, and we often compete with the in-house technical
staff of our prospective clients. In addition, the market reflects an increasing
number of entrants that have introduced or developed products and services
similar to ours. Our target markets are rapidly evolving and are subject to
continuous technological change.

We compete on the basis of a number of factors, including the following:

- vertical industry knowledge;

- integrated strategy, technology and systems architectural design
services;

- technological innovation;

- quality, pricing and speed of service delivery; and

- understanding clients' strategies and needs.

We believe that we compete favorably in each of these areas and that our
client references, in-depth industry and business domain subject matter
expertise and repeatable, industry proven solutions, supported by our Model
Office, give us a competitive advantage over our potential competitors.
Nevertheless, existing or future competitors may develop or offer strategic
Internet services that provide significant technological, creative, performance,
price or other advantages over the services offered by us. See "Risk Factors --
Competition from bigger, more established competitors who have greater financial
resources could result in price reductions, reduced profitability and loss of
market share."

Current and potential competitors include:

- Internet service firms such as AGENCY.COM, C-bridge Internet Solutions,
Inc., iXL Enterprises, Inc., Modem Media.Poppe Tyson, Proxicom, Inc.,
Razorfish, Inc., Sapient Corp., Scient Corp., MarchFirst (formerly
Whitman-Hart) and Viant Corp.;

- systems integration firms such as Andersen Consulting, Cambridge
Technology Partners, Cap Gemini, Electronic Data Systems Corporation,
Navigant Consulting, Logica, SAIC, SAP Business Partners and WM-Data;

- management consulting firms such as Arthur D. Little, Boston Consulting
Group, Inc., McKinsey & Company and the consulting arms of the Big 5
accounting firms; and

- software and hardware vendors such as Hewlett-Packard, IBM and Oracle.

PEOPLE AND CULTURE

Professional Environment. Our success depends in substantial part upon our
ability to recruit, develop and retain strong technical professionals with deep
subject matter expertise within our core
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markets. We believe that the combination of our fast-paced, entrepreneurial
corporate culture, technically challenging project work and our competitive
compensation and incentive programs will allow us to continue to attract world
class professionals.

Employee Acquisition. Our recruitment efforts are central to our ability to
provide outstanding customer service to our clients. Our recruiting initiatives
include a significant employee referral program, direct recruitment, use of
third party vendors, Internet recruitment tools and campus recruitment. We
believe the uniqueness of our technology and our depth in our industries, as
well as our dynamic corporate culture, will continue to allow us to attract high
caliber employees.

Professional Development. We believe that providing our professionals with
challenging client assignments in conjunction with our more formal learning
initiatives, together with access to developing technologies, keeps our
employees on the cutting edge of technology. Our new employee programs allow new
hires to assimilate quickly into the Convergent culture and make an immediate
impact on our clients. Each of our professionals has a formal development plan
that is reviewed annually. This plan includes both technical and management
development learning to ensure that we are developing the future management of
our company.

Culture. We have a fast paced, entrepreneurial, intellectual culture which
reflects the core values of our founders. This continues to be very attractive
to the high caliber technical talent we seek. Our incentive programs tie
directly to achievement of annual individual and team objectives as well as to
corporate financial goals.

As of March 31, 2000, we had a total of 285 employees, including 187
technical professional services personnel and 98 marketing, sales and general
administration personnel. None of our employees are represented by labor unions,
and we consider our employee relations to be good.

INTELLECTUAL PROPERTY

Our success depends upon our proprietary components, frameworks,
methodologies and other intellectual property rights. We rely upon a combination
of trade secret, nondisclosure and other contractual arrangements, and copyright
and trademark laws, to protect our proprietary rights. None of our business
processes, applications or solutions are patented. We require all personnel to
enter into confidentiality agreements. We also generally require that our
consultants and clients enter into confidentiality agreements and we limit
access to and distribution of our proprietary information. If we fail to
adequately protect our intellectual property rights and proprietary information
or if we become involved in litigation relating to our intellectual property
rights and proprietary technology, our business could be harmed. Any actions we
take may be inadequate to protect our intellectual proprietary rights and other
companies may develop technologies that are similar or superior to our
proprietary technology.

Our business generally involves the development of software applications
for specific client engagements. We also develop software application
frameworks. It is our strategy to retain significant ownership and marketing
rights to these software applications and application frameworks and to
incorporate any modifications to these frameworks into our repeatable solutions
package, which we then market and adapt through further customization for future
client projects. Although we believe that our products and services do not
infringe on the intellectual property rights of others and that we have all
rights needed to use the intellectual property employed in our business, we
could become subject to claims alleging infringement of third party intellectual
property rights in the future. Any intellectual property infringement claims
could subject us to costly litigation and may require us to pay damages and
develop non-infringing intellectual property or acquire licenses to the related
intellectual property, potentially at substantial cost.

PROPERTY/FACILITIES

We currently lease approximately 73,000 square feet of space at our
headquarters in Englewood, Colorado under a lease that expires in September,
2009. We also maintain sales offices in Boston,

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<PAGE> 58

Massachusetts; London, England and Brisbane, Australia. We believe that we will
be able to obtain additional space on an as-needed basis at commercially
reasonable rates.

LITIGATION

We are not a party to any lawsuit or proceeding that, in the opinion of our
management, is likely to harm our business.

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<PAGE> 59

MANAGEMENT

The following table sets forth our directors, executive officers, their
ages and the positions held by them with us as of December 31, 1999.

<TABLE>
<CAPTION>
NAME AGE POSITION(S)
---- --- -----------
<S> <C> <C>
Glenn E. Montgomery, Jr................... 49 Chairman, Chief Executive Officer and
President
Scott M. Schley........................... 42 Executive Vice President, Finance,
Treasurer and Director
John A. Ramseur........................... 60 Executive Vice President
Larry J. Engelken......................... 50 Executive Vice President, Global Sales and
Secretary
Mark Shirman.............................. 42 Executive Vice President, Corporate
Development
Bryan R. Mileger.......................... 40 Chief Financial Officer
Andrea S. Maizes.......................... 39 Executive Vice President, Resource
Management
David Rubinstein.......................... 40 Executive Vice President, Global Delivery
Robert Sharpe............................. 56 Director
Jerry Murdock............................. 41 Director
John W. Blend III......................... 54 Director
</TABLE>

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

GLENN E. MONTGOMERY, JR., a founding partner of Convergent Group, has been
the Chairman of our Board of Directors and our President and Chief Executive
Officer since 1994. He had been President and Chief Executive Officer of
Convergent Group's predecessor, UGC Consulting, since 1985. Prior to joining UGC
Consulting, he served from 1982 to 1985 as an executive consultant with Kellogg
Corporation, an engineering management consulting firm. From 1977 to 1982, Mr.
Montgomery served as a projects director with MSE Corporation, a consulting and
engineering company, providing consulting, project planning, and management
expertise to GIS and land-related information system projects. Mr. Montgomery
holds both an M.S.E.S. degree in technology assessment from the School of
Environmental Affairs and a B.A. in computer mapping and geography from Indiana
University.

SCOTT M. SCHLEY has been Executive Vice President of Finance of Convergent
Group since February 2000, Treasurer since 1994 and a director since August
1999. From 1994 to February 2000, Mr. Schley also served as Chief Financial
Officer of Convergent Group. Prior to joining Convergent Group, he served as
Chief Financial Officer and Executive Vice President of Operations for the John
Madden Company, a commercial real estate developer, which he joined after
spending five years with a national public accounting firm. He holds a B.S. in
business administration and accounting from Colorado State University.

JOHN A. RAMSEUR has been Executive Vice President of Convergent Group since
1998, and is responsible for the development and implementation of corporate
growth, expansion and marketing strategies. Mr. Ramseur joined Convergent Group
in 1989 to lead a long-term consulting assignment for IBM. He left in 1993 to
become President of Smallworld, North America, a software company, and after
their initial public offering in 1997 he returned to Convergent Group. He served
as Chief Marketing Officer of Synercom Technology, a software company, from 1983
until their initial public offering in 1986. Prior to joining Synercom, Mr.
Ramseur was President of Utility Data Corporation, a data services company.

LARRY J. ENGELKEN, a founding partner of Convergent Group, has been our
Executive Vice President of Global Sales since 1997, and is responsible for
executive leadership of our sales, account development and account management
activities. Prior to founding Convergent Group in 1985, Mr. Engelken worked at
two global engineering design and construction services firms, as well as being
a Director and Executive Vice President of EGT, Inc., a data conversion services
and GIS application software company. He is past

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<PAGE> 60

president of the Geospatial Information & Technology Association (GITA). Mr.
Engelken holds a B.S. degree in electrical engineering from Kansas State
University.

MARK SHIRMAN joined Convergent Group in October 1999 and serves as
Executive Vice President of Corporate Development. Prior to joining Convergent
Group, he was responsible for the Customer Relationship Management and
Interactive Web Services Solutions practices of Cambridge Technology Partners.
Before joining Cambridge Technology Partners in 1997, Mr. Shirman served as Vice
President of BSG, a global systems integration company, where he managed product
development and marketing. Prior to joining BSG in 1995, Mr. Shirman founded
Innovative Information Systems, Inc., a client/server integrator specializing in
application development, network systems and mainframe alternatives, and served
as its Chief Executive Officer. Previously, Mr. Shirman was with Andersen
Consulting, where he served as a consultant. Mr. Shirman holds an M.B.A. in
finance from American University and a B.A. in economics from Brandeis
University.

BRYAN R. MILEGER joined Convergent Group in January 2000 and has been our
Chief Financial Officer since February 2000. Prior to joining Convergent Group,
he served as Director of Corporate Acquisitions and Alliances with Electronic
Data Systems Corporation. Mr. Mileger has worked in various capacities with
Electronic Data Systems during the past fifteen years, including in its Treasury
Department. Mr. Mileger holds an M.B.A. from Baylor University and a B.B.A. in
accounting from Abilene Christian University.

ANDREA S. MAIZES joined Convergent Group in November 1999 as our Executive
Vice President of Resource Management. Prior to joining Convergent Group, Ms.
Maizes held several executive positions at Cambridge Technology Partners,
including Director of Human Resources for the Customer Relationship Management
and Interactive Solutions practices and National Director of North American
Recruitment. Before joining Cambridge Technology Partners in 1995, Ms. Maizes
served during 1994 as Director of Human Resources for the northeast management
consulting practice of Ernst & Young. Prior to joining Ernst & Young, Ms. Maizes
served from 1989 to 1993 as Director of Human Resources for the metropolitan New
York tax practice of Arthur Anderson, LLP and from 1985 to 1989 as Director of
Human Resources at the financial services center of Deloitte & Touche. Ms.
Maizes holds a B.A. in Psychology from Clark University.

DAVID RUBINSTEIN joined Convergent Group in December 1999 as our Executive
Vice President of Global Delivery. Prior to joining Convergent Group, Mr.
Rubinstein served as the Vice President of Customer Management Systems at
Cambridge Technology Partners. Prior to joining Cambridge Technology Partners in
1997, Mr. Rubenstein was a Managing Director of BSG Alliance/IT, an information
technology consulting company. Mr. Rubenstein was also a co-founder of
Innovative Systems, Inc., a client/server integration company. Mr. Rubenstein
holds a B.S. in Management and Computer Science from Worcester Polytechnic
Institute.

ROBERT SHARPE has been a director of Convergent Group since May 1998. In
1999, he retired from Electronic Data Systems Corporation, where he served in
various capacities from 1972 until his retirement, most recently as Corporate
Vice President responsible for EDS' corporate global pursuit team. Prior to his
position with the global pursuit team, Mr. Sharpe was in charge of North
American and international business development for EDS. Mr. Sharpe was named
Corporate Vice President in 1982, and during his tenure with EDS he also managed
the Industrial Division, Finance and Industrial Group, General Motors Operations
Group and Financial and Commercial Group. Mr. Sharpe has a B.S. in marketing and
management from the University of Illinois.

JERRY MURDOCK has been a director of Convergent Group since August, 1999.
He co-founded InSight Capital Partners in 1995 and is a general partner of the
firm. Mr. Murdock was formerly the managing general partner of the Aspen
Technology Group, a consulting firm which he founded in 1987. He was a
consultant to E.M. Warburg Pincus from 1989 to 1995. Mr. Murdock is a director
of Quest Software, Click Commerce, Software Technology Corporation,
WarrantyCheck.com, Ikano, Peace Computers and Planiesia. He graduated from San
Diego State University with a B.A. in political science.

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<PAGE> 61

JOHN W. BLEND III has been a director of Convergent Group since August
1999. He currently consults with InSight Capital Partners and serves on the
boards of directors of a number of utility related technology companies. From
1985 to 1997, Mr. Blend served as President of Worldwide Sales and Marketing and
Director for Indus International, an enterprise asset management solutions
company. Mr. Blend has a B.A. in social sciences from Muhlenberg College.

Officers of Convergent Group serve at the discretion of the board of
directors and hold office until their successors are duly elected and qualified
or until their earlier resignation or removal. There are no family relationships
among any of our directors or executive officers.

DIRECTORS' TERMS

Upon completion of this offering, our board of directors will be divided
into three classes that serve staggered three-year terms, as follows:

<TABLE>
<CAPTION>
CLASS EXPIRATION BOARD MEMBER
----- ---------- ------------
<S> <C> <C>
Class I...................................... 2001 Scott M. Schley
Class II..................................... 2002 John Blend III, Robert Sharpe
Class III.................................... 2003 Glenn E. Montgomery, Jr.,
Jerry Murdock
</TABLE>

As a result, approximately one-third of our board of directors will be
elected each year. Each director will hold office until the appropriate annual
meeting of stockholders, as determined by the year of the director's election to
the board of directors, and until his or her successor has been duly elected and
qualified.

Pursuant to our Stockholders' Agreement, dated as of August 13, 1999, our
board of directors consists of five directors, two of whom, Messrs. Montgomery
and Schley, were designated and approved by a majority of the holders of our
common stock ("Company Shareholder Directors"); two of whom, Messrs. Murdock and
Blend, were designated and approved by 75% of the investors in our 1999
recapitalization ("Investor Directors"); and one of whom, Mr. Sharpe, was
designated and approved by the Company Shareholder Directors and the Investor
Directors. The Stockholders' Agreement will terminate upon the consummation of
this offering.

COMMITTEES OF THE BOARD OF DIRECTORS

The board of directors has a compensation committee and an audit committee.
The compensation committee evaluates our compensation policies, determines
compensation for our executive officers and administers our stock option plans.
The members of the compensation committee are Glenn E. Montgomery, Jr., Robert
Sharpe and Jerry Murdock. The audit committee provides assistance to the board
in fulfilling its legal and fiduciary obligations in matters involving our
accounting, auditing, financial reporting, internal control and legal compliance
functions. The audit committee overseas the audit efforts of our independent
accountants, and takes those actions it may deem necessary to satisfy itself
that the auditors are independent of management. Prior to this offering, the
audit committee consisted of John Blend III, Robert Sharpe and Scott M. Schley.
Effective upon consummation of this offering, the audit committee will consist
of Messrs. Blend and Sharpe and a new director to be named within 90 days of
this offering who will qualify as an independent director under the Nasdaq
rules.

DIRECTOR COMPENSATION AND OTHER ARRANGEMENTS

Directors do not receive any cash compensation for serving as directors. We
pay all reasonable expenses incurred by our directors, including legal and
travel expenses, in connection with the performance of their duties as members
of our board of directors, including expenses incurred as a result of attending
meetings of the board of directors and of any committees thereof. However, in
its discretion, the board of directors in the future may determine to pay
directors a fixed fee for serving as a director and/or a fixed

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<PAGE> 62

fee for attendance at each meeting of the board of directors or a committee of
the board. Directors are also eligible to participate in our stock option plan.

Cinergy Communications, Inc., under its agreement with us, has the right to
designate an observer to our board of directors. See "Concurrent Private
Placement."

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

Prior to our recapitalization in August 1999, the compensation committee
consisted of Mr. Montgomery and a former shareholder of our company. Since the
recapitalization, the compensation committee has been comprised of Messrs.
Montgomery, Murdock and Sharpe, and has been responsible for executive
compensation decisions. Mr. Montgomery is the President and Chief Executive
Officer of our Company, and Mr. Murdock is a general partner of InSight Capital
Partners III, L.P. which, together with its affiliates, is our largest single
stockholder. No executive officer of the Company has served as a director or
member of the compensation committee of any other entity whose executive
officers served as a director or member of our compensation committee.

EXECUTIVE COMPENSATION

The following table sets forth, in accordance with the rules of the
Securities and Exchange Commission, information for the fiscal year ended
December 31, 1999 concerning compensation paid to our Chief Executive Officer
and our four other most highly compensated executive officers whose salary and
bonus exceeded $100,000 in 1999.

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
AWARDS
1999 COMPENSATION --------------
------------------------------------- SECURITIES
OTHER ANNUAL UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION SALARY BONUS COMPENSATION(1) OPTIONS/SAR(#) COMPENSATION
--------------------------- -------- -------- --------------- -------------- ------------
<S> <C> <C> <C> <C> <C>
Glenn E. Montgomery, Jr...... $256,580 $416,496 $3,831,391(2) 755,419(7) $1,305,383(3)(4)
Chairman, Chief Executive
Officer and President
Larry J. Engelken............ 256,580 422,821 3,831,391(2) -- 813,383(3)
Executive Vice President,
Global Sales
Mark L. Epstein.............. 256,580 422,821 3,831,391(2) -- 813,383(3)
Executive Vice President
Scott M. Schley.............. 154,250 62,400 1,116,847(2) -- 246,000(4)
Executive Vice President,
Finance and Treasurer(5)
John A. Ramseur.............. 126,280 50,000 76,471(6) 336,142(7) --
Executive Vice President,
Corporate Development
</TABLE>

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

(1) The value of perquisites and other personal benefits is not included in the
amounts disclosed because it did not exceed for any officer in the table
above the lesser of either $50,000 or 10% of the total annual salary and
bonus reported for the officer.

(2) Reflects the value of common stock granted to the named executive officer in
connection with the recapitalization.

(3) Reflects $813,383 for termination of the named officer's employment
agreement at time of recapitalization.

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<PAGE> 63

(4) Reflects $492,000 in the case of Mr. Montgomery and $246,000 in the case of
Mr. Schley and represents a finance fee paid in connection with the
recapitalization.

(5) Mr. Schley also served as Chief Financial Officer during 1999.

(6) Reflects the value of common stock granted to Mr. Ramseur prior to the
recapitalization and the value of common stock granted to Mr. Ramseur in
connection with the recapitalization.

(7) Mr. Ramseur's options were granted prior to the recapitalization and
exercised in connection with the recapitalization. Mr. Montgomery's options
were granted subsequent to the recapitalization.

OPTION GRANTS DURING THE YEAR ENDED DECEMBER 31, 1999

The following tables set forth information concerning grants to purchase
shares of our common stock to each of the officers named in the summary
compensation table above during the year ended December 31, 1999.

<TABLE>
<CAPTION>
POTENTIAL
REALIZABLE VALUE
AT ASSUMED
ANNUAL RATES OF
NUMBER OF PERCENTAGE OF STOCK PRICE
SECURITIES TOTAL OPTIONS APPRECIATION FOR
UNDERLYING GRANTED TO EXERCISE OPTION TERM(3)
OPTIONS EMPLOYEES IN PRICE PER EXPIRATION ----------------
NAME GRANTED 1999 SHARE DATE 5% 10%
---- ---------- ------------- --------- ---------- ------ ------
<S> <C> <C> <C> <C> <C> <C>
Glenn E. Montgomery, Jr. ................ 755,419(1) 16.8 0.092 12/30/09 -- --
Larry J. Engelken........................ -- -- -- -- -- --
Mark L. Epstein.......................... -- -- -- -- -- --
Scott M. Schley.......................... -- -- -- -- -- --
John A. Ramseur(2)....................... 304,403 7.5 0.026 1/19/09 -- --
31,739 8/6/09
</TABLE>

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

(1) All options were immediately vested. Mr. Montgomery exercised these options
in January 2000.

(2) All options which were granted prior to the recapitalization were exercised
in connection with the recapitalization. Mr. Ramseur sold 50% of the shares
he received on exercise in the recapitalization.

(3) These amounts represent hypothetical gains that could be achieved if the
respective options are exercised at the end of the option term. These gains
are based on assumed rates of stock price appreciation of 5% and 10%
compounded annually from the date the respective options were granted to
their expiration dates, based upon an assumed initial public offering price
of $9.00 per share. These assumptions are not intended to forecast future
appreciation of our stock price. Actual gains, if any, on stock option
exercises are dependent on the future performance of our common stock and
overall market conditions. The potential realizable value computation does
not take into account federal or state income tax consequences of option
exercises or sales of appreciated stock.

OPTION VALUES AS OF DECEMBER 31, 1999

The following table sets forth information concerning option exercises by
each of the officers named in the above summary compensation table.

<TABLE>
<CAPTION>
NUMBER OF VALUE OF UNEXERCISED
SECURITIES UNDERLYING IN-THE-MONEY
UNEXERCISED OPTIONS AT OPTIONS AT FISCAL
SHARES FISCAL YEAR-END YEAR-END(2)
ACQUIRED ON VALUE ---------------------------- ---------------------------
NAME EXERCISE(#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ----------- ------------ ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Glenn E. Montgomery,
Jr. .................. -- -- 755,419(1) -- -- --
Larry J. Engelken....... -- -- -- -- -- --
Mark L. Epstein......... -- -- -- -- -- --
Scott M. Schley......... -- -- -- -- -- --
John A. Ramseur......... 336,142(3) $76,471 -- -- -- --
</TABLE>

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

(1) Mr. Montgomery exercised these options in January 2000.

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<PAGE> 64

(2) Based on an assumed initial public offering price of $9.00 per share, less
the exercise price, multiplied by the number of shares underlying the
option.

(3) Options were exercised in January and August.

STOCK OPTION PLANS

The board of directors adopted, and our stockholders approved, our 1999
stock option plan. The plan provides for the grant of (i) options that qualify
as incentive stock options within the meaning of Section 422(a) of the Internal
Revenue Code of 1986, as amended, to specific employees and (ii) nonqualified
stock options to specific employees (including directors and officers who are
our employees), directors and consultants. The total number of shares of Common
Stock for which options may be granted under the stock option plan is 7,115,576
shares. As of March 31, 2000, options to purchase 3,255,053 shares were
outstanding and 1,696,592 shares had been issued upon exercise of options issued
under the plan. The stock option plan is administered by our compensation
committee, which determines to whom options are granted, the exercise prices,
number and other terms and conditions of exercise. The exercise price of
incentive stock options granted under the plan must be at least equal to the
fair market value of the shares on the date of grant, except that the exercise
price of any incentive stock option granted to any participant who owns stock
possessing more than 10% of the total combined voting power of our outstanding
capital stock must be at least equal to 110% of the fair market value of the
shares on the date of grant. The term of each incentive stock option granted
pursuant to the plan cannot exceed ten years, except that the term of any
incentive stock option granted to a participant who owns stock possessing more
than 10% of the total combined voting power of our outstanding capital stock or
any option granted to a non-employee director cannot exceed five years. The
exercise price of nonqualified stock options granted under the plan must not be
less than the par value of the shares subject to the option. No option granted
under the plan is transferable by the optionee other than by will or the laws of
descent and distribution and each option is exercisable during the lifetime of
the optionee only by the optionee. Options under the plan must either be
exercised during the term of the participant's employment with us, or during the
three-month period after the participant's date of termination if the
termination is other than for cause, unless the compensation committee extends
this period. All vesting of options ceases upon termination of employment, and
options are exercisable by a terminated employee only to the extent the options
were exercisable on the date of termination.

401(K) PLAN

Our 401(k) Plan is a defined contribution plan covering all full time
employees age 21 or older, and the plan is subject to the provisions of the
Employee Retirement Income Security Act of 1974. Each year participants may
contribute up to 15% of their pretax annual compensation, up to a maximum of
$10,500. We match employee contributions dollar for dollar on the first 4% of
each employee's contribution and $0.50 on each dollar of the next 2%
contributed. Additional special amounts based on a percentage of compensation
and other discretionary amounts may be contributed at the option of our board of
directors. Contributions are subject to limitations specified by federal law.

The amounts of our contributions over the past five years are as follows:

<TABLE>
<CAPTION>
YEAR AMOUNT
---- --------
<S> <C>
1995..................................................... $232,000
1996..................................................... $198,000
1997..................................................... $397,000
1998..................................................... $656,000
1999..................................................... $878,000
</TABLE>

EMPLOYMENT AGREEMENTS

Mr. Montgomery is employed under an Employment Agreement that expires on
December 31, 2002, pursuant to which he was entitled to receive $200,000 in base
salary on an annual basis commencing

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<PAGE> 65

August 15, 1999. Mr. Montgomery's base salary for 2000 is $225,000, with an
annual increase of $25,000 each year thereafter. Mr. Montgomery received a
performance bonus under his current employment agreement for the period
commencing August 15, 1999 through December 31, 1999 equal to $35,375. He is
eligible to receive a maximum annual performance bonus of up to $750,000 in
2000, $800,000 in 2001 and $825,000 in 2002, contingent upon our ability to
exceed specific revenue, bookings and EBITDA targets established by our board of
directors. The bonus amount is contingent upon the extent to which we meet or
exceed the financial targets, and in order for Mr. Montgomery to receive the
maximum bonus amounts, we must exceed the financial targets by 30%. Up to
$333,333 of Mr. Montgomery's annual bonus for these years is payable in the form
of immediately exercisable stock options, with an exercise price equal to 25% of
the fair market value of our common stock as of December 31 of that year. The
remainder of Mr. Montgomery's bonus is payable in cash. If Mr. Montgomery
terminates his employment with good reason, or if we terminate his employment
after a change of control, we will be required to purchase all shares of our
common stock owned by Mr. Montgomery at the time of his termination at their
then fair market value.

Mr. Engelken and Mr. Epstein are each employed under an Employment
Agreement that expires on December 31, 2002, pursuant to which each was entitled
to receive $200,000 in base salary on an annual basis commencing August 15,
1999. Each executive's base salary in 2000 is $210,000, and will increase 5% per
year over the previous year's salary each year thereafter. Each executive is
also eligible to receive an incentive bonus, the amount of which is targeted at
50% of each executive's base salary. Two-thirds of the incentive bonus is based
upon our attainment of targeted revenue goals, and one-third of the incentive
bonus is based upon our attainment of targeted margin goals. We must achieve
more than 90% of the targeted revenues or targeted margins, whichever is being
tested during the period in question, for a bonus to be paid with respect to
that component. To the extent either bonus amount exceeds 100% of that
component's target, one-third of the excess will be payable in cash, and
two-thirds will be payable by the issuance of Nonqualified Stock Options at a
per share exercise price equal to 25% of the fair market value of our common
stock as of December 31 of that year. Messrs. Engelken and Epstein each received
a bonus under their current employment agreements for the period commencing
August 15, 1999 through December 31, 1999 of $41,700.

Mr. Schley is employed under an Employment Agreement that expires on
December 31, 2000, pursuant to which he was entitled to receive $168,000 in base
salary on an annual basis commencing August 15, 1999. Mr. Schley received
$63,000 in 1999 under this agreement. Mr. Schley's base salary in 2000 is
$176,400, and will increase 5% per year over the previous year's salary each
year thereafter. Mr. Schley is eligible to receive an incentive bonus targeted
at 50% of his base salary. Two-thirds of the incentive bonus is based upon our
attainment of targeted EBITDA goals and one-third of the incentive bonus is
based upon our attainment of targeted margin goals. We must achieve more than
90% of the targeted revenues or targeted margins, whichever is being tested
during the period in question, for a bonus to be paid with respect to that
component. To the extent either bonus amount exceeds 100% of that component's
target, one-third of the excess will be payable in cash and two-thirds will be
payable by the issuance of Nonqualified Stock Options, at a per share exercise
price equal to 25% of the fair market value of our common stock as of December
31 of that year. Mr. Schley received a bonus for 1999 under his current
employment agreement of $62,400.

Mr. Mileger is employed under an Employment Agreement that expires on
January 31, 2003, pursuant to which he is entitled to receive $150,000 in base
salary in 2000. Mr. Mileger's salary will increase to $162,500 upon the date of
his relocation to Denver, Colorado. In addition, Mr. Mileger received a $100,000
advance against his incentive bonus earned for 2000. The amount of the advance
will be offset against the amount of his incentive bonus, if any, earned in
2000. The advance is payable in eleven monthly installments, provided Mr.
Mileger remains employed by us during that period. Mr. Mileger is eligible to
receive an incentive bonus targeted at 100% of his base salary. Payment of the
bonus is dependent upon the attainment of specific performance goals established
by Mr. Mileger and us. We must achieve 90% of these performance goals, and Mr.
Mileger must remain employed by us as of the last day of the year, in order for
Mr. Mileger to be eligible to receive the bonus payment.

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Mr. Shirman is employed under an Employment Agreement that expires on
December 31, 2002, pursuant to which he currently receives an annual base salary
of $200,000. In addition to his base salary, Mr. Shirman received a $180,000
signing bonus, payable in equal monthly installments over the first 12 months of
his employment, provided Mr. Shirman remains employed by us during that period.
Mr. Shirman is also entitled to receive a cost of living adjustment. Commencing
October 1, 2000, Mr. Shirman will be eligible to receive an incentive bonus
based upon our attainment of specific performance goals established by Mr.
Shirman and us. Mr. Shirman was also granted options to purchase 394,708 shares
of our common stock at a per share exercise price of $0.092, of which 113,313
options were immediately exercisable. Mr. Shirman's unvested options will vest
based on his continued employment with us and our achievement of specific
performance goals.

CERTAIN TRANSACTIONS

1999 RECAPITALIZATION

On August 13, 1999 we consummated a recapitalization pursuant to an
agreement among us, some of our then existing stockholders and investors led by
InSight Capital Partners III, L.P. and including UBS Capital II LLC and
affiliates of Goldman, Sachs & Co. In connection with the recapitalization, the
investors acquired an approximately 63% controlling interest in us through the
purchase of shares of a new series of our voting convertible participating
preferred stock for a total purchase price of approximately $45.5 million. As
part of the recapitalization:

- we entered into a $25.0 million revolving line of credit with Fleet
National Bank, of which $22.0 million was borrowed in order to finance
the recapitalization;

- all shares of our then outstanding preferred stock and all shares of
common stock owned by our two largest non-employee stockholders were
purchased for a total purchase price of approximately $44.3 million;

- our employee stockholders, including the persons named in the summary
compensation table, received cash payments totaling $11.8 million in
respect of the purchase of a portion of their equity interest in us;

- we made cash payments totaling approximately $5.4 million to members of
our senior management, including some of the persons named in the summary
compensation table, in connection with the termination of their former
employment agreements, as fees in connection with the recapitalization
and to satisfy previously deferred bonus obligations to them;

- we issued 10,516,424 shares of our common stock and options to purchase
694,506 shares of our common stock, at an exercise price of $0.092 per
share, to specific employees, including the persons named in the summary
compensation table, in consideration for their continued employment with
us; and

- we loaned $2.0 million to our Chief Executive Officer.

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<PAGE> 67

The following table sets forth the sources and uses of funds for the
Recapitalization.

SOURCES AND USES
(in thousands)

<TABLE>
<S> <C>
SOURCES:
Investor proceeds......................................... $45,546
Line of credit borrowings................................. 22,000
-------
Total sources..................................... $67,546
=======
USES:
Retirement of preferred shareholder and two largest
non-employee common shareholders....................... $44,265
Buyout of employment agreements........................... 2,440
Legal and other finance fees.............................. 1,356
Fees paid to employees.................................... 738
Payment of previously deferred bonuses.................... 2,236
Payments to employee stockholders......................... 11,766
Loan to Chief Executive Officer........................... 2,000
-------
Total uses........................................ $64,801
=======
Net proceeds...................................... $ 2,745
=======
</TABLE>

Under the recapitalization agreement, we agreed to indemnify the investors,
in the form of cash, additional shares of our stock, or a combination of both,
for breaches of representations, warranties and covenants we made to them in
connection with their purchase of our capital stock, including representations
and warranties regarding our financial condition, our liabilities and our client
contracts, up to a maximum of $1.5 million in cash and $3.0 million in Series A
Preferred stock, valued at $1.08 per share. Most of the representations and
warranties under the recapitalization agreement survive until the first
anniversary of the recapitalization. The obligation to indemnify the investors
against environmental claims remains in effect until the seventh anniversary of
the closing of the recapitalization; the obligations to indemnify the investors
against tax-related and ERISA claims remain in effect until the expiration of
all applicable statutes of limitation; and the obligation to indemnify the
investors against claims made in connection with representations and warranties
relating to specific fundamental corporate matters, such as our organization,
our subsidiaries, our outstanding stock and specific corporate approvals,
remains in effect indefinitely. Also in connection with the recapitalization,
our continuing stockholders agreed to elect two designees of the investors,
currently Mr. John Blend III and Mr. Jerry Murdock, to serve on our board of
directors. This obligation to elect the designees of the investors will
terminate upon the closing of this offering.

INSIGHT CAPITAL PARTNERS TRANSACTION FEE

We agreed to pay InSight Capital Partners a one-time fee equal to one
percent (1%) of our market capitalization in our initial public offering, which
is payable in full upon the consummation of the public offering. Based on the
number of shares of common stock expected to be outstanding upon consummation of
this offering and assuming an initial public offering price of $9.00 per share,
the fee payable to InSight Capital Partners will be approximately $4.0 million.

In addition, we agreed to pay InSight Capital Partners a management fee
equal to $500,000 per year for management and strategic advice rendered by
InSight Capital Partners throughout the year. During 1999, we paid InSight
$187,500 for their management and strategic advice. We will be obligated to pay
a pro-rata portion of the fee during 2000 until the consummation of this
offering, at which time our obligation to pay the fee will terminate.

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<PAGE> 68

LOAN TO GLENN E. MONTGOMERY, JR.

On August 13, 1999, we extended a $2,000,000 loan to Glenn E. Montgomery,
Jr., evidenced by a promissory note. The interest rate on the loan is 5.9% per
annum, and Mr. Montgomery is required to make payments of principal and interest
to us in four equal installments of $652,685.27 on or before each of July 1,
2003, January 1, 2004, July 1, 2004 and August 13, 2004. Mr. Montgomery may
prepay the outstanding principal and accrued interest on the loan at any time
without penalty. If we experience a major capital event, including an initial
public offering, the entire unpaid principal amount and all accrued interest
under the loan shall immediately become due and payable. Mr. Montgomery will
repay this loan in connection with the consummation of the offering.

The loan to Mr. Montgomery is non-recourse. To secure the loan, Mr.
Montgomery executed a Stock Pledge Agreement whereby he pledged to us all shares
of our common stock then owned by him. In addition, Mr. Montgomery's obligations
under the promissory note were initially guaranteed on a non-recourse basis by
GMJM Stock Partnership, Ltd. GMJM's obligations under the guaranty are secured
by a pledge to us of all shares of our common stock owned by GMJM. The GMJM
guaranty and pledge were released in January 2000 in connection with the sale of
the shares owned by GMJM. In connection with the release of the GMJM guaranty
and pledge, Mr. Montgomery pledged additional shares of our common stock that he
acquired subsequent to the date of his original pledge.

1999/2000 ISSUANCE OF RESTRICTED STOCK TO CERTAIN DIRECTORS

On October 29, 1999 we issued 377,710 shares of common stock to each of
Robert Sharpe and John Blend III, members of our board of directors. The shares
vest at the rate of 47,213.5 shares per calendar quarter, effective on the last
day of each quarter, commencing September 30, 1999. If either director's service
as a member of our board is terminated, either for cause or voluntarily by the
director, all unvested shares are immediately forfeited back to us. In the event
of a termination of either director's service on the board for any other reason,
all unvested shares will immediately vest.

STOCK SALE BY GLENN E. MONTGOMERY, JR.

Between January 15, 2000 and February 14, 2000, Glenn E. Montgomery, Jr.
sold 755,420 shares of preferred and common stock to three separate investor
groups. Total aggregate consideration for the transactions amounted to $6.0
million, or approximately $8.00 per share.

TERMINATION OF CONSULTING AGREEMENT

On November 19, 1999, the Company acquired 100% of the outstanding common
stock of an entity wholly owned by a former individual shareholder of the
Company for the sole purpose of terminating an existing consulting agreement
with the individual shareholder. Among other things, the consulting agreement,
which had a remaining term of approximately five years, obligated us to pay a
minimum monthly consulting fee of $14,000, quarterly incentive payments of
$25,000 and a finance fee equal to 8% of the gross proceeds received by us from
a major capital event, less all fees, discounts and commissions paid to any
investment bankers, underwriters, brokers and/or dealers associated with the
transaction, but with the fee equal to at least 2% of the gross proceeds. The
outstanding capital stock was acquired by us for $3,920,000 in cash and was
expensed during 1999.

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<PAGE> 69

PRINCIPAL AND SELLING STOCKHOLDERS

The following table provides specific information regarding the beneficial
ownership of our common stock as of March 31, 2000 and as adjusted to reflect
the exercise of stock options through June 15, 2000, the June 2000 sale of
common stock to Cinergy Communications, Inc., the sale of the shares of our
common stock offered by us in this offering and the concurrent private placement
for:

- each person or entity known by us to beneficially own 5% or more of our
common stock;

- each of our directors;

- each executive officer named in the summary compensation table;

- all executive officers and directors as a group; and

- each selling stockholder.

Unless otherwise indicated, the address of each person named in the table
below is c/o Convergent Group Corporation, 6399 South Fiddler's Green Circle,
Suite 600, Englewood, Colorado 80111. The amounts and percentages of common
stock beneficially owned are reported on the basis of regulations of the
Securities and Exchange Commission governing the determination of beneficial
ownership of securities. Under the rules of the Commission, a person is deemed
to be a "beneficial owner" of a security if that person has or shares "voting
power," which includes the power to vote or to direct the voting of the
security, or "investment power," which includes the power to dispose of or to
direct the disposition of the security. A person is also deemed to be a
beneficial owner of any securities of which that person has a right to acquire
beneficial ownership within 60 days. Under these rules, more than one person may
be deemed a beneficial owner of the same securities and a person may be deemed
to be a beneficial owner of securities as to which that person has no economic
interest. The information set forth in the following table is based on the
number of shares of Common Stock outstanding as of March 31, 2000, assuming the
conversion of all shares of our preferred stock into common stock upon
completion of this offering. Except as set forth in Note 11 below, the table
assumes that the underwriters' over-allotment option has not been exercised and
excludes any shares purchased in this offering by the respective beneficial
owner. Beneficial ownership after this offering is based on 44,464,957 shares to
be outstanding, including the issuance of 981,801 additional shares of common
stock to Cinergy Communications in the concurrent private placement, which will
result in Cinergy Communications owning 4.99% of our common stock to be
outstanding after the offering.

<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP BEFORE OFFERING
-----------------------------------------------------
COMMON STOCK BENEFICIAL
UNDERLYING OWNERSHIP
OPTIONS AFTER OFFERING
COMMON STOCK EXERCISABLE --------------
NAME OF BENEFICIAL OWNER OUTSTANDING(1) WITHIN 60 DAYS TOTAL PERCENT PERCENT
------------------------ -------------- -------------- ---------- ------- --------------
<S> <C> <C> <C> <C> <C>
Entities affiliated with Insight Capital Partners(2)..... 7,960,053 -- 7,960,053 22.0% 17.9%
UBS Capital II LLC(3).................................... 7,960,038 -- 7,960,038 22.0% 17.9%
Entities affiliated with GS Private Equity Partners(4)... 2,304,188 -- 2,304,188 6.4% 5.2%
Entities associated with Wexford Management LLC(5)....... 2,304,220 -- 2,304,220 6.4% 5.2%
Glenn E. Montgomery, Jr.................................. 3,275,093 -- 3,275,093 9.1% 7.4%(11)
Scott M. Schley.......................................... 847,427 -- 847,427 2.3% 1.9%
Mark L. Epstein(6)....................................... 3,275,093 -- 3,275,093 9.1% 7.4%
Larry J. Engelken(7)..................................... 2,766,081 -- 2,766,081 7.7% 6.2%
John A. Ramseur.......................................... 388,017 -- 388,017 1.1% 0.9%
Robert Sharpe(8)......................................... 784,382 -- 784,382 2.2% 1.8%(11)
John Blend III(9)........................................ 8,337,763 -- 8,337,763 23.1% 18.8%
Jerry Murdock(9)......................................... 7,960,053 -- 7,960,053 22.0% 17.9%
All executive officers and directors as a group (11
persons)(10)........................................... 16,908,808 669,357 17,578,165 48.6% 39.5%(11)
</TABLE>

65
<PAGE> 70

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

(1) Assuming the conversion of all outstanding shares of Series A Preferred
Stock into Common Stock, on a fully diluted basis.

(2) Consists of 5,696,190 shares held by Insight Capital Partners III, L.P.,
1,411,047 shares held by Insight Capital Partners III (Cayman), L.P., and
852,816 shares held by Insight Capital Partners III (Co-Investors), L.P.
The general partner of each of these entities is InSight Venture Associates
III, LLC. The managing members of InSight Venture Associates III, LLC are
Jeff Horing and Jerry Murdock. Each of InSight Venture Associates III, LLC
and Messrs. Horing and Murdock may be deemed the beneficial owners of the
shares of our common stock owned by each of these entities. The address of
Insight Capital Partners III, L.P. and Insight Capital Partners
(Co-Investors), L.P. is 527 Madison Avenue, 10th Floor, New York, New York
10022. The address of Insight Capital Partners (Cayman) III, L.P. is c/o
W.S. Walker & Company, Walker House, P.O. Box 265GT, Mary Street,
Georgetown, Grand Cayman, Cayman Islands.

(3) The address of UBS Capital II LLC is 299 Park Avenue, New York, New York
10171. UBS Capital II LLC is an indirectly wholly owned subsidiary of UBS
AG. UBS AG may be deemed to be the beneficial owner of the shares of our
common stock owned by UBS Capital III LLC, a financial services company
organized under the laws of Switzerland.

(4) Consists of 788,784 shares held by GS Private Equity Partners II, L.P.,
408,459 shares held by GS Private Equity Partners II Offshore, L.P.,
826,757 shares held by GS Private Equity Partners III, L.P., 192,737 shares
held by GS Private Equity Partners III Offshore, L.P. and 87,451 shares
held by NBK/GS Private Equity Partners, L.P. GS PEP II Advisors, L.L.C., GS
PEP II Offshore Advisors, Inc., GS PEP III Advisors, L.L.C., GS PEP III
Offshore Advisors, Inc., and GS PEP Offshore Advisors (NBK), Inc.,
indirectly wholly owned subsidiaries of The Goldman Sachs Group, Inc. ("GS
Group"), are the general partners of, respectively, GS Private Equity
Partners II, L.P., GS Private Equity Partners II Offshore, L.P., GS Private
Equity Partners III, L.P., GS Private Equity Partners III Offshore, L.P.
and NBK/GS Private Equity Partners, L.P. (together, the "Limited
Partnerships"). Goldman Sachs & Co. ("Goldman Sachs") and GS Group may be
deemed to beneficially own common stock through the Limited Partnerships.
Goldman Sachs and GS Group each disclaims beneficial ownership of common
stock beneficially owned by the Limited Partnerships to the extent of
partnership interests in the Limited Partnerships held by persons other
than Goldman Sachs, GS Group or their affiliates. The address for each
entity listed in this footnote 4 is as follows: One New York Plaza, New
York, New York 10004.

(5) Consists of 1,382,532 shares held by WI Software Investors LLC and 921,688
shares held by Imprimis SB LP. The managing member of WI Software Investors
LLC is Wexford Management LLC. The general partner of Imprimis SB LP is
Imprimis GP LLC, the managing member of which is Wexford Management LLC.
The address for each entity listed in this footnote 5 is 411 West Putnam
Avenue, Greenwich, Connecticut 06830.

(6) Shares held by a trust.

(7) Shares held by Mr. Engelken, his wife Holly Storm-Engelken and six trusts.

(8) Shares held by two trusts for the benefit of Mr. Sharpe's children of which
Mr. Sharpe is the trustee. Includes 188,855 shares which are subject to
vesting. See "Certain Transactions -- 1999/2000 Issuance of Restricted
Stock to Certain Directors."

(9) Includes the shares held by entities affiliated with InSight Capital
Partners. The address of Messrs. Blend and Murdock is c/o Insight Capital
Partners, 527 Madison Avenue, 10th Floor, New York, New York 10022. Mr.
Blend is an employee and Mr. Murdock is a partner of Insight Capital
Partners and each disclaims beneficial ownership of the shares held by
Insight Capital Partners except to the extent of their respective pecuniary
interests. With respect to Mr. Blend, includes 188,855 shares owned
directly by him which are subject to vesting. See "Certain
Transactions -- 1999/2000 Issuance of Restricted Stock to Certain
Directors."

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<PAGE> 71

(10) Includes all shares held by entities affiliated with specific directors as
described in note (9) above. Also includes 680,015 shares subject to
vesting, including those described in notes (8) and (9) above.

(11) If the underwriters' over-allotment option to purchase up to 900,000
additional shares is exercised in full, Mr. Montgomery, our Chairman, Chief
Executive Officer and President, will sell 469,000 shares and Mr. Sharpe, a
director, will sell 200,000 shares. The following table presents these
persons' beneficial ownership after the offering and the beneficial
ownership of all executive officers and directors as a group, assuming the
underwriters' over-allotment option is exercised in full:

<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP
NAME AFTER OFFERING
---- --------------------
<S> <C>
Mr. Montgomery.............................................. 6.3%
Mr. Sharpe.................................................. 1.3%
All executive officers and directors as a group (11
persons).................................................. 37.8%
</TABLE>

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<PAGE> 72

DESCRIPTION OF CAPITAL STOCK

Upon the completion of this offering, our capital stock will consist of
125,000,000 shares of common stock, $0.001 par value per share, and 75,000,000
shares of preferred stock, $0.001 par value per share. As of March 31, 2000, and
giving effect to the conversion of all outstanding shares of our preferred stock
into common stock upon the closing of this offering, there were outstanding
36,133,090 shares of common stock held by 170 stockholders of record. In
addition, there were outstanding options to purchase an aggregate of 3,255,053
shares of common stock at March 31, 2000.

The following description of our capital stock, provisions of our restated
certificate of incorporation and our amended bylaws and specific provisions of
Delaware law are summaries thereof and are qualified in their entirety by
reference to the Delaware General Corporation Law, and our restated certificate
of incorporation and our amended bylaws. Copies of our restated certificate of
incorporation and amended bylaws have been filed with the Commission as exhibits
to our registration statement, of which this prospectus forms a part.

COMMON STOCK

The holders of our common stock are entitled to dividends as our board of
directors may declare from time to time from funds legally available therefor,
subject to the preferential rights of the holders of our preferred stock, if
any. The holders of our common stock are entitled to one vote per share on any
matter to be voted upon by stockholders. Our restated certificate of
incorporation does not provide for cumulative voting in connection with the
election of directors, and, accordingly, holders of more than 50% of the shares
voting will be able to elect all of the directors. No holder of our common stock
will have any preemptive right to subscribe for any shares of capital stock
issued in the future.

Upon any voluntary or involuntary liquidation, dissolution, or winding up
of our affairs, the holders of our common stock are entitled to share ratably in
all assets remaining after payment to creditors and subject to prior
distribution rights of our preferred stock, if any. All of the outstanding
shares of common stock are, and the shares offered by us will be, fully paid and
non-assessable.

PREFERRED STOCK

As of the closing of this offering, no shares of our preferred stock will
be outstanding. Under our restated certificate of incorporation, our board of
directors, without further action by our stockholders, will be authorized to
issue shares of preferred stock in one or more classes or series. The board may
fix the rights, preferences and privileges of each class or series of preferred
stock, along with any limitations or restrictions, including voting rights,
dividend rights, conversion rights, redemption privileges and liquidation
preferences of each class or series of preferred stock. The preferred stock
could have voting or conversion rights that could adversely affect the voting
power or other rights of holders of our common stock. The issuance of preferred
stock could also have the effect, under some circumstances, of delaying,
deferring or preventing a change of control of Convergent Group. We currently
have no plans to issue any shares of preferred stock.

SECTION 203 OF THE DELAWARE GENERAL CORPORATION LAW

We are subject to the provisions of Section 203 of the Delaware General
Corporation Law. Section 203 prohibits a publicly held Delaware corporation from
engaging in a "business combination" with an "interested stockholder" for a
period of three years after the date of the transaction in which the person
became an "interested stockholder," unless the business combination is approved
in a prescribed manner. A "business combination" includes mergers, asset sales,
and other transactions resulting in a financial benefit to the "interested
stockholder." Subject to specific exceptions, an "interested stockholder" is a
person who, together with affiliates and associates, owns, or within the past
three years did own, 15% of the corporation's voting stock.

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<PAGE> 73

OTHER CHARTER AND BY-LAW PROVISIONS

Some provisions of our restated certificate of incorporation and amended
bylaws could have anti-takeover effects. These provisions are intended to
enhance the likelihood of continuity and stability in the composition of the
corporate policies formulated by our board of directors. In addition, these
provisions also are intended to ensure that our board of directors will have
sufficient time to act in what the board of directors believes to be in the best
interests of us and our stockholders. These provisions also are designed to
reduce our vulnerability to an unsolicited proposal for our takeover that does
not contemplate the acquisition of all of our outstanding shares or an
unsolicited proposal for the restructuring or sale of all or part of Convergent
Group. The provisions are also intended to discourage some tactics that may be
used in proxy fights. However, these provisions could delay or frustrate the
removal of incumbent directors or the assumption of control of us by the holder
of a large block of common stock, and could also discourage or make more
difficult a merger, tender offer, or proxy contest, even if the event would be
favorable to the interest of our stockholders.

Classified Board of Directors

Our restated certificate of incorporation will provide for our board of
directors to be divided into three classes of directors, with each class as
nearly equal in number as possible, serving staggered three-year terms, other
than directors who may be elected by holders of any preferred stock we may issue
in the future. As a result, approximately one-third of our board of directors
will be elected each year. The classified board provision will promote the
continuity and stability of our board of directors and our business strategies
and policies as determined by our board of directors. The classified board
provision could have the effect of discouraging a third party from making an
unsolicited tender offer or otherwise attempting to obtain control of us without
the approval of our board of directors. In addition, the classified board
provision could delay stockholders who do not like the policies of our board of
directors from electing a majority of our board of directors for two years.

No Stockholder Action by Written Consent; Special Meetings

Our restated certificate of incorporation will provide that stockholder
action can only be taken at an annual or special meeting of shareholders and
prohibits shareholder action by written consent in lieu of meeting. Our amended
bylaws provide that special meetings of shareholders may be called only by our
board of directors or our Chairman or Chief Executive Officer. Our stockholders
are not permitted to call a special meeting of stockholders or to require that
our board of directors call a special meeting.

Advance Notice Requirements for Shareholder Proposals and Director Nominees

Our amended bylaws will establish an advance notice procedure for our
stockholders to make nominations of candidates for election as directors or to
bring other business before an annual meeting of our stockholders. The
stockholder notice procedure provides that only persons who are nominated by, or
at the direction of, our board of directors or by a stockholder who has given
timely written notice to our Secretary prior to the meeting at which directors
are to be elected will be eligible for election as our directors. The
stockholder notice procedure also provides that at an annual meeting only
business properly brought before the meeting by, or at the direction of, our
board of directors or by a stockholder who has given timely written notice to
our Secretary of that stockholder's intention to bring the business before the
meeting. Under the stockholder notice procedure, if a stockholder desires to
submit a proposal or nominate persons for election as directors at an annual
meeting, the stockholder must submit written notice not less than 90 days nor
more than 120 days prior to the first anniversary of the previous year's annual
meeting. In addition, under the stockholder notice procedure, a stockholder's
notice proposing to nominate a person for election as a director or relating to
the conduct of business other than the nomination of directors must contain
specified information. If the chairman of a meeting determines that business was
not properly brought before the meeting in accordance with the stockholder
notice procedure, the business shall not be discussed or transacted.

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<PAGE> 74

Number of Directors; Removal; Filling Vacancies

Our restated certificate of incorporation and amended bylaws will provide
that our board of directors will consist of not less than 3 nor more than 15
directors, other than directors elected by holders of our preferred stock, the
exact number to be fixed from time to time by resolution adopted by our
directors. Further, subject to the rights of the holders of any series of our
preferred stock, if any, our restated certificate of incorporation and amended
bylaws will authorize our board of directors to elect additional directors under
specified circumstances and fill any vacancies that occur in our board of
directors by reason of death, resignation, removal, or otherwise. A director so
elected by our board of directors to fill a vacancy or a newly created
directorship holds office until the next election of the class for which the
director has been chosen and until his successor is elected and qualified.
Subject to the rights of the holders of any series of our preferred stock, if
any, our restated certificate of incorporation and amended bylaws will also
provide that directors may be removed only for cause and only by the affirmative
vote of holders of 66 2/3% of the voting power of the then outstanding shares of
stock entitled to vote generally in the election of directors, voting together
as a single class. The effect of these provisions is to preclude a stockholder
from removing incumbent directors without cause and simultaneously gaining
control of our board of directors by filling the vacancies created by a
director's removal with its own nominees.

RESTATED CERTIFICATE OF INCORPORATION

The provisions of our restated certificate of incorporation that would have
anti-takeover effects as described above will be subject to amendment,
alteration, repeal, or recession by the affirmative vote of the holders of not
less than two-thirds (66 2/3%) of the outstanding shares of voting securities.
This requirement will make it more difficult for stockholders to make changes to
the provisions in our restated certificate of incorporation which could have
anti-takeover effects by allowing the holders of a minority of the voting
securities to prevent the holders of a majority of voting securities from
amending these provisions of our restated certificate of incorporation.

AMENDED BYLAWS

Our restated certificate of incorporation will provide that our amended
bylaws are subject to adoption, amendment, alteration, repeal, or recession
either by our board of directors without the assent or vote of our stockholders,
or by the affirmative vote of the holders of not less than two-thirds (66 2/3%)
of the outstanding shares of voting securities. This provision makes it more
difficult for stockholders to make changes in our amended bylaws by allowing the
holders of a minority of the voting securities to prevent the holders of a
majority of voting securities from amending our amended bylaws.

LIMITATIONS ON LIABILITY AND INDEMNIFICATION OF OFFICERS AND DIRECTORS

Our restated certificate of incorporation includes a provision that
eliminates the personal liability of our directors for monetary damages for
breach of fiduciary duty as a director, except for liability:

- for any breach of the director's duty of loyalty to us or to our
stockholders;

- for acts or omissions not in good faith or that involve intentional
misconduct or a knowing violation of law;

- under section 174 of the Delaware General Corporation Law regarding
unlawful dividends and stock purchases; or

- for any transaction from which the director derived an improper personal
benefit.

These provisions are permitted under Delaware law.

We have obtained directors' and officers' insurance for our directors,
officers and some employees for specified liabilities.

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<PAGE> 75

The limitation of liability and indemnification provisions in our amended
and restated certificate of incorporation and amended bylaws may discourage
stockholders from bringing a lawsuit against directors for breach of their
fiduciary duty. They may also have the effect of reducing the likelihood of
derivative litigation against directors and officers, even though an action of
this kind, if successful, might otherwise benefit us and our stockholders.
Furthermore, a stockholder's investment may be adversely affected to the extent
we pay the costs of settlement and damage awards against directors and officers
pursuant to these indemnification provisions. However, we believe that these
indemnification provisions are necessary to attract and retain qualified
directors and officers.

At present, there is no pending litigation or proceeding involving any of
our directors, officers or employees regarding which indemnification is sought,
nor are we aware of any threatened litigation that may result in claims for
indemnification.

TRANSFER AGENT AND REGISTRAR

The Transfer Agent and Registrar for our common stock is Norwest Bank
Minnesota, N.A.

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<PAGE> 76

SHARES ELIGIBLE FOR FUTURE SALE

Prior to this offering, there has not been any public market for our common
stock, and no prediction can be made as to the effect, if any, that market sales
of shares of common stock or the availability of shares of common stock for sale
will have on the market price of the common stock prevailing from time to time.
Nevertheless, sales of substantial amounts of our common stock in the public
market or the perception that these sales could occur could adversely affect
prevailing market prices of our common stock and could also adversely affect our
ability to raise capital at a time and on terms favorable to us.

Upon completion of this offering and the concurrent private placement, we
will have outstanding a total of 44,464,957 shares of our common stock. Of these
shares, all of the shares sold in this offering will be freely tradable without
restriction or further registration under the Securities Act, unless the shares
are held by our affiliates as that term is defined in Rule 144 under the
Securities Act. The remaining 38,464,957 shares of common stock held by existing
stockholders and Cinergy Communications, Inc. are restricted securities as that
term is defined in Rule 144 under the Securities Act. Restricted securities may
be sold in the public market only if registered or if they qualify for an
exemption from registration under Rule 144 or Rule 701 under the Securities Act.
These rules are summarized below.

Subject to the lock-up agreements described below and the provisions of
Rules 144, 144(k) and 701, additional shares will be available for sale in the
public market as follows:

<TABLE>
<CAPTION>
NUMBER OF SHARES DATE
---------------- ----
<C> <S>
35,174,608 Beginning 90 days after the date of this prospectus, shares
saleable under Rule 144 (subject to volume limitations)
2,308,548 After 180 days from the date of this prospectus (subject to
volume limitations of Rule 144)
5,305,918 Upon the filing of a registration statement to register
shares of common stock issuable upon the exercise of options
granted under our stock option plan.
981,801 One year after 180 days from the date of this prospectus.
</TABLE>

LOCK-UP AGREEMENTS

Our officers, directors, Cinergy Communications, Inc. and other
stockholders owning one or more percent of our capital stock, holding in the
aggregate approximately 36.6 million shares of our common stock, have agreed,
subject to specific exceptions, not to offer to sell, contract to sell, or
otherwise sell, dispose of, loan, pledge or grant any rights with respect to any
shares of common stock or any options or warrants to purchase any shares of
common stock, or any securities convertible into or exchangeable for shares of
common stock owned as of the date of this prospectus or later acquired directly
by those holders or with respect to which they have the power of disposition,
without the prior written consent of FleetBoston Robertson Stephens Inc., for a
period of 180 days from the date of this prospectus. However, FleetBoston
Robertson Stephens Inc. may, in its sole discretion and at any time without
notice, release all or any portion of securities subject to these agreements not
to sell shares. When determining whether or not to release shares from the
lock-up agreements, FleetBoston Robertson Stephens Inc. will consider, among
other factors, the stockholder's reasons for requesting the release, the number
of shares for which the release is being requested and market conditions at that
time. FleetBoston Robertson Stephens Inc. does not currently anticipate that
registration rights of stockholders or its position in the common stock will be
a factor in determining whether or not to release shares from the lock-up
agreements. There are no existing agreements between the representatives of the
underwriters and any of our stockholders providing consent to the sale of shares
prior to the expiration of the above period, and we are not currently aware of
any officers, directors or current stockholders who intend to ask for consent to
offer, sell or otherwise dispose of any common stock within the lock-up period.

72
<PAGE> 77

RULE 144

In general, under Rule 144, as currently in effect, a person (or persons
whose shares are required to be aggregated) including an affiliate, who has
beneficially owned shares of our common stock for at least one year can sell
within any three-month period commencing 90 days after the date of this
prospectus, a number of shares that does not exceed the greater of:

- 1% of the number of shares of common stock then outstanding
(approximately 444,647 shares immediately after this offering); or

- the average weekly trading volume in our common stock during the four
calendar weeks preceding the filing of a notice on Form 144 with respect
to the sale.

Sales under Rule 144 are also subject to manner of sale provisions and notice
requirements and to the availability of public information about us. In
addition, under Rule 144(k), a person who is not one of our affiliates at any
time during the 90 days preceding a sale, and who has beneficially owned the
shares proposed to be sold for at least two years, can sell those shares without
complying with the manner of sale, public information, volume limitation or
notice provisions of Rule 144.

RULE 701

In general, under Rule 701, any of our employees, directors, consultants or
advisors who purchase shares from us in connection with a compensatory stock
option plan or other written agreement are eligible to resell these shares 90
days after the date of this offering in reliance on Rule 144, without compliance
with specific restrictions contained in Rule 144, including the holding period.
However, the holders of our outstanding options have also executed lock-up
agreements as discussed above.

After this offering, we intend to register an aggregate of 5,305,918 shares
of common stock which may be issued under our stock option plan. Shares issued
upon exercise of options after the effective date of the registration statement
on Form S-8 will be eligible for resale in the public market without
restriction, subject to Rule 144 limitations applicable to affiliates and the
lock-up agreements noted above.

REGISTRATION RIGHTS

Following the offering, holders of 20,989,343 shares of our common stock
will be entitled to request an unlimited number of demand registrations of these
shares of common stock under the Securities Act, provided that holders of a
majority of these shares make the request. We are not currently aware of any
stockholders who intend to exercise any of their registration rights. Commencing
180 days after the consummation of this offering, holders of 36,707,625 shares
of our common stock, including the foregoing shares, will have specified
piggyback registration rights in the event we intend to register shares of our
common stock under the Securities Act. In addition, at any time after we have
qualified for a registration pursuant to Form S-3, a majority of holders of
these shares shall have the right to request an unlimited number of
registrations of their common stock on Form S-3, subject to specific conditions
and limitations. In addition, Cinergy Communications, Inc. has the right to
request an unlimited number of registrations with respect to its shares, subject
to specific conditions and limitations, at any time after April 28, 2000 if we
are qualified for registration pursuant to Form S-3. If and whenever we are
under an obligation to effect the filing and maintenance of a registration
statement, we are required to use our best efforts to effect the registration,
subject to specific conditions and limitations. We are required to pay most of
the expenses related to these registrations, excluding underwriting commissions
and discounts.

73
<PAGE> 78

UNDERWRITING

The underwriters named below, acting through their representatives,
FleetBoston Robertson Stephens Inc., Donaldson, Lufkin & Jenrette Securities
Corporation and Wit SoundView Corporation, have entered into an underwriting
agreement with us and the selling stockholders to purchase the number of shares
of common stock listed opposite their respective names below. The underwriters
are obligated to purchase and pay for all of the shares if any are purchased.

<TABLE>
<CAPTION>
NUMBER
UNDERWRITER OF SHARES
----------- ---------
<S> <C>
FleetBoston Robertson Stephens, Inc. .......................
Donaldson, Lufkin & Jenrette Securities Corporation.........
Wit SoundView Corporation...................................
---------
Total............................................. 6,000,000
=========
</TABLE>

The representatives have advised us that the underwriters propose to offer
the shares of our common stock to the public at the public offering price
located on the cover page of this prospectus and to specific dealers at that
price less a concession of not in excess of $ per share, of which $ may
be reallowed to other dealers. After the initial public offering, the public
offering price, concession and reallowance to dealers may be reduced by the
representatives. No reduction in this price will change the amount of proceeds
to be received by us and the selling stockholders as indicated on the cover page
of this prospectus.

The underwriters have advised us that they do not expect sales to
discretionary accounts to exceed five percent of the total number of shares
offered.

Over-Allotment Option. Two selling stockholders, Glenn E. Montgomery, Jr.
and Robert Sharpe, have granted to the underwriters an option, exercisable
during the 30-day period after the date of this prospectus, to purchase up to an
aggregate of 669,000 outstanding shares of common stock and we have granted to
the underwriters an option to purchase up to 231,000 additional shares of common
stock to cover over-allotments, if any, at the same price per share as we will
receive for the 6,000,000 shares that the underwriters have agreed to purchase.
If these options are exercised, the underwriters will first exercise the option
from Mr. Montgomery, second from Mr. Sharpe and third from us. To the extent
that the underwriters exercise these options, each of the underwriters will have
a firm commitment to purchase approximately the same percentage of these
additional shares that the number of shares of common stock to be purchased by
it shown in the above table represents as a percentage of the 6,000,000 shares
offered by this prospectus. If purchased, the additional shares will be sold by
the underwriters on the same terms as those on which the shares are being sold.
The selling stockholders and Convergent Group will be obligated, under these
options, to sell shares to the extent the options are exercised. In the event
the overallotment options are not exercised in full, the underwriters will
exercise the options from the selling stockholders before exercising the option
from us. The underwriters may exercise the options only to cover over-allotments
made in connection with the sale of the 6,000,000 shares of our common stock
offered by this prospectus.

The following table shows the per share and total underwriting discounts
and commissions to be paid to the underwriters. This information is presented
assuming either no exercise or full exercise by the underwriters of their
over-allotment options.

<TABLE>
<CAPTION>
TOTAL
--------------------------------
WITHOUT WITH
OVER-ALLOTMENT OVER-ALLOTMENT
PER SHARE OPTION OPTION
--------- -------------- --------------
<S> <C> <C> <C>
Assumed public offering price......................... $ $ $
Underwriting discounts and commissions................
Proceeds, before expenses, to us......................
Proceeds, before expenses, to selling stockholders....
</TABLE>

74
<PAGE> 79

The expenses of the offering, other than underwriting discounts and
commissions, payable by us are estimated at $2.4 million. FleetBoston Robertson
Stephens Inc. expects to deliver the shares of common stock to purchasers on
, 2000.

Directed Share Program. The underwriters have reserved up to five percent
of the common stock offered for sale in this offering, at the initial public
offering price, for directors, officers, employees, business associates and
persons otherwise connected to Convergent Group. The number of shares of common
stock available for sale to the general public will be reduced to the extent
these individuals purchase reserved shares. Any reserved shares which are not
purchased will be offered by the underwriters to the general public on the same
basis as the other shares offered in this offering.

Internet Distribution. A prospectus in electronic format is being made
available on an Internet Web site maintained by Wit SoundView's affiliate, Wit
Capital Corporation. In addition, other dealers purchasing shares from Wit
SoundView in this offering have agreed to make a prospectus in electronic format
available on Web sites maintained by each of these dealers. Other than the
prospectus in electronic format the information on Wit Capital's Web site and
any information contained on any other Web site maintained by Wit Capital is not
part of the prospectus or the registration statement of which this prospectus
forms a part, has not been approved and/or endorsed by us or any underwriter in
its capacity as underwriter and should not be relied upon by investors.

Indemnity. The underwriting agreement contains covenants of indemnity
between the underwriters, us and the selling stockholders against specific civil
liabilities, including liabilities under the Securities Act, and liabilities
arising from breaches of representations and warranties contained in the
underwriting agreement.

Agreements Not to Sell Shares. All of our officers and directors and
stockholders owning one or more percent of our outstanding capital stock have
agreed, subject to limited exceptions, not to offer to sell, contract to sell,
or otherwise sell, dispose of, loan, pledge or grant any rights with respect to
any shares of common stock or any options or warrants to purchase any shares of
common stock, or any securities convertible into or exchangeable for shares of
common stock owned as of the date of this prospectus or later acquired directly
by those holders or with respect to which they have the power of disposition,
without the prior written consent of FleetBoston Robertson Stephens Inc., for a
period of 180 days from the date of this prospectus. However, FleetBoston
Robertson Stephens Inc. may, in its sole discretion and at any time without
notice, release all or any portion of securities subject to these agreements not
to sell shares. There are no existing agreements between the representatives of
the underwriters and any of our stockholders providing consent to the sale of
shares prior to the expiration of the above period.

Future Sales by Us. In addition, we have agreed that during the 180 days
after the date of this prospectus, we will not, without the prior written
consent of FleetBoston Robertson Stephens Inc., subject to specific exceptions
(a) consent to the disposition of any shares held by stockholders subject to
agreements not to sell shares prior to the expiration of the period set forth
above or (b) issue, sell, contract to sell, or otherwise dispose of, any shares
of common stock, any options to purchase any shares of common stock or any
securities convertible into, exercisable for or exchangeable for shares of
common stock other than our sale of shares in this offering and to Cinergy
Communications, Inc. in the concurrent private placement, the issuance of common
stock upon the exercise of outstanding options, and the issuance of options
under existing stock option and incentive plans, provided the options do not
vest prior to the expiration of the 180-day period. See "Shares Eligible for
Future Sale."

Listing. Our common stock has been approved for quotation on the Nasdaq
National Market under the symbol "CVGP," subject to notice of issuance.

No Prior Public Market. Prior to this offering, there has been no public
market for our common stock. Consequently, the initial public offering price for
the common stock offered by this prospectus has been determined through
negotiations among us, the selling stockholders and the representatives. Among
the factors considered in these negotiations were prevailing market conditions,
our financial information, market valuations of other companies that we and the
representatives believed to be comparable to us,

75
<PAGE> 80

estimates of our business potential, the present state of our development and
other factors deemed relevant.

Syndicate Short Sales. The representatives have advised us that, on behalf
of the underwriters, they may make short sales of our common stock in connection
with this offering, resulting in the sale by the underwriters of a greater
number of shares than they are required to purchase pursuant to the underwriting
agreement. The short position resulting from those short sales will be deemed a
"covered" short position to the extent that it does not exceed the 900,000
shares subject to the underwriters' over-allotment option and will be deemed a
"naked" short position to the extent that it exceeds that number. A naked short
position is more likely to be created if the underwriters are concerned that
there may be downward pressure on the trading price of the common stock in the
open market that could adversely affect investors who purchased shares in the
offering. The underwriters may reduce or close out their covered short position
either by exercising the over-allotment option or by purchasing shares in the
open market. In determining which of these alternatives to pursue, the
underwriters will consider the price at which shares are available for purchase
in the open market as compared to the price at which they may purchase shares
through the over-allotment option. Any "naked" short position will be closed out
by purchasing shares in the open market. Similar to the other stabilizing
transactions described below, open market purchases made by the underwriters to
cover all or a portion of their short position may have the effect of preventing
or retarding a decline in the market price of our common stock following this
offering. As a result, our common stock may trade at a price that is higher than
the price that otherwise might prevail in the open market.

Stabilization. The representatives have advised us that, pursuant to
Regulation M under the Securities Exchange Act of 1934, they may engage in
transactions, including stabilizing bids or the imposition of penalty bids, that
may have the effect of stabilizing or maintaining the market price of the shares
of common stock at a level above that which might otherwise prevail in the open
market. A "stabilizing bid" is a bid for or the purchase of shares of common
stock on behalf of the underwriters for the purpose of fixing or maintaining the
price of the common stock. A "penalty bid" is an arrangement permitting the
representatives to claim the selling concession otherwise accruing to an
underwriter or syndicate member in connection with the offering if the common
stock originally sold by that underwriter or syndicate member is purchased by
the representatives in the open market pursuant to a stabilizing bid or to cover
all or part of a syndicate short position. The representatives have advised us
that stabilizing bids and open market purchases may be effected on the Nasdaq
National Market or otherwise and, if commenced, may be discontinued at any time.

LEGAL MATTERS

The validity of the common stock offered by this prospectus will be passed
upon for us by O'Sullivan Graev & Karabell, LLP, New York, New York and for the
underwriters by Wilson Sonsini Goodrich & Rosati, Professional Corporation, Palo
Alto, California. An investment partnership of O'Sullivan Graev & Karabell, LLP
is a limited partner of InSight Capital Partners III (Co-Investors), L.P., one
of our stockholders.

EXPERTS

The consolidated financial statements of Convergent Group Corporation as of
December 31, 1998 and 1999 and for each of the years in the three year period
ended December 31, 1999 included in this prospectus have been included in
reliance upon the report of Grant Thornton, LLP, independent accountants, given
on the authority of said firm as experts in auditing and accounting.

76
<PAGE> 81

WHERE YOU CAN FIND MORE INFORMATION

We have filed a registration statement on Form S-1 (including exhibits and
schedules) with the SEC. This prospectus, which forms a part of that
registration statement, does not contain all of the information included in the
registration statement. Certain information is omitted and you should refer to
the registration statement and its exhibits. With respect to references made in
this prospectus to any contract or other document, these references are not
necessarily complete and you should refer to the exhibits attached to the
registration statement for copies of the actual contract or document. You may
review a copy of the registration statement at the SEC's public reference room
in Washington, D.C., and at the SEC's regional offices in Chicago, Illinois and
New York, New York. Please call the SEC at 1-800-SEC-0330 for further
information on the operation of the public reference rooms. Our SEC filings and
the registration statement can also be reviewed by accessing the SEC's Web site
at http://www.sec.gov. As a result of this offering, we will become subject to
the information and reporting requirements of the Securities Exchange Act and,
in accordance therewith, will file periodic reports, proxy statements and other
information with the SEC.

77
<PAGE> 82

CONVERGENT GROUP CORPORATION

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Certified Public Accountants.......... F-2
Consolidated Financial Statements:
Consolidated Balance Sheets............................... F-3
Consolidated Statements of Operations..................... F-4
Consolidated Statements of Stockholders' Equity
(Deficit).............................................. F-5
Consolidated Statements of Cash Flows..................... F-6
Notes to Consolidated Financial Statements................ F-8
</TABLE>

F-1
<PAGE> 83

To the Board of Directors and Stockholders of
Convergent Group Corporation

When the reverse stock split referred to in Note A7 of the Notes to
Consolidated Financial Statements has been consummated, we will be in a position
to render the following report.

Grant Thornton LLP

REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

We have audited the accompanying consolidated balance sheets of Convergent
Group Corporation as of December 31, 1998 and 1999, and the related consolidated
statements of operations, stockholders' equity (deficit), and cash flows for
each of the three years in the period ended December 31, 1999. 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 consolidated financial position of Convergent
Group Corporation and subsidiaries as of December 31, 1998 and 1999, and the
consolidated results of their operations and their cash flows for each of the
years in the three-year period ended December 31, 1999 in conformity with
generally accepted accounting principles.

Denver, Colorado
February 8, 2000, (except for Note J, as to which
the date is February 16, 2000)

F-2
<PAGE> 84

CONVERGENT GROUP CORPORATION

CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS EXCEPT SHARE DATA)

ASSETS

<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
------------------- --------------------
PRO FORMA
1998 1999 2000 2000
-------- -------- -------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C>
CURRENT ASSETS
Cash and cash equivalents................................. $ 4,958 $ 1,596 $ 2,358 $ 2,358
Accounts receivable (net of allowance for doubtful
accounts of $156, $43 and $43, respectively)............ 4,578 9,181 5,204 5,204
Unbilled revenues......................................... 3,269 6,351 11,673 11,673
Other..................................................... 226 417 218 218
-------- -------- -------- --------
13,031 17,545 19,453 19,453
Deferred tax asset........................................ 1,964 3,400 3,010 3,010
Prepaid expenses and other................................ 221 578 313 313
Deferred offering costs................................... -- -- 1,200 1,200
-------- -------- -------- --------
Total current assets................................ 15,216 21,523 23,976 23,976
PROPERTY AND EQUIPMENT, AT COST (net of accumulated
depreciation and amortization of $4,152, $4,963 and
$5,349, respectively)..................................... 2,725 3,102 3,584 3,584
LOAN RECEIVABLE FROM RELATED PARTY.......................... -- 2,046 2,076 2,076
OTHER ASSETS................................................ 36 36 -- --
-------- -------- -------- --------
Total assets........................................ $ 17,977 $ 26,707 $ 29,636 $ 29,636
======== ======== ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES:
Accounts payable.......................................... $ 2,015 $ 2,346 $ 2,568 $ 2,568
Note payable.............................................. 500 40 -- --
Deferred revenue.......................................... 5,463 2,182 2,114 2,114
Accrued liability for anticipated contract costs.......... 1,648 1,949 2,414 2,414
Accrued compensation and related expense.................. 3,592 2,128 2,695 2,695
Accrued project related costs............................. 2,191 5,619 6,568 6,568
Other accrued expenses.................................... 297 1,327 2,360 2,360
-------- -------- -------- --------
Total current liabilities........................... 15,706 15,591 18,719 18,719
NON-CURRENT LIABILITIES:
Accrued liability for anticipated contract costs.......... 1,108 171 127 127
Accrued compensation and related expenses................. 1,076 227 227 227
Long-term loan (net of deferred acquisition costs)........ -- 21,753 21,770 21,770
-------- -------- -------- --------
Total liabilities................................... 17,890 37,742 40,843 40,843
MANDATORILY REDEEMABLE PREFERRED STOCK ($0.10 par value with
a liquidation preference of $40,541)...................... 28,907 -- -- --
Series A Convertible Exchangeable (5,725, -0-, -0- and
-0- shares authorized, issued and outstanding)........ -- -- -- --
Series B Exchangeable (39,000, -0-, -0- and -0- shares
authorized; 34,816 and -0- shares issued and
outstanding).......................................... -- -- -- --

COMMITMENTS

STOCKHOLDERS' EQUITY (DEFICIT):
Series A convertible preferred stock ($.001 par value;
75,000,000 shares authorized; -0-, 41,978,689, and
42,487,701 shares issued and outstanding, liquidation
preference $34,000) zero shares outstanding on a pro
forma basis........................................... -- 42 42 --
Class A common stock ($0.001 par value; 12,870,480, -0-
and -0- shares authorized; 9,193,200 and -0- shares
issued and outstanding) zero shares outstanding on a
proforma basis........................................ 9 -- -- --
Class B common stock ($0.001 par value; 668,340 and -0-
shares authorized; -0-shares issued and
outstanding).......................................... -- -- -- --
Common stock ($0.001 par value; 125,000,000 shares
authorized; 5,991,750, and 13,749,322 and 14,889,240
shares issued and outstanding, 36,133,090 shares
outstanding on a pro forma basis)..................... 6 14 15 36
Additional paid-in capital.............................. 33,089 62,666 69,205 69,226
Deferred compensation................................... (22) (9,037) (14,852) (14,852)
Accumulated deficit..................................... (62,206) (65,030) (65,929) (65,929)
Accumulated other comprehensive income.................. 304 310 312 312
-------- -------- -------- --------
Total stockholders' equity (deficit)................ (28,820) (11,035) (11,207) (11,207)
-------- -------- -------- --------
Total liabilities and stockholders' equity
(deficit)......................................... $ 17,977 $ 26,707 $ 29,636 $ 29,636
======== ======== ======== ========
</TABLE>

The accompanying notes are an integral part of these statements.

F-3
<PAGE> 85

CONVERGENT GROUP CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS EXCEPT SHARE DATA)

<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEARS ENDED DECEMBER 31, MARCH 31,
--------------------------------------- -------------------------
1997 1998 1999 1999 2000
----------- ----------- ----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
REVENUES:
Integration, consulting and other
services................................ $ 21,517 $ 28,957 $ 41,029 $ 9,283 $ 13,552
Subcontractor and other revenue........... 19,339 18,458 25,581 5,526 5,081
----------- ----------- ----------- ----------- -----------
Total revenues..................... 40,856 47,415 66,610 14,809 18,633
COST OF REVENUES:
Cost of integration, consulting and other
services (exclusive of $143 and $19 in
1999 and the March 31, 2000 period,
respectively, reported below as employee
stock compensation expense)............. 17,326 17,564 22,296 5,153 6,601
Cost of subcontractor and other revenue... 13,010 13,959 20,205 4,345 3,963
----------- ----------- ----------- ----------- -----------
Total cost of revenue.............. 30,336 31,523 42,501 9,498 10,564
----------- ----------- ----------- ----------- -----------
Gross profit....................... 10,520 15,892 24,109 5,311 8,069
EXPENSES:
Selling, General and Administrative
Expenses (exclusive of $12,094 and $601
in 1999 and the March 31, 2000 period,
respectively, reported below as employee
stock compensation expense)............. 11,574 12,123 16,855 3,867 7,473
Recapitalization Costs.................... -- -- 7,098 -- --
Employee Stock Compensation Expense....... 8 12 12,237 -- 620
Consulting Agreement Termination Costs.... -- -- 3,920 -- --
Loss from Disposal of Assets.............. -- 93 -- -- --
Research and Development.................. 173 -- -- -- --
Gain from Restructuring................... (1,218) (95) -- -- --
----------- ----------- ----------- ----------- -----------
10,537 12,133 40,110 3,867 8,093
----------- ----------- ----------- ----------- -----------
Operating income (loss)............ (17) 3,759 (16,001) 1,444 (24)
OTHER INCOME (EXPENSE):
Interest income........................... 82 176 176 23 54
Interest expense.......................... (1,170) (119) (778) (8) (498)
----------- ----------- ----------- ----------- -----------
Total other income (expense)....... (1,088) 57 (602) 15 (444)
----------- ----------- ----------- ----------- -----------
INCOME (LOSS) BEFORE INCOME TAXES........... (1,105) 3,816 (16,603) 1,459 (468)
INCOME TAX BENEFIT (EXPENSE)................ -- 1,861 1,347 128 (431)
----------- ----------- ----------- ----------- -----------
NET INCOME (LOSS)........................... (1,105) 5,677 (15,256) 1,587 (899)
PREFERRED STOCK ADJUSTMENTS................. (776) (853) 12,432 (207) --
----------- ----------- ----------- ----------- -----------
NET INCOME (LOSS) AVAILABLE TO COMMON
STOCKHOLDERS.............................. $ (1,881) $ 4,824 $ (2,824) $ 1,380 $ (899)
=========== =========== =========== =========== ===========
EARNINGS (LOSS) PER COMMON SHARE............ $ (0.12) $ 0.32 $ (0.20) $ 0.09 $ (0.06)
----------- ----------- ----------- ----------- -----------
EARNINGS (LOSS) PER COMMON SHARE ASSUMING
DILUTION.................................. $ (0.12) $ 0.20 $ (0.20) $ 0.06 $ (0.06)
----------- ----------- ----------- ----------- -----------
WEIGHTED AVERAGE SHARES OUTSTANDING......... 16,234,348 15,135,368 14,310,546 15,478,085 14,487,160
----------- ----------- ----------- ----------- -----------
WEIGHTED AVERAGE SHARES OUTSTANDING ASSUMING
DILUTION.................................. 16,234,348 23,771,852 14,310,546 23,634,615 14,487,160
----------- ----------- ----------- ----------- -----------
PRO FORMA BASIC NET INCOME (LOSS) PER SHARE
(unaudited)............................... $ (0.10) $ (0.03)
=========== ===========
PRO FORMA DILUTED NET INCOME (LOSS) PER
SHARE (unaudited)......................... $ (0.10) $ (0.03)
=========== ===========
PRO FORMA WEIGHTED AVERAGE SHARES
OUTSTANDING USED IN THE CALCULATION OF
BASIC INCOME PER SHARE (unaudited)........ 27,424,410 35,731,010
=========== ===========
PRO FORMA WEIGHTED AVERAGE SHARES
OUTSTANDING USED IN THE CALCULATION OF
DILUTED EARNINGS PER SHARE (unaudited).... 27,424,410 35,731,010
=========== ===========
</TABLE>

The accompanying notes are an integral part of these statements.

F-4
<PAGE> 86

CONVERGENT GROUP CORPORATION

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)

YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999
AND FOR THE THREE MONTHS ENDED MARCH 31, 2000
(IN THOUSANDS EXCEPT FOR SHARE DATA)

<TABLE>
<CAPTION>
NEW SERIES A CLASS A CLASS B
PREFERRED STOCK COMMON STOCK COMMON STOCK
------------------- ------------------- -------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
---------- ------ ---------- ------ ---------- ------
<S> <C> <C> <C> <C> <C> <C>
BALANCE AS OF JANUARY 1, 1997............................... -- $-- 9,193,200 $ 9 5,229,092 $ 5
Net loss................................................... -- -- -- -- -- --
Foreign currency translation adjustments................... -- -- -- -- -- --
Comprehensive loss......................................... -- -- -- -- -- --
Accretion of mandatorily redeemable preferred stock........ -- -- -- -- -- --
Class B common stock acquired upon disposition of
subsidiary............................................... -- -- -- -- (5,229,092) (5)
Exercise of stock options.................................. -- -- -- -- -- --
Issuance of common stock for services...................... -- -- -- -- -- --
---------- --- ---------- --- ---------- ---
BALANCE AS OF DECEMBER 31, 1997............................. -- -- 9,193,200 9 -- --
Net income................................................. -- -- -- -- -- --
Foreign currency translation adjustments................... -- -- -- -- -- --
Comprehensive income....................................... -- -- -- -- -- --
Conversion of accreted value of mandatorily redeemable
preferred stock to common stock.......................... -- -- -- -- -- --
Accretion of mandatorily redeemable preferred stock........ -- -- -- -- -- --
Purchase of common stock................................... -- -- -- -- -- --
Issuance of common stock for services...................... -- -- -- -- -- --
Exercise of stock options.................................. -- -- -- -- -- --
Issuance of employee options............................... -- -- -- -- -- --
Purchase of option to reacquire stock...................... -- -- -- -- -- --
---------- --- ---------- --- ---------- ---
BALANCE AS OF DECEMBER 31, 1998............................. -- -- 9,193,200 9 -- --
Net loss................................................... -- -- -- -- -- --
Foreign currency translation adjustments................... -- -- -- -- -- --
Comprehensive loss......................................... -- -- -- -- -- --
Accretion of mandatorily redeemable preferred stock........ -- -- -- -- -- --
Purchase of common stock................................... -- -- -- -- -- --
Exercise of stock options.................................. -- -- -- -- -- --
Issuance of common stock for services...................... -- -- -- -- -- --
Issuance of convertible series A preferred stock net of
issuance costs of $687................................... 41,978,689 42 -- -- -- --
Convert preferred A to class B common stock................ -- -- -- -- 1,042,500 1
Purchase of common stock................................... -- -- (9,193,200) (9) (1,042,500) (1)
Deferred compensation on stock grants and options.......... -- -- -- -- -- --
Stock option compensation expense.......................... -- -- -- -- -- --
Settlement of redeemable preferred at less than redemption
value.................................................... -- -- -- -- -- --
Distribution to common stockholders........................ -- -- -- -- -- --
Issuance of common stock for services...................... -- -- -- -- -- --
---------- --- ---------- --- ---------- ---
BALANCE AS OF DECEMBER 31, 1999............................. 41,978,689 42 -- -- -- --
Net loss (unaudited)....................................... -- -- -- -- -- --
Foreign currency transaction (unaudited)................... -- -- -- -- -- --
Comprehensive loss (unaudited)............................. -- -- -- -- -- --
Exercise of stock options (unaudited)...................... -- -- -- -- -- --
Conversion of common to preferred stock (unaudited)........ 509,012 -- -- -- -- --
Compensation expense associated with options (unaudited)... -- -- -- -- -- --
Deferred compensation on stock grants (unaudited).......... -- -- -- -- -- --
-- -- -- -- -- --
---------- --- ---------- --- ---------- ---
BALANCE AS OF MARCH 31, 2000 (UNAUDITED).................... 42,487,701 $42 -- $-- -- $--
========== === ========== === ========== ===

COMMON STOCK ADDITIONAL
------------------- DEFERRED PAID-IN ACCUMULATED
SHARES AMOUNT COMPENSATION CAPITAL DEFICIT
---------- ------ ------------ ---------- -----------
<S> <C> <C> <C> <C> <C>
BALANCE AS OF JANUARY 1, 1997............................... 5,583,801 $ 6 $ (22) $ 30,140 $(65,149)
Net loss................................................... -- -- -- -- (1,105)
Foreign currency translation adjustments................... -- -- -- -- --
Comprehensive loss......................................... -- -- -- -- --
Accretion of mandatorily redeemable preferred stock........ -- -- -- -- (776)
Class B common stock acquired upon disposition of
subsidiary............................................... -- -- -- (126) --
Exercise of stock options.................................. 19,071 -- -- -- --
Issuance of common stock for services...................... 307,723 -- -- 8 --
---------- --- -------- -------- --------
BALANCE AS OF DECEMBER 31, 1997............................. 5,910,595 6 (22) 30,022 (67,030)
Net income................................................. -- -- -- -- 5,677
Foreign currency translation adjustments................... -- -- -- -- --
Comprehensive income....................................... -- -- -- -- --
Conversion of accreted value of mandatorily redeemable
preferred stock to common stock.......................... -- -- -- 3,068 --
Accretion of mandatorily redeemable preferred stock........ -- -- -- -- (853)
Purchase of common stock................................... (3,188) -- -- (1) --
Issuance of common stock for services...................... 80,400 -- -- 2 --
Exercise of stock options.................................. 3,943 -- -- 1 --
Issuance of employee options............................... -- -- -- 12 --
Purchase of option to reacquire stock...................... -- -- -- (15) --
---------- --- -------- -------- --------
BALANCE AS OF DECEMBER 31, 1998............................. 5,991,750 6 (22) 33,089 (62,206)
Net loss................................................... -- -- -- -- (15,256)
Foreign currency translation adjustments................... -- -- -- -- --
Comprehensive loss......................................... -- -- -- -- --
Accretion of mandatorily redeemable preferred stock........ -- -- -- -- (629)
Purchase of common stock................................... (1,738,364) (2) -- (1,468) --
Exercise of stock options.................................. 2,030,083 2 -- 106 --
Issuance of common stock for services...................... 1,151,994 1 22 103 --
Issuance of convertible series A preferred stock net of
issuance costs of $687................................... -- -- -- 44,817 --
Convert preferred A to class B common stock................ -- -- -- 2,474 --
Purchase of common stock................................... -- -- -- (30,255) --
Deferred compensation on stock grants and options.......... 755,420 1 (12,060) 12,059 --
Stock option compensation expense.......................... -- -- 3,023 -- --
Settlement of redeemable preferred at less than redemption
value.................................................... -- -- -- -- 13,061
Distribution to common stockholders........................ -- -- -- (7,341) --
Issuance of common stock for services...................... 5,558,439 6 -- 9,082 --
---------- --- -------- -------- --------
BALANCE AS OF DECEMBER 31, 1999............................. 13,749,322 14 (9,037) 62,666 (65,030)
Net loss (unaudited)....................................... -- -- -- -- (899)
Foreign currency transaction (unaudited)................... -- -- -- -- --
Comprehensive loss (unaudited)............................. -- -- -- -- --
Exercise of stock options (unaudited)...................... 1,394,424 1 -- 104 --
Conversion of common to preferred stock (unaudited)........ (254,506) -- -- -- --
Compensation expense associated with options (unaudited)... -- -- 620 -- --
Deferred compensation on stock grants (unaudited).......... -- -- (6,435) 6,435 --
-- -- -- -- --
---------- --- -------- -------- --------
BALANCE AS OF MARCH 31, 2000 (UNAUDITED).................... 14,889,240 $15 $(14,852) $ 69,205 $(65,929)
========== === ======== ======== ========

<CAPTION>
ACCUMULATED
OTHER
COMPREHENSIVE COMPREHENSIVE
INCOME INCOME
------------- -------------
<S> <C> <C>
BALANCE AS OF JANUARY 1, 1997............................... $292
Net loss................................................... -- $(1,105)
Foreign currency translation adjustments................... (11) (11)
-------
Comprehensive loss......................................... -- (1,116)
-------
Accretion of mandatorily redeemable preferred stock........ --
Class B common stock acquired upon disposition of
subsidiary............................................... --
Exercise of stock options.................................. --
Issuance of common stock for services...................... --
----
BALANCE AS OF DECEMBER 31, 1997............................. 281
Net income................................................. -- 5,677
Foreign currency translation adjustments................... 23 23
-------
Comprehensive income....................................... -- 5,700
-------
Conversion of accreted value of mandatorily redeemable
preferred stock to common stock.......................... --
Accretion of mandatorily redeemable preferred stock........ --
Purchase of common stock................................... --
Issuance of common stock for services...................... --
Exercise of stock options.................................. --
Issuance of employee options............................... --
Purchase of option to reacquire stock...................... --
----
BALANCE AS OF DECEMBER 31, 1998............................. 304
Net loss................................................... -- (15,256)
Foreign currency translation adjustments................... 6 6
-------
Comprehensive loss......................................... -- (15,250)
-------
Accretion of mandatorily redeemable preferred stock........ --
Purchase of common stock................................... --
Exercise of stock options.................................. --
Issuance of common stock for services...................... --
Issuance of convertible series A preferred stock net of
issuance costs of $687................................... --
Convert preferred A to class B common stock................ --
Purchase of common stock................................... --
Deferred compensation on stock grants and options.......... --
Stock option compensation expense.......................... --
Settlement of redeemable preferred at less than redemption
value.................................................... --
Distribution to common stockholders........................ --
Issuance of common stock for services...................... --
----
BALANCE AS OF DECEMBER 31, 1999............................. 310
Net loss (unaudited)....................................... -- (899)
Foreign currency transaction (unaudited)................... 2 2
-------
Comprehensive loss (unaudited)............................. -- (897)
-------
Exercise of stock options (unaudited)...................... --
Conversion of common to preferred stock (unaudited)........ --
Compensation expense associated with options (unaudited)... --
Deferred compensation on stock grants (unaudited).......... --
----
BALANCE AS OF MARCH 31, 2000 (UNAUDITED).................... $312
====
</TABLE>

The accompanying notes are an integral part of these statements.

F-5
<PAGE> 87

CONVERGENT GROUP CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)

<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEARS ENDED DECEMBER 31, MARCH 31,
---------------------------- -------------------
1997 1998 1999 1999 2000
------- ------- -------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net income (loss)............................... $(1,105) $ 5,677 $(15,256) $ 1,587 $ (899)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Depreciation and amortization................. 1,350 1,235 1,407 326 387
Deferred income taxes......................... -- (1,964) (1,437) (159) 390
Provision for bad debts (recovery)............ 45 (542) (113) 10 --
Gain from CGAP dissolution.................... (792) -- -- -- --
Gain from restructuring....................... (773) (95) -- -- --
Loss on disposal of fixed assets.............. 637 93 -- -- --
Stock and options issued as compensation...... 8 12 12,237 -- 620
Changes in operating assets and liabilities:
Receivables and unbilled revenues.......... 3,447 48 (7,571) (2,182) (1,147)
Prepaid expenses and other assets.......... 469 555 (548) (566) 301
Accounts payable and accrued expenses...... (1,084) 28 2,476 (547) 1,548
Accrual for anticipated contract costs..... 1,749 (573) (636) 118 421
Accrual for restructuring.................. (2,719) (147) -- -- --
Unearned revenue and customer deposits..... 1,477 (446) (3,281) (1,753) (68)
------- ------- -------- ------- -------
Net cash provided by (used in)
operating activities................ 2,709 3,881 (12,722) (3,166) 1,553
INVESTING ACTIVITIES
Purchase of property and equipment............ (555) (1,025) (1,761) (303) (868)
FINANCING ACTIVITIES
Repayment of note payable..................... -- -- (500) -- --
Note receivable from a shareholder............ -- -- (2,046) -- --
Issuance of stock............................. -- 2 -- -- (30)
Acquisition of options to repurchase stock.... -- (15) -- -- --
Borrowing line of credit...................... -- -- 1,000 -- --
Paydown line of credit........................ (1,000) -- (1,000) -- --
Borrowing on revolving credit loan
agreements................................. -- -- 24,000 -- --
Payments on revolving credit loan
agreements................................. -- -- (2,000) -- --
Payments on debt obligations.................. (806) -- -- -- --
Deferred loan acquisition costs............... -- -- (270) -- --
Purchase of common stock...................... -- -- (1,430) (253) --
Distribution to common stockholders........... -- -- (7,341) -- --
Exercise of stock options..................... -- -- 108 44 105
Purchase of redeemable preferred stock and
class A common stock....................... -- -- (44,265) -- --
Issuance of convertible preferred stock net of
issuance costs of $687..................... -- -- 44,859 -- --
------- ------- -------- ------- -------
Net cash provided by (used in)
financing activities................ (1,806) (13) 11,115 (209) 75
------- ------- -------- ------- -------
Effect of exchange rate changes on cash and cash
equivalents................................... (11) 23 6 -- 2
------- ------- -------- ------- -------
</TABLE>

F-6
<PAGE> 88
CONVERGENT GROUP CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS -- (CONTINUED)

The accompanying notes are an integral part of these statements.

F-7
<PAGE> 89

CONVERGENT GROUP CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE A -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

A summary of significant accounting policies consistently applied in the
preparation of the accompanying financial statements follows:

1. Organization and Purpose

Convergent Group Corporation (the Company) was incorporated on April 9,
1994, in the state of Delaware. On the incorporation date, the Company acquired
all of the outstanding preferred and common stock of Graphic Data Systems
Corporation (GDS) and Utility Graphics Consultants Corporation (UGC). On
February 5, 1996, the Company, through a newly formed, wholly-owned subsidiary,
Convergent Group Asia Pacific Pty. Ltd. (CGAP), acquired the business and
related net assets of ARC Systems Pty. Ltd. (ARC Systems), an Australian Limited
Company. CGAP was subsequently disposed of in April 1997 (see Note M).

The Company provides professional services that enable its utility and
local government clients to implement Internet-based eBusiness solutions. The
Company combines the use of existing and emerging digital technologies with its
business expertise in the utility and local government sectors to deliver
solutions that address its clients' mission-critical business problems. These
eBusiness transformation solutions help clients integrate data from various
isolated sources to create a single, Web-based point of entry through which
internal decision-makers, business partners, suppliers, customers and
constituents can access business information on a real-time basis. The Company's
solutions help its clients increase revenues, reduce costs, improve customer
services, ensure service reliability, improve resource management and exploit
their information assets.

The Board of Directors has filed a registration statement with the SEC that
would permit the Company to sell shares of the Company's common stock in
connection with a proposed public offering. In conjunction with a qualified
public offering, all outstanding preferred stock automatically converts into
shares of the Company's common stock on a 0.5 for one basis. The effect of the
conversion has been reflected in the accompanying pro forma balance sheet as if
the conversion had occurred as of March 31, 2000.

2. Recapitalization

Effective May 17, 1999 the Company entered into an option agreement with
its sole preferred shareholder to purchase all of the then outstanding preferred
stock for $14 million. Additionally, the option agreement granted the Company
the right to purchase on an as if converted basis 2,145,684 shares of the
Company's common stock at a price equal to 82.5% of any similar common stock
transactions entered into during the option period.

Effective June 19, 1999 the Company entered into a separate option
agreement with its then largest common shareholder to purchase 8,090,016 shares
of common stock at $2.18 per share.

On August 13, 1999 pursuant to a Recapitalization Agreement between the
Company and certain institutional investors, the Company exercised the
aforementioned option agreements and acquired all of its then outstanding shares
of redeemable Series A and Series B Convertible Exchangeable Preferred Stock and
all of it Class A Common Stock for an aggregate of $44,265,000. As part of the
recapitalization, the Company issued 41,978,689 shares of Convertible
Participating Preferred Stock, par value $0.001, to the institutional investors
for $44,859,000, net of issuance costs. All classes of stock have been canceled
and are no longer authorized except for common stock and Convertible
Participating Preferred Stock.

As part of the recapitalization, the Company recorded, to reflect the
substance of the transaction, a distribution of $7,341,000 to common
shareholders of record on August 13, 1999 to reflect the

F-8
<PAGE> 90
CONVERGENT GROUP CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

proportionate share of the cash received by shareholders, cash compensation of
$4,276,000 to reflect the disproportionate amount of cash received by certain
executives for services rendered, redemption of shares by nonemployee
stockholders in the amount of $156,000 and the issuance of 5,558,439 net shares
of common stock to employees for services in the amount of $9,088,000.

The Company incurred a total of $23,255,000 in expenses associated with the
recapitalization, including recapitalization costs, $12,237,000 noncash employee
stock compensation expense, and consulting agreement termination costs, all of
which were either noncash items or were funded from the new investor proceeds.

3. Basis of Consolidation

The consolidated financial statements include the accounts of the Company
and all subsidiaries. All significant intercompany accounts and transactions
have been eliminated.

4. Foreign Currency Translation

Assets and liabilities of foreign subsidiaries are translated to U.S.
dollars at year-end exchange rates. Income and expense items are translated at
average exchange rates prevailing during the period. Translation adjustments
resulting from translating the accounts of the Company's foreign subsidiaries
from the functional currency to U.S. dollars are accumulated in a separate
component of stockholders' equity. Exchange gains (losses) resulting from
foreign currency transactions are included in the consolidated statement of
operations. The Company recorded transaction exchange losses of $(55,000),
$(128,000), and $(21,000) for the years ended December 31, 1997, 1998 and 1999,
respectively.

5. Depreciation and Amortization of Property and Equipment

Depreciation of property and equipment is provided on the straight-line
basis over the estimated useful life of three to seven years. Leasehold
improvements are amortized over the life of the related lease.

6. Cash and cash equivalents

For purposes of the statement of cash flows, the Company considers all
highly liquid cash investments with an original maturity of three months or less
to be cash equivalents.

7. Common Stock Split

On January 2, 1997, all classes of Common Stock were split 470 for one,
with par value remaining at $0.01 per share. On August 13, 1999, the Company
recorded a Common Stock split on a 7.8 for one basis. On , the
Company effected a reverse split of its common stock on a one for two basis. All
share amounts have been restated to retroactively reflect the stock splits.

8. Revenue Recognition

Revenue earned through systems integration services, data conversion
services, and/or software licenses and hardware products is recognized on the
percentage of completion method using the output method of accounting in
accordance with SOP 81-1 and which is consistent with SOP 97-2. The Company
accounts for the gross profit on all of the above components that are included
in a contract as part of that contract's total gross profit and does not account
for the gross profit on components separately. Systems integration revenue is
measured based on integration costs incurred to date as compared to total
estimated costs. Output measures for other revenue components are based on
various milestones which are met through delivery and acceptance. Acceptance for
conversion services consists of acceptance of the subcontractor's work by the
Company and/or the customer. Acceptance of software is predicated on the

F-9
<PAGE> 91
CONVERGENT GROUP CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

successful testing of the software and in some cases written confirmation from
the customer. Acceptance for hardware products is determined at the time of
delivery to the customer. Cost of revenue is based on recognizing costs as a
percentage of revenue to provide a consistent gross margin throughout the life
of the contract. When management believes the cost of completing a contract will
exceed contract revenue the full amount of the loss is immediately recognized.

The Company develops reusable software in connection with a specific
project engagement, and therefore the costs associated with the development are
expensed as cost of revenues related to that engagement.

The Company has a history of making dependable estimates of the extent of
progress towards completion, contract revenue, and contract costs on its
long-term contracts. However, due to uncertainties inherent in the estimation
process, actual results could differ from those estimates.

Software and hardware maintenance under customer support agreements are
recorded as unearned maintenance fees and recognized as revenue ratably over a
twelve month period. The standard duration of software and hardware maintenance
under customer support agreements is twelve months, renewable annually.

9. Concentration of Credit Risk

The Company sells services and products to customers primarily in the
United States with continuing maintenance and support services with established
customers in the United Kingdom through April 2000. The Company performs ongoing
credit evaluations of customers and generally does not require collateral.
Receivables are due within 30 days from invoice date. Primarily as a result of
the restructuring (see Note M) the Company realized credit losses outside of
North America of $614,000 in 1997. Ongoing credit losses in North America during
1997, 1998, and 1999, which have not been significant, have been within
management's expectations. At December 31, 1999, three of the Company's
customers had outstanding balances that accounted for approximately 38% of total
accounts receivable.

The Company has no balance billed but not paid by its customers under
retainage provisions, billed or unbilled amounts representing claims or other
similar items subject to uncertainty related to their ultimate realization, or
billed or unbilled amounts collectible after one year. Amounts representing the
recognized sales value of performance that had not been billed and were not then
billable to customers at December 31, 1998 and 1999 were $2,585,000 and
$4,716,000, respectively.

The Company's unbilled receivable accounts represent contracted work
performed or costs incurred, including expected profits, which are invoiced to
customers pursuant to the terms of the customer's contract, generally within ten
days of month end.

The allowance for doubtful accounts was $698,000, $156,000 and $43,000 at
December 31, 1997, 1998 and 1999, respectively.

10. Use of Estimates

The preparation of the 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 at the balance sheet dates and
the reported amounts of revenues and expenses during the reporting periods.
Actual results could differ from those estimates.

F-10
<PAGE> 92
CONVERGENT GROUP CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

11. Estimated Fair Value Information

Statement of Financial Accounting Standards ("SFAS") No. 107, Disclosure
about Fair Value of Financial Instruments, requires disclosure of the estimated
fair value of an entity's financial instrument assets and liabilities, as
defined, regardless of whether recognized in the financial statements of the
reporting entity. The fair value information does not purport to represent the
aggregate net fair value of the Company.

The estimated fair value of the Company's cash and cash equivalents,
accounts receivable and payable and short-term notes payable approximates the
carrying amounts at December 31, 1998 and 1999 due principally to their
short-term maturities. Loan receivable from related party has an estimated fair
value which approximates the carrying value due to the anticipated short-term
duration of the loan. The estimated fair value of the long-term loan
approximates carrying value as the interest rate is considered to approximate
the market rate.

The Company estimated the fair value of its previously outstanding Series A
and Series B Mandatorily Redeemable Preferred Stock issued in 1994 by
determining the net present value of the expected cash return to the holders
over the redemption period. The Company accreted the difference between the fair
value and the redemption price as described in Note H.

12. External Marketing and Advertising Costs

The Company expenses external marketing and advertising costs as incurred.
These expenses were approximately $415,000, $638,000, and $1,103,000 for the
years ended December 31, 1997, 1998 and 1999, respectively.

13. Income Taxes

The Company provides for income tax expense in accordance with Statement of
Financial Accounting Standards No. 109 (SFAS 109), Accounting for Income
Taxes. Under SFAS 109, the liability method is used in accounting for income
taxes. Under this method, deferred tax assets and liabilities are determined
based on the differences between financial reporting and tax basis of assets and
liabilities and are measured using the enacted tax rates and laws that will be
in effect when the differences are expected to reverse.

14. Comprehensive Income

The Company adopted Statement of Financial Accounting Standards No. 130
(SFAS 130), Reporting Comprehensive Income. SFAS 130 establishes standards for
reporting and display of comprehensive income and its components.

15. Reclassifications

Certain financial statement reclassifications have been made in 1997 and
1998 to conform to presentations used in 1999. All periods presented reflect
certain reclassifications, disclosures, and restatements which have been made to
conform to the requirements of the Securities and Exchange Commission.

16. Recent Accounting Pronouncements

There have been no recent accounting pronouncements that have had or are
expected to have a material effect on the Company's financial position or
results of operations.

F-11
<PAGE> 93
CONVERGENT GROUP CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

17. Earnings Per Share

The Company computes earnings per share in accordance with SFAS No. 128,
Earnings per Share (SFAS 128). Under the provisions of SFAS No. 128, basic and
diluted net loss per share is computed by dividing the net income or loss
available to common stockholders for the period by the weighted average number
of shares of Common Stock outstanding during the period. The calculation of
diluted net income or loss per share excludes potential common shares if the
effect is antidilutive. Potential common shares are composed of Common Stock
issuable upon the exercise of stock options and upon conversion of Series A and
Series B mandatorily Redeemable Preferred Stock and Series A Convertible
Preferred Stock.

18. Interim Financial Statements

In the opinion of management, the unaudited interim financial statements as
of March 31, 2000 and for the three months ended March 31, 1999 and 2000 include
all adjustments, consisting only of those of a normal recurring nature,
necessary to present fairly the Company's financial position as of March 31,
2000 and the results of its operations and cash flows for the three month
periods ended March 31, 1999 and 2000. The results of operations for the three
months ended March 31, 2000 are not necessarily indicative of the results to be
expected for the full year.

The following table sets forth the computation of basic and diluted
earnings per share (in thousands, except share data):

<TABLE>
<CAPTION>
THREE MONTHS
ENDED
YEARS ENDED DECEMBER 31, MARCH 31,
------------------------------------ -------------------------
1997 1998 1999 1999 2000
---------- ---------- ---------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Numerator:
Earnings (loss) from continuing
operations.................... $ (1,105) $ 5,677 $ (15,256) $ 1,587 $ (899)
Preferred stock adjustments...... (776) (853) 12,432 (207) --
---------- ---------- ---------- ----------- -----------
Numerator for basic earnings
(loss) per share and earnings
(loss) per share assuming
dilution -- income (loss)
available to common
shareholders.................. $ (1,881) $ 4,824 $ (2,824) $ 1,380 $ (899)
========== ========== ========== =========== ===========
Denominator:
Denominator for basic earnings
per share-weighted average
shares........................ 16,234,348 15,135,368 14,310,546 15,478,085 14,487,160
Potential dilutive common
shares -- employee stock
options and conversion of
preferred stock............... -- 8,636,484 -- 8,156,530 --
---------- ---------- ---------- ----------- -----------
Denominator for diluted earnings
(loss) per share -- adjusted
weighted-average shares and
assumed conversions........... 16,234,348 23,771,852 14,310,546 23,634,615 14,487,160
========== ========== ========== =========== ===========
Basic earnings (loss) from
continuing operations per
common share.................. $ (0.12) $ 0.32 $ (0.20) $ 0.09 $ (0.06)
========== ========== ========== =========== ===========
Earnings (loss) from continuing
operations per common share --
assuming dilution............. $ (0.12) $ 0.20 $ (0.20) $ 0.06 $ (0.06)
========== ========== ========== =========== ===========
</TABLE>

F-12
<PAGE> 94
CONVERGENT GROUP CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The following table sets forth the computation of the Company's unaudited
pro forma basic and diluted earnings per share. Pro forma basic and diluted
earnings per share is computed by assuming the conversion of all convertible
participating preferred stock into common stock as if such shares were
outstanding from their respective date of issuance.

<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31, 2000
------------------
<S> <C>
Numerator:
Income (loss) available to common shareholders (in
thousands)............................................. $ (899)
===========
Denominator:
Weighted average number of common shares.................. 35,731,010
Denominator for diluted earnings per share -- weighted
average................................................ 35,731,010
===========
Pro forma basic earnings (loss) per share................... $ (0.03)
===========
Pro forma diluted earnings (loss) per share................. $ (0.03)
===========
</TABLE>

NOTE B -- INCOME TAXES

The Company accounts for income taxes under the liability method. Deferred
taxes are provided based upon the tax rate at which items of income and expense
are expected to be settled in the Company's tax return.

The provision (benefit) for income taxes included the following:

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------
1997 1998 1999
------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Current
Federal............................................... $ -- $ 94 $ 90
State................................................. -- 9 --
------- ------- -------
-- 103 90
------- ------- -------
Deferred
Federal............................................... -- (1,793) (1,309)
State................................................. -- (171) (128)
------- ------- -------
-- (1,964) (1,437)
------- ------- -------
Total
Federal............................................... -- (1,699) (1,219)
State................................................. -- (162) (128)
------- ------- -------
$ -- $(1,861) $(1,347)
======= ======= =======
</TABLE>

F-13
<PAGE> 95
CONVERGENT GROUP CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

A reconciliation between the expected federal income tax expense computed
by applying the Federal Statutory rate to income before income taxes and the
actual benefit from taxes on income for the year ended December 31, is as
follows:

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------
1997 1998 1999
------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Provision (benefit) for income taxes at statutory
rate.................................................. $ (431) $ 1,488 $ (789)
Change in valuation reserve............................. 1,475 (3,367) (379)
Change in prior year estimate........................... (747) -- --
Other................................................... (297) 18 (179)
------- ------- -------
$ -- $(1,861) $(1,347)
======= ======= =======
</TABLE>

Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components of
the Company's deferred tax liabilities and assets are as follows at December 31:

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------
1997 1998 1999
-------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Deferred tax assets:
Net operating loss carryforwards:
Domestic........................................... $ 11,739 $ 10,414 $ 12,922
International...................................... 2,874 3,142 2,937
Deferred income...................................... 12 -- --
Liability for anticipated contract costs............. 37 274 196
Organization costs................................... 21 2 --
Book over tax depreciation and amortization
domestic........................................... 2,105 2,043 1,873
Book over tax depreciation international............. 148 -- --
Restructuring accrual:
Domestic........................................... 6 -- --
International...................................... 1,931 1,931 1,931
Executive bonuses.................................... 1,231 1,047 27
Miscellaneous accruals and other..................... 378 226 250
-------- -------- --------
Total deferred tax assets.................. 20,482 19,079 20,136
Valuation allowance for deferred tax assets.......... (20,482) (17,115) (16,736)
-------- -------- --------
Net deferred tax assets/liabilities.................. $ -- $ 1,964 $ 3,400
======== ======== ========
</TABLE>

The domestic income tax net operating loss carryforwards of approximately
$33,134,000 resulting from operations, if not utilized, will expire as follows
(in thousands):

F-14
<PAGE> 96
CONVERGENT GROUP CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Certain changes in stock ownership can result in a tax law limitation on
the amount of net operating loss that can be utilized each year. The Company
determined it has undergone such an ownership change as defined under Section
382 of the Internal Revenue Code. As a result, utilization of net operating
losses will be limited to approximately $3,800,000 per year. The international
income tax net operating loss carryforward, primarily resulting from the
Company's operations in the United Kingdom, of approximately $7,000,000 will
carry forward indefinitely, if not utilized. Realization of the United Kingdom
net loss carryforwards are subject to the generation of future operating profits
in the United Kingdom. Payments on income taxes during the year ended December
31, 1999 were immaterial.

NOTE C -- PROPERTY AND EQUIPMENT

Property and equipment consists of the following:

<TABLE>
<CAPTION>
DECEMBER 31,
------------------
1998 1999
------- -------
(IN THOUSANDS)
<S> <C> <C>
Computer hardware and software.............................. $ 5,072 $ 6,178
Furniture and equipment..................................... 1,231 1,648
Leasehold improvements...................................... 574 239
------- -------
6,877 8,065
Less accumulated depreciation and amortization.............. (4,152) (4,963)
------- -------
$ 2,725 $ 3,102
======= =======
</TABLE>

The cost of computer software as defined in SOP 98-1, Accounting for the
Costs of Computer Software Developed or Obtained for Internal Use, was
approximately $0 and $130,000 for the years ended December 31, 1998 and 1999,
respectively.

NOTE D -- DEFINED CONTRIBUTION PLANS

The Company maintains a defined contribution plan (the Plan) intended to
qualify under Section 401(k) of the Internal Revenue Code of 1986, as amended.
All regular, full-time United States employees, as defined in the Plan,
including officers and directors who are also employees of the subsidiaries, are
eligible to participate in the Plan. The Company may make discretionary matching
contributions to the Plan. For the year ended December 31, 1997, eligible
employees were entitled to a 1.75% effective match of qualified wages through
May 1997 and a 5.0% effective match of qualified wages for the balance of the
year and for the years ended December 31, 1999 and 1998. The total contributions
by the Company to the Plan on behalf of participating employees were
approximately $397,000, $656,000 and $878,000 for the years ended December 31,
1997, 1998 and 1999, respectively.

NOTE E -- COMMITMENTS

The Company leases office facilities and equipment under noncancelable
operating lease agreements. Rent expense was approximately $1,150,000,
$1,114,000, and $1,522,000 for the years ended December 31, 1997, 1998 and 1999
respectively. During 1998, the Company decided not to exercise its option to
renew the existing lease of the Company's headquarters and, in September 1999,
signed a new office lease agreement for approximately 73,000 square feet of
office space to house the Company's headquarters and operations which began
September 1999. The lease agreement has a term of 10 years with additional
options for extension and provides options to lease additional space. The
Company has an obligation to rent additional office space of at least 12,000
square feet but limited to 20,000 square feet at the current facility on or
before October 1, 2000. The Company expects to meet its minimum obligation for
additional office space.

F-15
<PAGE> 97
CONVERGENT GROUP CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Future minimum rental commitments relating to these leases are as follows
(in thousands):

<TABLE>
<S> <C>
2000...................................................... $ 2,145
2001...................................................... 2,084
2002...................................................... 2,003
2003...................................................... 1,937
2004...................................................... 1,973
Thereafter................................................ 9,828
-------
$19,970
=======
</TABLE>

NOTE F -- BANK LINE OF CREDIT

At December 31, 1998, the Company had a three-year Credit and Security
Agreement with a financial institution, providing the Company with secured
borrowings of up to $3,000,000, none of which was outstanding at December 31,
1998. During 1999, the Credit and Security Agreement was replaced with a
Revolving Credit Loan Agreement described in Note G.

NOTE G -- LONG-TERM DEBT

On August 12, 1999, the Company entered into a four-year Revolving Credit
Loan Agreement (Agreement) with a financial institution, providing the Company
with borrowings of up to $25,000,000, $22,000,000 of which was outstanding at
December 31, 1999. The proceeds were used, principally, to acquire certain
redeemable preferred stock and the Class A common stock in the recapitalization.
Borrowings under the Agreement are secured by all of the assets of the Company.
At the Company's election, interest on borrowings is based on either the London
Interbank Rate plus 2.5% or the prime rate plus 0.75%. At December 31, 1999, the
Company elected a 180-day LIBOR base on $20,000,000 and prime rate on the
remainder of the outstanding balance. The effective interest rate on borrowings
at December 31, 1999 is 8.45%. The Company is subject to certain financial
ratios, including minimum interest coverage, debt service and current asset
ratios and limitations on additional debt pursuant to the Agreement which are
adjusted periodically based on the financial performance of the Company. At
December 31, 1999, the Company was in compliance with all such covenants.

NOTE H -- MANDATORILY REDEEMABLE PREFERRED STOCK

Prior to redemption (Note A2), holders of the Company's Series A
Convertible Exchangeable Preferred Stock had the right to convert shares of the
Series A Convertible Exchangeable Preferred Stock into Class B Common Stock upon
notice to the Company.

The holders of Preferred Stock were entitled to receive annual dividends at
the rate of 3% of the Preferred Stock issue price for Series A Convertible
Exchangeable Preferred Stock and 5% of the Preferred Stock issue price for
Series B Exchangeable Preferred Stock. The dividends were payable to the extent
of available cash (as defined in the Company's Certificate of Designations) in
arrears on June 30 for each year beginning June 30, 1998, and continuing until
the preferred shares have been redeemed, converted to Common Stock, or exchanged
for a note. The amount of any specified dividend in excess of available cash, as
defined, was forgiven and was not cumulative. For purposes of dividend payments
and mandatory redemptions of preferred stock, available cash is defined as cash
in excess of $5 million. There were no dividends payable for the measurement
periods ending December 31, 1998 and 1997, as cash did not exceed the available
cash threshold as defined in the Agreement.

The Company's outstanding Preferred Stock at December 31, 1998 had an
aggregate liquidation preference of $40,541,000 over the Company's Common Stock
and had no voting rights relating to the

F-16
<PAGE> 98
CONVERGENT GROUP CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

election of the Company's Board of Directors. Redemption of the outstanding
Preferred Stock was required to begin by the Company on June 30, 2001, and
continue on each June 30 thereafter until all shares of Preferred Stock had been
redeemed, provided that no shares of Series A Convertible Exchangeable Preferred
Stock were redeemed, whether by mandatory redemption or by optional redemption,
until all outstanding shares of Series B Exchangeable Preferred Stock were
redeemed or otherwise acquired by the Company and canceled.

The annual aggregate scheduled share redemption commitment at December 31,
1998 was as follows (in thousands):

<TABLE>
<S> <C>
2001...................................................... $ 3,000
2002...................................................... 3,000
Thereafter................................................ 34,541
-------
$40,541
=======
</TABLE>

The Company accretes the difference between the fair value of the
redeemable preferred stock at the date of issue and the mandatory redemption
price using the interest method.

In 1998, the Company entered into a Restructuring Agreement (the Agreement)
with the preferred stockholder, certain Company officers and directors, and
certain creditors.

The principal attributes of the Agreement were to provide for the
conversion of $4,725,000 of debt owed to the preferred stockholder to 4,725
shares of Series A Preferred Stock and to mutually release claims and
liabilities arising from events up through the date of the Agreement among all
parties.

In connection with its recapitalization (see Note A(2)), the Company
reacquired 5,725 shares of Series A Convertible Exchangeable Stock for
approximately $12,600,000 and 39,000 shares of Series B Mandatorily Redeemable
Preferred Stock for approximately $14,000,000. The Company also recorded
$13,061,000 as income available to common shareholders as a result of the
redemption of its Series B Mandatorily Redeemable Preferred Stock at less than
its then accreted fair value of $27,052,000.

Pursuant to the Securities and Exchange Commission Staff Accounting
Bulletin Topic 3:C, the Company restated the recorded value of its Series B
Mandatorily Redeemable Preferred Stock issued in 1994 to fair value at that
date. The Company has reflected as dividends to preferred shareholders the
accretion of the difference between the redeemable value and the restated fair
value for all periods presented. The effect of this restatement was to reduce
the gain recorded on the preferred stock redemption in 1999 from the previously
reported $20.8 million to $13.1 million. This reduction had the effect of
reducing net income attributable to common stockholders in 1999 by $7.7 million.

NOTE I -- CONVERTIBLE PARTICIPATING PREFERRED STOCK

In its Restated Certificate of Incorporation dated August 13, 1999, the
Company authorized 75 million shares of preferred stock, $0.001 par value per
share, designated as Series A Convertible Participating Preferred Stock
(Convertible Preferred). The Convertible Preferred carries a liquidation
preference of approximately $34 million and participates on an as converted
basis with Common Stock on voting and dividend rights. The Convertible Preferred
may be converted to Common Stock on a .5 share for one share basis at the
election of the holder which provide antidilutive conversion features. The
Convertible Preferred is mandatorily convertible to Common Stock of the Company
upon the consummation of the first underwritten public offering for the account
of the Company pursuant to a registration statement filed under the Securities
Act of 1933, as amended with aggregate proceeds (net of underwriting discounts
and commissions) to the Company of not less than $25,000,000.

F-17
<PAGE> 99
CONVERGENT GROUP CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE J -- STOCK OPTION PLAN

The Company's Board of Directors has adopted the Convergent Group
Corporation 1999 Stock Option Plan (the 1999 Plan) which provides for the
issuance of options to purchase up to 7,115,576 shares of the Company's Common
Stock to any employee at the discretion of the Board of Directors. For the
period ended December 31, 1999, the Company granted options to purchase
3,888,414 shares of Common Stock under the 1999 Plan to employees, of which
1,057,588 vested immediately and the remainder vest either 20% on the grant date
anniversary each year for five years or ratably on the grant date anniversary
over three years.

On December 20, 1996, the Company's Board of Directors adopted the
Convergent Group Corporation 1996 Stock Option Plan (the 1996 Plan), which
provided for the issuance of options to purchase up to 1,278,958 shares of the
Company's Common Stock to any employee at the discretion of the Board of
Directors. During the years ended December 31, 1997, 1998 and 1999, the Company
granted options to purchase 479,682, 497,748, and 609,920 shares of common stock
under the 1996 Plan to employees, of which 141,716, 135,422 and -0- vested
immediately, and the remainder vest 20% on the grant date anniversary each year
for five years. All options granted had an exercise price of $0.03 per share and
ten-year terms. All options outstanding under the 1996 Plan became immediately
exercisable upon the change of control (as defined in the 1996 Plan) and were
exercised on or before August 13, 1999, and converted to Common Stock.

The Company has elected to follow Accounting Principles Board Opinion No.
25, Accounting for Stock Issued to Employees (APB 25) and related
interpretations in accounting for its employee stock options. The Options
generally have a term of 10 years when issued and vest over three to five years.
Had compensation cost for the Plan been determined based on the fair value of
the Options at the grant date consistent with the method of Statement of
Financial Accounting Standards 123, Accounting for Stock-Based Compensation, the
Company's net income (loss) and basic and diluted earnings (loss) per common
share would have been (in thousands except share data):

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------
1997 1998 1999
------- ------ -------
<S> <C> <C> <C>
Net income (loss) available to common shareholder
As reported.............................................. $(1,881) $4,824 $(2,824)
Pro forma................................................ $(1,881) $4,824 $(2,824)
Basic earnings (loss) per common share
As reported.............................................. $ (0.12) $ 0.32 $ (0.20)
Pro forma................................................ $ (0.12) $ 0.32 $ (0.10)
Diluted earnings (loss) per share
As reported.............................................. $ (0.12) $ 0.20 $ (0.20)
Pro forma................................................ $ (0.12) $ 0.20 $ (0.10)
</TABLE>

The fair value of each option grant is estimated on the date of grant using
the Black-Scholes options-pricing model with the following weighted-average
assumptions for grants used in 1997, 1998 and 1999: no expected dividends;
expected volatility of 0%; risk-free interest rate of 6%; and expected lives of
five years.

F-18
<PAGE> 100
CONVERGENT GROUP CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The following table summarizes the activity of the Company's 1999 Stock
Option Plan:

<TABLE>
<CAPTION>
WEIGHTED AVERAGE
EXERCISE PRICE
SHARES PER SHARE
---------- ----------------
<S> <C> <C>
Outstanding at January 1, 1999........................... -- $ --
Granted.................................................. 3,888,414 0.092
Exercised................................................ (302,168) 0.092
Canceled................................................. (35,300) 0.092
---------- ------
Outstanding at December 31, 1999......................... 3,550,946 $0.092
---------- ------
Total Exercisable at December 31, 1999................... 3,550,946 $0.092
========== ======

(Weighted average fair value of options granted during 1999 was $2.73)
</TABLE>

The following table summarizes the activity of the Company's 1996 Stock
Option Plan:

<TABLE>
<CAPTION>
WEIGHTED AVERAGE
EXERCISE PRICE
SHARES PER SHARE
---------- ----------------
<S> <C> <C>
OUTSTANDING AT JANUARY 1, 1997.............................. 356,094 $0.02
Granted................................................... 479,682 0.02
Exercised................................................. (19,071) 0.02
Canceled.................................................. (59,220) 0.02
---------- -----
OUTSTANDING AT DECEMBER 31, 1997............................ 757,485 $0.02
---------- -----
Total exercisable at December 31, 1997...................... 301,694 $0.02
========== =====
(Weighted average fair value of options granted during 1997 was $0.02)

Outstanding at January 1, 1998............................ 757,485 $0.02
Granted................................................... 497,748 0.02
Exercised................................................. (3,943) 0.02
Canceled.................................................. (52,926) 0.02
---------- -----
OUTSTANDING AT DECEMBER 31, 1998............................ 1,198,364 0.02
---------- -----
Total exercisable at December 31, 1998...................... 492,525 $0.02
========== =====
(Weighted average fair value of options granted during 1998 was $0.06)

Outstanding at January 1, 1999............................ 1,198,364 $0.02
Granted................................................... 609,920 0.14
Exercised................................................. (1,727,915) 0.04
Canceled.................................................. (80,369) 0.02
---------- -----
OUTSTANDING AT DECEMBER 31, 1999............................ -- $ --
========== =====
</TABLE>

The following information applies to stock options outstanding at December
31, 1999:

<TABLE>
<CAPTION>
WEIGHTED AVERAGE
RANGE OF OPTIONS WEIGHTED AVERAGE REMAINING
EXERCISE PRICES OUTSTANDING EXERCISE PRICE CONTRACTUAL LIFE
--------------- ----------- ---------------- ----------------
<S> <C> <C> <C>
$0.092 3,550,946 $0.092 8.76
</TABLE>

F-19
<PAGE> 101
CONVERGENT GROUP CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The following information applies to options exercisable at December 31,
1999:

<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
RANGE OPTIONS EXERCISE PRICE
----- --------- --------------
<S> <C> <C>
$0.092.. 3,550,946 $0.092
</TABLE>

The Company recorded compensation expense of $2,147,665 in 1999 related to
stock options issued at prices below fair market value. Compensation expense of
$8,111,119 will be recognized in future periods as these options vest over 3 to
5 years or on the occurrence of certain future events.

In accordance with the Plan agreement, these options may be exercised prior
to vesting. However, unvested shares are returnable to the Company upon
termination of employment at the exercise price.

NOTE K -- EMPLOYMENT AGREEMENTS WITH OFFICERS

At the formation of Convergent Group Corporation, certain Company officers
entered into long-term employment contracts. The contracts were for a period of
ten years and, among other things, provide for base salaries, minimum annual
bonuses subject to the Company's financial performance as determined by the
Compensation Committee, other special benefits, and the prohibition of the
officer owning or working for a competitive entity for a period of three years
after termination of the officer's employment with the Company.

On August 13, 1999, pursuant to the Recapitalization Agreement between
Convergent Group Corporation and certain investors in the Company's new Series A
Convertible Participating Preferred Stock, the long-term employment contracts
were terminated for $2,440,000. The Company then entered into long-term
employment contracts with certain Company officers. The contracts are for a
period of four years and provide for base salaries and minimum annual bonuses.

At December 31, 1998 and 1999, $1,384,000 and $127,000, respectively is
included in accrued compensation and related expenses for bonuses to such
officers related to performance for the year then ended.

NOTE L -- ACCRUED LIABILITY FOR ANTICIPATED CONTRACT COSTS

The accrued liability for anticipated contract costs consists of accruals
for goods and services to be provided with regard to contracts where components
of the contracts result in varying profit margins during the contract
performance period and in accordance with the percentage of completion method of
accounting, costs associated with future performance are accrued to reflect such
margins at the overall expected margin at the completion of the contract. The
long-term portion of the accrual represents costs that the Company expects to
incur beyond the subsequent fiscal year.

NOTE M -- RESTRUCTURING COSTS

In December 1996, the Company adopted a plan to phase out GDS software
research and development and focus on the delivery of system integration and
consulting services.

As a result of the decision to phase out any further investments in GDS
software research and development, certain assets including purchased software,
property and equipment, inventory, accounts receivable and goodwill became
impaired. The Company also became obligated under the terms of existing
contracts to perform substantial services to migrate several customers to other
software platforms. The Company also had contractual obligations under existing
leases for space no longer used in operations as a result of the restructuring,
and for employee termination and other costs directly attributable to the
restructuring.
F-20
<PAGE> 102
CONVERGENT GROUP CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

At December 31, 1997 an accrual of approximately $957,000 remained on the
Company's financial statements to allow fulfillment of its obligations resulting
from the restructuring. At December 31, 1998, the Company had fulfilled all
contractual obligations to customers as a result of the restructuring and
reversed the remaining accrual of approximately $95,000.

In April 1997, the Company sold to Informatix assets associated with the
GDS product development business. Certain employees involved with product
development also transferred to Informatix. Payment terms for the $1,750,000
sale were $1,000,000 at closing, $500,000 due December 31, 1997, and $250,000
due December 31, 1998. The Company realized a gain on the sale of GDS software
and fixed assets to Informatix of approximately $1,500,000, representing the net
difference between the carrying value of the assets sold and the expected
proceeds of the sale. The likelihood of this transaction was almost certain when
the restructuring accrual was recorded in 1996, and this recovery was included
in the original accrual. Consequently, when the transaction occurred during
1997, the proceeds from the sale to Informatix were netted against the accrual
for restructuring costs. As of December 31, 1998 all amounts had been collected.

In a transaction concurrent with the asset sale, the Company and Informatix
entered into an ongoing maintenance agreement. For a three-year term, Informatix
will provide software development, support and maintenance services necessary to
support the ongoing customer maintenance support services. In exchange for such
services, the Company will pay $100,000 per month for the first year and $65,000
per month for the final two years of the agreement. The three year maintenance
agreement with Informatix was accounted for on a monthly basis over the three
year term of the agreement (the agreement expires on April 30, 2000). Each
month, maintenance revenue was recorded from the customers with whom the Company
had ongoing maintenance contracts and maintenance expense was recorded based on
payment made or due to Informatix for that month ($100,000 for the first two
years and $65,000 for the final two years). With this agreement in place, the
Company continued to provide first line customer maintenance support, but had
effectively out-sourced the remaining maintenance to which it has committed. The
Company subsequently agreed to transfer first line maintenance support to
Informatix effective April 2000.

On February 5, 1996, the Company merged with the business and related net
assets of ARC Systems through a newly formed, wholly owned subsidiary, CGAP, an
Australian company.

Discontinuance of the GDS product development business eliminated the
strategic benefits of the merger with CGAP. As a result, in April 1997, the
merger was reversed with no future obligation to the Company.

NOTE N -- MAJOR CUSTOMERS

A significant portion of the Company's business resulted from contracts
with major customers. Major customers accounted for approximately 12%, 13% and
27% of the Company's total revenue for the year ended December 31, 1997, 11%,
16%, and 20% for the year ended December 31, 1998 and 9%, 9%, and 18% for the
year ended December 31, 1999.

NOTE O -- RELATED PARTY TRANSACTIONS

During August 1999 as part of the recapitalization, the Company loaned
$2,000,000 to an officer of the Company, secured by a Stock Pledge Agreement and
Guarantee Agreement. The nonrecourse loan carries an interest rate of 5.9% and
is payable in four equal installments beginning July 1, 2003. However, if the
Company experiences a major capital event, such as a sale of all or
substantially all of its assets, a merger, or an initial public offering, the
entire unpaid principal amount and all accrued interest become immediately due
and payable.

F-21
<PAGE> 103
CONVERGENT GROUP CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

As part of its recapitalization, the Company entered into an agreement with
one of its institutional investors providing for an annual management fee of
$500,000 for management and strategic advice. In addition, the agreement
provides for payment of a fee equal to 1% of the implied equity value of the
Company in a transaction which results in either a sale of the Company which is
approved by the holders of more than 50% of the then outstanding stock of the
Company or a public offering. The agreement terminates upon the earlier of an
initial public offering in which the Company raises net proceeds of at least $25
million or at such time as the shares held by the investor falls below certain
thresholds.

On November 19, 1999, the Company acquired 100% of the outstanding common
stock of an entity wholly owned by a former individual shareholder of the
Company for the sole purpose of terminating an existing Consulting Agreement
with the individual shareholder. Among other things, the Consulting Agreement,
which had a remaining term of approximately five years, obligated the Company to
minimum monthly consulting fees of $14,000, quarterly incentive payments of
$25,000, and a finance fee equal to 8% of the net proceeds received by the
Company from a major capital event. The outstanding common stock was acquired by
the Company for $3,920,000 in cash and was expensed during 1999.

NOTE P -- EVENTS SUBSEQUENT TO MARCH 31, 2000 (UNAUDITED)

In June 2000, the Company sold 1,237,000 shares of its common stock to
Cinergy Communications, Inc. (Cinergy) for $10,000,000. Cinergy also agreed to
purchase additional shares concurrently with the closing of the Company's
proposed public offering.

F-22
<PAGE> 104

[CONVERGENT GROUP LOGO]
<PAGE> 105

SUBJECT TO COMPLETION, DATED JULY 10, 2000

[CONVERGENT GROUP LOGO]

6,000,000 SHARES

COMMON STOCK

---------------------
INVESTING IN OUR COMMON STOCK INVOLVES RISKS. SEE "RISK FACTORS" BEGINNING
ON PAGE 7.
---------------------

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

ROBERTSON STEPHENS INTERNATIONAL

DONALDSON, LUFKIN & JENRETTE
WIT SOUNDVIEW
The date of this prospectus is , 2000
<PAGE> 106

UNDERWRITING

<TABLE>
<CAPTION>
NUMBER
UNDERWRITER OF SHARES
----------- ---------
<S> <C>
FleetBoston Robertson Stephens, Inc. and FleetBoston
Robertson Stephens International Limited..................
Donaldson, Lufkin & Jenrette Securities Corporation.........
Wit SoundView Corporation...................................
---------
Total............................................. 6,000,000
=========
</TABLE>

The underwriters have advised us that they do not expect sales to
discretionary accounts to exceed five percent of the total number of shares
offered.

74
<PAGE> 107

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.

The following table sets forth the costs and expenses, other than
underwriting discounts and commissions, payable by the registrant in connection
with the sale of common stock being registered. All amounts are estimates except
for the SEC and NASD filing fees.

<TABLE>
<S> <C>
SEC registration fee........................................ $ 32,941
----------
NASD filing fee............................................. $ 12,978
----------
Nasdaq National Market listing fee.......................... 95,000
Printing and engraving expenses............................. 600,000
Legal fees and expenses..................................... 1,200,000
Accounting fees and expenses................................ 200,000
Blue Sky fees and expenses.................................. 10,000
Transfer agent fees......................................... 10,000
Miscellaneous fees and expenses............................. 239,081
----------
Total............................................. $2,400,000
==========
</TABLE>

ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS

Section 145 of the Delaware General Corporation Law authorizes a court to
award, or a corporation's board of directors to grant, indemnity to directors,
officers and specific other persons in terms sufficiently broad to permit
indemnification under particular circumstances for liabilities (including
reimbursement for expenses incurred) arising under the Securities Act of 1933,
as amended (the "Securities Act").

The Registrant's restated certificate of incorporation and amended by-laws
provide that, to the fullest extent permitted by the laws of the state of
Delaware, no director will be personally liable to the Registrant or its
stockholders for monetary damages for breach of fiduciary duty as a director.
Furthermore, the Registrant's restated certificate of incorporation provides
that, except as prohibited by law, each of the Registrant's directors and
officers is entitled to be indemnified by the Registrant against all expenses
and liability incurred in connection with any legal proceeding brought against
him or her by virtue of his or her position as a director or officer. This right
to indemnification may extend to a person serving as an employee or other
representative of the Registrant or a subsidiary of the Registrant. A person
entitled to indemnification is entitled to have the Registrant advance to him or
her the expenses of a legal proceeding brought against him or her.

These provisions of the restated certificate of incorporation and the
amended by-laws do not eliminate the fiduciary duties of the directors and
officers of the Registrant, and in appropriate circumstances, equitable remedies
such as injunctive or other forms of relief will remain available under Delaware
law. In addition, each director will continue to be subject to liability for
breach of the director's duty of loyalty to the Registrant for acts or omissions
not in good faith or involving intentional misconduct, for knowing violations of
law, and for dividends or approval of stock repurchases or redemption's that are
unlawful under Delaware law. The provision does not affect a director's
responsibilities under any other law, such as the federal securities laws or
state or federal environmental laws.

The Delaware General Corporation Law also allows the Registrant to purchase
insurance covering the Registrant's directors and officers against liability
asserted against them in their capacity as directors and officers. The
Underwriting Agreement also provides for the indemnification of officers,
directors and controlling persons of the Registrant against specific
liabilities.

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<PAGE> 108

ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES

Common Stock and Preferred Stock. Set forth in chronological order is
information regarding shares of common stock and preferred stock issued and
options granted by the Registrant since January 1997. All share numbers have
been adjusted to reflect a 470 for 1 stock split effected in October, 1997; a
7.83 for 1 stock split effected in August, 1999; and a 1-for-2 reverse stock
split effected immediately prior to the completion of this offering. Further
included is the consideration, if any, received by the Registrant for such
shares and options and information relating to the section of the Securities Act
of 1933, as amended (the "Securities Act"), or rule of the Securities and
Exchange Commission under which exemption from registration was claimed.

1. In June, 1997, the Registrant issued 98,097 shares of common stock to an
employee upon exercise of an option for an aggregate purchase price of $2,505.

2. In October, 1997, the Registrant issued 19,085 shares of common stock to
an employee upon exercise of an option for an aggregate purchase price of $488.

3. In January, 1998, the Registrant issued 4,725 shares of Series A
Preferred Stock to Electronic Data Systems Corporation in satisfaction of
obligations owed to them totaling $4,725,000.

4. In January, 1998, the Registrant issued 83,906 shares of common stock as
a stock grant to an employee.

5. In March, 1998, the Registrant issued 763 shares of common stock to an
employee upon exercise of an option for an aggregate purchase price of $20.

6. In May, 1998, the Registrant issued 1,957 shares of common stock to an
employee upon exercise of an option for an aggregate purchase price of $50.

7. In January, 1999, the Registrant issued 304,402 shares of common stock
to an employee upon exercise of an option for an aggregate purchase price of
$7,775.

8. In February, 1999, the Registrant issued 391,500 shares of common stock
as a stock grant to two trusts for the benefit of the children of a director.

9. In March, 1999, the Registrant issued 39,150 shares of common stock as a
stock grant to an employee.

10. In August, 1999, the Registrant issued 255,407 shares of common stock
as a stock grant to an employee.

11. In August, 1999, the Registrant issued 1,420,751 shares of common stock
to 67 employees upon exercise of options for an aggregate purchase price of
$36,290.

12. In August 1999, the Registrant issued 32,530,778 shares of New Series A
Preferred Stock to 13 investors for $1.08 per share, for an aggregate purchase
price of $35,294,767.51.

13. In August 1999, the Registrant issued 9,447,911 shares of New Series A
Preferred Stock to certain existing shareholders and employees in exchange for
9,447,911 shares of common stock.

14. In August 1999, the Registrant issued 10,138,720 shares of common stock
as a stock grant to certain existing shareholders and employees.

15. Between August 14, 1999 and December 31, 1999, the Registrant issued
302,168 shares of common stock to three employees upon exercise of options for
an aggregate purchase price of $27,799.

16. In September, 1999, the Registrant issued 377,710 shares of common
stock as a stock grant to four employees.

17. In October, 1999, the Registrant issued 755,420 shares of common stock
as a stock grant to a director and to two trusts for the benefit of the children
of a director.

II-2
<PAGE> 109

18. Between January 1, 2000 and March 31, 2000, the Registrant issued
1,394,424 shares of common stock to 150 employees upon exercise of options for
an aggregate exercise price of $128,287.

19. In January and February 2000, the Registrant issued 509,012 shares of
New Series A Preferred Stock to GMJM Stock Partnership, Ltd. in exchange for
254,506 shares of common stock.

20. Between April 1, 2000 and June 15, 2000 the Registrant issued 113,066
shares of common stock to 12 employees upon exercise of options for an aggregate
purchase price of $10,402.

21. In June 2000, the Registrant issued 1,237,000 shares of common stock to
Cinergy Communications, Inc. for $10,000,000.

Options. The Registrant from time to time has granted stock options to
employees, directors and consultants. The following table sets forth certain
information regarding such grants.

<TABLE>
<CAPTION>
NUMBER OF EXERCISE
SHARES PRICE
--------- --------
<S> <C> <C>
January 1, 1997 to December 31, 1997........................ 480,049 $0.026
January 1, 1998 to December 31, 1998........................ 498,129 $0.026
January 1, 1999 to August 13, 1999.......................... 617,485 $0.026
August 14, 1999 to December 31, 1999........................ 3,888,414 $0.092
January 1, 2000 to March 31, 2000........................... 1,044,210 $0.092-6.76
</TABLE>

All of the above-described issuances were exempt from registration (i)
pursuant to Section 4(2) of the Securities Act, or Regulation D promulgated
thereunder, as transactions not involving a public offering or (ii) Rule 701
promulgated under the Securities Act or (iii) as transactions not involving a
sale of securities. No underwriters were involved in connection with the sales
of securities referred to in this Item 15.

II-3
<PAGE> 110

ITEM 16(a). EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<C> <S>
1 -- Form of Underwriting Agreement.
3.1 -- Restated Certificate of Incorporation of the Registrant.
3.1A -- Certificate of Amendment to Certificate of
Incorporation.*
3.2 -- Amended and Restated Certificate of Incorporation of the
Registrant, to be effective upon the closing of this
offering.
3.3 -- By-Laws of the Registrant, including all amendments
thereto.
3.4 -- Amended By-Laws of the Registrant, to be effective upon
the closing of this offering.
4.1 -- Specimen common stock certificate.
4.2 -- Credit Agreement with Fleet Bank.
5 -- Opinion of O'Sullivan Graev & Karabell, LLP.*
10.1 -- Recapitalization Agreement, dated as of August 13, 1999,
by and among the Registrant, certain shareholders of the
Registrant, Scott M. Schley as the Shareholder's
representative, InSight Capital Partners III, L.P. as the
Investor's representative and the Investors party
thereto.
10.2 -- Stock Purchase and Redemption Agreement, dated as of
August 13, 1999, by and among the Registrant, certain
shareholders of the Registrant, Scott M. Schley as the
shareholder's representative, InSight Capital Partners
III, L.P. as the Investor's representative and the
Investors party thereto.
10.3 -- 1999 Stock Option Plan, including Amendment No. 1
thereto.
10.4 -- Employment Agreement, dated as of August 13, 1999,
between the Registrant and Glenn E. Montgomery, Jr..
10.5 -- Form of Registration Rights Agreement, dated as of April
28, 2000 by and among the Registrant, the Investors, the
continuing shareholders of the Registrant, and the
Strategic Investor.
10.6 -- Stock Pledge Agreement, dated as of August 13, 1999, by
and between Glenn E. Montgomery, Jr. and the Registrant.
10.7 -- Agreement, dated as of August 13, 1999, by Glenn E.
Montgomery, Jr., GMJM Stock Partnership, Ltd., InSight
Capital Partners III, L.P. and the Registrant.
10.8 -- Employment Agreement, dated as of August 13, 1999,
between the Registrant and Mark L. Epstein.
10.9 -- Employment Agreement, dated as of August 13, 1999,
between the Registrant and Larry J. Engelken.
10.10 -- Employment Agreement, dated as of August 13, 1999,
between the Registrant and Scott M. Schley.
10.11 -- Employment Agreement, dated as of October 11, 1999,
between the Registrant and Mark Shirman, including
Amendment No. 1 thereto.
10.12 -- Employment Agreement, dated as of January 7, 2000,
between the Registrant and Bryan R. Mileger.
10.13 -- Restricted Stock Agreement, dated as of October 29, 1999,
between the Registrant and John Blend.
10.14 -- Restricted Stock Agreement, dated as of October 29, 1999,
between the Registrant and Robert Sharpe.
10.15 -- Form of Agreement used between the Registrant and its
clients.
</TABLE>

II-4
<PAGE> 111

<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<C> <S>
10.16 -- Office Lease, dated August 28, 1998, between the
Registrant and Fiddler's Green Center for real property
located at 6399 South Fiddler's Green Circle, Suite 600,
Englewood, CO 80111.
10.17 -- Service Agreement, dated as of July 10, 1997, between the
Registrant and Cinergy Corp.
10.18 -- Service Agreement, dated as of August 21, 1996, between
the Registrant and Alliant Energy Corporation (f/k/a IES
Industries Inc.).
10.19 -- Service Agreement, dated as of September 15, 1997,
between the Registrant and Citizens Utilities Company.
10.20 -- Service Agreement, dated as of March 31, 2000, between
the Registrant and Cinergy Corp.
10.21 -- Stock Purchase Agreement, dated as of April 28, 2000,
between the Registrant and Cinergy Communications, Inc.
10.22 -- Amendment No. 1 to the Stock Purchase Agreement dated as
of April 28, 2000 between the Registrant and Cinergy
Communications, Inc., dated as of June 13, 2000.
21 -- Subsidiaries of the Registrant.
23.1 -- Consent of Grant Thornton, LLP.**
23.2 -- Consent of O'Sullivan Graev & Karabell, LLP (included in
Exhibit 5).*
24 -- Powers of Attorney (included on signature pages).
27.1 -- Financial Data Schedule.
27.2 -- Financial Data Schedule.**
</TABLE>

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

* To be filed by amendment.

** Filed herewith.

ITEM 16(b). EXHIBITS AND FINANCIAL STATEMENTS

All schedules for which provision is made in the applicable accounting
regulations of the Securities and Exchange Commission are not required under the
related instructions, are inapplicable or not material, or the information
called for thereby is otherwise included in the financial statements and
therefore has been omitted.

ITEM 17. UNDERTAKINGS.

The undersigned Registrant hereby undertakes to provide to the underwriters
at the closing specified in the underwriting agreement certificates in such
denominations and registered in such names as required by the underwriters to
permit prompt delivery to each purchaser.

Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.

II-5
<PAGE> 112

The undersigned Registrant hereby undertakes that:

1. For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed to be part of this registration
statement as of the time it was declared effective.

2. For the purpose of determining any liability under the Securities Act of
1933, each post-effective amendment that contains a form of prospectus shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.

II-6
<PAGE> 113

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Amendment No. 3 to Registration Statement to be signed on
its behalf by the undersigned, thereunder duly authorized, in the City of
Denver, State of Colorado, on July 10, 2000.

CONVERGENT GROUP CORPORATION

By:/s/ GLENN E. MONTGOMERY, JR.
----------------------------------
Glenn E. Montgomery, Jr.
Chairman and Chief Executive
Officer

Pursuant to the requirements of the Securities Acts of 1933, as amended,
this Amendment No. 3 to Registration Statement has been signed by the following
persons in the capacities and on the dates indicated.

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>

/s/ GLENN E. MONTGOMERY, JR.* Chairman of the Board and Chief July 10, 2000
----------------------------------------------------- Executive Officer (Principal
Glenn E. Montgomery, Jr. Executive Officer)

/s/ BRYAN R. MILEGER* Chief Financial Officer July 10, 2000
----------------------------------------------------- (Principal Financial Officer
Bryan R. Mileger and Principal Accounting
Officer)

/s/ SCOTT M. SCHLEY Executive Vice President of July 10, 2000
----------------------------------------------------- Finance, Treasurer and Director
Scott M. Schley

/s/ ROBERT SHARPE* Director July 10, 2000
-----------------------------------------------------
Robert Sharpe

/s/ JOHN W. BLEND* Director July 10, 2000
-----------------------------------------------------
John W. Blend III

/s/ JERRY MURDOCK* Director July 10, 2000
-----------------------------------------------------
Jerry Murdock

*By: /s/ SCOTT M. SCHLEY
------------------------------------------------
Scott M. Schley
Attorney-in-fact
</TABLE>

II-7
<PAGE> 114

EXHIBIT INDEX

<PAGE> 115

<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<C> <S>
10.15 -- Form of Agreement used between the Registrant and its
clients.
10.16 -- Office Lease, dated August 28, 1998, between the
Registrant and Fiddler's Green Center for real property
located at 6399 South Fiddler's Green Circle, Suite 600,
Englewood, CO 80111.
10.17 -- Service Agreement, dated as of July 10, 1997, between the
Registrant and Cinergy Corp.
10.18 -- Service Agreement, dated as of August 21, 1996, between
the Registrant and Alliant Energy Corporation (f/k/a IES
Industries Inc.).
10.19 -- Service Agreement, dated as of September 15, 1997,
between the Registrant and Citizens Utilities Company.
10.20 -- Service Agreement, dated as of March 31, 2000, between
the Registrant and Cinergy Corp.
10.21 -- Stock Purchase Agreement, dated as of April 28, 2000,
between the Registrant and Cinergy Communications, Inc.
10.22 -- Amendment No. 1 to the Stock Purchase Agreement dated as
of April 28, 2000 between the Registrant and Cinergy
Communications, Inc., dated as of June 13, 2000.
21 -- Subsidiaries of the Registrant.
23.1 -- Consent of Grant Thornton, LLP.**
23.2 -- Consent of O'Sullivan Graev & Karabell, LLP (included in
Exhibit 5).*
24 -- Powers of Attorney (included on signature pages).
27.1 -- Financial Data Schedule.
27.2 -- Financial Data Schedule.**
</TABLE>

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

* To be filed by amendment.

** Filed herewith.